<PAGE> 1
As filed with the Securities and Exchange Commission on May 22, 1998.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
SENSORMATIC ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 34-1024665
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
-------------------------
951 YAMATO ROAD
BOCA RATON, FLORIDA 33431-0700
(561) 989-7000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
-------------------------
GARRETT E. PIERCE
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
SENSORMATIC ELECTRONICS CORPORATION
951 YAMATO ROAD
BOCA RATON, FLORIDA 33431-0700
(561) 989-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
JEROME M. LEWINE, ESQ.
CHRISTY & VIENER
620 FIFTH AVENUE
NEW YORK, NEW YORK 10020
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
-------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, check the
following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Amount Amount of
Title of Securities to be to be Registration
Registered Registered Price Per Share Aggregate Price Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depositary Shares each
representing a one-tenth 6,900,000 $23.8125(1) $164,306,250 $48,470.34
interest in a share of 6 1/2%
Convertible Preferred Stock
(liquidation preference
equivalent to $25.00 per
Depositary Share)
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6 1/2% Convertible Preferred
Stock, liquidation preference
$250.00 per share, par value 690,000 N.A. N.A. (2)
$0.01 per share
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Common Stock, $0.01 par
value per share, issuable upon
conversion of the Depositary 8,837,090(3) N.A. N.A. (2)
Shares and 6 1/2% Convertible
Preferred Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value per share, issuable as
dividends on the 6 1/2%
Convertible Preferred Stock (4) (4) $22,425,000(4) $ 6,615.38
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value per share, issuable as
liquidated damages on the 6 1/2%
Convertible Preferred Stock (5) (5) $ 862,500(5) $ 254.43
- -----------------------------------------------------------------------------------------------------------------------------------
Total: $55,340.15
===================================================================================================================================
</TABLE>
(1) Average of the bid and asked prices on May 21, 1998, pursuant to Rule
457(c) under the Securities Act.
(2) Pursuant to Rule 457(i) under the Securities Act, a registration fee is
not required in connection with the registration of the 6 1/2%
Convertible Preferred Stock or the Common Stock issuable upon
conversion of the Depository Shares or shares of the 6 1/2% Convertible
Preferred Stock.
(3) Pursuant to Rule 416 under the Securities Act, an indeterminate number
of additional shares of Common Stock are registered hereunder which may
be issued in the event that applicable antidilution provisions with
respect to conversion of the Depositary Shares and 6 1/2% Convertible
Preferred Stock become operative.
(4) Pursuant to Rule 457(o) under the Securities Act, the registration fee
is based upon the maximum offering price of shares of Common Stock
that may be issued by the Registrant from time to time in lieu of or
in combination with cash as dividends on the 6 1/2% Convertible
Preferred Stock, equal to total cash dividends that will accrue on the
6 1/2% Convertible Preferred Stock through April 3, 2000.
(5) Pursuant to Rule 457(o) under the Securities Act, the registration fee
is based upon the maximum offering price of shares of Common Stock
that may be issued by the Registrant from time to time as payment of
accrued liquidated damages relating to the 6 1/2% Convertible
Preferred Stock pursuant to the Registration Rights Agreement dated
as of April 13, 1998 between the Registrant and the initial purchasers
of the Depositary Shares, equal to such liquidated damages that would
accrue during any two year period that this Registration Statement is
not effective.
-----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE> 3
SUBJECT TO COMPLETION, DATED MAY 22, 1998
PRELIMINARY PROSPECTUS
SENSORMATIC ELECTRONICS CORPORATION
6,900,000 DEPOSITARY SHARES
EACH REPRESENTING A ONE-TENTH INTEREST IN A SHARE OF
6 1/2% CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE EQUIVALENT TO $25.00 PER DEPOSITARY SHARE)
690,000 SHARES OF 6 1/2% CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $250.00 PER SHARE, PAR VALUE $0.01 PER SHARE)
8,837,090 SHARES OF COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
ISSUABLE UPON CONVERSION OF THE DEPOSITARY SHARES
AND 6 1/2% CONVERTIBLE PREFERRED STOCK
SHARES OF COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
ISSUABLE AS DIVIDENDS ON THE 6 1/2% CONVERTIBLE PREFERRED STOCK OR IN
PAYMENT OF LIQUIDATED DAMAGES, IF ANY, UNDER THE REGISTRATION RIGHTS AGREEMENT
This Prospectus is being used in connection with the offering from time
to time by certain holders (the "Selling Securityholders") of (1) depositary
shares (the "Depositary Shares") each representing a one-tenth interest in a
share of 6 1/2% Convertible Preferred Stock (the "Preferred Stock"), liquidation
preference $250.00 per share (equivalent to $25.00 per Depositary Share; the
"Liquidation Preference"), par value $0.01 per share, of Sensormatic Electronics
Corporation (the "Company" or "Sensormatic"), (2) the shares of Preferred Stock
and (3) the shares (the "Common Shares") of common stock, $0.01 par value per
share, of the Company (the "Common Stock") issuable upon conversion of the
Preferred Stock and/or the Depositary Shares, (4) the shares of Common Stock
issuable by the Company to the Selling Securityholders from time to time through
April 3, 2000 in lieu of or in combination with cash as dividends on the
Preferred Stock (the "Dividend Shares"), and (5) shares of Common Stock that may
be issued by the Company to the Selling Securityholders pursuant to the
Registration Rights Agreement dated April 13, 1998 between the Company and the
Initial Purchasers (as defined below) in payment of up to $862,500 in liquidated
damages, if any, as provided therein ("Liquidated Damages"; such shares being
sometimes referred to herein as "Liquidated Damages Shares") (the Depositary
Shares, Preferred Stock and Common Shares, together with the Dividend Shares and
Liquidated Damages Shares, are sometimes collectively referred to herein as the
"Securities"). See "Description of Preferred Stock -- Dividends" and
"--Registration Rights; Liquidated Damages." The Depositary Shares were
originally issued by the Company in a private placement on April 13, 1998 (the
"First Closing") and purchased by Bear, Stearns & Co. Inc., Lehman Brothers
Inc., NationsBanc Montgomery Securities LLC and Schroder & Co. Inc. (the
"Initial Purchasers") pursuant to a purchase agreement dated as of April 6, 1998
(the "Purchase Agreement") between the Company and the Initial Purchasers.
Subsequently, the Initial Purchasers exercised the over-allotment option in
connection therewith on April 17, 1998. The issuance and sale of the Depositary
Shares pursuant to the First Closing and the over-allotment exercise are
collectively referred to herein as the "April 13, 1998 Offering." The Initial
Purchasers, in turn, resold the Depositary Shares in private sales pursuant to
exemptions from registration under the Securities Act of 1933, as amended (the
"Securities Act").
(continued on next page)
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<PAGE> 4
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 3.
----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
No person has been authorized to give any information or to make any
representations not in this Prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or the Selling Securityholders. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any security other than the
shares of Preferred Stock (and related Depositary Shares) and Common Stock
offered hereby, nor does it constitute an offer to sell or a solicitation of an
offer to buy any of the shares of Preferred Stock (and related Depositary
Shares) or Common Stock to anyone or by anyone in any jurisdiction where, or to
any person to whom, it would be unlawful to make such an offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there has not been a change in the
information set forth in this Prospectus or in the affairs of the Company since
the date hereof.
THE DATE OF THIS PROSPECTUS IS MAY ____, 1998.
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<PAGE> 5
Holders of Depositary Shares are entitled to all proportional rights
and preferences of the Preferred Stock (including dividend, voting, redemption
and liquidation rights). Dividends on the Preferred Stock accrue at a rate per
annum equal to 6 1/2% of the Liquidation Preference per share of Preferred Stock
and are payable quarterly on January 1, April 1, July 1 and October 1 of each
year, commencing on July 1, 1998. Dividends are payable in cash or, at the
option of the Company, in shares of Common Stock of the Company or a combination
thereof. See "Description of Preferred Stock -- Dividends."
The Preferred Stock will be redeemable for cash on or after April 4,
2001, at the option of the Company, in whole or from time to time in part, at
the redemption prices set forth herein, together with all accumulated and unpaid
dividends (including an amount in cash or shares of Common Stock equal to a
prorated dividend for the period from the dividend payment immediately prior to
the redemption date to the redemption date) and Liquidated Damages, if any, to
the redemption date. See "Description of Preferred Stock" and "Description of
Depositary Shares."
The Preferred Stock, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company,
ranks (i) senior to all Junior Securities (as defined herein), including all
Common Stock of the Company; (ii) subject to certain conditions, on a parity
with any Parity Securities (as defined herein); and (iii) subject to certain
conditions, junior to each class of Senior Securities (as defined herein). In
addition, the Preferred Stock ranks junior in right of payment to all
indebtedness and other obligations of the Company.
The Securities may be sold from time to time to purchasers directly
by the Selling Securityholders. Alternatively, the Selling Securityholders may
from time to time offer the Securities through brokers, dealers or agents who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholders and/or the purchasers of the Securities for
whom they may act as agent. The Selling Securityholders and any such brokers,
dealers or agents who participate in the distribution of the Securities may be
deemed to be "underwriters", and any profits on the sale of the Securities by
them and any discounts, commissions or concessions received by any such brokers,
dealers or agents may be deemed to be underwriting discounts and commissions
under the Securities Act. To the extent the Selling Securityholders may be
deemed to be underwriters, the Selling Securityholders may be subject to certain
statutory liabilities of the Securities Act, including, but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). See "Plan of
Distribution." The Selling Securityholders and any other person participating in
such distribution will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders and any other such person. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.
The Company will not receive any proceeds from the sale of the
Securities or the issuance of the Dividend Shares or the Liquidated Damages
Shares offered hereby. The Company has agreed to pay substantially all of the
expenses incidental to the registration, offering and sale by the Selling
Securityholders of the Securities to the public other than commissions, fees and
discounts of underwriters, brokers, dealers and agents.
The Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "SRM". On May 21, 1998, the last reported sale price
of the Common Stock on the NYSE was $13 3/8 per share.
The Company has not applied and does not intend to apply for the
listing of the Depositary Shares or the Preferred Stock on any securities
exchange or for quotation through the Nasdaq National Market. The Preferred
Stock (and the related Depositary Shares) are expected to be eligible for
trading in the National Association of Securities Dealers, Inc.'s Private
Offerings, Resales and Trading Through Automatic Linkages ("PORTAL") Market.
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<PAGE> 6
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Risk Factors",
"Business" and elsewhere in this Prospectus and in documents incorporated by
reference herein (see "Incorporation of Certain Documents by Reference") may
constitute "forward-looking" statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Forward-looking statements
may be indicated by phrases such as "believes", "anticipates", "expects",
"intends", "foresees", "projects", "forecasts" or words of similar meaning or
import. Such statements may involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from the future results, performance or
achievements expressed or implied by such forward-looking statements. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
the Company's expectations are disclosed in this Prospectus or in such documents
incorporated by reference ("Cautionary Statements"), including, without
limitation, those statements made in conjunction with the forward-looking
statements included under "Risk Factors", "Business", and otherwise herein.
Readers are cautioned that the forward-looking statements set forth or
incorporated by reference herein are only made as of the date hereof (or, in the
case of forward-looking statements contained in documents incorporated by
reference herein, as of the date thereof), and the Company expressly disclaims
any undertaking or obligation to release publicly any revisions of these
forward-looking statements to reflect events or circumstances after the
respective dates of such statements or to reflect unanticipated events or
developments. All written and oral forward-looking statements attributable to
the Company are expressly qualified in their entirety by the Cautionary
Statements.
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<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and
New York Regional Office, 75 Park Place, New York, New York 10007. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C., 20549 at prescribed
rates. Materials may also be obtained from the Commission's web site at
http://www.sec.gov. In addition, reports, proxy statements and other information
concerning the Company may be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a Registration Statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act with respect to the securities offered by this
Prospectus. For further information about the Company and the securities offered
hereby reference is made to the Registration Statement and to the exhibits as a
part thereof. Statements contained in this Prospectus as to the contents of any
document filed as an exhibit are not necessarily complete and, in each instance,
are qualified by reference to the copy of such exhibit to the Registration
Statement.
The Company has agreed that, for so long as the Securities
constitute "restricted securities" within the meaning of the Securities Act, the
Company will furnish, upon request of any holder of such "restricted
securities", to any holder or beneficial owner of such securities in connection
with any sale thereof and to any prospective purchaser thereof, the information
required by Rule 144A(d)(4) under the Securities Act to permit compliance with
Rule 144A under the Securities Act.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all information incorporated by reference herein of the
Company's public reports (other than exhibits not specifically incorporated by
reference into the text of such documents). Requests should be directed to
Walter A. Engdahl, Secretary, Sensormatic Electronics Corporation, 951 Yamato
Road, Boca Raton, Florida 33431-0700. The Company's telephone number is (561)
989-7000.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997; its Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1997, December 31, 1997 and March 31, 1998, respectively, and its
Current Report on Form 8-K filed April 2, 1998, under the Exchange Act have been
filed with the Commission (File Number 1-10739) and are incorporated by
reference into this Prospectus. The description of the Company's Common Stock
set forth in the Company's amended Registration Statement on Form 8-A, dated May
14, 1991, filed under the Exchange Act, is also incorporated herein by
reference.
All reports and other documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15 (d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of the Securities made by this Prospectus shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from their respective
dates of filing. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which is or is deemed to be incorporated herein by reference modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
-vi-
<PAGE> 8
THE COMPANY
Sensormatic Electronics Corporation ("Sensormatic" or the "Company")
is the leading designer, manufacturer and marketer of electronic security,
sensing and tracking systems in the world. Sensormatic has a leading market
share in its three major market segments: electronic article surveillance
("EAS") systems, closed circuit television ("CCTV") and video systems, and
access control and intelligent tagging and tracking ("ITT") systems. The
Company's EAS products include reusable hard tags and disposable labels as well
as detection and deactivation systems. Sensormatic's CCTV products include
various types of microprocessor-controlled cameras and monitoring systems. The
Company's access control and ITT systems provide intelligent tagging, tracking
and access systems to monitor the movements of people and/or assets.
Sensormatic's installed base of customers includes 96 of the top 100
retailers in the world, as well as more than half of the Fortune 500 companies.
The Company operates directly and through dealers and distributors in more than
80 countries and has the largest sales and service network in the industry, with
more than 1,700 internal personnel directly serving retail customers and more
than 600 independent dealers and distributors serving commercial/industrial
customers.
Sensormatic is a Delaware corporation organized in 1968 to succeed
its predecessor, an Ohio corporation founded in 1966. Sensormatic's principal
executive offices are located at 951 Yamato Road, Boca Raton, Florida
33431-0700, and its telephone number is (561) 989-7000.
For purposes of this Prospectus, the terms "Sensormatic" and
"Company" refer to Sensormatic Electronics Corporation and its subsidiaries,
except as otherwise stated or indicated by the context.
SUMMARY OF TERMS OF SECURITIES
<TABLE>
<S> <C>
April 13, 1998 Offering................. 6,900,000 Depositary Shares, each representing a one-tenth interest in a share of
Preferred Stock and entitling the holder to that portion of all the rights, preferences
and percentages of the fraction of a share of Preferred Stock (including dividend,
voting, conversion and liquidation rights and preferences) represented thereby.
Dividends............................... Cumulative dividends on the Preferred Stock (and the related Depositary Shares)
will accrue from April 13, 1998 at a rate per annum equal to 6 1/2% of the
liquidation preference per Depositary Share and will be payable quarterly in arrears
on January 1, April 1, July 1 and October 1 of each year, commencing July 1, 1998.
Dividends will be payable in cash or, at the option of the Company, in shares of
Common Stock (valued at 95% of the Average Stock Price (as defined herein)), or
a combination thereof. Certain of the Company's financial agreements currently
prohibit the payment of cash dividends. See "Risk Factors-- Restrictions on
the Company's Ability to Pay Cash Dividends" and "Description of Certain
Indebtedness".
Ranking................................. The Preferred Stock ranks junior in right of payment to all indebtedness and other
liabilities of the Company.
Conversion.............................. The Preferred Stock (and the related Depositary Shares) will be convertible, subject
to prior redemption, at any time after July 13, 1998, at the option of the holder
thereof, into Common Stock at a conversion price of $19.52 per share (equivalent
to 1.2807 shares of Common Stock per Depositary Share), subject to certain
adjustments.
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
Redemption.............................. The Preferred Stock (and the related Depositary Shares) will be redeemable, at the
option of the Company, in whole or in part, at any time on or after April 4, 2001, at
the redemption prices set forth herein, plus accumulated and unpaid dividends and
Liquidated Damages (as defined herein), if any, thereon to the redemption date.
Special Conversion Rights
Upon a Change of Control................ Upon the occurrence of a Change of Control (as defined herein), each holder of
shares of Preferred Stock (and the related Depositary Shares) will have the option
to convert all, but not less than all, of such holder's shares of Preferred Stock into
Common Stock at a conversion rate equal to the liquidation preference per share of
Preferred Stock divided by the higher of (i) the Market Value (as defined herein) of
the Common Stock at the time of the Change of Control and (ii) $10.67 per share
(which is equal to 66 2/3% of the last reported sale price on April 6, 1998, the date
of the Offering Memorandum in respect of the April 13, 1998 Offering), as such
amount may be adjusted each time that the conversion price is adjusted. See
"Description of Preferred Stock-- Special Conversion Rights upon a Change of
Control".
Voting Rights........................... Holders of the Preferred Stock (and the related Depositary Shares) have no voting
rights except as provided by law or, in certain events, as provided in the Certificate
of Designations (as defined herein). See "Description of Preferred Stock-- Voting
Rights".
Registration Rights; Liqui
dated Damages........................... The Company has agreed to use its reasonable best efforts to keep the registration
statement of which this Prospectus forms a part (the "Shelf Registration Statement")
effective until the earlier of (i) the date when all Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration Statement,
and (ii) such date when the holders of the Securities covered by the Shelf
Registration Statement are able to sell all such Securities immediately without
restriction pursuant to Rule 144(k) under the Securities Act and (iii) the second
anniversary of the effectiveness of the Shelf Registration Statement. The Company
is permitted to suspend the effectiveness of the Shelf Registration Statement for
certain periods under certain circumstances. If the Company fails to maintain the
effectiveness of the Shelf Registration Statement for the requisite period (other than
for a permitted suspension), the Company will be required to pay to holders of
Preferred Stock (and related Depositary Shares), under certain circumstances,
Liquidated Damages at an annual rate of $0.625 per $250 Liquidation Preference of
Preferred Stock (or $0.0625 per $25.00 liquidation preference of Depositary
Shares). See "Description of Preferred Stock-- Registration Rights; Liquidated
Damages."
Use of Proceeds......................... The Company will not receive any proceeds from the sale of the Securities by the
Selling Securityholders or the issuance of the Dividend Shares or Liquidated
Damages Shares by the Company.
Risk Factors............................ For a discussion of certain factors that should be considered by prospective
purchasers in evaluating an investment in the Securities offered hereby, see "Risk
Factors".
</TABLE>
For additional information regarding the Depositary Shares and the
Preferred Stock, see "Description of Depositary Shares" and "Description of
Preferred Stock".
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<PAGE> 10
RISK FACTORS
Prospective purchasers of the Securities offered hereby should
carefully review the information set forth below, in addition to the other
information contained in this Prospectus, in evaluating an investment in the
Securities offered hereby.
HISTORY OF RECENT LOSSES
Due to substantial restructuring and special charges, the Company
had a net loss in fiscal 1996 and fiscal 1997, and in the first quarter of
fiscal 1998. The Company has been implementing new strategic and operational
initiatives intended to significantly reduce manufacturing costs and operating
expenses, and increase revenue and operating income. The Company is also seeking
to reduce its working capital requirements by improved control of accounts
receivable and inventories and by outsourcing certain manufacturing activities.
However, the Company's operations generally are subject to economic, financial,
competitive, currency, legal and other factors, many of which are beyond its
control. Accordingly, although the Company had operating income and net income
in the second quarter of fiscal 1998, there can be no assurance that this trend
will continue or that the Company's initiatives will be successful in returning
the Company to sustained or increasing profitability.
RESTRICTIONS ON THE COMPANY'S ABILITY TO PAY CASH DIVIDENDS
The Company's ability to pay cash dividends, purchase or redeem
shares or make other payments or distributions in respect of its capital stock,
including the Preferred Stock (collectively, "Cash Stock Payments"), is
restricted by various covenants and conditions contained in certain of its
financial agreements. These provisions include a covenant not to make Cash Stock
Payments in excess of an amount determined by reference to a percentage of
cumulative net income since January 1, 1993 (giving effect to 50% of net income
and 100% of any deficit for each fiscal year), plus net cash proceeds from the
issuance of Common Stock. Compliance with this covenant is determined annually
based on the Company's fiscal year-end financial statements. At June 30, 1997,
the Company had a cumulative deficit for purposes of the foregoing covenant of
approximately $10.7 million, making it unable to pay cash dividends during
fiscal 1998. Since the Company has incurred losses (including restructuring and
special charges) of $47.5 million for the first nine months of fiscal 1998, it
is unlikely that the Company would be able to pay any cash dividends during
fiscal 1999. It is therefore likely that the Company would not be able to pay
cash dividends on the Preferred Stock until after the preparation of its audited
financial statements for fiscal 1999 at the earliest. Certain of the Company's
financial agreements also contain a covenant requiring maintenance of a minimum
consolidated net worth. Future agreements of the Company may also restrict the
Company's ability to pay cash dividends or make other Cash Stock Payments. See
"Description of Certain Indebtedness" and "-- Subordination of the Preferred
Stock".
The Certificate of Designations provides that, if dividends on the
Preferred Stock are in arrears and unpaid for six quarterly periods (whether or
not consecutive), the sole remedy to the holders of the Preferred Stock will be
the voting rights arising from a Voting Rights Triggering Event (as defined
herein). See "Description of Preferred Stock -- Voting Rights".
QUARTERLY PERFORMANCE
Because sales of the Company's products generate substantial gross
margins, results of any quarter can be significantly affected by a shortfall
from anticipated sales levels caused by a delay in the timing of one or more
large orders or otherwise; as in many businesses, the Company generally receives
and ships more than a majority of its orders filled in any quarter in the last
month of such quarter. As a result of these factors, the Company's quarterly
results may vary from those anticipated.
-3-
<PAGE> 11
ACCOUNTS RECEIVABLE
The Company historically maintains 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 to
increase market penetration by providing alternative financing options to its
retail customers, including deferred billing and long-term installment sales and
lease terms, resulting in extended accounts receivable recovery periods.
Additionally, as is common in connection with accounts receivable from retail
customers, the Company has experienced a historical pattern of delayed payments
by certain retail customers and, accordingly, the Company's levels of
receivables past due represent a relatively high percentage of total
receivables. (Note 3 to the Company's Consolidated Financial Statements included
in the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1997, and Note C to the Company's unaudited consolidated condensed financial
statements included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, incorporated by reference in this Prospectus,
contain further information relating to the Company's accounts receivable.). The
Company incurred substantial charges in fiscal 1996 to increase its valuation
allowance for accounts receivable and, in fiscal 1997, the Company recorded
additional charges to increase its valuation allowance for the recourse
provision of receivables financed with third parties. Although the Company
believes that its current reserves are adequate, there can be no assurance that
future adverse trends in the retail industry or other factors might not
materially affect the collectibility of the Company's receivables.
SUBSTANTIAL INDEBTEDNESS
The Company has, and after giving effect to the April 13, 1998
Offering and the application of the net proceeds therefrom, will continue to
have, consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of March 31, 1998, after giving pro forma effect to the
April 13, 1998 Offering and the application of the net proceeds therefrom, the
Company would have had outstanding consolidated indebtedness (including
short-term debt and current portions of long-term debt) of approximately $552.9
million and total stockholders' equity of approximately $888.9 million. The
degree to which the Company is leveraged could have important consequences to
holders of the Preferred Stock, including the following: (i) a substantial
portion of the Company's cash flow from operations will be dedicated to payment
of the principal and interest on its indebtedness, thereby reducing funds
available for other purposes; (ii) the Company's significant degree of leverage
could increase its vulnerability to changes in general economic conditions or
increase its costs of borrowing; and (iii) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes could be impaired.
COMPETITION
The electronic security industry continues to be highly competitive.
There are many alternatives available to protect people and assets, in addition
to the use of EAS, CCTV and access control systems. There are several other
companies that market EAS equipment to retail stores directly or through
distributors. With respect to CCTV system components and access control systems,
there are numerous companies that market directly or through distributors such
equipment to both retail and non-retail customers. The Company competes in
marketing its systems and products principally on the basis of product
performance, multiple technologies, service and price. Price competition has
been especially intense in recent years. 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, nor that new technologies will not be developed and introduced into the
marketplace, any of which could adversely affect the Company's business. See
"Business -- Competition".
PRODUCT DESIGN AND DEVELOPMENT AND MARKET ACCEPTANCE
The Company devotes substantial efforts and resources to the design
and development of new products and enhancement of existing products. It has
introduced a substantial number of new products in recent years. However, there
can be no assurance that the Company will be able to continue to design and
develop new or enhanced products in a timely manner to meet changing customer
requirements, to manufacture such products in a commercially viable
-4-
<PAGE> 12
manner and to gain satisfactory market acceptance of such products. See
"Business -- Product Research, Development and Engineering".
YEAR 2000 RISK
In connection with the implementation of a new enterprise-wide
management information system, commenced in 1996, the Company has implemented a
Year 2000 program which is expected to ensure that the Company's computer
systems and applications will function properly beyond 1999 in all material
respects. The Company believes that it has allocated adequate resources for this
purpose and expects its Year 2000 date conversion program to be successfully
completed on a timely basis. There can, however, be no assurance that this will
be the case. The Company has not separately estimated the expenditures expected
to address the Year 2000 issue, as such expenditures were originally
incorporated in the planned expenditures (estimated at $20 million) for the new
management information project prior to the widespread recognition of the Year
2000 issue. The ability of third parties with whom the Company transacts
business to adequately address their Year 2000 issues is outside of the
Company's control. There can be no assurance that the failure of the Company or
such third parties to adequately address their respective Year 2000 issues will
not have a material adverse effect on the Company's business, financial
condition, cash flows and results of operations.
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. Revenues from
operations of the Company's international subsidiaries were $503.6 million and
$370.5 million in fiscal 1997 and the first nine months of fiscal 1998,
respectively, representing approximately 49% and 51%, respectively, of total
revenues for those periods. The Company's sales to its international
distributors, approximately $31.7 million and $36.2 million, respectively, for
the foregoing periods, are invoiced and paid in U.S. dollars. Management has
estimated that the net impact of currency fluctuations on the Company's results
of operations is largely due to the strengthening of the U.S. dollar in the
three fiscal years ended June 30, 1997 and is not considered significant in any
of such years. However, fiscal 1998 results have been negatively affected by the
currency crisis in Asia Pacific as well as the weakened European currencies.
The Company monitors its currency exposures but does not 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.
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 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.
Notwithstanding the foregoing, however, there can be no assurance
that such currency fluctuations may not materially adversely affect the
Company's results of operations or financial condition.
DEPENDENCE UPON MANAGEMENT AND KEY PERSONNEL
The success of the Company will depend significantly upon its
President and Chief Executive Officer, Robert A. Vanourek; its Senior Vice
President and Chief Financial Officer, Garrett E. Pierce; and other key
employees of the Company. The loss of the services of Messrs. Vanourek, Pierce
or other key employees of the Company could have a material adverse effect upon
the Company's business and results of operations. In addition, the Company's
success will be dependent upon its ability to recruit and retain qualified
personnel, including engineering personnel.
-5-
<PAGE> 13
GOVERNMENTAL REGULATION
The sale and use of the Company's products are subject to regulation
by governmental authorities having jurisdiction over the sale and use of
electronic and communication equipment or health and safety standards. Such
systems are in compliance with currently applicable requirements and standards
under the regulations of government authorities in the U.S., in countries in
which the Company markets such products directly or through its subsidiaries and
in many other countries. In particular, electromagnetic field ("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 such new safety standards which may be
established. 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 ETSI (European
Telecommunications Standards Institute). As of January 1, 1996 new standards
were required to be met to apply the CE Mark to market products in the EU, and
the Company certified its products to the CE Mark requirements. Meeting CE Mark
requirements includes meeting standards established by CENELEC, ETSI and other
standard-setting organizations. Such standard-setting organizations are
continually considering the establishment of new standards and reconsidering
existing standards, including health and safety standards. There can be no
assurance that adverse changes or amendments to existing regulations or
standards, or new adverse regulations or standards, will not be adopted, or that
all products of the Company subject to regulations or standards will meet the
requirements of all such regulations and standards in all countries in which the
Company desires its products to be marketed.
The Food and Drug Administration ("FDA") has been conducting studies
into the effects of various devices such as airport metal detectors, store
security systems and some cellular telephones on implantable medical devices.
The Company is also aware of studies as to whether any hazards are posed to
wearers of implantable medical devices by a number of devices, including EAS
systems. While the Company believes there to be substantial evidence that no
health hazard is posed by the interactions between the Company's EAS systems and
such medical devices, and has presented such evidence to the FDA, 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 an adverse
report, the recommendation of precautionary measures and/or the adoption of
regulations which could adversely affect the Company. The Company is also aware
of attempts by one of its competitors to generate adverse publicity regarding
this issue. There can be no assurance that such attempts will not adversely
affect the Company. See "Business -- Governmental Regulation".
SUBORDINATION OF THE PREFERRED STOCK
The Company's obligations with respect to the Preferred Stock are
subordinate and junior in right of payment to all present and future
indebtedness of the Company and its subsidiaries, including the Company's Senior
Notes (as defined herein) and the Revolving Credit Facility (as defined herein)
and to all subsequent series of preferred stock of the Company which by their
respective terms rank senior to the Preferred Stock. See "Description of Certain
Indebtedness" and "Description of Preferred Stock". In addition to the dividend
restrictions set forth in the agreements governing the Senior Notes and the
Revolving Credit Facility, no cash dividend payments may be made with respect to
the Preferred Stock if (i) the obligations with respect to the Senior Notes or
the Revolving Credit Facility are not paid when due or (ii) any other event of
default has occurred under the agreements governing the Senior Notes and the
Revolving Credit Facility and certain other of the Company's financial
agreements, and is continuing or would occur as a consequence of such payment.
In the event of bankruptcy, liquidation or reorganization of the Company, the
assets of the Company will be available to pay obligations on the Preferred
Stock only after all Senior Securities (as defined herein) and all indebtedness
of the Company have been paid, and there may not be sufficient assets remaining
to pay amounts due on any or all of the Preferred Stock then outstanding. See
"Description of Preferred Stock -- Ranking" and "Description of Certain
Indebtedness".
-6-
<PAGE> 14
ABSENCE OF A PUBLIC MARKET FOR THE DEPOSITARY SHARES
The Depositary Shares and Preferred Stock are new issues of
securities for which there is currently no public market. The Company does not
intend to apply for listing of the Depositary Shares or the Preferred Stock on
any securities exchange or on the Nasdaq National Market. Although the Initial
Purchasers have informed the Company that they currently intend to make a market
in the Depositary Shares, they are not obligated to do so and any such
market-making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Depositary Shares. If a market for the Depositary Shares were to develop, the
Depositary Shares may trade at prices that may be higher or lower than their
initial offering price depending upon many factors, including prevailing
interest rates, the Company's operating results and the markets for similar
securities. Historically, the market for securities such as the Depositary
Shares has been subject to disruptions that have caused substantial volatility
in the prices of securities similar to the Depositary Shares. There can be no
assurance that, if a market for the Depositary Shares were to develop, such a
market would not be subject to similar disruptions. The Company does not expect
a market for the Preferred Stock to develop.
FORWARD-LOOKING STATEMENTS
The statements contained in this Prospectus (including in documents
incorporated by reference herein) that are not historical facts are
"forward-looking statements" (as such term is defined in the Private Securities
Litigation Reform Act of 1995), which can be identified by the use of
forward-looking terminology such as "estimates", "projects", "targets",
"anticipates", "expects", "intends", "believes", or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. Management wishes to caution the
reader that these forward-looking statements, such as the Company's market
opportunity presented by source tagging, the anticipation of increased sales of
its products and statements regarding development of the Company's businesses,
the estimate of market sizes and addressable markets for the Company's services
and products, and other statements contained in this Prospectus or in documents
incorporated by reference herein regarding matters that are not historical
facts, are only estimates or predictions. No assurance can be given that future
results will be achieved and actual events or results may differ materially as a
result of risks and uncertainties facing the Company or actual results differing
from the assumptions underlying such statements. Such risks and assumptions
include, but are not limited to, the Company's ability to successfully market
its products and services to current and new customers and to develop and
provide innovative and cost-effective products and solutions, as well as risks
from changes in international operations, exchange rate risks, market conditions
for the Company's products, competition, and changes in the economic climate,
any of which could cause actual results to vary materially from the future
results indicated, expressed or implied, in such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Prospectus or as the date of
such documents incorporated by reference, as the case may be. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Securities by the Selling Securityholders or the issuance of the Dividend Shares
or Liquidated Damages Shares by the Company.
-7-
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following statement of operations and balance sheet data set
forth below have been derived from the audited Consolidated Financial Statements
of the Company for each of the respective fiscal years indicated. The
Consolidated Financial Statements as of June 30, 1997 and 1996, and for each of
the three years in the period ended June 30, 1997, and the report of Ernst &
Young LLP thereon, are included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 (File Number 1-10739), incorporated herein
by reference. The selected historical financial information presented below as
of March 31, 1998 and for the periods in the nine months ended March 31, 1998
and March 31, 1997, is derived from the unaudited condensed consolidated
financial statements of the Company included in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998 (File Number 1- 10739),
incorporated herein by reference, which in the opinion of Sensormatic management
includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the information set forth therein. This selected
historical financial information should be read in conjunction with the
consolidated financial statements, related notes and other financial information
incorporated herein by reference. The results of operations for the nine months
ended March 31, 1998 are not necessarily indicative of results that can be
expected for the full year.
