<PAGE> 1
As filed with the Securities and Exchange Commission on July 17, 1998.
Registration No. 333-53457
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-------------------------
AMENDMENT NO. 1
TO
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)
- ------------------------------------------------------------------------------------------------------------
6 1/2% Convertible Preferred
Stock, liquidation
preference $250.00 per 690,000 N.A. N.A. (2)
share, par value $0.01 per
share
- ------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value per share, issuable
upon conversion of the 8,837,090(3) N.A. N.A. (2)
Depositary Shares and 6 1/2%
Convertible Preferred Stock
- ------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value per share, issuable as (4) (4) $ 22,425,000(4) $ 6,615.38
dividends on the 6 1/2%
Convertible Preferred Stock
- ------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value per share, issuable as
liquidated damages on the 6 1/2 (5) (5) $ 862,500(5) $ 254.43
Convertible Preferred Stock
- ------------------------------------------------------------------------------------------------------------
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 JULY 17, 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)
ISSUED OR 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,
(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, and (4) 189,425 Dividend Shares (as
hereinafter defined) issued by the Company on July 1, 1998 in payment of the
dividend due on the Preferred Stock. This Prospectus is also being used in
connection with the issuance by the Company of 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 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." 6,000,000 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 with respect to an additional 900,000
Depositary Shares. 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 Rule 144A under the Securities Act of 1933, as amended (the "Securities
Act").
(continued on next page)
-ii-
<PAGE> 4
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 4.
----------------------------------
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 JULY ____, 1998.
-iii-
<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.
Certain of the Company's financial agreements currently prohibit the payment of
cash dividends, and it is unlikely that the Company would be able to pay cash
dividends through its fiscal year ending June 30, 1999. Accordingly, the Company
intends initially to pay dividends on the Preferred Stock in shares of Common
Stock of the Company. See "Risk Factors -- Restrictions on the Company's Ability
to Pay Cash Dividends" and "Description of Certain Indebtedness".
The Preferred Stock (and the related Depositary Shares) became eligible
for conversion, subject to prior redemption, 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.
The Preferred Stock (and related Depositary Shares) 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).
Currently, there are no outstanding Senior Securities or Parity Securities, and
the Common Stock of the Company is the only outstanding Junior Security. In
addition, the Preferred Stock ranks junior in right of payment to all
indebtedness and other obligations of the Company. As of May 31, 1998, the
amount of such indebtedness was $545.5 million in the aggregate and the amount
of the trade payables and accrued liabilities of the Company was $376.9 million
in the aggregate.
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.
-iv-
<PAGE> 6
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "SRM". On July 16, 1998, the last reported sale price of the
Common Stock on the NYSE was $ 13 11/16 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.
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.
-v-
<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 -- i.e., customers at which
Sensormatic products are installed -- 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
April 13, 1998 Offering... Pursuant to the April 13, 1998 Offering, 6,900,000
Depositary Shares were issued, 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. The
aggregate gross proceeds of the April 13, 1998
Offering were $172,500,000, and the net proceeds
thereof, after deduction of discounts and
commissions of $0.75 per Depositary Share and
estimated expenses of $650,000, were approximately
$166,675,000. Such proceeds were used to repay
borrowings under the Company's revolving credit
facility, to fund the remaining balance due under
the settlement of the shareholder class action and
for working capital and general corporate
purposes. On April 13, 1998, the last reported
sale price of the Common Stock on the NYSE was
$15.8125
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, and it is unlikely that
the Company would be able to pay cash dividends
through its fiscal year ending June 30, 1999.
Accordingly, the Company intends initially to pay
dividends on the Preferred Stock in shares of
Common Stock of the Company. See "Risk Factors --
Restrictions on the Company's Ability to Pay Cash
Dividends" and "Description of Certain
Indebtedness".
<PAGE> 9
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 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"). Currently, there are no outstanding
Senior Securities or Parity Securities, and the
Common Stock is the only outstanding Junior
Security. 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 liabilities of the Company. As of May 31,
1998, the amount of such indebtedness was $545.5
million in the aggregate and the amount of the
trade payables and accrued liabilities of the
Company was $376.9 million in the aggregate.
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 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).
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.
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<PAGE> 10
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;
Liquidated 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). 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.
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".
For additional information regarding the Depositary Shares and the
Preferred Stock, see "Description of Depositary Shares" and "Description of
Preferred Stock".
RECENT DEVELOPMENTS
In March 1998, the Company entered into an agreement with the Securities
and Exchange Commission (the "Commission" or "SEC") resolving the investigation
of the Company by the Commission which commenced in 1995. The investigation
concerned the Company's books and records and its public filings for fiscal 1995
and prior
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<PAGE> 11
periods, in particular with respect to revenue recognition practices, including
end-of-period shipments. Without admitting or denying any wrongdoing, the
Company agreed to an order of the Commission that the Company will not in the
future violate Federal securities law provisions, among other things, governing
the maintenance of books and records, governing periodic reporting and
prohibiting fraud. There were no fines or other penalties imposed upon the
Company. In addition, Ronald G. Assaf, the Company's non-executive Chairman of
the Board and former Chief Executive Officer, as well as certain other former
officers of the Company, without admitting or denying any wrongdoing,
individually entered into agreements with the Commission which resolved the
matter as it relates to them.
