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Exhibit 4
FIRST AMENDMENT TO NOTE AGREEMENT
FIRST AMENDMENT, dated as of October 31, 1997, to the Note
Agreement, dated as of March 29, 1996, (the "Note Agreement") between
SENSORMATIC ELECTRONICS CORPORATION (the "Company") and the Purchasers parties
thereto, in respect of the Company's $230,000,000 principal amount 7.74% Senior
Notes due March 29, 2006, $50,000,000 principal amount 7.11% Senior Notes due
March 29, 2001, and $70,000,000 principal amount Senior Notes due March 29,
2000.
WHEREAS, the Company has requested certain amendments to the
Note Agreement; and
WHEREAS, the holders of the Notes (as defined in the Note
Agreement) are willing to agree to such amendments on the terms and conditions
set forth herein;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties, the
Company and the holders of the Notes hereby agree as follows:
A. Certain Defined Terms.
Except as expressly defined in this First Amendment,
capitalized terms defined in the Note Agreement shall have their respective
meanings as defined therein when used in this First Amendment.
B. Amendments to Note Agreement.
Effective upon (i) the execution and delivery of this First
Amendment by holders of at least 66-2/3% in aggregate principal amount of the
Notes and (ii) the approval by the Company's Board of Directors (or a committee
thereof) of the terms of the Class Action Settlement (as herein defined), the
Note Agreement is hereby amended as follows:
1. At the end of Section 1 of the Note Agreement, there
shall be added a new Section 1.3 as follows:
1.3 Certain Payments. In consideration of the
agreement of the holders of the Notes to enter into the First
Amendment dated as of October 31, 1997, to this Agreement, the
Company agrees to make to the holder of each Note payments,
from the date on which such First Amendment becomes effective
by its terms to but not including the earliest of (i) the
maturity date for such Note, (ii) the date of repayment or
prepayment in full of such Note in accordance with this
Agreement, or (iii) the date on which the Debt Rating (as
hereinafter defined) is changed to BBB- or higher (the
earliest such date being called the "Termination
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Date"). Such payments shall be calculated on the outstanding
principal amount of each Note, at the rate per annum set forth
in the following table with respect to such Note:
For each 7.74% Senior Note
due March 29, 2006 0.30%
For each 7.11% Senior Note
due March 29, 2001 0.23%
For each 6.99% Senior Note
due March 29, 2000 0.22%,
and shall be computed on the basis of a 360-day year of twelve
30-day months, payable on March 30 and September 30 in each
year, commencing March 30, 1998, and on the Termination Date.
Such payments shall be made in lawful money of the United
States of America in the manner and at the place provided with
respect to interest on such Note in Section 2.4 of this
Agreement.
2. In Section 5.1 of the Note Agreement, the definition
of "Consolidated Net Worth" shall be amended to read in its entirety as follows:
Consolidated Net Worth. The consolidated
stockholders' equity of the Company and its Subsidiaries
determined in accordance with generally accepted accounting
principles; provided, that solely for purposes of calculating
compliance with the financial covenants set forth in Sections
7.2 and 7.3, the Shareholder Litigation Charge, to the extent
deducted as a charge in arriving at Consolidated Net Worth,
shall be added back to Consolidated Net Worth.
3. In Section 5.1 of the Note Agreement, there shall be
added the following new definitions in the appropriate alphabetical position:
Class Action Settlement. The settlement or any
proposed settlement of the shareholders' class actions filed
in 1995 and consolidated before the Xxx. Xxxxxxx Xxxxx, United
States District Judge for the United States District Court for
the Southern District of Florida.
Consolidated Net Total Interest Expense. For any
period, the sum of (a) the aggregate amount of interest
expense in respect of all Indebtedness of the Company and its
Subsidiaries for such period on a consolidated basis
determined in accordance with generally accepted accounting
principles (including, without limitation, to the extent such
items are included in interest expense under generally
accepted accounting principles, all non-cash interest
payments, the
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interest portion of any deferred payment obligations and the
interest component of Capitalized Lease obligations), minus
(b) the aggregate amount of all interest income of the Company
and its Subsidiaries for such period on a consolidated basis
determined in accordance with generally accepted accounting
principles.
CTA. Each currency translation adjustment that
results in a change (whether positive or negative) in the
foreign currency adjustment account balance which the Company
records as an equity account on its balance sheet pursuant to
generally accepted accounting principles.