-8-
<PAGE> 16
<TABLE>
<CAPTION>
NINE MONTHS ENDED
Years Ended June 30, MARCH 31,
-------------------------------------------------------- -------------------------
1993(1) 1994(1) 1995(1)(2) 1996(1)(3) 1997(3) 1997 1998(3)
---------- --------- ----------- ----------- ------- ---------- -------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ............................. $ 487.3 $ 656.0 $ 889.1 $ 994.6 $ 1,025.7 $ 752.7 $ 726.1
Operating costs and expenses:
Cost of sales ............................ 231.8 311.8 437.3 560.2 539.4 388.8 381.2
Depreciation on revenue
equipment .............................. 15.4 15.0 16.3 20.3 20.8 15.5 14.1
Selling, general and
administrative ......................... 148.4 196.2 300.3 418.5 392.6 273.1 241.8
Restructuring charges .................... -- -- -- 85.3 26.8 -- 43.0
Research, development and
engineering ............................ 13.7 18.0 22.7 27.7 24.5 17.5 20.0
Amortization of intangibles .............. 7.0 10.2 14.6 17.1 19.5 14.6 16.0
--------- --------- --------- --------- --------- --------- ---------
Total operating costs and
expenses ......................... 416.3 551.2 791.2 1,129.1 1,023.6 709.5 716.1
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss) .................... 71.0 104.8 97.9 (134.5) 2.1 43.2 10.0
Other (expenses) income:
Interest income .......................... 17.1 14.3 17.2 16.9 16.2 12.7 10.6
Interest expense ......................... (18.7) (22.7) (29.0) (38.4) (47.9) (35.7) (38.3)
Litigation recoveries (settlement),
net ................................ -- -- -- -- -- -- (45.7)
Other, net ............................... 2.6 (0.4) 2.9 (3.9) (0.7) (0.7) (4.9)
--------- --------- --------- --------- --------- --------- ---------
Total other (expenses)
income ........................... 1.0 (8.8) (8.9) (25.4) (32.4) (23.7) (78.3)
Income (loss) from continuing
operations before income taxes ........... 72.0 96.0 89.0 (159.9) (30.3) 19.5 (68.3)
Provision (benefit) for income
taxes .................................... 17.9 23.9 19.4 (62.2) (8.9) 5.5 (20.8)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations ............................... 54.1 72.1 69.6 (97.7) (21.4) 14.0 (47.5)
Discontinued operations(4) ................. -- -- 4.1 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) .......................... $ 54.1 $ 72.1 $ 73.7 $ (97.7) $ (21.4) $ 14.0 $ (47.5)
========= ========= ========= ========= ========= ========= =========
Basic earnings (loss) per common
share(5)(6):
Continuing operations .................... $ 1.00 $ 1.20 $ 0.98 $ (1.32) $ (0.29) $ 0.19 $ (0.64)
Discontinued operations .................. -- -- 0.06 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ........................ $ 1.00 $ 1.20 $ 1.04 $ (1.32) $ (0.29) $ 0.19 $ (0.64)
========= ========= ========= ========= ========= ========= =========
Diluted earnings (loss) per common share(5):
Continuing operations .................... $ 0.93 $ 1.13 $ 0.96 -- -- $ 0.19 --
Discontinued operations .................. -- -- 0.06 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ........................ $ 0.93 $ 1.13 $ 1.02 --(7) --(7) $ 0.19 --(7)
========= ========= ========= ========= ========= ========= =========
Number of shares used in computation
of Basic earnings (loss) per
share .................................... 54.2 60.1 70.8 73.6 74.1 73.9 74.2
========= ========= ========= ========= ========= ========= =========
Number of shares used in computation
of Diluted earnings (loss) per
share .................................... 63.6 68.4 72.2 --(7) --(7) 74.1 --(7)
========= ========= ========= ========= ========= ========= =========
</TABLE>
-9-
<PAGE> 17
<TABLE>
<CAPTION>
June 30, MARCH 31,
---------------------------------------------------------- ------------------------
1993 1994 1995 1996 1997 1997 1998
------ --------- ---------- ---------- --------- ----------- ----------
(IN MILLIONS)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets ............. $ 926.9 $ 1,155.5 $ 1,570.9 $ 1,630.3 $ 1,643.6 $ 1,672.9 $ 1,763.3
Total debt ............... $ 194.2 $ 219.2 $ 326.7 $ 516.5 $ 523.3 $ 559.6 $ 611.9
Stockholders' equity...... $ 489.8 $ 727.7 $ 952.7 $ 831.7 $ 772.9 $ 817.8 $ 722.3
--------
</TABLE>
(1) Certain amounts in prior years have been reclassified to conform to the
1997 presentation.
(2) In fiscal 1995, the Company acquired Knogo Corporation's operations
outside the United States, Puerto Rico and Canada.
(3) In fiscal 1996 and 1997 and the first nine months of fiscal 1998, the
Company recorded restructuring and special charges of $186.0, $48.9 and
$43.0, respectively. The restructuring charges pertain to various cost
reduction programs, and the special charges primarily represent
increases to accounts receivable and inventory valuation allowances. In
addition, during the first nine months of fiscal 1998, the Company
recorded a $45.7 litigation settlement charge, net of estimated
insurance recoveries. A summary of the restructuring, special and
litigation settlement charges, net of estimated insurance recoveries,
recorded in each fiscal year and for the nine months ended March 31,
1998 and the captions under which the special charges are included in
the Statement of Operations Data follows:
<TABLE>
<CAPTION>
FISCAL NINE MONTHS
YEAR ENDED ENDED
JUNE 30, MARCH 31,
--------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Restructuring charges ........................... $ 85.3 $ 26.8 $ 43.0
Special charges:
Cost of sales ................................. 29.1 2.5 --
Depreciation on revenue equipment ............. 2.6 -- --
Selling, general and administrative ........... 68.5 19.6 --
Research, development and engineering ......... 0.5 -- --
------- ------- -------
Total special charges ................. 100.7 22.1 --
------- ------- -------
Litigation settlement (recoveries), net ......... -- -- 45.7
------- ------- -------
Total pre-tax restructuring, special and
litigation settlement (recoveries), net charges $ 186.0 $ 48.9 $ 88.7
======= ======= =======
Total after-tax restructuring, special and
litigation settlement (recoveries), net charges $ 118.2 $ 34.6 $ 61.6
======= ======= =======
Basic and Diluted loss per common share ......... $ 1.60 $ 0.47 $ 0.83
======= ======= =======
</TABLE>
(4) In fiscal 1995, the Company reduced income tax liabilities by $4.1;
such amount related to a previously discontinued business and was no
longer required.
(5) The Company's historical earnings per share amounts have been restated
to conform to the requirements of Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings per Share", which was effective
for periods ending after December 15, 1997. See "Computation of
Earnings Per Share".
(6) Supplemental earnings per share for fiscal 1997 and the nine months
ended March 31, 1998, giving effect to the April 13, 1998 Offering and
the application of net proceeds to repay outstanding indebtedness, as
if the transaction had occurred at the beginning of each such period,
has not been presented as the resulting per share amounts are
anti-dilutive.
(7) Not shown as effect is anti-dilutive.
-10-
<PAGE> 18
COMPUTATION OF EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128 "Earnings Per Share" effective for periods ending
after December 15, 1997. SFAS No. 128 requires a dual presentation, for complex
capital structures, of basic and diluted earnings per share ("EPS") on the face
of the income statement and requires a reconciliation of basic EPS factors to
diluted EPS factors. The Company adopted SFAS No. 128 in December 1997, with no
material impact to the Company's EPS calculation or disclosure information. The
following table reflects the restated EPS amounts for the last five fiscal years
and the required reconciliation of the numerator and denominator used in such
calculation for each period.
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended June 30, March 31,
---------------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
COMPUTATION OF BASIC AND
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing
operations ..................... $ 54.1 $ 72.1 $ 69.6 $ (97.7) $ (21.4) $ 14.0 $(47.5)
Discontinued operations .......... -- -- 4.1 -- -- -- --
Add: Interest expense (net of
tax) on 7% Convertible
Subordinated Debentures ........ 5.1 4.9 -- -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Income (loss) applicable to
common stockholders ............ $ 59.2 $ 77.0 $ 73.7 $ (97.7) $ (21.4) $ 14.0 $(47.5)
======== ======== ======== ======== ======== ====== ======
Weighted average common shares
outstanding .................... 54.2 60.1 70.8 73.6 74.1 73.9 74.2
Add: Stock options ............... 2.1 1.9 1.4 --(1) --(1) 0.2 --(1)
Convertible debt shares ..... 7.3 6.4 -- -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Total number of dilutive
shares ................... 63.6 68.4 72.2 73.6 74.1 74.1 74.2
======== ======== ======== ======== ======== ====== ======
Basic earnings (loss) per share:
Continuing operations ...... $ 1.00 $ 1.20 $ 0.98 $ (1.32) $ (0.29) $ 0.19 $(0.64)
Discontinued operations .... -- -- 0.06 -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Net income (loss) .......... $ 1.00 $ 1.20 $ 1.04 $ (1.32) $ (0.29) $ 0.19 $(0.64)
======== ======== ======== ======== ======== ====== ======
Diluted earnings (loss) per share:
Continuing operations ...... $ 0.93 $ 1.13 $ 0.96 -- -- $ 0.19 $ --
Discontinued operations .... -- -- 0.06 -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Net income (loss) .......... $ 0.93 $ 1.13 $ 1.02 --(1) --(1) $ 0.19 $ --(1)
======== ======== ======== ======== ======== ====== ======
- ---------------
</TABLE>
(1) Amount not shown as the effect is anti-dilutive.
-11-
<PAGE> 19
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months
Year Ended June 30, Ended March 31,
------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1) 4.68 5.07 3.92 --(2) 0.45(2)(3) 1.57 --(2)(3)
</TABLE>
(1) For purposes of calculating the ratio of earnings to fixed charges: (i)
earnings consist of earnings (loss) before income taxes and fixed
charges, excluding capitalized interest, and (ii) fixed charges consist
of interest expensed and capitalized, amortization of deferred
financing costs and a portion of rent expense under operating leases
deemed by the Company to represent an interest factor.
(2) Earnings before fixed charges for fiscal 1996 and the nine months ended
March 31, 1998 were insufficient to cover fixed charges by $158.3 and
$65.1, respectively. Excluding restructuring, special and net
litigation charges, the ratio of earnings to fixed charges for fiscal
1996, fiscal 1997 and the nine months ended March 31, 1998 would have
been 1.68, 1.43 and 1.59, respectively.
(3) The pro forma ratio of earnings to combined fixed charges and preferred
stock dividends for fiscal 1997 was 0.36 and, for the nine months ended
March 31, 1998, earnings before fixed charges were insufficient to
cover pro forma fixed charges by $73.5, after giving effect to the
April 13, 1998 Offering and the payment of dividends on the Preferred
Stock as if such transaction had occurred at the beginning of each such
period. Excluding restructuring and net litigation charges, the pro
forma ratio of earnings to combined fixed charges and preferred stock
dividends for the nine months ended March 31, 1998 was 1.32.
BUSINESS
INTRODUCTION
Sensormatic is the leading designer, manufacturer and marketer of
electronic security, sensing and tracking systems in the world. Sensormatic has
a leading market share in its three major market segments: EAS systems, CCTV and
video systems, and access control and ITT systems. The Company's EAS products
include hard tags and disposable labels as well as detection and deactivation
systems. Sensormatic's CCTV products include various types of
microprocessor-controlled cameras and monitoring systems. The Company's access
control and ITT systems provide intelligent tagging, tracking and access systems
to monitor the movements of people and/or assets.
Sensormatic's installed base of customers includes 96 of the top
100 retailers in the world, as well as more than half of the Fortune 500
companies. The Company operates directly and through dealers and distributors in
more than 80 countries and has the largest sales and service network in the
industry, with more than 1,700 internal personnel directly serving retail
customers and more than 600 independent dealers and distributors serving
commercial/industrial customers.
STRATEGIC RESTRUCTURING AND OTHER STRATEGIES
The Company's rapid growth and success in the late 1980's and
first half of the 1990's took Sensormatic from $100 million in revenues in
fiscal 1987 to more than $1 billion in fiscal 1997, representing a compound
annual growth rate in excess of 25%. These results were driven by internal
growth as well as strategic acquisitions. This rapid growth caused the Company
to outgrow its infrastructure and systems. As a result, in 1996 the management
team, led by newly recruited senior management personnel, began implementing a
long-term strategic restructuring plan to harness the Company's growth, rebuild
and improve the infrastructure of the Company and restore stability to the
Company's operations. The plan is centered around three main priorities: (i)
expense and asset control, (ii) investments in processes and systems and (iii)
quality, sustainable growth. The 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.
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This review of the Company's global operations focused on operational and
organizational structures and systems, facilities utilization, product
rationalization, quality improvements, inventory valuation and accounts
receivable balances and related collection efforts. In fiscal 1996, as a result
of the aforementioned initiatives, the Company recorded restructuring and
special charges of approximately $186 million, with an after-tax impact of
approximately $118 million.
At the end of fiscal 1997, the Company announced additional
restructuring actions which include the divestiture of non-core businesses and
additional cost-reduction plans, which mainly include staff reductions within
its European operations. These recent restructuring actions resulted in total
restructuring and special charges of approximately $92 million with an after-tax
impact of approximately $65 million recorded in the fourth quarter of fiscal
1997 and the first quarter of fiscal 1998. The Company's U.S.
commercial/industrial direct sales and installation business, which was sold in
September 1997, constituted the largest non-core business to be divested. The
Company elected to exit the commercial/industrial direct sales and installation
business due to market conflicts with its indirect sales channels (dealers and
distributors). This strategic decision allows the Company to focus on partnering
with dealers and distributors to promote products in the commercial/industrial
markets and thereby lower its distribution and installation costs while
improving customer service. The special charges principally related to the
allowances for accounts receivable and receivables financed with third parties.
In connection with its restructuring plan, the Company embarked
upon a long-term process improvement and total quality management program
internally referred to as "Q3". The program's objective is to provide superior
value for customers, stockholders and employees, by establishing a culture of
"continuous improvement" in all of the Company's business processes. Q3 is a
multi-year, enterprise-wide effort in which the Company is reengineering
operations in every function and business unit globally. In connection with Q3,
the Company initiated the implementation of a new enterprise-wide management
information system and an extensive internal training program, both of which are
expected to significantly enhance global operational efficiencies and improve
customer service.
The Company is organized into four principal sales organizations:
North America Retail, Europe Retail, International Retail (which principally
consists of the Asia Pacific, the Middle East and the Latin America regions) and
C/I Worldwide. The Company has two major product line management functions: the
EAS Division and the ISS Division, which manages CCTV systems and components,
and access control and ITT systems. Both product line management divisions
service commercial/industrial and retail customers and sales organizations as
well as coordinate engineering, manufacturing and quality control for these two
major product groups. These divisions are supported by a supply chain management
organization with responsibility for purchasing, logistics and manufacturing.
Additionally, the Company has a 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 personnel who work globally with major retailers,
manufacturers, packaging companies, licensees, associations and industry
consultants to implement and expand the use of source tagging by manufacturers
and distributors.
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 several strategic
acquisitions. The Company's strategy to expand internationally also has included
the use of distribution arrangements with independent, local businesses in
certain countries, and, in some cases, controlling interest ventures with local
businesses, Brazil in particular. The Company has also acquired its distributors
in certain countries, e.g., recently, in Columbia and Argentina. The Company
presently markets its products directly in more than 25 countries throughout
North America, Europe and certain Asia/Pacific and South American countries,
and, in more than 55 other countries, the Company sells its products to
distributors for resale or lease. The Company plans to expand into additional
countries in the Middle East, Latin America, Asia, Africa and eastern Europe
using distribution or controlling interest venture arrangements.
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Additionally, the Company has over the past several years expanded
its commercial/industrial business through several strategic acquisitions,
including 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; and American Dynamics, a manufacturer of CCTV components, switchers and
controllers. As a result of these acquisitions, the Company acquired additional
product lines to complement its previously existing CCTV and access control
products, together with well established dealer/distribution sales channels.
These acquisitions have enabled the Company to integrate certain product lines
thereby improving product compatibility and performance. Software House, Robot
Research and American Dynamics are now managed as part of the ISS Division.
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 help prevent shoplifting and reduce inventory
shrinkage.
- CCTV and video systems, consisting of computer controlled
cameras integrated with sophisticated video switching and
transmission products which monitor activity throughout
an establishment for operational safety and/or theft
deterrence and detection 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.
- ITT systems, consisting of electronic identification and
tracking technologies which work in conjunction with
software-based applications to protect equipment and
assets, as well as track products throughout the supply
chain.
Consolidated revenues by principal products and systems for the
years ended June 30, 1995, 1996 and 1997, and the nine month periods ended March
31, 1997 and 1998, are as follows:
CONSOLIDATED REVENUES BY PRINCIPAL PRODUCTS AND SYSTEMS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED JUNE 30, MARCH 31,
-------------------------------- -------------
1995 1996 1997 1997 1998(1)
-------- -------- ---------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EAS ............................... $ 511.2 $ 542.2 $ 533.0 $ 391.3 $ 396.4
CCTV .............................. 255.7 297.5 314.6 227.8 218.9
ACCESS CONTROL/ITT ................ 46.1 60.8 60.7 43.6 31.4
-------- -------- ---------- -------- --------
SUBTOTAL ................ 813.0 900.5 908.3 662.7 646.7
INSTALLATION, MAINTENANCE AND OTHER 76.1 94.1 117.4 90.0 79.4
-------- -------- ---------- -------- --------
TOTAL ................... $ 889.1 $ 994.6 $ 1,025.7 $ 752.7 $ 726.1
======== ======== ========== ======== ========
</TABLE>
- ----------
(1) IN THE FIRST HALF OF FISCAL 1998, THE COMPANY COMPLETED THE
DIVESTITURE OF CERTAIN NON-CORE BUSINESSES WITH REVENUES FOR FISCAL
1997 OF APPROXIMATELY $89. THE REVENUES OF SUCH BUSINESSES INCLUDED
IN THE ABOVE TABLE FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998
WERE APPROXIMATELY $60.9 AND $11.4, RESPECTIVELY.
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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 installed directly into floors as pedestals or concealed
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,
distribution centers and/or checkout lanes. 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
configurations. 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 positioned at the cash register and are generally disposed of
after use. Certain labels can be reactivated with the Company's reactivation
devices.
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 systems utilize a proprietary acousto-magnetic
technology which is the most advanced and rapidly growing anti-theft technology
in the world. This technology is used in more than 15 different electronic
anti-theft systems sold by the Company under various brand names including Pro
- - Max(R), Floor - Max(R), Euro - Max(TM), Sensor - Max, Mega - Max, MAX
Checkout(TM), and Ultra - Post. 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, ability to be reactivated, and ability to
work in close proximity to metal. 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 other technologies.
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 the acousto-magnetic technology. 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.
SensorStrip Checkout (the latest generation of AisleKeeper(R))
systems utilize proprietary advanced magnetostrictive technology and standard
low frequency electromagnetic 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
magnetostrictive technology sold by the Company includes SensorStrip Checkout
and SensorStrip Checkout Plus (formerly known as AisleKeeper and AisleKeeper II,
respectively, in the U.S., and as Checkout Control and Checkout Control II,
respectively, in Europe). The SensorStrip Checkout Plus is especially engineered
to comply with the Americans with Disabilities Act as well as the European
Disabilities Acts. The standard SensorStrip label is a thin micromagnetic wire
encapsulated in transparent tape attached to merchandise which is passed around
the system during the checkout process or, with certain versions, may be
deactivated by a device which can be fitted in the conveyor belt at a checkout
station. Like Ultra-Max, Sensormatic's electromagnetic technology supports
source tagging programs.
Microwave systems are anti-shoplifting systems that utilize high
radio frequency technology. Microwave systems protect wide exits and are widely
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. Microwave systems are the most widely used technology with
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soft good retailers and the large base of Microwave system installations
represents the largest potential for upgrade to Ultra - Max.
Swept-RF or swept 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).
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 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 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 ITT systems. The following is a
description of key CCTV products 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. SpeedDome cameras 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
cameras may be integrated with other Sensormatic products to create a more
comprehensive overall security program.
Video switchers/controllers are used to switch cameras to view an
object in response to an alarm or at an operator's command. The Company markets
a full line of video switchers/controllers, ranging from systems which can
support up to sixteen cameras to more complex systems which support more than
1,000 cameras. Video switchers/controllers are marketed under various brand
names including high-end video 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 8, View Manager 16 and View Manager(R) 96 ("VM96"),
which when used with a Touch Tracker(R) keyboard, can control 8, 16, and 96
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 single video monitor.
Video transmission systems allow for the capability to remotely
view stores, warehouses, and other facilities and are marketed under the
SensorLink(TM) PC or HyperScan(R) Ultra brand names. These video transmission
systems are PC based and can be operated over standard telephone lines or the
ISDN ("Integrated Services Digital Network"), allowing
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users to view video images and/or control and operate cameras, alarm inputs and
relay controls from remote locations. SensorLink PC and HyperScan allow users to
view up to sixteen cameras simultaneously.
Intelligent Digital Video systems search video recordings, and
based on parameters set by the user, locate and playback preprogrammed alarm
events, light levels changes or special types of motion normally associated with
a security breach. Proprietary video tools provide image magnification and
enhancement to further improve alarm event analysis and documentation.
Intelligent digital video systems are marketed under the brand name Intellex. A
new Intellex unit introduced in 1997 won the Security Industry Association's
1997 "Judge's Choice" award.
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 and inserts or swipes the badge at a door reader to
gain access to buildings, rooms and other enclosures. The Company's access
control 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, alarm and ITT
systems, thus providing for additional security and protection.
The Company offers a full line of access control systems to
address a wide range of customers and their requirements. Systems include the
C-CURE(R) 1 Plus Ultra, a high end integrated security system that monitors and
controls entrances and exits with a fully embedded photo imaging system; C-CURE
800, a mid-range integrated access control and security management system
allowing manual control and viewing from display screens; and EZ 2000 Entry(TM),
a small facility software application that manages access control and alarm
monitoring. These systems range in capacities from two readers accommodating
3,000 cardholders up to 2,048 readers accommodating 250,000 cardholders.
INTELLIGENT TAGGING AND TRACKING SYSTEMS
ITT systems are new and important initiatives within Sensormatic
which utilize "smart" tags that combine the security benefits of conventional
EAS tags with the intelligence capabilities of RFID. RFID chips provide a
miniature database able to store variable data, such as warranty information,
time, date, and location of sale or manufacture. ITT systems will combine
existing proprietary asset protection and access control applications with RFID
tags and software to create a complete range of sensing and tracking solutions
which can be used to protect and track assets in commercial/industrial and
retail environments. Asset management, service, warranty, lease information,
perpetual inventory management and reverse logistics management are some of the
applications to be provided by ITT systems.
The SenTrac ID(TM) system utilizes RFID tags or transponders
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. The SenTrac ID system can function individually or in an
integrated security network. It was this technology, integrated with CCTV and
access control biometric hand readers, that was utilized at the 1996 Olympic
Games.
SALES REVENUE
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 export sales of new products and systems to
distributors in foreign countries and through the sale of selected new equipment
to dealers and system integrators.
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 generally with terms of 60 months or
greater. The Company believes that offering its customers flexible terms,
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including long-term financing, is an advantageous competitive marketing program.
For each of the three fiscal years in the period ended June 30, 1997, and for
the nine months ended March 31, 1998, no single customer accounted for 10% or
more of the Company's consolidated revenues.
The Company also leases systems under non-cancelable operating
leases. Such leases are generally for terms of 36 to 54 months. Additionally,
the Company generates revenues from the installation, service and maintenance of
its systems.
MARKETS AND MARKETING STRATEGY
Markets
The Company principally markets its EAS products and systems
directly to retailers. In many retail environments, the 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 normally ranges 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.
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 and food retailers, such as supermarkets, hypermarkets, home improvement
centers, drug, mass merchandise, optical, music, hardware, book, video, and
entertainment stores, have increasingly become users of EAS products and
systems. The Company believes that it holds a significant market share of this
worldwide EAS market. Retailers also make extensive use of CCTV products and
systems to enhance security and the safety of their operations as well as access
control systems.
Several of the newer EAS technologies used by retailers are used
in commercial/industrial markets 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.
Commercial/industrial installations of the Company's CCTV, access
control and/or ITT products and systems range from small to medium size
businesses to large domestic and international operations and businesses. The
Company has historically marketed its CCTV, access control and ITT products and
systems both directly to end user customers and indirectly through distributors
and dealers to the commercial/ industrial markets. As previously discussed, the
Company is exiting the commercial/industrial direct sales and service business,
and the Company's U.S. commercial/industrial direct sales and installation
business was sold in September 1997. This strategic decision allows the Company
to focus on partnering with dealers and distributors to promote products in the
commercial/industrial markets and thereby lower its distribution and
installation costs while improving customer service.
The Company has a broad range of electronic security products and
systems, and the Company's customers 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. The Company supplies 96 of the top 100 retailers in the world and more
than half of the Fortune 500 companies use its products.
Marketing Strategy
The Company's principal marketing strategies are as follows:
Ultra - Max Technology Expansion. The Company has focused its
marketing and sales efforts on the promotion of Ultra-Max technology to
relatively unpenetrated markets such as food and hard goods retailers. The
Company also expects to capitalize on its significant market share among soft
goods retailers to transition from older EAS technology to
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Ultra-Max. The broader utilization of Ultrao Max is expected to provide
retailers source tagging opportunities in all merchandise categories.
Recurring Label Sales. The sale of EAS systems and devices to hard
goods retailers has been growing significantly in recent years and the Company
believes that there is potential for continued growth. Hard goods merchandise is
protected with labels which leave the store with the merchandise, representing a
source of recurring revenues to the Company. Labels may be self-adhesive,
stick-on labels which are attached to merchandise by the retailer or applied at
the point of manufacture or distribution.
Source Tagging. 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, supermarkets and discount
stores), to enable merchandise to be protected during the manufacturing or
packaging process. Source tagging is intended to help retailers increase product
sales and profitability through open merchandising and product exposure, reduce
shrinkage and reduce costs by eliminating the need for sales associates to apply
security tags and labels to merchandise. Currently more than 500 vendors in the
U.S. and more than 1,400 worldwide participate in source tagging with the
Company's Ultra - Max and electromagnetic based labels. The Company estimates
that in fiscal 1997, these suppliers provided U.S. and international retailers
with more than 430 million source tagged labels. The increased utilization of
source tagging is expected to result in increased label sales and/or royalty
income as well as increased system sales.
Licensing Label Production. The Company has entered into license
agreements with leading label producing com panies, such as Avery Dennison and
Wallace Computer Systems, to manufacture the Company's Ultra - Strip labels. The
Company believes that the licensing agreements will allow it to gain
'efficiencies in label manufacturing, distribution and application for source
tagging that are expected to reduce the overall cost of source tagging programs
to retailers and suppliers as well as reduce the Company's capital investment in
label manufacturing. These agreements are expected to result in a broader
distribution of Ultra - Strip labels and, therefore, facilitate the growth of
Ultra - Max technology, as well as allow Sensormatic to focus on systems and
security solutions. Royalty fees to be paid based on sales generated by the
licensees will provide recurring revenue to the Company.
Commercial/Industrial Markets. Through C/I Worldwide the Company
intends to further expand into commercial/ industrial markets. C/I Worldwide
sales personnel partner with dealers and distributors to target major national
and global customers and offer complete integrated security solutions. As part
of the Company's strategy to highlight its expansion into commercial/industrial
markets, Sensormatic was the official electronic security supplier to the 1996
Olympic Games in Atlanta, the first official electronic security supplier in
history. The Company provided the electronic security technology, including
CCTV, access control and ITT systems, to the highly secured areas. The Olympics
represented the most extensive commercial electronic security installation in
the world.
Integrated Security Solutions. The Company is focusing its efforts
on the further development of integrated security solutions for retail and
commercial/industrial users and has formed the ISS Division to coordinate and
monitor the engineering, manufacturing and quality control efforts of CCTV,
access control and ITT systems. The Company has greatly expanded its product
group beyond retail only products, with its CCTV and access control product
lines. A key example is Intellex, the first "intelligent" CCTV display, record
and analysis system on the market. Additionally, ITT systems, which utilize
smart tags that combine the benefits of conventional EAS tags with the
intelligence capabilities of RFID technology, are key development projects for
Sensormatic. The Company is also combining its resources with other partners,
such as Texas Instruments and Micron Communications, as part of its product
development efforts.
SALES AND SERVICE ORGANIZATION AND DISTRIBUTION
At February 28, 1998, the Company employed approximately 2,140
sales and customer engineering personnel worldwide to market and service its
products directly to retail and commercial/industrial customers. In addition,
the Company's products are marketed and serviced by a large network of sales and
customer engineering personnel employed by dealers and distributors throughout
the world. Sales and service personnel are directed from offices located
throughout
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the U.S. and in more than 80 countries worldwide. The Company believes that a
major factor in its success has been 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, retail specialized sales groups have been created to target the
supermarket industry and key soft goods retailers in the U.S. Similar
specialized sales groups, concentrating on self-service stores and hypermarkets,
have been formed 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 and provide improved customer service. Approximately 400
personnel employed in the U.S. commercial/industrial direct sales and service
business were transferred to the purchaser of such operations in September 1997.
C/I Worldwide will retain a smaller sales force which will partner with dealers
and distributors to promote the Company's products and engage in national
marketing.
BACKLOG
As of March 31, 1998 and March 31, 1997, the Company had a backlog
of orders of $40.6 million and $85.6 million, respectively. Backlog includes
only expected revenues from firm orders which are expected to be installed or
delivered within one year. The March 31, 1997 backlog includes orders of $ 15.3
million for the U.S. commercial/industrial direct sales and installation
business which was sold in September 1997. 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 new orders and installations during this period.
PATENTS AND RELATED RIGHTS
The Company owns or is the exclusive licensee of more than 200
active patents issued by the U.S. Patent and Trademark Office (as well as
corresponding foreign patents). These patents cover a variety of inventions and
features, including the Company's acousto-magnetic (Ultra - Max),
electromagnetic, microwave, swept-RF systems and CCTV systems. The Company has
81 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, the abilities
of its established and experienced sales and service organization and its
leadership position in its industry, 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 also has a manufacturing facility in
Brazil. Approximately 60% of the Company's production takes place in its Puerto
Rico facility, which accounts for approximately 70% of the manufacturing
personnel. In fiscal 1995 the Company began manufacturing
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<PAGE> 28
operations in an 80,000 square foot leased facility located in Cork, Ireland.
This facility allows the Company to manufacture a wide range of products closer
to its large European customer base. Utilization of this facility has increased
substantially since its startup and is expected to continue to increase in the
future.
The Company's strategy is to maintain critical manufacturing
processes in-house and to form alliances with independent manufacturing partners
to produce certain products and components at the lowest possible 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. Independent suppliers provide various component
products and materials used to manufacture the Company's products, and also
manufacture certain component parts and label products to the Company's
specifications. Certain magnetic materials used in the manufacture of Ultrao Max
labels and tags are currently purchased from one or two suppliers. The Company
is seeking to develop alternative sources of supply for such materials. A core
supplier base of approximately 100 major international suppliers has been
established worldwide to maintain a reliable flow of quality materials at the
lowest possible cost.
The Company has improved, and expects to continue to improve, its
production efficiencies and cost structures through new processes, increased
automation and improved product designs. Such improvements, particularly to
increase capacity and lower product costs of EAS products, have required
additional capital investment for new production equipment.
COMPETITION
The electronic security industry continues to be highly
competitive. There are many alternatives available to protect people and assets,
in addition to the use of EAS, CCTV and access control 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 EAS equipment to retail stores directly
or through distributors, such as Sentry Technology Corporation in the U.S.,
Checkpoint Systems, Inc. in the U.S., Europe, Latin America and Asia, and
Esselte Meto and Nedap B.V. in Europe, all of which are principal competitors of
the Company. 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 in the sale of access control systems,
including CardKey Inc., Westinghouse Electronic Corporation, Northern Computers
Inc. and Casi-Rusco Inc.
The Company competes in marketing its systems and products
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, nor that new technologies will not
be developed and introduced into the market place, which could adversely affect
the Company's business.
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.
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, digital signal processing 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 February 28,
1998, the Company employed a staff of 195 engineering professionals, including
73 with advanced Masters and Ph.D. degrees.
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<PAGE> 29
In fiscal 1997, 1996 and 1995, the Company incurred approximately
$24.5 million, $27.7 million and $22.7 million, respectively, and in the nine
month periods ended March 31, 1998 and 1997, the Company incurred approximately
$20.0 million and $17.5 million, respectively, for research, development and
engineering costs. The reduced level of spending in fiscal 1997 was the result
of planned consolidations and product rationalizations.
GOVERNMENTAL REGULATION
The sale and use of the Company's products are subject to
regulation by governmental authorities having jurisdiction over the sale and use
of electronic and communication equipment (i.e., the U.S. Federal Communications
Commission and like authorities in other countries) or health and safety
standards (e.g., the U.S. Department of Health and Human Services). Such systems
are in compliance with currently applicable requirements and standards under the
regulations of government authorities in the U.S., in countries in which the
Company markets such products directly or through its subsidiaries and in many
other countries. In particular, 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 such new safety standards which may be established. In addition, in
view of the Company's high level of business activity in the EU, the Company
actively participates in the development of evolving technical standards issued
by CENELEC and ETSI. As of January 1, 1996 new standards were required to be met
to apply the CE Mark to market products in the EU, and the Company certified its
products to the CE Mark requirements. Meeting CE Mark requirements includes
meeting standards established by CENELEC, ETSI and other standard-setting
organizations. Such standard-setting organizations are continually considering
the establishment of new standards and reconsidering existing standards,
including health and safety standards. There can be no assurance that adverse
changes or amendments to existing regulations or standards, or new adverse
regulations or standards, will not be adopted, or that all products of the
Company subject to regulations or standards will meet the requirements of all
such regulations and standards in all countries in which the Company desires its
products to be marketed.
The FDA has been conducting studies into the effects of various
devices such as airport metal detectors, store security systems and some
cellular telephones on implantable medical devices. The Company is also aware of
studies as to whether any hazards are posed to wearers of implantable medical
devices by a number of devices, including EAS systems. While the Company
believes there to be substantial evidence that no health hazard is posed by the
interactions between the Company's EAS systems and such medical devices, and has
presented such evidence to the FDA, 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 an adverse report, the
recommendation of precautionary measures and/or the adoption of regulations
which could adversely affect the Company.
EMPLOYEES
As of March 31, 1998, the Company employed approximately 5,800
persons worldwide. The Company has announced plans to reduce its workforce by
approximately 1,200 employees in connection with the divestiture of non-core
businesses and cost-reduction plans. As of March 31, 1998, the work force has
been reduced by more than 700 employees from June 30, 1997 levels pursuant to
such plans, with a major portion of such reduction resulting from the sale of
the U.S. commercial/industrial sales and installation business. The Company also
uses temporary staff, particularly in manufacturing areas, to balance workload
during peak periods.
PROPERTIES
Domestically, the Company owns or leases facilities in Florida,
Puerto Rico, California, Massachusetts and New York 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.
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<PAGE> 30
The Company's international subsidiaries own or lease office and
warehouse space for their operations. The principal facilities are located in
Argentina, Australia, Belgium, Brazil, Canada, France, Germany, Ireland, Italy,
Mexico, The Netherlands, Singapore, Spain, Sweden and the U.K.
Previously, the Company maintained its corporate headquarters,
primary U.S. operations and research and development activities in Deerfield
Beach, Florida, where the Company owned three buildings. During fiscal 1996 and
1997, the Company relocated its corporate headquarters, U.S. operations,
research and development activities and U.S. repair center operations from its
Deerfield Beach facilities to Boca Raton, Florida, where it currently owns two
buildings. As of May 15, 1998, all of the Deerfield Beach facilities have been
sold.
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 above.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The terms of the Preferred Stock are set forth in the Certificate
of Designations (the "Certificate of Designations") which has been filed with
the Secretary of State of the State of Delaware as required by the Delaware
General Corporation Law (the "DGCL"). The following summary of certain
provisions of the Preferred Stock, the Certificate of Designations and the
Registration Rights Agreement does not purport to be complete and is subject to,
and qualified in its entirety by, the provisions of the Certificate of
Designations and the Registration Rights Agreement, copies of which are
available from the Company upon request. See "Available Information".
The Company is authorized to issue 10,000,000 shares of preferred
stock, $.01 par value per share, of which 690,000 shares are outstanding on the
date of this Prospectus. The Restated Certificate of Incorporation of the
Company (the "Restated Certificate of Incorporation") authorizes the Board of
Directors, without stockholder approval, to issue classes of preferred stock
from time to time in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions as may be determined by the Board of Directors. The
Board of Directors has adopted resolutions creating a maximum of 690,000 shares
of Preferred Stock pursuant to the Certificate of Designations. All of such
shares are issued and outstanding and fully paid and non-assessable, and the
holders thereof do not have any subscription or preemptive rights related
thereto. BankBoston, N.A. is transfer agent and registrar (the "Transfer Agent")
for the Preferred Stock.
BankBoston, N.A. is also Depositary Agent for the Depositary
Shares. The Company does not expect that there will be any public trading market
for the Preferred Stock except as represented by the Depositary Shares. See
"Description of Depositary Shares."
RANKING
The Preferred Stock, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company,
ranks (i) senior to all classes of common stock of the Company and to each other
class of capital stock or series of preferred stock established after the date
of this Prospectus by the Board of Directors, the terms of which do not
expressly provide that it ranks senior to or on a parity with the Preferred
Stock as to dividend distributions and distributions upon the liquidation,
winding-up and dissolution of the Company (collectively referred to with the
common stock of the Company as "Junior Securities"); (ii) subject to certain
conditions, on a parity with any class of capital stock or series of preferred
stock issued by the Company established after the date of this Prospectus by the
Board of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "Parity Securities"); and (iii)
subject to certain conditions, junior to each class of capital stock or series
of preferred stock issued by the Company established after the date of this
Prospectus by the Board of Directors, the terms
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<PAGE> 31
of which expressly provide that such class or series will rank senior to the
Preferred Stock as to dividend distributions and distributions upon liquidation,
winding-up and dissolution of the Company (collectively referred to as "Senior
Securities"). The Preferred Stock is subject to the issuance of series of Junior
Securities, Parity Securities or Senior Securities, provided that the Company
may not issue any new class of Parity Securities or Senior Securities without
the approval of the holders of at least 66 2/3% of the shares of Preferred Stock
then outstanding, voting or consenting, as the case may be, together as one
class.
In addition, the Preferred Stock ranks junior in right of payment
to all indebtedness and other obligations of the Company. See "Risk Factors --
Subordination of the Preferred Stock".
DIVIDENDS
Holders of the Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends on the Preferred Stock at a rate per annum equal to 6 1/2%
of the liquidation preference per share of Preferred Stock, payable quarterly.
All dividends will be cumulative, whether or not earned or declared, on a daily
basis from April 13, 1998, the date of issuance of the Preferred Stock, and will
be payable quarterly in arrears on January 1, April 1, July 1, and October 1 of
each year, commencing on July 1, 1998 (each, a "Dividend Payment Date").
Dividends will be payable to holders of record of the Preferred
Stock on the stock register of the Company on the record date for such purpose
fixed by the Board of Directors of the Company, which shall not be less than 10
nor more than 60 days preceding the Dividend Payment Date. Dividends will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in any period of less than one month.
Dividends will be payable (i) in cash, (ii) by delivery of shares
of Common Stock to holders (based upon 95% of the Average Stock Price (as
defined below)) or (iii) through any combination of the foregoing. The Company
intends to pay dividends in shares of Common Stock on each Dividend Payment Date
to the extent that it is unable to pay dividends in cash. If the dividends are
paid in shares of Common Stock, the number of shares of Common Stock to be
issued on each Dividend Payment Date will be determined by dividing the total
dividend to be paid on each share of Preferred Stock by 95% of the average of
the high and low sales prices of the Common Stock as reported by the NYSE, or
any national securities exchange upon which the Common Stock is then listed, for
each of the ten consecutive trading days immediately preceding the fifth
business day preceding the record date related to such Dividend Payment Date
(the "Average Stock Price"). The Transfer Agent is authorized and directed in
the Certificate of Designations to aggregate any fractional shares of Common
Stock that are issued as dividends, sell them at the best available price and
distribute the proceeds to the holders in proportion to their respective
interests therein. The Company will pay the expenses of the Transfer Agent with
respect to such sale, including brokerage commissions.
Except as set forth in the following sentence, no dividends may be
declared or paid or funds set apart for the payment of dividends on any Parity
Securities for any period unless full cumulative dividends shall have been or
contemporaneously are declared and paid or declared and a sufficient sum set
apart for such payment on the Preferred Stock. If full dividends are not so
paid, the Preferred Stock will share dividends pro rata with the Parity
Securities. No dividends may be paid or set apart for such payment on Junior
Securities (except dividends on Junior Securities in additional shares of Junior
Securities) and no Junior Securities or Parity Securities may be repurchased,
redeemed or otherwise retired, nor may funds be set apart for payment with
respect thereto, if full cumulative dividends have not been paid on the
Preferred Stock.
Certain of the Company's current financial agreements contain, and
future financial agreements or other agreements relating to indebtedness, Senior
Securities or Parity Securities to which the Company becomes a party may
contain, restrictions on the ability of the Company to pay dividends on the
Preferred Stock. See "Risk Factors -- Restrictions on the Company's Ability to
Pay Cash Dividends."
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<PAGE> 32
OPTIONAL REDEMPTION
The Preferred Stock will be redeemable for cash on or after April
4, 2001, at the option of the Company, in whole or from time to time in part, at
the redemption prices set forth herein, together with all accumulated and unpaid
dividends (including an amount in cash or shares of Common Stock equal to a
prorated dividend for the period from the dividend payment immediately prior to
the redemption date to the redemption date) and Liquidated Damages, if any, to
the redemption date. The redemption prices (expressed as percentages of
liquidation preference) are as follows for shares of Preferred Stock redeemed
during the twelve-month period beginning on April 4 of the years indicated:
<TABLE>
<CAPTION>
YEAR Percentage
<S> <C>
2001................................................ 103.71%
2002................................................ 102.79%
2003................................................ 101.86%
2004................................................ 100.93%
2005 and thereafter................................. 100.00%
</TABLE>
No optional redemption may be authorized or made unless prior
thereto full unpaid cumulative dividends shall have been paid in cash or Common
Stock. In the event of partial redemptions of Preferred Stock, the shares to be
redeemed will be determined pro rata or by lot, as determined by the Company.
CONVERSION RIGHTS
Each share of Preferred Stock will be convertible at any time on
or after July 13, 1998, at the option of the holder thereof, into Common Stock
of the Company, at a conversion rate equal to $250.00 (the liquidation
preference per share of Preferred Stock) divided by the conversion price, except
that the right to convert shares of Preferred Stock called for redemption will
terminate at the close of business on the business day preceding the redemption
date and will be lost if not exercised prior to that time, unless the Company
defaults in making the payment due upon redemption.
The initial conversion price is $19.52 per share of Common Stock.
The conversion price will be subject to adjustment in certain events, including:
(i) the payment of dividends (and other distributions) in Common Stock on any
class of capital stock of the Company, other than the payment of dividends in
Common Stock on the Preferred Stock; (ii) the issuance to all holders of Common
Stock of rights, warrants or options entitling them to subscribe for or purchase
Common Stock at less than the current market price (determined as provided in
the Certificate of Designations); (iii) subdivisions, combinations and
reclassifications of Common Stock; and (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Company, shares of any class of
capital stock, cash or other assets (including securities, but excluding those
dividends, rights, warrants, options and distributions referred to above and
dividends and distributions paid in cash out of the retained earnings of the
Company, unless the sum of all such cash dividends and distributions made and
the amount of cash and the fair market value of other consideration paid in
respect of any repurchases of Common Stock by the Company or any of its
subsidiaries, in each case within the preceding 12 months in respect of which no
adjustment has been made, exceeds 20% of the product of the then current market
price of the Common Stock times the aggregate number of shares of Common Stock
outstanding on the record date for such dividend or distribution).
No adjustment of the conversion price will be required to be made
until cumulative adjustments amount to 1% or more of the conversion price as
last adjusted. Notwithstanding the foregoing, no adjustment to the conversion
price shall reduce the conversion price below the then par value per share of
the Common Stock. In addition to the foregoing adjustments, the Company will be
permitted to make such reductions in the conversion price as it considers to be
advisable in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the holders of the
Common Stock.
In the case of certain consolidations or mergers to which the
Company is a party or the transfer of substantially all of the assets of the
Company, each share of Preferred Stock then outstanding would become convertible
only into the kind and amount of securities, cash and other property receivable
upon the consolidation, merger or transfer by a holder of the
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<PAGE> 33
number of shares of Common Stock into which such share of Preferred Stock might
have been converted immediately prior to such consolidation, merger or transfer
(assuming such holder of Common Stock failed to exercise any rights of election
and received per share the kind and amount receivable per share by a plurality
of non-electing shares).
No fractional shares of Common Stock will be issued upon
conversion; in lieu thereof, the Company will pay a cash adjustment based upon
the then-current market price of the Common Stock.
The holder of record of a share of Preferred Stock at the close of
business on a record date with respect to the payment of dividends on the
Preferred Stock will be entitled to receive such dividends with respect to such
share of Preferred Stock on the corresponding Dividend Payment Date,
notwithstanding the conversion of such share after such record date and prior to
such Dividend Payment Date. A share of Preferred Stock surrendered for
conversion during the period from the close of business on any record date for
the payment of dividends to the opening of business of the corresponding
Dividend Payment Date must be accompanied by a payment in cash, Common Stock or
a combination thereof, depending on the method of payment that the Company has
chosen to pay the dividend, in an amount equal to the dividend payable on such
Dividend Payment Date, unless such share of Preferred Stock has been called for
redemption on a redemption date occurring during the period from the close of
business on any record date for the payment of dividends to the close of
business on the business day immediately following the corresponding Dividend
Payment Date. The dividend payment with respect to a share of Preferred Stock
called for redemption on a date during the period from the close of business on
any record date for the payment of dividends to the close of business on the
business day immediately following the corresponding Dividend Payment Date will
be payable on such Dividend Payment Date to the record holder of such share on
such record date, notwithstanding the conversion of such share after such record
date and prior to such Dividend Payment Date. No payment or adjustment will be
made upon conversion of shares of Preferred Stock for accumulated and unpaid
dividends or for dividends with respect to the Common Stock issued upon such
conversion.
SPECIAL CONVERSION RIGHTS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, as defined below, each
holder of shares of Preferred Stock will have the option, during the period
commencing on the date that the applicable Change of Control Notice (as defined
below) is mailed to holders of the Preferred Stock and ending at the close of
business on the 45th day thereafter (the "Special Conversion Date"), to convert
all, but not less than all, of such holder's shares of Preferred Stock into
Common Stock at a conversion rate equal to $250.00 (the liquidation preference
per share of Preferred Stock) divided by the Special Conversion Price (as
defined below).
A "Change of Control" will be deemed to have occurred upon the
occurrence of any of the following: (a) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole; (b) the adoption of a plan
relating to the liquidation or dissolution of the Company; (c) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that any "person" or "group" (as such terms are used in
Section 13(d)(3) of the Exchange Act) becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting power of the outstanding voting
stock of the Company, unless (i) the closing price per share of Common Stock for
any five trading days within the period of 10 consecutive trading days ending
immediately after the announcement of such Change of Control equals or exceeds
105% of the conversion price of the Preferred Stock in effect on each such
trading day or (ii) at least 90% of the consideration in the transaction or
transactions constituting a Change of Control pursuant to this clause (c)
consists of shares of common stock traded or to be traded immediately following
such Change of Control on a national securities exchange or the Nasdaq National
Market and, as a result of such transaction or transactions, the Preferred Stock
becomes convertible solely into such common stock (and any rights attached
thereto); or (d) the first day on which more than one-third of the members of
the Board of Directors of the Company (excluding any directors elected by the
holders of the Preferred Stock following a Voting Rights Triggering Event) are
not Continuing Directors (as defined herein).
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<PAGE> 34
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (a) was a member of the
Board of Directors on the date of original issuance of the Preferred Stock or
(b) was nominated for election to the Board of Directors with the approval of at
least two thirds of the Continuing Directors who were members of the Board of
Directors at the time of such nomination or election, but in any event excluding
any directors elected by the holders of the Preferred Stock following a Voting
Rights Triggering Event.
"Special Conversion Price" means the higher of (a) the Market
Value of the Common Stock and (b) $10.67 per share (which is equal to 66 2/3% of
the last reported sale price of the Common Stock on April 6, 1998, the date of
the Offering Memorandum with respect to the April 13, 1998 Offering), which
amount, in the case of this clause (b), shall be adjusted each time that the
conversion price is adjusted so that the ratio of such amount (as so adjusted)
to the conversion price (as so adjusted) equals the ratio of $10.67 to the
initial conversion price.
"Market Value", with respect to the Common Stock, means the
average of the Closing Prices (as defined herein) of the Common Stock for the
five trading days ending on the last trading day preceding the date of
occurrence of the Change of Control.
"Closing Price", with respect to the Common Stock on any trading
day, means the last reported regular-way sale price of the Common Stock on the
NYSE, or if the Common Stock is not then listed on the NYSE, the last reported
regular-way sale price of the Common Stock on the principal stock exchange or
market of the Nasdaq Stock Market on which the Common Stock is then listed or
traded, or if the Common Stock is not then listed or traded on any such stock
exchange or market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any NYSE member firm selected from time
to time by the Company for that purpose.
Within 15 days after a Change of Control, the Company will mail to
each holder of shares of the Preferred Stock a notice (a "Change of Control
Notice") setting forth the details of the Change of Control and the special
conversion rights occasioned thereby, together with all information required by
federal and state securities laws to permit such holder to determine whether or
not to convert such holder's shares of Preferred Stock. Exercise by a holder of
such holder's special conversion right following a Change of Control is
irrevocable, except that a holder may withdraw its election to exercise such
holder's special conversion right at any time prior to the close of business on
the Special Conversion Date by delivering a written or facsimile transmission
notice to the Transfer Agent at the address or facsimile number specified in the
Change of Control Notice. Such notice, to be effective, must be received by the
Transfer Agent prior to the close of business on the Special Conversion Date.
All shares of Preferred Stock tendered for conversion pursuant to holders'
special conversion rights as described herein and not withdrawn will be
converted at the close of business on the Special Conversion Date.
Except as described herein, the Certificate of Designations does
not provide the holders of the Preferred Stock with any special protection in
the event of a takeover, recapitalization or similar transaction. In addition,
the Company could enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that could affect the Company's capital
structure or the value of the Preferred Stock or the Common Stock, but that
would not constitute a Change of Control.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, holders of Preferred Stock will be entitled to be
paid, out of the assets of the Company available for distribution, $250.00 per
share, plus an amount in cash equal to accumulated and unpaid dividends and
Liquidated Damages, if any, thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend for
the period from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up), before any payments are made or assets
are distributed on any Junior Securities, including, without limitation, common
stock of the Company. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the amounts payable with respect to
the Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Preferred Stock and the Parity Securities will share equally and
ratably in any distribution of assets of the Company in proportion to the full
liquidation
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<PAGE> 35
preference and accumulated and unpaid dividends and Liquidated Damages to which
each is entitled. After payment of the full amount of the liquidation
preferences and accumulated and unpaid dividends and Liquidated Damages to which
they are entitled, the holders of shares of Preferred Stock will not be entitled
to any further participation in any distribution of assets of the Company.
However, neither the sale, lease, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of the property or assets of the Company nor the consolidation or merger of the
Company with or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the Company.
The Certificate of Designations for the Preferred Stock does not
contain any provision requiring funds to be set aside to protect the liquidation
preference of the Preferred Stock although such liquidation preference will be
substantially in excess of the par value of such shares of Preferred Stock. In
addition, the Company is not aware of any provision of Delaware law or any
controlling decision of the courts of the State of Delaware (the state of
incorporation of the Company) that requires a restriction upon the surplus of
the Company solely because the liquidation preference of the Preferred Stock
will exceed its par value. Consequently, there will be no restriction upon the
surplus of the Company solely because the liquidation preference of the
Preferred Stock will exceed the par value and there will be no remedies
available to holders of the Preferred Stock before or after the payment of any
dividend, other than in connection with the liquidation of the Company, solely
by reason of the fact that such dividend would reduce the surplus of the Company
to an amount less than the difference between the liquidation preference of the
Preferred Stock and its par value.
VOTING RIGHTS
Holders of the Preferred Stock have no voting rights with respect
to general corporate matters except as provided by law or as set forth in the
Certificate of Designations. The Certificate of Designations provides, however,
that if dividends on the Preferred Stock are in arrears and unpaid for six
quarterly periods (whether or not consecutive) (a "Voting Rights Triggering
Event"), then the number of directors constituting the Board of Directors of the
Company will be adjusted to permit the holders of the majority of the then
outstanding shares of Preferred Stock, voting separately as a class, to elect
two directors. Such voting rights will continue until such time as all dividends
and Liquidated Damages, if any, in arrears on the Preferred Stock are paid in
full and the Company has paid dividends in full on the two consecutive Dividend
Payment Dates following the payment of such arrearage. In addition, the
Certificate of Designations provides that, except as stated above under "--
Ranking", the Company will not authorize any class of Senior Securities or
Parity Securities without the approval of holders of at least 66 2/3% of the
shares of Preferred Stock then outstanding, voting or consenting, as the case
may be, as one class. The Certificate of Designations also provides that the
Company may not amend the Certificate of Designations so as to affect adversely
the specified rights, preferences, privileges or voting rights of holders of the
Preferred Stock or authorize the issuance of any additional shares of Preferred
Stock, Parity Securities or Senior Securities without the approval of the
holders of at least 66 2/3% of the then outstanding shares of Preferred Stock,
voting or consenting, as the case may be, as one class. The Certificate of
Designations also provides that, except as set forth above, (a) the creation,
authorization or issuance of any shares of Junior Securities, Parity Securities
or Senior Securities or (b) the increase or decrease in the amount of authorized
capital stock of any class, including any preferred stock, shall not require the
consent of the holders of Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of holders of
shares of Preferred Stock.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the vote or consent of the holders of a majority of the
then outstanding shares of Preferred Stock, the Company may not consolidate or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person unless (a) the
entity formed by such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (in any such case, the "resulting entity") is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (b) if the Company is not the resulting entity, the
Preferred Stock is converted into or exchanged for and becomes shares of such
resulting entity, having in respect of such resulting entity the same (or more
favorable) powers, preferences and relative, participating, optional or other
special rights thereof that the Preferred Stock had immediately prior to such
transaction; and (c) immediately after giving effect to such transaction, no
Voting Rights
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Triggering Event has occurred and is continuing; provided, however, that the
foregoing shall not be applicable to any transaction that constitutes a Change
of Control.
COVENANT TO REPORT
Whether or not the Company is required to do so by the rules and
regulations of the Commission, the Company has agreed to file with the
Commission such information, documents and reports as a public company is
required to file, or as is required as a condition to the availability of Rule
144 under the Securities Act or the use of registration statements on Forms S-2
and S-3. The Company is required to furnish to the holders of Preferred Stock
such notices, information and data as the Company provides to the holders of the
Common Stock and such other information as such holders may reasonably request.
In addition, the Company will furnish to the holders of the Preferred Stock,
prospective purchasers of shares of Preferred Stock and securities analysts,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement, the Company agreed
to file the Shelf Registration Statement covering resales of Transfer Restricted
Securities (as defined below) by holders thereof (who satisfied certain
conditions relating to the provision of information to the registrant) on or
prior to 60 days after the consummation of the offering of Preferred Stock (and
the related Depositary Shares), and to use its reasonable best efforts to cause
the Shelf Registration Statement to become effective on or prior to 120 days
after such consummation date.
"Transfer Restricted Securities" for this purpose, means each
Depositary Share, each share of 6 1/2 Convertible Preferred Stock and each
Common Share (including Dividend Shares and Liquidated Damages Shares) until (a)
the date on which such security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (b) the date on which such security is distributed to the public
pursuant to Rule 144 under the Securities Act or may be distributed to the
public pursuant to Rule 144(k) under the Securities Act.
The Registration Statement of which this Prospectus forms a part
constitutes the Shelf Registration Statement. The Company is obligated to use
its best efforts to maintain the effectiveness of the Shelf Registration
Statement for a period ending on the earlier of (i) the date when there are no
longer any Transfer Restricted Securities included in the Shelf Registration
Statement, or (ii) the second anniversary of the effectiveness of the Shelf
Registration Statement, provided, that the Company will have the option of
suspending the effectiveness of the Shelf Registration Statement for one period
of up to 30 trading days if the Board of Directors of the Company determines
that compliance with the disclosure obligations necessary to maintain the
effectiveness of the Shelf Registration Statement at such time could reasonably
be expected to have a material adverse effect on the Company. If the Shelf
Registration Statement ceases to be effective or usable for a period of ten
consecutive trading days or for any 30 trading days in any 180-day period in
connection with resales of Transfer Restricted Securities (subject to the
Company's option of suspending the effectiveness of the Shelf Registration
Statement without becoming obligated to pay Liquidated Damages, as described
above) (a "Registration Default"), then the Company will pay to each holder of
Transfer Restricted Securities liquidated damages ("Liquidated Damages") at an
annual rate of $0.625 per $250 liquidation preference of the Preferred Stock (or
$0.0625 per $25.00 liquidation preference of Depositary Shares) constituting
Transfer Restricted Securities, which shall accrue from the date of the
Registration Default until such Registration Default is cured. All accrued
Liquidated Damages will be payable, at the option of the Company, (1) in cash,
(2) by delivery of shares of Common Stock, or (3) through any combination of the
foregoing. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
DESCRIPTION OF DEPOSITARY SHARES
Each Depositary Share represents a one-tenth interest in a share
of Preferred Stock deposited under the Deposit Agreement ("Deposit Agreement"),
among the Company, BankBoston, N.A., as depositary agent (the "Depositary
Agent"), and the holders from time to time of Depositary Receipts issued
thereunder. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share is entitled proportionately to all of the rights and
preferences of the shares of Preferred
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Stock represented thereby (including dividend, voting, redemption and
liquidation rights) contained in the Company's Certificate of Incorporation and
the Certificate of Designations and summarized above under "Description of
Preferred Stock". The Company does not expect that there will be any public
trading market for the Preferred Stock except as represented by the Depositary
Shares.
The Depositary Shares are evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). The following
description of Depositary Shares does not purport to be complete and is subject
to, and qualified in its entirety by, the provisions of the Deposit Agreement
(which contains the form of Depositary Receipt), a copy of which is available
from the Company, upon request. See "Available Information".
ISSUANCE OF DEPOSITARY RECEIPTS
Certificates representing the Preferred Stock were deposited with
the Depositary Agent immediately prior to the April 13, 1998 Offering, and the
Depositary Agent, executed and delivered the Depositary Receipts to the Company.
The Company, in turn, delivered the Depositary Receipts to the Initial
Purchasers. Depositary Receipts will be issued evidencing only whole Depositary
Shares.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust
office of the Depositary Agent, the owner of the Depositary Shares evidenced
thereby is entitled to delivery at such office of the number of whole shares of
Preferred Stock represented by such Depositary Shares. Owners of Depositary
Shares are entitled to receive only whole shares of Preferred Stock on the basis
of one share of Preferred Stock for each ten Depositary Shares. In no event will
fractional shares of Preferred Stock (or cash in lieu thereof) be distributed by
the Depositary Agent. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of whole shares of Preferred Stock to be
withdrawn, the Depositary Agent will deliver to such holder at the same time a
new Depositary Receipt evidencing such excess number of Depositary Shares.
The Company has not applied and does not intend to apply for the
listing of the Depositary Shares or the Preferred Stock on any securities
exchange or for quotation through the Nasdaq National Market.
CONVERSION AND CALL PROVISION
Conversion at the Option of Holder. As described under
"Description of Preferred Stock -- Conversion Rights", the Preferred Stock may
be converted, in whole or in part, into shares of Common Stock at the option of
the holders of Preferred Stock at any time after July 13, 1998, unless
previously redeemed. The Depositary Shares held by any holder may, at the option
of such holder, be converted in whole or from time to time in part (but only in
lots of ten Depositary Shares or integral multiples thereof), into shares of
Common Stock upon the same terms and conditions as the Preferred Stock, except
that the number of shares of Common Stock received upon conversion of each
Depositary Share will be equal to the number of shares of Common Stock received
upon conversion of one share of Preferred Stock divided by ten. To effect such
an optional conversion, a holder of Depositary Shares must deliver Depositary
Receipts evidencing the Depositary Shares to be converted, together with a
written notice of conversion and a proper assignment of the Depositary Receipts
to the Company or in blank, to the Depositary Agent or its agent. A Depositary
Share surrendered for conversion during the period from the close of business on
any record date for the payment of dividends to the opening of business of the
corresponding Dividend Payment Date must be accompanied by a payment in cash,
Common Stock or a combination thereof, depending on the method of payment that
the Company has chosen to pay the dividend, in an amount equal to the dividend
payable with respect to such Depositary Share on such Dividend Payment Date,
unless such Depositary Share has been called for redemption on a redemption date
occurring during the period from the close of business on any record date for
the payment of dividends to the close of business on the business day
immediately following the corresponding Dividend Payment Date. The dividend
payment with respect to a Depositary Share called for redemption on a date
during the period from the close of business on any record date for the payment
of dividends to the close of business on the business day immediately following
the corresponding Dividend Payment Date will be payable on such Dividend Payment
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Date to the record holder of such share on such record date, notwithstanding the
conversion of such share after such record date and prior to such Dividend
Payment Date. Each optional conversion of Depositary Shares shall be deemed to
have been effected immediately before the close of business on the date on which
the foregoing requirements shall have been satisfied.
If only a portion of the Depositary Shares evidenced by a
Depositary Receipt is to be converted, a new Depositary Receipt or Receipts will
be issued for any Depositary Shares not converted. No fractional shares of
Common Stock will be issued upon conversion of Depositary Shares, and, if such
conversion would otherwise result in a fractional share of Common Stock being
issued, in lieu thereof, the holders of such Depositary Shares will receive a
cash adjustment based upon the then-current market price of the Common Stock.
After the date fixed for conversion or redemption, the Depositary
Shares so converted or called for redemption will no longer be deemed to be
outstanding and all rights of the holders of such Depositary Shares will cease,
except that the holder of such Depositary Shares shall be entitled to receive
any money or other property to which the holders of such Depositary Shares were
entitled upon such conversion or redemption, upon surrender to the Depositary
Agent of the Depositary Receipt or Receipts evidencing such Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary Agent will distribute all dividends or other
distributions in respect of the Preferred Stock to the record holders of
Depositary Receipts in proportion to the number of Depositary Shares owned by
such holders. See "Description of Preferred Stock -- Dividends".
The amount distributed in any of the foregoing cases will be
reduced by any amount required to be withheld by the Company or the Depositary
Agent on account of taxes.
RECORD DATE
Whenever (i) any dividend or other distribution shall become
payable, any distribution shall be made, or any rights, preferences or
privileges shall be offered with respect to the Preferred Stock, or (ii) the
Depositary Agent shall receive notice of any meeting at which holders of
Preferred Stock are entitled to vote or of which holders of Preferred Stock are
entitled to notice, or of any election on the part of the Company to call for
redemption of any Preferred Stock, the Depositary Agent shall in each such
instance fix a record date (which shall be the same date as the record date for
the Preferred Stock) for the determination of the holders of Depositary Receipts
(x) who shall be entitled to receive such dividend, distribution, rights,
preferences or privileges or the net proceeds of the sale thereof, (y) who shall
be entitled to give instructions for the exercise of voting rights at any such
meeting or to receive notice of such meeting, or (z) who shall be subject to
such redemption, subject to the provisions of the Deposit Agreement.
VOTING OF DEPOSITARY SHARES
Holders of record of Depositary Shares have no voting rights,
except as required by law and as provided in the Certificate of Designations in
respect of the Preferred Stock, as described under "Description of Preferred
Stock -- Voting Rights".
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary Agent. However, any amendment that imposes any fees, taxes or other
charges payable by holders of Depositary Receipts (other than taxes and other
governmental charges, fees and other expenses payable by such holder as stated
under "Charges of the Depositary Agent"), or that otherwise prejudices any
substantial existing right of holders of Depositary Receipts, will not take
effect as to outstanding Depositary Receipts until the expiration of 90 days
after notice of such amendment has been given to the record holders of
outstanding Depositary
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Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of Depositary Shares, subject to the conditions
specified in the Deposit Agreement, upon surrender of the Depositary Receipts
evidencing such Depositary Shares, to receive Preferred Stock or, upon
conversion of the Preferred Stock represented by the Depositary Receipts, to
receive shares of Common Stock, and in each case any money or other property
represented thereby, except in order to comply with mandatory provisions of
applicable law.
Whenever so directed by the Company, the Depositary Agent will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
before the date fixed in such notice for such termination. The Depositary Agent
may likewise terminate the Deposit Agreement if at any time 45 days shall have
expired after the Depositary Agent shall have delivered to the Company a written
notice of its election to resign and a successor depositary shall not have been
appointed and accepted its appointment. If any Depositary Receipts remain
outstanding after the date of termination, the Depositary Agent thereafter will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders thereof, and will not give any further notices
(other than notice of such termination) or perform any further acts under the
Deposit Agreement except as provided below and except that the Depositary Agent
will continue (i) to collect dividends on the Preferred Stock and any other
distributions with respect thereto and (ii) to deliver the dividends and
distributions and the net proceeds of any sales of rights, preferences,
privileges or other property, without liability for interest thereon, in
exchange for Depositary Receipts surrendered. At any time after the expiration
of two years from the date of termination, the Depositary Agent may sell the
Preferred Stock then held by it at public or private sale, at such place or
places and upon such terms as it deems proper and may thereafter hold the net
proceeds of any such sale, together with any money and other property then held
by it, without liability for interest thereon, for the pro rata benefit of the
holders of Depositary Receipts which have not been surrendered. The Company does
not intend to terminate the Deposit Agreement or to permit the resignation of
the Depositary Agent without appointing a successor depositary.
CHARGES OF THE DEPOSITARY AGENT
The Company will pay all charges of the Depositary Agent,
including charges in connection with the initial deposit of the Preferred Stock,
the initial execution and delivery of the Depositary Receipts, the distribution
of information to the holders of Depositary Receipts with respect to matters on
which Preferred Stock are entitled to vote, withdrawals of the Preferred Stock
by the holders of Depositary Receipts or redemption or conversion of the
Depositary Receipts, except for taxes (including transfer taxes, if any) and
other governmental charges and such other charges as are provided in the Deposit
Agreement to be at the expense of the holders of Depositary Receipts or persons
depositing Preferred Stock.
GENERAL
The Depositary Agent will make available for inspection by holders
of Depositary Receipts at its corporate trust office all reports and
communications from the Company that are delivered to the Depositary Agent and
made generally available to the holders of the Preferred Stock.
Neither the Depositary Agent nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control from or in
performing its obligations under the Deposit Agreement.
FORM, DENOMINATION AND REGISTRATION
Global Shares; Book Entry Form. The Depositary Shares have been
issued in the form of one or more global certificates (collectively, the "Global
Certificate") which have been deposited with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of Cede & Co., as DTC's
nominee. Except as set forth below, record ownership of the Global Certificate
may be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
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Owners of a beneficial interest in the Global Certificate may hold
their interest in the Global Certificate directly through DTC if such holder is
a participant in DTC or indirectly through organizations that are participants
in DTC (the "Participants"). Persons who are not Participants may beneficially
own interests in the Global Certificate held by DTC only through Participants or
certain banks, brokers, dealers, trust companies and other parties that clear
though or maintain a custodial relationship with a Participant, either directly
or indirectly ("Indirect Participants"). So long as Cede & Co., as the nominee
of DTC, is the registered owner of the Global Certificate, Cede & Co. for all
purposes will be considered the sole holder of the Global Certificate. Subject
to certain conditions, owners of beneficial interests in the Global Certificate
are entitled to have Depositary Share certificates registered in their names and
to receive physical delivery of certificates in definitive form (the "Definitive
Securities").
Payment of dividends in cash on and any redemption price with
respect to the Global Certificate will be made to Cede & Co., the nominee of
DTC, as registered owner of the Global Certificate, by wire transfer of
immediately available funds on each Dividend Payment Date or redemption date, as
applicable. If dividends to be paid on any Dividend Payment Date are paid in
shares of Common Stock, payment of such dividends with respect to the Global
Certificate will be made to Cede & Co., the nominee of DTC, as registered owner
of the Global Certificate, by delivery of one or more certificates representing
the shares of Common Stock to be issued to the holder of the Global Certificate
on any such Dividend Payment Date. Neither the Company nor the Transfer Agent
have or will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Global Certificate or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
The Company has been informed by DTC that, with respect to any
payment of dividends on, or the redemption price with respect to, the Global
Certificate, DTC's practice is to credit Participants' accounts on the payment
date therefor, with payments in amounts proportionate to their respective
beneficial interests in the Depositary Shares represented by the Global
Certificate as shown on the records of DTC, unless DTC has reason to believe
that it will not receive payment on such payment date. Payments by Participants
to owners of beneficial interests in the Depositary Shares represented by the
Global Certificate held through such Participants are and will be the
responsibility of such Participants, as is now the case with securities held for
the accounts of customers registered in "street name".
Transfers between Participants will be effected in the ordinary
way in accordance with DTC's rules and will be settled in immediately available
funds. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
beneficial interests in the Global Certificate to such persons may be limited.
Because DTC can only act on behalf of Participants, who in turn act on behalf of
Indirect Participants and certain banks, the ability of a person having a
beneficial interest in the Depositary Shares represented by the Global
Certificate to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate evidencing such
interest.
Neither the Company nor the Transfer Agent have or will have
responsibility for the performance of DTC or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised the Company that it will take any
action permitted to be taken by a holder of Depositary Shares (including,
without limitation, the presentation of Depositary Shares for exchange as
described below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Certificate are credited, and only in
respect of the Depositary Shares represented by the Global Certificate as to
which such Participant or Participants has or have given such direction.
DTC has also advised the Company that DTC is a limited purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a security depository, a "clearing corporation" within
the meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchasers. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system
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<PAGE> 41
is available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with, a Participant, either
directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Certificate among Participants,
it is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. If DTC is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will cause the Depositary Shares to
be issued in definitive form in exchange for the Global Certificate.
Certificated Depositary Shares. Investors in the Depositary Shares
may request that certificated Depositary Shares be issued in exchange for
Depositary Shares represented by a Global Certificate. Furthermore, Definitive
Securities may be issued in exchange for Depositary Shares represented by the
Global Certificate if no successor depositary is appointed by the Company as set
forth above.
Unless determined otherwise by the Company in accordance with
applicable law, Definitive Securities issued upon transfer or exchange of
beneficial interests in Depositary Shares represented by the Global Certificate
will bear a legend setting forth transfer restrictions under the Securities Act
as set forth under "Notice to Investors". Any request for the transfer of
Definitive Securities bearing the legend, or for removal of the legend from
Definitive Securities, must be accompanied by satisfactory evidence, in the form
of an opinion of counsel, that such transfer complies with the Securities Act or
that neither the legend nor the restrictions on transfer set forth therein are
required to ensure compliance with the provisions of the Securities Act, as the
case may be.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is
qualified in its entirety by reference to the Company's Restated Certificate of
Incorporation, as amended.
The Company's authorized capital stock consists of 125,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders. There are
no cumulative voting rights. Unless otherwise required by law, the affirmative
vote of a majority of the votes cast is required to authorize stockholder
actions, except that a plurality of the votes cast determines the election of
directors and the affirmative vote of at least 80% of the voting stock of the
Company is required to authorize certain other actions as described below. The
Common Stock has no preemptive, conversion, redemption or other similar rights.
Upon liquidation of the Company, subject to any preferential liquidation rights
of any then outstanding shares of Preferred Stock, the holders of the Common
Stock would be entitled to share ratably in the net assets available for
distribution to stockholders. Subject to any preferential dividend rights of any
outstanding Preferred Stock, the holders of the Common Stock are entitled to
such dividends as may be declared by the Board of Directors of the Company out
of funds legally available therefor.
The Company's Board of Directors is classified into three classes
of directors, each consisting as nearly as possible of one-third of the total
number of directors. The term of office of one of the three classes terminates
each year, and each class is elected for a three-year term.
Under certain circumstances, the holders of at least 80% of the
outstanding voting stock of the Company must approve (a) any merger or
consolidation with, any disposal of a substantial part of the assets of the
Company or any subsidiary to, or any issuance or sale by the Company or a
subsidiary of any stock of the Company or a subsidiary to, a beneficial owner of
5% or more of the outstanding voting stock of the Company, unless such
transaction is approved by the Board of Directors and a majority of the
directors so approving are continuing directors (as defined in the Restated
Certificate of Incorporation), (b) any dissolution of the Company, any offer by
the Company to purchase its shares, or any reclassification, recapitalization or
other transaction designed to decrease the number of holders of shares of the
Company's voting stock, if any person or entity is then the beneficial owner of
5% or more of the outstanding voting stock of the Company, unless such action is
approved by the Board of Directors and a majority of the directors so approving
are continuing directors, (c) any changes in provisions of the Company's
Restated Certificate of Incorporation or By-Laws regarding the number,
classification, term of office, qualifications, election and removal of
directors and the filling of vacancies and newly created directorships, or to
the effect that stockholders of the Company may not take action by written
consent, or any changes in the provisions of the Company's Restated Certificate
of Incorporation regarding the limitation of liability of directors or the
indemnification of officers and directors, unless such change is submitted to
the stockholders with the unanimous recommendation of the entire Board of
Directors, or (d) any amendment to the foregoing supermajority voting
requirements, unless such amendment is submitted to the stockholders with the
unanimous recommendation of the entire Board of Directors.
Certain of the foregoing provisions of the Company's Restated
Certificate of Incorporation may make more difficult, and therefore discourage,
attempts to acquire control of the Company through acquisitions of shares of
Common Stock or otherwise, in transactions not approved by the Company's Board
of Directors. As a result of these provisions, transactions or proposed
transactions which might have the short-term effect of increasing the market
price of the Company's common stock may be discouraged, and management of the
Company may be able to resist changes which the stockholders might otherwise
have the power to impose. The division of the Company's Board of Directors into
three classes could discourage third parties from seeking to acquire control of
the Board of Directors and could impede proxy contests or other attempts to
change the Company's management.
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The transfer agent and registrar for the Common Stock is
BankBoston, N.A.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without
further action by the stockholders, to provide for the issuance of shares of
Preferred Stock from time to time, in different series, and to fix before
issuance the powers, designation, preferences and relative rights of each
series, the qualifications, limitations or restrictions thereof, and the number
of shares included in each series. There presently are outstanding 690,000
shares of Preferred Stock pursuant to the Certificate of Designations.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the DGCL prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock or (iii) on or after such date the business combination is approved
by the board and by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the interested stockholder. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years, did own) 5% or more of the corporation's voting stock.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR NOTES
As of March 31, 1998, the Company had an aggregate outstanding
principal amount of $135,000,000 of 8.21% Senior Notes due January 30, 2003,
issued pursuant to a Note Agreement dated as of January 15, 1993 (as amended,
the "1993 Note Agreement"). The Company also had an aggregate outstanding
principal amount of $230,000,000 of 7.74% Senior Notes due March 29, 2006, an
aggregate outstanding principal amount of $50,000,000 of 7.11% Senior Notes due
March 29, 2001, and an aggregate outstanding principal amount of $70,000,000 of
6.99% Senior Notes due March 29, 2000, all of which were issued pursuant to a
Note Agreement dated as of March 29, 1996 (as amended, the "1996 Note
Agreement"). All of the Senior Notes issued pursuant to the 1993 Note Agreement
or the 1996 Note Agreement (collectively, the "Senior Notes") may be prepaid at
the option of the Company at 100% of the principal amount, plus interest accrued
to the date of prepayment, plus payment of a Make-Whole Amount (as defined
therein). Upon the occurrence of a Change of Control Event (as defined therein),
the Company is required to offer to prepay the Senior Notes at 100% of the
principal amount, plus interest accrued to the date of prepayment, plus payment
of 50% of the Make-Whole Amount. In addition, certain asset sales would require
the Company to make a ratable prepayment of all of its senior indebtedness,
which includes the Senior Notes.
The Senior Notes are unsecured obligations of the Company ranking
pari passu with all of its other unsecured, unsubordinated indebtedness.
The 1993 Note Agreement restricts the Company's ability to declare
or pay cash dividends, purchase or redeem shares of capital stock or make other
payments or distributions in respect of its capital stock, including preferred
stock, and the Company's ability to make any payment (other than scheduled
payments or prepayments) on consolidated subordinated indebtedness
(collectively, "Restricted Payments") in excess of an amount determined from
time to time primarily by reference to a percentage of cumulative annual net
income since January 1, 1993 (giving effect to 50% of net income and 100% of any
deficit for each fiscal year), plus net cash proceeds from the issuance of
Common Stock. Compliance with this covenant is determined annually based on the
Company's fiscal year-end financial statements. At June 30, 1997, the Company
had a cumulative net deficit for purposes of the foregoing covenant of
approximately $10.7 million, making it
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unable to pay cash dividends during fiscal 1998. Since the Company has incurred
losses (including restructuring and special charges) of $47.5 million in the
first nine months of fiscal 1998, it is unlikely that the Company would be able
to make any Cash Stock Payments during fiscal 1999. It is therefore likely that
the Company would not be able to pay cash dividends on the Preferred Stock until
following the preparation of its audited financial statements for fiscal 1999 at
the earliest. The 1993 Note Agreement and the 1996 Note Agreement also contain
certain financial covenants, including, without limitation, maintenance of a
minimum net worth, and a limitation on incurrence of debt based upon an agreed
ratio of senior debt to total capitalization and an agreed ratio of total debt
to total capitalization. In addition, there are limitations on liens,
limitations on mergers and consolidations, and limitations on dispositions of
assets.
If any Event of Default (as defined therein) occurs and is
continuing, the holders of at least 33 1/3% of the aggregate principal amount of
the Senior Notes then outstanding may declare all of the Senior Notes to be due
and payable immediately, and if certain Events of Default relating to bankruptcy
occur, the Senior Notes will immediately become due and payable without any
action on the part of the Senior Note holders. Accelerated repayments are
subject to payment of interest accrued to the date of repayment and, to the
extent permitted by law, the Make-Whole Amount.
REVOLVING CREDIT FACILITY
The Company is a party to a $250,000,000 Amended and Restated
Multicurrency Revolving Credit Agreement dated as of March 18, 1997 (as amended,
the "Revolving Credit Facility") with a syndicate of financial institutions led
by BankBoston, N.A., as Agent, and NationsBank, N.A., as Syndication Agent. The
Company has the right to cause certain subsidiaries to become party to the
Revolving Credit Facility as subsidiary borrowers. Pursuant to the Revolving
Credit Facility, the Company and such subsidiaries are permitted to borrow loans
in U.S. dollars or in certain other currencies, and/or may cause certain
financial institutions to issue letters of credit for the account of the Company
or such subsidiary borrowers. Each subsidiary of the Company that is party to
the Revolving Credit Facility is liable for extensions of credit made to that
subsidiary. The Company is obligated for its own extensions of credit and also
has guaranteed all credits extended to the subsidiary borrowers. Certain
indemnities for costs and other amounts are the joint and several obligation of
all borrowers. The Revolving Credit Facility terminates on December 10, 1999.
The credits extended under the Revolving Credit Facility are
unsecured obligations of the Company and the subsidiary borrowers, ranking pari
passu with all of their other unsecured, unsubordinated indebtedness (including,
without limitation, the Senior Notes).
The interest rate on utilizations of the Revolving Credit
Facility, the facility fee and letter of credit fees are subject to adjustment
depending on the Company's senior public debt rating with Standard & Poor's
Ratings Services or Moody's Investors Services, Inc.
The Revolving Credit Facility restricts the Company's ability to
declare or pay cash dividends, purchase or redeem shares of capital stock or
make other payments or distributions in respect of its capital stock, including
preferred stock, and the Company's ability to make any payment (other than
scheduled payments or prepayments) on consolidated subordinated indebtedness in
excess of an amount determined from time to time primarily by reference to a
percentage of cumulative net income since January 1, 1993. Under the Revolving
Credit Facility, the Company and its subsidiaries also are subject to certain
financial covenants, including, without limitation, maintenance of a minimum net
worth, an agreed ratio of senior debt to total capitalization, an agreed ratio
of total debt to total capitalization and an agreed interest expense coverage
ratio. For these purposes, debt, in certain cases, includes allowances for
expected losses with respect to the sale, factoring or securitization of leases
and other receivables. In addition, there are limitations on the incurrence and
maintenance of debt, limitations on liens, limitations on mergers and
consolidations, limitations on dispositions of assets (including sale and
leaseback transactions), limitations on voluntary prepayments of and amendments
to the terms of subordinated debt and the Senior Notes, and certain restrictions
on investments.
If any Event of Default (as defined therein) occurs and is
continuing, the lenders holding at least 51% of the outstanding loans or, in
certain circumstances, the commitments, have the right to terminate the
commitments and accelerate the maturity of outstanding credits, and if certain
Events of Default relating to bankruptcy occur, the commitments will
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<PAGE> 45
immediately terminate and the credits will become due and payable without any
action on the part of the lenders. In addition, the Company and the subsidiary
borrowers are obligated to offer to terminate the Revolving Credit Facility upon
the occurrence of a Change in Control (as defined therein). Finally, certain
asset dispositions could give rise to an obligation to make a ratable prepayment
of all senior indebtedness, including, without limitation, credits under the
Revolving Credit Facility.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States
federal income tax considerations generally applicable to holders acquiring the
Depositary Shares on original issue, but does not purport to be a complete
analysis of all potential consequences. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations,
Internal Revenue Service ("IRS") rulings and judicial decisions now in effect,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Depositary Shares and Common Stock.
The discussion assumes that the holders of the Depositary Shares
and Common Stock will hold them as "capital assets" within the meaning of
Section 1221 of the Code. The discussion is not binding on the IRS or the
courts. The Company has not sought and will not seek any rulings from the IRS
with respect to the positions of the Company discussed herein, and there can be
no assurance that the IRS will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the Depositary Shares
or Common Stock or that any such position would not be sustained.
The tax treatment of a holder of the Depositary Shares and Common
Stock may vary depending on such holder's particular situation or status.
Certain holders (including S corporations, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, taxpayers subject to
alternative minimum tax and persons holding Depositary Shares or Common Stock as
part of a straddle, hedging or conversion transaction) may be subject to special
rules not discussed below. The following discussion is limited to the United
States federal income tax consequences relevant to a holder of the Depositary
Shares and Common Stock that is a citizen or resident of the United States, or
any state thereof, or a corporation or other entity created or organized under
the laws of the United States, or any state or political subdivision thereof, or
an estate or trust the income of which is subject to United States federal
income tax regardless of source or that is otherwise subject to United States
federal income tax on a net income basis in respect of the Depositary Shares and
Common Stock. The following discussion does not consider all aspects of United
States federal income tax that may be relevant to the purchase, ownership and
disposition of the Depositary Shares and Common Stock by a holder in light of
such holder's personal circumstances. In addition, the discussion does not
consider the effect of any applicable foreign, state, local or other tax laws,
or estate or gift tax considerations. PERSONS CONSIDERING THE PURCHASE OF THE
DEPOSITARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR
SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL, OR FOREIGN TAXING JURISDICTION.
INTRODUCTION
Holders of Depositary Shares will be treated for United States
federal income tax purposes as if they were owners of the Preferred Stock
represented by such Depositary Shares. Accordingly, holders of Depositary Shares
will recognize the items of income, gain, loss and deductions that they would
recognize if they directly held the Preferred Stock. References in this "Certain
Federal Income Tax Consequences" section to holders of Preferred Stock include
holders of Depositary Shares, and references to Depositary Shares include
Preferred Stock.
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<PAGE> 46
DISTRIBUTIONS ON DEPOSITARY SHARES AND COMMON STOCK
A distribution on the Depositary Shares, whether paid in cash or
in shares of Common Stock, or a cash distribution on Common Stock, will be
taxable to the holder as ordinary dividend income to the extent that the amount
of the distribution (i.e., the amount of cash and/or the fair market value of
the Common Stock on the date of distribution) does not exceed the Company's
current or accumulated earnings and profits allocable to such distribution (as
determined for federal income tax purposes). To the extent that the amount of
the distribution exceeds the Company's current or accumulated earnings and
profits allocable to such distribution, the distribution will be treated as a
return of capital, thus reducing the holder's adjusted tax basis in the
Depositary Shares or Common Stock with respect to which such distribution is
made. The amount of any such excess distribution that exceeds the holder's
adjusted tax basis in the Depositary Shares or Common Stock will be taxed as
capital gain and will be long-term capital gain if the holder's holding period
for the Depositary Shares or Common Stock exceeds one year. If the holding
period for the Depositary Shares or Common Stock is more than 18 months, a
maximum tax rate of 20% will apply to any such capital gain if recognized by a
non-corporate holder. A holder's initial tax basis in Common Stock received as a
distribution on the Depositary Shares will equal the fair market value of the
Common Stock on the date of the distribution. The holding period for the Common
Stock will commence on the day following the distribution. There can be no
assurance that the Company will have sufficient earnings and profits to cause
distributions on the Preferred Stock or Common Stock to be treated as dividends
for federal income tax purposes. For purposes of the remainder of this
discussion, the term "dividend" refers to a distribution paid out of current or
accumulated earnings and profits, unless the context indicates otherwise.
Preferred Stock Liquidated Damages should be taxed in the same manner as
dividend distributions, except that it is possible that Preferred Stock
Liquidated Damages might be treated as payment of a fee and hence as ordinary
income with respect to which no dividends-received deduction is available.
Pursuant to certain amendments to Section 305(c) of the Code, the
IRS has the authority to promulgate regulations that may treat unpaid cumulative
dividends on preferred stock as being constructively paid to the holder in
certain circumstances, such as when there is no intention for dividends to be
paid currently at the time of issuance of the preferred stock. The IRS has not
yet proposed any such regulations.
Dividends received by corporate holders will generally be eligible
for the 70% dividends-received deduction under Section 243 of the Code. There
are, however, many exceptions and restrictions relating to the availability of
the dividends-received deduction, such as restrictions relating to (i) the
holding period of the stock on which the dividends are received, (ii)
debt-financed portfolio stock, (iii) dividends treated as "extraordinary
dividends" for purposes of Section 1059 of the Code, and (iv) taxpayers that pay
alternative minimum tax. Corporate holders should consult their own tax advisors
regarding the extent, if any, to which such exceptions and restrictions may
apply to their particular factual situations. In addition, a corporate holder of
Common Stock or (except as provided in the following sentence) Preferred Stock
must satisfy a separate forty-six day holding period requirement with respect to
each dividend in order to be eligible for the dividends-received deduction with
respect to such dividend. Furthermore, a corporate holder of Preferred Stock
must satisfy a separate ninety-one day holding period requirement with respect
to any dividend attributable to a period of more than 366 days in order to be
eligible for the dividends-received deduction with respect to such dividend.
REDEMPTION PREMIUM
Under certain circumstances, Section 305(c) of the Code requires
that any excess of the redemption price of preferred stock over its issue price
be treated as constructively distributed on a periodic basis prior to actual
receipt. However, the Company believes that a holder of the Depositary Shares
should not be required to include any redemption premium in income under Section
305(c).
ADJUSTMENT OF CONVERSION PRICE
Treasury regulations issued under Section 305 of the Code treat
certain adjustments to conversion provisions of stock such as the Preferred
Stock as constructive distributions of stock with respect to preferred stock.
Such constructive distributions of stock would be taxable to holders of
Depositary Shares as described above under the caption "Distributions
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<PAGE> 47
on Depositary Shares and Common Stock". In general, any adjustment increasing
the number of shares of Common Stock into which the Depositary Shares can be
converted could constitute a constructive distribution of stock to holders of
Depositary Shares unless made pursuant to a bona fide, reasonable adjustment
formula that has the effect of preventing dilution of the interest of the
holders of Depositary Shares. Any adjustment in the conversion price to
compensate the holders of Depositary Shares for taxable distributions of cash or
property on any of the outstanding Common Stock of the Company may be treated as
a constructive distribution of stock to holders of Depositary Shares. The
Company is unable to predict whether any such adjustment will be made.
CONVERSION OF PREFERRED STOCK
No gain or loss will generally be recognized for United States
federal income tax purposes on conversion of the Preferred Stock solely into
Common Stock. However, if the conversion takes place when there is a dividend
arrearage on the Preferred Stock, a portion of the Common Stock received may be
treated as a taxable dividend to the extent of such dividend arrearage. Except
for any Common Stock treated as payment of a dividend, the tax basis for the
Common Stock received upon conversion (including any fractional share deemed
received) will be the tax basis of the Preferred Stock converted, and the
holding period of the Common Stock received upon conversion (including any
fractional share deemed received) will include the holding period of the
Preferred Stock converted into such Common Stock. The receipt of cash in lieu of
a fractional share upon conversion of Preferred Stock to Common Stock will
generally be treated as a sale of such fractional share of Common Stock in which
the holder will recognize taxable gain or loss equal to the difference between
the amount of cash received and the holder's tax basis in the fractional share
redeemed. Such gain or loss will be capital gain or loss and will be long-term
if the holder's holding period for the fractional share exceeds one year. If the
holding period for the fractional share is more than 18 months, a maximum tax
rate of 20% will apply to any such capital gain if recognized by a non-corporate
holder.
CONVERSION OF PREFERRED STOCK AFTER DIVIDEND RECORD DATE
If a holder whose Preferred Stock has not been called for
redemption surrenders such Preferred Stock for conversion into shares of Common
Stock after a dividend record date for the Preferred Stock but before payment of
the dividend, such holder will be required to pay the Company an amount equal to
such dividend upon conversion. The holder will likely recognize the dividend
payment as ordinary dividend income when it is received and increase the basis
of the Common Stock received by the amount paid to the Company.
REDEMPTION, SALE OR EXCHANGE OF PREFERRED STOCK AND SALE OR EXCHANGE OF COMMON
STOCK
A redemption of shares of Preferred Stock for cash will be a
taxable event.
A redemption of shares of Preferred Stock for cash will generally
be treated as a sale or exchange if the holder does not own, actually or
constructively within the meaning of Section 318 of the Code, any stock of the
Company other than the Preferred Stock redeemed. If a holder does own, actually
or constructively, other stock of the Company, a redemption of Preferred Stock
may be treated as a dividend to the extent of the Company's allocable current or
accumulated earnings and profits (as determined for United States federal income
tax purposes). Such dividend treatment will not be applied if the redemption is
"not essentially equivalent to a dividend" with respect to the holder under
Section 302(b)(1) of the Code. A distribution to a holder will be "not
essentially equivalent to a dividend" if it results in a "meaningful reduction"
in the holder's stock interest in the Company. For this purpose, a redemption of
Preferred Stock that results in a reduction in the proportionate interest in the
Company (taking into account any actual ownership of Common Stock and any stock
constructively owned) of a holder whose relative stock interest in the Company
is minimal and who exercises no control over corporate affairs should be
regarded as a meaningful reduction in the holder's stock interest in the
Company.
If a redemption of the Preferred Stock for cash is treated as a
sale or exchange, the redemption will result in capital gain or loss equal to
the difference between the amount of cash received and the holder's adjusted tax
basis in the Preferred Stock redeemed, except to the extent that the redemption
price includes dividends that have been declared by the Board of Directors of
the Company prior to the redemption. Similarly, upon the sale or exchange of the
Preferred Stock or
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<PAGE> 48
Common Stock (other than in a redemption, on conversion or pursuant to a
tax-free exchange), the difference between the sum of the amount of cash and the
fair market value of other property received and the holder's adjusted basis in
the Preferred Stock or Common Stock will be capital gain or loss. This gain or
loss will be long-term capital gain or loss if the holder's holding period for
the Preferred Stock or Common Stock exceeds one year. If the holding period for
the Preferred Stock or Common Stock is more than 18 months, a maximum tax rate
of 20% will apply to any such capital gain if recognized by a non-corporate
holder.
If a redemption of Preferred Stock is treated as a distribution
that is taxable as a dividend, the amount of the distribution will be the amount
of cash received by the holder. The holder's adjusted tax basis in the redeemed
Preferred Stock will be transferred to any remaining stock holdings in the
Company, subject to reduction or possible gain recognition under Section 1059 of
the Code with respect to the nontaxed portion of such dividend. If the holder
does not retain any actual stock ownership in the Company (having a stock
interest only constructively by attribution), the holder may lose the benefit of
the basis in the Preferred Stock.
BACKUP WITHHOLDING
A holder of Depositary Shares or Common Stock may be subject to
backup withholding at the rate of 31% with respect to dividends paid on, or the
proceeds of a redemption, sale or exchange of, the Depositary Shares or Common
Stock, unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates its exemption or (b) provides
a correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder of Depositary Shares or Common Stock who
does not provide the Company with the holder's correct taxpayer identification
number may be subject to penalties imposed by the IRS. Any amount paid as backup
withholding would be creditable against the holder's federal income tax
liability.
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<PAGE> 49
THE SELLING SECURITYHOLDERS
The following table sets forth, as of [ ], 1998 certain information regarding
the Selling Securityholders' ownership of the Company's Depositary Shares,
Preferred Stock and Common Stock. Unless otherwise disclosed in the footnotes to
the table, no Selling Securityholder has held any position, office or had any
other material relationship with the Company, its predecessors or affiliates
during the past three years. All of the Depositary Shares and shares of
Preferred Stock are registered in the name of "Cede & Co." on the books of the
Company's Transfer Agent. To the knowledge of the Company, except as disclosed
in the table below, the Selling Securityholders did not own, or have any rights
to acquire, any other Depositary Shares, shares of Preferred Stock or Common
Stock as of the date of this Prospectus.
<TABLE>
<CAPTION>
Common Stock Depositary Shares
Beneficially
Beneficially Owned Owned After
Name of Selling Prior to This Offered for This Offering Beneficially Owned Prior Offered
Security-holder(1) Offering(2)(3) Sale (2)(3) to This Offering(2) for Sale
- ------------------------------------------------------------------------------------------------------------------------------------
No. of % of
No. of % of Depositary Depositary
Shares Shares Shares Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unnamed holders of Convertible
Preferred Stock or related Depositary
Shares or any future transferees,
pledgees, donors or successors of or
from any such Unnamed holder(5)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
6 1/2% Convertible Preferred Stock
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficially
Beneficially Beneficially Owned Prior to Owned After
Owned After This Offering Offered for This Offering
This Offering(2) (2)(4) Sale (2)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
No. of
Shares of % of
Preferred Preferred
Stock Stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unnamed holders of Convertible
Preferred Stock or related Depositary
Shares or any future transferees,
pledgees, donors or successors of or
from any such Unnamed holder(5)
Unnamed holders of Convertible
Preferred Stock or related Depositary
Shares or any future transferees,
pledgees, donors or successors of or
from any such Unnamed holder(5)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent. Based on [ ] shares of Common Stock outstanding
on [ ], 1998, and 6,900,000 Depositary Shares and 690,000 shares of
Preferred Stock outstanding on [ ], 1998.
(1) The names of Selling Securityholders will be provided in an amendment
to this registration statement.
(2) Under the rules of the Commission, a person is deemed to be the
beneficial owner of a security if such person has or shares the power
to vote or direct the voting of such security or the power to dispose
or direct the disposition of such security. A person is also deemed to
be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days. Accordingly, more than one
person may be deemed to be a beneficial owner of the same securities.
Unless otherwise indicated by footnote, the named individuals have sole
voting and investment power with respect to the securities beneficially
owned.
(3) Assuming the conversion of all Depositary Shares and/or shares of
Preferred Stock. The Depositary Shares and the Preferred Stock may not
be converted into Common Stock until after July 13, 1998.
(4) Assuming the conversion of all Depositary Shares into shares of
Preferred Stock on the basis of one share of Preferred Stock for each
ten Depositary Shares.
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<PAGE> 50
(5) No such holder may offer Preferred Stock (or related Depositary Shares)
pursuant to the Registration Statement of which this Prospectus forms a
part until such holder is included as a Selling Securityholder in a
supplement to this Prospectus in accordance with the Registration
Rights Agreement.
(6) Assumes that the unnamed holders of Preferred Stock (or related
Depositary Shares) or any future transferees, pledges, donees or
successors of or from any such unnamed holder do not beneficially own
any Common Stock other than the Common Stock issuable upon conversion
of the Preferred Stock (or related Depositary Shares) at the initial
conversion rate.
Because the Selling Securityholders may, pursuant to this Prospectus,
offer all or some portion of the Preferred Stock (or related Depositary Shares)
they presently hold, no estimate can be given as to the amount of the Preferred
Stock (or related Depositary Shares) that will held by the Selling
Securityholders upon termination of any such sales. In addition, the Selling
Securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Preferred Stock (or related Depositary
Shares) since the date on which they provided the information regarding their
Preferred Stock (or related Depositary Shares), in transactions exempt from the
registration requirements of the Securities Act.
Only Selling Securityholders identified above who beneficially own the
Preferred Stock (or related Depositary Shares) set forth opposite each such
Selling Securityholder's name in the foregoing table on the effective date of
the Registration Statement of which this Prospectus forms a part may sell such
Preferred Stock (or related Depositary Shares) pursuant to the Registration
Statement. The Company may from time to time, in accordance with the
Registration Rights Agreement, include additional Selling Securityholders in
supplements to this Prospectus.
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<PAGE> 51
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the
Securities or the issuance of the Dividend Shares or Liquidated Damages Shares
offered hereby. The Dividend Shares may be issued by the Company from time to
time in lieu of or in combination with cash to holders of record of the
Preferred Stock, all in accordance with the Certificate of Designations, payable
quarterly on January 1, April 1, July 1 and October 1 of each year, commencing
on July 1, 1998. See "Description of Preferred Stock--Dividends." The Securities
may be sold from time to time to purchasers directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer the Securities through brokers, dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Securities for whom they
may act as agent. The Selling Securityholders and any such brokers, dealers or
agents who participate in the distribution of the Securities may be deemed to be
"underwriters", and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents may be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Securityholders may be deemed to be
underwriters, the Selling Securityholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold by the Selling
Securityholders from time to time in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The Securities may be sold by one or
more of the following methods, without limitation: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the Securities as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) an exchange distribution in accordance with the rules of such exchange; (e)
face-to-face transactions between sellers and purchasers without a
broker-dealer; (f) through the writing of options; and (g) other. At any time a
particular offer of the Securities is made, a revised Prospectus or Prospectus
Supplement, if required, will be distributed which will set forth the aggregate
amount and type of Securities being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, any
discounts, commissions and other items constituting compensation from the
Selling Securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. Such Prospectus Supplement and, if necessary, a
post-effective amendment to the Registration Statement of which this Prospectus
is a part, will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Securities. In
addition, the Securities covered by this Prospectus may be sold in private
transactions or pursuant to Rule 144 under the Securities Act rather than
pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no
plans, arrangements or understandings between any Selling Securityholders and
any broker, dealer, agent or underwriter regarding the sale of the Securities by
the Selling Securityholders. There is no assurance that any Selling
Securityholder will sell any or all of the Securities offered by it hereunder or
that any such Selling Securityholder will not transfer, devise or gift such
Securities by other means not described herein.
The Selling Securityholders and any other person participating in
such distribution will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders and any other such person. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.
Pursuant to the Registration Rights Agreement entered into in
connection with the offer and sale of the Depositary Shares by the Company, each
of the Company and the applicable Selling Securityholders will be indemnified by
the other against certain liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company has agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the Securities to the public other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
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<PAGE> 52
LEGAL MATTERS
Certain legal matters with respect to the validity of the
securities offered hereby are being passed upon for the Company by Christy &
Viener, New York, New York. Jerome M. LeWine, a partner at Christy & Viener, and
a former director of the Company, beneficially owns 6,600 shares of Common Stock
of the Company and holds options to purchase 213,500 shares of Common Stock.
EXPERTS
The consolidated financial statements of Sensormatic appearing in
Sensormatic's Annual Report on Form 10-K for the year ended June 30, 1997 (File
Number 1-10739), have been audited by Ernst & Young LLP, independent certified
public accountants, as set forth in their report included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
-45-
<PAGE> 53
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE
SHARES OF PREFERRED STOCK (AND RELATED DEPOSITARY SHARES) AND COMMON STOCK
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SHARES OF PREFERRED STOCK (AND RELATED DEPOSITARY
SHARES) OR COMMON STOCK TO ANYONE OR BY ANYONE IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-
LOOKING STATEMENTS..............................v
AVAILABLE INFORMATION...................................vi
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE......................................vi
THE COMPANY..............................................1
SUMMARY OF TERMS OF SECURITIES...........................1
RISK FACTORS.............................................3
USE OF PROCEEDS..........................................7
SELECTED CONSOLIDATED FINANCIAL INFORMATION..............8
COMPUTATION OF EARNINGS PER SHARE.......................11
RATIO OF EARNINGS TO FIXED CHARGES......................12
BUSINESS ...............................................12
DESCRIPTION OF PREFERRED STOCK..........................23
DESCRIPTION OF DEPOSITARY SHARES........................29
DESCRIPTION OF CAPITAL STOCK............................35
DESCRIPTION OF CERTAIN INDEBTEDNESS.....................36
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................38
THE SELLING SECURITYHOLDERS.............................42
PLAN OF DISTRIBUTION....................................44
LEGAL MATTERS...........................................45
EXPERTS ...............................................45
</TABLE>
SENSORMATIC ELECTRONICS CORPORATION
6,900,000 DEPOSITARY SHARES
EACH REPRESENTING A
ONE-TENTH INTEREST IN
A SHARE OF
6 1/2% CONVERTIBLE PREFERRED
STOCK
690,000 SHARES OF
6 1/2% CONVERTIBLE PREFERRED STOCK
8,837,090 SHARES OF COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
May , 1998
<PAGE> 54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by the Company in connection with the
offering of the Shares are set forth below. All the amounts shown are estimates,
except for the Securities and Exchange Commission registration fee and the NYSE
listing fee.
<TABLE>
<S> <C>
SEC registration fee.................................... $55,339
Legal fees and expenses................................. 20,000
Accounting fees and expenses............................ 10,000
Miscellaneous........................................... 4,661
-------
Total................. $90,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that the
Company will to the fullest extent permitted by the DGCL indemnify all persons
whom it may indemnify pursuant thereto. The Company's By-laws contain a similar
provision requiring indemnification of the Company's directors and officers to
the fullest extent authorized by the DGCL. The DGCL permits a corporation to
indemnify its directors and officers (among others) against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought (or threatened to be brought) by third parties, if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made for expenses (including attorneys'
fees) actually and reasonably incurred by directors and officers in connection
with the defense or settlement of such action if they had acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged liable to the Company unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses. The DGCL further provides that, to the extent any
director or officer has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in this paragraph, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith. In addition, the Company's Certificate of Incorporation
contains a provision limiting the personal liability of the Company's directors
for monetary damages for certain breaches of their fiduciary duty as directors.
The Company has indemnification insurance under with directors and officers are
insured against certain liability that may occur in their capacity as such.
II-1
<PAGE> 55
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
1.1 Purchase Agreement, dated as of April 6, 1998, among the Company and
the Initial Purchasers.
4.1 Registration Rights Agreement, dated as of April 13, 1998, among the
Company and the Initial Purchaser.
4.2 Certificate of Designations of Voting Power, Designation Preferences
and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of 6 1/2% Convertible
Preferred Stock of the Company, filed with the Secretary of State of
the State of Delaware on April 9, 1998 (incorporated by
reference to Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the Quarter Ended March 31, 1998, File No.
1-10739).
4.3 Deposit Agreement, dated as of April 13, 1998, between the Company and
BankBoston, N.A.
5.1 Opinion of Christy & Viener.
8.1 Opinion of Christy & Viener as to tax matters is contained in Exhibit
5.1 to this Registration Statement.
12.1 Statement Re: Computation of Ratios.
23.1 Consent of Christy & Viener is contained in their opinion filed as
Exhibit 5.1 to this Registration Statement.
23.2 Consent of Ernst & Young LLP.
24.1 Power of Attorney is set forth on the signature page of this
Registration Statement.
</TABLE>
II-2
<PAGE> 56
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section13 or seciton15(d) of the Exchange Act that rate incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that the opinion of the Securities and Exchange Commission such
indemnifications is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on the 22nd day of May
1998.
SENSORMATIC ELECTRONICS CORPORATION
By /s/ ROBERT A. VANOUREK
---------------------------------------------------------
Robert A. Vanourek, President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
makes, constitutes and appoints Robert A. Vanourek and Garrett E. Pierce, and
each of them acting without the other, his or her attorney-in-fact and agent, in
his or her name, place and stead, to execute on his or her behalf, as an officer
or director of the Company, this Registration Statement and any and all
amendments, including any post-effective amendments, to this Registration
Statement, and to file the same, with all exhibits thereto, and other and
documents in connection therewith, with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 (the "Act"), and any other instruments
which either of such attorneys-in-fact and agents deems necessary or desirable
to enable the Company to comply with the Act and the rules and regulations
promulgated thereunder and the securities or blue sky laws of any state or other
governmental subdivision, giving and granting to each of such attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing necessary or desirable to be done in and about the premises as fully to
all intents as he or she might or could do if personally present, with full
power of substitution and resubstitution, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitutes, may do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ ROBERT A. VANOUREK President and Chief Executive Officer; May 22, 1998
- ------------------------------- Director (Principal executive officer)
Robert A. Vanourek
/s/ GARRETT A. PIERCE Senior Vice President and Chief May 22, 1998
- ------------------------------- Financial Officer (Principal financial
Garrett A. Pierce officer)
/s/ JEAN M. NELSON Vice President and Treasurer May 22, 1998
- -------------------------------
Jean M. Nelson
/s/ GREGORY C. THOMPSON Vice President and Controller May 22, 1998
- ------------------------------- (Principal accounting officer)
Gregory C. Thompson
/s/ RONALD G. ASSAF Chairman of the Board May 22, 1998
- -------------------------------
Ronald G. Assaf
/s/ THOMAS V. BUFFETT Director May 22, 1998
- -------------------------------
Thomas V. Buffett
Director May __, 1998
- -------------------------------
Timothy P. Hartman
/s/ JAMES E. LINEBERGER Director May 22, 1998
- -------------------------------
James E. Lineberger
/s/ J. RICHARD MUNRO Director May 22, 1998
- -------------------------------
J. Richard Munro
/s/ JOHN T. RAY, JR. Director May 22, 1998
- -------------------------------
John T. Ray, Jr.
</TABLE>
II-4
<PAGE> 58
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NO.
<S> <C> <C>
1.1 Purchase Agreement, dated as of April 6, 1998, among the Company and
the Initial Purchasers.
4.1 Registration Rights Agreement, dated as of April 13, 1998, among the
Company and the Initial Purchaser.
4.2 Certificate of Designations of Voting Power, Designation Preferences
and Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of 6 1/2% Convertible
Preferred Stock of the Company, filed with the Secretary of State of
the State of Delaware on April 9, 1998 (incorporated by reference to
Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1998, File No. 1-10739).
4.3 Deposit Agreement, dated as of April 13, 1998, between the Company and
BankBoston, N.A.
5.1 Opinion of Christy & Viener.
8.1 Opinion of Christy & Viener as to tax matters is contained in Exhibit
5.1 to this Registration Statement.
12.1 Statement Re: Computation of Ratios.
23.1 Consent of Christy & Viener is contained in their opinion filed as
Exhibit 5.1 to this Registration Statement.
23.2 Consent of Ernst & Young LLP.
24.1 Power of Attorney is set forth on the signature page of this
Registration Statement.
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1.1
SENSORMATIC ELECTRONICS CORPORATION
6,000,000 Depositary Shares Each Representing a One-Tenth Interest in a
Share of 6 1/2% Convertible Preferred Stock
PURCHASE AGREEMENT
April 6, 1998
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
SCHRODER & CO. INC.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Ladies and Gentlemen:
Sensormatic Electronics Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
several Initial Purchasers named in Schedule I hereto (the "Initial Purchasers")
an aggregate of 6,000,000 Depositary Shares (the "Depositary Shares"), each
representing a one-tenth interest in a share of its 6 1/2% Convertible Preferred
Stock, par value $0.01 (the "Preferred Stock"). The Preferred Stock and the
related Depositary Shares are to be authorized and issued pursuant to the
provisions of a Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional or Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions (the "Certificate of Designations")
to be filed with the Secretary of State of the State of Delaware. BankBoston,
N.A. will be the transfer agent and registrar for the Preferred Stock and will
also act as the "Depositary Agent" for the Depositary Shares.
1. ISSUANCE OF SECURITIES. The Company proposes to, upon the terms and
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers 6,000,000 Depositary Shares (the "Firm Shares"). In addition, the
Company proposes to grant to the Initial Purchasers an option, for the sole
purpose of covering over-allotments in connection with the sale of the Firm
Shares, to purchase up to an additional 900,000 Depositary Shares (the
"Additional Shares," and together with the Firm Shares, the "Company Shares").
The Firm Shares, any Additional Shares and the Preferred Stock are collectively
referred to herein as the "Securities."
For purposes of this Purchase Agreement (this "Agreement"), capitalized
terms used but not otherwise defined herein shall have the meanings given to
such terms in the Certificate of Designations. Upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Securities Act (as defined herein), the Securities
1
<PAGE> 2
(and all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS),
(2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. OFFERING. The Company Shares will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
prepared a preliminary offering memorandum, dated March 26, 1998 (the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated April
6, 1998 (the "Offering Memorandum"), relating to the Company and the Securities.
The Shares have not been registered under the Securities Act, and are
being sold in reliance on exemptions from or in transactions not subject to the
registration requirements of the
2
<PAGE> 3
Securities Act, including sales (i) made in the United States to "qualified
institutional buyers" as defined in, and in reliance on, Rule 144A under the
Securities Act ("Rule 144A"), or (ii) made in the United States to a limited
number of persons who have represented to the Company that they are
institutional "accredited investors" referred to in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers of sale (the "Exempt Resales") of the Company
Shares, on the terms set forth in the Offering Memorandum, as amended or
supplemented, solely to persons whom any of the Initial Purchasers reasonably
believe to be "qualified institutional buyers," as defined in Rule 144A under
the Securities Act ("QIBs"), and to a limited number of persons who have
represented to the Company that they are institutional "accredited investors"
referred to in Rule 501(a)(1), (2), (3) or (7) under the Securities Act (each,
an "Accredited Investor"). The QIBs and the Accredited Investors are referred to
herein as the "Eligible Purchasers." The Initial Purchasers will offer the
Securities to such Eligible Purchasers initially at the price per share set
forth in the Offering Memorandum. Such price may be changed at any time without
notice.
Holders (including subsequent transferees) of the Securities will have
the registration rights set forth in a Registration Rights Agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date (as
defined below), for so long as such Securities constitute "Transfer Restricted
Securities" (as defined in the Registration Rights Agreement). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement") relating to the resale by
certain holders of the Securities, and to the sale by certain holders of Common
Stock of the Company received in connection with conversion of the Preferred
Stock or received in payment of dividends on the Preferred Stock, and to use its
best efforts to cause the Shelf Registration Statement to be declared effective.
This Agreement, the Certificate of Designations, the Securities, the
Registration Rights Agreement and the Deposit Agreement (as defined in the
Registration Rights Agreement) are hereinafter sometimes referred to
collectively as the "Operative Documents."
3. PURCHASE, SALE AND DELIVERY. (a) On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to sell
to the Initial Purchasers, and the Initial Purchasers, severally and not
jointly, agree to purchase from the Company, the number of Firm Shares set forth
opposite their respective names in Schedule I hereto. The purchase price for the
Firm Shares shall be as indicated in the Offering Memorandum.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants to the Initial
Purchasers the option to purchase, severally and not jointly, up to an aggregate
of 900,000 Additional Shares, for the sole purpose of covering over-allotments
in the sale of Firm Shares by the Initial Purchasers, at the same purchase price
to be paid by the Initial Purchasers to the Company for the Firm Shares as set
forth in Section 3(a).
3
<PAGE> 4
This option may be exercised at any time, in whole or in part, on or before the
30th day following the date of the Offering Memorandum, by written notice by
Bear, Stearns & Co., Inc. ("Bear Stearns"), on behalf of the Initial Purchasers,
to the Company. Such notice shall set forth the aggregate number of Additional
Shares to be purchased pursuant to the option and the date and time when the
Additional Shares are to be delivered (such date and time being herein sometimes
referred to as the "Additional Closing Date"); provided that the Additional
Closing Date shall not be earlier than (x) the Closing Date or (y) the second
full business day after the date on which the option shall have been exercised,
nor later than the eighth full business day after the date on which the option
shall have been exercised (unless such date and time are postponed in accordance
with Section 10 hereof). Upon any exercise of the option, the Initial
Purchasers, severally and not jointly, agree to purchase from the Company, the
number of Additional Shares that bears the same proportion to the aggregate
number of Firm Shares set forth opposite the name of such Initial Purchaser in
Schedule I hereto (or such number increased as set forth in Section 10 hereof)
bears to the aggregate number of Firm Shares, subject to such adjustments to
eliminate fractional Depositary Shares as Bear Stearns, on behalf of the Initial
Purchasers, in its sole discretion may make.
(c) Payment of the purchase price for, and delivery of, the
Firm Shares will be made at the offices of Christy & Viener, New York, New York,
at 9:30 a.m. (New York time) on April 13, 1998, unless postponed in accordance
with Section 10 hereof, or such other time and date as may be mutually agreed in
writing between the Initial Purchasers and the Company (the time and date of
such payment and delivery being herein called the "Closing Date").
(d) Payment of the purchase price for, and delivery of, any
Additional Shares to be purchased by the Initial Purchasers will be made at the
offices of Christy & Viener, New York, New York, at such time and on the
Additional Closing Date.
(e) The Firm Shares and any Additional Shares to be purchased
hereunder shall initially be issued in the form of one or more global
certificates (the "Global Securities"), registered in the name of Cede & Co., as
the nominee of The Depository Trust Company ("DTC"), having a liquidation
preference corresponding to the aggregate liquidation preference of the Firm
Shares and the Additional Shares, as the case may be. The Global Securities
shall be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct), in each case with the transfer taxes payable upon initial
issuance thereof, if any, duly paid by the Company, against payment of the
purchase price by wire transfer of immediately available funds to the order of
the Company. The Global Securities shall be made available to the Initial
Purchasers for inspection no later than 9:30 a.m. (New York time) on the
business day immediately preceding the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Initial Purchasers
that:
(a) The Offering Memorandum, as of the date hereof and as of
the Closing Date and as of any Additional Closing Date is and will be accurate
in all material respects, does not and will not contain an untrue statement of a
material fact and does not and will not omit to
4
<PAGE> 5
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Preliminary Offering Memorandum, as of the date
thereof, was accurate in all material respects, did not contain an untrue
statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading.
No representation and warranty is made in this Section 4(a), however, with
respect to any information contained in or omitted from the Preliminary Offering
Memorandum or the Offering Memorandum or any amendment thereof or supplement
thereto in reliance upon and in conformity with information furnished in writing
to the Company by the Initial Purchasers expressly for use in connection with
the preparation thereof.
(b) When the Company Shares are issued and delivered pursuant
to this Agreement, neither the Preferred Stock nor the Company Shares will be of
the same class (within the meaning of Rule 144A under the Securities Act) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act, or that are quoted in a United
States automated inter-dealer quotation system.
(c) The Company and each of its subsidiaries (i) has been duly
organized and is validly existing as a corporation in good standing under the
laws of its respective jurisdiction of incorporation, (ii) has all requisite
corporate power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease and
operate its properties, and (iii) is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification EXCEPT, with respect to this clause (iii), where the failure to be
so qualified or in good standing does not and could not reasonably be expected
to (x) individually or in the aggregate, result in a material adverse effect on
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company and its subsidiaries, taken as a
whole, (y) interfere with or adversely affect the issuance or marketability of
the Securities pursuant hereto or (z) in any manner draw into question the
validity of this Agreement or any other Operative Documents (any of the events
set forth in clauses (x), (y) or (z), a "Material Adverse Effect").
(d) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. At December 31, 1997, after giving effect to the issuance and sale of
the Preferred Stock (and the related Depositary Shares) pursuant hereto, the
Company had an authorized and outstanding consolidated capitalization as set
forth in the Offering Memorandum under the caption "Capitalization."
(e) Except as set forth in the Offering Memorandum, there are
not, as of the date hereof and will not be as a result of the Offering, any
outstanding subscriptions, rights, warrants, calls, commitments of sale or
options to acquire, or instruments convertible into or exchangeable for, any
capital stock or other equity interest of the Company or any of its
subsidiaries.
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<PAGE> 6
(f) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Operative Documents, and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the corporate
power and authority to issue, sell and deliver the Securities as provided herein
and therein.
(g) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
EXCEPT insofar as certain provisions may be limited by applicable law or
equitable principles and subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
(h) The shares of Preferred Stock (and the related Depositary
Shares) have been duly and validly authorized for issuance and sale to the
Initial Purchasers by the Company pursuant to this Agreement and, when issued,
delivered and paid for in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable and entitled to the rights,
privileges and preferences set forth in the Certificate of Designations, and the
issuance of such shares of Preferred Stock (and the related Depositary Shares)
will not be subject to any preemptive or similar rights. The Preferred Stock
(and the related Depositary Shares) will conform in all material respects with
the description thereof in the Offering Memorandum.
(i) The Certificate of Designations has been duly authorized
by all necessary corporate action (including any stockholder action) and, on the
Closing Date will have been duly executed by the Company and filed with the
Secretary of State of the State of Delaware and will conform in all material
respects to the description thereof in the Offering Memorandum.
(j) Each of the Registration Rights Agreement and the Deposit
Agreement has been duly and validly authorized by the Company and, when duly
executed and delivered by the Company, will be the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity and limitations on the validity or
enforceability of certain provisions set forth therein. The Offering Memorandum
contains a fair summary of the material terms of the Registration Rights
Agreement and the Deposit Agreement.
(k) None of the Company or any of its subsidiaries is and,
after giving effect to the Offering, will not be (i) in violation of its charter
or bylaws, (ii) in default in the performance of any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties is subject,
or (iii) in violation of any local, state or federal law, statute, ordinance,
rule, regulation, requirement, judgment or court decree (including, without
limitation, the orders of the Federal Trade Commission dated April 18, 1995 and
January 21, 1998, respectively, the Cease and Desist Order of the Commission
dated March 25, 1998, the rules and regulations of the Federal
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<PAGE> 7
Communications Commission (the "FCC"), and environmental laws, statutes,
ordinances, rules, regulations, judgments or court decrees) applicable to the
Company or any of its subsidiaries or any of their assets or properties (whether
owned or leased) OTHER THAN, in the case of clauses (ii) and (iii), any default
or violation (A) that could not reasonably be expected to have a Material
Adverse Effect or (B) which was disclosed in the Offering Memorandum. To the
best knowledge of the Company, there exists no condition that, with notice, the
passage of time or otherwise, would constitute a default under any such document
or instrument that could reasonably be expected to result in a Material Adverse
Effect, except as disclosed in the Offering Memorandum.
(l) None of (i) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents, (ii) the issuance
and sale of the Securities, (iii) the performance by the Company of its
obligations under this Agreement and the other Operative Documents and (iv) the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents violate, conflict with or constitute a breach of any of the
terms or provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require consent under,
or result in any imposition of a lien or encumbrance on any properties of the
Company or any of its subsidiaries, or an acceleration of any indebtedness of
the Company or any of its subsidiaries pursuant to, (A) the charter or bylaws of
the Company or any of its subsidiaries, (B) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which any of them or their
property is or may be bound, (C) any statute, rule or regulation applicable to
the Company or any of its subsidiaries or any of their respective assets or
properties or (D) any judgment, order or decree of any court or governmental
agency or authority having jurisdiction over the Company or its subsidiaries or
any of their assets or properties, EXCEPT in the case of clauses (B), (C) and
(D) for such violations, conflicts, breaches, defaults, consents, impositions of
liens or accelerations that (1) could not singly, or in the aggregate,
reasonably be expected to have a Material Adverse Effect or (2) were disclosed
in the Offering Memorandum. Other than as described in the Offering Memorandum,
no consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (i) any court or governmental
agency body or administrative agency (including, without limitation, the FCC) or
(ii) any other person is required for (A) the execution, delivery and
performance by the Company of this Agreement and the other Operative Documents,
or (B) the issuance and sale of the Securities and the transactions contemplated
hereby and thereby, EXCEPT (x) such as have been obtained and made (or, in the
case of the Registration Rights Agreement, will be obtained and made) under the
Securities Act and state securities or Blue Sky laws and regulations or such as
may be required by the NASD or (y) where the failure to obtain any such consent,
approval, authorization or order of, or filing, registration, qualification,
license or permit could not reasonably be expected to result in a Material
Adverse Effect.
(m) There is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of the Company or any of its
subsidiaries, threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property of the
Company or any of its subsidiaries is subject, (ii) no statute, rule, regulation
or order that has been enacted, adopted or issued by any governmental agency or
that has been proposed by any
7
<PAGE> 8
governmental body or (iii) no injunction, restraining order or order of any
nature by a federal or state court or foreign court of competent jurisdiction to
which the Company or any of its subsidiaries is or may be subject or to which
the business, assets, or property of the Company or any of its subsidiaries are
or may be subject that, either individually or in the aggregate (x) is required
to be disclosed in the Preliminary Offering Memorandum and the Offering
Memorandum and that is not so disclosed, or (y) could reasonably be expected to,
either individually or in the aggregate, result in a Material Adverse Effect.
(n) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Preferred Stock (and the related Depositary Shares)
or prevents or suspends the use of the Offering Memorandum; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Preferred Stock (and the related Depositary Shares) or prevents or suspends the
sale of the Preferred Stock (and the related Depositary Shares) in any
jurisdiction referred to in Section 5(c) hereof; and every request of any
securities authority or agency of any jurisdiction for additional information
has been complied with in all material respects.
(o) Except as set forth in the Offering Memorandum, there is
(i) no significant unfair labor practice complaint pending against the Company
or any of its subsidiaries nor, to the best knowledge of the Company, threatened
against any of them, before the National Labor Relations Board, any state or
local labor relations board or any foreign labor relations board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Company or
any of its subsidiaries or, to the best knowledge of the Company, threatened
against any of them, (ii) no significant strike, labor dispute, slowdown or
stoppage pending against the Company or any of its subsidiaries and (iii) to the
best knowledge of the Company, no union representation question existing with
respect to the employees of the Company or any of its subsidiaries that, either
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. To the best knowledge of the Company, no collective
bargaining organizing activities are taking place with respect to the Company
and its subsidiaries that could reasonably be expected to result in a Material
Adverse Effect. None of the Company or any of its subsidiaries has violated (A)
any federal, state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, (B) any applicable wage or hour laws or
(C) any provision of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules and regulations thereunder, which, either
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(p) None of the Company or any of its subsidiaries has
violated any environmental, safety or similar law or regulation applicable to it
or its business or property relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), lacks any permit, license or other
approval required of it under applicable Environmental Laws or is violating any
term or condition of such permit, license or approval which could reasonably be
expected to, either individually or in the aggregate, have a Material Adverse
Effect.
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<PAGE> 9
(q) Each of the Company and its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the Offering
Memorandum as owned by it, free and clear of all liens, charges, encumbrances
and restrictions, (ii) peaceful and undisturbed possession under all material
leases to which any of them is a party as lessee, (iii) all licenses,
certificates, permits, authorizations, approvals, franchises and other rights
from, and has made all declarations and filings with, all federal, state and
local authorities (including, without limitation, the FCC), all self-regulatory
authorities and all courts and other tribunals (each an "Authorization")
necessary to engage in the business conducted by any of them in the manner
described in the Offering Memorandum and (iv) no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such Authorization, EXCEPT as described in the Offering Memorandum or as could
not reasonably be expected to result in a Material Adverse Effect. Except where
the failure to be in full force and effect would not have a Material Adverse
Effect, all such Authorizations are valid and in full force and effect and each
of the Company and subsidiaries is in compliance in all material respects with
the terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto. Except as could not reasonably be expected to result in a Material
Adverse Effect, all material leases to which the Company and its subsidiaries is
a party are valid and binding and no default by the Company or any of its
subsidiaries has occurred and is continuing thereunder and, to the best
knowledge of the Company and its subsidiaries, no material defaults by the
landlord are existing under such lease.
(r) Each of the Company and its subsidiaries owns, possesses
or has the right to employ all patents, patent rights, licenses (including all
FCC, state, local or other jurisdictional regulatory licenses), inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, software, systems or
procedures), trademarks, service marks and trade names, inventions, computer
programs, technical data and information (collectively, the "Intellectual
Property") presently used by it in connection with the businesses now operated
by it or which are proposed to be operated by it. The use of the Intellectual
Property in connection with the business and operations of the Company and its
subsidiaries does not infringe on or otherwise contravene the rights of any
person, nor has the Company or any of its subsidiaries received any notice of
any infringement of or conflict with asserted rights of others with respect to
any of the foregoing, EXCEPT as could not reasonably be expected to have a
Material Adverse Effect. Except as could not reasonably be expected to have a
Material Adverse Effect, all of the software included in the Intellectual
Property (the "SOFTWARE") (i) will continue to operate and produce data after
December 31, 1999, accurately and without delay, interruption or error relating
to the fact that the time at which and the date on which the Software is
operating is after December 31, 1999 or that the year 2000 is a leap year; and
(ii) will not cause any interruption in normal business operations of the
Company and its subsidiaries whether before, on or after December 31, 1999.
(s) None of the Company or any of its subsidiaries, or to the
best knowledge of the Company, any of their respective officers, directors,
partners, employees, agents or affiliates or any other person acting on behalf
of the Company or any of its subsidiaries has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal
9
<PAGE> 10
price concessions to customers or agents of a customer or supplier, official or
employee of any governmental agency (domestic or foreign), instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is or may be in a position
to help or hinder the business of the Company or any of its subsidiaries (or
assist the Company or any of its subsidiaries in connection with any action or
proposed transaction) which (i) might subject the Company or any of its
subsidiaries, or any other individual or entity, to any damage or penalty in any
civil, criminal or governmental litigation or proceeding (domestic or foreign),
(ii) if not given in the past, might have had a Material Adverse Effect on the
assets, business or operations of the Company or any of its subsidiaries, or
(iii) if not continued in the future, might have a Material Adverse Effect.
(t) All material tax returns required to be filed by the
Company and each of its subsidiaries in all jurisdictions have been so filed.
All taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that are
due and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently payable
without penalty or interest. To the knowledge of the Company, there are no
material proposed additional tax assessments against the Company, the assets or
property of the Company or any of its subsidiaries.
(u) None of the Company or any of its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or an "affiliate" of a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(v) Except as disclosed in the Offering Memorandum, there are
no holders of securities of the Company or its subsidiaries who, by reason of
the execution by the Company of this Agreement or any other Operative Documents
to which it is a party or the consummation by the Company of the transactions
contemplated hereby and thereby, have the right to request or demand that the
Company or any of its subsidiaries register under the Securities Act or
analogous foreign laws and regulations securities held by them.
(w) Each of the Company and its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect thereto.
(x) Each of the Company and its subsidiaries maintains
insurance covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in accordance
with customary industry practice to protect the Company and
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<PAGE> 11
its subsidiaries and their respective businesses. None of the Company or any of
its subsidiaries has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will have to be made
in order to continue such insurance. All such insurance is outstanding and duly
in force on the date hereof, subject only to changes made in the ordinary course
of business, consistent with past practice, which do not, singly or in the
aggregate, materially alter the coverage thereunder or the risks covered
thereby.
(y) None of the Company or any of its subsidiaries has (i)
taken, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Securities
or (ii) since the date of the Preliminary Offering Memorandum (A) sold, bid for,
purchased or paid any person (other than the Initial Purchasers) any
compensation for soliciting purchases of the Preferred Stock (and the related
Depositary Shares) or (B) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
(z) No registration under the Securities Act of the Preferred
Stock (and the related Depositary Shares) is required for the sale of the
Preferred Stock (and the related Depositary Shares) to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming (i) that the purchasers
who buy the Preferred Stock (and the related Depositary Shares) in the Exempt
Resales are either QIBs or Accredited Investors and (ii) the accuracy of the
Initial Purchasers' representations regarding the absence of general
solicitation in connection with the sale of Preferred Stock (and the related
Depositary Shares) to the Initial Purchasers and the Exempt Resales contained
herein. No form of general solicitation or general advertising was used by the
Company or any of its representatives (other than the Initial Purchasers, as to
which the Company makes no representation or warranty) in connection with the
offer and sale of any of the Preferred Stock (and the related Depositary Shares)
or in connection with Exempt Resales, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
No securities of the same class as the Preferred Stock (and the related
Depositary Shares) have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(aa) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement thereto,
as of its date, contains the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Securities Act.
(bb) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing Date,
except as set forth in the Offering Memorandum, (i) none of the Company or any
of its subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, nor entered into any material transaction
not in the ordinary course of business, (ii)
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<PAGE> 12
there has not been, singly or in the aggregate, any change or development, which
could reasonably be expected to result in a Material Adverse Effect and (ii)
there has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock.
(cc) None of the Company or any of its subsidiaries or any
agent thereof acting on behalf of them has taken, and none of them will take,
any action that might cause this Agreement or the issuance or sale of the
Securities to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R.
Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part
224) of the Board of Governors of the Federal Reserve System or analogous
foreign laws and regulations.
(dd) To the best knowledge of the Company, Ernst & Young,
L.L.P., the accountants who have audited and have reported on the consolidated
financial statements for each of the three fiscal years in the period ended June
30, 1997 (the "Audited Financial Statements"), included as part of the Offering
Memorandum, are independent public accountants. The Audited Financial Statements
and the unaudited financial statements for the six-month periods ended December
31, 1997 and 1996 included in the Offering Memorandum comply as to form in all
material respects with the applicable accounting requirements for registration
statements under the Securities Act and the related rules and regulations
thereunder, and present fairly in all material respects the financial position
and results of operations of the Company and its subsidiaries at the respective
dates and for the respective periods indicated. Such financial statements have
been prepared in accordance with generally accepted accounting principles on a
consistent basis throughout the periods presented. The other financial
information and data included in the Offering Memorandum are accurately
presented in all material respects and prepared on a basis consistent with the
financial statements included in the Offering Memorandum and the books and
records of the Company and its subsidiaries, as applicable.
(ee) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company and any other person
that would give rise to a valid claim against the Company or any of the Initial
Purchasers for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Securities.
(ff) The inventories of raw materials, work-in-process and
finished goods (collectively the "Inventory") shown on the Financial Statements
consist of items of a quality and quantity useable and saleable in the ordinary
course of business by the Company, except for obsolete and slow-moving items and
items below standard quality, all of which have been written down on the books
of the Company to net realizable value, or have been provided for by adequate
reserves. All items included in the Inventory are the property of the Company
and in the Company's possession, except for Inventory sold in the ordinary
course of business since December 31, 1997, and inventory in the possession of
suppliers or customers in the ordinary course of business.
(gg) All of the accounts receivable of the Company as set
forth in the Financial Statements (collectively, the "Accounts"), and all papers
and documents relating thereto, are genuine and in all respects what they
purport to be, and each such Account is valid and subsisting and arises out of a
bona fide sale or lease of goods sold or leased and delivered to, or out of and
for services
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<PAGE> 13
theretofore actually rendered by the Company to, the account debtor named in
such Account EXCEPT as could not reasonably be expected to result in a Material
Adverse Effect.
(hh) None of the Company, any of its affiliates (as defined in
Rule 501(b) under the Securities Act) nor any person acting on behalf of any
such person (excluding the Initial Purchasers and their respective affiliates,
as to which no representation is made) has engaged, or will engage, in any
direct selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Securities.
(ii) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or Counsel for the Initial Purchasers (as
defined below) shall be deemed to be a representation and warranty by the
Company to the Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 7 hereof, counsel to the Company and Counsel for the Initial Purchasers,
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
of the Initial Purchasers that:
(a) If at any time prior to the Closing Date or any Additional
Closing Date any event shall have occurred as a result of which the Preliminary
Offering Memorandum or the Offering Memorandum, as then amended or supplemented,
would in the judgment of the Initial Purchasers or the Company include an untrue
statement of a material fact or omit to state any material fact required to be
stated there-in or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Company will
notify the Initial Purchasers promptly and prepare and deliver to the
Representative on behalf of the Initial Purchasers an amendment or supplement
(in form and substance satisfactory to the Initial Purchasers) which will
correct such statement or omission.
(b) The Company will promptly deliver to the Initial
Purchasers and those persons identified by the Initial Purchasers to the
Company, without charge, as many copies of the Preliminary Offering Memorandum,
the Offering Memorandum and all amendments of and supplements thereto as the
Initial Purchasers may reasonably request. The Company consents to the use of
the Preliminary Offering Memorandum and the Offering Memorandum and all
amendments of and supplements thereto by the Initial Purchasers in connection
with Exempt Resales.
(c) The Company will endeavor in good faith, in cooperation
with the Initial Purchasers, to qualify the Company Shares for offering and sale
under the securities and legal investment laws relating to the offering or sale
of the Company Shares of such jurisdictions as the Initial Purchasers may
designate and to maintain such qualification in effect for so long as required
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<PAGE> 14
for the Exempt Resales; except that in no event shall the Company be obligated
in connection therewith to qualify as a foreign corporation or to execute a
general consent to service of process.
(d) The Company will apply the proceeds from the sale of the
Company Shares as set forth under "Use of Proceeds" in the Offering Memorandum.
(e) The Company will use its best efforts to cause the Company
Shares to be designated Private Offerings, Resales and Trading through Automated
Linkage ("PORTAL") market securities in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. relating to
trading on the PORTAL market.
(f) The Company shall (whether or not it shall then be
required to do so) timely file with the Commission such information, documents
and reports that a corporation subject to Section 13 or 15(d) of the Exchange
Act is required to file. In addition, the Company shall take such other measures
and file such other information, documents and reports, as shall hereafter be
required by the Commission as a condition to the availability of Rule 144 under
the Securities Act (or any similar exemptive provision hereafter in effect) and
the use of registration statements on Forms S-2 and S-3. The Company also
covenants to use its best efforts, to the extent that it is reasonably within
its power to do so, to continue to qualify for the use of Forms S-2 and S-3. The
Company acknowledges and agrees that the purposes of the requirements contained
in this paragraph (f) are (i) to enable any holder of the Securities to comply
with the current public information requirement contained in paragraph (c) of
Rule 144 under the Securities Act should such holder ever wish to dispose of any
of the Securities without registration under the Securities Act in reliance upon
Rule 144 (or any other similar exemptive provision) and (ii) to qualify the
Company for the use of registration statements on Forms S-2 and S-3.
(g) During the period of 90 days from the date of the Offering
Memorandum, the Company will not, without prior written consent of Bear Stearns,
issue, sell, offer or agree to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any Common Stock (or any
securities convertible into, exercisable for or exchangeable for Common Stock),
other than the Company's sale of the Company Shares hereunder and the Company's
issuance of Common Stock upon the exercise of presently outstanding stock
options and conversion of the Preferred Stock.
(h) None of the Company, its subsidiaries or affiliates or any
person acting on their behalf (other than the Initial Purchasers and their
respective affiliates, as to which no representation is made) will solicit any
offer to buy or offer or sell the Company Shares by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.
(j) During the period from the Closing Date until three years
after the Closing Date, the Company and its subsidiaries will not, and will not
permit any of their "affiliates" (as defined in Rule 144 under the Securities
Act) to, resell any of the Company Shares that have been
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<PAGE> 15
reacquired by them, except for Company Shares purchased by the Company and its
subsidiaries or any of their affiliates and resold in a transaction registered
under the Securities Act.
(k) None of the Company, any of its affiliates (as defined in
Rule 501(b) under the Securities Act) nor any person acting on behalf of any
such person (excluding the Initial Purchasers and their respective affiliates,
as to which no representation is made) has engaged in any direct selling efforts
(as such term is defined in Regulation S) or will offer, sell or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) which will be integrated with the sale of the Company Shares in
a manner that would require the registration of the sale of the Company Shares
under the Securities Act, or take any other action that would result in the
Exempt Resales not being exempt from registration under the Securities Act.
6. PAYMENT OF EXPENSES. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Preliminary
Offering Memorandum and the Offering Memorandum and any amendments or
supplements thereto (including, without limitation, fees and expenses of the
Company's accountants and counsel), the underwriting documents (including this
Agreement and the other Operative Documents and any related agreement among
underwriters, intersyndicate agreement or selling agreement) and all other
documents related to the offering of the Securities (including those supplied to
the Initial Purchasers in quantities provided for herein), (ii) the issuance,
transfer and delivery of the Securities to the Initial Purchasers, including any
transfer or other taxes payable thereon, (iii) the qualification of the
Securities under state or foreign legal investment, securities or Blue Sky laws,
including the costs of printing and mailing a preliminary and final "Blue Sky
Survey" and the fees of Counsel for the Initial Purchasers and such counsel's
disbursements in relation thereto, (iv) the cost and charges of the Depositary
Agent and any transfer agent or registrar, (v) the preparation of certificates
for the Securities (including, without limitation, printing and engraving
thereof), (vi) all expenses and listing fees in connection with the application
for quotation of the Company Shares in PORTAL, (vii) the costs and charges in
connection with the approval of the Securities by DTC for "book entry" transfer,
(viii) rating the Securities by rating agencies (ix) the performance of the
Company under this Agreement and the Operative Documents, and (x) "roadshow"
travel and other expenses incurred in connection with the marketing and sale of
the Securities (other than out-of-pocket expenses incurred by the Initial
Purchasers for travel, meals and lodgings).
7. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of
the Initial Purchasers to purchase and pay for the Firm Shares and the
Additional Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date (for purposes of this Section 7 "Closing Date"
shall refer to the Closing Date and any Additional Closing Date, if different),
to the absence from any certificates, opinions, written statements or letters
furnished to the Initial Purchasers or to Hughes & Luce, L.L.P., Dallas, Texas
("Counsel for the Initial Purchasers")
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pursuant to this Section 6 of any misstatement or omission, to the performance
by the Company of its obligations hereunder, and to the following additional
conditions:
(a) At the Closing Date the Initial Purchasers shall have
received the opinion of Christy & Viener, New York, New York, counsel for the
Company, dated the Closing Date, addressed to the Initial Purchasers and in form
and substance satisfactory to Counsel for the Initial Purchasers, to the effect
that:
(i) Each of the Company and each of its United States
subsidiaries that would constitute a significant subsidiary
within the meaning of Rule 1-02 of Regulation S-X promulgated
by the Commission, or any successor rule ("Significant
Subsidiaries") (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; (B) is duly qualified and
in good standing as a foreign corporation in each jurisdiction
in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures
to be so qualified or in good standing which will not in the
aggregate have a Material Adverse Effect; and (C) to the
knowledge of such counsel, has all requisite corporate power
and authority, and all material consents, approvals,
authorizations, orders, registrations, qualifications,
licenses and permits of and from all public, regulatory or
governmental agencies and bodies, necessary to own, lease,
license and operate its properties and conduct its business as
now being conducted and as described in the Offering
Memorandum, EXCEPT as could not be reasonably expected to have
a Material Adverse Effect.
(ii) The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations
under this Agreement and the Operative Documents, and to
consummate the transactions contemplated hereby and thereby,
including (without limitation) (A) the issuance, sale and
delivery of the Securities hereunder and (B) the filing of the
Shelf Registration Statement under and as defined in the
Registration Rights Agreement.
(iii) The execution, delivery, and performance of
this Agreement and the other Operative Documents and the
consummation of the transactions contemplated hereby and
thereby do not and will not (A) conflict with or result in a
breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its
subsidiaries pursuant to, any agreement, instrument,
franchise, license or permit known to such counsel to which
the Company or any of its subsidiaries is a party or by which
any of such corporations or their respective properties or
assets may be bound, (B) violate or conflict with any
provision of the certificate of incorporation or by-laws of
the Company or, to the knowledge of such counsel, any of its
subsidiaries or any judgment, decree, order, statute, rule or
regulation of any court or any public,
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<PAGE> 17
governmental or regulatory agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their
respective properties or assets or (C) to the knowledge of
such counsel, require any consent, approval, authorization,
order, registration, filing, qualification, license or permit
of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their respective properties or
assets, except (in the case of clause (C) above) for any such
consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits as have been
made or obtained, as may be required under state securities or
Blue Sky laws and regulations, or such as may be required by
the NASD, in connection with the purchase and distribution of
the Securities by the Initial Purchasers (as to which such
counsel need express no opinion) or such as have been obtained
and made (or, in the case of the Registration Rights
Agreement, will be obtained and made) under the Securities
Act, and EXCEPT (in the case of clauses (A), (B) and (C)) as
could not singly, or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
(iv) This Agreement and each of the other Operative
Documents, and the transactions contemplated herein and
therein, have been duly and validly authorized by the Company.
This Agreement and each of the other Operative Documents has
been duly and validly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with
its terms, EXCEPT insofar as indemnification and contribution
provisions may be limited by applicable law, or equitable
principles or public policy, and subject to (x) the effect of
any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally and (y) the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or
at law).
(v) To such counsel's knowledge, there is no
litigation or governmental or other action, suit, proceeding
or investigation before any court or before or by any public,
regulatory or governmental agency or body pending or
threatened against, or involving the properties or business
of, the Company or any of its subsidiaries, which is of a
character required to be disclosed in the Offering Memorandum
which has not been fairly and accurately disclosed therein.
(vi) The Company has an authorized capital stock as
set forth in the Offering Memorandum. All of the outstanding
shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and
nonassessable and were not issued and are not now in violation
of or subject to any preemptive rights. All of the issued and
outstanding shares of capital stock of each Significant
Subsidiary of the Company have been duly and validly issued,
are fully paid and nonassessable, were not issued and are not
now in violation of any preemptive rights, and, to the
knowledge of such counsel, are owned directly or indirectly by
the Company, free and clear of any lien, claim, encumbrance,
security
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<PAGE> 18
interest, restriction on transfer, shareholders' agreement,
voting trust or other preferential arrangement or defect of
title whatsoever.
(vii) The Securities have been duly and validly
authorized and, when delivered by the Company in accordance
with this Agreement, will be duly and validly issued, fully
paid and nonassessable and will not have been issued in
violation of or subject to any preemptive rights.
(viii) The information in the Offering Memorandum
under the headings "Description of Preferred Stock" and
"Description of Depositary Shares," to the extent that it
constitutes a matter of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been
reviewed by such counsel and is correct in all material
respects.
(ix) The information in the Offering Memorandum under
the heading "Certain Federal Income Tax Considerations," to
the extent that it constitutes a matter of law, summaries of
legal matters, documents or proceedings, or legal conclusions,
has been reviewed by such counsel and is correct in all
material respects.
(x) The statements in the Offering Memorandum under
the heading "Notices to Investors," insofar as they purport to
summarize matters of United States federal law, is correct in
all material respects.
(xi) It is not necessary in connection with (a) the
offer, sale and delivery of the Securities to the Initial
Purchasers in the manner contemplated by this Agreement and
the Offering Memorandum or (b) the initial resale of the
Securities by the Initial Purchasers in the manner
contemplated in this Agreement and the Offering Memorandum to
register the issuance of the Securities under the Securities
Act, it being understood that no opinion need be expressed as
to any subsequent resale of any Security.
(xii) The shares of Common Stock issuable upon
conversion of the Preferred Stock have been duly authorized by
the Company and, when issued and delivered upon such
conversion in accordance with the terms and provisions of the
Preferred Stock and the Certificate of Designations (assuming
payment for and delivery of the Company Shares in accordance
with this Agreement), will be validly issued, fully paid and
nonassessable. The shares of Common Stock issuable on
conversion of the Preferred Stock at the initial conversion
price set forth in the Certificate of Designations have been
reserved for issuance and no further approval or authority of
the stockholders or the Board of Directors of the Company will
be required for such issuance of Common Stock.
(xiii) To such counsel's knowledge, no holders of
securities of the Company have rights which have not been
satisfied or waived to the registration of
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<PAGE> 19
shares of capital stock or other securities of the Company
because of the filing of the Shelf Registration Statement (as
such terms are defined in the Offering Memorandum) by the
Company or the respective offerings contemplated thereby.
(xiv) Except as disclosed in the Offering Memorandum
and this Agreement, to such counsel's knowledge, except for
stock options outstanding pursuant to the Company's existing
stock incentive plans, and stock options and other awards that
may be granted under such plans, there are no outstanding
options, warrants or other rights calling for the issuance of,
and no commitments, plans or arrangements to issue, any shares
of capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company.
(xv) In addition, such opinion shall also contain a
statement that such counsel has participated in conferences
with officers and representatives of the Company,
representatives of the independent public accountants for the
Company and the Initial Purchasers at which the contents and
the Offering Memorandum and related matters were discussed
and, on the basis of the foregoing, nothing has come to the
attention of such counsel which would lead such counsel to
believe that the Offering Memorandum on the date hereof or at
any time through the Closing Date contained an untrue
statement of a material fact or omitted to state any material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading
(it being understood that such counsel has not independently
verified the accuracy, completeness or fairness of such
statements and that such counsel need express no belief or
opinion with respect to the Financial Statements and schedules
and other financial data included therein).
In rendering such opinion, such counsel may rely (x) as to
matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Counsel for the Initial Purchasers) of other
counsel reasonably acceptable to Counsel for the Initial Purchasers
familiar with the applicable laws, (y) to the extent they deem proper,
as to factual matters upon, and as to materiality of any matter to a
large extent upon, facts and information provided to such counsel by
officers and other representatives of the Company and (z) certificates
or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries,
provided that copies of any such statements or certificates shall be
delivered to Counsel for the Initial Purchasers. The opinion of such
counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion,
the Initial Purchasers and they are justified in relying thereon.
(b) All proceedings taken in connection with the sale of the
Securities as herein contemplated shall be satisfactory in form and substance to
the Initial Purchasers and to Counsel
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<PAGE> 20
for the Initial Purchasers, and the Initial Purchasers shall have received from
said Counsel for the Initial Purchasers a favorable opinion, dated as of the
Closing Date, with respect to the issuance and sale of the Securities, the
Offering Memorandum and such other related matters as the Initial Purchasers may
reasonably require, and the Company shall have furnished to Counsel for the
Initial Purchasers such documents as they may request for the purpose of
enabling them to pass upon such matters.
(c) At the Closing Date the Initial Purchasers shall have
received a certificate of the Chief Executive Officer and the Chief Financial
Officer of the Company, dated the Closing Date, to the effect that (i) as of the
date hereof and as of the Closing Date, the representations and warranties of
the Company set forth in Section 4 hereof are accurate, (ii) as of the Closing
Date, the obligations of the Company to be performed hereunder on or prior
thereto have been duly performed and (iii) subsequent to the respective dates as
of which information is given in the Offering Memorandum, the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, and there has not been any material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the business, prospects, properties,
operations, condition (financial or otherwise), or results of operations of the
Company and its subsidiaries taken as a whole, except in each case as disclosed
in the Offering Memorandum.
(d) At the time this Agreement is executed and at the Closing
Date, the Initial Purchasers shall have received a customary comfort letter,
from Ernst & Young LLP, independent accountants for the Company, dated,
respectively, as of the date of this Agreement and as of the Closing Date
addressed to the Initial Purchasers in form and substance satisfactory to the
Initial Purchasers and Counsel for the Initial Purchasers with respect to the
Financial Statements and certain financial information of the Company contained
in the Offering Memorandum.
(e) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further information, certificates and
documents as the Initial Purchasers may reasonably request.
(f) At the Closing Date, the Securities shall have been
approved for quotation in the PORTAL.
(g) The Company shall have authorized, executed and filed the
Certificate of Designations in accordance with Delaware law and each of the
Initial Purchasers shall have received a certified copy thereof.
(h) The Company shall have entered into each of the
Registration Rights Agreement and the Deposit Agreement and the Initial
Purchasers shall have received counterparts, conformed as executed, thereof.
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(i) The Company shall have deposited the Preferred Stock with
the Depositary Agent pursuant to the terms of the Deposit Agreement.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the Initial
Purchasers or to Counsel for the Initial Purchasers pursuant to this Section 7
shall not be in all material respects reasonably satisfactory in form and
substance to Bear Stearns and to Counsel for the Initial Purchasers, all
obligations of the Initial Purchasers hereunder may be canceled by the Initial
Purchasers at, or at any time prior to, the Closing Date and the obligations of
the Initial Purchasers to purchase the Additional Shares may be canceled by the
Initial Purchasers at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telex or telegraph, confirmed in writing.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
and all losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Offering Memorandum or the Preliminary Offering Memorandum or any amendment or
supplement thereto or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent but only to the
extent that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by any Initial Purchaser expressly for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have including under this Agreement.
(b) Each Initial Purchaser severally, and not jointly, agrees
to indemnify and hold harmless the Company, each of the directors of the
Company, each of the officers of the Company, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, against any losses, liabilities, claims,
damages and expenses whatsoever as incurred (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), jointly or severally, to which they or any
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<PAGE> 22
of them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Offering
Memorandum, or any related preliminary Offering Memorandum, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by any
Initial Purchaser expressly for use therein; provided, however, that in no case
shall any Initial Purchaser be liable or responsible for any amount in excess of
the underwriting discount applicable to the Company Shares purchased by such
Initial Purchaser hereunder. This indemnity will be in addition to any liability
which any Initial Purchaser may otherwise have including under this Agreement.
The Company acknowledges that the statements set forth in the last paragraph of
the cover page and in paragraphs one, three and six and the sixth and seventh
sentences of paragraph seven under the caption "Plan of Distribution" in the
Offering Memorandum constitute the only information furnished in writing by any
Initial Purchaser expressly for use in the Offering Memorandum or in any
amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the Securities Action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
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<PAGE> 23
9. CONTRIBUTION. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 8 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Initial Purchasers
shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Initial Purchasers, who may also be
liable for contribution, including persons who control the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, officers and directors of the Company) as incurred to which the Company and
one or more of the Initial Purchasers may be subject, in such proportions as is
appropriate to reflect the relative benefits received by the Company and the
Initial Purchasers from the offering of the Securities or, if such allocation is
not permitted by applicable law or indemnification is not available as a result
of the indemnifying party not having received notice as provided in Section 8
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Initial Purchasers in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Initial Purchasers shall be deemed to be in the same proportion as (x)
the total proceeds from the Offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and (y) the
underwriting discounts and commissions received by the Initial Purchasers
respectively. The relative fault of the Company and of the Initial Purchasers
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 9, (i) in no case shall any Initial Purchaser be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Company Shares purchased by such Initial Purchaser hereunder, (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 1l(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation and (iii) no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Company Shares purchased by it and sold in the Offering
were offered to subsequent purchasers exceeds the amount of any damages that
such Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. For purposes
of this Section 9, each person, if any, who controls an Initial Purchaser within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act shall have the same rights to contribution as such Initial Purchaser, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act, each of officer and
each director of
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<PAGE> 24
the Company shall have the same rights to contribution as the Company, subject
in each case to clauses (i) and (ii) of this Section 9. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 9 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its consent; provided, however, that such consent was
not unreasonably withheld.
10. DEFAULT BY AN INITIAL PURCHASER.
If one or more of the Initial Purchasers shall fail at the
Closing Date or the Additional Closing Date to purchase the Company Shares which
it is obligated to purchase under this Agreement (the "Defaulted Shares"), the
non-defaulting Initial Purchaser(s) shall have the right, within 24 hours
thereafter, to make arrangements for it or any other Initial Purchaser(s) to
purchase all, but not less than all, of the Defaulted Shares in such amounts as
may be agreed upon and upon the terms herein set forth; if, however, the
non-defaulting Initial Purchaser(s) shall not have completed such arrangements
within such 24-hour period, then this Agreement shall terminate without
liability on the part of the non-defaulting Initial Purchaser(s).
No action taken pursuant to this Section shall relieve any
defaulting Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the non-defaulting Initial Purchaser(s) or
the Company shall have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Offering
Memorandum or in any other documents or arrangements.
11. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Section 5,
the indemnity agreements contained in Section 8 and the contribution agreements
contained in Section 9, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Initial Purchasers
or any agent, representative or controlling person thereof or by or on behalf of
the Company, any of its of officers and directors or any controlling person
thereof, and shall survive delivery of and payment for the Company Shares to and
by the Initial Purchasers. The representations contained in Section 1 and the
agreements contained in Sections 5, 8, 9 and 12(d) hereof shall survive the
termination of this Agreement, including termination pursuant to Section 10 or
12 hereof.
12. TERMINATION.
(a) Bear Stearns, on behalf of the Initial Purchasers, shall
have the right to terminate this Agreement at any time prior to the Closing Date
or the obligations of the Initial Purchasers to purchase the Additional Shares
at any time prior to the Additional Closing Date, as
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<PAGE> 25
the case may be, if (A) any domestic or international event or act or occurrence
has materially disrupted, or in Bear Stearns' opinion will in the immediate
future materially disrupt the market for the Company's securities, or the United
States or international securities markets, generally; or (B) if trading on the
New York Stock Exchange shall have been suspended, or materially limited; or (C)
if a banking moratorium has been declared by any United States federal or New
York State authority or if any new restriction materially adversely affecting
the distribution of the Firm Shares or the Additional Shares, as the case may
be, shall have become effective; or (D) if any downgrading in the rating of the
Company's debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Securities Act);
or (E)(i) if the United States becomes engaged in hostilities or there is an
escalation of hostilities involving the United States, or there is a declaration
of a national emergency or war by the United States or (ii) if there shall have
been such change in political, financial or economic conditions if the effect of
any such event in (i) or (ii) in Bear Stearns' judgment makes it impracticable
or inadvisable to proceed with the offering, sale and delivery of the Firm
Shares or the Additional Shares, as the case may be, on the terms contemplated
by the Offering Memorandum.
(b) Any notice of termination pursuant to this Section 12
shall be by telephone, telex, or telegraph, confirmed in writing by letter.
(c) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to Section 10 or 12(a) hereof),
or if the sale of the Company Shares provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set forth
herein is not satisfied or because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any provision
hereof, the Company will, subject to demand by the Initial Purchasers, reimburse
the Initial Purchasers for all out-of-pocket expenses (including the fees and
expenses of their counsel), incurred by the Initial Purchasers in connection
herewith.
13. NOTICE. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any Initial
Purchaser, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to it c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167, Attention: Steven Parish, Senior Managing Director; if sent to the
Company, shall be mailed, delivered, or telegraphed and confirmed in writing to
the Company, 951 Yamato Road, Boca Raton, Florida 33431-0700, Attention: Garrett
E. Pierce, Senior Vice President and Chief Financial Officer.
14. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons, directors, officers, employees and agents referred to in
Section 8 and 9, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Company Shares from any of the Initial
Purchasers.
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<PAGE> 26
15. GOVERNING LAW.
(a) This Agreement shall be governed by the laws of the State
of New York.
(b) The Company hereby irrevocably submits to the
non-exclusive jurisdiction of the courts of the State of New York and the
federal courts of the United States of America sitting in the City of New York
in any action or proceeding arising out of or relating to this Agreement and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard in any such New York State or Federal court. The Company irrevocably
waives, to the fullest extent it may do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding and appoints CT Corporation
Trust System with an office at 1633 Broadway, New York, New York 10019 as its
authorized agent upon whom process may be served in any action arising out of or
based upon this Agreement which may be instituted in any such court. The Company
represents and warrants that such agent has agreed to act as its agent for
service of process and agrees to take any and all actions including the filing
of any and all documents or instruments (including the appointment of any
successor agent, as necessary) that may be necessary to continue such
appointment in effect. Nothing herein shall be construed to prevent or impair
the right of any Initial Purchaser to serve process in any other manner
permitted by law or to bring any action, suit or proceeding in any other
jurisdiction.
[remainder of page intentionally left blank]
26
<PAGE> 27
If the foregoing correctly sets forth the understanding between the
Initial Purchasers and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
SENSORMATIC ELECTRONICS
CORPORATION
By: /s/ Garrett E. Pierce
---------------------------------
Garrett E. Pierce,
Senior Vice President and
Chief Financial Officer
Accepted as of the date first above written
BEAR, STEARNS & CO., INC.
By: /s/ Rick A. Lacher
---------------------------------------
Rick A. Lacher, Managing Director
LEHMAN BROTHERS INC.
By: /s/ Blake Kim
---------------------------------------
Blake Kim, Vice President
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Gray Hampton
---------------------------------------
Gray Hampton, Managing Director
SCHRODER & CO. INC.
By: /s/ Ivan L. Lustig
---------------------------------------
Ivan L. Lustig, Managing Director
27
<PAGE> 28
SCHEDULE I
NUMBER OF FIRM
NAME OF INITIAL PURCHASER SHARES TO BE PURCHASED
- ------------------------- ----------------------
Bear, Stearns & Co. Inc. 3,000,000
Lehman Brothers Inc. 1,500,000
NationsBanc Montgomery Securities LLC 900,000
Schroder & Co. Inc. 600,000
--------------
Total 6,000,000
==============
28
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Depositary Shares Representing a One-Tenth Interest in a Share of
6 1/2% Convertible Preferred Stock
Dated as of April 13, 1998
by and among
SENSORMATIC ELECTRONICS CORPORATION,
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
SCHRODER & CO. INC.
- -------------------------------------------------------------------------------
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of April 13, 1998, by and among Sensormatic Electronics
Corporation, a Delaware corporation (the "Company"), and Bear, Stearns & Co.
Inc., Lehman Brothers Inc., NationsBanc Montgomery Securities LLC and Schroder &
Co. Inc. (each an "INITIAL PURCHASER" and together, the "INITIAL PURCHASERS"),
each of whom have agreed to purchase Depositary Shares (the "DEPOSITARY
SHARES"), each representing a one-tenth interest in a share of the Company's 6
1/2% Convertible Preferred Stock (the "PREFERRED STOCK") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement in respect to
the Preferred Stock, dated April 6, 1998 (the "PURCHASE AGREEMENT"), by and
among the Company and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Depositary Shares, the Company has agreed to provide
the registration rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the obligations of the Initial Purchasers
set forth in Section 7 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended
AVERAGE STOCK PRICE: The average of the high and low sales prices of
the Common Stock (as defined herein) as reported by the New York Stock Exchange
or any national securities exchange upon which the Common Stock is then listed,
for each of the ten consecutive trading days immediately preceding the fifth
business day preceding the record date related to such Dividend Payment Date.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the
City of New York, on which banks are authorized to close.
CERTIFICATE OF DESIGNATIONS: The Certificate of Designations pursuant
to which the Depositary Shares, Preferred Stock, and Common Stock issuable upon
conversion of the Preferred Stock are to be issued, as such Certificate of
Designations is amended or supplemented from time to time in accordance with the
terms thereof.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
COMMON STOCK: The common stock of the Company to be issued upon
conversion of the Preferred Stock, as dividends in respect of Preferred Stock
and as Liquidated Damages.
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<PAGE> 3
DAMAGES PAYMENT DATE: Each Dividend Payment Date.
DEFINITIVE SECURITIES: As defined in the Deposit Agreement.
DEPOSIT AGREEMENT: The Deposit Agreement dated the date hereof between
the Company and BankBoston, N.A., a national banking association.
DIVIDEND PAYMENT DATE: As defined in the Certificate of Designations.
EFFECTIVENESS TARGET DATE: As defined in Section 4.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Depositary Shares to certain "QUALIFIED INSTITUTIONAL
BUYERS," as such term is defined in Rule 144A under the Act, and to certain
institutional "ACCREDITED INVESTORS," as such term is defined in Rule 501(a)(1),
(2), (3) and (7) of Regulation D under the Act.
GLOBAL CERTIFICATE HOLDER: As defined in the Deposit Agreement.
HOLDERS: As defined in Section 2 hereof.
LIQUIDATED DAMAGES: As defined in Section 4 hereof.
LIQUIDATION PREFERENCE: As defined in the Certificate of Designations.
NASD: National Association of Securities Dealers, Inc.
OFFERING MEMORANDUM: The final offering memorandum, dated April 7,
1998, relating to the Company, the Depositary Shares and the Preferred Stock.
PERSON: An individual, partnership, corporation, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
PRELIMINARY OFFERING MEMORANDUM: The preliminary offering memorandum,
dated March 26, 1998, relating to the Company, the Depositary Shares, and the
Preferred Stock.
PROSPECTUS: The prospectus included in a Shelf Registration Statement
at the time such Shelf Registration Statement is declared effective, as amended
or supplemented by any prospectus supplement, and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
REGISTRATION DEFAULT: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 3 hereof.
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<PAGE> 4
SHELF FILING DEADLINE: As defined in Section 3 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 3 hereof.
TRANSFER AGENT: The transfer agent with respect to the Depositary
Shares and the Preferred Stock.
TRANSFER RESTRICTED SECURITIES: Each Depositary Share, each share of
Preferred Stock, and each share of Common Stock, until the earliest to occur of
(i) the date on which the transfer of such Depositary Share, share of Preferred
Stock, or share of Common Stock, as the case may be, is effectively registered
under the Act and such share is disposed of in accordance with the Shelf
Registration Statement or (ii) the date on which such Depositary Share, share of
Preferred Stock, or share of Common Stock, as the case may be, is distributed to
the public pursuant to Rule 144 under the Act or may be distributed to the
public pursuant to Rule 144(k) under the Securities Act.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for re-offering to
the public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. SHELF REGISTRATION
(a) SHELF REGISTRATION. The Company shall:
(x) cause to be filed on or prior to 60 days after the
consummation of the offering of Preferred Stock (and the related
Depositary Shares) (the "SHELF FILING DEADLINE"), a shelf registration
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION
STATEMENT"), relating to resales of all Transfer Restricted Securities
the Holders of which shall have provided the information required
pursuant to Section 3(b) hereof, and
(y) use its reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 60 days after
the Shelf Filing Deadline.
The Company shall use its reasonable best efforts to keep the Shelf Registration
Statement discussed in this Section 3(a) continuously effective, supplemented
and amended as required by the provisions of Sections 5(b) and (c) hereof to the
extent necessary to ensure that it is available for resales of Transfer
Restricted Securities by the Holders thereof entitled to the benefit of this
Section 3(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period
4
<PAGE> 5
expiring on the earlier of (i) the date when there are no longer any Transfer
Restricted Securities included in the Shelf Registration Statement, or (ii) the
second anniversary of the effectiveness of the Shelf Registration Statement;
PROVIDED, that the Company will have the option of suspending the effectiveness
of the Shelf Registration Statement for one period of up to 30 trading days if
the Board of Directors of the Company determines that compliance with the
disclosure obligations necessary to maintain the effectiveness of the Shelf
Registration Statement at such time could reasonably be expected to have a
material adverse effect on the Company (a "PERMITTED SUSPENSION").
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in the Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 Business Days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the Act
for use in connection with the Shelf Registration Statement or Prospectus or the
preliminary Prospectus included therein, including the information set forth in
the questionnaire included as Annex B to the Offering Memorandum. No Holder of
Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant
to Section 4 hereof unless and until such Holder shall have provided all such
information required to be provided by such Holder for inclusion therein. Each
Holder as to which the Shelf Registration Statement is being effected agrees to
furnish promptly to the Company, for so long as the Shelf Registration Statement
is effective, all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 4. LIQUIDATED DAMAGES
If (i) the Company fails to file the Shelf Registration Statement with
the Commission on or prior to the Shelf Filing Deadline, (ii) the Shelf
Registration Statement has not been declared effective by the Commission on or
prior to the 60th day after the Shelf Filing Deadline (the "EFFECTIVENESS TARGET
DATE"), whether or not the Company has breached any obligation to use its
reasonable best efforts to cause the Shelf Registration Statement to be declared
effective, or (iii) the Shelf Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities for any period of ten consecutive trading days or
for any 30 trading days in any 180-day period without being succeeded within the
time period provided for herein by a post effective amendment to such Shelf
Registration Statement that cures such failure and that is itself declared
effective within ten Business Days of the filing thereof, PROVIDED, that such
effectiveness was not suspended in connection with a Permitted Suspension (a
"REGISTRATION DEFAULT"), then commencing on the day following the date on which
such Registration Default occurs, the Company agrees to pay to each Holder of
Transfer Restricted Securities affected by such Registration Default, liquidated
damages ("LIQUIDATED DAMAGES") at an annual rate of $0.625 per $250 Liquidation
Preference of Preferred Stock (or $0.0625 per $25.00 Liquidation Preference of
Depositary Shares) constituting Transfer Restricted Securities held by such
Holder until such Registration Default is cured. The obligation of the Company
to pay Liquidated Damages is the sole obligation of the Company to the Holders
of Transfer Restricted Securities for Registration Defaults.
5
<PAGE> 6
All Liquidated Damages will be payable, at the option of the Company,
(1) in cash, (2) by delivery of shares of Common Stock, or (3) through any
combination of the foregoing. All accrued Liquidated Damages to be paid in cash
shall be paid to the Global Certificate Holder by wire transfer of immediately
available funds or by federal funds check and to Holders of Definitive
Securities by mailing checks to their registered addresses by the Company on
each Damages Payment Date. All accrued Liquidated Damages to be paid in Common
Stock shall be paid by the Company by mailing certificates representing such
Common Stock to the Global Certificate Holder and to Holders of Definitive
Securities at their registered addresses on each Damages Payment Date. If the
Liquidated Damages are paid in shares of Common Stock, the number of shares of
Common Stock to be issued on each Dividend Payment Date will be determined by
dividing the total Liquidated Damages to be paid on each share of Preferred
Stock by the Average Stock Price. The Company shall not issue any fractional
shares of Common Stock as payment for Liquidated Damages. Instead the Company
shall round the number of shares to be issued up to the nearest full share of
Common Stock. All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(a) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 5(c) below and shall use its reasonable best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 3(b)
hereof), and pursuant thereto, the Company will prepare and file with the
Commission a Shelf Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(b) GENERAL PROVISIONS. In connection with the Shelf Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities, the Company shall:
(i) use its reasonable best efforts to keep such Shelf
Registration Statement continuously effective, subject to a Permitted
Suspension, and provide all requisite financial statements for the
period specified in Section 3 of this Agreement. Upon the occurrence of
any event that would cause any such Shelf Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement,
subject to a Permitted Suspension, the Company shall file promptly an
appropriate amendment to such Shelf Registration Statement (1) in the
case of clause (A), correcting any such misstatement or omission, and
(2) in the case of either
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<PAGE> 7
clause (A) or (B), use its reasonable best efforts to cause such
amendment to be declared effective and such Shelf Registration
Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
(ii) except in the event of a Permitted Suspension, prepare
and file with the Commission such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to
keep the Shelf Registration Statement effective for the applicable
period set forth in Section 3 hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold, cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424 and 430A, as applicable, under the Act in a
timely manner; and comply with the provisions of the Act with respect
to the disposition of all securities covered by such Shelf Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in
such Shelf Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if required by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the Shelf
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Shelf Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement under
the Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any
of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made
in the Shelf Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Shelf Registration Statement in order to make the statements
therein not misleading, or that requires the making of any additions to
or changes in the Prospectus in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Shelf Registration Statement, or
any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use its reasonable best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) make available to each selling Holder named in the Shelf
Registration Statement or Prospectus (and each of the underwriters in
connection with such sale, if any), before filing with the Commission,
copies of the Shelf Registration Statement or any
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<PAGE> 8
Prospectus included therein or any amendments or supplements to any
such Shelf Registration Statement or Prospectus in connection with such
sale, if any, for a period of at least five Business Days, and the
Company will not file any such Shelf Registration Statement or
Prospectus or any amendment or supplement to any such Shelf
Registration Statement or Prospectus to which the selling Holders of
the Transfer Restricted Securities covered by such Shelf Registration
Statement reasonably object within five Business Days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Shelf Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act;
(v) promptly upon the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or
Prospectus, make available copies of such document to the selling
Holders and to the underwriters in connection with such sale, if any,
and, upon the reasonable request of such Holders or underwriters, make
the Company's representatives available for discussion of such document
and other customary due diligence matters;
(vi) make available at reasonable times for inspection by any
Holder selling Transfer Restricted Securities representing at least
$15,000,000 in Liquidation Preference (a "QUALIFIED Holder"), any
underwriter participating in any disposition pursuant to such Shelf
Registration Statement and any attorney or accountant reasonably
acceptable to the Company retained by any such selling Holder or any of
such underwriters, all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply such information as may be
reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Shelf Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness; PROVIDED that any Person to whom
information is provided under this clause (vi) agrees in writing to
maintain the confidentiality of such information to the extent such
information is not in the public domain;
(vii) if requested by any selling Holders or the underwriters
in connection with such sale, if any, promptly include in the Shelf
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information of the type
that is customarily found in such documents relating to similar
securities offerings as the selling Holders and underwriters, if any,
may reasonably request to have included therein, including, without
limitation, information relating to the "PLAN OF DISTRIBUTION" of the
Transfer Restricted Securities, information with respect to the
principal amount of Transfer Restricted Securities being sold to such
underwriters, the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities to be sold
in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
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<PAGE> 9
(viii) furnish to each selling Holder and each of the
underwriters, if any, in connection with such sale, if any, without
charge, at least one copy of the Shelf Registration Statement, as first
filed with the Commission, and of each amendment thereto, and make
available all documents incorporated by reference therein and all
exhibits (including exhibits incorporated therein by reference);
(ix) deliver to each selling Holder and each of the
underwriters, if any, without charge, as many copies of the Prospectus
(including such preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby
consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriters, if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(x) enter into such agreements (including, unless not required
pursuant to Section 9 hereof, an underwriting agreement) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to the Shelf
Registration Statement as may be reasonably requested by any Qualified
Holder of Transfer Restricted Securities or underwriter in connection
with any sale or resale pursuant to the Shelf Registration Statement
contemplated by this Agreement, and in connection therewith, whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company shall:
(A) furnish to each selling Holder and each underwriter, if
any, upon the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of effectiveness of
the Shelf Registration Statement signed by (x) the President
or any Vice President and (y) the principal financial or
accounting officer of the Company, confirming with respect to
the Prospectus or any purchase or underwriting agreement and
the Transfer Restricted Securities, as of the date thereof,
the matters set forth in paragraph (c) of Section 7 of the
Purchase Agreement and such other matters as the Holders
and/or underwriters may reasonably request;
(2) an opinion, dated the date of effectiveness of
the Shelf Registration Statement, of counsel for the Company,
covering (i) due authorization and enforceability of the
Depositary Shares, the Preferred Stock and Common Stock, (ii)
a statement to the effect that such counsel has participated
in conferences with officers and other representatives of the
Company and representatives of the independent public
accountants for the Company and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such
9
<PAGE> 10
statements; and that such counsel advised that, on the basis
of the foregoing (relying as to materiality to a large extent
upon the facts and information provided to such counsel by
officers and other representatives of the Company and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the Shelf Registration Statement, at the time such Shelf
Registration Statement or any post-effective amendment thereto
became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Shelf
Registration Statement as of its date contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading and (iii) such other matters of the type
customarily covered in opinions of counsel for an issuer in
connection with similar securities offerings, as may
reasonably be requested by such parties. Without limiting the
foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial,
statistical and accounting data included in the Shelf
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) if the registration is a registration in which
securities of the Company are sold to an underwriter for
reoffering to the public, obtain a customary comfort letter,
dated as of the date of effectiveness of the Shelf
Registration Statement, addressed to the Board of Directors of
the Company or any underwriter from the Company's independent
accountants, in the customary form and covering matters of the
type customarily covered in comfort letters to boards of
directors in underwritten offerings;
(B) set forth in full or incorporated by reference in the
underwriting agreement, if any, in connection with any sale or
resale pursuant to the Shelf Registration Statement the
indemnification provisions and procedures of Section 7 hereof
with respect to all parties to be indemnified pursuant to said
Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance
with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement
entered into by the Company pursuant to this clause (xi), if
any.
The above shall be done at each closing under each underwriting or
similar agreement, as and to the extent required thereunder, and if at any time
the representations and warranties of the
10
<PAGE> 11
Company contemplated in (A)(1) above cease to be true and correct in all
material respects, the Company shall so advise the underwriters, if any, and the
selling Holders promptly and if requested by such Persons, shall confirm such
advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriters, if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriters, if any, may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
Shelf Registration Statement; PROVIDED, HOWEVER, that the Company shall
not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Shelf Registration Statement,
in any jurisdiction where it is not now so subject;
(xii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold
and not bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and such names as the
Holders or the underwriters, if any, may request at least two Business
Days prior to such sale of Transfer Restricted Securities;
(xiii) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
or the underwriters, if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xii) above;
(xiv) if any fact or event contemplated by Section
5(b)(iii)(D) above shall exist or have occurred, except in the event of
a Permitted Suspension, prepare a supplement or post-effective
amendment to the Shelf Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement covering such Transfer Restricted Securities and provide the
Transfer Agent with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depositary
Trust Company;
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<PAGE> 12
(xvi) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "QUALIFIED INDEPENDENT UNDERWRITER")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable best efforts to cause
such Shelf Registration Statement to become effective and approved by
such governmental agencies or authorities as may be necessary to enable
the Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xvii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to the Shelf
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective
date of the Shelf Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xviii) cause all Transfer Restricted Securities covered by
the Shelf Registration Statement to be listed on each securities
exchange on which similar securities issued by the Company are then
listed if requested by the Holders of a majority in aggregate
Liquidation Preference of Preferred Stock (and the related Depositary
Shares) or the managing underwriters, if any; and
(xix) provide promptly to each Holder, upon written request,
each document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act identified in such
request.
(c) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section 5(b)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(b)(xvi) hereof, or until it is advised in writing (the
"ADVICE") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
time period regarding the effectiveness of such Shelf Registration Statement set
forth in Section 3 hereof, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 5(b)(iii)(D) hereof to and including the date when each selling Holder
covered by such Shelf Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 5(c)(xvi) hereof
or shall have received the Advice.
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<PAGE> 13
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether the
Shelf Registration Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses (including filings made with
the NASD (including, if applicable, the fees and expenses, excluding
underwriting discounts or commissions, of any "QUALIFIED INDEPENDENT
UNDERWRITER" and its counsel, as may be required by the rules and regulations of
the NASD)); (ii) all fees and expenses of compliance with federal securities and
state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Depositary Shares, Preferred Stock, and Common
Stock and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company and, in
accordance with Section 6(b) below, the Holders of Transfer Restricted
Securities; (v) all application and filing fees in connection with listing the
Depositary Shares, Preferred Stock or Common Stock on a national exchange or
automated quotation system if required hereunder; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with the Shelf Registration Statement required by
this Agreement, the Company will reimburse the Initial Purchasers and the
Holders of Transfer Restricted Securities being registered pursuant to the Shelf
Registration Statement for the reasonable fees and disbursements of not more
than one counsel, or such other counsel as may be chosen by the Holders of a
majority in number of shares or aggregate Liquidation Preference, as the case
may be, of the Transfer Restricted Securities for whose benefit the Shelf
Registration Statement is being prepared.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder,
(ii) each Person, if any, who controls a Holder within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and (iii) the respective
officers, directors, partners, employees, representatives and agents of any
Holder or any controlling Person to the fullest extent lawful, from and against
any and all losses, liabilities, claims, damages and expenses whatsoever
(including, but not limited to, attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become or are subject under the Act,
the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Shelf Registration Statement or the Prospectus, or in any
supplement thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or
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<PAGE> 14
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that the Company
will not be liable in any such case to the extent, but only to the extent, that
(i) any such loss, liability, claim, damage or expense arises out of or is based
upon such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder expressly
for use therein, and (ii) the foregoing indemnity with respect to any untrue
statement contained in or omitted from a Shelf Registration Statement or the
Prospectus shall not inure to the benefit of any Holder (or any Person
controlling such Holder), from whom the Person asserting any such loss,
liability, claim, damage or expense purchased (or received upon conversion), any
of the Depositary Shares, Preferred Stock or Common Stock which are the subject
thereof if it is finally judicially determined that such loss, liability, claim,
damage or expense resulted solely from the fact that the Holder sold Depositary
Shares, Preferred Stock or Common Stock, to a Person to whom there was not sent
or given, at or prior to the written confirmation of such sale, a copy of the
Shelf Registration Statement and the Prospectus, as amended or supplemented, and
(x) the Company shall have previously and timely furnished sufficient copies of
the Shelf Registration Statement or Prospectus, as so amended or supplemented,
to such Holder in accordance with this Agreement and (y) the Shelf Registration
Statement or Prospectus, as so amended or supplemented, would have corrected
such untrue statement or omission of a material fact. This indemnity agreement
will be in addition to any liability which the Company may otherwise have,
including, under this Agreement.
(b) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless the Company and each Person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any losses, liabilities, claims, damages and expenses whatsoever
(including, but not limited to, attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, the light of the circumstances under
which they were made, not misleading, in each case to the extent, but only to
the extent, that any such loss, liability, claim, damage or expense arises out
of or is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder expressly
for use therein. This indemnity will be in addition to any liability which a
Holder may otherwise have, including, under this Agreement. In no event,
however, shall the liability of any selling Holder thereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon its
sale of the Depositary Shares, Preferred Stock or Common Stock giving rise to
such indemnification obligation.
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<PAGE> 15
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties; PROVIDED, HOWEVER, that the
indemnifying party under subsection (a) or (b) above shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its prior written consent, PROVIDED, HOWEVER, that such consent
was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 7 is for any reason held to be
unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and each Holder shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal or other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from Persons,
other than the Holders, who may be liable for contribution, including Persons
who control the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act) to which the Company and any Holder may be subject,
in such proportion as is appropriate to reflect the relative benefits received
by the Company from the offering of the Preferred Stock (and the related
Depositary Shares), and any such Holder from its sale of Depositary Shares,
Preferred Stock or Common Stock, or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in this Section 7, in
such proportion as is appropriate to reflect not only the relative
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<PAGE> 16
benefits referred to above, but also to the relative fault of the Company and
the Holders in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and any Holder shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of discounts but before deducting expenses) of
the Preferred Stock (and the related Depositary Shares) received by the Company
and (y) the total proceeds received by such Holder upon its sale of Depositary
Shares, Preferred Stock or Common Stock which would otherwise give rise to the
indemnification obligation. The relative fault of the Company and of the Holders
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to sate a material fact relates to information supplied by the Company or the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each Holder agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this Section
7, (i) no Holder shall be required to contribute, in the aggregate, any amount
in excess of the amount by which the total received by such Holder with respect
to the sale of its Depositary Shares, Preferred Stock or Common Stock exceeds
the sum of (A) the amount paid by such Holder for such Depositary Shares,
Preferred Stock or Common Stock, plus (B) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and (ii) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11 of the Act) shall
be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, (A) each Person,
if any, who controls a Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and (B) the respective officer, directors,
partners, employees, representatives and agents of a Holder or any controlling
Person shall have the same rights to contribution as such Holder, and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 7(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent; PROVIDED, however, that such written consent
was not unreasonably withheld.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available, upon request of any
Holder of Transfer Restricted Securities, to any Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted
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<PAGE> 17
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 9. UNDERWRITTEN REGISTRATIONS
The Holders of Transfer Restricted Securities may elect to sell their
Transfer Restricted Securities pursuant to one or more Underwritten
Registrations; PROVIDED, HOWEVER, that in no event shall any Holder commence any
such Underwritten Registration if a period of less than 180 days has elapsed
since the consummation of the most recent Underwritten Registration hereunder;
and PROVIDED FURTHER, that in no event shall the Holders effect more than three
such Underwritten Registrations hereunder; and PROVIDED FURTHER, that the
Transfer Restricted Securities to be sold pursuant to any such Underwritten
Registration must represent at least $15,000,000 in aggregate Liquidation
Preference. No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnifies, underwriting agreements,
lock-up letters and other documents required under the terms of such
underwriting arrangements.
SECTION 10. SELECTION OF UNDERWRITERS
In any Underwritten Offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority of shares or aggregate Liquidation
Preference of the Transfer Restricted Securities included in such offering,
PROVIDED that such investment banker and managers must be reasonably
satisfactory to the Company. Such investment bankers and managers are referred
to herein as the "UNDERWRITERS."
SECTION 11. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Certificate of Designations, the Purchase
Agreement or granted by law, including recovery of liquidated or other damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages (including the Liquidated Damages
contemplated hereby) would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that conflicts with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect
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<PAGE> 18
on the date hereof, except where a waiver with respect thereto has been obtained
prior to the date of effectiveness of any registration statement required under
this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the shares or the outstanding
Liquidation Preference of Transfer Restricted Securities.
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Transfer Agent with a copy to the Transfer Agent; and,
(ii) if to the Company:
Sensormatic Electronic Corporation
951 Yamato Road
Boca Raton, Florida 33431-0700
Attn: Treasurer
Telecopier Number: 561/989-7215
With a copy to:
Christy & Viener
620 Fifth Avenue
New York, NY 10020-2457
Attn: Anthony J. Carroll, Esq.
Telecopier Number: 212/632-5555
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed, when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent at
the address specified in the Certificate of Designations.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities;
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<PAGE> 19
PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit of or be
binding upon a successor assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities directly from such
Holder.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement, together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
* * *
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<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
SENSORMATIC ELECTRONICS CORPORATION
By: /s/ Garrett E. Pierce
------------------------------
Name: Garrett E. Pierce
------------------------------
Title: Senior Vice President and
Chief Financial Officer
------------------------------
[Countersignature Follows]
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INITIAL PURCHASERS:
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
NATIONSBANC MONTGOMERY
SECURITIES LLC
SCHRODER & CO. INC.
By: BEAR, STEARNS & CO. INC.,
as representative for the Initial
Purchasers
By: /s/ Rick Lacher
-------------------------------------
Name: Rick Lacher
-----------------------------------
Title: Managing Director
----------------------------------
21
<PAGE> 1
EXHIBIT 4.3
SENSORMATIC ELECTRONICS CORPORATION
BANKBOSTON, N.A.
AS DEPOSITARY
AND
HOLDERS OF DEPOSITARY RECEIPTS
DEPOSIT AGREEMENT
DATED AS OF APRIL 13, 1998
DEPOSIT AGREEMENT, dated as of April 13, 1998, among SENSORMATIC
ELECTRONICS CORPORATION, a Delaware corporation (the "Company"), BANKBOSTON,
N.A., a national banking association, as depositary (the "Depositary"), and all
holders from time to time of Depositary Receipts issued hereunder.
W I T N E S S E T H:
WHEREAS, the Company desires to provide for the deposit of shares of 6
1/2% Convertible Preferred Stock, par value of $0.01 per share (the "Preferred
Stock"), of the Company and for the issuance of Depositary Receipts evidencing
Depositary Shares in respect of the Preferred Stock so deposited, all on the
terms and conditions set forth in this Agreement; and
WHEREAS, the Depositary Receipts are to be substantially in the form of
Exhibit A annexed hereto, with appropriate insertions, modifications and
omissions, as hereinafter provided in this Deposit Agreement;
NOW, THEREFORE, in consideration of the mutual premises contained
herein, it is agreed by and among the parties hereto as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following definitions shall for all
purposes, unless otherwise clearly indicated, apply to the respective terms used
in this Agreement and the Depositary Receipts:
"Authorizing Resolutions" means the resolutions adopted by the
Company's Board of Directors establishing and setting forth the rights,
preferences and privileges of the Preferred Stock.
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<PAGE> 2
"Certificate of Incorporation" means the Restated Certificate
of Incorporation, as amended from time to time, of the Company.
"Certificate of Designations" means the Certificate of
Designations of the Powers, Preferences and Relative, Participating,
Optional or Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof, filed with the Secretary of State
of the State of Delaware, setting forth the terms of the Preferred
Stock.
"Company" means Sensormatic Electronics Corporation, a
Delaware corporation, having its principal office at 951 Yamato Road,
Boca Raton, Florida 33431, and its successors.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
"Deposit Agreement" means this Agreement, as the same may be
amended or supplemented from time to time.
"Depositary" means BankBoston, N.A., a national banking
association, and any successor as depositary hereunder.
"Depositary Shares" means the interest in the Preferred Stock
deposited with the Depositary hereunder and represented by the
Receipts. Each Depositary Share shall, as provided herein, represent an
interest in one one-tenth (1/10th) of one share of Preferred Stock.
"Depositary's Agent" means any agent appointed by the
Depositary pursuant to Section 7.05.
"Issue Date" means April 13, 1998.
"Liquidated Damages" means all liquidated damages then owing
under the Registration Rights Agreement.
"Liquidation Preference" means, with respect to the Preferred
Stock, a liquidation preference of $250 per share.
"NYSE" means the New York Stock Exchange, Inc.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as
well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
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<PAGE> 3
"Preferred Stock" means shares of the Company's 6 1/2%
Convertible Preferred Stock, par value $0.01 per share.
"Principal Office" means the principal office of the
Depositary, at which at any particular time its corporate trust
business shall be administered.
"Receipt" means one or more of the Depositary Receipts issued
hereunder.
"Record Holder" as applied to a Receipt means the Person in
whose name a Receipt is registered on the books of the Depositary
maintained for such purpose.
"Registrar" means any bank or trust company which shall be
appointed to register Receipts as herein provided.
"Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Depositary Shares, the Preferred Stock
and the Common Stock issuable upon conversion of the Preferred Stock,
dated as of April 13, 1998, by and among the Company, Bear, Stearns &
Co. Inc., Lehman Brothers Inc., NationsBanc Montgomery Securities LLC
and Schroder & Co. Inc., as such agreement may be amended, modified or
supplemented from time to time.
"Securities Act of 1993" means the Act of May 27, 1933 (15
U.S. Code,ss.ss.77a-77aa)), as from time to time amended.
"Stockholders" means the holders of the Preferred Stock.
ARTICLE II
FORM OF RECEIPTS, DEPOSIT OF PREFERRED STOCK,
EXECUTION AND DELIVERY, TRANSFER, SURRENDER
AND REDEMPTION OF RECEIPTS
SECTION 2.1 FORM AND TRANSFERABILITY OF RECEIPTS. (a) Receipts shall be
engraved or printed or lithographed on steel engraved borders and shall be
substantially in the form set forth in Exhibit A annexed to this Depositary
Agreement, with appropriate insertions, modifications and omissions, as
hereinafter provided. Receipts shall be executed by the Depositary by the manual
signature of a duly authorized representative of the Depositary, PROVIDED that
such signature may be a facsimile if a Registrar for the Receipts (other than
the Depositary) shall have been appointed and such Receipts are countersigned by
manual signature of a duly authorized representative of the Registrar. No
Receipt shall be entitled to any benefits under this Deposit Agreement or be
valid or obligatory for any purpose unless it shall have been executed on behalf
of the Company by the manual or facsimile signature of a duly authorized officer
and executed manually or, if a Registrar for the Receipts (other than the
Depositary) shall have been appointed, by facsimile signature of a duly
authorized representative of the Depositary and, if executed by facsimile
signature of the Depositary, shall have been countersigned manually
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<PAGE> 4
by a duly authorized representative of such Registrar. The Depositary shall
record on its books each receipt so signed and delivered as hereinafter
provided.
(b) Receipts shall be in denominations of any number of whole
Depositary Shares, unless otherwise directed by the Company.
(c) Receipts may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Deposit Agreement as may be required by the Depositary at the
direction of the Company or required to comply with any applicable law or any
regulation thereunder or with the rules and regulations of any securities
exchange or Nasdaq National Market upon which the Preferred Stock, the
Depositary Shares or the Receipts may be listed or to conform with any usage
with respect thereto, or to indicate any special limitations or restrictions to
which any particular Receipts are subject by reason of the date of issuance of
the Preferred Stock or otherwise.
(d) Title to Depositary Shares evidenced by a Receipt which is
properly endorsed or accompanied by a properly executed instrument of transfer,
shall be transferable by delivery with the same effect as in the case of a
negotiable instrument; PROVIDED, HOWEVER, that until a Receipt shall be
transferred on the books of the Depositary as provided in Section 2.6, the
Depositary may, notwithstanding any notice to the contrary, treat the Record
Holder thereof at such time as the absolute owner thereof for the purpose of
determining the Person entitled to distribution of dividends or other
distributions or to any notice provided for in this Deposit Agreement and for
all other purposes.
SECTION 2.2 FORM, DENOMINATION AND REGISTRATION. (a) The Depositary
Shares shall be issued in the form of one or more Global Certificates
(collectively, the "Global Certificate"). The Global Certificate shall be
deposited on the Issue Date with, or on behalf of, the Depositary Trust Company
("DTC") and registered in the name of Cede & Co., as DTC's nominee (such nominee
being referred to as the "Global Certificate Holder").
(b) So long as the Global Certificate Holder is the registered
owner of any Depositary Shares, the Global Certificate Holder will be considered
the sole holder under this Deposit Agreement of any Depositary Shares evidenced
by the Global Certificate. Beneficial owners of Depositary Shares shall not be
considered the owners or holders thereof under this Deposit Agreement for any
purpose.
(c) Payments in respect of the Liquidation Preference,
dividends and Liquidated Damages, if any, on any Preferred Stock underlying
Depositary Shares registered in the name of the Global Certificate Holder on the
applicable record date shall be payable by the Company to or at the direction of
the Global Certificate Holder in its capacity as the registered holder under
this Deposit Agreement. The Company may treat the Persons in whose name
Depositary Shares, including the Global Certificate, are registered as the
owners thereof for the purpose of receiving such payments.
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(d) Any Person having a beneficial interest in the Global
Certificate may, upon request to the Company, exchange such beneficial interest
for Depositary Shares in the form of registered definitive certificates (the
"Definitive Securities"). Upon any such issuance, the Company shall register
such Definitive Securities in the name of, and cause the same to be delivered
to, such Person or Persons (or the nominee of any thereof). If (i) the Company
notifies the holders of beneficial interests in the Global Certificate in
writing that DTC is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days, or (ii) the
Company, at its option, notifies such holders in writing that it elects to cause
the issuance of Depositary Shares in the form of Definitive Securities under
this Deposit Agreement, then, upon surrender by the Global Certificate Holder of
the Global Certificate, Depositary Shares in such form will be issued to each
Person that the Global Certificate Holder and DTC identify as being the
beneficial owner of the related Depositary Shares.
(e) The Global Certificate shall bear a legend in
substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITARY TRUST
COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE
APPOINTED BY THE COMPANY AND THE TRANSFER AGENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY
BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(f) The Depositary Shares, Preferred Stock issuable upon
exchange for the Depositary Shares and the Common Stock issuable upon conversion
of the Preferred Stock shall
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bear a legend to the following effect, unless the Company determines otherwise
in compliance with applicable law:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (l)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS),
(2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(g) Holders of the Depositary Shares, the Preferred Stock
issuable upon exchange for the Depositary Shares and the Common Stock issuable
upon conversion of the Preferred Stock shall have such rights with respect to
such securities as are set forth in the Registration Rights Agreement.
SECTION 2.3 DEPOSIT OF PREFERRED STOCK, EXECUTION AND DELIVERY OF
RECEIPTS IN RESPECT THEREOF. (a) Subject to the terms and conditions of this
Deposit Agreement, any holder of Preferred Stock may deposit such Preferred
Stock under this Deposit Agreement by delivery to the Depositary at its
Principal Office (or at
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such other place as may be agreeable to the Depositary) of a certificate or
certificates for the Preferred Stock to be deposited, properly endorsed or
accompanied, if required by the Depositary, by a duly executed instrument of
transfer or endorsement, in form satisfactory to the Depositary, together with
all such certifications as may be required by the Depositary in accordance with
the provisions of this Deposit Agreement, and together with a written order
directing the Depositary to execute and deliver to, or upon the written order
of, the Person or Persons stated in such order a Receipt for the number of
Depositary Shares representing such deposited Preferred Stock.
(b) The Depositary shall require, at the direction of the
Company, that Preferred Stock presented for deposit at any time, whether or not
the register of Stockholders is closed, shall also be accompanied by an
agreement or assignment, or other instrument satisfactory to the Depositary,
which will provide for the prompt transfer to the Depositary or its nominee of
any dividend or right to subscribe for additional Preferred Stock or to receive
other property which any Person in whose name the Preferred Stock is or has been
recorded may thereafter receive upon or in respect of such deposited Preferred
Stock, or in lieu thereof such agreement of indemnity or other agreement as
shall be satisfactory to the Depositary.
(c) Subject to the terms and conditions of this Deposit
Agreement, Preferred Stock may also be deposited hereunder in connection with
the delivery of Receipts to represent distributions under Section 4.2 and upon
exercise of the rights to subscribe referred to in Section 4.3.
(d) Upon each delivery to the Depositary of a certificate or
certificates for Preferred Stock to be deposited hereunder, together with the
other documents above specified, the Depositary shall, as soon as transfer and
recordation can be accomplished, present such certificate or certificates to the
Registrar and transfer agent of the Preferred Stock for transfer and recordation
in the name of the Depositary or its nominee of the Preferred Stock being
deposited. Deposited Preferred Stock shall be held by the Depositary, at the
Principal Office, or at such other place or places as the Depositary shall
determine.
(e) Upon receipt by the Depositary of a certificate or
certificates for Preferred Stock deposited in accordance with the provisions of
this Section, together with the other documents required as above specified, the
Depositary, subject to the terms and conditions of this Deposit Agreement, shall
execute and deliver to or upon the order of the Person or Persons named in the
written order delivered to the Depositary referred to in Section 2.3(a), a
Receipt for the number of Depositary Shares representing the Preferred Stock so
deposited and registered in such name or names as may be requested by such
Person or Persons. The Depositary shall execute and deliver such Receipts at its
Principal Office and at such other offices, if any, as it may designate.
Delivery at other offices shall be at the risk and expense of the Person
requesting such delivery. However, in each case, such delivery will be made only
upon payment to the Depositary of the fee of the Depositary by the Company
(unless payable by the holder) as provided in Section 5.7, for the execution and
delivery of such Receipt and of all taxes and governmental charges and fees
payable in connection with such deposit and the transfer of the deposited
Preferred Stock.
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SECTION 2.4 OPTIONAL REDEMPTION OF PREFERRED STOCK. (a) The Company
shall have the right to redeem the Preferred Stock in accordance with the terms
of the Preferred Stock. Whenever the Company shall elect to redeem shares of
Preferred Stock pursuant to the terms of the Preferred Stock, it shall (unless
otherwise agreed in writing with the Depositary) give the Depositary notice of
the date of such proposed redemption of Preferred Stock and of the number of
shares held by the Depositary to be so redeemed not later than five days prior
to the proposed mailing date of the notice referenced below; PROVIDED, HOWEVER,
that if such notice by the Company is not accompanied by copies of the materials
to be mailed to the Record Holders, such notice must be given no later than 10
days prior to the date of such mailing. On the date of such redemption, PROVIDED
that the Company shall then have deposited with the Depositary the amount of
cash necessary to effect such redemption, the Depositary shall redeem the number
of Depositary Shares representing such Preferred Stock. The Depositary shall
mail notice of such redemption and the proposed simultaneous redemption of the
number of Depositary Shares representing the Preferred Stock to be redeemed, by
first class postage prepaid, not less than 30 and not more than 60 days prior to
the date fixed for redemption of such Preferred Stock and Depositary Shares (the
"Redemption Date"), to the Record Holders on the record date for such redemption
(determined pursuant to Section 4.4) of the Receipts evidencing the Depositary
Shares to be so redeemed, at the addresses of such Record Holders as the same
appear on the records of the Depositary; but neither failure to mail any such
notice to one or more such Record Holders nor any defect in any notice shall
affect the sufficiency of the proceedings for redemption as to other Record
Holders. Each such notice shall state the record date for the purposes of such
redemption; the Redemption Date; the number of Depositary Shares to be redeemed
and, if less than all of the Depositary Shares held by any such Record Holder
are to be redeemed, the number of such Depositary Shares held by such Record
Holder to be so redeemed; the amount of cash to be received by such Record
Holder; the place or places where Receipts evidencing Depositary Shares are to
be surrendered for cash; and that dividends in respect of the Preferred Stock
represented by the Depositary Shares to be redeemed will cease to accrue at the
close of business on such Redemption Date. In case less than all the outstanding
Depositary Shares are to be redeemed, the Depositary Shares to be so redeemed
shall be selected by lot or pro rata (as nearly as may be) or in any other
equitable manner determined by the Depositary to be consistent with the method
determined by the Board of Directors with respect to the Preferred Stock.
(b) Notice having been mailed by the Depositary as described
in Section 2.4(a), from and after the Redemption Date (unless the Company shall
have failed to redeem the shares of Preferred Stock to be redeemed by it as set
forth in the Company's notice provided for in Section 2.4(a)), all dividends in
respect of the shares of Preferred Stock so called for redemption shall cease to
accrue, the Depositary Shares being so redeemed shall be deemed no longer to be
outstanding, all rights of the holders of Receipts evidencing such Depositary
Shares shall cease and terminate and, upon surrender in accordance with said
notice of the Receipts evidencing any such Depositary Shares (properly endorsed
or assigned for transfer, if the Depositary shall so require), such Depositary
Shares shall be redeemed by the Depositary for the consideration therefor
specified in said notice, plus all money and other property, if any, represented
by such Depositary Shares, including all amounts, if any, paid by the Company in
respect of dividends which on the Redemption Date have accrued on the shares of
Preferred Stock to be so redeemed
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and have not theretofore been paid. If less than all of the Depositary Shares
evidenced by any Receipt are called for redemption, the Depositary will deliver
to the holder of such Receipt upon its surrender to the Depositary, together
with the redemption payment, a new Receipt evidencing the Depositary Shares
evidenced by such prior Receipt and not called for redemption. The foregoing
shall further be subject to the terms and conditions of the Preferred Stock, as
set forth in the Certificate of Incorporation and Certificate of Designation.
(c) Any balance of monies deposited by the Company for the
purpose of redeeming Preferred Stock underlying the Depositary Shares and
unclaimed by the holders of the Depositary Shares entitled thereto at the
expiration of two years from the Redemption Date shall be repaid, together with
any interest or earnings thereon, if any, to the Company. After any such
repayment, such holders of Depositary Shares entitled to the funds so repaid to
the Company shall look only to the Company for payment without interest or other
earnings.
SECTION 2.5 CONVERSION OF DEPOSITARY SHARES. (a) The Depositary Shares
held by any holder of a Receipt or Receipts may, at the option of such holder,
be converted, in whole, or from time to time in part (but only in lots of ten
Depositary Shares or integral multiples thereof if less then all the Depositary
Shares held by such holder are being converted), into shares of Common Stock
upon the same terms and conditions as the Preferred Stock, except that the
number of shares of Common Stock received upon conversion of each Depositary
Share will be equal to the number of shares of Common Stock received upon
conversion of one share of Preferred Stock divided by ten. Whenever a holder of
a Receipt or Receipts shall elect to convert the Depositary Shares represented
by such Receipt or Receipts into shares of Common Stock pursuant to the terms of
the Preferred Stock, such holder shall deliver to the Depositary or any of the
Depositary's Agents the Receipt or Receipts evidencing the Depositary Shares to
be converted, together with a written notice of conversion and an assignment of
the Receipt or Receipts to the Company or in blank, in form reasonably
acceptable to the Depositary. In addition, if such holder surrenders such
Depositary Shares for conversion during the period from the close of business on
any record date fixed pursuant to Section 4.4 for the payment of dividends until
the opening of business of the dividend payment date corresponding to such
record date (the "Dividend Payment Date"), such Receipt or Receipts shall be
accompanied by a payment in cash, Common Stock or a combination thereof
(depending on the method of payment that the Company has chosen to pay the
dividend) in an amount equal to the dividend payable on the Dividend Payment
Date, unless such Depositary Shares have been called for redemption on a
Redemption Date occurring during the period from the close of business on such
record date until the close of business on the business day immediately
following the Dividend Payment Date. The dividend payment with respect to
Depositary Shares called for redemption on a date during the period from the
close of business on such record date to the close of business on the business
day immediately following the Dividend Payment Date will be payable on the
Dividend Payment Date to the Record Holder of such Depositary Shares on such
record date, notwithstanding the conversion of such Depositary Shares after such
record date and prior to the Dividend Payment Date, and the holder converting
such Depositary Shares need not include a payment of such dividend amount upon
surrender of such Depositary Shares. Each conversion of Depositary Shares shall
be deemed to have been effected immediately before the
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close of business on the date on which the requirements specified in the
preceding sentence shall have been satisfied (the "Conversion Date").
(b) If a holder of a Receipt elects to convert less than all
of the Depositary Shares evidenced by a Receipt, the Depositary will deliver to
the holder of the Receipt upon its surrender to the Depositary a new Receipt
evidencing the Depositary Shares evidenced by such prior Receipt and not
converted, together with a certificate for the shares of Common Stock issued
upon conversion. The foregoing shall further be subject to the terms and
conditions of the Preferred Stock, as set forth in the Certificate of
Incorporation and Certificate of Designation.
(c) No fractional shares of Common Stock will be issued upon
conversion of Depositary Shares. If such conversion would otherwise result in a
fractional share of Common Stock being issued, the Company shall cause to be
delivered to the holder of such Depositary Shares an amount in cash for such
fractional share as provided in the Certificate of Designations.
(d) From and after the Conversion Date, the Depositary Shares
being converted shall be deemed no longer to be outstanding, all dividends with
respect to the shares of Preferred Stock converted shall cease to accrue, all
rights of the holders of Receipts evidencing such Depositary Shares shall, to
the extent of such Depositary Shares, cease and terminate, except the right to
receive shares of Common Stock into which the Depositary Shares have been
converted and the right to receive any money or other property to which the
holders of such Receipts were entitled upon conversion (including all amounts,
if any, paid by the Company in respect of dividends which, on the Conversion
Date, have accrued on the shares of Preferred Stock to be converted and have not
theretofore been paid).
SECTION 2.6 TRANSFER OF RECEIPTS. Subject to the terms and conditions
of this Deposit Agreement, the Depositary shall make transfers on its books from
time to time of Receipts upon any surrender thereof at the Depositary's
Principal Office by the holder in person or by duly authorized attorney,
properly endorsed or accompanied by a properly executed instrument of transfer,
and duly stamped as may be required by law. Thereupon the Depositary shall
execute a new Receipt or Receipts and deliver the same to or upon the order of
the Person entitled thereto evidencing the same aggregate number of Depositary
Shares as those evidenced by the Receipt or Receipts surrendered.
SECTION 2.7 COMBINATIONS AND SPLIT-UPS OF RECEIPTS. Upon surrender of a
Receipt or Receipts at the Depositary's Principal Office or at such other
offices as it may designate for the purpose of effecting a split-up or
combination of such Receipt or Receipts, and subject to the terms and conditions
of this Deposit Agreement, the Depositary shall execute and deliver a new
Receipt or Receipts in the authorized denominations requested, evidencing the
same aggregate number of Depositary Shares evidenced by the Receipt or Receipts
surrendered.
SECTION 2.8 SURRENDER OF RECEIPTS AND WITHDRAWAL OF PREFERRED STOCK.
(a) Any holder of a Receipt or Receipts representing any number of whole shares
of Preferred Stock may withdraw the Preferred Stock and all money and other
property, if any, represented thereby by surrendering such Receipt or Receipts,
at the Depositary's
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Principal Office or at such other offices as the Depositary may designate for
such withdrawals. Thereafter, without unreasonable delay, the Depositary shall
deliver to such holder, or to the Person or Persons designated by such holder as
hereinafter provided, the number of whole shares of Preferred Stock and all
money and other property, if any, represented by the Receipt or Receipts so
surrendered for withdrawal. If the Receipt delivered by the holder to the
Depositary in connection with such withdrawal shall evidence a number of
Depositary Shares in excess of the number of Depositary Shares representing the
number of whole shares of Preferred Stock to be so withdrawn, the Depositary
shall at the same time, in addition to such number of whole shares of Preferred
Stock and such money and other property, if any, to be so withdrawn, deliver to
such holder, or upon his order, a new Receipt evidencing such excess number of
Depositary Shares. In no event will fractional shares of Preferred Stock (or
cash in lieu thereof) be distributed by the Depositary. Delivery of the
Preferred Stock and money and other property being withdrawn may be made by the
delivery of such certificates, documents of title and other instruments as the
Depositary may deem appropriate, which, if required by the Depositary, shall be
properly endorsed or accompanied by proper instruments of transfer.
(b) If the Preferred Stock and the money and other property
being withdrawn are to be delivered to a Person or Persons other than the Record
Holder of the Receipt or Receipts being surrendered for withdrawal of Preferred
Stock, such Record Holder shall execute and deliver to the Depositary a written
order so directing the Depositary and the Depositary may require that the
Receipt or Receipts surrendered by such Record Holder for withdrawal of such
shares of Preferred Stock be properly endorsed in blank or accompanied by a
properly executed instrument of transfer in blank.
(c) Delivery of the Preferred Stock and the money and other
property, if any, represented by Receipts surrendered for withdrawal shall be
made by the Depositary at its Principal Office, except that at the request, risk
and expense of the holder that surrendered such Receipt or Receipts, and for the
account of the holder thereof, such delivery may be made at such other place as
may be designated by such holder.
SECTION 2.9 LIMITATIONS ON EXECUTION AND DELIVERY, TRANSFER, SPLIT-UP,
COMBINATION AND SURRENDER OF RECEIPTS. (a) As a condition precedent to the
execution and delivery, transfer, split-up, combination or surrender of any
Receipt, the Depositary, or any of the Depositary's Agents, or the Company, may
require (i) payment to it of a sum sufficient for the payment (or, in the event
that the Depositary or the Company shall have made such payment, the
reimbursement to it) of any tax or other governmental charge with respect
thereto (including any such tax or charge with respect to Preferred Stock being
deposited or withdrawn), (ii) the production of proof satisfactory to it as to
the identity and genuineness of any signature and (iii) compliance with such
regulations, if any, as the Depositary or the Company may establish consistent
with the provisions of this Deposit Agreement.
(b) The deposit of Preferred Stock may be refused, or the
delivery of Receipts against Preferred Stock may be suspended or the transfer of
Receipts may be refused, or the transfer, split-up, combination or surrender of
outstanding Receipts may be suspended (i) during
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any period when the register of Stockholders of the Company is closed, or (ii)
if any such action is deemed necessary or advisable by the Depositary, any of
the Depositary's Agents or the Company at any time or from time to time because
of any requirement of law or of any government or governmental body or
commission, or under any provision of this Deposit Agreement or, with the
approval of the Company, for any other reason.
SECTION 2.10 LOST RECEIPTS, ETC. In case any Receipt shall be mutilated
or destroyed or lost or stolen, the Depositary in its discretion may execute and
deliver a Receipt of like form and tenor in exchange and substitution for such
mutilated Receipt, or in lieu of and in substitution for such destroyed, lost or
stolen Receipt, upon (a) the filing by the holder thereof with the Depositary of
evidence satisfactory to the Depositary and the Company of such destruction or
loss or theft of such Receipt, of the authenticity thereof and of his ownership
thereof and (b) the furnishing of the Depositary and the Company with an
indemnity bond or other reasonable indemnification satisfactory to them.
SECTION 2.11 CANCELLATION AND DESTRUCTION OF SURRENDERED RECEIPTS. All
Receipts surrendered to the Depositary or any of the Depositary's Agents shall
be cancelled by the Depositary. Except as prohibited by applicable law or
regulation, the Depositary shall, unless otherwise directed by the Company, hold
on behalf of the Company such Receipts so cancelled.
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS
OF RECEIPTS AND THE COMPANY
SECTION 3.1 FILING PROOFS, CERTIFICATES AND OTHER INFORMATION. Any
Person presenting Preferred Stock for deposit or any holder of a Receipt may be
required from time to time to file such proof of residence, or other matters or
other information, to execute such certificates and to make such representations
and warranties as the Depositary or the Company may reasonably deem necessary or
proper. The Depositary or the Company may withhold the delivery or delay the
transfer, redemption or exchange of any receipt or the withdrawal of the
Preferred Stock represented by the Depositary Shares evidenced by any Receipt or
the distribution of any dividend or other distribution or the sale of any rights
or of the proceeds thereof until such proof or other information is filed or
such certificates are executed or such representations and warranties are made.
SECTION 3.2 PAYMENT OF TAXES OR OTHER GOVERNMENTAL CHARGES. If any tax
or other governmental charge shall become payable by or on behalf of the
Depositary with respect to any Receipt evidencing Depositary Shares or with
respect to the Preferred Stock (or any fractional interest therein) represented
by such Depositary Shares, such tax (including transfer taxes, if any) or
governmental charge shall be payable by the holder of such Receipt, subject to
certain exceptions set forth in Section 5.7. Transfer of any Receipt or any
withdrawal of Preferred Stock and all money or other property, if any,
represented by the Depositary Shares evidenced by such Receipt may be refused
until such payment is made, and any
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dividends, interest payments or other distributions may be withheld, or any part
or all of the Preferred Stock or other property represented by the Depositary
Shares evidenced by such Receipt and not theretofore sold may be sold for the
account of the holder thereof (after attempting by reasonable means to notify
such holder prior to such sale), and such dividends, interest payments or other
distributions or the proceeds of any such sale may be applied to any payment of
such tax or other governmental charge, the holder of such Receipt remaining
liable for any deficiency.
SECTION 3.3 REPRESENTATIONS AND WARRANTIES AS TO PREFERRED STOCK. In
the case of the initial deposit of the Preferred Stock, the Company and, in the
case of subsequent deposits thereof, each Person so depositing Preferred Stock
under this Deposit Agreement shall be deemed thereby to represent and warrant
that such Preferred Stock and each certificate therefore are valid and that the
Person making such deposit is duly authorized so to do. The Company hereby
further represents and warrants that the Preferred Stock, when issued, will be
validly issued, fully paid and nonassessable. Such representations and
warranties shall survive the deposit of the Preferred Stock and the issuance of
Receipts.
ARTICLE IV
THE DEPOSITED SECURITIES; NOTICES
SECTION 4.1 CASH DISTRIBUTIONS. Whenever the Depositary shall receive
any cash dividend or other cash distribution on Preferred Stock, including any
cash Liquidated Damages, the Depositary shall, subject to Section 3.2,
distribute to Record Holders of Receipts on the record date fixed pursuant to
Section 4.4 such amounts of such sum as are, as nearly as practicable, in
proportion to the respective numbers of Depositary Shares evidenced by the
Receipts held by such Record Holders; PROVIDED, HOWEVER, that in case the
Company or the Depositary shall be required to withhold and does from any cash
dividend or other cash distribution in respect of the Preferred Stock an amount
on account of taxes, the amount made available for distribution or distributed
in respect of Depositary Shares shall be reduced accordingly. The Depositary
shall distribute or make available for distribution, as the case may be, only
such amount, however, as can be distributed without attributing to any owner of
Depositary Shares a fraction of one cent, and any balance not so distributable
shall be held by the Depositary (without liability for interest thereon) and
shall be added to and be treated as part of the next sum received by the
Depositary for distribution to Record Holders of Receipts then outstanding.
SECTION 4.2 DISTRIBUTIONS OTHER THAN CASH. Whenever the Depositary
shall receive any distribution upon the Preferred Stock, including any
Liquidated Damages, in shares of Common Stock, the Depositary shall, subject to
Section 3.2, distribute to Record Holders of Receipts on the record date fixed
pursuant to Section 4.4, such shares of Common Stock received by it in
proportion to the respective numbers of Depositary Shares evidenced by the
Receipts held by such holders, except that the Depositary may not distribute
fractional shares of Common Stock. If in the opinion of the Company, after
consultation with the Depositary, such distribution cannot be made
proportionately among such Record Holders, or if for any reason
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(including any requirement that the Company or the Depositary withhold an amount
on account of taxes) the Depositary deems, after consultation with the Company,
such distribution not to be feasible, the Depositary may, at the direction of
the Company, adopt such method as the Company deems equitable and practicable
for the purpose of effecting such distribution, including the sale at public
sale of the other securities or property thus received, or any part thereof, at
such place or places and upon such terms as it may deem proper. No fractional
shares of Common Stock will be issued as a distribution on the Preferred Stock
and, if such distribution would otherwise result in a fractional share of Common
Stock being issued, the Depositary shall sell the total number of shares of
Common Stock that would have been represented by such fractional shares at
public sale at such place or places and upon such terms it deems proper. The net
proceeds of any sale made pursuant to this Section 4.2 shall, subject to Section
3.2, be distributed or made available for distribution, as the case may be, by
the Depositary to Record Holders of Receipts as provided by Section 4.1 in the
case of a distribution received in cash.
SECTION 4.3 SUBSCRIPTION RIGHTS, PREFERENCES OR PRIVILEGES. (a) If the
Company shall at any time offer or cause to be offered to the Persons in whose
names Preferred Stock is recorded on the books of the Company any rights,
preferences or privileges to subscribe for or to purchase any securities or any
rights, preferences or privileges of any other nature, such rights, preferences
or privileges shall in each such instance be made available by the Depositary to
the Record Holders of Receipts in such manner as the Company may determine,
either by the issue to such Record Holders of warrants representing such rights,
preferences or privileges or by such other method as may be approved by the
Company in its discretion with the approval of the Depositary; PROVIDED,
HOWEVER, that (i) if at the time of issue or offer of any such rights,
preferences or privileges the Company determines that it is not lawful or (after
consultation with the Depositary) not feasible to make such rights, preferences
or privileges available to holders of Receipts by the issue of warrants or
otherwise or (ii) if and to the extent so instructed by holders of Receipts who
do not desire to exercise such rights, preferences or privileges, then the
Company, in its discretion (with the approval of the Depositary, in any case
where the Company has determined that it is not feasible to make such rights,
preferences or privileges available), may, if applicable laws or the terms of
such rights, preferences or privileges permit such transfer, sell such rights,
preferences or privileges at public sale, at such place or places and upon such
terms as it may deem proper. The net proceeds of any such sale shall be
distributed by the Depositary to the Record Holders of Receipts entitled thereto
as provided by Section 4.1 in the case of a distribution received in cash.
(b) If registration under the Securities Act of 1933 of the
securities to which any rights, preferences or privileges relate is required in
order for holders of Receipts to be offered or sold the securities to which such
rights, preferences or privileges relate, the Company agrees with the Depositary
that it will promptly file a registration statement pursuant to such Act with
respect to such rights, preferences or privileges and securities and use its
best efforts and take all steps available to it to cause such registration
statement to become effective sufficiently in advance of the expiration of such
rights, preferences or privileges. In no event shall the Depositary make
available to the holders of Receipts any right, preference or privilege to
subscribe for or to purchase any securities unless and until the Company
provides to the Depositary an opinion of counsel stating that the securities to
which such rights, preferences or
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privileges relate have been registered under the Securities Act of 1933 or do
not need to be registered under such Act.
(c) If any other action under the laws of any jurisdiction or
any governmental or administrative authorization, consent or permit is required
in order for such rights, preferences or privileges to be made available to
holders of Receipts, the Company agrees with the Depositary that the Company
will use its best efforts to take such action or obtain such authorization,
consent or permit sufficiently in advance of the expiration of such rights,
preferences or privileges to enable such holders to exercise such rights,
preferences or privileges.
SECTION 4.4 NOTICE OF DIVIDENDS; FIXING OF RECORD DATE FOR HOLDERS OF
RECEIPTS. Whenever (a) any cash dividend or other cash distribution shall become
payable or any distribution other than cash shall be made, or any rights,
preferences or privileges shall at any time be offered, with respect to
Preferred Stock, or (b) the Depositary shall receive notice of any meeting at
which holders of Preferred Stock are entitled to vote or of which holders of
Preferred Stock are entitled to notice or of any election on the part of the
Company to redeem any shares of Preferred Stock, the Depositary shall in each
such instance fix a record date (which shall be the same date as the record date
fixed by the Company with respect tithe Preferred Stock) for the determination
of the Record Holders of Receipts (x) who shall be entitled to receive such
dividend, distribution, rights, preferences or privileges or the net proceeds of
the sale thereof, or (y) who shall be entitled to give instructions for the
exercise of voting rights at any such meeting, or who shall be entitled to
notice of such meeting, or (z) whose Depositary Shares are to be redeemed.
SECTION 4.5 VOTING RIGHTS. Upon receipt of notice of any meeting at
which the holders of Preferred Stock are entitled to vote, the Depositary shall,
as soon as practicable thereafter, mail to the Record Holders of Receipts a
notice which shall contain (a) such information as is contained in such notice
of meeting, and (b) a statement that the holders of Receipts at the close of
business on a specified record date determined pursuant to Section 4.4 will be
entitled, subject to any applicable provision of law and of the Certificate of
Incorporation or the Authorizing Resolution, to instruct the Depositary as to
the exercise of the voting rights pertaining to the amount of Preferred Stock
represented by their respective Depositary Shares, and a brief statement as to
the manner in which such instructions may be given. Upon the written request of
a Record Holder of a Receipt, the Depositary shall endeavor insofar as
practicable to vote or cause to be voted the amount of Preferred Stock
represented by the Depositary Shares evidenced by such Receipt in accordance
with the instructions set forth in such request. To the extent any such
instructions request the voting of a fraction of a share of Preferred Stock, the
Depositary shall aggregate such fraction with all other fractions resulting from
requests with the same voting instructions and shall vote the number of whole
shares resulting from such aggregation in accordance with the instructions
received in such requests. The Company hereby agrees to take all reasonable
action which may be deemed necessary by the Depositary in order to enable the
Depositary to vote such Preferred Stock or cause such Preferred Stock to be
voted. In the absence of specific written instructions from the Record Holder of
a Receipt, the Depositary will abstain from voting to the extent of the
Preferred Stock represented by the Depositary Shares evidenced by such Receipt.
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SECTION 4.6 CHANGES AFFECTING DEPOSITED SECURITIES AND
RECLASSIFICATIONS, RECAPITALIZATIONS, ETC. Upon any change in par or stated
value, split-up, consolidation or any other reclassification of the Preferred
Stock, or upon any recapitalization, reorganization, merger, amalgamation or
consolidation or sale of all or substantially all of the Company's assets
affecting the Company or to which it is a party, the Depositary shall, upon the
instructions of the Company and in such manner as the Company may deem
equitable, (a) make such adjustments in (i) the fraction of an interest
represented by one Depositary Share in one share of Preferred Stock and (ii) the
ratio of the redemption price per Depositary Share to the redemption price of a
share of Preferred Stock in each case as may be necessary to fully reflect the
effects of such change in par or stated value, split-up, consolidation or other
reclassification of the Preferred Stock, or of such recapitalization,
reorganization, merger, amalgamation or such consolidation or sale and (b) treat
any securities which shall be received by the Depositary in exchange for or upon
conversion of or otherwise in respect of the Preferred Stock as new deposited
securities under this Deposit Agreement, and Receipts then outstanding shall
thenceforth represent the new deposited securities so received. In any such case
the Company may, in its discretion, direct the Depositary to execute and deliver
additional Receipts, or may call for the surrender of all outstanding Receipts
to be exchanged for new Receipts specifically describing such new deposited
securities.
SECTION 4.7 REPORTS. The Depositary shall make available for inspection
by Record Holders of Receipts at its Principal Office, and at such other places
as it may from time to time deem advisable, any reports and communications
received from the Company which are received by the Depositary as the holder of
Preferred Stock unless at the time of or prior to receipt the Company advises
the Depositary that such reports or communications have not been made generally
available to the holders of Preferred Stock.
SECTION 4.8 LISTS OF RECEIPT HOLDERS. Upon request from time to time by
the Company, the Depositary shall, without unreasonable delay, furnish to the
Company a list, as of a recent date, of the names, addresses and holdings of
Preferred Stock by all Persons in whose names Receipts are registered on the
books of the Depositary.
ARTICLE V
THE DEPOSITARY AND THE COMPANY
SECTION 5.1 MAINTENANCE OF OFFICE, AGENCIES, TRANSFER BOOKS BY THE
DEPOSITARY REGISTRAR. (a) Upon execution of this Deposit Agreement in accordance
with its terms, the Depositary shall maintain at its Principal Office facilities
for the execution and delivery, transfer, surrender and exchange of Receipts,
and at the offices of the Depositary's Agents, if any, facilities for the
delivery, transfer, surrender and exchange of Receipts, all in accordance with
the provisions of this Deposit Agreement.
(b) The Depositary shall keep books at its Principal Office
for the transfer of Receipts, which books at all reasonable times shall be open
for inspection by the Record Holders
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of Receipts, unless the Company advises the Depositary in a particular instance
that such inspection is not for a proper purpose reasonably related to such
Person's interest as an owner of Depositary Shares evidenced by the Receipts.
The Depositary may close such books, at any time or from time to time, when
deemed expedient by it in connection with the performance of its duties
hereunder.
(c) If the Receipts or the Depositary Shares evidenced thereby
or the Preferred Stock represented by such Depositary Shares shall be quoted on
the NYSE, the Company may, upon consultation with the Depositary, appoint a
Registrar for registry of such Receipts or Depositary Shares in accordance with
the requirements of the NYSE. Such Registrar (which may be the Depositary if so
permitted by the requirements of the NYSE) may be removed and a substitute
registrar appointed by the Depositary upon the request or with the approval of
the Company. If the Receipts of such Depositary Shares or such Preferred Stock
are listed on one or more stock exchanges, the Depositary will, at the request
of the Company, arrange such facilities for the delivery, transfer, surrender
and exchange of such Receipts or such Depositary Share or such Preferred Stock
as may be required by law or applicable stock exchange regulation.
SECTION 5.2 PREVENTION OR DELAY IN PERFORMANCE BY THE DEPOSITARY, THE
DEPOSITARY'S AGENTS OR THE COMPANY. Neither the Depositary nor any Depositary's
Agent nor the Company shall incur any liability to any holder of any Receipt, if
by reason of any provision of any present or future law, or regulation
thereunder of the United States of America, or of any other governmental
authority or, in the case of the Depositary or any of the Depositary's Agents,
by reason of any provision, present or future, of the Certificate of
Incorporation or the Authorizing Resolution or by reason of any act of God or
war or other circumstance beyond the control of the relevant party, the
Depositary, any Depositary's Agent or the Company shall be prevented or
forbidden from or delayed in doing or performing any act or thing which the
terms of this Deposit Agreement provide shall or may be done or performed, or by
reason of any exercise of, or failure to exercise, any discretion provided for
in this Deposit Agreement.
SECTION 5.3 OBLIGATIONS OF THE DEPOSITARY, THE DEPOSITARY'S AGENTS AND
THE COMPANY. (a) Neither the Depositary nor any Depositary's Agent nor the
Company assumes any obligations or shall be subject to any liability under this
Deposit Agreement to holders of Receipts other than that each of them agrees to
use its best judgment and good faith in the performance of such duties as are
specifically set forth in this Deposit Agreement.
(b) Neither the Depositary nor any Depositary's Agent nor the
Company shall be under any obligation to appear in, prosecute or defend any
action, suit or other proceeding with respect to Preferred Stock, Depositary
Shares or Receipts, which in its opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all expense and liability be
furnished as often as may be required.
(c) Neither the Depositary nor any Depositary's Agent nor the
Company shall be liable for any action or any failure to act by it in reliance
upon the advice of or information
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from legal counsel, accountants, any Person presenting Preferred Stock for
deposit, any holder of a Receipt or any other Person believed by it in good
faith to be competent to give such advice or information. The Depositary, any
Depositary's Agent and the Company may each rely and shall each be protected in
acting upon any written notice, request, direction or other document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
(d) The Depositary and the Depositary's Agents may own and
deal in any class of securities of the Company and its affiliates and in
Receipts. The Depositary may also act as transfer agent or registrar of any of
the securities of the Company and its affiliates.
SECTION 5.4 RESIGNATION AND REMOVAL OF THE DEPOSITARY, APPOINTMENT OF
SUCCESSOR DEPOSITARY. (a) The Depositary may at any time resign as Depositary
hereunder by notice of its election to do so delivered to the Company, such
resignation to take effect upon the appointment of a successor depositary and
its acceptance of such appointment as hereinafter provided.
(b) The Depositary may at any time be removed by the Company
by notice of such removal delivered to the Depositary, such removal to take
effect upon the appointment of a successor depositary and its acceptance of such
appointment as hereinafter provided.
(c) In case at any time the Depositary acting hereunder shall
resign or be removed, the Company shall, within 45 days after the delivery of
the notice of resignation or removal, as the case may be, appoint a successor
depositary, which shall be a bank or trust company having its principal office
in the United States of America. Each successor depositary shall execute and
deliver to its predecessor and to the Company an instrument in writing accepting
its appointment hereunder, and thereupon such successor depositary, without any
further act or deed, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor and for all purposes shall be the
Depositary under this Deposit Agreement, and such predecessor, upon payment of
all sums due it and on the written request of the Company, shall promptly
execute and deliver an instrument transferring to such successor all rights and
powers of such predecessor hereunder, shall duly assign, transfer and deliver
all rights, title and interest in the stock and any moneys or property held
hereunder to such successor, and shall deliver to such successor a list of the
Record Holders of all outstanding Receipts. Any successor depositary shall
promptly mail notice of its appointment to the Record Holders of Receipts.
(d) Any corporation into or with which the Depositary may be
merged, consolidated or converted shall be the successor of such Depositary
without the execution or filing of any document or any further act. Such
successor depositary may authenticate the Receipts in the name of the
predecessor depositary or in the name of the successor depositary.
SECTION 5.5 CORPORATE NOTICES AND REPORTS. The Company agrees that it
will deliver to the Depositary, and the Depositary will, promptly after receipt
thereof, transmit to the Record Holders of Receipts, in each case at the address
recorded in the Depositary's books, copies of all notices and reports
(including, without limitation, financial statements) required by law, by the
rules of any national securities exchange or the Nasdaq National Market upon
which
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the Preferred Stock, the Depositary Shares or the Receipts are listed or
by the Certificate of Incorporation (including the Certificate of Designations)
and the Authorizing Resolution to be furnished by the Company to holders of
Preferred Stock. Such transmission will be at the Company's expense and the
Company will provide the Depositary with such number of copies of such documents
as the Depositary may reasonably request. In addition, the Depositary will
transmit to the holders of Receipts (at the Company's expense) such other
documents as may be requested by the Company.
SECTION 5.6 INDEMNIFICATION BY THE COMPANY. (a) The Company agrees to
indemnify the Depositary and its directors, employees and agents (including any
Depositary's Agent and any Registrar) against, and hold each of them harmless
from, any loss, liability or expense (including reasonable costs of
investigation, court costs, and attorneys' fees and disbursements) which may
arise out of acts performed or omitted in accordance with the provisions of this
Deposit Agreement, as the same may be amended, modified or supplemented from
time to time, and of the Receipts (i) by the Depositary, and Registrar or any of
their respective officers, employees or agents (including any Depositary's
Agent), except for any loss, liability or expense arising out of negligence, bad
faith or willful misconduct on the part of any such Person or Persons, or (ii)
by the Company or any of its agents.
(b) Any Person seeking indemnification hereunder (an
"indemnified person") shall notify the Company of the commencement of any
indemnifiable action or claim promptly after such indemnified person becomes
aware of such commencement (provided that the failure to make such notification
shall not affect such indemnified person's rights otherwise than under this
Section 5.6). In case any such action is brought against any indemnified party,
and it notifies the Company of the commencement thereof, the Company will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from the indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to the Company. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action, (ii) the Company shall not have employed
counsel to have charge of the defense of such action within a reasonable time
after notice of commencement of such action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of such indemnified party or parties), in any
of which events such reasonable fees and expenses shall be borne by the Company.
Anything in this subsection to the contrary notwithstanding, the Company shall
not be liable for any settlement of any claim or action effected without its
written consent; PROVIDED, HOWEVER, that such consent was not unreasonably
withheld.
(c) The obligations provided in this Section 5.6 shall survive
the termination of this Deposit Agreement and the succession or substitution of
any Person indemnified hereby.
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SECTION 5.7 CHARGES AND EXPENSES. The Company shall pay all transfer
and other taxes and governmental charges arising solely from the existence of
the depositary arrangements. The Company shall pay any and all fees of the
Depositary as shall be agreed to between the Company and the Depositary, and all
charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the initial issuance of the Depositary Receipts,
distribution of information to the holders of Receipts with respect to matters
on which holders of Preferred Stock are entitled to vote, withdrawals of the
Preferred Stock by holders of the Receipts and any redemption or conversion of
the Depositary Receipts. All other transfer and other taxes and governmental
charges shall be at the expense of holders of Depositary Shares. If, at the
request of a holder of Receipts, the Depositary incurs charges or expenses for
which it is not otherwise liable hereunder, such holder will be liable for such
charges and expenses. All other reasonable charges and expenses of the
Depositary and any Depositary's Agent hereunder and of any Registrar (including,
in each case, reasonable fees and expenses of counsel) incident to the
performance of their respective obligations hereunder will be paid upon
consultation and agreement between the Depositary and the Company as to the
amount and nature of such charges and expenses. The Depositary shall present its
statement for charges and expenses to the Company monthly or at such other
intervals as the Company and the Depositary may agree.
ARTICLE VI
AMENDMENT AND TERMINATION
SECTION 6.1 AMENDMENT. The form of the Receipts and any provision of
this Deposit Agreement may at any time and from time to time be amended by
agreement between the Company and the Depositary in any respect which they may
deem necessary or desirable. Any amendment which shall impose any fees, taxes or
charges (other than fees and charges provided for herein), or which shall
otherwise prejudice any substantial existing right of holders of Receipts, shall
not become effective as to outstanding Receipts until the expiration of 90 days
after notice of such amendment shall have been given to the Record Holders of
outstanding Receipts. Every holder of an outstanding Receipt at the time any
such amendment so becomes effective shall be deemed, by continuing to hold such
Receipt, to consent and agree to such amendment and to be bound by this Deposit
Agreement as amended thereby. In no event shall any amendment impair the right,
subject to the provisions of Sections 2.8 and 2.9 and Article III, of any owner
of any Receipts to instruct the Depositary to deliver to the holder of Receipts
representing whole shares of Preferred Stock the whole shares of Preferred Stock
represented by such Receipts and all money and other property, if any,
represented by such Receipts, except in order to comply with mandatory
provisions of applicable law.
SECTION 6.2 TERMINATION. (a) Whenever so directed by the Company, the
Depositary will terminate this Deposit Agreement by mailing notice of such
termination to the Record Holders of all Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. The Depositary
may likewise terminate this Deposit Agreement if at any time 45 days shall have
expired after the Depositary shall have delivered to the Company written notice
of its election to resign and a successor depositary shall not have been
appointed and accepted its appointment as provided in Section 5.4.
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(b) If any Receipts shall remain outstanding after the date of
termination of this Deposit Agreement, the Depository thereafter shall
discontinue the transfer of Receipts, shall suspend the distribution of
dividends to the holders thereof, and shall not give any further notices (other
than notice of such termination) or perform any further acts under this Deposit
Agreement, except that the Depositary shall continue to (i) collect dividends
and other distributions pertaining to the Preferred Stock, (ii) to deliver the
dividends and distributions and the net proceeds from any sales of rights,
preferences or privileges as provided in this Deposit Agreement, and (iii)
deliver the Preferred Stock and any money and other property, without liability
for interest thereon, represented by Receipts upon surrender thereof by the
holders thereof. At any time after the expiration of two years from the date of
termination, the Depositary shall sell the Preferred Stock then held hereunder
at public or private sale, at such places and upon such terms as the Depositary
deems proper and may thereafter hold the net proceeds of any such sale, together
with any money and other property held by it hereunder, without liability for
interest, for the benefit, pro rata in accordance with their holdings, of the
holders of Receipts which have not theretofore been surrendered. After making
such sale, the Depositary shall be discharged from all obligations under this
Deposit Agreement, except to account for such net proceeds and money and other
property. Upon the termination of this Deposit Agreement, the Company shall be
discharged from all obligations under this Deposit Agreement except for its
obligations to the Depositary, any Depositary's Agent and any Registrar under
Sections 5.6 and 5.7.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 COUNTERPARTS. This Deposit Agreement may be executed in any
number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. Copies of this Deposit Agreement shall be filed
with the Depositary and the Depositary's Agents and shall be open to inspection
during business hours at the Depositary's Principal Office and the respective
offices of the Depositary's Agents, if any, by any holder of a Receipt.
SECTION 7.2 EXCLUSIVE BENEFITS OF PARTIES. This Deposit Agreement is
for the exclusive benefit of the parties hereto, and their respective successors
hereunder, and shall not be deemed to give any legal or equitable right, remedy
or claim to any other Person whatsoever.
SECTION 7.3 INVALIDITY OF PROVISIONS. In case any one or more of the
provisions contained in this Deposit Agreement or in the Receipts should be or
become invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
in no way be affected, prejudiced or disturbed thereby.
SECTION 7.4 NOTICES. (a) Any and all notices to be given to the Company
hereunder or under the Depositary Receipts shall be in writing and shall be
deemed to have been
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duly given if personally delivered or sent by mail or telecopy confirmed by
letter, addressed to the Company at 951 Yamato Road, Boca Raton, Florida
33431-0700, Attention: Treasurer, Telecopy: (561) 989-7140, or at any other
place to which the Company may specify in writing to the Depositary.
(b) Any and all notices to be given to the Depositary
hereunder or under the Depositary Receipts shall be in writing and shall be
deemed to have been duly given if personally delivered or sent by mail or by
telecopy confirmed by letter, addressed to the Depositary, at BankBoston, N.A.,
c/o Boston Equiserve Limited Partnership, 150 Royall Street, Canton, MA, 02021,
Attention: Client Administration, Telecopy: (781) 575-2549, or at any other
place to which the Depositary may specify in writing to the Company.
(c) Any and all notices given to a Record Holder of a Receipt
hereunder or under the Depositary Receipts shall be in writing and shall be
deemed to have been duly given if personally delivered or sent by mail or by
telecopy confirmed by letter, addressed to such Record Holder at the address of
such Record Holder as it appears on the books of the Depositary, or if such
holder shall have filed with the Depositary a written request that notices
intended for such holder be mailed to some other address, at the address
designated in such request.
Delivery of a notice sent by mail or by telecopy shall be
deemed to be effected at the time when a duly addressed letter containing the
same (or a confirmation thereof in the case of a telecopy message) is deposited,
postage prepaid, in a post office letter box. The Depositary or the Company,
may, however, act upon any telecopy message received by it from the other or
from any holder of a Receipt, notwithstanding that such telecopy message shall
not subsequently be confirmed by letter as aforesaid.
SECTION 7.5 DEPOSITARY'S AGENTS. The Depositary may from time to time
appoint Depositary's Agents to act in any respect or the Depositary for the
purposes of this Deposit Agreement and may at any time appoint additional
Depositary's Agents. The Depositary will notify the Company of any such action.
The Depository may also subcontract for performance of services hereunder with
Boston Equiserve Limited Partnership, a Delaware limited partnership.
SECTION 7.6 HOLDERS OF RECEIPTS ARE PARTIES. The holders of Receipts
from time to time shall be deemed to be parties to this Deposit Agreement and
shall be bound by all of the terms and conditions hereof and of the Receipts by
acceptance of delivery thereof.
SECTION 7.7 GOVERNING LAW. The Deposit Agreement and the Receipts and
all rights hereunder and thereunder and provisions hereof and thereof shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without reference to the principles of conflicts of law thereof. The
Company and the Depositary agree that the federal courts in the State of New
York for the Southern District of New York shall have jurisdiction to hear and
determine any suit, action or proceeding and to settle any dispute between them
that may arise out of or in connection with this Deposit Agreement and, for such
purposes, each irrevocably submits to the nonexclusive jurisdiction of such
courts.
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SECTION 7.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE
DEPOSITARY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY OR AGAINST IT BY THE OTHER PARTY ON ANY MATTERS WHATSOEVER, IN
CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
SECTION 7.9 ASSIGNMENT. This Deposit Agreement may not be assigned by
either the Company or the Depositary without the consent of the other party.
SECTION 7.10 HEADINGS. The headings of articles and sections in this
Deposit Agreement and in the form of a Receipt set forth in Exhibit A hereto
have been inserted for convenience only and are not to be regarded as a part of
this Deposit Agreement or to have any bearing upon the meaning or interpretation
of any provision contained herein or in the Receipts.
* * *
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IN WITNESS WHEREOF, Sensormatic Electronics Corporation and BankBoston,
N.A. have duly executed this Agreement as of the day and year first above set
forth and all holders of Receipts shall become parties hereto by and upon
acceptance by them of delivery of Receipts issued in accordance with the terms
hereof.
SENSORMATIC ELECTRONICS CORPORATION
Attest: /s/ Avis M. Peterson By: /s/ Garrett E. Pierce
-------------------------- ----------------------------------
Avis M. Peterson Name: Garrett E. Pierce
Title: Senior Vice Presdient and
Chief Financial Officer
BANKBOSTON, N.A.
Attest: /s/ Carol Mulvey-Eori By: /s/ Katherine Anderson
-------------------------- ----------------------------------
Carol Mulvey-Eori Name: Katherine Anderson
Title: Administration Manager
24
<PAGE> 1
Exhibit 5.1
May 22, 1998
Sensormatic Electronics Corporation
951 Yamato Road
Boca Raton, Florida 33431-0700
Ladies and Gentlemen:
We have acted as counsel to Sensormatic Electronics
Corporation, a Delaware corporation (the "Company"), in connection with its
Registration Statement on Form S-3 (Registration No. 333 - ) (the "Registration
Statement"), filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), relating to (i) the offering from time to time by certain
holders (the "Selling Securityholders") of (1) 6,900,000 depositary shares (the
"Depositary Shares") each representing a one-tenth interest in a share of 6 1/2%
Convertible Preferred Stock ("Convertible Preferred Stock"), liquidation
preference $250.00 per share, par value $0.01 per share, of the Company, (2)
690,000 shares of Convertible Preferred Stock, (3) 8,837,090 shares (the "Common
Shares") of common stock, $0.01 par value per share, of the Company (the "Common
Stock") issuable upon conversion of the Convertible Preferred Stock and/or the
Depositary Shares and (ii) the issuance from time to time by the Company of
shares of Common Stock in lieu of cash as dividends on the Convertible Preferred
Stock (the "Dividend Shares") or as liquidated damages under the Registration
Rights Agreement (the "Registration Rights Agreement"), dated as of April 13,
1998, between the Company and the Initial Purchasers referred to below (the
"Liquidated Damages Shares"). The Depositary Shares were originally issued by
the Company in a private placement on April 13, 1998, pursuant to the Purchase
Agreement dated as of April 6, 1998 (the "Purchase Agreement") between the
Company and the Initial Purchasers referred to therein, and were subsequently
resold by the Initial Purchasers thereof in private sales pursuant to exemptions
from registration under the Securities Act of 1933, as amended.
As such counsel, we have examined and are familiar with the
following: (a) the Restated Certificate of Incorporation of the Company, as
amended, (b) the By-Laws of the Company, as amended, (c) the minutes of the
meetings of the stockholders, Board of Directors and Finance Committee of the
Company, (d) the Purchase Agreement, (e) the Certificate of Designations of
Voting Power, Designation Preferences and Relative, Participating, Optional and
Other Special Rights and Qualifications, Limitations and Restrictions of 6 1/2%
Convertible Preferred Stock of the Company, filed with the Secretary of State of
the State of Delaware on April 9, 1998 (the "Certificate of Designations"), (f)
the Deposit Agreement, dated as of April 13, 1998, between the Company and
BankBoston, N.A. (the "Deposit Agreement"), (g) the Registration Statement and
(h) such other documents and instruments as we have deemed appropriate. In such
review, we have assumed the genuineness of all signatures, the authenticity of
all documents submitted as
<PAGE> 2
Sensormatic Electronics Corporation
Page 2 May 22, 1998
originals and the conformity to the original documents of all documents
submitted to us as copies.
Based upon the foregoing, and assuming that applicable
provisions of the Securities Act and the securities or "blue sky" laws of
various states shall have been complied with, we are of the opinion that:
1. The Depositary Shares and/or shares of Convertible
Preferred Stock to be offered by the Selling Securityholders are duly
authorized and duly and validly issued, fully paid and nonassessable.
2. Upon conversion of (a) the Depositary Shares into Common
Shares in accordance with the Deposit Agreement and the Certificate of
Designations and (b) the shares of Convertible Preferred Stock into
Common Shares in accordance with the Certificate of Designations, such
Common Shares to be offered by the Selling Securityholders will be duly
authorized and duly and validly issued, fully paid and nonassessable.
3. Upon the issuance of the Dividend Shares in accordance with
the Certificate of Designations or the Liquidated Damages Shares in
accordance with the Certificate of Designations and the Registration
Rights Agreement, such Dividend Shares or Liquidated Damages Shares to
be offered by the Selling Securityholders will be duly authorized and
duly and validly issued, fully paid and nonassessable.
4. The statements under the caption "Certain Federal Income
Tax Considerations" in the preliminary prospectus relating to the
Depositary Shares included in the Registration Statement, insofar as
such statements constitute summaries of federal income tax law, fairly
summarize the matters referred to therein.
We are qualified to practice law in the State of New York and
do not purport to be experts on, or to express any opinion herein concerning,
any laws other than the laws of the State of New York, the General Corporation
Law of the State of Delaware and the federal laws of the United States of
America, and this opinion is rendered only with respect to such laws.
We hereby consent to the use of our name under the caption
"Legal Matters" in the prospectus included in the Registration Statement and to
the use of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
/s/ CHRISTY & VIENER
<PAGE> 1
Exhibit 12.1
Sensormatic Electronics Corporation
Computation of Ratio of Earnings to Fixed Charges
(In millions, except ratio amounts)
<TABLE>
<CAPTION>
Nine Months
Years Ended June 30, Ended March 31,
----------------------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from operations before income
taxes........................................... $72.0 $ 96.0 $ 89.0 $(159.9) $(30.3) $19.5 $(68.3)
Add (deduct)
Fixed charges less preferred stock dividends.. 19.7 23.7 30.8 40.5 49.8 37.1 39.7
Minority interest in consolidated subsidiaries 0.5 0.5 1.0 1.6 2.7 1.6 3.2
----- ------ ------ ------- ------ ----- ------
Adjusted Earnings............................... $92.2 $120.2 $120.8 $(117.8) $ 22.2 $58.2 $(25.4)
===== ====== ====== ======= ====== ===== ======
Fixed Charges:
Interest...................................... $18.7 $ 22.7 $ 29.0 $ 38.4 $ 47.9 $35.7 $ 38.3
Amortization of debt expense and debt
discounts..................................... -- -- 0.3 0.6 0.8 0.6 0.6
Portion of Rents representative of interest
factor........................................ 1.0 1.0 1.5 1.5 1.1 0.8 0.8
Preferred Stock dividends..................... -- -- -- -- -- -- --
----- ------ ------ ------- ------ ----- ------
Total fixed charges............................. $19.7 $ 23.7 $ 30.8 $ 40.5 $ 49.8 $37.1 $ 39.7
===== ====== ====== ======= ====== ===== ======
Ratio of Earnings to fixed charges (1).......... 4.68 5.07 3.92 -- 0.45 1.57 --
===== ====== ====== ======= ====== ===== ======
</TABLE>
(1) Earnings for the year ended June 30, 1996 and the nine months ended March
31, 1998 were insufficient to cover fixed charges by $158.3 and $65.1,
respectively.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-00000) and related Prospectus of
Sensormatic Electronics Corporation for the registration of 6,900,000 Depository
Shares, 690,000 shares of Preferred Stock and 8,837,090 shares of its common
stock issuable upon conversion of the Preferred Stock and to the incorporation
by reference therein of our reports dated August 14, 1997, with respect to the
consolidated financial statements of Sensormatic Electronics Corporation
incorporated by reference in its Annual Report (Form 10-K) for the year ended
June 30, 1997 and the related financial statement schedule included therein,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
West Palm Beach, Florida
May 20, 1998