An agreement in principle has been reached to settle the three derivative
actions that were filed against certain directors and former directors of the
Company in the Delaware Court of Chancery in September 1995, which actions arose
out of alleged statements and omissions regarding, among other things, the
Company's financial results and accounting practices that were also generally
the subject of the previously pending shareholder action (referred to below).
The settlement provides for payment of legal fees in an amount that would not be
material. The agreement in principle is subject to final documentation and Court
approval.
The Company had previously entered into a settlement agreement, approved
by the Court, with respect to a stockholder class action providing, among other
things, for the Company to pay the members of the class and their counsel $53.5
million, together with certain interest thereon. The Company has paid all
amounts due under the settlement agreement, in part from the proceeds of the
April 13, 1998 Offering.
The Company has reached an agreement in principle, subject to final
documentation, with Federal Insurance Company, the remaining excess directors
and officers liability insurance carrier in litigation with the Company and
certain of its current and former directors and officers, to resolve coverage
claims in connection with the above matters.
In addition, the complaint filed by Marshall Wolf in November 1996 against
the Company and certain members of the Board of Directors in Delaware Court of
Chancery, challenging the adequacy of the disclosures in the Company's September
30, 1996 proxy statement, was dismissed by the Court in June 1998.
Additional information regarding the above litigations and other legal
proceedings involving the Company is contained in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1997 and its Quarterly Reports on
Form 10-Q for the quarters ended September 30, 1997, December 31, 1997 and March
31, 1998, all of which are incorporated herein by reference.
Pursuant to the April 13, 1998 Offering, the Company issued an aggregate
of 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. The aggregate gross proceeds of the April 13,
1998 Offering were $172,500,000.
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 net
losses in fiscal 1996 and fiscal 1997, and for the nine months ended March 31,
1998, of $97.7 million, $21.4 million and $47.5 million, respectively. 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. In fiscal 1996,
the Company recorded restructuring charges of $85.3 million and special charges
of $100.7 million. In fiscal 1997, the Company recorded restructuring charges of
$26.8 million and special charges of $22.1 million. In the first nine months of
fiscal 1998, the Company recorded restructuring charges of $43.0 million. The
restructuring charges related to cost reduction programs, as well as provision
for the disposal of non-core businesses. The special charges primarily
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<PAGE> 12
represented increases to accounts receivable and inventory valuation allowances.
The Company had operating income and net income in the second and third quarters
of fiscal 1998. However, there can be no assurance that the Company's operations
will continue to be profitable or that the Company's initiatives referred to
above will be successful.
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. Accordingly, the Company intends initially to
pay dividends on the Preferred Stock in shares of Common Stock of the Company.
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), a Voting Rights Triggering Event (as defined herein) will have
occurred, in which event the sole remedy to the holders of the Preferred Stock
will be to vote for and elect, as a class, two additional members of the Board
of Directors. As the Company intends initially to pay dividends on the Preferred
Stock in shares of Common Stock of the Company, it does not anticipate that a
Voting Rights Triggering Event will occur as a result of its inability to pay
cash dividends. 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.
ACCOUNTS RECEIVABLE
The Company historically maintains a high level of accounts receivable and
sales-type leases outstanding, measured as a percentage of revenues. For fiscal
1997 and the first nine months of fiscal 1998, the amounts of accounts
receivable and sales-type leases outstanding at the end of the period, as a
percentage of revenues (annualized for the nine months), were 45.9% and 51.7%,
respectively. 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. At June 30, 1997 and March 31, 1998, gross
accounts receivable (excluding the reserve for doubtful accounts) over 30 days
past due were 33.8% and 37.4%, respectively, of the related balances. (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
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<PAGE> 13
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 increased the valuation
allowance for accounts receivable, including receivables financed with third
parties, after updating its periodic evaluation of the collectibility of
specific individual accounts as well as the review of documentation available to
pursue the collection of certain lease receivables. 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. 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 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. There
can be no assurance, however, that the Company's Year 2000 date conversion
program will be successfully completed on a timely basis. 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
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<PAGE> 14
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.
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
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<PAGE> 15
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. As of May 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"). The Senior Notes are unsecured
obligations of the Company ranking pari passu with all of its other unsecured,
unsubordinated indebtedness.
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.
Pursuant to the Revolving Credit Facility, the Company and certain 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. The Company is
obligated for its own extensions of credit and also has guaranteed all credits
extended to the subsidiary borrowers. As of May 31, 1998, there were no amounts
outstanding under the Revolving Credit Facility. 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). 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
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<PAGE> 16
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".
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.
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<PAGE> 17
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.
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<PAGE> 18
<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>
-11-
<PAGE> 19
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- --------- --------- --------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
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
====== ====== =====
</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.
-12-
<PAGE> 20
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
---- ---- ---- ---- ----- ---- ----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF BASIC AND
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing ............ $ 54.1 $ 72.1 $ 69.6 $ (97.7) $ (21.4) $ 14.0 $ (47.5)
operations
Discontinued operations .................. -- -- 4.1 -- -- -- --
Add: Interest expense (net of
tax) on 7% Convertible ................. 5.1 4.9 -- -- -- -- --
------- ------- ------ -------- ------- ------- -------
Subordinated Debentures
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.
-13-
<PAGE> 21
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. 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
-14-
<PAGE> 22
and manufacturing costs while increasing efficiencies. 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. The fiscal 1996 pre-tax restructuring charges were $85.3 million and
the related estimated cash outlay was $33.3 million, of which $22.3 million was
disbursed as of December 31, 1997. To date, the savings realized as a result of
this plan have been partially offset by reinvestment in the Company's business,
including costs associated with the addition of approximately 250 employees in
strategic growth and key technical areas, the new enterprise-wide management
information system and additional consultants, and by increased legal fees
relating principally to the pending litigation and government investigations.
These savings were also partially reflected as reductions in manufacturing costs
which have helped to generally maintain gross profit margins in the face of
intense price competition.
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 this
restructuring plan, the Company has planned for the reduction in workforce of
approximately 1,200 positions, of which 600 relate to the divestiture on
non-core businesses and the remaining positions principally represent the
termination of administrative personnel. As of December 31, 1997, approximately
650 positions had been eliminated, including the positions associated with the
divested business units. The pre-tax restructuring charges related to this
restructuring plan, net of expected proceeds from the divestiture on non-core
businesses, was estimated to be $30 million. As of December 31, 1997, $4.6
million had been disbursed, offset by $7.5 million of proceeds received from the
sale of non-core businesses. Upon completion of these restructuring activities
which were commenced in fiscal 1997, the Company expects net annualized savings
of approximately $50 million.
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.
-15-
<PAGE> 23
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.
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.
-16-
<PAGE> 24
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.
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
-17-
<PAGE> 25
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(TM) 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 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.
-18-
<PAGE> 26
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 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. The
Company's intelligent digital video systems are marketed under the brand name
Intellex. A new Intellex unit, designed by the Company and introduced in 1997,
won the 1997 "Judge's Choice" award of the Security Industry Association, an
association of manufacturers and distributors of security systems and services.
Candidates for the "Judge's Choice" award are judged on innovation, the value of
the problems solved and needs addressed, ease of product installation and
implementation, the number of product strengths and benefits and the value of
such benefits.
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(R), 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 -- i.e., "radio frequency
identification" 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
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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, 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.
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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 Ultra-Max. The broader utilization of
Ultra-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 companies, such as Avery Dennison (in
May 1997) and Wallace Computer Systems (in February 1997), to manufacture the
Company's Ultra-Strip labels. The Company believes that its licensing programs
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 programs 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
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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
Olympic history. A stated goal of the Olympic Committee for the 1996 Games was
to stage the "most secure games ever", and Sensormatic was designated the
official electronic security sponsor to the 1996 Games. Like other sponsors of
this event, Sensormatic paid a sponsorship fee, which included providing
equipment for the 1996 games. This sponsorship contributed to improving
worldwide brand recognition and highlighted the Company's capabilities in
commercial and industrial applications.
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 also has working relationships with other companies
developing RFID technologies, such as Texas Instruments and Micron
Communications, as part of its efforts to develop and/or market effective and
commercially feasible RFID products.
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 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.
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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 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 Ultra-Max
labels and tags are currently purchased from one or two suppliers. While there
are potential alternative sources of supply of such materials, the loss or
disruption of one or both of such existing suppliers could result in increased
costs or product shortages or otherwise materially adversely affect the
Company's business. The Company is seeking to develop additional 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
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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.
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.
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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.
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 summarizes all material provisions
of the Certificate of Designations and the Registration Rights Agreement, but it
does not summarize all of the provisions of such documents, which are filed as
exhibits to the Registration Statement of which this Prospectus forms a part and
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
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"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 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
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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."
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
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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 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
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<PAGE> 36
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).
"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
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<PAGE> 37
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 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
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<PAGE> 38
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 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,
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<PAGE> 39
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 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.
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<PAGE> 40
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
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
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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 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
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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.
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
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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 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. See "Description
of Preferred Stock."
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 May 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. As of May 31, 1998, there were no amounts outstanding under the
Revolving Credit Facility. 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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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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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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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
-42-
<PAGE> 50
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.
-43-
<PAGE> 51
THE SELLING SECURITYHOLDERS
The following table sets forth, as of July 17, 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
Beneficially Owned Owned After Beneficially Owned Owned After
Name of Selling Prior to This Offered This Offering Prior to This Offered This
Securityholder(1) Offering(2)(3) for Sale (2)(3) Offering (2) for Sale Offering(2)
- ------------------------------------------------------------------------------------------------------------------------------------
No. of % of
No. of % of Depositary Depositary
Shares Shares Shares Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aim Balanced Fund 4392 * 4392 0 160000 .0167 160000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Alexandra Global Investment
Fund 1 Ltd. 905 * 905 0 33000 * 33000 0
- ------------------------------------------------------------------------------------------------------------------------------------
American Investors Life
Insurance Company, Inc. (5) 823 * 823 0 30000 * 30000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Classic Convertible
Arbitrage Fund L.P. 3294 * 3294 0 120000 .0174 120000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Classic Convertible
Arbitrage Fund (Bermuda) L.P. 1784 * 1784 0 65000 * 65000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Associated Electric & Gas
Insurance Services Limited (6) 219 * 219 0 8000 * 8000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Bear, Stearns & Co. Inc. (7) 1098 * 1098 0 96700 .0140 96700 0
- ------------------------------------------------------------------------------------------------------------------------------------
Black Diamond Ltd. (8) 541 * 541 0 19725 * 19725 0
- ------------------------------------------------------------------------------------------------------------------------------------
Black Diamond Partners, L.P. 482 * 482 0 17558 * 17558 0
- ------------------------------------------------------------------------------------------------------------------------------------
BNP Arbitrage SNC (9) 278 * 278 0 10000 * 10000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Boston College Endowment Fund
(10) 81 * 81 0 2970 * 2970 0
- ------------------------------------------------------------------------------------------------------------------------------------
Calamos Convertible Fund (6) 1235 * 1235 0 45000 * 45000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Carrigaholt Capital (Bermuda)
L.P. 960 * 960 0 35000 * 35000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Champion International
Corporation Master Retirement
Trust (6) 1056 * 1056 0 38500 * 38500 0
- ------------------------------------------------------------------------------------------------------------------------------------
(The) Class 1C Company, Ltd. 960 * 960 0 35000 * 35000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Commonwealth Life Insurance
Company (Teamsters-Camden
Non-Enhanced) 1372 * 1372 0 50000 * 50000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Delta Airlines Master Trust (6) 1784 * 1784 0 65000 * 65000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG 37522 * 37522 0 1366800 .1981 1366800 0
- ------------------------------------------------------------------------------------------------------------------------------------
Double Black Diamond Offshore
LDC (8) 228 * 228 0 8318 * 8318 0
- ------------------------------------------------------------------------------------------------------------------------------------
(The) Dow Chemical Company
Employees' Retirement Plan (6) 1811 * 1811 0 66000 * 66000 0
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
6 1/2% Convertible Preferred Stock
- -----------------------------------------------------------------------------------------------------------------
Beneficially
Beneficially Owned Prior to Owned After
Name of Selling This Offering Offered for This Offering
Securityholder(1) (2)(4) Sale (2)(4)
- -----------------------------------------------------------------------------------------------------------------
No of.
Shares of % of
Preferred Preferred
Stock Stock
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aim Balanced Fund 16000 .0167 16000 0
- -----------------------------------------------------------------------------------------------------------------
Alexandra Global Investment
Fund 1 Ltd. 3300 * 3300 0
- -----------------------------------------------------------------------------------------------------------------
American Investors Life
Insurance Company, Inc. (5) 3000 * 3000 0
- -----------------------------------------------------------------------------------------------------------------
Argent Classic Convertible
Arbitrage Fund L.P. 12000 .0174 12000 0
- -----------------------------------------------------------------------------------------------------------------
Argent Classic Convertible
Arbitrage Fund (Bermuda) L.P. 6500 * 6500 0
- -----------------------------------------------------------------------------------------------------------------
Associated Electric & Gas
Insurance Services Limited (6) 800 * 800 0
- -----------------------------------------------------------------------------------------------------------------
Bear, Stearns & Co. Inc. (7) 9670 .0140 9670 0
- -----------------------------------------------------------------------------------------------------------------
Black Diamond Ltd. (8) 1972.5 * 1972.5 0
- -----------------------------------------------------------------------------------------------------------------
Black Diamond Partners, L.P. 1755.8 * 1755.8 0
- -----------------------------------------------------------------------------------------------------------------
BNP Arbitrage SNC (9) 1000 * 1000 0
- -----------------------------------------------------------------------------------------------------------------
Boston College Endowment Fund
(10) 297 * 297 0
- -----------------------------------------------------------------------------------------------------------------
Calamos Convertible Fund (6) 4500 * 4500 0
- -----------------------------------------------------------------------------------------------------------------
Carrigaholt Capital (Bermuda)
L.P. 3500 * 3500 0
- -----------------------------------------------------------------------------------------------------------------
Champion International
Corporation Master Retirement
Trust (6) 3850 * 3850 0
- -----------------------------------------------------------------------------------------------------------------
(The) Class 1C Company, Ltd. 3500 * 3500 0
- -----------------------------------------------------------------------------------------------------------------
Commonwealth Life Insurance
Company (Teamsters-Camden
Non-Enhanced) 5000 * 5000 0
- -----------------------------------------------------------------------------------------------------------------
Delta Airlines Master Trust (6) 6500 * 6500 0
- -----------------------------------------------------------------------------------------------------------------
Deutsche Bank AG 136680 .1981 136680 0
- -----------------------------------------------------------------------------------------------------------------
Double Black Diamond Offshore
LDC (8) 831.8 * 831.8 0
- -----------------------------------------------------------------------------------------------------------------
(The) Dow Chemical Company
Employees' Retirement Plan (6) 6600 * 6600 0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-44-
<PAGE> 52
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Depositary Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficially Beneficially
Beneficially Owned Owned After Beneficially Owned Owned After
Name of Selling Prior to This Offered This Offering Prior to This Offered This
Securityholder(1) Offering(2)(3) for Sale (2)(3) Offering (2) for Sale Offering(2)
- ------------------------------------------------------------------------------------------------------------------------------------
No. of % of
No. of % of Depositary Depositary
Shares Shares Shares Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Employers' Reinsurance Corp.
(10), (5) 726 * 726 0 26470 * 26470 0
-----------------------------------------------------------------------------------------------
823 * 823 0 30000 * 30000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Excelsior Value & Restructuring
Fund 6588 * 6588 0 240000 .0348 240000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies
Fund A-5 2049 * 2049 0 74650 .0108 74650 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Global Convertible Fund
A-5 2090 * 2090 0 76150 .0110 76150 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies
Fund II L.P. Series A-5I 170 * 170 0 6200 * 6200 0
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies
Fund II L.P. Series A-5M 172 * 172 0 6300 * 6300 0
- ------------------------------------------------------------------------------------------------------------------------------------
(The) Fondren Foundation (6) 71 * 71 0 2600 * 2600 0
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Investment
Management Corp. (5) 5078 * 5078 0 185000 .0268 185000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Heritage Indemnity Company (11) 823 * 823 0 30000 * 30000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Highbridge Capital Corp. (8) 36 * 36 0 1333 * 1333 0
- ------------------------------------------------------------------------------------------------------------------------------------
Highbridge Capital Corporation 3019 * 3019 0 110000 .0159 110000 0
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Securities Inc. #410 1921 * 1921 0 70000 .0101 70000 0
- ------------------------------------------------------------------------------------------------------------------------------------
KA Trading LP 407 * 407 0 14850 * 14850 0
- ------------------------------------------------------------------------------------------------------------------------------------
KA Management Ltd. 827 * 827 0 30150 * 30150 0
- ------------------------------------------------------------------------------------------------------------------------------------
Kettering Medical Center Funded
Depreciation Account (6) 82 * 82 0 3000 * 3000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Convertibles, L.P. 5627 * 5627 0 205000 .0297 205000 0
- ------------------------------------------------------------------------------------------------------------------------------------
LLT Limited (12) 131 * 131 0 4800 * 4800 0
- ------------------------------------------------------------------------------------------------------------------------------------
McMahan Securities Company, L.P. 1002 * 1002 0 36500 * 36500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Millennium Trading Co., L.P. 1372 * 1372 0 50000 * 50000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Modern Wood men of America (13) 1098 * 1098 0 40000 * 40000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Motors Insurance Corp. (5) 549 * 549 0 20000 * 20000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Museum of Fine Arts, Boston (10) 88 * 88 0 3230 * 3230 0
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire State Retirement
System (10) 455 * 455 0 16580 * 16580 0
- ------------------------------------------------------------------------------------------------------------------------------------
(The) Northwestern Mutual Life
Insurance Company 2745 * 2745 0 100000 .0145 100000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Convertible
Securities Fund-Bond Fund
Series 6176 * 6176 0 225000 .0326 225000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Orrington International Fund Ltd 274 * 274 0 10000 * 10000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Orrington Investments Limited
Partnership 411 * 411 0 15000 * 15000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Life Insurance Co. 1098 * 1098 0 40000 * 40000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Paloma Securities L.L.C. 12354 * 12354 0 450000 .0652 450000 0
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
6 1/2 Convertible Preferred Stock
- -----------------------------------------------------------------------------------------------------------------
Beneficially
Beneficially Owned Prior to Owned After
This Offering Offered for This Offering
(2)(4) Sale (2)(4)
- -----------------------------------------------------------------------------------------------------------------
No of.
Shares of % of
Preferred Preferred
Stock Stock
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employers' Reinsurance Corp.
(10), (5) 2647 * 2647 0
-----------------------------------------------------------------
3000 * 3000 0
- -----------------------------------------------------------------------------------------------------------------
Excelsior Value & Restructuring 24000 .0348 24000 0
Fund
- -----------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies
Fund A-5 7465 .0108 7465 0
- -----------------------------------------------------------------------------------------------------------------
Forest Global Convertible Fund
A-5 7615 .0110 7615 0
- -----------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies
Fund II L.P. Series A-5I 620 * 620 0
- -----------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies
Fund II L.P. Series A-5M 630 * 630 0
- -----------------------------------------------------------------------------------------------------------------
(The) Fondren Foundation (6) 260 * 260 0
- -----------------------------------------------------------------------------------------------------------------
General Motors Investment
Management Corp. (5) 18500 .0268 18500 0
- -----------------------------------------------------------------------------------------------------------------
Heritage Indemnity Company (11) 3000 * 3000 0
- -----------------------------------------------------------------------------------------------------------------
Highbridge Capital Corp. (8) 133.3 * 133.3 0
- -----------------------------------------------------------------------------------------------------------------
Highbridge Capital Corporation 11000 .0159 11000 0
- -----------------------------------------------------------------------------------------------------------------
HSBC Securities Inc. #410 7000 .0101 7000 0
- -----------------------------------------------------------------------------------------------------------------
KA Trading LP 1485 * 1485 0
- -----------------------------------------------------------------------------------------------------------------
KA Management Ltd. 3015 * 3015 0
- -----------------------------------------------------------------------------------------------------------------
Kettering Medical Center Funded
Depreciation Account (6) 300 * 300 0
- -----------------------------------------------------------------------------------------------------------------
Lipper Convertibles, L.P. 20500 .0297 20500 0
- -----------------------------------------------------------------------------------------------------------------
LLT Limited (12) 480 * 480 0
- -----------------------------------------------------------------------------------------------------------------
McMahan Securities Company, L.P. 3650 * 3650 0
- -----------------------------------------------------------------------------------------------------------------
Millennium Trading Co., L.P. 5000 * 5000 0
- -----------------------------------------------------------------------------------------------------------------
Modern Woodmen of America (13) 4000 * 4000 0
- -----------------------------------------------------------------------------------------------------------------
Motors Insurance Corp. (5) 2000 * 2000 0
- -----------------------------------------------------------------------------------------------------------------
Museum of Fine Arts, Boston (10) 323 * 323 0
- -----------------------------------------------------------------------------------------------------------------
New Hampshire State Retirement
System (10) 1658 * 1658 0
- -----------------------------------------------------------------------------------------------------------------
(The) Northwestern Mutual Life
Insurance Company 10000 .0145 10000 0
- -----------------------------------------------------------------------------------------------------------------
Oppenheimer Convertible
Securities Fund-Bond Fund
Series 22500 .0326 22500 0
- -----------------------------------------------------------------------------------------------------------------
Orrington International Fund Ltd 1000 * 1000 0
- -----------------------------------------------------------------------------------------------------------------
Orrington Investments Limited
Partnership 1500 * 1500 0
- -----------------------------------------------------------------------------------------------------------------
Pacific Life Insurance Co. 4000 * 4000 0
- -----------------------------------------------------------------------------------------------------------------
Paloma Securities L.L.C. 45000 .0652 45000 0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-45-
<PAGE> 53
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Depositary Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficially Beneficially
Beneficially Owned Owned After Beneficially Owned Owned After
Name of Selling Prior to This Offered This Offering Prior to This Offered This
Securityholder(1) Offering(2)(3) for Sale (2)(3) Offering(2) for Sale Offering(2)
- ------------------------------------------------------------------------------------------------------------------------------------
No. of % of
No. of % of Depositary Depositary
Shares Shares Shares Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Parker-Hannifin Corporation (10) 111 * 111 0 4070 * 4070 0
- ------------------------------------------------------------------------------------------------------------------------------------
Port Authority of Allegheny
County Retirement and
Disability Allowance Plan for
the Employees Represented by
Local 85 of the Amalgamated
Transit Union (6) 1276 * 1276 0 46500 * 46500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Promutual (10) 380 * 380 0 13860 * 13860 0
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Balanced Retirement Fund
(14) 238 * 238 0 8670 * 8670 0
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Convertible
Income-Growth Trust (14) 3247 * 3247 0 118300 .0171 118300 0
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Convertible
Opportunities and Income Trust
(14) 286 * 286 0 10440 * 10440 0
- ------------------------------------------------------------------------------------------------------------------------------------
R2 Investments, LDC 2402 * 2402 0 87500 .0127 87500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Idaho (5) 49 * 49 0 1800 * 1800 0
- ------------------------------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Oregon (5) 87 * 87 0 3200 * 3200 0
- ------------------------------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Utah (5) 30 * 30 0 1100 * 1100 0
- ------------------------------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Washington (5) 142 * 142 0 5200 * 5200 0
- ------------------------------------------------------------------------------------------------------------------------------------
Rhone-Poulenc Rorer Inc.
Pension Plan (10) 147 * 147 0 5370 * 5370 0
- ------------------------------------------------------------------------------------------------------------------------------------
RJR Nabisco, Inc. Defined
Benefit Master Trust (6) 796 * 796 0 29000 * 29000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Total Return
Fund (5) 329 * 329 0 12000 * 12000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Senvest International LLC 1647 * 1647 0 60000 * 60000 0
- ------------------------------------------------------------------------------------------------------------------------------------
SoundShore Partners L.P. 1372 * 1372 0 50000 * 50000 0
- ------------------------------------------------------------------------------------------------------------------------------------
SPT (6) 686 * 686 0 25000 * 25000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Susquehanna Capital Group 960 * 960 0 35000 * 35000 0
- ------------------------------------------------------------------------------------------------------------------------------------
UBS A.G., London Branch 2882 * 2882 0 105000 .0152 105000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Unifi, Inc. Profit Sharing Plan
and Trust (6) 164 * 164 0 6000 * 6000 0
- ------------------------------------------------------------------------------------------------------------------------------------
United Food and Commercial
Workers Local 1262 Employers
Pension Fund (6) 466 * 466 0 17000 * 17000 0
- ------------------------------------------------------------------------------------------------------------------------------------
University of Rochester (10) 88 * 88 0 3230 * 3230 0
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Dillon Read LLC 1081 * 1081 0 39400 * 39400 0
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Transactions Ltd. (8) 84 * 84 0 3066 * 3066 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total 138037 138037 5086090 73.71% 5086090 0
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
6 1/2% Convertible Preferred Stock
- ------------------------------------------------------------------------------------------------------------------
Beneficially
Beneficially Owned Prior to Owned After
This Offering Offered for This Offering
(2)(4) Sale (2)(4)
- ------------------------------------------------------------------------------------------------------------------
No of.
Shares of % of
Preferred Preferred
Stock Stock
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Parker-Hannifin Corporation (10) 407 * 407 0
- -----------------------------------------------------------------------------------------------------------------
Port Authority of Allegheny
County Retirement and
Disability Allowance Plan for
the Employees Represented by
Local 85 of the Amalgamated
Transit Union (6) 4650 * 4650 0
- -----------------------------------------------------------------------------------------------------------------
Promutual (10) 1386 * 1386 0
- -----------------------------------------------------------------------------------------------------------------
Putnam Balanced Retirement Fund (14) 867 * 867 0
- -----------------------------------------------------------------------------------------------------------------
Putnam Convertible
Income-Growth Trust (14) 11830 .0171 11830 0
- -----------------------------------------------------------------------------------------------------------------
Putnam Convertible
Opportunities and Income Trust
(14) 1044 * 1044 0
- -----------------------------------------------------------------------------------------------------------------
R2 Investments, LDC 8750 .0127 8750 0
- -----------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Idaho (5) 180 * 180 0
- -----------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Oregon (5) 320 * 320 0
- -----------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Utah (5) 110 * 110 0
- -----------------------------------------------------------------------------------------------------------------
Regence Blue Cross/Blue Shield
of Washington (5) 520 * 520 0
- -----------------------------------------------------------------------------------------------------------------
Rhone-Poulenc Rorer Inc.
Pension Plan (10) 537 * 537 0
- -----------------------------------------------------------------------------------------------------------------
RJR Nabisco, Inc. Defined
Benefit Master Trust (6) 2900 * 2900 0
- -----------------------------------------------------------------------------------------------------------------
Salomon Brothers Total Return
Fund (5) 1200 * 1200 0
- -----------------------------------------------------------------------------------------------------------------
Senvest International LLC 6000 * 6000 0
- -----------------------------------------------------------------------------------------------------------------
SoundShore Partners L.P. 5000 * 5000 0
- -----------------------------------------------------------------------------------------------------------------
SPT (6) 2500 * 2500 0
- -----------------------------------------------------------------------------------------------------------------
Susquehanna Capital Group 3500 * 3500 0
- -----------------------------------------------------------------------------------------------------------------
UBS A.G., London Branch 10500 .0152 10500 0
- -----------------------------------------------------------------------------------------------------------------
Unifi, Inc. Profit Sharing Plan
and Trust (6) 600 * 600 0
- -----------------------------------------------------------------------------------------------------------------
United Food and Commercial
Workers Local 1262 Employers
Pension Fund (6) 1700 * 1700 0
- -----------------------------------------------------------------------------------------------------------------
University of Rochester (10) 323 * 323 0
- -----------------------------------------------------------------------------------------------------------------
Warburg Dillon Read LLC 3940 * 3940 0
- -----------------------------------------------------------------------------------------------------------------
Worldwide Transactions Ltd. (8) 306.6 * 306.6 0
- -----------------------------------------------------------------------------------------------------------------
Total 508609 73.71% 508609
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-46-
<PAGE> 54
* Less than one percent. Based on an aggregate of 76,315,526 shares of
Common Stock outstanding on July 16, 1998 (of which 76,126,121 shares
are common stock which are not included in the Offering and 189,405
shares are restricted common stock) and 6,900,000 Depositary Shares and
690,000 shares of Preferred Stock outstanding on July 16, 1998.
(1) The names of additional Selling Securityholders may be provided
subsequent hereto pursuant to Rule 424(c) under the Securities Act.
(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.
(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.
(5) Salomon Brothers Asset Management Inc. acts as discretionary investment
adviser with respect to the Selling Securityholder and as such has
shared voting and investment power with respect to the Securities owned
by the Selling Securityholder.
(6) Calamos Asset Management, Inc. acts as investment manager with respect
to the Selling Securityholder and as such has shared voting and
investment power with respect to the Securities owned by the Selling
Securityholder.
(7) Bear Stearns & Co., Inc. provides investment banking services to the
Company and was one of four initial purchasers in a private placement
by the Company of the Securities. The Securities held by Bear, Stearns
& Co., Inc. were acquired from time to time after the initial placement
of the Securities in its capacity as a broker dealer or market maker.
Additionally, Bear Stearns & Co., Inc. has acted as financial advisor
in connection with the sale of certain businesses of the Company.
(8) Carlson Offshore Advisors, L.P., acts as investment advisor with
respect to the Selling Securityholder and as such has shared voting and
investment power with respect to the Securities owned by the Selling
Securityholder.
(9) Shares of Common Stock listed do not include 50,174 shares of Common
Stock which are not included in this Offering.
(10) The Putnam Advisory Company, Inc. acts as investment advisor with
respect to the Selling Securityholder and as such has shared voting and
investment power with respect to the Securities owned by the Selling
Securityholder.
(11) Cramblit & Carney, Inc. acts as investment advisor with respect to the
Selling Securityholder and as such has shared voting and investment
power with respect to the Securities owned by the Selling
Securityholder.
(12) Forest Investment Management L.P. acts as investment advisor with
respect to the Selling Securityholder and as such has shared voting and
investment power with respect to the Securities owned by the Selling
Securityholder.
(13) Shares of Common Stock listed do not include 55,957 shares of Common
Stock which are not included in this Offering.
(14) Putnam Investment Management, Inc. acts as investment advisor with
respect to the Selling Securityholder and as such has shared voting and
investment power with respect to the Securities owned by the Selling
Securityholder.
-47-
<PAGE> 55
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
-48-
<PAGE> 56
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.
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.
-49-
<PAGE> 57
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.............................................................4
USE OF PROCEEDS..........................................................9
SELECTED CONSOLIDATED FINANCIAL INFORMATION.............................10
COMPUTATION OF EARNINGS PER SHARE.......................................13
RATIO OF EARNINGS TO FIXED CHARGES......................................14
BUSINESS................................................................14
DESCRIPTION OF PREFERRED STOCK..........................................25
DESCRIPTION OF DEPOSITARY SHARES........................................32
DESCRIPTION OF CAPITAL STOCK............................................37
DESCRIPTION OF CERTAIN INDEBTEDNESS.....................................38
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................40
THE SELLING SECURITYHOLDERS.............................................44
PLAN OF DISTRIBUTION....................................................48
LEGAL MATTERS...........................................................49
EXPERTS.................................................................49
</TABLE>
<PAGE> 58
==================================
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 Preferred Stock
8,837,090 Shares of Common Stock
----------------------------------
PROSPECTUS
----------------------------------
July , 1998
==================================
<PAGE> 59
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......................................................... 40,000
Accounting fees and expenses.................................................... 30,000
Printing fees and expenses...................................................... 10,000
Miscellaneous................................................................... 4,661
--------
Total................................... $140,000
</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> 60
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> 61
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
Section 13 or section 15(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> 62
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 Amendment to
the 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
17th day of July, 1998.
SENSORMATIC ELECTRONICS CORPORATION
By /s/ ROBERT A. VANOUREK
-------------------------------------------
Robert A. Vanourek, President and Chief
Executive Officer
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; July 17, 1998
- -------------------------------------------------- Director (Principal executive officer)
Robert A. Vanourek
/s/ GARRETT A. PIERCE* Senior Vice President and Chief July 17, 1998
- -------------------------------------------------- Financial Officer (Principal financial
Garrett A. Pierce officer)
/s/ JEAN M. NELSON* Vice President and Treasurer July 17, 1998
- --------------------------------------------------
Jean M. Nelson
/s/ GREGORY C. THOMPSON* Vice President and Controller July 17, 1998
- -------------------------------------------------- (Principal accounting officer)
Gregory C. Thompson
/s/ RONALD G. ASSAF* Chairman of the Board July 17, 1998
- --------------------------------------------------
Ronald G. Assaf
/s/ THOMAS V. BUFFETT* Director July 17, 1998
- --------------------------------------------------
Thomas V. Buffett
/s/ TIMOTHY P. HARTMAN* Director July 17, 1998
- --------------------------------------------------
Timothy P. Hartman
/s/ JAMES E. LINEBERGER* Director July 17, 1998
- --------------------------------------------------
James E. Lineberger
/s/ J. RICHARD MUNRO* Director July 17, 1998
- --------------------------------------------------
J. Richard Munro
/s/ JOHN T. RAY, JR.* Director July 17, 1998
- --------------------------------------------------
John T. Ray, Jr.
/s/ ROBERT A. VANOUREK July 17, 1998
- --------------------------------------------------
* By Robert A. Vanourek, Attorney-in-Fact
</TABLE>
II-4
<PAGE> 63
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>
- -------------------------
* Previously Filed
<PAGE> 1
Exhibit 5.1
July 16, 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 July 16, 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 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 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-53457) and related
Prospectus of Sensormatic Electronics Corporation for the registration of
6,900,000 Depositary 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
July 17, 1998