Debt Rating. The rating of the Company's public
unsecured long-term senior debt, without third party credit
enhancement, issued by S&P or any Successor Rating Agency;
provided, that until such time as the Company receives such a
rating on such public unsecured long-term senior debt, the
Company's corporate credit rating by S&P or such Successor
Rating Agency shall apply. In the event that S&P or such
Successor Rating Agency changes its debt rating designations,
definitions or symbols, the Company and holders of at least
66- 2/3% in aggregate principal amount of the Notes then
outstanding shall agree, in good faith, as to the exact
application of such new debt rating terminology to this
Agreement, taking into account the explanation of such new
rating terminology by S&P or such Successor Rating Agency, as
the case may be, and its comparability to the Debt Rating in
effect immediately prior thereto.
EBIT. With respect to any period, an amount equal to
Consolidated Net Income for such period after eliminating
therefrom, without duplication, (i) all extraordinary items of
income or expense for such period, (ii) the Company's
September 30, 1997 restructuring charge and (iii) the
Shareholder Litigation Charge, plus, to the extent otherwise
deducted in arriving at such Consolidated Net Income and
without duplication, (a) income tax expense for such period
determined in accordance with generally accepted accounting
principles and (b) Consolidated Net Total Interest Expense for
such period.
Interest Coverage Ratio. As at any date of
determination, the ratio of (a) EBIT of the Company and its
Subsidiaries on a consolidated basis for the Reference Period
ending on such date, to (b) Consolidated Net Total Interest
Expense for such Reference Period.
Reference Period. Each period of four consecutive
complete fiscal quarters of the Company, commencing with the
four-quarter period ending on June 30, 1998.
S&P. Standard & Poor's Ratings Services, a division
of The XxXxxx-Xxxx Companies, Inc., or any successor thereto.
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Shareholder Litigation Charge. The after-tax charge
taken by the Company on or before December 31, 1997,
associated with the Class Action Settlement and in accordance
with generally accepted accounting principles; provided, that
solely for purposes of calculating compliance with the
financial covenants set forth in Sections 7.1, 7.2 and 7.3,
such charge shall be deemed not to exceed, in the aggregate,
the excess of (a) $40,000,000 over (b) to the extent not
deducted from such charge under generally accepted accounting
principles, the aggregate amount of all recoveries, by
assignment or otherwise, from insurance (net of all taxes and
expenses reasonably incurred in connection with such
recoveries) with respect to the Class Action Settlement.
Successor Rating Agency. Any rating service or
services other than S&P as the Company may designate from time
to time with the consent of holders of at least 66-2/3% in
aggregate principal amount of the Notes then outstanding.
4. Section 7.1 of the Note Agreement shall be amended to
read in its entirety as follows:
7.1 Net Worth. The Company will not permit at any
time its Consolidated Net Worth to be less than the sum of (i)
$730,000,000 less the Shareholder Litigation Charge, plus (a)
if the date of determination is any day during the period from
and including January 1, 1997 through June 30, 1998 ("Period
No. 1"), 100% of the aggregate net CTA from the first day of
Period No. 1 through such date of determination; (b) if the
date of determination is any day during the period from and
including July 1, 1998 through June 30, 1999 ("Period No. 2"),
the sum of 100% of the aggregate net CTA for Period No. 1 plus
75% of the aggregate net CTA from the first day of Period No.
2 through such date of determination; and (c) if the date of
determination is any day during the period commencing on or
after July 1, 1999 ("Period No. 3"), the sum of 100% of the
aggregate net CTA for Period No. 1, plus 75% of the aggregate
net CTA for Period No. 2, plus 50% of the aggregate net CTA
during the period from and including the first day of Period
No. 3 through the date of determination, plus (ii) the
cumulative sum of 50% of Consolidated Net Income (without
reduction for any net losses) for each completed fiscal year
of the Company ending after June 30, 1997 and on or before the
date 120 days prior to the date of determination, plus (iii)
for the then current fiscal year of the Company, the
cumulative sum of 50% of Consolidated Net Income (without
reduction for any net losses) from the beginning of such year
to the last day of the fiscal quarter of the Company most
recently ended as of the date 60 days prior to the date of
determination.
5. At the end of Section 7 of the Note Agreement there
shall be added a new Section 7.9 as follows:
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7.9 Interest Coverage Ratio. The Company will not, as
of the end of any Reference Period ending on any date set
forth in the table below, permit the Interest Coverage Ratio
for such Reference Period to be less than the ratio set forth
opposite such date in such table:
Reference Period Ending Date Ratio
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June 30, 1998 1.70:1.00
September 30, 1998 1.70:1.00
December 31, 1998 1.70:1.00
March 31, 1999 1.90:1.00
June 30, 1999 1.90:1.00
Each fiscal quarter-end date
after June 30, 1999 2.00:1.00;
provided, that the foregoing covenant shall not apply to any
Reference Period ending on any date set forth above if, at the
close of business on such date, the Debt Rating is BBB- or
higher.
6. References in the Note Agreement to "this Agreement",
and the words "hereof", "herein", "hereto" and the like (when such words refer
to the Note Agreement as whole and not simply to any individual provision
thereof), shall be deemed to refer to the Note Agreement as amended by this
First Amendment.
C. Representations and Warranties; Covenant.
1. The Company hereby represents and warrants as
follows:
This First Amendment has been duly authorized on the part of
the Company, and this First Amendment, the Note Agreement as amended hereby, and
the Notes constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except that the enforcement of this First Amendment, the Note Agreement or the
Notes may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of the rights of creditors of by equitable principles,
regardless of whether enforcement is sought in equity or at law. The compliance
by the Company with all of the provisions of this First Amendment, the Note
Agreement as amended hereby, and the Notes (i) are within the corporate powers
of the Company, (ii) have been duly authorized by proper corporate action, (iii)
are legal and will not violate any provisions of any law or regulation or order
of any court, governmental authority or agency, and (iv) will not result in any
breach of any of, or constitute a default under, or result in the creation of
any Lien on any property of the Company or any Material Subsidiary under the
provisions of, any charter document, by-law, loan agreement or other agreement
or instrument relating to Indebtedness of the Company or any
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Material Subsidiary to which the Company or any Material Subsidiary is a party
or by which any of them or their property may be bound. No event has occurred
and no condition exists which, upon the effectiveness of this First Amendment,
would constitute a Default or an Event of Default under the Note Agreement as
amended hereby.
2. The Company hereby agrees that, promptly after the Class
Action Settlement has been executed by the parties thereto and approved by the
court, the Company will deliver to each holder of Notes an Officer's Certificate
to that effect.
D. Miscellaneous.
1. Except as expressly modified by this First Amendment,
the Note Agreement shall remain unmodified and in full force and effect.
2. THIS FIRST AMENDMENT AND THE NOTE AGREEMENT AS
AMENDED HEREBY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
3. The headings of the sections and subsections of this
First Amendment are inserted for convenience only and do not constitute part of
this Agreement. This First Amendment expresses the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior
understandings, whether oral or written, with respect to such subject matter.
4. This First Amendment may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument, and it
shall not be necessary in making proof this First Amendment to produce or
account for more than one such counterpart or reproduction thereof permitted by
Section 11.3 of the Note Agreement.
IN WITNESS WHEREOF, the Company and the holders of the Notes
have caused this First Amendment to be executed and delivered by their
respective officer or officers thereunto duly authorized.
SENSORMATIC ELECTRONICS
CORPORATION
By:
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Title:
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XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK as Trustee
of a Commingled Pension Fund
By:
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Title:
X.X. XXXXXX INVESTMENT
MANAGEMENT INC. as Investment
Manager for All Institutional Investors for
which it is acting under the Note Agreement
By:
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Title:
XXXXXX GUARANTY TRUST COMPANY OF NEW YORK as
Investment Manager for All Institutional
Investors for which it is acting under
the Note Agreement
By:
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Title:
8
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:
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Title:
PRUCO LIFE INSURANCE COMPANY
By:
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Title:
9
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
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Title:
10
CONNECTICUT GENERAL LIFE
By: CIGNA Investments, Inc.
By:
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Title:
CONNECTICUT GENERAL LIFE
under the Note Agreement
By: CIGNA Investments, Inc.
By:
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Title:
CENTURY INDEMNITY COMPANY
By: CIGNA Investments, Inc.
By:
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Title:
LIFE INSURANCE COMPANY OF
By: CIGNA Investments, Inc.
By:
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Title:
11
TEACHERS INSURANCE AND
By:
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Title:
12
THE EQUITABLE LIFE ASSURANCE
By:
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Title:
13
THE MINNESOTA MUTUAL LIFE
By: MIMLIC Asset Management Company
By:
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Title:
14
THE OHIO NATIONAL LIFE
By:
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Title:
00
XXXXXX XXXXXXX XX XXXXXXX
By:
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Title:
16
PRINCIPAL MUTUAL LIFE
By:
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Title:
By:
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Title:
17
NATIONWIDE LIFE AND ANNUITY
By:
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Title:
NATIONWIDE LIFE INSURANCE
By:
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Title:
18
SUNLIFE ASSURANCE COMPANY OF
By: By:
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Title:
SUNLIFE ASSURANCE COMPANY OF
By: By:
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Title:
19
METROPOLITAN INSURANCE AND
By:
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Title:
METROPOLITAN INSURANCE AND
By:
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Title:
20
GENERAL AMERICAN LIFE
By:
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Title:
21
XXXXXXX AND COMPANY
By:
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Title:
22
WEST COAST LIFE INSURANCE
COMPANY
By:
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Title:
