AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1995
FILE NO. 33-57509
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2297459
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
-------------------
ONE TYCO PARK
EXETER, NEW HAMPSHIRE 03833
(603) 778-9700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------
IRVING GUTIN
SENIOR VICE PRESIDENT
TYCO INTERNATIONAL LTD.
ONE TYCO PARK
EXETER, NEW HAMPSHIRE 03833
(603) 778-9700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
COPIES TO:
<TABLE>
<S> <C> <C>
HOWARD A. SOBEL, ESQ. VALERIE FORD JACOB, ESQ. DAVID A. BRITTENHAM, ESQ.
KRAMER, LEVIN, NAFTALIS, FRIED, FRANK, HARRIS, DEBEVOISE & PLIMPTON
NESSEN, KAMIN & FRANKEL SHRIVER & JACOBSON 875 THIRD AVENUE
919 THIRD AVENUE ONE NEW YORK PLAZA NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10004 (212) 909-6000
(212) 715-9100 (212) 859-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, 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, check the following box. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value
$.50.................. 8,700,000 $49.03 $426,561,000 $147,100(1)
</TABLE>
(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee. A registration fee in the amount of $134,655 was
previously paid on January 30, 1995 relating to 7,948,772 shares of Common
Stock. An additional $12,700 is being paid herewith.
-------------------
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement contains a prospectus relating to a public
offering in the United States and Canada (the "U.S. Offering") of an aggregate
of 6,226,297 shares of Common Stock, par value $.50 per share (the "Common
Stock"), of Tyco International Ltd. (the "Company" or "Tyco"), together with
separate prospectus pages relating to a concurrent offering outside the United
States and Canada (the "International Offering") of an aggregate of 1,556,574
shares of Common Stock. The complete prospectus for the U.S. Offering follows
immediately after this Explanatory Note. After such prospectus are the alternate
pages for the International Offering: a front cover page, a "Certain United
States Tax Consequences to Non-U.S. Holders of Common Stock" section, an
"Underwriting" section, a "Validity of Shares" section, an "Experts" section and
a back cover page. All other pages of the prospectus for the U.S. Offering are
to be used for both the U.S. Offering and the International Offering. The
complete prospectus for each of the U.S. Offering and the International Offering
in the forms in which they are to be used after effectiveness will be filed with
the Securities and Exchange Commission pursuant to Rule 424(b) and Item 101(a)
of Regulation S-T.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 23, 1995
PROSPECTUS
7,782,871 SHARES
TYCO INTERNATIONAL LTD.
COMMON STOCK
-------------------
Of the 7,782,871 shares of Common Stock being offered, 6,226,297 shares are
being offered initially in the United States and Canada by the U.S. Underwriters
and 1,556,574 shares are being offered initially outside the United States and
Canada by the International Managers. See "Selling Shareholders" and
"Underwriting."
Of the 7,782,871 shares of Common Stock being offered, 7,590,373 shares are
being sold by certain Selling Shareholders of the Company, 147,930 shares are
being sold upon the exercise of Warrants and 44,568 shares are being sold upon
the exercise of Reallocation Rights. In connection with the Offerings, certain
Selling Shareholders will sell to the Underwriters their Warrants and
Reallocation Rights, and the Underwriters will exercise such Warrants and
Reallocation Rights in order that the underlying shares of Common Stock may be
sold in the Offerings. The Company will not receive any of the proceeds from the
sale of the shares offered hereby or from the exercise of the Reallocation
Rights, although it will receive $11.94 per share (or an aggregate of $852,397)
in connection with the exercise of A Warrants and $15.92 per share (or an
aggregate of $1,218,517) in connection with the exercise of B Warrants. See "Use
of Proceeds."
The Common Stock is traded on the New York Stock Exchange under the symbol
"TYC." On February 22, 1995, the last reported sale price of the Common Stock,
as reported on the New York Stock Exchange, was $50.25 per share. See "Price
Range of Common Stock and Dividends."
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE><CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) SHAREHOLDERS(2)(3)
<S> <C> <C> <C>
Per Share........................... $ $ $
Total(4)............................ $ $ $
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) The Company has agreed to pay expenses related to the Offerings, estimated
at $697,855.
(3) Does not include $852,397 ($11.94 per share) to be paid to the Company by
the Underwriters upon exercise of A Warrants to be purchased by the
Underwriters from certain of the Selling Shareholders and $1,218,517 ($15.92
per share) to be paid to the Company by the Underwriters upon exercise of B
Warrants being purchased by the Underwriters from certain of the Selling
Shareholders. Also does not include $532,142 in respect of the exercise
price of the Reallocation Rights, a portion of which is payable to certain
Selling Shareholders.
(4) Certain of the Selling Shareholders have granted the U.S. Underwriters and
the International Managers options, exercisable within 30 days after the
date hereof, to purchase 609,927 and 152,482 additional shares of Common
Stock, respectively, to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Selling Shareholders will be $ , $ and $ ,
respectively. See "Underwriting."
-------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares will be made in New York, New York, on or about March ,
1995.
-------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
-------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1995.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PHOTOS FOR INSIDE FRONT COVER TO S-3/A
UPPER LEFT HAND CORNER
FIRE PROTECTION
LOWER LEFT-HAND CORNER
ELECTRICAL AND ELECTRONIC COMPONENTS
UPPER RIGHT-HAND CORNER
FLOW CONTROL
LOWER RIGHT-HAND CORNER
DISPOSABLE AND SPECIALTY PRODUCTS
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), all of which may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, 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, Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such
material can also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005, where the Common Stock is listed.
This Prospectus constitutes part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act, with respect
to the shares of Common Stock offered in the Offerings. This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to the Company and the Common Stock. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, where a copy of such document has been filed as an exhibit to the
Registration Statement or otherwise has been filed with the Commission,
reference is made to the copy of the applicable document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994, and December 31, 1994; The Company's Quarterly Report on
Form 10-Q/A for the quarter ended December 31, 1994;
(c) The Company's Current Report on Form 8-K, dated July 26, 1994;
(d) The Company's Current Report on Form 8-K, dated August 17, 1994, and
the Company's Current Report on Form 8-K/A, dated September 19, 1994;
(e) The Company's Current Report on Form 8-K, dated October 28, 1994,
and the Company's Current Reports on Form 8-K/A, dated November 1, 1994,
November 2, 1994 and November 3, 1994; and
(f) The Company's Current Report on Form 8-K, dated January 10, 1995.
All documents filed by the Company with the Commission pursuant to Sections
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 Common Stock made hereby
shall be deemed to be incorporated by reference into this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein 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.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, including any beneficial owner of Common Stock,
upon the written or oral request of any such person, a copy of any and all of
the documents that have been or may be incorporated by reference herein other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Such requests should be directed
to Irving Gutin, Senior Vice President, Tyco International Ltd., One Tyco Park,
Exeter, New Hampshire 03833 (telephone: (603) 778-9700).
3
<PAGE>
PROSPECTUS SUMMARY
THE COMPANY
Tyco International Ltd. ("Tyco" or the "Company"), through its divisions and
operating subsidiaries, is the world's largest manufacturer and provider of fire
protection systems and maintains strong leadership positions in each of its
segments of its respective markets for flow control products, electrical and
electronic components and disposable medical supplies and other specialty
products. The disposable and specialty products segment includes the results of
Kendall International, Inc. ("Kendall"), which was acquired through a merger
with a wholly-owned subsidiary of Tyco on October 19, 1994 (the "Merger") that
has been accounted for using the pooling of interests method of accounting. The
Company, which operates in more than 50 countries around the world, had combined
sales of over $4 billion during its fiscal year ended June 30, 1994.
The Company's business strategy is to seek to establish and maintain a
leadership position in each of the markets it serves. The Company endeavors to
achieve this objective by attempting to be a low-cost, high-quality producer of
its products and through the acquisition of complementary product lines that can
be effectively integrated into the Company's manufacturing and distribution
operations. The goal of this strategy is to create value for the Company's
shareholders by increasing the Company's earnings per share.
The Company is a Massachusetts corporation. Its executive offices are
located at One Tyco Park, Exeter, New Hampshire 03833, and its telephone number
is (603) 778-9700.
THE OFFERINGS
The offering of 6,226,297 shares of common stock, par value $.50 per share,
of the Company (the "Common Stock") in the United States and Canada (the "U.S.
Offering") and the offering of 1,556,574 shares of Common Stock outside the
United States and Canada (the "International Offering") are collectively
referred to herein as the "Offerings." The Common Stock is being sold by certain
shareholders who received shares of the Company's Common Stock, or rights to
acquire the same, as a result of the Merger. The number of outstanding shares of
Common Stock was 75,183,309 as of February 22, 1995.
Of the 7,782,871 shares of Common Stock being offered, 7,590,373 shares are
being sold by certain Selling Shareholders (as defined herein) of the Company,
147,930 shares are being sold upon the exercise of Warrants (as defined herein)
and 44,568 shares are being sold upon the exercise of Reallocation Rights (as
defined herein). The Underwriters will exercise such Warrants and Reallocation
Rights in order that the underlying shares of Common Stock may be sold in the
Offerings. Upon exercise of such Warrants, the Underwriters will deliver to the
Company the Warrant exercise price of $11.94 per share in respect of A Warrants
to acquire 71,390 shares (or an aggregate of $852,397) and $15.92 per share in
respect of B Warrants to acquire 76,540 shares (or an aggregate of $1,218,517),
which the Company will use for working capital and general corporate purposes.
The Company will not receive any of the proceeds of the Offerings from the sale
of Common Stock or from the exercise of the Reallocation Rights. See "Use of
Proceeds", "Description of Capital Stock--Warrants", --"Reallocation Rights" and
- --"Registration Rights Agreement." In addition, holders of Common Stock (other
than Common Stock issued upon exercise of Warrants or delivered upon exercise of
Reallocation Rights subsequent to the Merger, and other than Common Stock issued
or delivered upon exercise of Warrants and Reallocation Rights to be sold to the
Underwriters) participating in the Offerings have granted options to the
Underwriters, exercisable within 30 days after the date hereof, to acquire an
aggregate of 762,409 shares of Common Stock solely to cover over-allotments, if
any. Unless otherwise indicated, all information herein assumes that the
Underwriters have not exercised their over-allotment options.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth summary consolidated financial data of the
Company. The summary consolidated financial data should be read in conjunction
with the audited and unaudited Consolidated Financial Statements of the Company
and the Notes thereto, appearing elsewhere in this Prospectus, and the
information contained in "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Operating
Results."
<TABLE><CAPTION>
SIX MONTHS ENDED DECEMBER
31, FISCAL YEAR ENDED JUNE 30,
-------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................. $2,151,895 $1,997,671 $4,076,383 $3,919,357
Costs and Expenses:
Cost of sales..................... 1,572,626 1,478,851 3,003,194 2,909,947
Non-recurring inventory charge.... -- -- -- 22,485(6)
Selling, general and
administrative.................. 354,111 336,163 682,568 682,520
Merger and transaction related
costs........................... 37,170(1) -- -- --
Restructuring and severance
charges......................... -- -- -- 39,325(6)
Interest.......................... 31,703 33,320 62,431 85,785
---------- ---------- ---------- ----------
1,995,610 1,848,334 3,748,193 3,740,062
---------- ---------- ---------- ----------
Income before income taxes,
extraordinary item and
cumulative effect of accounting
changes......................... 156,285 149,337 328,190 179,295
Income taxes...................... (76,276) (63,867) (138,999) (84,837)
---------- ---------- ---------- ----------
Income before extraordinary item
and cumulative effect of
accounting changes.............. 80,009 85,470 189,191 94,458
Extraordinary item, net of tax
benefit......................... (2,600)(2) -- -- (2,816)(2)
Cumulative effect of accounting
changes......................... -- -- -- (71,040)
---------- ---------- ---------- ----------
Net income........................ $ 77,409 $ 85,470 $ 189,191 $ 20,602
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income Per Share:
Income before extraordinary item
and cumulative effect of
accounting changes.............. $ 1.07 $ 1.16 $ 2.56 $ 1.30
Extraordinary item................ (0.03) -- -- (0.04)
Cumulative effect of accounting
changes......................... -- -- -- (0.98)
---------- ---------- ---------- ----------
Net income........................ $ 1.04 $ 1.16 $ 2.56 $ 0.28
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Cash dividends per common
share(3)........................ $ 0.20 $ 0.20 $ 0.40 $ 0.38
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
5
<PAGE>
<TABLE><CAPTION>
SIX MONTHS ENDED DECEMBER 31, FISCAL YEAR ENDED JUNE 30,
---------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (at end of
period):
Working capital................... $ 396,874 $ 329,918 $ 341,154
Total assets...................... 3,186,469 3,140,821 3,164,966
Long-term debt.................... 563,467 588,491 812,585
Shareholders' equity.............. 1,486,833 1,367,026 1,138,786
SEGMENT DATA:
Sales:
Fire Protection................. $ 801,944 $ 763,999 $1,525,906 $1,526,079
Flow Control Products........... 480,974 431,789 914,430 806,915
Electrical and Electronic
Components.................... 205,638 214,578 436,884 413,300
Disposable and Specialty
Products...................... 663,339 587,305 1,199,163 1,173,063
---------- ---------- ---------- ----------
$2,151,895 $1,997,671 $4,076,383 $3,919,357
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income before income taxes,
extraordinary item and
cumulative effect of accounting
changes:
Fire Protection................. $ 39,198 $ 34,269 $ 70,171 $ 43,190(6)
Flow Control Products........... 39,511 33,936 74,125 44,638(6)
Electrical and Electronic
Components.................... 36,595 36,094 72,510 68,401(6)
Disposable and Specialty
Products...................... 121,400 86,287 191,669 126,280(6)
---------- ---------- ---------- ----------
Income from operations............ 236,704 190,586 408,475 282,509
Interest expense................ (31,703) (33,320) (62,431) (85,785)
Corporate and other amounts..... (48,716)(4) (7,929) (17,854)(5) (17,429)(6)
---------- ---------- ---------- ----------
$ 156,285 $ 149,337 $ 328,190 $ 179,295
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- ------------
(1) Results for the six months ended December 31, 1994 include a charge of $31.2
million after-tax ($0.42 per share) for fees and expenses related to the
Merger and integration of Kendall and Tyco. See Note 1 to the unaudited
Consolidated Financial Statements. Excluding the $31.2 million after-tax
charge, income before extraordinary item would have been $111.2 million, or
$1.49 per share, for the six months ended December 31, 1994.
(2) Results for the six months ended December 31, 1994 include an extraordinary
charge of $2.6 million after-tax ($0.03 per share) resulting from the early
extinguishment of $100 million of Kendall debt. See Note 3 to the unaudited
Consolidated Financial Statements. During fiscal 1993, Kendall refinanced
certain notes and borrowings outstanding under its bank facilities. In
connection with the refinancing, the Company recorded an extraordinary
charge of $2.8 million after-tax ($0.04 per share). See Note 5 to the
Consolidated Financial Statements.
(3) Cash dividends were paid by Tyco in fiscal 1993, 1994 and 1995. Kendall did
not pay dividends to its shareholders during these periods.
(4) Results for the six months ended December 31, 1994 include pre-tax charges
of $37.2 million for merger and transaction related costs. See Note 1 to the
unaudited Consolidated Financial Statements.
(5) Results for fiscal 1994 include expenses of $4.1 million related to the
accounts receivable program, which cost would have been reflected as
interest expense under previous financing arrangements. See Note 6 to the
Consolidated Financial Statements.
(6) Results for fiscal 1993 include pre-tax restructuring and severance charges
of $16.0 million, $19.0 million, $0.7 million, and $3.6 million, for Fire
Protection, Flow Control Products, Electrical and Electronic Components and
Corporate, respectively, and a non-recurring inventory charge of $22.5
million before and after-tax in the Disposable and Specialty Products
segment. Excluding the $49.8 million after-tax charges, income before
extraordinary item would have been $144.3 million, or $1.99 per share, for
fiscal 1993.
6
<PAGE>
THE COMPANY
The Company, through its divisions and operating subsidiaries, is the
world's largest manufacturer and provider of fire protection systems and
maintains strong leadership positions in each of its segments of its respective
markets for flow control products, electrical and electronic components and
disposable medical supplies and other specialty products. The disposable and
specialty products segment includes the results of Kendall, which was acquired
through the Merger that has been accounted for using the pooling of interests
method of accounting. The Company, which operates in more than 50 countries
around the world, had combined sales of over $4 billion during its fiscal year
ended June 30, 1994. See Notes to the Consolidated Financial Statements for
certain consolidated segment and geographic financial data relating to the
Company's businesses.
The Company's business strategy is to seek to establish and maintain a
leadership position in each of the markets it serves. The Company endeavors to
achieve this objective by attempting to be a low-cost, high-quality producer of
its products and through the acquisition of complementary product lines that can
be effectively integrated into the Company's manufacturing and distribution
operations. The goal of this strategy is to create value for the Company's
shareholders by increasing the Company's earnings per share.
The Company reviews acquisition opportunities in the ordinary course of
business, some of which may be material and some of which are currently under
investigation, discussion or negotiation. There can be no assurance that any of
such acquisitions will be consummated.
FIRE PROTECTION
The Company engages in fire protection contracting and in the manufacture
and distribution of fire protection products and equipment.
The Company's Grinnell subsidiary ("Grinnell"), whose business was founded
in 1850, is the largest installer, manufacturer and supplier of automatic
sprinkler and fire protection and detection systems in North America. In August
1990, the Company acquired the business and substantially all the operating
assets of Wormald International Limited ("Wormald"). Wormald, whose business was
founded in 1889, operates as a major fire protection company with contracting,
manufacturing and distribution operations throughout Western Europe and
Asia-Pacific. The combination of Grinnell and Wormald has resulted in creating
the largest fire protection company in the world, forming a network of over 200
offices on five continents.
Contracting
As the largest fire protection contractor in the world, the Company designs,
fabricates, installs and services automatic sprinkler and fire suppression
systems in buildings and other installations. Grinnell's fire protection
contracting business in North America operates through a network of offices
located in the United States, Canada, Mexico and Puerto Rico. Internationally,
the Company engages in fire protection contracting through a network of offices
in the United Kingdom, Ireland, France, Spain, Belgium, the Netherlands,
Germany, Italy, Austria, Switzerland, Denmark, Norway, Sweden, Finland, United
Arab Emirates, Saudi Arabia, Australia, New Zealand, Hong Kong, Singapore,
Taiwan, Malaysia, Thailand and Indonesia.
The Company installs fire protection systems in both new and existing
structures. Typically, the contracting businesses bid on contracts for fire
protection installation which are let by owners, architects, construction
engineers and mechanical or general contractors. In recent years, the business
of retrofitting existing buildings in the United States and Canada has grown as
a result of local and state legislation requiring installation of fire
protection systems and the availability of reduced insurance premiums on
structures with automatic sprinkler systems. The retrofitting and servicing of
fire
7
<PAGE>
protection systems in existing buildings represented approximately 60% of
Grinnell's North American contracting sales in each of fiscal 1994, 1993 and
1992.
A majority of the fire suppression systems installed by the Company are
water-based, but the Company is also the world's leader in providing custom
designed special hazard fire protection systems which incorporate various
specialized non-water agents such as foams, dry chemicals and gases. Systems
using agents other than water are suited for fire protection in certain
manufacturing, power generation, petrochemical, offshore oil exploration,
transportation, telecommunications, mining and marine applications. The Company
holds exclusive manufacturing and distribution rights in several regions of the
world for INERGEN TM fire suppression products. INERGEN TM, an alternative to
the ozone depleting agent known as Halon, consists of a mixture of three inert
gases designed to effectively extinguish fires without polluting the environment
or damaging costly equipment.
The Company also services, maintains, repairs and inspects fire suppression
systems installed by the Company and other contractors. In Australia, New
Zealand and Asia, the Company, through its O'Donnell Griffin subsidiaries, also
engages in the installation of electrical wire and related electrical equipment
in new and existing structures and offers specialized electrical instrumentation
and mechanical contracting services in these markets including applications for
railroad and bridge construction.
Substantially all the mechanical components (and, in North America, most of
the pipe) used in the fire protection systems installed by the Company are
manufactured in the Company's own facilities. The Company also has fabrication
plants worldwide that cut, thread and weld pipe, which is then shipped with
other prefabricated components to job sites for installation. The Company also
installs alarms, detection and activation devices and centralized monitors. The
Company has developed its own computer-aided-design technology that reduces the
time required to design systems for specific applications and coordinates
fabrication and delivery of system components.
In its fire protection contracting business the Company employs both
non-union and union employees in North America, Europe and Asia-Pacific. Many of
the union employees are employed on an hourly basis for particular jobs. In
North America, the largest number of union employees is represented by a number
of local unions affiliated with the United Association of Plumbers and
Pipefitters ("UAP"). During fiscal 1994, Grinnell's contracts with a number of
locals of the UAP were not renewed following lengthy negotiations. Employees in
those locations, representing 64% of those employees represented by the UAP
unions, went on strike. Grinnell has continued to operate with former union
members who have continued to work for Grinnell and with replacement workers.
The labor action has not had, and is not expected to have, any material adverse
effect on Grinnell's business or results of operations.
Generally, competition in the fire protection business varies by geographic
location. In North America, Grinnell competes with hundreds of smaller
contractors on a regional or local basis for the installation of fire
suppression and alarm and detection systems. Many of the regional and local
competitors employ non-union labor. In Europe, the Company competes with many
regional or local contractors on a country by country basis. In Australia, New
Zealand and Asia, the Company competes with a few large fire protection
contractors as well as with many smaller regional or local companies. The
Company competes for fire protection contracts primarily on the basis of price,
service and quality.
Manufacturing and Distribution
The Company manufactures most of the components used in its own fire
protection contracting business, as well as a variety of products for sale to
other fire protection contractors. In North America, the Company manufactures
pipe and pipe fittings, fire hydrants, sprinkler heads and substantially all of
the other mechanical sprinkler components used in an automatic fire suppression
system. In the United Kingdom, France, Germany and the Asia-Pacific region, the
Company manufactures and sells sprinkler heads, specialty valves, fire doors and
electronic panels for use in fire detection systems. In Mexico, the Company
manufactures fire extinguishers, fire hose and related equipment.
8
<PAGE>
At Ansul Fire Protection (Wisconsin) and Total Parsch (Mexico), the Company
manufactures and sells various lines of dry chemical, liquid and gaseous
portable fire extinguishers and related agents for industrial, government,
commercial and consumer applications. These operating units also manufacture and
sell special hazard fire suppression systems designed for use in restaurants,
earth moving equipment, marine applications, mining applications, the
petrochemical industry, confined industrial spaces and commercial spaces housing
delicate and electronic equipment. Ansul Fire Protection also manufactures spill
control products designed to absorb, neutralize and solidify spills of various
hazardous materials.
Fire protection products are sold in North America primarily through the
Company's flow control products distribution network discussed below and, to a
lesser extent, through independent distributors.
In Europe, the Company distributes fire protection products through
warehouses located in the Netherlands, the United Kingdom, Germany and France.
Products are sold principally to distributors and to fire protection contractors
and in some instances to mechanical and industrial contractors.
In Asia-Pacific, the Company distributes fire protection and flow control
products through warehouses located in Australia, New Zealand and Singapore.
Products are sold directly to fire protection and other contractors as well as
to mechanical and industrial contractors and independent distributors.
Backlog
Fire protection contracting backlog amounted to $527 million at December 31,
1994 and $439 million at June 30, 1994. The increase in backlog is due primarily
to an increase at the European and Asia-Pacific region contracting operations.
FLOW CONTROL PRODUCTS
The Company is a manufacturer and distributor of flow control products in
North America, Europe and Asia-Pacific. Flow control products include pipe,
fittings, valves, meters and related products which are used to transport,
control and measure the flow of liquids and gases. Products are manufactured at
23 plants in North America, the United Kingdom, Germany and Switzerland, and
distributed through the Company's own worldwide distribution network and through
independent distributors. The Company's Flow Control Group includes Mueller Co.
("Mueller"), Allied Tube & Conduit Corporation ("Allied") and Grinnell's flow
control operations.
Manufacturing
The Company manufactures and distributes a wide range of flow control
products, including pipe and pipe fittings, tubing, valves, meters, couplings,
pipe hangers, struts and related components. These products are used in
plumbing, heating, ventilation and air conditioning (HVAC) systems, mechanical
contracting, power generation, water and gas utilities, oil and gas exploration
and numerous other industrial applications. The Company also manufactures
certain related products such as steel tubing, custom iron castings and fencing
materials.
Allied is the leading North American manufacturer of pipe and other tubular
products. Allied manufactures a full line of steel pipe for the fire protection
and construction industries and for commercial, residential and institutional
markets. Its mechanical tube division offers steel tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications.
Allied's fence division is a leader in the manufacture of products for the
residential and industrial/commercial fence market.
Mueller, a manufacturer of water and gas distribution products, manufactures
fire hydrants, valves, fittings, water meters, backflow preventers and related
products for sale to independent distributors and, to a lesser extent, directly
to waterworks contractors, municipalities and gas companies throughout the
United States and Canada.
9
<PAGE>
Tyco's Anvil Products, Inc. and Canvil Ltd. subsidiaries manufacture forged
steel fittings and valves. Its Swiss NeoTecha subsidiary manufactures Teflon
lined specialty valves for use in highly corrosive environments. Three
U.K.-based subsidiaries, Hindle Cockburns Limited, Charles Winn (Valves) Limited
and Spensall Engineering Limited, manufacture specialty high performance
butterfly valves and ball valves that are used principally in the oil and gas,
chemical and processing industries.
In May 1994, the Company acquired Preferred Pipe Products, Inc., a
U.S.-based manufacturer of pipe fitting products, primarily for the oilfield and
petrochemical markets. Also, during 1994, the Company acquired the assets of a
U.S. manufacturer of malleable iron pipe fittings.
Distribution
The Company has historically operated through a 47 branch distribution
network for the sale of flow control and fire protection products in North
America. During fiscal 1992, the Company opened a Regional Distribution Center
("RDC") in Harvey, Illinois, and in fiscal 1994 opened a second RDC in Norcross,
Georgia, each of which stocks over 8,500 products. These RDCs support the
inventory needs of the Company's branches in the central, eastern and southern
regions of North America by shipping products directly to customers. As a result
of the RDCs, warehousing and shipping requirements at the branches are reduced,
allowing management to focus on sales and customer service. During fiscal 1995,
the Company opened an additional RDC on the west coast to service and support
the remaining North American branch network. The Company also stocks and sells
products through various distribution centers in Europe, Australia, New Zealand,
the Middle East and Asia. The Company offers its products to distributors and
sprinkler contractors and, to a lesser extent, mechanical and industrial
contractors and original equipment manufacturers. While distribution patterns
vary, most centers stock an extensive line of valves, fittings, pipe and other
products for fire protection systems, components for HVAC installations and
water and gas distribution, and specialized valves and piping for the chemical,
food and beverage processing industries. Products manufactured by the Company
accounted for approximately 74% of its North American distribution sales in
fiscal 1994.
Grinnell's North American distribution network competes with other
manufacturers, independent manufacturers' representatives and, to a lesser
extent, with local and regional supply houses, all of which carry lines of other
domestic or foreign manufacturers. Grinnell competes on the basis of price, the
breadth of its product line, delivery and quality. Grinnell competes for the
sale of gray iron pipe fittings, malleable iron fittings and other flow control
products and fire protection sprinklers and devices principally with other
domestic producers. Grinnell uses an internal sales force for the sale of
certain iron castings not sold through Grinnell's distribution network.
Allied competes for the sale of steel pipe, which is sold through Grinnell's
distribution network discussed above, with pipe from other domestic and foreign
producers. Competition for the sale of pipe is based on price, service and
breadth of product line. Fence and other specialized industrial tubing is sold
to wholesalers, original equipment manufacturers and other distributors.
Competition for the sale of fence products is principally from national and
regional domestic producers and to a lesser extent from foreign companies, on
the basis of price, service and distribution. The Company competes with many
small regional manufacturers for sales of specialized industrial tubing on the
basis of price and breadth of product line.
Mueller's water and natural gas distribution flow control products are sold
through independent distributors, and directly to utilities, municipalities and
gas distribution companies. The Company competes for the sale of these products
on the basis of product quality, service, breadth of product line and conformity
with municipal codes and other engineering standards. The Company competes with
several other manufacturers in the United States and Canada for the sale of iron
and brass flow control devices for water and natural gas distribution systems.
10
<PAGE>
Backlog
Flow Control products backlog amounted to $59 million at December 31, 1994
and $58 million at June 30, 1994.
ELECTRICAL AND ELECTRONIC COMPONENTS
The Company's Electrical and Electronic Components group consists of Simplex
Technologies, Inc. ("Simplex"), the Company's Printed Circuit Group and Allied's
Electrical Conduit division. Simplex manufactures underwater communications
cable and cable assemblies. The Printed Circuit Group manufactures printed
circuit boards and assembles backplanes for the electronics industry. Allied
manufactures and distributes electrical conduit and related components used in
commercial electrical installations.
Simplex
Simplex is the largest U.S. manufacturer of undersea fiber optic
telecommunications cables. Simplex also manufactures cable and cable assemblies
for the U.S. Navy, underwater electric power cable for use by power authorities
and utilities, and electro-mechanical cable for unique field applications.
Simplex's principal customer is AT&T, which accounted for approximately 84% of
its revenues in fiscal 1994.
Under a multi-year engineering development program, Simplex and AT&T Bell
Laboratories, Inc. have developed a proprietary encapsulation process for AT&T
supplied optical fibers used in underwater telecommunications cables. Simplex
manufactures the cable and performs system assembly and has proprietary rights
to the encapsulation process. From 1986 through June 30, 1994, Simplex
manufactured approximately 85,000 kilometers of undersea optical cable deployed
by AT&T. Simplex is developing the next generation of high capacity undersea
systems for deployment in the mid to late 1990s. The next generation of undersea
systems will have enhanced operating capabilities including greater speed,
increased capacity and a new fiber design. Simplex's encapsulation and systems
assembly and testing processes are being adapted to incorporate the new
requirements.
For more than thirty years, Simplex has been the primary supplier of cable
and cable assemblies to the U.S. Navy for use in data-gathering systems. Cable
for U.S. Navy systems is manufactured under various types of contracts,
including cost-plus-incentive fee, time and material and fixed-price.
Simplex, usually in conjunction with AT&T, competes on a worldwide basis
primarily against two other entities: Alcatel-Alsthom, located in France along
with its subsidiary, Standard Telephone Co. ("STC"), located in England; and
KDD, located in Japan. Alcatel/STC is vertically integrated and produces its own
cable, whereas AT&T utilizes Simplex in the manufacture of its underwater cable
and KDD utilizes a Japanese cable manufacturer.
Simplex's backlog was approximately $375 million at December 31, 1994 and
$191 million at June 30, 1994. Simplex normally sells cable under long-term
multi-million dollar contracts, and the amount of its backlog as of any date is
affected by contract issuance for major systems and by timing of completion of
such underwater communications cable systems. During the first quarter of fiscal
1995, Simplex received a $250 million order extension on a multi-year contract.
Simplex owns a special-purpose 500,000 square foot manufacturing facility on
a deep river site in New Hampshire, with direct access to the Atlantic Ocean.
Printed Circuit Group
Tyco's Printed Circuit Group of companies (the "Group") is one of the
largest independent manufacturers of multi-layered printed circuit boards and
assemblers of backplanes in the United States. Printed circuit boards are used
in the electronics industry to mount and interconnect components to create
electronic systems. They are categorized by the number of sides or layers that
contain
11
<PAGE>
circuitry, which could be single-sided, double-sided or multi-layer. In general,
single and double-sided boards are less advanced. Multi-layer boards provide
greater interconnection density while decreasing the number of separate printed
circuit boards which are required to accommodate powerful and sophisticated
components. Backplanes include printed circuit boards and are assemblies of
connectors and other electronic components which distribute power and
interconnect printed circuit boards, power supplies and other system elements.
The Group manufactures highly sophisticated double-sided, mass molded boards
of up to eight layers, precision tooled, custom laminated multi-layer boards of
up to 28 layers and sophisticated flex-rigid circuit boards for use in
environmentally demanding conditions. The majority of the Group's sales are
derived from its high-density multi-layer boards. The Company's backplanes
facility produces fully assembled units utilizing press-fit or soldered
connection technology, custom pin grid array sockets and surface mounted
assembly. The printed circuit boards and backplanes manufactured by the Company
are designed by customers and are manufactured on a job order basis to the
customers' specifications. Backplane sales, inclusive of board content,
accounted for 39% of the Group's sales in fiscal 1994.
The Group markets its products mainly through independent manufacturers'
representatives and, to a lesser extent, through its own internal sales
organization. The Group's customers are generally original equipment
manufacturers in the telecommunications, aircraft, computer, military and other
industrial and consumer electronics industries. The Company competes with
several large companies which manufacture less complex single-sided and
double-sided printed circuit boards in the United States, as well as with many
companies that have their own in-house manufacturing capabilities. The Company
believes that far fewer competitors manufacture the more complex, high density
double-sided and multi-layer boards. The Group competes on the basis of quality,
price, reliability and timeliness of delivery.
As a manufacturer of sophisticated products at the high technological end of
the market, the Company invests approximately $2.5 million per year in
state-of-the-art manufacturing equipment. The Group uses computer-aided-design
equipment, numerically controlled drilling machines and routers, automated gold
plating, computerized electrical testing and automated optical inspection in its
manufacturing operations.
The Group backlog amounted to $11 million at December 31, 1994 and $14
million at June 30, 1994.
Allied
Allied's Electrical Conduit division is one of the leading producers of
steel electrical conduit in the United States. Electrical conduit is galvanized
steel tubing designed to contain current-carrying electrical wires both inside
and outside buildings. Steel conduit also serves as an electrical ground which
ensures proper operation of circuit interruptors and provides a channel into
which additional wires can be inserted or removed as electrical needs change.
The division manufactures a full line of electrical conduit at plants in
Illinois and Pennsylvania. The division also manufactures steel strut channel
framing at a plant in Illinois.
The division's electrical conduit and related products are sold to wholesale
electrical distributors through the division's distribution facilities by an
internal sales force and a network of commissioned sales agents. The division
competes for the sale of electrical products primarily with several other large
domestic manufacturers. Competition in the electrical conduit industry is
primarily based upon price, quality, delivery and breadth of product line.
The division's electrical products backlog amounted to $4 million at
December 31, 1994 and $8 million at June 30, 1994.
12
<PAGE>
DISPOSABLE AND SPECIALTY PRODUCTS
Tyco's Disposable and Specialty Products Group consists of Kendall, Ludlow
Corporation ("Ludlow") and Armin Plastics ("Armin"). Kendall manufactures,
markets and distributes medical supplies and adhesive products and tapes. In
addition, Kendall markets and distributes home health care products. Ludlow is a
manufacturer of disposable medical products, laminated and coated products,
extrusion coated polyester yarns and woven fabrics, and deep-drawn metal parts.
Armin is a leading independent manufacturer of polyethylene film and packaging
products.
Kendall
Tyco acquired Kendall in October 1994. Kendall conducts its operations
through four business units: Kendall Healthcare, Kendall International
("International"), Futuro and Polyken. Kendall's products are manufactured at 23
plants in North America, the United Kingdom, Germany, Mexico, China, Thailand
and Malaysia.
In each of its business units, Kendall competes with numerous other
companies, including a number of larger well-established companies. In general,
no single company competes directly with Kendall in all of its product lines.
Kendall relies on its reputation for excellent quality and dependable service,
together with its low cost manufacturing and innovative products, to compete in
its markets.
The Kendall Healthcare business unit markets a broad range of wound care,
vascular therapy, urological care, incontinence care, anesthetic care and other
products to U.S. and Canadian hospitals and alternate site health care
customers. Kendall Healthcare leads the industry in gauze production with its
Kerlix(R) and Curity(R) brands. Kendall Healthcare's other core domestic product
category consists of its vascular therapy products, principally anti-embolism
stockings, marketed under the T.E.D.(R) brand name, sequential pneumatic
compression devices sold under the SCD TM brand name and a venous plexus foot
pump marketed under the A-V Impulse System(R) brand name. Kendall Healthcare
pioneered the pneumatic compression form of treatment and continues to be the
dominant participant in the pneumatic compression and elastic stocking segments
of the vascular therapy market.
Kendall Healthcare distributes its products both directly through its sales
force and through a network of over 250 independent distributors. Kendall
Healthcare's sales force is divided into two groups, one promoting its vascular
therapy products and the other promoting all its wound care and other products.
Most of the U.S. distributors also sell similar products made by Kendall's
competitors, a practice common in the industry.
In April 1994, Kendall acquired Superior Healthcare Group, Inc. and its
affiliates, a manufacturer of a broad line of disposable medical supplies
including respiratory, urology and nursing care products. In October 1994,
Kendall acquired Sheridan Catheter Corporation, a manufacturer of airway
management, temperature monitoring and specialty products serving patients in
anesthesia, critical care and emergency medicine.
International is responsible for the manufacturing, marketing, distribution
and export of Kendall products in numerous countries worldwide. International's
operations are organized primarily into three geographic regions--Europe, Latin
America and the Far East. International generally markets a range of products,
similar to those of Kendall Healthcare and, to a lesser extent, Futuro, although
the mix of product lines varies from country to country. International markets
to hospital and medical professionals directly and through independent
distributors.
The Futuro business unit manufactures and distributes Kendall's home health
care products to retail consumers and professional health care providers. The
unit has a broad first-aid line sold under the Curity(R) and Curad brand names,
including products such as Curad adhesive bandages, Telfa(R) pads and "kids
size" bandages with character themes utilizing, under license, Flintstones and
McDonald's trade names. Other home health care products include elastic supports
and braces, graduated compression hosiery, ambulation aids and patient aids such
as canes, crutches and bathroom safety products.
13
<PAGE>
Futuro markets its home health care products primarily through a nationwide
distributor network to more than 35,000 pharmacies and retail outlets, including
food and mass merchandisers. Futuro's direct sales force is responsible for
pharmacy sales and selected key accounts outside the retail pharmacy market. A
separate network of broker sales representatives handles all other sales.
The Polyken division manufactures and markets specialty adhesive products
and tapes for industrial applications, including external corrosion protection
tape products for oil, gas and water pipelines. Other industrial applications
include tapes used in the automotive industry for wire harness wraps, sealing
and other purposes, and tapes used in the aerospace and heating and air
conditioning (HVAC) industries. Polyken also produces duct, packaging and
electrical tapes for consumer applications and bandages and medical tapes for
Kendall's healthcare product units and for third parties.
Polyken generally markets its pipeline products directly, working with local
manufacturing representatives, international engineering and construction
companies, and the owners and operators of pipeline transportation facilities.
Polyken sells its other industrial products either directly to major end users
or through diverse distribution channels, depending on the industry being
served.
Ludlow
Ludlow's Technical Products division manufactures and sells a variety of
disposable medical products, specialized paper and film products. These products
include recording chart papers for medical and industrial instrumentation,
disposable electrodes for medical devices, high quality facsimile paper,
adhesive tapes and pressure sensitive coated papers and films used for business
forms and in printing applications. These products are marketed primarily by the
division's internal sales force. The division's manufacturing plants are located
in Massachusetts, Minnesota and Washington. Competitors vary from small regional
firms to larger firms that compete with the division on a national basis.
Competition is on the basis of price and quality.
In December 1993, the Company acquired Uni-Patch, Inc. ("Uni-Patch") and
Classic Medical Products ("Classic"), both manufacturers and distributors of
medical electrodes and related products. Uni-Patch manufactures and distributes
TENS electrodes and related products which are used primarily in physical
therapy and other forms of rehabilitation medicine. Classic manufactures medical
electrodes for EKGs and similar diagnostic tests. In March 1994, Tyco purchased
the Promeon electrode gel business from Medtronics, Inc. Promeon is a leading
manufacturer of gels which are used with medical electrodes for testing and
other monitoring purposes. All of these businesses have been integrated into
Ludlow's existing facilities except for Uni-Patch, which maintains a
manufacturing facility in Minnesota.
Ludlow's Laminating and Coating division produces protective packaging and
other materials made of coated or laminated combinations of paper, polyethylene
and foil. Coated packaging materials provide barriers against grease, oil,
light, heat, moisture, oxygen and other contaminants that could damage the
contained products. The division produces structural coated and laminated
products such as plastic coated kraft, linerboard and bleached boards for rigid
urethane insulation panels, automotive components and wallboard panels. Other
applications include packaging for photographic film, frozen foods, health care
products, electrical and metallic components, agricultural chemicals, cement and
specialty resins. The division has two manufacturing plants located in Louisiana
and Mississippi.
Ludlow markets its laminated and coated products through its internal sales
force and independent manufacturers' representatives. The Company competes with
many large and specialized manufacturers of laminated and coated products on the
basis of price, service, marketing coverage and custom application engineering.
The Twitchell division of Ludlow ("Twitchell") manufactures extrusion coated
polyester yarns and woven fabrics and woven and knit paper fabrics. These
fabrics are sold by Twitchell's internal sales force to manufacturers for use
principally in outdoor furniture, awnings, housewares and other specialty
products. Non-woven coated fabric is manufactured and sold for use as disposable
medical clothing.
14
<PAGE>
Twitchell's plant is located in Alabama. Competition with a number of U.S. and
foreign manufacturers is on the basis of price, quality and service.
Ludlow's Accurate Forming division ("Accurate") manufactures deep-drawn
metal parts, primarily barrels, caps and clips for pens and pencils and
containers, caps and closures for cosmetics, pharmaceutical packaging and
automotive applications. Accurate sells its products on a direct basis through
its internal sales force and also utilizes manufacturers' representatives. The
Company competes with many small, independent deep-drawn metal manufacturers and
plastic extruders, several of which have manufacturing locations in the Far
East. Competition is on the basis of price. Accurate's facility is in New
Jersey.
Ludlow's backlog amounted to $42 million at December 31, 1994 and $33
million at June 30, 1994.
Armin
Armin manufactures polyethylene film and packaging products in a wide range
of size, gauge, construction strength, stretch capacity, clarity and color. With
purchases of over 300 million pounds of polyethylene per year, Armin extrudes
low density and linear low density polyethylene film from resin in pellet form,
in many cases mixing in coloring, anti-slip, anti-block and other chemical
additives. Examples of Armin's product mix include plastic supermarket
packaging, greenhouse sheeting, shipping covers and liners and a variety of
other packaging configurations for the aerospace, agricultural, automotive,
construction, cosmetics, electronics, food processing, healthcare,
pharmaceutical and shipping industries. Armin also manufactures a number of
other polyethylene products, such as reusable plastic pallets, transformer pads
for electric utilities, and a large variety of disposable gloves for the
cosmetic, medical, foodhandling and pharmaceutical industries. Virtually all
sales are generated through Armin's internal sales force. Armin serves over
6,000 customers in the United States and has 11 plants in New Jersey, Oklahoma,
California, South Carolina, North Carolina and Georgia.
Armin competes with a wide range of manufacturers, including some vertically
integrated companies and companies that manufacture polyethylene resins for
their own use. Competition in many market segments is based upon, in addition to
price, product innovation, specialization and customer service. Armin's backlog
amounted to $19 million at December 31, 1994 and $20 million at June 30, 1994.
ENVIRONMENTAL MATTERS
The Company makes a substantial effort to operate its facilities in
compliance with federal, state and local laws relating to the protection of the
environment. Compliance in any fiscal year has not had and is not expected to
have a material effect upon the capital expenditures, earnings or competitive
position of the Company.
The Company believes that, consistent with applicable laws and regulations,
it exercises due care and takes appropriate precautions in the disposal of
wastes. The Company has received notification from the U.S. Environmental
Protection Agency and certain state environmental agencies that conditions at a
number of sites where hazardous wastes were disposed of by the Company and other
persons require cleanup and other possible remedial action.
The Company has a number of projects underway at several of its
manufacturing facilities in order to comply with current environmental laws. In
addition, the Company remains responsible for certain environmental matters at
manufacturing locations sold by the Company. These projects, which involve both
remediation expenses and capital improvements, relate to a variety of
activities, including solvent contamination clean up, upgrading of underground
storage tanks, surface dredging, oil spill containage and clean up, containment
area upgrades, feasibility studies and equipment upgrades and replacement.
The ultimate cost of the Company's remediation projects is difficult to
predict given the uncertainties regarding the extent of the required cleanup,
the interpretation of applicable laws and regulations and alternative cleanup
methods. Based upon the Company's experience with the foregoing environmental
matters, the Company has concluded that there is a reasonable possibility that
remedial costs
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<PAGE>
will be incurred with respect to these projects in the aggregate range of $14.0
million to $50.5 million. At June 30, 1994 the Company had concluded that the
most probable amount which will be incurred within this range is $25.5 million
and such amount is included in the caption "accrued expenses" on the Company's
consolidated balance sheet. Based upon information available to the Company, at
those sites where there has been an allocation of the share of cleanup and such
liability could be joint and several, management believes it is probable that
other responsible parties will fully pay the cost apportioned to them, except
with respect to one site for which the Company has assumed that one of the
identified responsible parties will be unable to pay the cost apportioned to it
and that such party's cost will be reapportioned among the remaining responsible
parties. In view of the Company's financial position and reserves for
environmental matters of $25.5 million, the Company has concluded that its
payment of such estimated amounts will not have a material adverse effect on its
consolidated financial position or results of operations.
USE OF PROCEEDS
All of the shares of Common Stock offered hereby are being offered by
certain Selling Shareholders. See "Selling Shareholders." The Company will not
receive any of the proceeds from the sale of the shares offered hereby or from
the exercise of any Reallocation Rights. The amount payable by a holder of
Reallocation Rights upon exercise of such Reallocation Rights is payable to and
apportioned among the Kendall Investors (as defined herein) in proportion to the
number of Reallocated Shares held for their respective accounts by the
Reallocation Agent (as defined herein). The Company will receive aggregate
proceeds of $852,397 (or $11.94 per share) from the exercise of A Warrants and
$1,218,517 (or $15.92 per share) from the exercise of B Warrants, which the
Company will use for working capital and general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock of the Company is traded on the New York Stock Exchange
under the symbol "TYC." The following table sets forth the high and low sale
prices for the Company's Common Stock, as reported on the New York Stock
Exchange, and the quarterly dividends per share declared on the Common Stock for
the periods indicated.
<TABLE><CAPTION>
COMMON STOCK
------------------------
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
Fiscal 1993
First Quarter......................................................... $37 1/2 $30 5/8 $ .09
Second Quarter........................................................ 43 1/8 33 1/2 .09
Third Quarter......................................................... 48 3/8 41 .10
Fourth Quarter........................................................ 45 1/8 37 3/8 .10
Fiscal 1994
First Quarter......................................................... $46 7/8 $38 3/4 $ .10
Second Quarter........................................................ 51 3/4 41 1/2 .10
Third Quarter......................................................... 55 1/4 48 7/8 .10
Fourth Quarter........................................................ 50 1/8 44 .10
Fiscal 1995
First Quarter......................................................... $48 3/8 $42 1/2 $ .10
Second Quarter........................................................ 50 1/3 43 3/8 .10
Third Quarter (through February 22, 1995)............................. 50 5/8 46 1/2 .10
</TABLE>
Cash dividends were paid by Tyco in fiscal 1993, 1994 and 1995. Kendall did
not pay dividends to its shareholders during these periods.
On February 22, 1995, the Company had approximately 6,900 Common Stock
holders of record, which does not include beneficial owners holding through
nominee or "street" name. The last reported sale price of the Common Stock on
the New York Stock Exchange on February 22, 1995 was $50.25 per share.
16
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1994. This table should be read in conjunction with
the audited and unaudited Consolidated Financial Statements of the Company and
the Notes thereto, appearing elsewhere in this Prospectus.
<TABLE><CAPTION>
AS OF
DECEMBER 31, 1994
--------------------------------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C>
Loans payable and current portion of long-term debt:............ $ 104,655
-----------
-----------
Long-term debt:
Credit agreements............................................. $ 0
Uncommitted lines of credit................................... 0
Insurance company notes....................................... 135,000
8.125% public notes due 1999.................................. 144,889
6.375% public debentures due 2004............................. 104,262
9.5% public debentures due 2022............................... 199,568
8.0% public debentures due 2023............................... 49,958
Other......................................................... 34,445
Less current portion...................................... (104,655)
-----------
Total long-term debt...................................... 563,467
-----------
Shareholders' equity:
Preferred stock ($1 par value, authorized 2,000,000 shares,
none outstanding)........................................... --
Common stock ($.50 par value, authorized 180,000,000 shares,
73,901,064 outstanding)..................................... 36,951
Capital in excess of par value (net of deferred compensation
of $25,367)................................................. 603,378
Currency translation adjustment............................... (23,819)
Retained earnings............................................. 870,323
-----------
Total shareholders' equity................................ 1,486,833
-----------
Total capitalization............................................ $2,050,300
-----------
-----------
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA(A)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected consolidated financial information
of the Company for the four years in the period ended June 30, 1994, the year
ended May 31, 1990 and the six month periods ended December 31, 1994 and 1993.
On October 19, 1994, Tyco acquired Kendall in the Merger, which has been
accounted for using the pooling of interests method of accounting. The selected
consolidated financial information reflects the combined financial position,
operating results and cash flows of Tyco and Kendall as if they had been
combined for all periods presented subsequent to June 30, 1992, the date Kendall
consummated a financial restructuring (the "Kendall Restructuring"). Financial
data for the six months ended December 31, 1994 and 1993 are unaudited but, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary to summarize fairly the Company's financial
position and results of operations. The selected financial information should be
read in conjunction with the audited and unaudited Consolidated Financial
Statements of the Company and the Notes thereto, appearing elsewhere in this
Prospectus, and the information contained in "Management's Discussion and
Analysis of Financial Condition and Operating Results."
<TABLE><CAPTION>
SIX MONTHS ENDED FISCAL
DECEMBER 31, FISCAL YEAR ENDED JUNE 30, YEAR ENDED
------------------------ -------------------------------------------------- MAY 31,
1994(B) 1993 1994 1993(C) (D) 1992(E) 1991(F) 1990(G)
---------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................... $2,151,895 $1,997,671 $4,076,383 $ 3,919,357 $3,066,485 $3,107,891 $2,102,740
Costs and Expenses:
Cost of sales....................... 1,572,626 1,478,851 3,003,194 2,909,947 2,390,218 2,406,077 1,603,054
Non-recurring inventory charge...... -- -- -- 22,485 -- -- --
Selling, general and
administrative.................... 354,111 336,163 682,568 682,520 446,244 422,943 256,827
Merger and transaction related
costs............................. 37,170 -- -- -- -- -- --
Restructuring and severance
charges........................... -- -- -- 39,325 25,612 -- --
Interest............................ 31,703 33,320 62,431 85,785 63,261 73,856 41,256
---------- ---------- ---------- ----------- ---------- ---------- ----------
1,995,610 1,848,334 3,748,193 3,740,062 2,925,335 2,902,876 1,901,137
---------- ---------- ---------- ----------- ---------- ---------- ----------
Income before income taxes,
extraordinary item and cumulative
effect of accounting changes....... 156,285 149,337 328,190 179,295 141,150 205,015 201,603
Income taxes........................ (76,276) (63,867) (138,999) (84,837) (45,884) (87,530) (82,484)
---------- ---------- ---------- ----------- ---------- ---------- ----------
Income before extraordinary item and
cumulative effect of accounting
changes............................ 80,009 85,470 189,191 94,458 95,266 117,485 119,119
Extraordinary item, net of tax
benefit............................ (2,600) -- -- (2,816) -- -- --
Cumulative effect of accounting
changes............................ -- -- -- (71,040) -- -- --
---------- ---------- ---------- ----------- ---------- ---------- ----------
Net income.......................... $ 77,409 $ 85,470 $ 189,191 $ 20,602 $ 95,266 $ 117,485 $ 119,119
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
Income Per Share:
Income before extraordinary item
and cumulative effect of
accounting changes............... $ 1.07 $ 1.16 $ 2.56 $ 1.30 $ 2.06 $ 2.57 $ 2.90
Extraordinary item................. (0.03) -- -- (0.04) -- -- --
Cumulative effect of accounting
changes.......................... -- -- -- (0.98) -- -- --
---------- ---------- ---------- ----------- ---------- ---------- ----------
Net Income.......................... $ 1.04 $ 1.16 $ 2.56 $ 0.28 $ 2.06 $ 2.57 $ 2.90
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
Cash dividends per common share..... $ 0.20 $ 0.20 $ 0.40 $ 0.38 $ 0.36 $ 0.35 $ 0.31
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
BALANCE SHEET DATA:
Working capital..................... $ 396,874 $ 329,918 $ 341,154 $ 274,278 $ 252,021 $ 219,773
Total assets........................ 3,186,469 3,140,821 3,164,966 2,451,537 2,392,966 1,416,556
Long-term debt...................... 563,467 588,491 812,585 534,951 609,255 269,776
Shareholders' equity................ 1,486,833 1,367,026 1,138,786 1,040,551 905,151 607,374
</TABLE>
- ------------
(a) The selected financial statement data reflect the combined results of
operations and financial position of Tyco and Kendall for all periods
subsequent to June 30, 1992. The selected financial data at and for the
years ended June 30, 1992 and 1991 and at and for the year ended May 31,
1990, reflect only the results of operations and financial position of Tyco.
See Note 1 to the Consolidated Financial Statements.
(b) Results for the six months ended December 31, 1994 include a charge of $31.2
million after-tax ($0.42 per share) for fees and expenses related to the
merger and integration of the combined companies, and an extraordinary item
of $2.6 million after-tax ($0.03 per share) resulting from the early
extinguishment of $100 million of Kendall debt. See Notes 1 and 3 to the
unaudited Consolidated Financial Statements.
(c) Effective July 1, 1992, Tyco adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 109 "Accounting for Income Taxes"
and SFAS 106 "Employers' Accounting for Post-Retirement Benefits Other Than
Pensions." Kendall adopted SFAS 109 and SFAS 106 effective with the Kendall
Restructuring (see Note 1 to the Consolidated Financial Statements) and,
accordingly, there is no cumulative effect reflected in the Consolidated
Financial Statements.
(d) Fiscal 1993 results include restructuring and severance charges of $27.3
million after-tax, a non-recurring inventory charge of $22.5 million before
and after-tax, a reduction in tax expense of $6.7 million attributable to
revisions in previous tax estimates, incremental income tax expense due to
tax rates changes of $7.8 million and a special pension charge of $1.2
million after-tax.
(e) Fiscal 1992 results include restructuring and severance charges of $14.9
million after-tax and a reduction in tax expense of $16.9 million
attributable to revisions in previous tax estimates.
(f) Fiscal 1991 results include the results of operations of Wormald from the
date of its acquisition, August 2, 1990.
(g) The Company changed its fiscal year from May 31 to June 30 effective with
the fiscal year ended June 30, 1991. Accordingly, the June 1990 results are
not presented above. The Company's results of operations for the month of
June 1990 reflected net sales of $130.2 million, net loss before income
taxes of $10.5 million, an income tax benefit of $3.5 million, net loss of
$6.9 million and net loss per share of $0.17.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
On October 19, 1994, a wholly-owned subsidiary of Tyco merged with Kendall.
The Merger was accounted for as a pooling of interests and the historical
results of Tyco and Kendall have been combined for all periods presented
subsequent to June 30, 1992, the effective date of the Kendall Restructuring.
Accordingly, the unaudited Consolidated Financial Statements at and for the six
months ended December 31, 1994 and 1993 and the Consolidated Financial
Statements for the years ended June 30, 1994 and 1993 reflect the combined
financial position and results of operations and cash flows of Tyco and Kendall.
The Consolidated Financial Statements for the year ended June 30, 1992 reflect
only the results of operations and cash flows of Tyco. See Note 1 to the
Consolidated Financial Statements.
Information for all periods presented below reflects the grouping of the
Company's businesses into four industry segments, consisting of Fire Protection,
Flow Control Products, Electrical and Electronic Components and Disposable and
Specialty Products. Additionally, state income tax expense, previously included
in selling, general and administrative expense, has been reclassified to the
provision for income taxes for all periods presented.
RESULTS OF OPERATIONS FOR THE FIRST SIX MONTHS OF FISCAL 1995 COMPARED WITH THE
FIRST SIX MONTHS OF FISCAL 1994
Overview
Income before extraordinary item was $80.0 million, or $1.07 per share, for
the first six months of fiscal 1995 compared with $85.5 million, or $1.16 per
share for the first six months of fiscal 1994. Excluding the $31.2 million
($0.42 per share) after-tax charge for merger and transaction related costs
related to the Merger in fiscal 1995 (see Note 1 to the unaudited Consolidated
Financial Statements), income before extraordinary item rose 30% to $111.2
million, or $1.49 per share. The increase was attributable to strong earnings in
the Disposable and Specialty Products group as well as increased income in each
of the Company's other business segments.
Sales
Sales during the first six months of fiscal 1995 were $2.15 billion, an 8%
increase over the first six months of fiscal 1994 sales of $2.0 billion. Sales
of the Fire Protection group increased $37.9 million to $801.9 million, or 5%,
due to increased sales in the North American and Asia-Pacific contracting
business partially offset by slightly lower sales in the European contracting
business. The decline in Europe was principally the result of the sale of
certain fire products businesses in the fourth quarter of fiscal 1994 partially
offset by the impact of changes in average foreign currency exchange rates on
non-U.S. dollar denominated sales in the first six months of fiscal 1995 as
compared to the first six months of fiscal 1994. Had average foreign currency
exchange rates during the first six months of fiscal 1995 remained constant with
the average during the first six months of fiscal 1994, sales would have been
approximately $24 million less in fiscal 1995. Sales of the Flow Control group
increased $49.2 million to $481.0 million, or 11%, reflecting higher volume at
Allied, Mueller and Grinnell's distribution operations. Sales of the Electrical
and Electronic Components group decreased $8.9 million to $205.6 million, or 4%,
resulting principally from lower sales of underwater communications cable
systems at Simplex. Sales of the Disposable and Specialty Products group
increased $76.0 million to $663.3 million, or 13%, due to increased sales
principally at Kendall and, to a lesser extent, at Ludlow and Armin.
Income Before Income Taxes and Extraordinary Item
For the first six months of fiscal 1995 as compared to the first six months
of fiscal 1994, operating profits of the Fire Protection group rose $4.9 million
to $39.2 million, or 14%, due principally to higher
19
<PAGE>
margins at the North American and Asia-Pacific fire protection operations
partially offset by slightly lower margins at the European contracting
operations. The operating profits of the Flow Control group increased $5.6
million to $39.5 million, or 16%, resulting principally from increased earnings
at Grinnell's North American distribution operations and at Mueller. Operating
profits of the Electrical and Electronic Components group increased $0.5 million
to $36.6 million, or 1%, due to increased earnings at Simplex somewhat offset by
decreased margins at Allied's electrical business. Operating income of the
Disposable and Specialty Products group increased $35.1 million to $121.4
million, or 41%, reflecting higher earnings at Kendall and, to a lesser extent,
at Ludlow and Armin. The impact on the consolidated results of operations from
changes in foreign exchange rates relative to the value of the U.S. dollar for
the first six months of fiscal 1995 as compared to the same period of fiscal
1994 was not material.
Interest Expense
Interest expense decreased $1.6 million to $31.7 million during the first
six months of fiscal 1995 as compared to the first six months of fiscal 1994 due
principally to the sale of $150 million of accounts receivable late in the
second quarter of fiscal 1994 (see Note 4 to the unaudited Consolidated
Financial Statements) and lower average debt balances partially offset by higher
interest rates.
Extraordinary Item
During the second quarter of fiscal 1995, the Company refinanced $100
million principal amount of Kendall's subordinated notes due 2003. In connection
with the refinancing, the Company recorded a charge of $4.3 million ($2.6
million after-tax) representing unamortized debt issuance expenses and a call
premium, as an extraordinary loss.
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED JUNE 30, 1994
Overview
Income before extraordinary item and cumulative effect of accounting changes
amounted to $189.2 million, or $2.56 per share for fiscal 1994. This compares to
$94.5 million, or $1.30 per share for fiscal 1993. Fiscal 1993 earnings reflect
restructuring and severance charges ("restructuring charges") of $39.3 million
($27.3 million after-tax), a non-recurring inventory charge of $22.5 million
before and after-tax, and a special pension charge of $2.0 million ($1.2 million
after-tax). Notes 1 and 4 to the Consolidated Financial Statements describe
these fiscal 1993 charges. Income before income taxes, extraordinary item and
cumulative effect of accounting changes was $328.2 million in fiscal 1994. This
compares to $243.1 million in fiscal 1993 (excluding the restructuring,
non-recurring inventory and special pension charges) or an increase of 35%.
These fiscal 1994 results reflect strong increases in the Disposable and
Specialty Products segment as well as increases in each of the Company's other
business segments.
Sales
Sales increased 4% during fiscal 1994 to $4.08 billion from $3.92 billion in
fiscal 1993. Sales of the Fire Protection group were approximately the same from
year to year, as increases in the Asia-Pacific and North American contracting
businesses were offset by a decrease in the European contracting business. The
lower sales in Europe reflect the result of changes in average foreign currency
exchange rates on non-U.S. dollar denominated sales in fiscal 1994 as compared
to fiscal 1993, which reduced sales in U.S. dollars for the year by
approximately $53.1 million. This reduction, due to the strengthening of the
U.S. dollar versus European currencies, primarily in the first quarter of fiscal
1994, was partially offset by increased sales in local currencies in the
European contracting businesses. Sales of the Flow Control group increased
$107.5 million to $914.4 million, or 13%, reflecting increased volume at Allied,
Mueller and Grinnell's distribution operations, as well as sales of a U.K. based
manufacturer of
20
<PAGE>
specialty high performance butterfly valves and ball valves ("Winn-Hindle")
acquired by the Company during the fourth quarter of fiscal 1993. Sales of the
Electrical and Electronic Components group increased $23.6 million to $436.9
million, or 6%, resulting principally from higher sales of electrical conduit at
Allied and higher sales of underwater communications cable systems at Simplex,
partially offset by decreased sales at the Company's printed circuit operations.
Sales of the Disposable and Specialty Products group increased $26.1 million to
$1.2 billion, or 2% due to increased sales at Armin, Kendall and Ludlow,
including the disposable medical products businesses acquired by Ludlow during
fiscal 1994.
Sales increased 28% during fiscal 1993 to $3.92 billion from $3.07 billion
in fiscal 1992 due principally to Kendall's operations, which are not included
in fiscal 1992 results (See Note 1 to the Consolidated Financial Statements).
Sales of the Fire Protection group decreased $89.6 million to $1,526.1 million,
or 6%, due to decreased sales in the European and Asia-Pacific contracting
businesses offset by a slight increase in the North American contracting
business. Sales of the Flow Control Products group increased $85.6 million to
$806.9 million, or 12%, reflecting increased volume at Allied, Grinnell's
distribution operations and Mueller. Sales of the Electrical and Electronic
Components group increased $21.0 million to $413.3 million, or 5%, resulting
principally from higher sales of underwater communications cable systems at
Simplex and higher sales of electrical conduit at Allied. Sales of the
Disposable and Specialty Products group increased $835.9 million to $1.17
billion due principally to the inclusion of Kendall's sales in 1993, as well as
increased sales at Armin and Ludlow.
Income Before Income Taxes, Extraordinary Item and Cumulative Effect of
Accounting Changes
Pre-tax income was $328.2 million in fiscal 1994 and $179.3 million in
fiscal 1993. Included in the results for fiscal 1993 are pre-tax charges for
restructuring of $39.3 million, a non-recurring inventory charge of $22.5
million and a special pension charge of $2.0 million. Excluding these charges,
pre-tax income in fiscal 1994 increased $85.1 million, or 35%. The restructuring
charges related to operational and organizational changes in certain of the
Company's businesses. See Notes 1 and 4 to the Consolidated Financial Statements
and a further description of the restructuring charges by segment below.
Management believes that the fiscal 1993 restructuring charges were sufficient
to make the required operational and organizational changes and does not
anticipate additional restructuring charges. The cash requirements for the
remaining restructuring actions are not expected to have a material effect on
the Company's fiscal 1995 cash flow as the cash needs are expected to be
partially offset by reductions in working capital.
The following is a comparison, excluding restructuring and non-recurring
inventory charges, of each of the Company's operating segments for fiscal 1994
and 1993. Operating profits of the Fire Protection group increased $11.0 million
to $70.2 million, or 19%. This was principally due to higher volume and margins
in North America. The impact on the consolidated results of operations from
changes in average foreign exchange rates for fiscal 1994 as compared to fiscal
1993 was not significant. The operating profits of the Flow Control Products
group increased $10.5 million to $74.1 million, or 16%. Improvements in margins
at Grinnell's distribution operations and earnings from Winn-Hindle were
partially offset by decreased margins at Allied's pipe operations. Operating
profits of the Electrical and Electronic Components group increased $3.4 million
to $72.5 million, or 5%, due to increased earnings reflecting higher margins at
Simplex and to a lesser extent electrical conduit at Allied, slightly offset by
a decrease in profits at the Company's printed circuit operations. Operating
profits of the Disposable and Specialty Products group increased $42.9 million
to $191.7 million, or 29%, reflecting increased earnings principally at Kendall
and, to a lesser extent, Armin and Ludlow, including the earnings of the
disposable medical products businesses acquired by Kendall and Ludlow during
fiscal 1994. Included in Corporate and other amounts for fiscal 1994 is an
expense of $4.1 million related to the Company's sale of accounts receivable.
See Note 6 to the Consolidated Financial Statements for a further description of
this transaction.
21
<PAGE>
Pre-tax income before extraordinary item and cumulative effect of accounting
changes for fiscal 1993 was $179.3 million, a 27% increase from the $141.2
million pre-tax income earned in fiscal 1992 due principally to Kendall's
operations, which are not included in fiscal 1992 results (see Note 1 to the
Consolidated Financial Statements). Included in the results for fiscal 1993 are
pre-tax charges for restructuring of $39.3 million ($27.3 million after-tax), a
non-recurring inventory charge of $22.5 million, a special pension charge of
$2.0 million ($1.2 million after-tax) and the current year effect of SFAS 106
and SFAS 109 of $0.8 million ($5.1 million after-tax). Included in fiscal 1992
results are pre-tax charges of $25.6 million ($14.9 million after-tax) for
restructuring charges. The Company's fiscal 1993 and 1992 restructuring charges
relate to operational and organizational changes in certain of the Company's
businesses. See Notes 1 and 4 to the Consolidated Financial Statements and a
further description of the restructuring charges and non-recurring inventory
charge by segment below.
The following is a comparison of each of the Company's operating segments
for fiscal 1993 and 1992. Operating profits of the Fire Protection group
decreased $42.0 million to $43.2 million, or 49%. This was due principally to
lower volume and reduced margins in the European and Australian contracting
businesses and to a lesser extent reduced margins in the North American
contracting businesses. In addition, fiscal 1993 included pre-tax restructuring
charges of $16.0 million related principally to reductions of personnel in the
European and Australian contracting businesses. In fiscal 1992, $10.0 million of
pre-tax restructuring charges were recorded. The operating profits of the Flow
Control Products group increased $6.9 million to $44.6 million, or 18%,
resulting principally from significantly increased earnings at Allied as a
result of increased margins and to a lesser extent increased earnings on the
distribution of flow control products in North America. These increases were
partly offset by decreased earnings at Mueller where unit volume was maintained
but margins suffered from competitive pricing as a result of low levels of
housing starts in the United States. In addition, fiscal 1993 included pre-tax
restructuring charges of $19.0 million related to severance and excess
facilities costs associated with a major reorganization of the distribution
system for Grinnell's North American flow control operations and the provision
for an anticipated loss on the sale of a United States pipe manufacturing
facility. In fiscal 1992, $13.4 million of pre-tax restructuring charges were
recorded. Operating profits of the Electrical and Electronic Components group
increased $14.3 million to $68.4 million, or 26%, due primarily to an increase
in earnings at Simplex reflecting higher sales of underwater communication
cables and to increased margins at the Company's printed circuit facilities
somewhat offset by a $0.7 million pre-tax restructuring charge for the shutdown
of a printed circuit board facility. Operating income of the Disposable and
Specialty Products group increased $82.8 million to $126.3 million principally
reflecting the inclusion of Kendall as of the beginning of fiscal 1993, as well
as increased volume and margins at Ludlow and Armin. Included in Corporate and
other amounts for fiscal 1993 are $5.6 million of pre-tax restructuring charges
primarily for personnel reductions and costs for certain pension items. In
fiscal 1992, a $2.2 million pre-tax restructuring charge was recorded. The
impact on the consolidated results of operations from changes in average foreign
exchange rates for fiscal 1993 as compared to fiscal 1992 was not significant.
Interest Expense
Interest expense decreased $23.4 million during fiscal 1994 due to lower
average interest rates, lower average debt levels and the sale of accounts
receivable as described in Note 6 to the Consolidated Financial Statements.
Interest expense increased $22.5 million during fiscal 1993 due to higher
average debt levels as a result of the inclusion of Kendall's debt as of July 1,
1992, and the related interest expense partially offset by lower average
interest rates.
Extraordinary Item
During fiscal 1993, Kendall refinanced certain notes and borrowings
outstanding under its bank facilities. In connection with the refinancing, the
Company recorded a charge of $4.6 million ($2.8
22
<PAGE>
million after-tax) representing unamortized bank fees and original issue
discount as an extraordinary loss.
Cumulative Effect of Accounting Changes
Effective July 1, 1992, Tyco adopted two new accounting pronouncements
related to income taxes (SFAS 109) and post-retirement health benefits (SFAS
106). The cumulative effect of these accounting changes was an after-tax charge
of $71.0 million comprised of $16.1 million for SFAS 109 and $54.9 million
($84.5 million pre-tax) for SFAS 106. In addition to the cumulative effect of
the accounting changes, SFAS 109 and SFAS 106 resulted in a fiscal year 1993
reduction in income of $5.1 million after-tax, comprised of $7.8 million of
nonrecurring tax rate changes in certain foreign jurisdictions and $1.6 million
related to additional post-retirement medical costs partially offset by $4.3
million of tax benefits. Kendall adopted SFAS 109 and SFAS 106 effective with
the Kendall Restructuring (see Note 1 to the Consolidated Financial Statements),
and accordingly there is no cumulative effect reflected in the Consolidated
Financial Statements.
Income Tax Expense
Income tax expense was $139.0 million in fiscal 1994. Income tax expense
before extraordinary item and cumulative effect of accounting changes was $84.8
million in fiscal 1993. The higher income tax expense in fiscal 1994 reflects
increased pre-tax income in fiscal 1994 and revisions of certain tax estimates
in fiscal 1993 resulting in a $6.7 million reduction in tax expense. An analysis
of income taxes and the effective income tax rate is presented in Note 8 to the
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As presented in the unaudited Consolidated Statement of Cash Flows, net cash
provided by operating activities was $128.0 million during the first six months
of fiscal 1995. The significant changes in working capital accounts were a
decrease of $15.3 million in accounts receivable and contracts in process, an
increase of $24.0 million in inventory and a $25.2 million decrease in accounts
payable and accrued expenses. Net changes in other working capital accounts were
not significant during the period. Working capital requirements for the
remainder of fiscal 1995 are not expected to change significantly.
During the first six months of fiscal 1995, the Company used cash to
purchase $64.3 million of property and equipment, acquire a European fire
products company, a U.S. flow control company and three U.S. disposable health
products companies for an aggregate of $23.6 million, pay dividends of $9.3
million and reduce total debt by $84.5 million. The Company received $34.6
million of cash during the first six months of fiscal 1995 from the exercise of
stock options and warrants.
The level of capital expenditures is expected to increase slightly in fiscal
1995 as compared to fiscal 1994 and the source of funds for such expenditures is
expected to be cash from operations. The amount of total dividends paid is
expected to increase during the remainder of fiscal 1995 due to issuance of
shares of common stock in connection with the Merger with Kendall. The source of
funds for such dividends is expected to be cash from operations.
At December 31, 1994, the Company's total debt was $668.1 million as
compared to $751.7 million at June 30, 1994. In November 1994, the Company
issued $145 million principal amount of 8.125% notes due 1999. The proceeds were
used, in part, to refinance $100 million principal amount of Kendall's
subordinated notes due 2003. The balance was used to refinance, in part, $80
million of insurance company notes that were due on January 30, 1995. In October
1994, the Company replaced its credit agreements with a new credit agreement
which gives the Company the right to borrow $300 million or a portion thereof
until October 1999 (see Note 3 to the unaudited Consolidated Financial
Statements). The Company believes that its funding sources are adequate for its
anticipated requirements through expected cash flows from operations and
established financing arrangements.
23
<PAGE>
Shareholders' equity was $1,486.8 million or $20.12 per share at December
31, 1994 compared to $1,367.0 million or $19.23 per share at June 30, 1994. The
increase is due to fiscal 1995 net income and due to the exercise of stock
options and warrants. Total debt as a percent of total capitalization (total
debt and shareholders' equity) was 31% at December 31, 1994 and 35% at June 30,
1994. The change is due principally to the decrease in debt and the increase in
shareholders' equity discussed above.
BACKLOG
The backlog of unfilled orders was approximately $1,037.5 million at
December 31, 1994 and $763.0 million at June 30, 1994. This increase is
principally attributable to a $184.6 million increase at Simplex, where backlog
was increased by an order extension on a multi-year contract for the manufacture
of underwater communications cable systems. Backlog also increased in each of
the Company's other business segments, most notably in the European and
Asia-Pacific regions of the Fire Protection segment.
ACCOUNTING PRONOUNCEMENTS
In November 1992, the Financial Accounting Standards Board (the "Board")
issued Statement of Financial Accounting Standards ("SFAS") No. 112, "Employer's
Accounting for Post-Employment Benefits." The Company adopted SFAS 112 in the
first quarter of fiscal 1995. The effect of adoption of this standard did not
materially affect the Company's financial position or results of operations. In
May 1993, the Board issued SFAS 114, "Accounting by Creditors for Impairment of
a Loan." This new standard must be adopted no later than fiscal 1996. Adoption
of this standard is not expected to have a material effect on the Company's
financial position or results of operations.
24
<PAGE>
SELLING SHAREHOLDERS
The Selling Shareholders named in the table below (collectively, the
"Selling Shareholders") were former shareholders of Kendall that received shares
of Common Stock, or rights to acquire the same, as a result of the Merger. The
Selling Shareholders, as well as other persons, have certain rights and
obligations pursuant to the Registration Rights Agreement (as defined below).
See "Description of Capital Stock--Registration Rights Agreement."
The following table sets forth certain information with respect to the
Selling Shareholders and their beneficial ownership of Common Stock. Information
with respect to positions, offices or other material relationships of the
Selling Shareholders with the Company or any predecessor or affiliate thereof,
other than as a shareholder thereof, during the past three years is provided
below the table or in the notes thereto. Unless otherwise indicated, each
Selling Shareholder named has sole voting and dispositive power with respect to
its shares of Common Stock, Warrants and Reallocation Rights.
All information with respect to beneficial ownership has been furnished by
the respective Selling Shareholders (except that certain information pertaining
to the Reallocated Shares (as defined below) has been furnished by the
Reallocation Agent referred to below).
<TABLE><CAPTION>
SHARES TO BE
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERINGS NUMBER OF OFFERINGS(2)
------------------- SHARES BEING -------------------
NUMBER PERCENT OFFERED(2) NUMBER PERCENT
--------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D Fund IV")(1)(3)....... 4,719,710 6.3% 4,273,480 434,247 *
270 Greenwich Avenue
Greenwich, CT 06830
Clayton & Dubilier Associates III Limited
Partnership(1)(3)(4)............................ 25,649 * 25,649 -- --
270 Greenwich Avenue
Greenwich, CT 06830
Joseph Littlejohn & Levy Fund, L.P. ("JLL
Fund")(1)(5).................................... 3,770,494 5.0% 2,553,770 262,585 *
50 Main Street, Suite 1000
White Plains, NY 10606
CBC Capital Partners, Inc....................... 231,003 * 210,003 21,000 *
270 Park Ave, 5th Floor
New York, NY 10017
The Trustees of Princeton University............ 184,803 * 168,003 16,800 *
c/o Princeton University
P.O. Box 35
2 New South Bldg.
Princeton, NJ 08544-0035
Yale University................................. 138,600 * 126,000 12,600 *
c/o Pitt & Co. / Bankers Trust
34 Exchange Place
Jersey City, NJ 07302
Toronto-Dominion Investments, Inc............... 92,400 * 84,000 8,400 *
909 Fannin
Suite 1700
Houston, TX 77010
</TABLE>
25
<PAGE>
<TABLE><CAPTION>
SHARES TO BE
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERINGS NUMBER OF OFFERINGS(2)
------------------- SHARES BEING -------------------
NUMBER PERCENT OFFERED(2) NUMBER PERCENT
--------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Middlebury College.............................. 92,400 * 84,000 8,400 *
c/o Comptroller's Office, Middlebury College
Middlebury, VT 05753
Norwest Equity Capital, Inc..................... 69,299 * 62,999 6,300 *
2800 Piper Jaffray Tower
Minneapolis, MN 55402
The Prudential Company of America(6)............ 33,228 * 33,228 -- --
c/o Schmidt & Co.
7th Floor, Gateway Center Two
Newark, NJ 07102-5096
McKinsey & Company Inc., Profit Sharing
Retirement Plan Trust(6)........................ 27,720 * 27,720 -- --
c/o Richard H. Moskowitz, McKinsey & Company
Inc.
55 East 52nd Street, 23rd Floor
New York, NY 10022
Northwestern National Life Insurance Company.... 23,098 * 20,998 2,100 *
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, MN 55401
Monterey Fund I(6).............................. 22,407 * 22,407 -- --
c/o Richard H. Moskowitz, McKinsey & Company
Inc.
55 East 52nd Street, 23rd Floor
New York, NY 10022
Putnam Investments(6)........................... 20,937 * 20,937 -- --
c/o Muico & Co.
859 Willard Street
Quincy, MA 02169
Northern Life Insurance Company................. 14,783 * 13,439 1,344 *
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, MN 55401
BNY Capital Corporation......................... 13,858 * 12,598 1,260 *
c/o The Bank of New York
48 Wall Street
New York, NY 10286
Neuville Company, Inc........................... 10,809 * 9,826 983 *
888 Seventh Avenue, Suite 2800
New York, NY 10106
T. Rowe Price High Yield Fund, Inc.(6).......... 9,714 * 9,714 -- --
c/o Bowman & Co.
State Street Bank & Trust
P.O. Box 1713
Boston, MA 02105-1713
</TABLE>
26
<PAGE>
<TABLE><CAPTION>
SHARES TO BE
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERINGS NUMBER OF OFFERINGS(2)
------------------- SHARES BEING -------------------
NUMBER PERCENT OFFERED(2) NUMBER PERCENT
--------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
North Atlantic Life Insurance Company of
America......................................... 8,868 * 8,062 806 *
c/o Washington Square Capital
100 Washington Square, Suite 800
Minneapolis, MN 55401
Bank of America of Illinois(6).................. 7,534 * 7,534 -- --
c/o Cust & Co.
231 So. LaSalle St.
Chicago, IL 60697
D.L. Sutton Ventures(6)......................... 3,235 * 3,235 -- --
760 Park Ave.
New York, NY 10021
Thomas Ole Dial(6).............................. 2,112 * 2,112 -- --
26 Old Huckleberry Road
Wilton, CT 06897
Federal Home Loan Bank(6)....................... 1,407 * 1,407 -- --
c/o Auer & Co.
907 Walnut
Des Moines, Iowa 50309
Jeffrey Sussman(6).............................. 557 * 557 -- --
c/o MJ Whitman, Inc.
1999 Avenue of the Stars
Suite 3150
Los Angeles, CA 90067-6042
Jeffrey Thorp(6)................................ 557 * 557 -- --
12021 Wilshire Blvd.
No. 529
Los Angeles, CA 90025
Trubenfit(6).................................... 351 * 351 -- --
c/o Charles Gordon
Trust Company Bank
55 Park Place, 13th floor
Atlanta, GA 30303
Mildred Rohr Trust(6)........................... 144 * 144 -- --
385 W. Onwentsia Rd.
Lake Forest, IL 60045
Penn Series High Yield Bond Fund(6)............. 141 * 141 -- --
c/o Richter & Co.
100 East Pratt Street, 7th Fl.
Baltimore, MD 21202
--------- ------- ------------ --------- -------
TOTAL........................................... 9,525,818 12.7% 7,782,871 776,825 1.0%
</TABLE>
- ------------
* Less than 1%
(Footnotes on following page)
27
<PAGE>
- ------------
(1) Pursuant to an Equity Reallocation Agreement, dated as of July 7, 1992 (the
"Reallocation Agreement"), among C&D Fund IV, JLL Fund, FIMA Finance
Management Inc. ("FIMA"), Mutual Series Fund Inc. ("Mutual Fund"), Leeway
and Co., Richard A. Gilleland and his daughter (collectively, the "Kendall
Investors"), Kendall and Mellon Bank, N.A., as successor reallocation agent,
the Kendall Investors delivered certain shares of Common Stock (the
"Reallocated Shares") to the reallocation agent in exchange for certificates
evidencing a residual interest in such shares. Pursuant to the Reallocation
Agreement, the holders of Kendall's equity securities outstanding
immediately prior to July 7, 1992 received, in partial exchange for such old
equity securities, rights to purchase (the "Reallocation Rights") the
Reallocated Shares. Until such time as the Reallocated Shares are delivered
upon exercise of the Reallocation Rights, the Kendall Investors have the
right to vote the Reallocated Shares in which they have a residual interest.
Shares beneficially owned by C&D Fund IV prior to the Offerings consist of
4,654,000 shares of Common Stock directly owned by C&D Fund IV, 46,519 shares of
Common Stock that it has the right to acquire upon the exercise of Warrants
and Reallocation Rights (including 3,698 Reallocated Shares in which it has a
residual interest and which it would acquire upon the exercise of its
Reallocation Rights) and 19,191 Reallocated Shares over which it had voting
power but not dispositive power as of February 21, 1995 (as to all of which
beneficial ownership has been disclaimed by certain persons (see Note 3)). In
connection with the Offerings, C&D Fund IV has agreed to sell to the
Underwriters 4,226,961 shares of Common Stock it owns directly and Warrants
and Reallocation Rights to acquire 46,519 shares of Common Stock, which
Warrants and Reallocation Rights will be exercised by the Underwriters so
that the underlying shares of Common Stock may be sold in the Offerings. In
addition, the holders of Reallocation Rights relating to 11,983 Reallocated
Shares (over which C&D Fund IV had voting power but not dispositive power as
of February 21, 1995) have agreed to sell such Reallocation Rights to the
Underwriters, which Reallocation Rights will be exercised by the Underwriters
so that the underlying shares of Common Stock may be sold in the Offerings.
Accordingly, C&D Fund IV would not beneficially own any shares of Common
Stock after consummation of the Offerings, other than the 427,039 shares of
Common Stock subject to the over-allotment options it granted to the
Underwriters and up to 7,208 Reallocated Shares over which it has voting
power but not dispositive power and for which the holders of Reallocation
Rights relating thereto have elected not to participate in the Offerings.
Shares beneficially owned by JLL Fund prior to the Offerings consist of
3,747,605 shares of Common Stock directly owned by JLL Fund and 22,889
Reallocated Shares over which it had voting power but not dispositive power
as of February 21, 1995 (as to all of which beneficial ownership has been
disclaimed by certain persons (see Note 5)). In the Offerings, JLL Fund has
agreed to sell 2,553,770 of the shares of Common Stock it owns directly. JLL
Fund will distribute approximately 938,458 shares of Common Stock it owns
directly to its general and limited partners prior to the completion of the
Offerings, which shares will not be sold in the Offerings. In addition, the
holders of Reallocation Rights relating to 15,681 Reallocated Shares over
which JLL Fund had voting power but not dispositive power as of February 21,
1995 have agreed to sell such Reallocation Rights to the Underwriters so that
the underlying shares of Common Stock may be sold in the Offerings.
Accordingly, JLL Fund would not beneficially own any shares of Common Stock
after consummation of the Offerings other than the 255,377 shares of Common
Stock subject to the over-allotment option it granted to the Underwriters and
up to 7,208 Reallocated Shares over which it has voting power but not
dispositive power and for which the holders of Reallocation Rights relating
thereto have elected not to participate in the Offerings.
(2) Assumes the Underwriters' over-allotment options are not exercised. See
"Underwriting." Holders of Common Stock (other than Common Stock issued upon
exercise of Warrants or delivered upon exercise of Reallocation Rights
subsequent to the Merger and other than Common Stock issuable or deliverable
upon exercise of Warrants and Reallocation Rights to be sold to the
Underwriters) participating in the Offerings have granted the Underwriters
options, exercisable within 30 days after the date hereof, to purchase up to
an aggregate of 762,409 additional shares of Common Stock solely to cover
over-allotments, if any.
(3) C&D Fund IV is an investment partnership, the general partner of which is
Clayton & Dubilier Associates IV Limited Partnership ("Associates IV"). The
general partners of Associates IV are Charles B. Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr.,
(Footnotes continued on following page)
28
<PAGE>
- ------------
Hubbard C. Howe, Andrall E. Pearson and Joseph L. Rice, III. Messrs.
Cribiore and Rice are also general partners of Clayton & Dubilier Associates
III Limited Partnership ("Associates III"). As such, Messrs. Ames, Barbe,
Cribiore, Gogel, Hendrix, Howe, Pearson and Rice share investment and voting
power with respect to the securities of Tyco that C&D Fund IV owns, and
Messrs. Cribiore and Rice share investment and voting power with respect to
securities of Tyco that Associates III owns. Messrs. Ames, Barbe, Cribiore,
Gogel, Hendrix, Howe, Pearson and Rice have disclaimed beneficial ownership
of such securities. Messrs. Cribiore and Pearson were directors of Kendall
prior to the Merger, and Mr. Cribiore was elected a director of Tyco
following the Merger.
(4) Associates III has the right to acquire 25,649 shares of Common Stock upon
the exercise of Warrants and Reallocation Rights to be sold to the
Underwriters (as to all of which beneficial ownership has been disclaimed by
certain persons (see Note 3)).
(5) Peter A. Joseph, Angus C. Littlejohn, Paul S. Levy and Yvonne V. Cliff are
the general partners of JLL Associates, L.P., the general partner of JLL
Fund, and as such, they share investment and voting power with respect to
the shares of Tyco Common Stock that JLL Fund owns. Messrs. Joseph,
Littlejohn and Levy and Ms. Cliff have disclaimed beneficial ownership of
such shares. Mr. Levy was a director of Kendall prior to the Merger and was
elected a director of Tyco following the Merger. Mr. Levy is expected to
receive approximately 182,500 shares of Tyco Common Stock through the
distribution of shares by JLL Fund to its general and limited partners prior
to the completion of the Offerings, which shares will not be sold in the
Offerings.
(6) Represents shares of Common Stock issuable or deliverable upon the exercise
of Warrants and Reallocation Rights beneficially owned by such person. In
connection with the Offerings, such Selling Securityholder has agreed to
sell to the Underwriters its Warrants and Reallocation Rights, which
Warrants and Reallocation Rights will be exercised by the Underwriters so
that the underlying shares of Common Stock may be sold in the Offerings.
BOARD MEMBERSHIP
Pursuant to the terms of the merger agreement between Tyco and Kendall
relating to the Merger, the Board of Directors of Tyco has elected Alberto
Cribiore and Paul S. Levy to serve as directors of Tyco.
Tyco has agreed that for so long as C&D Fund IV continues to hold at least
20% of the shares of Common Stock received by it in the Merger, Tyco will
include one person designated in writing by C&D Fund IV and reasonably
satisfactory to Tyco in the slate of nominees recommended by the Board of
Directors of Tyco to its shareholders for election at each annual meeting of
shareholders of Tyco and use its reasonable best efforts to cause such designee
to be elected as a director of Tyco. Tyco has also agreed that for so long as
the JLL Fund continues to hold at least 20% of the shares of Common Stock
received by it in the Merger, Tyco will include one person designated in writing
by JLL Fund and reasonably satisfactory to Tyco in the slate of nominees
recommended by the Board of Directors of Tyco to its shareholders for election
at each annual meeting of shareholders of Tyco and use its reasonable best
efforts to cause such designee to be elected as a director of Tyco. At such time
as C&D Fund IV or JLL Fund, as the case may be (together with certain other
persons), ceases to own at least 20% of the shares of Common Stock received by
it in the Merger, upon request of Tyco, C&D Fund IV or JLL Fund, as the case may
be, will request, and use all reasonable means at its disposal to cause, its
designee to tender such designee's resignation as a director of Tyco. Upon
consummation of the Offerings, neither C&D Fund IV nor JLL Fund (together with
the aforementioned persons) will own more than 20% of the shares of Common Stock
received by it in the Merger.
29
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description does not purport to be complete and is qualified
in its entirety by the applicable provisions of the Company's Restated Articles
of Organization and By-Laws, copies of which are filed as exhibits to the
Registration Statement.
The authorized capital stock of the Company consists of 2,000,000 shares of
preferred stock, par value $1 per share (the "Preferred Stock"), of which no
shares were outstanding at February 22, 1995, and 180,000,000 shares of Common
Stock, of which 75,183,309 shares were issued and outstanding at February 22,
1995. The Preferred Stock is divisible into and issuable in one or more series.
Different series may be established, and the variations in the relative rights
and preferences as between such series may be fixed, by the Board of Directors
of the Company.
Mellon Bank, N.A. is the registrar and transfer agent of the shares of
Common Stock.
The holders of Common Stock are entitled to receive dividends when and as
declared by the Company's Board of Directors but only out of funds legally
available for the payment thereof, subject to restrictions imposed by certain
indebtedness of the Company. No cash payment or distribution may be made to
holders of Common Stock until all accrued dividends on all series of Preferred
Stock, if any, have been declared and set apart for payment through the last
preceding dividend date set for all such securities.
Holders of Common Stock are entitled to one vote per share at any annual or
special meeting of shareholders. Holders of Preferred Stock, if any, are
entitled to the voting rights fixed by the Board of Directors of the Company for
their respective series. Voting rights are not cumulative, and therefore holders
of more than 50% of the voting power of the Company could, if they chose to do
so, elect all directors, in which case holders of the remaining voting power
would be unable to elect any director.
Article I, Section 6 of the Company's By-Laws provides that any person (a
"Related Person") who together with its Affiliates and Associates (each as
defined in the Company's By-Laws) owns 5% or more of the outstanding shares of
Voting Stock (defined in the Company's By-Laws to include all outstanding shares
of capital stock of the Company entitled to vote in the election of directors
upon the occurrence of a specified event or condition) of the Company, and any
Affiliate or Associate of such person (other than the Company and its
Subsidiaries (as defined in the Company's By-Laws)), must comply with certain
minimum price and procedural requirements or, in the alternative, obtain the
advance approval of a majority of the Company's Continuing Directors (as defined
in the Company's By-Laws) or holders of not less than 80% of the Company's
Voting Stock in order to effect a merger or other Business Combination involving
the Company. The various transactions in the definition of "Business
Combination" include: any merger or consolidation of the Company or a Subsidiary
with or into a Related Person; any sale, lease, exchange, transfer, or other
disposition, in one transaction or a series of transactions, (i) to a Related
Person or an Affiliate or Associate of a Related Person of any Substantial Part
(as defined in the Company's By-Laws) of the assets of the Company or a
Subsidiary or (ii) from a Related Person or an Affiliate or Associate of a
Related Person, in an amount that would constitute a Substantial Part of the
assets of the Company; any issuance or sale by the Company or a Subsidiary of
any of its securities to a Related Person or an Affiliate or Associate of a
Related Person other than pursuant to an employee plan approved by a majority of
the Continuing Directors and the shareholders of the Company; any acquisition by
the Company or a Subsidiary of any securities of a Related Person or Affiliate
or Associate of a Related Person; any adoption of any plan for the liquidation
or dissolution of the Company proposed by or on behalf of a Related Person or
any Affiliate or Associate of a Related Person; and any reclassification of
securities, recapitalization of the Company or any other transaction that has
the effect of increasing the proportion of the outstanding shares of any class
of the Company's or any Subsidiary's equity securities owned by a Related Person
or any Affiliate or Associate of a Related Person. The By-Laws of the Company
confer upon a majority of the Continuing Directors the authority to determine,
among other things, whether a person is a Related
30
<PAGE>
Person and whether any proposed Business Combination complies with the minimum
price and procedural requirements. This section of the By-Laws cannot be
repealed or amended, nor may an inconsistent provision be adopted, without the
affirmative vote of a majority of the Continuing Directors or holders of not
less than 80% of the outstanding shares of the Voting Stock of the Company.
Upon the dissolution of the Company or upon any distribution of the
Company's assets, holders of Common Stock are entitled to all of the Company's
assets available for distribution to shareholders after the holders of all
series of Preferred Stock, if any, have received the preference fixed by the
Board of Directors for their respective series. Holders of Common Stock do not
have any preemptive rights to subscribe for additional issues of capital stock,
and they are not liable to further calls or to assessment by the Company.
WARRANTS
The Warrants (the "Warrants") were issued pursuant to two Warrant
Agreements, each dated as of July 7, 1992 (the "Warrant Agreements"), between
Kendall and Norwest Bank Minnesota, N.A., as warrant agent (the "Warrant
Agent"). Upon consummation of the Merger, each Warrant became exercisable for
1.29485 shares of the Common Stock, the Company assumed the obligations of
Kendall under the Warrant Agreements, and Mellon Bank, N.A., the registrar and
transfer agent for the Common Stock, became the successor Warrant Agent. The
following summary of certain provisions of the Warrants does not purport to be
complete and is subject in all respects to the provisions of the Warrant
Agreements, copies of which are filed as exhibits to the Registration Statement,
to which reference is hereby made for a complete statement of such provisions.
The Warrants were issued on July 7, 1992, in connection with the
restructuring of Kendall under Chapter 11 of the United States Bankruptcy Code
(the "Kendall Restructuring") to holders of equity securities of Kendall
outstanding prior to consummation of the Kendall Restructuring. As a result of
the Merger, A Warrants entitle the holders thereof to purchase Common Stock at
an exercise price of $11.94 per share, and B Warrants entitle the holders
thereof to purchase Common Stock at an exercise price of $15.92 per share. As of
the date of the Merger, and excluding Warrants held by Associates III and C&D
Fund IV, there remained outstanding A Warrants to purchase 87,845 shares of
Common Stock and B Warrants to purchase 111,756 shares of Common Stock. The
applicable exercise price and the number of shares issuable upon exercise of the
Warrants are subject to adjustment in certain circumstances. Holders of the
Warrants are not entitled to any rights as shareholders of Tyco until such
holders properly exercise the Warrants and acquire shares of Common Stock.
The holders of Warrants exercisable for an aggregate of 147,930 shares of
Common Stock (including certain holders who exercised their Warrants subsequent
to the Merger) have elected to participate in the Offerings. The holders of
additional Warrants exercisable for an aggregate of up to approximately 65,299
shares of Common Stock have elected not to participate in the Offerings and will
retain certain piggyback registration rights following the Offerings. See
"Selling Shareholders" and "Description of Capital Stock--Registration Rights
Agreement."
REALLOCATION RIGHTS
In connection with the Kendall Restructuring, pursuant to the Reallocation
Agreement among the Kendall Investors, Kendall and Mellon Bank, N.A., as
successor reallocation agent (the "Reallocation Agent"), the Kendall Investors
delivered the Reallocated Shares to the reallocation agent in exchange for
certificates evidencing a residual interest in such shares and the holders of
Kendall's equity securities outstanding prior to the Kendall Restructuring
received rights to purchase (the "Reallocation Rights") the Reallocated Shares
at any time on or prior to July 7, 1999. The Reallocation Rights are
transferable. The amount payable by a holder of Reallocation Rights upon
exercise of such Reallocation Rights is payable to and apportioned among the
Kendall Investors in proportion to the number of Reallocated Shares held for
their respective accounts by the reallocation agent. Until the Reallocation
31
<PAGE>
Rights are exercised, the voting rights and the right to receive dividends with
respect to the Reallocated Shares remain with the Kendall Investors. The
foregoing summary of the Reallocation Rights does not purport to be complete and
is subject in all respects to the provisions of the Reallocation Agreement, a
copy of which is filed as an exhibit to the Registration Statement, to which
reference is hereby made for a complete statement of such provisions.
Upon consummation of the Merger, each Reallocated Share held by the
Reallocation Agent at the time of the Merger was converted into 1.29485 shares
of Common Stock, and Mellon Bank, N.A. became successor reallocation agent under
the Reallocation Agreement. Following the Merger, the Reallocation Rights
entitle the holders thereof to purchase Common Stock at an exercise price of
$11.94 per share.
The holders of Reallocation Rights exercisable for an aggregate of 44,568
shares of Common Stock have elected to participate in the Offerings. The holders
of additional Reallocation Rights exercisable for an aggregate of up to
approximately 20,435 shares of Common Stock have elected not to participate in
the Offerings and will retain certain piggyback registration rights following
the Offerings. See "Selling Shareholders" and "Description of Capital
Stock--Registration Rights Agreement."
REGISTRATION RIGHTS AGREEMENT
Tyco has agreed generally to assume and perform the obligations of Kendall
under the Registration Rights Agreement, dated as of July 7, 1992, as amended
(the "Registration Rights Agreement"), among Kendall and certain former
securityholders of Kendall, including C&D Fund IV, JLL Fund, Mutual Fund, FIMA
(each, an "Institutional Investor"), Mr. Gilleland and his daughter, and certain
permitted transferees (collectively, together with certain other former
securityholders of Kendall entitled to the benefits, and bound by the terms, of
the Registration Rights Agreement, the "Holders"). The following summary of
certain terms of the Registration Rights Agreement does not purport to be
complete and is subject in all respects to the provisions of the Registration
Rights Agreement, a copy of which is filed as an exhibit to the Registration
Statement, to which reference is hereby made for a complete statement of such
provisions.
Demand Registration. The Registration Rights Agreement gives the right to
each Institutional Investor to demand that Tyco file a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), covering
the Registrable Securities requested by such Institutional Investor and to use
its best efforts to cause such registration statement to become effective. If
the Company receives a demand for registration as provided in the previous
sentence, it is required to give notice of such demand to all other Holders and,
subject to certain limitations, to use its best efforts to include in the
registration statement Registrable Securities which any other Holder has
requested, within 15 business days after the date of such notice, to be
included. Each Institutional Investor is entitled to make one demand for
registration. However, the Company is not required to file a registration
statement unless the Holders have requested registration of a prescribed minimum
number of shares of Common Stock. The Company is entitled to postpone such a
registration statement for a reasonable period not to exceed 180 days in certain
circumstances.
Registrable Securities include the Common Stock received in the Merger in
exchange for Kendall Common Stock that prior to the Merger was entitled to
registration rights under the Registration Rights Agreement; Warrants received
in the Merger in exchange for warrants to acquire Kendall Common Stock that
prior to the Merger were entitled to registration rights, and shares of Common
Stock issuable upon exercise of such Warrants; shares of Common Stock issuable
upon exercise of Reallocation Rights; and securities issuable with respect to
such Common Stock or Warrants by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation, reorganization or otherwise. Securities cease to be Registrable
Securities when disposed of pursuant to an effective registration statement or
sold or distributed to the public in reliance on an exemption from the
registration requirements of the Securities Act.
32
<PAGE>
Piggyback Registration. The Registration Rights Agreement provides that if
Tyco proposes to register any of its equity securities, whether or not for its
own account (subject to certain exceptions), Tyco will give notice of such
registration to the Holders together with certain information concerning the
proposed offering. Upon the written request of any Holder delivered within 15
business days of the notice, Tyco will use its best efforts to effect the
registration under the Securities Act of all the Registrable Securities that the
Holder requests Tyco to register, provided that Tyco will be permitted not to
register or to delay the registration of such Registrable Securities if it
determines not to register or to delay the registration of the securities
otherwise intended to be registered.
If the registration involves an underwritten offering, all Holders
requesting inclusion in the underwritten offering must sell their Registrable
Securities to the underwriters on the same terms and conditions as apply to Tyco
or the other selling securityholders participating in such registration. If the
registration involves an underwritten offering and the managing underwriter
advises Tyco that, in its opinion, the number of securities proposed to be
registered must be limited due to market conditions, Tyco will include in such
registration first, the number of securities Tyco proposes to sell, and second,
the number of Registrable Securities of the Holders and securities of other
persons ("Other Persons") requested to be included in such registration that, in
the opinion of such managing underwriter, can be sold, allocated pro rata among
all such requesting Holders and Other Persons on the basis of the relative
number of securities as to which registration has been requested by each such
Holder and Other Person.
Tyco may not enter into any agreement that will grant any person piggyback
rights with respect to any demand registration of the Holders that fails to give
effect or diminishes the rights of Holders with respect to piggyback
registration as provided in the Registration Rights Agreement or that grants
registration rights to any person and does not require such person expressly to
recognize the rights of the Holders under the holdback provisions referred to
below.
Holdback Agreements. The Registration Rights Agreement provides that, if any
registration of Common Stock constituting Registrable Securities is made in
connection with an underwritten offering, the Holders will not effect any sale
or distribution, including in a private placement or pursuant to Rule 144 under
the Securities Act, of any Common Stock during the seven days prior to and
during the 180-day period following the effective date of such registration
statement. An amendment to the Registration Rights Agreement has been proposed
which would reduce the 180-day period referred to in the previous sentence to a
90-day period, or such shorter period as the managing underwriter of the
relevant underwritten offering agrees to, which amendment will become effective
if approved by the requisite percentages of Registrable Securities.
If any registration of Registrable Securities is made in connection with an
underwritten offering, Tyco agrees, and will use reasonable efforts to cause
other persons holding 5% or more of the Common Stock (other than institutional
investment managers) to agree, not to effect any sale or distribution of any of
Tyco's equity securities or of any security convertible into or exchangeable or
exercisable for any equity security of Tyco during the period beginning seven
days prior to the effective date of such registration statement and ending on
the earlier of (1) 180 days after such effective date, and (2) 90 days after
such effective date, if the managing underwriter in such underwritten offering
permits such sale or distribution as not materially adversely affecting the
offering. The Registration Rights Agreement provides that the Holders
participating in any such offering will use their reasonable efforts to obtain
such permission from the managing underwriter.
Certain Other Provisions. All expenses incident to Tyco's performance of its
registration obligations under the Registration Rights Agreement, including
filing fees and the reasonable fees and expenses of one counsel retained by the
Holders of a majority of the Registrable Securities being registered, will be
paid by Tyco. The foregoing does not include underwriting commissions or
discounts or transfer taxes, if any, attributable to the sale of Registrable
Securities by the Holders.
The Registration Rights Agreement contains customary indemnification
provisions whereby Tyco is obligated to indemnify and hold harmless the Holders
and certain related parties, and the Holders are
33
<PAGE>
obligated under certain circumstances to indemnify and hold harmless Tyco and
certain related parties, in each case in connection with liabilities relating to
the registration of the Registrable Securities. The Registration Rights
Agreement also provides for certain rights of contribution in the event that
such indemnity is unavailable.
The Company has filed this Registration Statement to enable certain Selling
Shareholders to sell their respective shares of Common Stock and shares issuable
upon the exercise of Warrants and Reallocation Rights. The shares of Common
Stock of other participating Selling Shareholders are included in the
Registration Statement pursuant to piggyback registration rights under the
Registration Rights Agreement.
34
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the United States purchase
agreement (the "U.S. Purchase Agreement") among the Company, the Selling
Shareholders and each of the underwriters named below (the "U.S. Underwriters"),
and concurrently with the sale of 1,556,574 shares of Common Stock to the
International Managers (as defined below), the Selling Shareholders severally
have agreed to sell to each of the U.S. Underwriters, and each of the U.S.
Underwriters severally has agreed to purchase from the Selling Shareholders, the
number of shares of Common Stock (or Warrants or Reallocation Rights to acquire
such shares of Common Stock) set forth opposite its name below:
<TABLE><CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITERS COMMON STOCK
- ------------------------------------------------------------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Goldman, Sachs & Co..........................................
Donaldson, Lufkin & Jenrette Securities Corporation..........
Lehman Brothers Inc..........................................
------------
Total............................................. 6,226,297
------------
------------
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation and Lehman Brothers Inc. are
acting as representatives (the "U.S. Representatives") of the U.S. Underwriters.
The Company and the Selling Shareholders have also entered into a purchase
agreement (the "International Purchase Agreement" and, together with the U.S.
Purchase Agreement, the "Purchase Agreements") with Merrill Lynch International
Limited, Goldman Sachs International, Donaldson, Lufkin & Jenrette Securities
Corporation and Lehman Brothers International (Europe) acting as Lead Managers
and certain other underwriters outside the United States and Canada (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters"). Subject to the terms and conditions set forth in the
International Purchase Agreement and concurrently with the sale of 6,226,297
shares of Common Stock (or Warrants or Reallocation Rights to acquire such
shares of Common Stock) to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Selling Shareholders severally have agreed to sell to the
International Managers, and the International Managers have severally agreed to
purchase, an aggregate of 1,556,574 shares of Common Stock (or Warrants or
Reallocation Rights to acquire such shares of Common Stock). The initial public
offering price per share and total underwriting discounts per share are
identical under the U.S. Purchase Agreement and the International Purchase
Agreement.
35
<PAGE>
In each Purchase Agreement, the several U.S. Underwriters and the several
International Managers have agreed, respectively, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all of the shares
of Common Stock (or Warrants or Reallocation Rights to acquire such shares of
Common Stock) being sold pursuant to such Purchase Agreement if any of such
shares of Common Stock (or Warrants or Reallocation Rights to acquire such
shares of Common Stock) being sold pursuant to such Purchase Agreement are
purchased. Under certain circumstances, the commitments of non-defaulting U.S.
Underwriters or International Managers (as the case may be) may be increased.
The sale of Common Stock (or Warrants or Reallocation Rights to acquire such
shares of Common Stock) to the U.S. Underwriters is conditioned upon the sale of
shares of Common Stock (or Warrants or Reallocation Rights to acquire such
shares of Common Stock) to the International Managers.
The U.S. Representatives have advised the Selling Shareholders that the U.S.
Underwriters propose to offer the shares of Common Stock offered hereby to the
public initially at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share of Common Stock. The U.S. Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ per share of
Common Stock on sales to certain other dealers. After the Offerings, the public
offering price, concession and discount may be changed.
The purchase price of the shares of Common Stock to be acquired by the
Underwriters upon the exercise of Warrants will be paid to the Company to the
extent of the exercise price of the A Warrants ($11.94 per share) and the
exercise price of the B Warrants ($15.92 per share), and the balance (net of
underwriting discount) will be paid to the Selling Shareholders. The purchase
price of the shares of Common Stock to be acquired by the Underwriters upon the
exercise of Reallocation Rights will be paid to the Kendall Investors to the
extent of the exercise price of the Reallocation Rights ($11.94 per share), and
the balance (net of underwriting discount) will be paid to the Selling
Shareholders.
Certain holders of Common Stock participating in the Offerings have granted
an option to the U.S. Underwriters, exercisable during the 30-day period after
the date of this Prospectus, to purchase up to an aggregate of 609,927
additional shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. The U.S.
Underwriters may exercise this option only to cover over-allotments, if any,
made on the sale of Common Stock offered hereby. To the extent that the U.S.
Underwriters exercise this option, each U.S. Underwriter will be obligated,
subject to certain conditions, to purchase the number of additional shares of
Common Stock proportionate to such U.S. Underwriter's initial amount reflected
in the foregoing table. Certain holders of Common Stock participating in the
Offerings also have granted an option to the International Managers, exercisable
during the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of 152,482 additional shares of Common Stock to cover over-allotments,
if any, on terms similar to those granted to the U.S. Underwriters.
The Selling Shareholders have been informed that the U.S. Underwriters and
the International Managers have entered into an agreement (the "Intersyndicate
Agreement") providing for the coordination of their activities. Under the terms
of the Intersyndicate Agreement, the U.S. Underwriters and the International
Managers are permitted to sell shares of Common Stock (or Warrants or
Reallocation Rights to acquire such shares of Common Stock) to each other for
purposes of resale at a per share of Common Stock price equal to the initial
public offering price, less an amount not greater than the selling concession
less an amount equal to the exercise price in the case of Warrants or
Reallocation Rights. Under the terms of the Intersyndicate Agreement, the
International Managers and any dealer to whom they sell shares of Common Stock
(or Warrants or Reallocation Rights to acquire such shares of Common Stock) will
not offer to sell or sell shares of Common Stock (or Warrants or Reallocation
Rights to acquire such shares of Common Stock) to persons who are United States
persons or Canadian persons or to persons they believe intend to resell to
persons who are United States persons or Canadian persons, and the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
36
<PAGE>
offer to sell or sell shares of Common Stock (or Warrants or Reallocation Rights
to acquire such shares of Common Stock) to persons who are non-United States and
non-Canadian persons or to persons they believe intend to resell to non-United
States and non-Canadian persons, except in each case for transactions pursuant
to such agreement.
The Company and the Selling Shareholders have agreed, subject to certain
exceptions relating to employee benefit arrangements and transfers to certain
affiliated persons who execute a lock-up agreement, that they will not, directly
or indirectly, for a period of 90 days following the date of this Prospectus,
except with the prior consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, on behalf of the Underwriters, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Common Stock or any
securities convertible into or exercisable for Common Stock.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Shareholders by M. Brian Moroze, Esq.,
General Counsel of the Company, Exeter, New Hampshire. Mr. Moroze owns 8,348
shares of the Company's Common Stock. Certain other legal matters will be passed
upon for the Company by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919
Third Avenue, New York, New York 10022. Joshua M. Berman, a director and the
Secretary of the Company, is counsel to the law firm of Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel and owns 18,000 shares of the Company's Common Stock.
Certain legal matters will be passed upon for the Underwriters by Fried, Frank,
Harris, Shriver & Jacobson (a partnership including professional corporations),
One New York Plaza, New York, New York 10004.
EXPERTS
The Consolidated Financial Statements of the Company giving retroactive
effect to the Merger of the Company and Kendall for the year ended June 30, 1994
and the combination of the financial statements of the Company and Kendall for
the year ended June 30, 1993 included in this Prospectus have been so included
in reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The Consolidated Financial Statements of the Company as of June 30, 1993 and
for the years ended June 30, 1993 and 1992 (prior to retroactive restatement to
account for the pooling of interests with Kendall on October 19, 1994) included
in this Prospectus have been so included in reliance on the report (which
includes an explanatory paragraph relating to the fact that the Company changed
its method of accounting for income taxes and for post-retirement benefits other
than pensions in fiscal 1993) of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
37
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE><CAPTION>
PAGE
----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
TYCO INTERNATIONAL LTD.
Report of Independent Accountants, Coopers & Lybrand L.L.P......................... F-2
Report of Independent Accountants, Price Waterhouse LLP............................ F-3
Consolidated Balance Sheet at June 30, 1994 and 1993............................... F-4
Consolidated Statement of Income for each of the three years in the
period ended June 30, 1994....................................................... F-5
Consolidated Statement of Shareholders' Equity for each of the three years
in the period ended June 30, 1994................................................ F-6
Consolidated Statement of Cash Flows for each of the three years in the
period ended June 30, 1994....................................................... F-7
Notes to Consolidated Financial Statements......................................... F-8
<CAPTION>
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
TYCO INTERNATIONAL LTD.
Consolidated Balance Sheet at December 31, 1994.................................... F-25
Consolidated Statement of Income for the Six Months Ended December 31,
1994 and 1993.................................................................... F-26
Consolidated Statement of Shareholders' Equity for the Six Months Ended
December 31, 1994 and 1993....................................................... F-27
Consolidated Statement of Cash Flows for the Six Months Ended December 31,
1994 and 1993.................................................................... F-28
Notes to Consolidated Financial Statements (Unaudited)............................. F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
TYCO INTERNATIONAL LTD.
We have audited the consolidated balance sheet of Tyco International Ltd. as
of June 30, 1994 and the related consolidated statements of income,
shareholders' equity and cash flows for the year ended June 30, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tyco
International Ltd. at June 30, 1994, and the consolidated results of operations
and cash flows for the year ended June 30, 1994, in conformity with generally
accepted accounting principles.
We have audited the consolidated balance sheet of Kendall International,
Inc. and subsidiaries as of June 30, 1993 and the related consolidated
statements of income and cash flows for the year ended June 30, 1993, prior to
their restatement for the 1994 pooling of interests. The contribution of Kendall
International, Inc. and subsidiaries to total assets, revenues and net income
before cumulative effect of accounting changes represented 22 percent, 21
percent and 21 percent of the respective restated totals. Separate financial
statements of Tyco International Ltd. included in the 1993 restated consolidated
balance sheet and statements of income and cash flows were audited and reported
on separately by other auditors. In addition, the financial statements of Tyco
International Ltd. for the year ended June 30, 1992, which represents 100% of
the combined restated financial statements for that period, were audited and
reported on by other auditors. We also audited the combination of the
accompanying consolidated balance sheet as of June 30, 1993 and the consolidated
statements of income and cash flows for the year ended June 30, 1993, after
restatement for the 1994 pooling of interests; in our opinion, such consolidated
statements have been properly combined on the basis described in Note 1 of Notes
to Consolidated Financial Statements.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 22, 1994
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
TYCO INTERNATIONAL LTD.
(formerly Tyco Laboratories, Inc.)
In our opinion, the consolidated balance sheet and the related consolidated
statements of income, of cash flows and of changes in stockholders' equity (not
presented separately herein) present fairly, in all material respects, the
financial position of Tyco International Ltd., formerly Tyco Laboratories, Inc.,
and its subsidiaries at June 30, 1993 and the results of their operations and
their cash flows for each of the two years in the period ended June 30, 1993
(prior to the retroactive restatement to account for the pooling of interests),
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Tyco
International Ltd. for any period subsequent to June 30, 1993.
As discussed in Notes 1, 8 and 12, the Company changed its method of
accounting for income taxes and for post-retirement benefits other than pensions
in fiscal 1993.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 3, 1993
F-3
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE><CAPTION>
AT JUNE 30
------------------------
<S> <C> <C>
1994 1993
---------- ----------
<CAPTION>
(IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 75,843 $ 50,041
Receivables, less allowance for doubtful accounts of $29,311 in
1994 and $28,981 in 1993......................................... 515,160 622,178
Contracts in process............................................... 79,475 77,925
Inventories........................................................ 517,068 502,338
Deferred income taxes.............................................. 101,837 82,663
Prepaid expenses................................................... 54,904 54,763
---------- ----------
1,344,287 1,389,908
---------- ----------
PROPERTY AND EQUIPMENT:
Land............................................................... 33,235 34,718
Buildings.......................................................... 257,485 253,645
Machinery and equipment............................................ 647,058 630,479
Leasehold improvements............................................. 15,166 13,037
Construction in progress........................................... 42,648 47,656
Accumulated depreciation........................................... (385,719) (362,537)
---------- ----------
609,873 616,998
---------- ----------
GOODWILL AND OTHER INTANGIBLE ASSETS............................... 918,791 868,151
REORGANIZATION VALUE IN EXCESS OF IDENTIFIABLE ASSETS.............. 115,201 185,892
DEFERRED INCOME TAXES.............................................. 112,691 80,493
OTHER ASSETS....................................................... 39,978 23,524
---------- ----------
TOTAL ASSETS....................................................... $3,140,821 $3,164,966
---------- ----------
---------- ----------
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt............. $ 163,164 $ 239,601
Accounts payable................................................... 332,004 290,256
Accrued expenses................................................... 382,576 411,877
Contracts in process--billings in excess of costs.................. 63,324 49,676
Income taxes....................................................... 73,301 57,344
---------- ----------
1,014,369 1,048,754
DEFERRED INCOME TAXES.............................................. 13,698 8,032
LONG-TERM DEBT..................................................... 588,491 812,585
OTHER LIABILITIES.................................................. 157,237 156,809
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized 2,000,000 shares; none
outstanding........................................................ -- --
Common stock, $.50 par value, authorized 180,000,000 shares;
outstanding 71,084,293 shares in 1994 and 70,924,026 shares
in 1993, net of reacquired shares of 7,600,747 in 1994 and
7,614,092 in 1993................................................ 35,542 35,462
Capital in excess of par value, net of deferred compensation of
$9,318 in 1994 and $12,314 in 1993............................... 567,476 558,481
Currency translation adjustment.................................... (40,874) (89,386)
Retained earnings.................................................. 804,882 634,229
---------- ----------
1,367,026 1,138,786
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................... $3,140,821 $3,164,966
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE><CAPTION>
YEAR ENDED JUNE 30(1)
--------------------------------------
<S> <C> <C> <C>
1994 1993 1992
---------- ---------- ----------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
SALES.................................................. $4,076,383 $3,919,357 $3,066,485
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales.......................................... 3,003,194 2,909,947 2,390,218
Non-recurring inventory charge......................... -- 22,485 --
Selling, general and administrative.................... 682,568 682,520 446,244
Restructuring and severance charges.................... -- 39,325 25,612
Interest............................................... 62,431 85,785 63,261
---------- ---------- ----------
3,748,193 3,740,062 2,925,335
---------- ---------- ----------
Income before income taxes, extraordinary item and
cumulative effect of accounting changes................ 328,190 179,295 141,150
Income taxes........................................... 138,999 84,837 45,884
---------- ---------- ----------
Income before extraordinary item and cumulative effect
of accounting changes................................ 189,191 94,458 95,266
Extraordinary item, net of tax benefit................. -- 2,816 --
---------- ---------- ----------
Income before cumulative effect of accounting
changes................................................ 189,191 91,642 95,266
Cumulative effect of accounting changes................ -- 71,040 --
---------- ---------- ----------
NET INCOME............................................. $ 189,191 $ 20,602 $ 95,266
---------- ---------- ----------
---------- ---------- ----------
INCOME PER SHARE:
Before extraordinary item and cumulative effect of
accounting changes..................................... $ 2.56 $ 1.30 $ 2.06
Extraordinary item..................................... -- (.04) --
Cumulative effect of accounting changes................ -- (.98) --
---------- ---------- ----------
NET INCOME............................................. $ 2.56 $ .28 $ 2.06
---------- ---------- ----------
---------- ---------- ----------
COMMON EQUIVALENT SHARES............................... 73,770 72,316 46,290
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------
(1) The consolidated financial statements reflect the combined results of
operations of Tyco and Kendall for the years ended June 30, 1994 and 1993.
Results for the year ended June 30, 1992 reflect only the results of Tyco.
See Note 1 to these financial statements.
See notes to consolidated financial statements.
F-5
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE><CAPTION>
FOR THE THREE YEARS ENDED
JUNE 30, 1994(1)
-----------------------------------------------------
<S> <C> <C> <C> <C>
COMMON CAPITAL IN CURRENCY
STOCK, $.50 EXCESS OF TRANSLATION RETAINED
PAR VALUE PAR VALUE ADJUSTMENT EARNINGS
------------ ---------- ----------- --------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1991...................... $ 23,527 $ 370,628 $ (42,351) $553,347
Net income.................................. 95,266
Dividends................................... (16,934)
Restricted stock grants, cancellations,
tax benefits and other.................... (24) 2,974
Currency translation adjustment............. 50,086
Amortization of deferred compensation....... 4,032
------------ ---------- ----------- --------
BALANCE AT JUNE 30, 1992...................... 23,503 377,634 7,735 631,679
Effect of Kendall Merger.................... 12,301 190,077
Net income.................................. 20,602
Dividends................................... (18,052)
Management equity compensation.............. 2,126
Restricted stock grants, cancellations,
tax benefits and other.................... (82) 3,015
Purchase of treasury stock.................. (260) (16,705)
Currency translation adjustment............. (97,121)
Amortization of deferred compensation....... 2,334
------------ ---------- ----------- --------
BALANCE AT JUNE 30, 1993...................... 35,462 558,481 (89,386) 634,229
Net income.................................. 189,191
Dividends................................... (18,538)
Management equity compensation.............. 1,273
Restricted stock grants, cancellations,
tax benefits and other.................... 15 2,409
Warrants, options exercised................. 65 2,215
Purchase of warrant......................... (600)
Currency translation adjustment............. 48,512
Amortization of deferred compensation....... 3,698
------------ ---------- ----------- --------
BALANCE AT JUNE 30, 1994...................... $ 35,542 $ 567,476 $ (40,874) $804,882
------------ ---------- ----------- --------
------------ ---------- ----------- --------
</TABLE>
- ------------
(1) The consolidated financial statements reflect the combined equity of Tyco
and Kendall for the years ended June 30, 1994 and 1993. Results for the year
ended June 30, 1992 reflect only the equity of Tyco. See Note 1 to these
financial statements.
See notes to consolidated financial statements.
F-6
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE><CAPTION>
YEAR ENDED JUNE 30(1)
-----------------------------------
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 189,191 $ 20,602 $ 95,266
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary item..................................... -- 2,816 --
Cumulative effect of accounting changes................ -- 71,040 --
Depreciation........................................... 83,027 79,076 66,501
Amortization of intangibles............................ 40,621 42,505 28,107
Amortization of debt discount and issue costs.......... 1,232 6,768 --
Provision for management equity plans.................. 6,325 7,256 --
Non-recurring inventory charge......................... -- 22,485 --
Deferred income taxes.................................. 31,459 (2,547) (13,832)
Provision for losses on accounts receivable and
inventory
writedowns........................................... 14,823 12,663 11,809
Changes in assets and liabilities net of effects from
acquisitions:
Decrease (increase) in accounts receivable........... 108,847 (28,040) 27,573
Decrease (increase) in contracts in process.......... 12,471 (8,016) 681
(Increase) decrease in inventory..................... (11,766) 1,204 10,461
(Decrease) increase in accounts payable and accrued
expenses................................................. (26,189) 47,277 (48,127)
Increase (decrease) in income taxes payable.......... 15,389 (3,588) (5,527)
Other, net........................................... 26,998 8,543 2,067
--------- --------- ---------
Net cash provided by operating activities.............. 492,428 280,044 174,979
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of acquired assets................... 18,054 -- 14,289
Capital expenditures..................................... (89,802) (94,399) (67,650)
Purchases of businesses, net of cash acquired............ (72,640) (72,008) (18,835)
--------- --------- ---------
Net cash used in investing activities.................. (144,388) (166,407) (72,196)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt............................. 104,628 49,955 199,528
Payments on long-term debt and lines of credit........... (409,692) (126,960) (275,951)
Purchase of warrant and treasury stock................... (600) (16,965) --
Dividends paid........................................... (18,510) (17,640) (16,934)
Financial restructuring and financing fees paid.......... (344) (5,631) --
Issuance of stock and warrants........................... 2,280 -- --
--------- --------- ---------
Net cash used in financing activities.................. (322,238) (117,241) (93,357)
--------- --------- ---------
Net change in cash and cash equivalents.................. 25,802 (3,604) 9,426
Cash and cash equivalents at beginning of year........... 50,041 32,135 22,709
Kendall cash and cash equivalents at beginning of year... -- 21,510 --
--------- --------- ---------
Cash and cash equivalents at end of year................. $ 75,843 $ 50,041 $ 32,135
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Interest paid............................................ $ 72,640 $ 82,952 $ 77,823
--------- --------- ---------
--------- --------- ---------
Income taxes paid (net of refunds)....................... $ 73,751 $ 55,112 $ 34,980
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------
(1) The consolidated financial statements reflect the combined cash flows of
Tyco and Kendall for the years ended June 30, 1994 and 1993. Results for the
year ended June 30, 1992 reflect only the cash flows of Tyco. See Note 1 to
these financial statements.
See notes to consolidated financial statements.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The consolidated financial statements include the
accounts of Tyco International Ltd. ("Tyco" or the "Company") and its
subsidiaries. As described more fully in Note 2, on October 19, 1994 a wholly
owned subsidiary of Tyco merged with Kendall International, Inc. ("Kendall").
These consolidated financial statements have been prepared following the pooling
of interests method of accounting and reflect the combined financial position,
operating results and cash flows of Tyco and Kendall as if they had been
combined for all periods presented subsequent to June 30, 1992, the date on
which Kendall undertook a financial restructuring.
During the first half of calendar 1992, Kendall undertook a financial
restructuring (the "Restructuring") which reduced its debt and associated
interest expense to a level supportable by its operations. The Restructuring was
consummated through a prepackaged plan of reorganization under Chapter 11 of the
U.S. Bankruptcy Code. For accounting purposes, the Restructuring was effective
as of June 30, 1992, the date Kendall adopted "fresh-start" accounting pursuant
to the American Institute of Certified Public Accountants Statement of Position
No. 90-7 ("SOP 90-7"). At that date, Kendall's assets and liabilities were
adjusted to their reorganization or fair market values, and a new reporting
entity was created with no retained earnings or accumulated deficit.
Accordingly, Kendall's results prior to June 30, 1992 have not been combined
with those of Tyco in these financial statements.
Investments--All highly liquid investments purchased with a maturity of
three months or less are considered to be cash equivalents.
Inventories and Contracts--Inventories are recorded at the lower of cost
(first-in, first-out) or market. The non-recurring inventory charge reflected in
the accompanying consolidated statement of income for the year ended June 30,
1993 represents the cost of sales impact of the inventory write-up required by
the asset valuation requirements of fresh-start reporting.
Contract sales for installation of fire protection systems are recorded on
the percentage-of-completion method. Profits recognized on contracts in process
are based upon estimated contract revenue and related cost at completion.
Revisions in cost estimates as contracts progress have the effect of increasing
or decreasing profits in the current period. Provisions for anticipated losses
are made in the period in which they first become determinable. Sales of
underwater cable systems are also recorded on the percentage-of-completion
method. Selling, general and administrative expenditures are expensed as
incurred. Accounts receivable include amounts not yet billed because of
retainage provisions for fire protection contracts. Retention balances of $24.8
million at June 30, 1994 which become due upon contract completion and
acceptance are expected to be substantially collected during fiscal 1995.
Property and Equipment--Property and equipment are principally recorded at
cost, except that in accordance with fresh-start reporting, all property, plant
and equipment of Kendall was restated to reflect reorganization value on June
30, 1992, which approximated fair value on a continued use basis. Maintenance
and repair expenditures are charged to expense when incurred. The straight-line
method of depreciation is used over the estimated useful lives of the related
assets, which range from 3 to 45 years.
Goodwill and Other Intangible Assets--Goodwill is being amortized on a
straight-line basis over 40 years. Accumulated amortization amounted to $112.5
million at June 30, 1994 and $88.9 million at June 30, 1993. Impairment of
goodwill, if any, is measured on the basis of whether anticipated undiscounted
operating cash flows generated by the acquired businesses will recover the
recorded goodwill balances over the remaining amortization period. At June 30,
1994 and 1993, no impairment of such assets was indicated.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Other intangible assets include patents, trademarks and other intangibles,
which are being amortized on a straight line basis over lives ranging from 2 to
30 years. At June 30, 1994 and 1993, accumulated amortization amounted to $12.7
million and $6.9 million respectively.
Reorganization Value in Excess of Identifiable Assets--The reorganization
value of Kendall was determined based on the purchase price paid for new Kendall
common stock issued as part of Kendall's Restructuring (See Basis of
Presentation, above). Based on the allocation of reorganization value in
conformity with procedures specified by SOP 90-7, the portion of reorganization
value which could not be attributed to specific tangible or identifiable
intangible assets has been reported as reorganization value in excess of
identifiable assets. See Note 8.
Reorganization value is being amortized using the straight line method over
20 years. Accumulated amortization amounted to $17.0 million and $9.7 million at
June 30, 1994 and 1993, respectively.
Research and Development--Company funded research and development
expenditures are expensed when incurred.
Translation of Foreign Currency--Assets and liabilities of the Company's
foreign subsidiaries, other than those operating in highly inflationary
environments, are translated into U.S. dollars using year-end exchange rates.
Revenues and expenses of foreign subsidiaries are translated at the average
exchange rates effective during the year. Foreign currency translation gains and
losses are included as a separate component of shareholders' equity. For
subsidiaries operating in highly inflationary environments, inventories and
property, plant and equipment, including related expenses, are translated at the
rate of exchange in effect on the date the assets were acquired, while other
assets and liabilities are translated at year-end exchange rates. Translation
adjustments for these operations are included in net income.
Gains and losses resulting from foreign currency transactions, the amounts
of which are not significant, are included in net income.
Interest Rate Swaps, Currency Options and Other Contracts--The Company
enters into a variety of interest rate swaps, currency options, and other
contracts in its management of interest costs and foreign currency exposures.
The interest rate swaps, which hedge interest rates on certain indebtedness,
involve the exchange of fixed and floating rate interest payment obligations
over the life of the related agreement without the exchange of the notional
payment obligation. The differential to be paid or received is accrued as
interest rates change and recognized over the life of the agreement as an
adjustment to interest expense.
Foreign currency options, acquired for the purpose of hedging foreign
operating income generally for periods not exceeding twelve months, are marked
to market with any realized and unrealized gains or losses reflected in selling,
general and administrative expense. The Company also enters into forward
exchange contracts to hedge certain foreign currency transactions for periods
consistent with the terms of the underlying transactions. The forward exchange
contracts generally have maturities that do not exceed one year. Gains and
losses on contracts qualifying as hedges are deferred and included in the
measurement of the related foreign currency transaction. Losses are not deferred
if it is estimated that deferral would lead to recognizing losses in a later
period. At June 30, 1994, the total amount of foreign currency transactions
covered by hedging contracts was $26.4 million. Such hedging contracts
approximate fair value.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Income Per Share--Net income per share is calculated on the basis of the
weighted average number of shares outstanding plus common equivalent shares
arising from the effect of stock options and warrants using the treasury stock
method.
Accounting Changes--Effective July 1, 1992 Tyco adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") 109 "Accounting for Income
Taxes" and SFAS 106 "Employers' Accounting for Post-Retirement Benefits Other
Than Pensions" (see Notes 8 and 12, respectively, to the consolidated financial
statements.) At July 1, 1992 the cumulative effect of the accounting changes was
to reduce net income by $71.0 million ($0.98 per share). Kendall adopted SFAS
109 and SFAS 106 effective with its Restructuring (See Basis of Presentation,
above), and accordingly there is no cumulative effect reflected in the financial
statements.
Reclassifications--Certain prior year amounts have been reclassified to
conform with current year presentation.
2. THE MERGER
On October 19, 1994, a wholly-owned subsidiary of Tyco merged with Kendall
(the "Merger"). Shareholders of Kendall received 1.29485 shares of Tyco common
stock for each share of Kendall common stock. The transaction qualifies for
pooling of interests accounting treatment, which is intended to present as a
single interest, common shareholder interests which were previously independent.
Accordingly, the historical financial statements for periods prior to the
consummation of the combination are restated as though the companies had been
combined during such periods. Financial statements for all periods prior to
Kendall's Restructuring (see Note 1) include only Tyco's results of operations
and cash flows.
All fees and expenses related to the Merger and to the integration of the
combined companies will be expensed as required under the pooling of interests
accounting method. These expenses have not been reflected in the consolidated
statement of income, but will be reflected in the consolidated statement of
income of the Company for the quarter ended December 31, 1994. Such fees and
expenses are presently estimated to be $37.2 million ($31.2 million after-tax).
The charge includes $18.6 million for financial advisory, legal, accounting and
other direct transaction fees, $14.9 million for payments under severance and
employment agreements and other costs associated with certain compensation
plans, and $3.7 million for other acquisition related and integration costs.
3. ACQUISITIONS
During fiscal 1994, the Company acquired a manufacturer of disposable
medical supplies, three manufacturers and distributors of medical electrodes and
related products, the assets of a flexible packaging business, the assets of a
manufacturer of malleable and cast iron fittings, a manufacturer of pipe
fittings products and a distributor and servicer of fire extinguishers and
related products for an aggregate of $72.6 million in cash and a note payable of
$3.6 million. Also during fiscal 1994, the Company sold certain of its European
fire products manufacturing and distribution businesses for cash proceeds of
$18.1 million and notes receivable of $14.8 million. The effect of these
transactions on the Company's financial position and earnings was not
significant.
During fiscal 1993, the Company acquired three flow control companies for an
aggregate of $67.1 million, and five fire protection companies for an aggregate
of $4.9 million. The effect of these acquisitions on the Company's financial
position and earnings was not significant.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS--(CONTINUED)
The acquisitions were accounted for by the purchase method, and the results
of operations have been consolidated with the Company's results from their
respective acquisition dates.
4. RESTRUCTURING AND SEVERANCE CHARGES
During fiscal 1993 and fiscal 1992, the Company recorded restructuring and
severance charges of $39.3 million ($27.3 million after-tax) and $25.6 million
($14.9 million after-tax), respectively. These charges include severance costs,
facilities consolidation costs, writedown of assets to net realizable value, and
professional fees and other costs associated with the restructurings. The fiscal
1993 charges were principally for personnel reductions in the European and
Australian fire protection contracting businesses, as well as severance and
excess facilities costs associated with the reorganization of Grinnell flow
control distribution operations into regional distribution centers in the United
States to reduce inventory levels, lower operating costs and improve customer
service. Fiscal 1993 charges also included a loss provision associated with the
Company's determination to dispose of a U.S. flow control pipe manufacturing
facility and severance and other costs associated with the shutdown of a printed
circuit board facility. The fiscal 1992 charges were principally for costs
associated with the temporary shutdown of a U.S. flow control pipe manufacturing
facility and personnel reductions at a European fire products manufacturing
facility. Fiscal 1992 charges also included personnel reductions in North
American fire protection operations and corporate headquarters and the
reorganization of certain North American Grinnell flow control distribution
operations. At June 30, 1994, $10.3 million of the fiscal 1993 restructuring
charge is accrued. This relates primarily to the reorganization of Grinnell flow
control distribution operations, European facilities rationalization and
remaining severance payments. The Company will complete the reorganization
process in fiscal 1995.
5. INDEBTEDNESS
Long-term debt is as follows:
AT JUNE 30
----------------------
1994 1993
-------- ----------
(IN THOUSANDS)
Credit agreements................................... $ 94,447 $ 181,395
Uncommitted lines of credit......................... 22,000 164,000
Accounts receivable facility........................ -- 83,000
Insurance company notes............................. 135,000 240,000
8.25% subordinated debt due 2003.................... 100,000 100,000
6.375% public debentures due 2004................... 104,644 --
9.5% public debentures due 2022..................... 199,559 199,543
8% public debentures due 2023....................... 49,957 49,955
Other............................................... 46,048 34,293
-------- ----------
Total debt.......................................... 751,655 1,052,186
Less current portion................................ 163,164 239,601
-------- ----------
Long-term debt...................................... $588,491 $ 812,585
-------- ----------
-------- ----------
Under Tyco's credit agreement with a group of commercial banks, Tyco had the
right until July 1997 to borrow $200 million or a portion thereof for its
general corporate purposes. Interest payable on borrowings was variable based
upon Tyco's option of selecting a certificate of deposit rate
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INDEBTEDNESS--(CONTINUED)
plus 0.5%, a Eurodollar rate plus 0.375% or a base rate, as defined. Kendall had
a $100 million revolving credit facility which was available through December
1998. Interest was variable based upon the option of selecting LIBOR plus 1.75%
or a bank rate, as defined, plus 0.5%. Kendall's borrowings under the facility
were collateralized by substantially all of its assets. In October 1994, the
Company replaced those agreements with a new credit agreement which gives the
Company the right to borrow $300 million or a portion thereof until October
1999. The principal amount then outstanding will be due and payable at that
time. Interest payable on borrowings is variable based upon the Company's option
of selecting a Eurodollar rate plus 0.325%, a certificate of deposit rate plus
0.45% or a base rate, as defined.
The Company's uncommitted lines of credit are borrowings from commercial
banks on an "as offered" basis. The borrowings and repayments occur daily and
contain no specific terms other than due dates and interest rates. The due dates
generally range from overnight to 90 days and interest rates approximate those
available under the Company's credit agreement.
The Company had an accounts receivable facility which expired in August
1993. Interest was variable based upon a defined commercial paper market rate
plus a facility fee of 0.5%. The facility was repaid with borrowings from
uncommitted lines of credit.
The insurance company notes consist of $80 million due in January 1995 and
$55 million due in June 1996, and bear interest at rates of 8.98% and 8.90%,
respectively.
In November 1994, the Company issued $145 million principal amount of 8.125%
debentures due 1999. The net proceeds from the sale of the notes were used, in
part, to refinance $100 million principal amount of Kendall's subordinated notes
due 2003. The balance will be used to refinance, in part, the $80 million
insurance company note due January 1995. Pending repayment of these notes, the
proceeds will be used to repay outstanding borrowings under various uncommitted
lines of credit.
In connection with the refinancing of Kendall's notes, unamortized bank
expenses and a call premium related to the refinanced debt of approximately $4.3
million will be reported, net of a $1.7 million tax benefit, as an extraordinary
loss for the Company's quarter ended December 31, 1994.
In January 1994, the Company issued $105 million principal amount of 6.375%
debentures due 2004. The net proceeds of the issuance were used to repay
insurance company notes of $105 million due in January 1994.
In April 1992, the Company issued $200 million principal amount of 9.5%
debentures due 2022. In March 1993, the Company issued $50 million principal
amount of 8% debentures due 2023. The net proceeds of the issuances were used to
refinance existing debt.
At June 30, 1994, the Company had interest rate swap agreements with a
number of financial institutions, having a total notional amount of $355
million, which effectively convert fixed rate debt to variable rate debt. Under
these agreements, the Company will receive payments at an average fixed rate of
6.09% and will make payments based on six month LIBOR which, at June 30, 1994,
was 5.25%. These agreements expire in the amounts of $100 million in each of
April 1995 and April 1997, $55 million in February 1996, $50 million in April
1996 and $50 million in March 1998. The impact of the Company's hedging
activities on its weighted average borrowing rate was a decrease of 1.1%, 0.8%
and an increase of 0.2% for fiscal 1994, 1993 and 1992, respectively. The impact
on reported interest was income of $7.0 million, $6.1 million and expense of
$1.7 million for fiscal 1994, 1993 and 1992, respectively.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INDEBTEDNESS--(CONTINUED)
During fiscal 1993, Kendall refinanced certain notes and borrowings
outstanding under its bank facilities. In connection with the refinancing, the
Company recorded a charge of approximately $4.6 million ($2.8 million after tax)
representing unamortized bank fees and original issue discount as an
extraordinary loss.
Under its various loan and credit agreements the Company is required to meet
certain covenants, none of which is considered restrictive to the operations of
the Company.
The aggregate amounts of total debt maturing during the next five fiscal
years are as follows (in thousands):
1995............................................................ $163,164
1996............................................................ 87,271
1997............................................................ 27,352
1998............................................................ 16,473
1999............................................................ 636
6. SALE OF ACCOUNTS RECEIVABLE
On November 1, 1993, the Company entered into an agreement pursuant to which
it sold a percentage ownership interest in a defined pool of the Company's trade
receivables. As collections reduce accounts receivable included in the pool, the
Company sells participating interests in new receivables to bring the amount
sold up to the $150 million maximum permitted by the related agreement. Under
terms of the agreement the Company has retained substantially the same risk of
credit loss as if the receivables had not been sold and, accordingly, the full
amount of the allowance for doubtful accounts has been retained. Proceeds of
$150 million from the sale were used to reduce borrowings under uncommitted
lines of credit and are reported as operating cash flows in the Company's
consolidated statement of cash flows and a reduction of receivables in the
Company's consolidated balance sheet. The proceeds of sale are less than the
face amount of accounts receivable sold by an amount which approximates the
purchaser's financing cost of issuing its own commercial paper backed by these
accounts receivable. The discount from the face amount was $4.1 million during
the year ended June 30, 1994, and has been included in selling, general and
administrative expense in the Company's consolidated statement of income. The
Company, as agent for the purchaser, retains collection and administrative
responsibilities for the participating interests of the defined pool.
7. FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt. In addition, the Company
has foreign currency options that hedge its exposure on net foreign income, as
well as interest rate swaps that effectively convert fixed rate debt to variable
rate debt. At June 30, 1994 the fair value of interest rate swaps was a $2.1
million liability, and the fair value of long-term debt was approximately $598.0
million, based on current interest rates. The fair value of financial
instruments in working capital approximated book value.
None of the Company's financial instruments represent a concentration of
credit risk as the Company deals with a variety of major banks worldwide and its
accounts receivable are spread among a number of major industries, customers and
geographic areas. None of the Company's off-balance sheet financial instruments
would result in a significant loss to the Company if the counterparty failed to
perform according to the terms of its agreement.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. FINANCIAL INSTRUMENTS--(CONTINUED)
In May 1993, the Financial Accounting Standards Board issued SFAS 114,
"Accounting by Creditors for Impairment of a Loan." This new standard must be
adopted no later than fiscal 1996. Adoption of this standard is not expected to
have a material effect on the Company's financial position or results of
operations.
8. INCOME TAXES
Provision for federal income taxes and differences between the provision at
the statutory rate and the amounts provided are as follows:
<TABLE><CAPTION>
YEAR ENDED JUNE 30
-------------------------------
<S> <C> <C> <C>
1994 1993 1992
-------- ------- --------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at statutory rate.................................. $114,866 $60,961 $ 47,991
State taxes.................................................. 11,511 5,783 6,377
Depreciation and amortization under purchase accounting...... 10,787 11,281 10,879
Foreign earnings taxed at different rates.................... 6,723 4,202 1,250
Revision of certain tax estimates............................ -- (6,739) (16,904)
Effect of rate changes....................................... (3,649) 7,752 --
Completed contract deferred tax adjustment................... -- -- (5,133)
Research and Development and Foreign Sales Corporation
benefits..................................................... (2,710) (500) (500)
Other........................................................ 1,471 2,097 1,924
-------- ------- --------
Provision for income taxes on earnings before cumulative
effect of accounting changes............................... 138,999 84,837 45,884
Benefit of cumulative effect of accounting changes........... -- (12,273) --
-------- ------- --------
Provision for income taxes................................... 138,999 72,564 45,884
Deferred provision........................................... (21,113) (7,011) 13,832
-------- ------- --------
Current provision............................................ $117,886 $65,553 $ 59,716
-------- ------- --------
-------- ------- --------
</TABLE>
The provisions for fiscal 1994, 1993 and 1992 include $23.9 million, $14.3
million and $8.3 million, respectively, for foreign income taxes. The foreign
component of income (loss) before income taxes was $35.7 million, $(1.9)
million, and $10.7 million for fiscal 1994, 1993 and 1992, respectively.
Generally, no provision has been made for U.S. or additional foreign income
taxes on the undistributed earnings of foreign subsidiaries as such earnings are
expected to be permanently reinvested. A liability has been recorded for U.S.
taxes attributable to certain undistributed earnings in selected jurisdictions
where repatriation to the U.S. may be desirable. It is not practicable to
estimate the additional taxes related to the permanently reinvested earnings.
During fiscal 1993 and 1992, the Company resolved various tax issues and,
accordingly, revised certain tax estimates which resulted in reductions in tax
expense of $6.7 million and $16.9 million, respectively.
During fiscal 1993, the Company recorded additional nonrecurring tax expense
of $7.8 million due to tax rate decreases in certain foreign jurisdictions. The
expense results principally from reducing the carrying value of deferred tax
assets.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES--(CONTINUED)
The completed contract deferred tax adjustment results from the completion
during fiscal 1992 of all contracts on the completed contract method for United
States tax purposes. Accordingly, the provision for fiscal 1992 reflects the
non-recurring reversal of the related deferred taxes originally provided at
higher rates.
Effective July 1, 1992 Tyco adopted the provisions of SFAS 109. At July 1,
1992 the cumulative effect of adopting this standard was to reduce net income by
$16.1 million ($0.22 per share). The impact on fiscal 1993's results was to
reduce net income by $3.5 million ($0.05 per share). Kendall had adopted the
provisions of SFAS 109 effective with its Restructuring (See Note 1) and,
accordingly, there is no cumulative impact reflected in the financial
statements.
The deferred income tax balance sheet accounts result from temporary
differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. The components of the net deferred income
tax asset at June 30, 1994 and 1993 are as follows:
1994 1993
-------- --------
(IN THOUSANDS)
Deferred tax assets:
Accrued liabilities and reserves.................... $122,382 $125,529
Accrued post-retirement benefit obligation.......... 35,248 34,084
Tax loss carryforwards.............................. 188,142 146,716
Other............................................... 3,142 1,473
Deferred tax liabilities:
Property, plant and equipment....................... (72,954) (80,206)
Contracts........................................... (9,027) (12,207)
Accrued liabilities and reserves.................... (6,793) (10,069)
Accrued interest.................................... -- (10,547)
Other............................................... (7,960) (2,378)
-------- --------
Net deferred income tax asset before valuation
allowance............................................. 252,180 192,395
Valuation allowance................................... (51,350) (37,271)
-------- --------
Net deferred income tax asset......................... $200,830 $155,124
-------- --------
-------- --------
During fiscal 1994, Kendall recorded certain adjustments to its deferred tax
assets for the valuation of underlying tax attributes as of the effective date
of its Restructuring, primarily net operating loss carryforwards. These
adjustments resulted in an increase to the deferred tax asset accounts of
approximately $63.6 million, with a corresponding reduction in reorganization
value in excess of net identifiable assets.
As of June 30, 1994 the Company had approximately $185.9 million of net
operating loss carryforwards in certain foreign jurisdictions. Of these, $165.4
million have no expiration, with the remaining $20.5 million expiring between
fiscal year 1995 and 2002. Domestic operating loss carryforwards at June 30,
1994 were approximately $266.3 and will expire in the years 2003 to 2007. A
valuation allowance has been provided for operating loss carryforwards which are
not expected to be utilized.
Under the previous method of accounting for income taxes, the deferred
income tax provision resulted primarily from timing differences between
financial and income tax reporting. The significant components of the deferred
tax provision in fiscal 1992 were $5.1 million for completed contracts, $8.9
million for revision of tax estimates and $7.9 million for restructuring and
severance charges. No other additional component of the deferred tax provision
was material in fiscal 1992.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. KEY EMPLOYEE LOAN PROGRAMS
Loans are made to employees under the 1981 and 1983 Key Employee Loan
Programs for the payment of taxes upon the vesting of shares granted under the
Company's Restricted Stock Ownership Plans. The loans are unsecured and
principally bear interest, payable annually, at prime rate except for loans
prior to September 1987 under the 1981 Employee Loan Program which bear interest
at 2%. Loans are generally repayable in ten years, except that earlier payments
are required under certain circumstances. Loans under these programs were $6.4
million and $5.7 million at June 30, 1994 and 1993, respectively.
10. CAPITAL STOCK
In July 1994, the Company's Board of Directors authorized the repurchase of
up to 2.9 million of its common shares.
In June 1994, the Company repurchased for $600,000 a warrant which entitled
the holder, Tyco Investments (Australia) Limited, formerly Wormald International
Limited, to purchase five million Tyco shares at a price of $70 per share.
In August 1992, the Company repurchased 520,000 shares of its common stock
at $32.625 per share from its former Chairman of the Board for an aggregate
purchase price of $17.0 million. The total cost of reacquired shares at June 30,
1994 and 1993 was $70.0 million and $70.1 million, respectively.
The Company's 1978 Restricted Stock Ownership Plan (the "1978 Plan")
provided for the award of 2,400,000 shares of common stock to key employees
through November 30, 1988. Under the 1978 Plan, 2,392,000 shares were granted,
net of surrenders. The 1983 Restricted Stock Ownership Plan (the "1983 Plan")
provided for the award of 3,400,000 shares of common stock to key employees
through October 18, 1993. Under the 1983 Plan, 2,918,533 shares were awarded,
net of surrenders. The Company's 1994 Restricted Stock Ownership Plan provides
for the award of 462,542 shares of common stock, all of which were reserved for
issuance as of June 30, 1994. Common stock is awarded subject to certain
restrictions with vesting varying over periods of one to ten years.
The fair market value of the shares at the time of the grant is amortized
(net of tax benefit for the deduction of such value) to expense over the period
of vesting. The unamortized portion of deferred compensation expense is recorded
as a reduction of shareholders' equity. Recipients of the restricted shares have
the right to vote such shares and receive dividends. Income tax benefits
resulting from compensation for the vesting of restricted shares, including a
deduction for the excess, if any, of the fair market value of restricted shares
at the time of vesting over their fair market value at the time of the grant and
from the payment of dividends on unvested shares are credited to capital in
excess of par value.
In connection with the Restructuring, Kendall issued to holders of old
equity securities, warrants to purchase common stock at per share exercise
prices of $15.46 (the "A Warrants") and $20.62 (the "B Warrants" and together
with the A Warrants, the "Warrants). As a result of the Merger, these Warrants
became exercisable for the Company's stock at per share prices of $11.94 and
$15.92, respectively. The Warrants expire on July 7, 1999. During fiscal 1994,
25,336 A Warrants and 26,475 B Warrants were exercised. As of June 30, 1994
1,378,527 A Warrants and 1,414,321 B Warrants were issued and outstanding.
Kendall maintains a number of stock incentive plans under which officers,
directors and key employees have been granted options and other awards to
purchase common stock, generally, at prices
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. CAPITAL STOCK--(CONTINUED)
equal to at least 100% of the market price on the date of grant. As a result of
the Merger, these options became exercisable for the Company's stock.
Transactions under these plans during fiscal 1994 and 1993 were as follows:
1994 1993
--------- ---------
(IN THOUSANDS)
Outstanding at beginning of period................... 1,336,933 1,285,139
Awards exercised..................................... (78,986) --
Awards granted....................................... 329,539 51,794
Awards cancelled..................................... (31,076) --
--------- ---------
Outstanding at June 30............................... 1,556,410 1,336,933
--------- ---------
--------- ---------
Exercisable at June 30............................... 252,496 --
--------- ---------
--------- ---------
The exercise prices per share of the Company's common stock for options
outstanding at June 30, 1994 ranged in price from $7.96 to $39.19 per share.
Kendall has a restricted stock grant agreement which provides for the
issuance of up to 1,000,000 shares of common stock to a key executive. As a
result of the Merger, up to 1,294,850 shares of the Company's common stock
became issuable under the agreement. Rights under the grant agreement fully vest
on July 7, 2002, subject to accelerated vesting if Kendall achieves certain
annual financial operating targets, as specified in the grant agreement. As of
June 30, 1994 rights for 1,294,850 shares were outstanding under the grant
agreement. As of December 31, 1994 1,035,880 shares under the grant agreement
had vested. Compensation expense of $1.3 million and $2.1 million was recorded
for the grant during fiscal 1994 and 1993, respectively. Unamortized
compensation expense was $0.7 million at June 30, 1994.
Tyco paid cash dividends of $0.40, $0.38 and $0.36 per share in fiscal 1994,
1993 and 1992, respectively. Kendall did not pay dividends to its shareholders.
11. COMMITMENTS AND CONTINGENCIES
The Company occupies certain facilities under leases which expire at various
dates through the year 2021. Rental expense under these leases and leases for
equipment was $60.4 million, $63.7 million, and $47.6 million for fiscal 1994,
1993 and 1992, respectively. At June 30, 1994 the minimum lease payments under
noncancellable leases were as follows (in thousands):
1995............................................................. $52,300
1996............................................................. 40,299
1997............................................................. 30,931
1998............................................................. 23,780
1999............................................................. 16,643
2000-2021........................................................ 85,574
In the normal course of business, the Company is liable for contract
completion and product performance. In the opinion of management, such
obligations will not significantly affect the Company's financial position or
results of operations.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company is involved in various stages of investigation and cleanup
related to environmental remediation matters. The ultimate cost of site cleanup
is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and
alternative cleanup methods. Based upon the Company's experience with the
foregoing environmental matters, the Company has concluded that there is a
reasonable possibility that remedial costs will be incurred with respect to
these sites in the aggregate amount in a range of $14.0 million to $50.5
million. At June 30, 1994, the Company has concluded that the most probable
amount which will be incurred within this range is $25.5 million, and such
amount is included in the caption accrued expenses in the accompanying
consolidated balance sheet. Based upon information available to the Company, at
those sites where there has been an allocation of the share of cleanup and such
liability could be joint and several, management believes it is probable that
other responsible parties will fully pay the cost apportioned to them, except
with respect to one site for which the Company has assumed that one of the
identified responsible parties will be unable to pay the cost apportioned to it
and that such party's cost will be reapportioned among the remaining responsible
parties. In view of the Company's financial position and reserves for
environmental matters of $25.5 million, the Company has concluded that its
payment of such estimated amounts will not have a material adverse effect on its
financial position or results of operations.
12. RETIREMENT PLANS
The Company has a number of noncontributory defined benefit retirement plans
covering certain of its domestic and foreign employees. The Company's funding
policy is to make annual contributions to the extent such contributions are tax
deductible as actuarially determined. The benefits under the defined benefit
plans are based on years of service and compensation.
The net periodic pension cost for all defined benefit pension plans include
the following components:
YEAR ENDED JUNE 30
-------------------------------
1994 1993 1992
-------- -------- -------
(IN THOUSANDS)
Service cost................................. $ 12,523 $ 11,451 $ 7,478
Interest..................................... 26,747 26,426 16,437
Actual return on assets...................... (7,717) (50,675) (9,358)
Net amortization and deferral................ (19,454) 24,467 (4,990)
-------- -------- -------
Net periodic pension cost.................... $ 12,099 $ 11,669 $ 9,567
-------- -------- -------
-------- -------- -------
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. RETIREMENT PLANS--(CONTINUED)
Accrued (prepaid) pension cost at June 30, 1994 for defined benefit plans is
as follows:
<TABLE><CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS TOTAL
------------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested............................................... $ 87,847 $223,462 $311,309
Non-vested........................................... 4,012 13,039 17,051
------------- -------------- --------
Total.............................................. 91,859 236,501 328,360
Effect of future salary increases...................... 7,214 11,831 19,045
------------- -------------- --------
Projected benefit obligations.......................... 99,073 248,332 347,405
Plan assets at fair value.............................. 113,597 185,976 299,573
------------- -------------- --------
Plan assets (in excess of) less than projected benefit
obligations............................................ (14,524) 62,356 47,832
Unrecognized transition asset (liability).............. 292 (1,096) (804)
Unrecognized prior service cost........................ (617) (7,583) (8,200)
Additional minimum liability........................... -- 15,545 15,545
Unrecognized net loss.................................. (14,953) (17,115) (32,068)
------------- -------------- --------
Accrued (prepaid) pension cost......................... $ (29,802) $ 52,107 $ 22,305
------------- -------------- --------
------------- -------------- --------
</TABLE>
Accrued (prepaid) pension cost at June 30, 1993 for defined benefit plans is
as follows:
<TABLE><CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS TOTAL
------------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested............................................... $ 209,528 $101,959 $311,487
Non-vested........................................... 7,665 8,021 15,686
------------- -------------- --------
Total.............................................. 217,193 109,980 327,173
Effect of future salary increases...................... 15,232 4,812 20,044
------------- -------------- --------
Projected benefit obligations.......................... 232,425 114,792 347,217
Plan assets at fair value.............................. 253,139 61,503 314,642
------------- -------------- --------
Plan assets (in excess of) less than projected benefit
obligations............................................ (20,714) 53,289 32,575
Unrecognized transition asset (liability).............. 341 (1,209) (868)
Unrecognized prior service cost........................ (628) (6,389) (7,017)
Additional minimum liability........................... -- 12,400 12,400
Unrecognized net loss.................................. (13,603) (6,138) (19,741)
------------- -------------- --------
Accrued (prepaid) pension cost......................... $ (34,604) $ 51,953 $ 17,349
------------- -------------- --------
------------- -------------- --------
</TABLE>
The Company has terminated certain defined benefit pension plans and is in
the process of distributing the plans' assets to the participants. Also, in
connection with the sale of the European fire products businesses as described
in Note 3, there was a settlement of a pension plan in Germany. Gains and losses
resulting from the above were not material.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. RETIREMENT PLANS--(CONTINUED)
Of the total plan obligations, 59% relate to domestic plans and 41% relate
to foreign plans. The average discount rate used in determining the actuarial
present value of the projected benefit obligation, weighted in relation to plan
obligations, was 8.5% and 8.2%, respectively, at June 30, 1994 and 1993. The
average rate of increase in future compensation levels was 5.7% at both June 30,
1994 and 1993. The weighted average long-term rate of return on assets was 9.4%
and 10.0%, respectively, at June 30, 1994 and 1993. Plan assets are invested
principally in equity and fixed income instruments.
The Company also has several defined contribution plans. Pension expense for
the defined contribution plans is computed as a percentage of participants'
compensation and was $15.6 million, $14.7 million and $10.9 million for fiscal
1994, 1993 and 1992, respectively. The Company also participates in a number of
multi-employer defined benefit plans on behalf of certain employees. Pension
expense related to multi-employer plans was $6.7 million, $6.9 million, and $6.6
million for fiscal 1994, 1993 and 1992, respectively.
Effective July 1, 1992 the Company adopted the provisions of SFAS 106. SFAS
106 requires the accrual method of accounting for post-retirement health care
and life insurance benefits based on actuarially determined costs. The Company
generally does not provide post-retirement benefits other than pensions for its
employees. Certain of the Company's acquired operations provide these benefits
to employees who were eligible at the date of acquisition. As of July 1, 1992
the Company recognized the full amount of its estimated accumulated
post-retirement benefit obligation. The effect on the date of adoption was to
reduce fiscal 1993 earnings by $54.9 million ($84.5 pre-tax) or $0.76 per share.
The charge has been reflected as a cumulative effect of an accounting change.
Net periodic post-retirement benefit cost for the years ended June 30, 1994
and 1993 reflects the following components:
1994 1993
------- ------
(IN THOUSANDS)
Cost attributable to service during the period........... $ 372 $ 389
Interest cost on accumulated post-retirement benefit
obligation............................................... 5,822 7,635
Net amortization and deferral............................ (1,275) --
------- ------
Net periodic post-retirement benefit cost................ $ 4,919 $8,024
------- ------
------- ------
For measurement purposes, in fiscal 1994 a 12% composite annual rate of
increase in the per capita cost of covered health care benefits was assumed,
which approximates the Company's current experience. The rate was assumed to
decrease gradually to 6% by the year 2008 and remains at that level thereafter.
The health care cost trend rate assumption may have a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by a percentage point would increase the accumulated post-retirement
benefit obligation as of June 30, 1994 by $6.3 million and the aggregate of the
service and interest cost component of net periodic post-retirement benefit cost
for the year then ended by $0.6 million. The weighted average discount rate used
in determining the accumulated post-retirement benefit obligation was 8.3% at
June 30, 1994 and 7.3% at June 30, 1993.
The incremental cost in fiscal 1993 of accounting for post-retirement health
and life insurance benefits under the new accounting method amounted to $2.3
million pre-tax. Under the previous accounting method, expense for benefits
aggregated $4.3 million pre-tax in fiscal 1992.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. RETIREMENT PLANS--(CONTINUED)
Presented below are the components of the accrued post-retirement benefit
obligation, all of which are unfunded:
<TABLE>
<CAPTION>
JUNE 30
-------------------
<S> <C> <C>
1994 1993
------- --------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.............................................................. $46,347 $ 82,300
Fully eligible active plan participants............................... 10,986 14,926
Other active plan participants........................................ 5,905 7,692
------- --------
63,238 104,918
Unrecognized prior service benefit...................................... 25,648 --
Unrecognized net gain (loss)............................................ 10,715 (4,719)
------- --------
Accrued post-retirement benefit cost.................................... $99,601 $100,199
------- --------
------- --------
</TABLE>
In fiscal 1994 the Company amended certain of its post-retirement health
care programs, principally to adjust the cost-sharing provisions. The amendment
resulted in a reduction of the Company's accumulated post-retirement benefit
obligation of $27.8 million, which created an unrecognized prior service
benefit. The unrecognized prior service benefit is being amortized over
approximately 16 years.
In November 1992, the Financial Accounting Standards Board issued SFAS 112
"Employers' Accounting for Post-Employment Benefits." The Company is required to
adopt SFAS 112 in fiscal 1995. Adoption of this standard is not expected to have
a material effect on the Company's financial position or results of operations.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. CONSOLIDATED SEGMENT DATA
Selected information by industry segment is presented below.
<TABLE><CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
<S> <C> <C> <C>
1994 1993 1992
---------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Fire Protection.............................. $1,525,906 $1,526,079 $1,615,723
Flow Control Products........................ 914,430 806,915 721,338
Electrical and Electronic Components......... 436,884 413,300 392,283
Disposable and Specialty Products............ 1,199,163 1,173,063 337,141
---------- ---------- ----------
$4,076,383 $3,919,357 $3,066,485
---------- ---------- ----------
---------- ---------- ----------
Income before income taxes, extraordinary item
and cumulative effect of accounting changes:
Fire Protection.............................. $ 70,171 $ 43,190(2) $ 85,189(4)
Flow Control Products........................ 74,125 44,638(2) 37,704(4)
Electrical and Electronic Components......... 72,510 68,401(2) 54,093
Disposable and Specialty Products............ 191,669 126,280(3) 43,432
---------- ---------- ----------
Income from operations......................... 408,475 282,509 220,418
Interest expense............................. (62,431) (85,785) (63,261)
Corporate and other amounts.................. (17,854)(1) (17,429)(2) (16,007)(4)
---------- ---------- ----------
$ 328,190 $ 179,295 $ 141,150
---------- ---------- ----------
---------- ---------- ----------
Total assets:
Fire Protection.............................. $1,135,128 $1,180,123 $1,337,690
Flow Control Products........................ 861,362 890,134 749,746
Electrical and Electronic Components......... 178,336 192,919 187,048
Disposable and Specialty Products............ 886,759 863,197 149,898
Corporate assets, including cash............. 79,236 38,593 27,155
---------- ---------- ----------
$3,140,821 $3,164,966 $2,451,537
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization:
Fire Protection.............................. $ 29,513 $ 30,975 $ 37,612
Flow Control Products........................ 39,409 34,225 31,846
Electrical and Electronic Components......... 11,313 10,889 11,810
Disposable and Specialty Products............ 40,618 48,278 8,990
Corporate.................................... 4,027 3,982 4,350
---------- ---------- ----------
$ 124,880 $ 128,349 $ 94,608
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Fire Protection.............................. $ 17,445 $ 24,931 $ 22,582
Flow Control Products........................ 33,941 37,667 25,580
Electrical and Electronic Components......... 11,728 9,278 13,340
Disposable and Specialty Products............ 26,341 22,281 6,112
Corporate.................................... 347 242 36
---------- ---------- ----------
$ 89,802 $ 94,399 $ 67,650
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------
(1) Fiscal 1994 includes expense of $4.1 million related to the accounts
receivable program, which cost would have been reflected as interest expense
under previous financing arrangements. See Note 6.
(Footnotes continued on following page)
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. CONSOLIDATED SEGMENT DATA--(CONTINUED)
(Footnotes continued from preceding page)
(2) Fiscal 1993 includes restructuring and severance charges of $16.0 million,
$19.0 million, $0.7 million, and $3.6 million, for Fire Protection, Flow
Control Products, Electrical and Electronic Components and Corporate,
respectively. See Note 4.
(3) Fiscal 1993 includes a non-recurring inventory charge of $22.5 million
related to the asset valuation requirements of fresh-start reporting. See
Note 1.
(4) Fiscal 1992 includes restructuring and severance charges of $10.0 million,
$13.4 million and $2.2 million for Fire Protection, Flow Control Products
and Corporate, respectively. See Note 4.
14. CONSOLIDATED GEOGRAPHIC DATA
Selected information by geographic area for the three years in the period
ended June 30, 1994 are presented below. Fiscal 1993 income from operations
includes restructuring and severance charges of $20.9 million, $8.5 million and
$6.3 million for North America, Europe and Asia-Pacific, respectively. Fiscal
1992 income from operations includes restructuring and severance charges of
$14.4 million and $9.0 million for North America and Europe, respectively.
<TABLE><CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
<S> <C> <C> <C>
1994 1993 1992
---------- ---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
North America........................................ $3,011,678 $2,878,686 $2,102,299
Europe............................................... 705,240 714,536 651,118
Asia-Pacific......................................... 359,465 326,135 313,068
---------- ---------- ----------
$4,076,383 $3,919,357 $3,066,485
---------- ---------- ----------
---------- ---------- ----------
Income From Operations:
North America........................................ $ 362,764 $ 256,940 $ 173,111
Europe............................................... 34,519 24,620 34,108
Asia-Pacific......................................... 11,192 949 13,199
---------- ---------- ----------
$ 408,475 $ 282,509 $ 220,418
---------- ---------- ----------
---------- ---------- ----------
Total Assets:
North America........................................ $2,106,391 $2,232,463 $1,591,141
Europe............................................... 684,508 664,859 600,353
Asia-Pacific......................................... 270,686 229,051 232,888
Corporate assets, including cash..................... 79,236 38,593 27,155
---------- ---------- ----------
$3,140,821 $3,164,966 $2,451,537
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
15. SUPPLEMENTARY BALANCE SHEET INFORMATION
JUNE 30
--------------------
1994 1993
-------- --------
(IN THOUSANDS)
Inventories:
Purchased materials and manufactured parts............ $145,965 $128,510
Work in process....................................... 92,786 87,865
Finished goods........................................ 278,317 285,963
-------- --------
$517,068 $502,338
-------- --------
-------- --------
Accrued salaries and vacations........................ $ 57,246 $ 55,328
-------- --------
-------- --------
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEAR ENDED JUNE 30
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
Maintenance and repairs....................... $71,498 $71,388 $52,017
------- ------- -------
------- ------- -------
Research and development...................... $32,170 $30,268 $15,805
------- ------- -------
------- ------- -------
17. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE><CAPTION>
FOR THE YEAR ENDED JUNE 30, 1994(1)
------------------------------------------------
<S> <C> <C> <C> <C>
1ST 2ND 3RD 4TH
-------- -------- ---------- ----------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales..................................... $999,598 $998,073 $1,003,730 $1,074,982
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Gross profit.................................. $259,133 $259,687 $ 260,327 $ 294,042
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Net income.................................... $ 42,068 $ 43,402 $ 49,516 $ 54,205
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Net Income Per Share.......................... $ .57 $ .59 $ .67 $ .73
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
<TABLE><CAPTION>
FOR THE YEAR ENDED JUNE 30, 1993(1)
------------------------------------------------
<S> <C> <C> <C> <C>
1ST(1)(3) 2ND(1) 3RD(1) 4TH(2)
---------- -------- -------- ----------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales..................................... $1,009,195 $958,018 $946,387 $1,005,757
---------- -------- -------- ----------
---------- -------- -------- ----------
Gross profit.................................. $ 257,289 $245,973 $245,050 $ 261,098
---------- -------- -------- ----------
---------- -------- -------- ----------
Income Before Extraordinary Item and
Cumulative Effect of Accounting Changes..... $ 17,308 $ 31,359 $ 36,468 $ 9,323
---------- -------- -------- ----------
---------- -------- -------- ----------
Income Per Share Before Extraordinary Item and
Cumulative Effect of Accounting Changes..... $ .24 $ .43 $ .50 $ .13
---------- -------- -------- ----------
---------- -------- -------- ----------
Net Income Per Share.......................... $ (.75) $ .43 $ .50 $ .09
---------- -------- -------- ----------
---------- -------- -------- ----------
</TABLE>
Income per share amounts are calculated independently for each of the
quarters presented. The sum of the quarters may not equal the full year earnings
per share amounts.
- ------------
(1) During the fourth quarter of fiscal 1993, the Company changed its method of
accounting for income taxes and post-retirement benefits other than
pensions, effective as of July 1, 1992 (the Company's first quarter). The
results presented for the first three quarters of fiscal 1993 have been
restated for the impact of the new accounting methods. The impact on income
per share before extraordinary item and cumulative effect of accounting
changes for the first three quarters was not material.
(2) Included in the fourth quarter of fiscal 1993 are after-tax restructuring
and severance charges of $27.3 million and a special pension charge of $1.2
million.
(3) Included in the first quarter of fiscal 1993 is an after-tax non-recurring
inventory charge of $22.5 million.
F-24
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE><CAPTION>
(UNAUDITED)
DECEMBER 31, 1994 JUNE 30, 1994
----------------- -------------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 56,781 $ 75,843
Receivables, less allowance for doubtful accounts of $31,209
in fiscal 1995 and $29,311 in fiscal 1994................... 511,224 515,160
Contracts in process.......................................... 90,839 79,475
Inventories................................................... 544,254 517,068
Deferred income taxes......................................... 115,266 101,837
Prepaid expenses and other.................................... 53,442 54,904
----------------- -------------
1,371,806 1,344,287
----------------- -------------
PROPERTY AND EQUIPMENT:
Land.......................................................... 33,203 33,235
Buildings..................................................... 267,794 257,485
Machinery and equipment....................................... 699,681 647,058
Leasehold improvements........................................ 16,374 15,166
Construction in progress...................................... 73,019 42,648
Accumulated depreciation...................................... (456,987) (385,719)
----------------- -------------
633,084 609,873
----------------- -------------
GOODWILL AND OTHER INTANGIBLE ASSETS.......................... 932,638 918,791
REORGANIZATION VALUE IN EXCESS OF IDENTIFIABLE ASSETS......... 112,271 115,201
DEFERRED INCOME TAXES......................................... 95,151 112,691
OTHER ASSETS.................................................. 41,519 39,978
----------------- -------------
TOTAL ASSETS.................................................. $ 3,186,469 $ 3,140,821
----------------- -------------
----------------- -------------
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt........ $ 104,655 $ 163,164
Accounts payable.............................................. 324,258 332,004
Accrued expenses.............................................. 390,537 382,576
Contracts in process--billings in excess of costs............. 76,977 63,324
Income taxes.................................................. 78,505 73,301
----------------- -------------
974,932 1,014,369
----------------- -------------
DEFERRED INCOME TAXES......................................... 7,986 13,698
LONG-TERM DEBT................................................ 563,467 588,491
OTHER LIABILITIES............................................. 153,251 157,237
COMMITMENTS AND CONTINGENCIES.................................
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized 2,000,000 shares;
none outstanding............................................ -- --
Common stock, $.50 par value, authorized 180,000,000 shares;
outstanding 73,901,064 shares in fiscal 1995 and 71,084,293
shares in fiscal 1994, net of reacquired shares of 7,594,427
in fiscal 1995 and 7,600,747 in fiscal 1994................. 36,951 35,542
Capital in excess of par value, net of deferred compensation
of $25,367 in fiscal 1995 and $9,318 in fiscal 1994......... 603,378 567,476
Currency translation adjustment............................... (23,819) (40,874)
Retained earnings............................................. 870,323 804,882
----------------- -------------
1,486,833 1,367,026
----------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................... $ 3,186,469 $ 3,140,821
----------------- -------------
----------------- -------------
</TABLE>
See notes to unaudited consolidated financial statements.
F-25
<PAGE>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE><CAPTION>
FOR THE SIX MONTHS ENDED
DECEMBER 31
------------------------
1994 1993
---------- ----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
SALES.............................................................. $2,151,895 $1,997,671
---------- ----------
COSTS AND EXPENSES:
Cost of sales...................................................... 1,572,626 1,478,851
Selling, general and administrative................................ 354,111 336,163
Merger and transaction related costs............................... 37,170 --
Interest........................................................... 31,703 33,320
---------- ----------
1,995,610 1,848,334
---------- ----------
Income before income taxes and extraordinary item.................. 156,285 149,337
Income taxes....................................................... (76,276) (63,867)
---------- ----------
Income before extraordinary item................................... 80,009 85,470
Extraordinary item, net of tax benefit............................. (2,600) --
---------- ----------
NET INCOME......................................................... $ 77,409 $ 85,470
---------- ----------
---------- ----------
INCOME PER SHARE:
Before extraordinary item.......................................... $ 1.07 $ 1.16
Extraordinary item................................................. (.03) --
---------- ----------
NET INCOME......................................................... $ 1.04 $ 1.16
---------- ----------
---------- ----------
CASH DIVIDENDS PER COMMON SHARE.................................... $ .20 $ .20
---------- ----------
---------- ----------
COMMON EQUIVALENT SHARES........................................... 74,732 73,624
---------- ----------
---------- ----------
</TABLE>
See notes to unaudited consolidated financial statements.
F-26
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE><CAPTION>
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
-------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL IN CURRENCY
COMMON STOCK, EXCESS OF TRANSLATION RETAINED
$.50 PAR VALUE PAR VALUE ADJUSTMENT EARNINGS
-------------- ---------- ----------- --------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1993...................... $ 35,462 $ 558,481 $ (89,386) $634,229
Net income.................................... 85,470
Dividends..................................... (9,269)
Management equity compensation................ 809
Restricted stock grants, cancellations, tax
benefits and other.......................... 16 1,294
Warrants, options exercised................... 319
Currency translation adjustment............... (2,939)
Amortization of deferred compensation......... 1,810
-------------- ---------- ----------- --------
BALANCE AT DECEMBER 31, 1993.................. $ 35,478 $ 562,713 $ (92,325) $710,430
-------------- ---------- ----------- --------
-------------- ---------- ----------- --------
BALANCE AT JUNE 30, 1994...................... $ 35,542 $ 567,476 $ (40,874) $804,882
Net income.................................... 77,409
Dividends..................................... (11,968)
Management equity compensation................ 404
Restricted stock grants, cancellations, tax
benefits and other.......................... 174 255
Warrants, options exercised................... 1,235 33,392
Currency translation adjustment............... 17,055
Amortization of deferred compensation......... 1,851
-------------- ---------- ----------- --------
BALANCE AT DECEMBER 31, 1994.................. $ 36,951 $ 603,378 $ (23,819) $870,323
-------------- ---------- ----------- --------
-------------- ---------- ----------- --------
</TABLE>
See notes to unaudited consolidated financial statements.
F-27
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE><CAPTION>
FOR THE SIX MONTHS
ENDED
DECEMBER 31,
----------------------
<S> <C> <C>
1994 1993
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 77,409 $ 85,470
Adjustments to reconcile net income to net cash provided by operating
activities:
Extraordinary item................................................. 2,600 --
Depreciation....................................................... 43,721 40,900
Amortization of intangibles........................................ 20,498 21,903
Provision for management equity plans.............................. -- 7,195
Deferred income taxes.............................................. (1,426) 22,390
Provision for losses on accounts receivable and inventory
writedowns........................................................... 6,845 7,328
Changes in assets and liabilities net of effects from acquisitions
and divestitures:
Decrease in accounts receivable and contracts in process......... 15,280 182,950
Increase in inventory............................................ (23,966) (15,575)
Decrease in accounts payable and accrued expenses................ (25,203) (46,663)
Increase in income taxes payable................................. 6,492 323
Other............................................................ 5,753 3,024
--------- ---------
Net cash provided by operating activities.......................... 128,003 309,245
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................. (64,292) (41,754)
Purchase of businesses, net of cash acquired......................... (23,601) (15,015)
--------- ---------
Net cash used in investing activities.............................. (87,893) (56,769)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt......................................... 144,889 --
Payments on long-term debt and lines of credit....................... (229,430) (251,092)
Dividends paid....................................................... (9,258) (9,262)
Exercise of stock options and warrants............................... 34,627 319
Other................................................................ -- (344)
--------- ---------
Net cash used in financing activities.............................. (59,172) (260,379)
--------- ---------
Decrease in cash and cash equivalents................................ (19,062) (7,903)
Cash and cash equivalents at beginning of year....................... 75,843 50,041
--------- ---------
Cash and cash equivalents at end of period........................... $ 56,781 $ 42,138
--------- ---------
--------- ---------
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Interest paid...................................................... $ 33,636 $ 36,058
--------- ---------
--------- ---------
Income taxes paid.................................................. $ 56,234 $ 35,603
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. On October 19, 1994, a wholly-owned subsidiary of Tyco merged with
Kendall International, Inc. ("Kendall"). Shareholders of Kendall received
1.29485 shares of Tyco common stock for each share of Kendall common stock. The
transaction qualified for pooling of interests accounting treatment, which is
intended to present as a single interest the common shareholder interests which
were previously independent. Accordingly, the historical financial statements
for periods prior to the consummation of the combination are restated as though
the companies had been combined during such periods. All fees and expenses
related to the merger and to the integration of the combined companies have been
expensed as required under the pooling of interests accounting method. Such fees
and expenses amounted to $37.2 million ($31.2 million after-tax). The charge
includes $18.6 million for financial advisory, legal, accounting and other
direct transaction fees, $14.9 million for payments under severance and
employment agreements and other costs associated with certain compensation
plans, and $3.7 million for other acquisition and integration costs.
2. The unaudited financial statements presented herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X as promulgated by the Securities and Exchange Commission. Accordingly, said
financial statements do not include all of the information and note disclosures
required by generally accepted accounting principles for complete financial
statements. These statements should be read in conjunction with the financial
statements and notes thereto for the year ended June 30, 1994 included in the
Company's Current Report on Form 8-K dated January 10, 1995 and elsewhere in
this Prospectus. The accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted auditing
standards, but in the opinion of management such financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary to
summarize fairly the Company's financial position and results of operations.
3. Long-term debt is as follows:
<TABLE><CAPTION>
DECEMBER 31, 1994 JUNE 30, 1994
----------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Credit agreement.............................. $-- $ 94,447
Uncommitted lines of credit................... -- 22,000
Insurance company notes....................... 135,000 135,000
8.25% subordinated notes due 2003............. -- 100,000
8.125% public notes due 1999.................. 144,889 --
6.375% public debentures due 2004............. 104,262 104,644
9.5% public debentures due 2022............... 199,568 199,559
8.0% public debentures due 2023............... 49,958 49,957
Other, including industrial revenue bonds..... 34,445 46,048
----------------- -------------
668,122 751,655
Less current portion and loans payable........ 104,655 163,164
----------------- -------------
$ 563,467 $ 588,491
----------------- -------------
----------------- -------------
</TABLE>
Under Tyco's credit agreement with a group of commercial banks, Tyco had the
right until July 1997 to borrow $200 million or a portion thereof for its
general corporate purposes. Kendall also had a $300 million revolving credit
facility which was available through July 1999. In October 1994, the Company
replaced those agreements with a new credit agreement which gives the Company
the right to borrow $300 million or a portion thereof until October 1999. The
principal amount then outstanding will be due and payable at that time. Interest
payable on borrowings is variable based upon the
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Company's option of selecting a Eurodollar rate plus 0.325%, a certificate of
deposit rate plus 0.45% or a base rate, as defined.
The Company's uncommitted lines of credit are arrangements which allow the
Company to borrow from commercial banks on an "as offered" basis. The borrowings
and repayments occur daily and contain no specific terms other than due dates
and interest rates. The due dates generally range from overnight to 90 days and
interest rates approximate those available under the credit agreement.
In November 1994, the Company issued $145 million principal amount of 8.125%
notes due 1999. The net proceeds from the sale of notes were used, in part, to
refinance $100 million principal amount of Kendall's subordinated notes due
2003. The balance was used to refinance, in part, the $80 million of insurance
company notes that were due on January 30, 1995. In the interim, the proceeds
were used to repay outstanding borrowings under various uncommitted lines of
credit.
In connection with the refinancing of Kendall's notes, the Company recorded
a charge of $4.3 million ($2.6 million after-tax) representing unamortized debt
issuance fees and a call premium, as an extraordinary loss for the Company's
quarter ended December 31, 1994.
Under its various loan agreements, the Company is required to meet certain
covenants, none of which is considered restrictive to the operations of the
Company.
4. The Company has an agreement under which it sells participating interests
in a defined pool of trade accounts receivable. Proceeds of $150 million from
the sale are less than the face amount of accounts receivable sold by an amount
which approximates the purchaser's financing cost of issuing its own commercial
paper backed by these accounts receivable. The discount from the face amount was
$3.6 million and $1.3 million for the first six months of fiscal 1995 and 1994,
respectively, and has been included in selling, general and administrative
expense in the Company's Consolidated Statement of Income.
5. Selected information for the Company's four industry segments follows (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1994 1993
---------- ----------
SALES:
Fire Protection................................... $ 801,944 $ 763,999
Flow Control Products............................. 480,974 431,789
Electrical and Electronic Components.............. 205,638 214,578
Disposable and Specialty Products................. 663,339 587,305
---------- ----------
$2,151,895 $1,997,671
---------- ----------
---------- ----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM:
Fire Protection................................... $ 39,198 $ 34,269
Flow Control Products............................. 39,511 33,936
Electrical and Electronic Components.............. 36,595 36,094
Disposable and Specialty Products................. 121,400 86,287
---------- ----------
Total operations................................ 236,704 190,586
Interest expense.................................. (31,703) (33,320)
Corporate and other amounts(1).................... (48,716) (7,929)
---------- ----------
$ 156,285 $ 149,337
---------- ----------
---------- ----------
</TABLE>
- ------------
(1) The six months ended December 31, 1994 includes charges of $37.2 million for
merger and transaction related costs. See Note 1 to these unaudited
consolidated financial statements.
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
6. Differences between the provision for federal income taxes at the
statutory rate and the amounts provided are as follows (in thousands):
SIX MONTHS ENDED
DECEMBER 31,
------------------
1994 1993
------- -------
Provision at statutory rate............................. $54,700 $52,268
State income taxes...................................... 7,446 5,424
Non-deductible merger and transaction related costs..... 7,009 --
Depreciation and amortization under purchase
accounting.............................................. 5,705 5,606
Foreign earnings taxed at different rates............... 1,942 2,687
Effect of rate changes.................................. -- (3,224)
Other................................................... (526) 1,106
------- -------
Provision for income taxes.............................. $76,276 $63,867
------- -------
------- -------
In the normal course, the Company's federal income tax returns are examined
by the Internal Revenue Service and in connection with such examinations,
significant assessments could arise. Currently, the Company's fiscal 1991 and
1992 returns are under examination. Ultimate resolution of such assessments, if
any, are not expected to have a material adverse effect on the Company's
financial position or results of operations.
7. Inventories are classified as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 JUNE 30, 1994
----------------- -------------
<S> <C> <C>
Purchased materials and manufactured parts.... $ 160,132 $ 145,965
Work in process............................... 99,883 92,786
Finished goods................................ 284,239 278,317
----------------- -------------
$ 544,254 $ 517,068
----------------- -------------
----------------- -------------
</TABLE>
8. In November 1992, the Financial Accounting Standards (the "Board") issued
Statement of Financial Accounting Standards ("SFAS") No. 112, "Employer's
Accounting for Post-Employment Benefits." The Company adopted SFAS 112 in the
first quarter of fiscal 1995. The effect of adoption of this standard did not
materially affect the Company's financial position or results of operations. In
May 1993, the Board issued SFAS 114, "Accounting by Creditors for Impairment of
a Loan." This new standard must be adopted no later than fiscal 1996. Adoption
of this standard is not expected to have a material effect on the Company's
financial position or results of operations.
9. In the normal course of business, the Company is liable for contract
completion and product performance. In addition, the Company is in receipt of
notifications from various environmental agencies that conditions at a number of
sites where hazardous wastes of the Company and other persons were disposed of
may require cleanup and other possible remedial action. In the opinion of
management, these obligations will not materially affect the Company's financial
position or results of operations.
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF ANY OFFER TO BUY, THE COMMON
STOCK TO ANY PERSON IN ANY JURISDICTION WHERE, OR IN ANY CIRCUMSTANCE IN WHICH,
SUCH OFFER OR SOLICITATION MAY NOT BE LEGALLY MADE. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE
COMPANY OR THE INFORMATION SET FORTH IN THE PROSPECTUS SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
Available Information................. 3
Incorporation of Certain Information
byReference........................... 3
Prospectus Summary.................... 4
The Offerings......................... 4
Summary Consolidated Financial Data... 5
The Company........................... 7
Use of Proceeds....................... 16
Price Range of Common Stock and
Dividends........................... 16
Capitalization........................ 17
Selected Consolidated Financial
Data.................................. 18
Management's Discussion and Analysis
of Financial Condition and Operating
Results............................... 19
Selling Shareholders.................. 25
Description of Capital Stock.......... 30
Underwriting.......................... 35
Validity of Shares.................... 37
Experts............................... 37
Consolidated Financial Statements..... F-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7,782,871 SHARES
[LOGO]
COMMON STOCK
-------------------
PROSPECTUS
------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
FEBRUARY , 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ALTERNATE INTERNATIONAL
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 23, 1995
PROSPECTUS
7,782,871 SHARES
[LOGO]
COMMON STOCK
-------------------
Of the 7,782,871 shares of Common Stock being offered, 1,556,574 shares are
being offered initially outside the United States and Canada by the
International Managers and 6,226,297 shares are being offered initially in the
United States and Canada by the U.S. Underwriters. See "Selling Shareholders"
and "Underwriting."
Of the 7,782,871 shares of Common Stock being offered, 7,590,373 shares are
being sold by certain Selling Shareholders of the Company, 147,930 shares are
being sold upon the exercise of Warrants and 44,568 shares are being sold upon
the exercise of Reallocation Rights. In connection with the Offerings, certain
Selling Shareholders will sell to the Underwriters their Warrants and
Reallocation Rights, and the Underwriters will exercise such Warrants and
Reallocation Rights in order that the underlying shares of Common Stock may be
sold in the Offerings. See "Description of Capital Stock." The Company will not
receive any of the proceeds from the sale of the shares offered hereby or from
the exercise of the Reallocation Rights, although it will receive $11.94 per
share (or an aggregate of $852,397) in connection with the exercise of A
Warrants and $15.92 per share (or an aggregate of $1,218,517) in connection with
the exercise of B Warrants. See "Use of Proceeds."
The Common Stock is traded on the New York Stock Exchange under the symbol
"TYC." On February 22, 1995, the last reported sale price of the Common Stock,
as reported on the New York Stock Exchange, was $50.25 per share.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) SHAREHOLDERS(2)(3)
Per Share........................... $ $ $
Total(4)............................ $ $ $
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) The Company has agreed to pay expenses related to the Offerings, estimated
at $697,855.
(3) Does not include $852,397 ($11.94 per share) to be paid to the Company by
the Underwriters upon exercise of A Warrants to be purchased by the
Underwriters from certain of the Selling Shareholders and $1,218,517 ($15.92
per share) to be paid to the Company by the Underwriters upon exercise of B
Warrants to be purchased by the Underwriters from certain of the Selling
Shareholders. Also does not include $532,142 in respect of the exercise
price of the Reallocation Rights, a portion of which is payable to certain
Selling Shareholders.
(4) Certain of the Selling Shareholders have granted the International Managers
and the U.S. Underwriters options, exercisable within 30 days after the date
hereof, to purchase 152,482 and 609,927 additional shares of Common Stock,
respectively, to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Selling Shareholders will be $ , $ and $ ,
respectively. See "Underwriting."
-------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares will be made in New York, New York, on or about March ,
1995.
-------------------
MERRILL LYNCH INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
-------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1995.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
ALTERNATE INTERNATIONAL
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of certain anticipated United States
federal income tax consequences of the ownership and disposition of Common Stock
by a person that, for United States federal income tax purposes, is not a
"United States Person" (a "Non-U.S. Holder"). For these purposes, a "United
States Person" means a citizen or resident of the United States, a corporation,
a partnership or other entity created or organized in or under the laws of the
United States or any state thereof, or an estate or trust, the income of which
is subject to United States federal income taxation regardless of its source.
The following discussion does not consider specific facts and circumstances
that may be relevant to a particular Non-U.S. Holder's tax position, including
the benefits that may be available to any person under an applicable tax treaty
to which the United States is a party. Specifically, without limitation, this
discussion does not address the United States tax consequences to any Non-U.S.
Holder who at any time owns (directly or through attribution) more than 5% of
the Common Stock or to any Non-U.S. Holder that is a controlled foreign
corporation, a foreign personal holding company, a foreign private foundation, a
foreign government, or a U.S. expatriate. Furthermore, the following discussion
is based on current provisions of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), and on administrative and judicial pronouncements
thereunder, all of which are subject to change. Each Non-U.S. Holder is urged to
consult a tax advisor with respect to the United States tax consequences of
acquiring, holding and disposing of Common Stock, as well as any tax
consequences that may arise under the laws of any foreign, state, local or other
tax jurisdiction.
DIVIDENDS
Dividends paid on shares of Common Stock will be treated as dividends for
United States federal income tax purposes to the extent of the Company's current
or accumulated earnings and profits (as determined pursuant to the Code). Any
portion of a payment that exceeds such earnings and profits will be treated as a
return of capital to the extent of each Non-U.S. Holder's adjusted tax basis in
his or her Common Stock. Any portion of a payment that exceeds the sum of a
stockholder's proportionate share of earnings and profits and his or her
adjusted tax basis will be treated as a gain from the sale or exchange of his or
her Common Stock to the extent of any such excess, with the consequences
described below under "Gain on Disposition of Common Stock."
Each Non-U.S. Holder who receives a payment treated as a dividend for United
States federal income tax purposes (including, for this purpose, payments
representing a return of capital or gain) will be subject to withholding of
United States federal income tax at a rate of 30% of such payment unless either
(i) such holder is eligible for a reduced tax rate or a tax exemption under an
applicable income tax treaty or (ii) such holder is engaged in the conduct of a
trade or business within the United States and the dividend is effectively
connected with that trade or business. If the dividend is effectively connected
with the conduct of a trade or business within the United States by a Non-U.S.
Holder, the dividend (as adjusted by any applicable deductions) will be subject
to United States federal income tax at regular rates generally applicable to
United States Persons. Any such effectively connected dividends received by a
corporate Non-U.S. Holder may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. Certain certification requirements
may have to be satisfied to claim treaty benefits or exemption from withholding
under the foregoing rules. A Non-U. S. Holder of Common Stock that is eligible
for a reduced rate of U.S. federal withholding tax pursuant to a tax treaty may
obtain a refund of any excess amounts currently withheld by filing an
appropriate claim for refund with the U.S. Internal Revenue Service. Non-U.S.
Holders that are partnerships or trusts may be subject to certain additional
withholding requirements and are urged to consult their tax advisors as to the
application of such requirements.
GAIN ON DISPOSITION OF COMMON STOCK
Except as described below, a Non-U.S. Holder will generally not be subject
to United States federal income tax (and no tax will generally be withheld) with
respect to gain recognized on a sale or other disposition of the Common Stock
unless (i) the gain is effectively connected with a trade or business conducted
by the Non-U.S. Holder in the United States (and, if an applicable tax treaty so
provides, is attributable to a United States permanent establishment of such
holder), (ii) the Company is, or has been during the five year period ending on
the date of disposition, a United States real property holding corporation for
United States federal income tax purposes (a "USRPHC"), or (iii) in the case of
an individual Non-U.S. Holder who holds the Common Stock as a capital asset,
such holder is present in the United States for 183 days or more in the taxable
year of the disposition and either (a) has a tax home in the United States
within the meaning of Section 911(d)(3) of the Code or (b) the gain is
attributable to an office or other fixed place of business maintained by such
holder in the United States.
With respect to (i) if the gain is effectively connected with the conduct of
a trade or business within the United States by the Non-U.S. holder (and, if an
applicable tax treaty so provides, is attributable to
35
<PAGE>
ALTERNATE INTERNATIONAL
a United States permanent establishment of such holder), the gain as adjusted by
any applicable deductions will be subject to United States federal income tax at
rates generally applicable to United States Persons (and may, in the case of a
corporate Non-U.S. Holder, also be subject to "branch profits tax"). With
respect to (ii), the Company believes that it has not been and is not currently
a USRPHC and does not anticipate becoming a USRPHC. Notwithstanding the
foregoing, even if the Company were treated as a USRPHC, the Common Stock would
not be treated as an interest in a USRPHC if (a) a Non-U.S. Holder has not owned
(directly or through attribution) more than 5% of the Common Stock for the five
year period ending on the date of disposition, and (b) the Common Stock is
regularly traded on an established securities exchange. An individual Non-U.S.
Holder to whom (iii) applies will generally be taxed at a rate of 30% on any
gain recognized during any year on the sale of Common Stock (as offset by U.S.
capital losses, if any).
FEDERAL ESTATE TAXES
Common Stock held by an individual Non-U.S. Holder at the date of his or her
death will be included in his or her gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
UNITED STATES INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
The Company must report annually to the Internal Revenue Service the total
amount of United States federal income taxes withheld from dividends paid to
Non-U.S. Holders. In addition, the Company must report annually to the Internal
Revenue Service and each Non-U.S. Holder the amount of dividends and other
payments distributed to and the tax withheld with respect to such holder. These
information reporting requirements apply regardless of whether withholding is
reduced or eliminated by an applicable treaty or is not required because the
dividends are effectively connected with a U.S. trade or business of a Non-U.S.
Holder. Under certain treaties, the Internal Revenue Service may make this
information available to the tax authorities in the country of a Non-U.S.
Holder's residence.
Backup withholding tax (which generally is a withholding tax imposed at the
rate of 31% on certain payments to persons that are not "exempt recipients" and
that fail to furnish certain information under United States information
reporting requirements) and information reporting relating thereto generally
will not apply to dividends and other payments paid to Non-U.S. Holders that are
either (i) subject to the 30% withholding discussed above or (ii) not so subject
because a tax treaty applies that reduces or eliminates such withholding. In
addition, under current temporary United States Treasury regulations, dividends
payable at an address located outside of the United States to a Non-U.S. Holder
are generally not subject to the backup withholding and information reporting
rules. These backup withholding requirements and information reporting rules
will apply to the gross proceeds paid by or through a United States office of a
broker to a Non-U.S. Holder upon the disposition of shares of Common Stock,
unless the Non-U.S. Holder certifies under penalty of perjury that it is a
foreign person or the Non-U.S. Holder otherwise establishes an exemption. Under
existing regulations, information reporting and backup withholding will also
apply to the payment of gross proceeds of a sale or other disposition of Common
Stock by or through a foreign office of a broker with certain United States
connections, unless the broker has documentary evidence that the holder is a
Non-U.S. Holder and the broker has no actual knowledge to the contrary. Proposed
regulations generally provide that backup withholding will not apply to
reportable payments where the payee may have a United States connection, unless
the broker has actual knowledge that the payee is United States Person. Any
amounts withheld under the backup withholding rules from a payment to a Non-U.S.
Holder will be refunded (or credited against the Non-U.S. Holder's United States
federal income tax liability, if any), provided that the required information is
furnished to the Internal Revenue Service. These backup withholding and
information reporting requirements are under review by the United States
Treasury Department. Their application to the ownership and disposition of
shares of Common Stock could be changed by future regulations.
36
<PAGE>
ALTERNATE INTERNATIONAL
UNDERWRITING
Subject to the terms and conditions set forth in an international purchase
agreement (the "International Purchase Agreement") among the Company, the
Selling Shareholders and each of the underwriters named below (the
"International Managers") and concurrently with the sale of 6,226,297 shares of
Common Stock to the U.S. Underwriters (as defined below), the Selling
Shareholders severally have agreed to sell to the International Managers, and
each of the International Managers severally has agreed to purchase from the
Selling Shareholders, the aggregate number of shares of Common Stock (or
Warrants or Reallocation Rights to acquire such shares of Common Stock) set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch International Limited......................................
Goldman Sachs International..............................................
Donaldson, Lufkin & Jenrette Securities Corporation......................
Lehman Brothers International (Europe)...................................
---------
Total........................................................... 1,556,574
---------
---------
</TABLE>
Merrill Lynch International Limited, Goldman Sachs International, Donaldson,
Lufkin & Jenrette Securities Corporation and Lehman Brothers International
(Europe) are acting as lead managers (the "Lead Managers") of the International
Managers.
The Company and the Selling Shareholders have also entered into a purchase
agreement (the "U.S. Purchase Agreement" and, together with the International
Purchase Agreement, the "Purchase Agreements") with certain underwriters in the
United States and Canada (the "U.S. Underwriters" and, together with the
International Managers, the "Underwriters") for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette
Securities Corporation and Lehman Brothers Inc. are acting as U.S.
Representatives. Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of 1,556,574 shares of Common
Stock (or Warrants or Reallocation Rights to acquire such shares of Common
Stock) to the International Managers pursuant to the International Purchase
Agreement, the Selling Shareholders severally have agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters severally have agreed to purchase from
the Selling Shareholders, an aggregate of 6,226,297 shares of Common Stock (or
Warrants or Reallocation Rights to acquire such shares of Common Stock). The
initial public offering price per share and the total underwriting discount per
share are identical under the International Purchase Agreement and the U.S.
Purchase Agreement.
In each Purchase Agreement, the several International Managers and the
several U.S. Underwriters, respectively, have agreed, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all of the shares
of Common Stock (or Warrants or Reallocation Rights to acquire such shares of
Common Stock) being sold pursuant to such Purchase Agreement if any such shares
of Common Stock (or Warrants or Reallocation Rights to acquire such shares of
Common Stock) being sold pursuant to such Purchase Agreement are purchased.
Under certain circumstances, the commitments of non-defaulting International
Managers or U.S. Underwriters (as the case may be) may be increased. The sale of
Common Stock (or Warrants or Reallocation Rights to acquire such shares of
Common Stock) to the International Managers is conditioned upon the sale of the
shares of Common Stock (or Warrants or Reallocation Rights to acquire such
shares of Common Stock) to the U.S. Underwriters.
The Lead Managers have advised the Selling Shareholders that the
International Managers propose initially to offer the shares of Common Stock to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share of Common Stock. The International Managers may
allow, and such dealers may reallow, a discount not in excess of $ per
share of Common Stock on sales to certain other dealers. After the Offerings,
the initial public offering price, concession and discount may be changed.
The purchase price of the shares of Common Stock to be acquired by the
Underwriters upon the exercise of Warrants will be paid to the Company to the
extent of the exercise price of the A Warrants ($11.94 per share) and the
exercise price of the B Warrants ($15.92 per share), and the balance (net of
underwriting discount) will be paid to the Selling Shareholders. The purchase
price of the shares of Common Stock to be acquired by the Underwriters upon the
exercise of Reallocation Rights will be paid to the Kendall Investors to the
extent of the exercise price of the Reallocation Rights ($11.94 per share), and
the balance (net of underwriting discount) will be paid to the Selling
Shareholders.
Certain holders of Common Stock participating in the Offerings have granted
an option to the International Managers, exercisable during the 30-day period
after the date of this Prospectus, to purchase up to an aggregate of 152,482
additional shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. The International
Managers may exercise this option only to cover over-allotments, if any, made on
the sale of Common Stock offered hereby. To the extent that the International
37
<PAGE>
ALTERNATE INTERNATIONAL
Managers exercise this option, each International Manager will be obligated,
subject to certain conditions, to purchase the number of additional shares of
Common Stock proportionate to such International Manager's initial amount
reflected in the foregoing table. Certain holders of Common Stock participating
in the Offerings have also granted an option to the U.S. Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to an aggregate of 609,927 additional shares of Common Stock to
cover over-allotments, if any, on terms similar to those granted to the
International Managers.
The Selling Shareholders have been informed that the International Managers
and the U.S. Underwriters have entered into an agreement (the "Intersyndicate
Agreement") providing for the coordination of their activities. Under the terms
of the Intersyndicate Agreement, the International Managers and the U.S.
Underwriters are permitted to sell shares of Common Stock (or Warrants or
Reallocation Rights to acquire such shares of Common Stock) to each other for
purposes of resale at a per share of Common Stock price equal to the initial
public offering price, less an amount not greater than the selling concession
less an amount equal to the exercise price in the case of Warrants or
Reallocation Rights. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock (or
Warrants or Reallocation Rights to acquire such shares of Common Stock) will not
offer to sell or sell shares of Common Stock to persons who are non-United
States and non-Canadian persons or to persons they believe intend to resell to
persons who are non-United States and non-Canadian persons, and the
International Managers and any dealer to whom they sell shares of Common Stock
(or Warrants or Reallocation Rights to acquire such shares of Common Stock) will
not offer to sell or sell shares of Common Stock (or Warrants or Reallocation
Rights to acquire such shares of Common Stock) to persons who are United States
persons or Canadian persons or to persons they believe intend to resell to
United States persons or Canadian persons, except in each case for transactions
pursuant to such agreement.
Each International Manager has agreed that (i) it has not offered to sell or
sold, and it will not offer to sell or sell, in the United Kingdom by means of
any document any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, except in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act of 1985, (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 (the
"Financial Services Act") with respect to anything done by it in relation to the
Common Stock in, from or otherwise involving the United Kingdom and (iii) it has
only issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the issuance of
Common Stock if that person is of a kind who is described in Article 9(3) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order
1988.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practice of the country of
purchase, in addition to the offering price set forth on the cover page hereof.
The Company and the Selling Shareholders have agreed, subject to certain
exceptions relating to employee benefit arrangements and transfers to certain
affiliated persons who execute a lock-up agreement, that they will not, directly
or indirectly, for a period of 90 days following the date of this Prospectus,
except with the prior consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, on behalf of the Underwriters, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Common Stock or any
securities convertible into or exercisable for Common Stock.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Shareholders by M. Brian Moroze, Esq.,
General Counsel of the Company, Exeter, New Hampshire. Mr. Moroze owns 8,348
shares of the Company's Common Stock. Certain other legal matters will be passed
upon for the Company by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919
Third Avenue, New York, New York 10022. Joshua M. Berman, a director and the
Secretary of the Company, is counsel to the law firm of Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel and owns 18,000 shares of the Company's Common Stock.
Certain legal matters will be passed upon for the Underwriters by Fried, Frank,
Harris, Shriver & Jacobson (a partnership including professional corporations),
One New York Plaza, New York, New York 10004.
EXPERTS
The Consolidated Financial Statements of the Company giving retroactive
effect to the Merger of the Company and Kendall for the year ended June 30, 1994
and the combination of the financial statements of the Company and Kendall for
the year ended June 30, 1993 included in this Prospectus have been so included
in reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The Consolidated Financial Statements of the Company as of June 30, 1993 and
for the years ended June 30, 1993 and 1992 (prior to retroactive restatement to
account for the pooling of interests with Kendall on October 19, 1994) included
in this Prospectus have been so included in reliance on the report (which
includes an explanatory paragraph relating to the fact that the Company changed
its method of accounting for incomes taxes and for post-retirement benefits
other than pensions in fiscal 1993) of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
38
<PAGE>
[ALTERNATE INTERNATIONAL]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF ANY OFFER TO BUY, THE COMMON
STOCK TO ANY PERSON IN ANY JURISDICTION WHERE, OR IN ANY CIRCUMSTANCE IN WHICH,
SUCH OFFER OR SOLICITATION MAY NOT BE LEGALLY MADE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY OR
THE INFORMATION SET FORTH IN THE PROSPECTUS SINCE THE DATE HEREOF.
THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF COMMON STOCK OFFERED HEREBY IN
THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT OF
1986 AND THE COMPANIES ACT OF 1985 WITH RESPECT TO ANYTHING DONE BY ANY PERSON
IN RELATION TO THE COMMON STOCK IN, FROM OR OTHERWISE INVOLVING THE UNITED
KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING."
IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS.
-------------------
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
Available Information................. 3
Incorporation of Certain Information
by Reference........................ 3
Prospectus Summary.................... 4
The Offerings......................... 4
Summary Consolidated Financial Data... 5
The Company........................... 7
Use of Proceeds....................... 16
Price Range of Common Stock and
Dividends............................. 16
Capitalization........................ 17
Selected Consolidated Financial
Data.................................. 18
Management's Discussion and Analysis
of Financial Condition and Operating
Results............................... 19
Selling Shareholders.................. 25
Description of Capital Stock.......... 30
Certain United States Tax Consequences
to Non-U.S. Holders of Common
Stock................................. 35
Underwriting.......................... 37
Validity of Shares.................... 38
Experts............................... 38
Consolidated Financial Statements..... F-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7,782,871 SHARES
[LOGO]
COMMON STOCK
------------------
PROSPECTUS
------------------
MERRILL LYNCH INTERNATIONAL
LIMITED
GOLDMAN SACHS INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
FEBRUARY , 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the Common Stock covered by this Registration Statement are as follows:
SEC registration fee (actual)................................... $147,355
NASD filing fee................................................. 30,500
Blue Sky fees and expenses...................................... 10,000
Printing and engraving expenses................................. 200,000
Legal fees and expenses......................................... 250,000
Accounting fees and expenses.................................... 50,000
Miscellaneous................................................... 10,000
--------
Total..................................................... $697,855
--------
--------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Articles of Organization of the Company provide that the
Company shall indemnify certain persons, including directors and officers,
against liabilities, amounts paid in settlement and professional fees and other
disbursements incurred by each such person in connection with any action, suit
or proceeding, civil or criminal, brought or threatened in or before any court,
tribunal, administrative or legislative body or agency in which he is involved
as a result of his serving or having served in such position or, at the request
of the Company, in certain positions of any other corporation in which the
Company owns shares or of which it is a creditor. No indemnification shall be
provided to an individual with respect to a matter as to which it shall have
been adjudicated that he did not act in good faith in the reasonable belief that
his action was in the best interests of the Company. In the event that any
action, suit or proceeding is compromised or settled so as to impose any
liability or obligation upon a person eligible for indemnification by the
Company, no indemnification shall be provided to him with respect to such matter
if the Company has obtained an opinion of its counsel that with respect to said
matter he did not act in good faith in the reasonable belief that his action was
in the best interests of the Company. The Restated Articles of Organization of
the Company further provide that nothing in them shall limit any lawful rights
to indemnification existing independently of them.
Section 67 of Chapter 156B of the General Laws of the Commonwealth of
Massachusetts provides that a corporation may indemnify any director or officer
(among others) except as to any matter as to which he is adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the corporation. Section 67 further provides
that a corporation has the power to purchase and maintain insurance policies on
behalf of any such officer or director against liability incurred by him in such
capacity or arising out of his status as such, whether or not the corporation
has the power to indemnify such officer or director against such liability.
The Company maintains $35,000,000 of insurance to reimburse its directors
and officers for charges and expenses incurred by them for wrongful acts claimed
against them by reason of their being or having been directors or officers of
the Company or any subsidiary thereof. Such insurance specifically excludes
reimbursement of any director or officer for any charge or expense incurred in
connection with various designated matters, including libel or slander,
illegally obtained personal profits, profits recovered by the Company pursuant
to Section 16(b) of the Exchange Act and deliberate dishonesty.
II-1
<PAGE>
The forms of Purchase Agreements contained in Exhibits 1(a) and 1(b) provide
for indemnification of the directors and officers signing the Registration
Statement and certain controlling persons of the Company against certain
liabilities under the Securities Act, under certain circumstances, by the
Underwriters.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
EXHIBIT
NUMBER EXHIBIT
- -------- ----------------------------------------------------------------------------------
*1(a) -- Form of U.S. Purchase Agreement among Registrant, the Selling Shareholders and
the Underwriters.
*1(b) -- Form of International Purchase Agreement among Registrant, the Selling
Shareholders and the International Underwriters.
*1(c) -- Form of Intersyndicate Agreement.
3(a) -- Restated Articles of Organization, as amended (incorporated by reference to
Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1987).
3(b) -- Articles of Amendment dated November 9, 1993; effective November 10, 1993
(incorporated by reference to Exhibit 3 to Registrant's Current Report on Form
8-K filed on November 12, 1993).
3(c) -- By-laws (incorporated by reference to Exhibit 3 to the Registrant's Current
Report on Form 8-K filed on August 17, 1990).
4 -- Form of Common Stock certificate (incorporated by reference to Exhibit 7 of the
Company's Registration Statement on Form 8-A filed on December 10, 1973).
*5 -- Opinion of M. Brian Moroze, General Counsel of the Registrant, as to the
validity of the securities being registered hereunder.
10(a) -- Registration Rights Agreement, dated as July 7, 1992 (the "Registration Rights
Agreement"), among Kendall International, Inc. (formerly CDK Holding
Corporation; "Kendall") and certain holders of Kendall securities (incorporated
by reference to Exhibit 4.42 of the Registration Statement on Form 10 of
Kendall, as amended).
10(b) -- Amendment No. 1 to the Registration Rights Agreement, dated July 11, 1994
(previously filed).
10(c) -- Assignment and Assumption Agreement, dated October 19, 1994, among Kendall, the
securityholders named therein and the Registrant (previously filed).
10(d) -- Stockholders Agreements between Registrant and each of C&D Fund IV and JLL Fund
(incorporated by reference to Exhibits 10.1 and 10.2 to Registrant's Current
Report on From 8-K, dated July 26, 1994, file No. 1-5482).
10(e) -- Warrant Agreement, dated as of July 7, 1992, between Holding and Norwest Bank
Minnesota, N.A., as warrant agent (the "Warrant Agent") (including the form of A
Warrant) (incorporated by reference to Exhibit 10.46.1 to the Registration
Statement on Form 10 filed by Kendall, as amended (the "Kendall Form 10")).
10(f) -- Warrant Agreement, dated as of July 7, 1992, between Kendall and the Warrant
Agent (including the form of B Warrant) (incorporated by reference to Exhibit
10.46.3 to the Kendall Form 10).
10(g) -- Equity Reallocation Agreement, dated as of July 7, 1992, among Kendall, the
Institutional New Investors, Richard A. Gilleland, Carrie Gilleland and Norwest
Bank Minnesota, N.A., as escrow agent (including the forms of Reallocation
Certificate and Residual Ownership Certificate) (incorporated by reference to
Exhibit 10.46.5 to the Kendall Form 10).
10(h) -- Assumption Agreement, dated October 19, 1994, between the Company and Norwest
Bank, Minnesota, N.A., as Warrant Agent (previously filed).
*23(a) --Consent of Coopers & Lybrand L.L.P.
*23(b) --Consent of Price Waterhouse LLP.
*23(c) --Consent of Mr. Brian Moroze (included in Exhibit 5).
24 --Power of Attorney (previously filed).
</TABLE>
- ------------
* Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising 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 in the opinion of the Commission such indemnification 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 the 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.
The undersigned Registrant hereby undertakes 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 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 the 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or(4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-3
<PAGE>
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 Town of Exeter, State of New Hampshire, on the 23rd day
of February, 1995.
TYCO INTERNATIONAL LTD.
By /s/ MARK H. SWARTZ
...............................
Mark H. Swartz
Vice President--Chief Financial
Officer
(Principal Financial
and Accounting Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON FEBRUARY
23, 1995 IN THE CAPACITIES INDICATED BELOW.
<TABLE><CAPTION>
SIGNATURE TITLE
- -------------------------------------------- --------------------------------------------
<S> <C>
* Chairman of the Board, President, Chief
............................................ Executive Officer and Director (Principal
L. Dennis Kozlowski Executive Officer)
* Director
............................................
Joshua M. Berman
* Director
............................................
Richard S. Bodman
* Director
............................................
Alberto Cribiore
* Director
............................................
John F. Fort
* Director
............................................
Stephen W. Foss
* Senior Vice President and Director
............................................
Richard A. Gilleland
* Director
............................................
Philip M. Hampton
* Director
............................................
Paul S. Levy
/s/ MARK H. SWARTZ Vice President--Chief Financial Officer
............................................
Mark H. Swartz
* Director
............................................
Frank E. Walsh, Jr.
</TABLE>
*By: /s/ IRVING GUTIN
...........................................................................
Attorney-in-Fact
(Pursuant to power of attorney previously filed with the Securities and
Exchange Commission with the Registration Statement)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE><CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- -------- ---------------------------------------------------------------------- ------------
<S> <C> <C>
*1(a) -- Form of U.S. Purchase Agreement among Registrant, the Selling
Shareholders and the Underwriters.
*1(b) -- Form of International Purchase Agreement among Registrant, the
Selling Shareholders and the International Underwriters.
*1(c) -- Form of Intersyndicate Agreement.
3(a) -- Restated Articles of Organization, as amended (incorporated by
reference to Exhibit 3(a) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1987).
3(b) -- Articles of Amendment dated November 9, 1993; effective November
10, 1993 (incorporated by reference to Exhibit 3 to Registrant's
Current Report on Form 8-K filed on November 12, 1993).
3(c) -- By-laws (incorporated by reference to Exhibit 3 to the Registrant's
Current Report on Form 8-K filed on August 17, 1990).
4 -- Form of Common Stock certificate (incorporated by reference to
Exhibit 7 of the Company's Registration Statement on Form 8-A filed
on December 10, 1973).
*5 -- Opinion of M. Brian Moroze, General Counsel of the Registrant, as
to the validity of the securities being registered hereunder.
10(a) -- Registration Rights Agreement, dated as July 7, 1992 (the
"Registration Rights Agreement"), among Kendall International, Inc.
(formerly CDK Holding Corporation; "Kendall") and certain holders of
Kendall securities (incorporated by reference to Exhibit 4.42 of the
Registration Statement on Form 10 of Kendall, as amended).
10(b) -- Amendment No. 1 to the Registration Rights Agreement, dated July
11, 1994 (previously filed).
10(c) -- Assignment and Assumption Agreement, dated October 19, 1994, among
Kendall, the securityholders named therein and the Registrant
(previously filed).
10(d) -- Stockholders Agreements between Registrant and each of C&D Fund IV
and JLL Fund (incorporated by reference to Exhibits 10.1 and 10.2 to
Registrant's Current Report on From 8-K, dated July 26, 1994, file
No. 1-5482).
10(e) -- Warrant Agreement, dated as of July 7, 1992, between Holding and
Norwest Bank Minnesota, N.A., as warrant agent (the "Warrant Agent")
(including the form of A Warrant) (incorporated by reference to
Exhibit 10.46.1 to the Registration Statement on Form 10 filed by
Kendall, as amended (the "Kendall Form 10")).
10(f) -- Warrant Agreement, dated as of July 7, 1992, between Kendall and
the Warrant Agent (including the form of B Warrant) (incorporated by
reference to Exhibit 10.46.3 to the Kendall Form 10).
10(g) -- Equity Reallocation Agreement, dated as of July 7, 1992, among
Kendall, the Institutional New Investors, Richard A. Gilleland,
Carrie Gilleland and Norwest Bank Minnesota, N.A., as escrow agent
(including the forms of Reallocation Certificate and Residual
Ownership Certificate) (incorporated by reference to Exhibit 10.46.5
to the Kendall Form 10).
10(h) -- Assumption Agreement, dated October 19, 1994, between the Company
and Norwest Bank, Minnesota, N.A., as Warrant Agent (previously
filed).
*23(a) --Consent of Coopers & Lybrand L.L.P.
*23(b) --Consent of Price Waterhouse LLP.
*23(c) --Consent of Mr. Brian Moroze (included in Exhibit 5).
24 --Power of Attorney (previously filed).
</TABLE>
- ------------
* Filed herewith.
Exhibit 1(a)
DRAFT 2/22/95
================================================================================
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Offering of
Shares of Common Stock
----
FORM OF
U.S. PURCHASE AGREEMENT
-----------------------
Dated: , 1995
-----------------
================================================================================
<PAGE>
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Offering of
Shares of Common Stock
-----------
U.S. PURCHASE AGREEMENT
-----------------------
, 1995
-----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc.
As Representatives of the several U.S. Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Tyco International Ltd., a Massachusetts corporation (the
"Company"), and each of the holders of securities of the Company listed in
Schedule A hereto (the "Selling Securityholders"), confirm their respective
agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc., and each of the other Underwriters named in Schedule B hereto
(collectively, the "U.S. Underwriters," which term shall also include any
underwriter substituted as hereinafter provided in Section 11), for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation and Lehman Brothers Inc. are acting as
representatives (in such capacity, the "U.S. Representatives"), with respect to
(i) the sale by the Selling Securityholders, acting severally and not jointly,
of the respective number of Securities
<PAGE>
(as defined below) set forth opposite such Selling Securityholder's name in
Schedule A hereto and the purchase by the U.S. Underwriters, acting severally
and not jointly, of the respective number of Securities opposite such U.S.
Underwriter's name in Schedule B hereto and (ii) the grant by the Selling
Securityholders, that are holders of shares of Common Stock (as defined below)
which were not issued upon exercise of Warrants or Reallocation Rights (as
defined below) subsequent to October 19, 1994, to the U.S. Underwriters, acting
severally and not jointly, of the option described in Section 2(d) hereof to
purchase all or any part of the U.S. Underwriters' pro rata portion of the
respective number of additional shares of Common Stock set forth opposite such
Selling Securityholder's name in Schedule A hereto, to cover over-allotments.
The term "Securities" is defined to mean the shares of common stock of the
Company, par value $.50 per share ("Common Stock"), the A warrants (the "A
Warrants") and the B warrants (the "B Warrants"; the A Warrants and the B
Warrants are collectively referred to herein as the "Warrants") to acquire
shares of Common Stock and the reallocation rights to acquire shares of Common
Stock ("Reallocation Rights") (issued pursuant to the Equity Reallocation
Agreement, dated July 7, 1992, among Kendall International, Inc. (formerly known
as CDK Holding Corporation) ("Kendall"), the New Investors (as defined therein)
and Mellon Bank, N.A., as successor Escrow Agent, for the benefit of certain
holders of old equity securities of Kendall (the "Reallocation Agreement")).
The Securities to be purchased by the U.S. Underwriters pursuant to this
Agreement are collectively hereinafter called the "U.S. Securities." The shares
of Common Stock to be purchased by the U.S. Underwriters are collectively
hereinafter called the "U.S. Purchased Shares." The Reallocation Rights to be
purchased by the U.S. Underwriters are collectively hereinafter called the "U.S.
Reallocation Rights." The Warrants to be purchased by the U.S Underwriters are
collectively hereinafter called the "U.S. Warrants." The U.S. Purchased Shares,
the shares of Common Stock issuable upon the exercise of the U.S. Warrants to be
purchased by the U.S. Underwriters and the shares of Common Stock acquirable
upon exercise of the U.S. Reallocation Rights, in each case at the Closing Time,
are collectively hereinafter called the "Initial U.S. Shares" and all or any
part of the shares of Common Stock subject to the options described in Section
2(d) hereof are collectively hereinafter called (the "U.S. Option Shares"). The
Initial U.S. Shares and the U.S. Option Shares are collectively hereinafter
called the U.S. Shares.
It is understood that the Company and the Selling Securityholders are
entering into an agreement, dated the date hereof (the "International Purchase
Agreement"), providing for the sale by the Selling Securityholders of an
aggregate of _________ shares of Common Stock (the "International Purchased
Shares"), _______ Warrants (the "International Warrants") and ______
Reallocation Rights (the "International Reallocation Rights" and, together with
the International Purchased Shares and the International Warrants, the
"International Securities"), through arrangements with certain underwriters
outside the United States and Canada (the "Managers" and, together with the U.S.
Underwriters, the "Underwriters"), for whom Merrill Lynch International
- 2 -
<PAGE>
Limited, Goldman Sachs International, Donaldson, Lufkin & Jenrette Securities
Corporation, and Lehman Brothers International (Europe) are acting as lead
managers (the "Lead Managers") and the grant by the Selling Securityholders,
that are holders of shares of Common Stock which were not issued upon exercise
of Warrants and Reallocation Rights subsequent to October 19, 1994, to the
Managers, acting severally and not jointly, of an option described in Section
2(d) of the International Purchase Agreement to purchase all or any part of the
Managers' pro rata portion of the respective number of additional shares of
Common Stock (the "International Option Shares") set forth opposite such Selling
Securityholder's name in Schedule A to the International Purchase Agreement to
cover over-allotments. The U.S. Securities and the International Securities are
referred to herein as the "Purchased Securities." It is understood that the
Selling Securityholders are not obligated to sell, and the U.S. Underwriters are
not obligated to purchase, any U.S. Securities unless all of the International
Securities are contemporaneously purchased by the Managers.
The U.S. Securities and the International Securities are
collectively hereinafter referred to as the "Purchased Securities." The shares
of Common Stock to be purchased directly by the Managers, the shares of Common
Stock acquirable upon the exercise of the Warrants to be purchased by the
Managers and the shares of Common Stock acquirable upon exercise of the
Reallocation Rights are collectively hereinafter called the "Initial
International Shares" and all or any part of the ____ shares of Common Stock
subject to the options described in Section 2(d) hereof to be purchased by the
Managers are collectively hereinafter called the "International Option Shares."
The Initial International Shares and the International Option Shares are
collectively hereinafter called the "International Shares." The U.S. Shares and
the International Shares are hereinafter collectively referred to as the
"Offered Shares." The U.S. Option Shares and the International Option Shares
are hereinafter collectively called the "Option Shares."
The Company and the Selling Securityholders understand that the
U.S. Underwriters will simultaneously enter into an agreement with the Managers
dated the date hereof (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the U.S. Underwriters and the
Managers.
You have advised the Selling Securityholders that you and the
other U.S. Underwriters, acting severally and not jointly, desire to purchase
the U.S. Securities and, if the U.S. Underwriters so elect, the U.S. Option
Shares, and that you have been authorized by the other U.S. Underwriters to
execute this Agreement and the U.S. Price Determination Agreement referred to
below on their behalf.
Prior to the purchase of the U.S. Securities and public offering
of the U.S. Shares by the several U.S. Underwriters, the Company, the Selling
Securityholders and the U.S. Representatives, acting on behalf of the U.S.
Underwriters shall enter into a separate written instrument substantially in the
form of Exhibit A hereto (the "U.S. Price
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Determination Agreement"). The U.S. Price Determination Agreement may take the
form of an exchange of any standard form of written telecommunication between
the Company, the Selling Securityholders and the U.S. Representatives and shall
specify such applicable information as included in Exhibit A hereto. The
purchase of the U.S. Securities and the offering of the U.S. Shares will be
governed by this Agreement, as supplemented by the U.S. Price Determination
Agreement. From and after the date of the execution and delivery of the U.S.
Price Determination Agreement, this Agreement shall be deemed to incorporate,
and all references herein to "this Agreement" or "herein" shall be deemed to
include, the U.S. Price Determination Agreement.
The initial public offering price per International Share and the
purchase price per International Security to be paid by the Managers pursuant to
the International Purchase Agreement shall be set forth in a separate agreement
(the "International Price Determination Agreement"), the form of which is
attached to the International Purchase Agreement. The purchase price per
security for the International Securities to be paid by the several Managers
shall be identical to the purchase price per share for the U.S. Securities to be
paid by the several U.S. Underwriters hereunder. This Agreement (including the
related U.S. Price Determination Agreement) and the International Purchase
Agreement (including the related International Price Determination Agreement)
are collectively referred to herein as the "Purchase Agreements."
It is understood and agreed that all Offered Shares and all
Option Shares sold hereunder or pursuant to the International Purchase Agreement
are being purchased by the U.S. Underwriters or the Managers, as the case may
be, on an ex-dividend basis, and that no U.S. Underwriter or Manager, or any
purchaser of Offered Shares or Option Shares from any U.S. Underwriter or
Manager, shall be entitled to receive any dividend, in cash or in kind, on the
Common Stock if such dividend has a record date or payment date preceding the
date of this Agreement or the International Purchase Agreement.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 33-57509) covering the registration of the Offered Shares under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectus or prospectuses, and either (A) has prepared and proposes
to file, prior to the effective date of such registration statement, an
amendment to such registration statement, including final prospectuses, or (B)
if the Company has elected to rely upon Rule 430A ("Rule 430A") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations"),
will prepare and file prospectuses, in accordance with the provisions of Rule
430A and Rule 424(b) ("Rule 424(b)") of the 1933 Act Regulations, promptly after
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execution and delivery of the U.S. Price Determination Agreement.*1 The
information, if any, included in such prospectuses that was omitted from any
prospectus included in such registration statement at the time it becomes
effective but that is deemed, pursuant to Rule 430A(b), to be part of such
registration statement at the time it becomes effective is referred to herein as
the "Rule 430A Information." Each form of U.S. Prospectus and form of
International Prospectus used before the time such registration statement
becomes effective, and any form of U.S. Prospectus and form of International
Prospectus that omits the Rule 430A Information that is used after such
effectiveness and prior to the execution and delivery of the U.S. Price
Determination Agreement or the International Price Determination Agreement, is
herein called a "preliminary prospectus." Any reference to any preliminary
prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act as of the
date of such preliminary prospectus. Such registration statement, including the
exhibits thereto and the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the 1933 Act, as amended at the time it becomes
effective and including, if applicable, the Rule 430A Information, is herein
called the "Registration Statement," and the form of U.S. Prospectus, including
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act and form of International Prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act included in the Registration Statement at the time it becomes effective are
herein called the "U.S. Prospectus" and the "International Prospectus,"
respectively, and, collectively, the "Prospectuses" and, individually, a
"Prospectus," except that, if the final U.S. Prospectus or International
Prospectus, as the case may be, first furnished to the U.S. Underwriters or the
Managers after the execution of the U.S. Price Determination Agreement or the
International Price Determination Agreement for use in connection with the
offering of the Offered Shares differs from the prospectuses included in the
Registration Statement at the time it becomes effective (whether or not such
prospectuses are required to be filed pursuant to Rule 424(b)), the terms "U.S.
Prospectus," "International Prospectus," "Prospectuses" and "Prospectus" shall
refer to the final U.S. Prospectus or International Prospectus, as the case may
be, first furnished to the U.S. Underwriters or the Managers, as the case may
be, for such use.
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* Two forms of prospectus are to be used in connection with the offering and
sale of the Offered Shares: one relating to the U.S. Shares (the "Form of U.S.
Prospectus") and one relating to the International Shares (the "Form of
International Prospectus"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover page, the section
captioned "Certain United States Tax Consequences to Non-U.S. Holders", the
section captioned "Underwriting," the section captioned "Validity of Shares,"
the section captioned "Available Information," the section captioned
"Incorporation of Certain Information by Reference," the section captioned
"Experts" and the back cover page.
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The Company and the Selling Securityholders understand that the
U.S. Underwriters propose to make a public offering of the U.S. Shares as soon
as you deem advisable after the Registration Statement becomes effective and the
U.S. Price Determination Agreement has been executed and delivered.
Section 1. Representations and Warranties. (a) The Company
------------------------------
represents and warrants to and agrees with each of the U.S. Underwriters that:
(i) The Company meets the requirements for use of Form S-3
under the 1933 Act, and when the Registration Statement shall become
effective, and if the Company has elected to rely upon Rule 430A, on
the date of the U.S. Price Determination Agreement or the
International Price Determination Agreement, and on the effective or
issue date of each amendment or supplement to the Registration
Statement or the Prospectuses, and at the Closing Time referred to
below, and if any U.S. Option Shares are purchased, up to and
including the Date of Delivery referred to below, (A) the Registration
Statement and any amendments and supplements thereto will comply in
all material respects with the requirements of the 1933 Act and the
1933 Act Regulations; (B) neither the Registration Statement nor any
amendment or supplement thereto will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and (C) neither of the Prospectuses nor any amendment or supplement to
either of them include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, this representation
and warranty does not apply to statements or omissions from the
Registration Statement or the Prospectuses or any amendments or
supplements thereto made in reliance upon and in conformity with
information furnished or confirmed in writing to the Company by or on
behalf of any U.S. Underwriters through you or the Lead Managers or by
or on behalf of the Selling Securityholders expressly for use in the
Registration Statement or the Prospectuses or any amendments or
supplements thereto.
(ii) The documents incorporated by reference in the
Prospectuses pursuant to Item 12 of Form S-3 under the 1933 Act, at
the time they were filed with the Commission, conformed in all
material respects with the requirements of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the rules and regulations of
the Commission thereunder (the "1934 Act Regulations"), and, when read
together with the information in the Prospectuses, at the time the
Registration Statement shall become effective, and if the Company has
elected to rely upon Rule 430A, on the
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date of the U.S. Price Determination Agreement or the International
Price Determination Agreement, and on the effective or issue date of
each amendment or supplement to the Registration Statement or the
Prospectuses, and at the Closing Time referred to below, and, if any
Option Shares are purchased, on the Date of Delivery referred to
below, will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(iii) Coopers & Lybrand L.L.P., and Price Waterhouse who
are reporting upon the audited consolidated financial statements and
schedules included or incorporated by reference in the Registration
Statement, are independent public accountants as required by the 1933
Act, the 1934 Act, the 1933 Act Regulations and the 1934 Act
Regulations.
(iv) This Agreement and the International Purchase Agreement
have been, and the U.S. Price Determination Agreement and the
International Price Determination Agreement on the date thereof will
be, duly authorized, executed and delivered by the Company.
(v) The consolidated financial statements included or
incorporated by reference in the Registration Statement and the
Prospectuses, together with the related schedules and notes, present
fairly, in all material respects, the consolidated financial position
of the Company and its Subsidiaries (as hereinafter defined) as of the
dates indicated and the consolidated statements of income,
shareholders' equity and cash flows of the Company and its
Subsidiaries for the periods specified. Except as otherwise stated in
the Registration Statement, such financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods
involved. The financial statement schedules, if any, included or
incorporated by reference in the Registration Statement present fairly
in accordance with GAAP the information required to be stated therein
and have been compiled on a basis consistent with that of the audited
consolidated financial statements included in the Registration
Statement. The selected financial data and the summary financial
information included in the Prospectuses present fairly in accordance
with GAAP the information shown therein and have been compiled on a
basis consistent with that of the audited consolidated financial
statements included in the Registration Statement.
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(vi) The Company is a corporation validly organized and
existing and in good standing under the laws of the Commonwealth of
Massachusetts with power and authority (corporate and other) under
such laws to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and
perform its obligations under this Agreement, the U.S. Price
Determination Agreement, the International Purchase Agreement and the
International Price Determination Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing under the laws of each other jurisdiction in which the nature
of its business or its ownership or leasing of its properties requires
qualification, except to the extent that the failure to so qualify or
be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its Subsidiaries (as defined
below), considered as one enterprise.
(vii) Each of the Company's significant subsidiaries (as
such term is defined in the Regulation S-X promulgated by the
Commission, each such subsidiary is hereinafter referred to as a
"Significant Subsidiary," and all of the Company's subsidiaries are
collectively hereinafter referred to as the "Subsidiaries") is a
corporation validly organized and existing as a corporation under the
laws of its jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and conduct its business
as described in the Prospectuses, is duly qualified as a foreign
corporation to transact business and is in good standing under the
laws of each jurisdiction in which the nature of its business of its
ownership or leasing of its properties required qualification, except
where the failure to be so qualified or in good standing would not
have a material adverse effect on the condition (financial or
otherwise) earnings, business affairs and business prospects of the
Company and the Subsidiaries considered as one enterprise; and all the
outstanding shares of capital stock of each Significant Subsidiary of
the Company have been duly authorized and validly issued, are fully-
paid and non-assessable, and (except for non-material liens that have
arisen in the ordinary course of business and in the case of foreign
subsidiaries, for directors qualifying shares) are owned by the
Company, directly or indirectly, free and clear of all liens,
encumbrances, security interests and claims.
(viii) The Company had at the date indicated in the
Prospectuses a duly authorized, issued and outstanding capitalization
as set forth in the Prospectuses under the caption "Capitalization,"
and the Common Stock, A Warrants, B Warrants and Reallocation Rights
conform in all material
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respects to the descriptions thereof
contained under the caption "Description of Capital Stock" in the
Prospectuses.
(ix) All of the outstanding shares of capital stock of the
Company, including the U.S. Purchased Shares, the International
Purchased Shares and the shares Common Stock to be acquired by the
Underwriters upon the exercise of the Reallocation Rights pursuant to
this Agreement and the International Purchase Agreement, have been
duly authorized and validly issued and are fully paid and non-
assessable.
(x) The obligations under the U.S. Warrants and the
International Warrants have been duly and validly authorized and
assumed by the Company and constitute binding obligations of the
Company entitling the holders thereof to purchase shares of Common
Stock upon the terms and in the manner set forth therein. The shares
of Common Stock to be sold by the Company to the Underwriters upon
exercise of the Warrants and the International Warrants have been duly
authorized and validly reserved for issuance upon exercise of the
Warrants and the International Warrants, and when certificates for
such shares of Common Stock have been issued and delivered by the
Company to the Underwriters upon receipt of the exercise price for the
underlying Warrant in accordance with this Agreement, such shares will
be validly issued, fully paid and non-assessable shares of the Common
Stock of the Company and will conform in all material respects to the
description thereof in the Prospectuses.
(xi) The obligations of Kendall under the U.S. Reallocation
Rights and the International Reallocation Rights and the Reallocation
Agreement have been duly and validly authorized and assumed by the
Company and constitute binding obligations of the Company enforceable
against the Company in accordance with their terms entitling the
holders thereof to acquire shares of Common Stock upon the terms and
in the manner set forth therein. The shares of Common Stock to be
acquired by the Underwriters upon exercise of the Reallocation Rights
have been duly authorized and, upon exercise of such Reallocation
Rights by the Underwriters, will be validly issued and are fully paid
and non-assessable and will conform in all material respects to the
description thereof in the Prospectuses.
(xii) Except as disclosed in the Prospectuses, there are
no outstanding options, warrants or other rights calling for issuance
of, and no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any of its Subsidiaries or any
security convertible into or exchangeable for capital stock of the
Company or any of its Subsidiaries. Except as set forth in the
Prospectuses, there are no holders of securities
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(debt or equity) of the Company or any of the Subsidiaries, or holders
of rights (including, without limitation, preemptive rights), warrants
or options to obtain securities of the Company or its Subsidiaries,
who have the right to request the Company or any of its Subsidiaries
to register securities held by them under the 1933 Act, other than
holders who are participating in the Offerings or who have elected not
to exercise such rights. None of the outstanding shares of Common
Stock of the Company was issued in violation of the preemptive or
other similar rights of any stockholder of the Company arising by
operation of law, under the charter or by-laws of the Company or under
any agreement to which the Company or any of its Subsidiaries is a
party.
(xiii) Since the respective dates as of which information
is given in the Registration Statement and the Prospectuses, except as
otherwise stated therein or contemplated thereby, there has not been
(A) any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise, whether or
not arising in the ordinary course of business, (B) any transaction
entered into by the Company or any Subsidiary, other than in the
ordinary course of business, that is material to the Company and its
Subsidiaries, considered as one enterprise, or (C) any dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(xiv) Neither the Company nor any Subsidiary is in
violation of its charter or by-laws or in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject, except for such defaults that would
not in the aggregate have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one
enterprise.
(xv) The purchase of the Purchased Securities, the sale
and delivery of the Offered Shares, the execution, delivery and
performance of this Agreement, the U.S. Price Determination Agreement,
the International Purchase Agreement and the International Price
Determination Agreement, the exercise of the U.S. Warrants and the
International Warrants and the delivery of shares of Common Stock upon
exercise thereof, the exercise of the U.S. Reallocation Rights and the
International Reallocation Rights and the delivery of shares of Common
Stock upon the exercise thereof, the
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consummation by the Company of the transactions contemplated thereby
and in the Registration Statement and compliance by the Company with
the terms of the foregoing have been duly authorized by all necessary
corporate action on the part of the Company and do not and will not
result in any violation of the Articles of Organization or by-laws of
the Company or any Subsidiary, and do not, and at the Closing Time
will not, conflict with, or result in a breach or violation by the
Company of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien or
encumbrance upon any property or assets of the Company or any
Subsidiary under (A) any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument
to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or to which any of their respective
properties or assets are subject, except for such conflicts, breaches,
violations or defaults or liens or encumbrances that would not in the
aggregate have a material adverse effect on the condition (financial
or otherwise), earnings, business affairs or business prospects of the
Company and the Subsidiaries, considered as one enterprise, or (B) any
law, statute, rule, regulation, judgment, order, writ or decree
applicable to the Company or any of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any Subsidiary or any of their respective
properties, assets or operations.
(xvi) No authorization, approval, consent or license of
any government, governmental instrumentality or court (other than
under the 1933 Act and the 1933 Act Regulations and the securities or
blue sky laws of the various states) is necessary in connection with
the due authorization, execution, delivery and performance by the
Company of this Agreement, the U.S. Price Determination Agreement, the
International Purchase Agreement and the International Price
Determination Agreement, the exercise of the U.S. Warrants and the
International Warrants and the delivery of shares of Common Stock upon
exercise thereof, the exercise of the U.S. Reallocation Rights and the
International Reallocation Rights and the acquisition of shares of
Common Stock by the Underwriters upon exercise thereof and the valid
sale and delivery of the Offered Shares.
(xvii) Except as disclosed in the Prospectuses, there is
no action, suit or proceeding before or by any government,
governmental instrumentality or court, domestic or foreign, now
pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary that is required to be
disclosed in the Registration Statement or Prospectuses or that, if
determined adversely to the Company or any of
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its Subsidiaries, could individually or in the aggregate reasonably be
expected to have a material adverse change in the condition (financial
or otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise, or which
might materially and adversely affect the consummation of the
transactions contemplated in this Agreement, the International
Purchase Agreement and in the Registration Statement.
(xviii) There are no contracts or documents of a character
to which the Company or any Subsidiary is a party or by which any of
them are bound required to be described in the Registration Statement,
the Prospectuses or the documents incorporated by reference therein or
to be filed as exhibits thereto that are not described and filed as
required.
(xix) The Company and its Subsidiaries are in compliance
with, and each such entity has not received any notice of any
outstanding violation of, all laws, ordinances, rules and regulations
applicable to it and its operations except, in either case, where any
failure by the Company or any Subsidiary to comply with any such law,
regulation, ordinance or rule would not have, individually or in the
aggregate, a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise.
(xx) Neither the Company nor any of its affiliates has
taken or will take, directly or indirectly, any action designed to,
or that might be reasonably expected to, cause or result in
stabilization or manipulation of the price of the Offered Shares; and
neither the Company nor any of its affiliates has distributed or will
distribute any prospectus (as such term is defined in the 1933 Act
and the 1933 Act Regulations) in connection with the offering and sale
of the Offered Shares other than any preliminary prospectus filed with
the Commission or the Prospectuses or other material permitted by the
1933 Act or the 1933 Act Regulations.
(xxi) The Company is not an investment company within
the meaning of the Investment Company Act of 1940, as amended.
(xxii) No labor dispute exists with the Company's
employees or with employees of its Subsidiaries or, to the knowledge
of the Company, is imminent that could reasonably be expected to
materially and adversely affect the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise.
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(b) (I) Each of the Selling Securityholders severally
represents and warrants to, and agrees with, each of the U.S. Underwriters as
follows:
(i) To the extent that any statements or omissions made in
the Registration Statement, any preliminary prospectus, the Prospectus
or any amendment or supplement thereto are made in reliance upon and
in conformity with written information furnished to the Company by
such Selling Securityholder expressly for use therein, such
preliminary prospectus and the Registration Statement did, and the
Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus will, when they become
effective or are filed with the Commission, as the case may be, not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(ii) Each Selling Securityholder has full right, power and
authority to enter into this Agreement, the International Purchase
Agreement, the U.S. Price Determination Agreement, the International
Price Determination Agreement and the Custody Agreement, the JLL Fund
Custody Agreement, the C&D Fund IV Custody Agreement or the Associates
III Custody Agreement, as the case may be (each as defined below), and
to sell, transfer and deliver the U.S. Securities it is selling
pursuant to this Agreement and the International Securities it is
selling pursuant to the International Purchase Agreement; and this
Agreement, the International Purchase Agreement and the Custody
Agreement, the JLL Fund Custody Agreement, the C&D Fund IV Custody
Agreement or the Associates III Custody Agreement, as the case may be,
have been, and the U.S. Price Determination Agreement and the
International Price Determination Agreement on the date thereof will
be, duly authorized, executed and delivered by such Selling
Securityholder and the Custody Agreement, the JLL Fund Custody
Agreement, the C&D Fund IV Custody Agreement or the Associates III
Custody Agreement, as the case may be, will be a valid and binding
obligation of such Selling Securityholder enforceable against such
Selling Securityholder in accordance with its terms.
(iii) Except as set forth in the Prospectuses, there is
no action, suit, investigation (of which such Selling Securityholder
has received written notice) or proceeding before or by any
government, governmental instrumentality or court, domestic or
foreign, now pending or, to the knowledge of such Selling
Securityholder, threatened, to which such Selling Securityholder is or
would be a party or to which the property of such
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Selling Securityholder is or would be subject, that (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge
the sale of the U.S. Securities or the International Securities by
such Selling Securityholder or any of the other transactions
contemplated hereby or (ii) questions the legality or validity of any
such transactions or seeks to recover damages or obtain other relief
in connection with any such transactions.
(iv) Such Selling Securityholder (other than Joseph
Littlejohn & Levy Fund, L.P. ("JLL Fund"), The Clayton & Dubilier
Private Equity Fund IV ("C&D Fund IV") and Clayton & Dubilier
Associates III Limited Partnership ("Associates III")) has duly
executed and delivered, in the form heretofore furnished to you, an
irrevocable power of attorney and custody agreement (the "Custody
Agreement") with Mellon Bank, N.A. as custodian (the "Custodian") and
Clayton, Dubilier & Rice, Inc., the Attorney-in-Fact (through one or
more of William A. Barbe, Kevin J. Conway or Alberto Cribiore, or any
other officer, employee, agent or representative of the Attorney-in-
Fact (each of Messrs. Barbe, Conway and Cribiore and such other
officers, employees, agents and representatives, a "Proxy"), or
through any additional Attorney-in-Fact duly appointed as such by the
Attorney-in-Fact); the Attorney-in-Fact is authorized to execute and
deliver this Agreement (including the U.S. Price Determination
Agreement) and the International Purchase Agreement (including the
International Price Determination Agreement) on behalf of such Selling
Securityholder (other than JLL Fund, C&D Fund IV and Associates III),
to determine, among other things, (a) the number of securities to be
sold to the U.S. Underwriters and the International Managers pursuant
to the Purchase Agreements and (b) the purchase price per security to
be paid by the U.S. Underwriters and Managers to such Selling
Securityholder (other than JLL Fund, C&D Fund IV and Associates III),
as provided in Section 2(a) hereof, and otherwise to act on behalf of
such Selling Securityholder (other than JLL Fund, C&D Fund IV and
Associates III) in connection with this Agreement and the
International Purchase Agreement, and the Custodian is authorized to
deliver the Purchased Securities to be sold by such Selling
Securityholder (other than JLL Fund, C&D Fund IV and Associates III)
pursuant to this Agreement and the International Purchase Agreement
upon the authorization of the Attorney-in-Fact and to accept payment
therefor.
(v) Each of JLL Fund, C&D Fund IV and Associates III have
duly executed and delivered a custody agreement (the "JLL Fund Custody
Agreement," the "C&D Fund IV Custody Agreement" and the "Associates
III Custody Agreement," respectively) with Mellon Bank, N.A. as
custodian
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<PAGE>
(the "Custodian"); each of JLL Fund, C&D Fund IV and Associates III is
authorized to execute and deliver this Agreement (including the U.S.
Price Determination Agreement) and the International Purchase
Agreement (including the International Price Determination Agreement),
to determine among other things, (a) the number of securities to be
sold to the U.S. Underwriters and the Managers pursuant to the
Purchase Agreements, the purchase price per security to be paid by the
Mangers and the U.S. Underwriters to each of JLL Fund, C&D Fund IV and
Associates III, as provided in Section 2(a) hereof; and the Custodian
is authorized to deliver the Purchased Securities to be sold by each
of JLL Fund, C&D Fund IV and Associates III pursuant to this Agreement
and the International Purchase Agreement upon the authorization of
each of JLL Fund, C&D Fund IV and Associates III and to accept payment
therefor.
(vi) No authorization, approval, consent or license of any
government, governmental instrumentality or court (other than under
the 1933 Act and the 1933 Act Regulations and the securities or blue
sky laws of the various states and the securities laws of any
jurisdiction outside the United States in which International Shares
are offered or sold by the Managers pursuant to the International
Purchase Agreement) is required for the execution and delivery by such
Selling Securityholder of the Custody Agreement, the JLL Fund Custody
Agreement, the C&D Fund IV Custody Agreement or the Associates III
Custody Agreement, as the case may be, the execution and delivery by
or on behalf of such Selling Securityholder of this Agreement, the
International Purchase Agreement, the U.S. Price Determination
Agreement and the International Price Determination Agreement and the
valid sale and delivery of the Purchased Securities to be sold by such
Selling Securityholder hereunder and thereunder.
(vii) The execution and delivery of this Agreement, the
International Purchase Agreement, the U.S. Price Determination
Agreement, the International Price Determination Agreement and the
Custody Agreement, the JLL Fund Custody Agreement, the C&D Fund IV
Custody Agreement or the Associates III Custody Agreement, as the case
may be, and the consummation of the transactions contemplated herein
and therein, including the sale to the Underwriters of the Purchased
Securities, will not result in a violation of the charter, by-laws or
other governing document of such Selling Securityholder and will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which such Selling Securityholder is a party or by which
such Selling Securityholder is bound
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<PAGE>
or to which the properties or assets of such Selling Securityholder
are subject nor will such action result in any violation of the
provisions of any statute applicable to such Selling Securityholder or
its legal or regulatory status or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such
Selling Securityholder or the property of such Selling Securityholder,
which order, rule or regulation is applicable to such Selling
Securityholder or the property of such Selling Securityholder.
(viii) Such Selling Securityholder has, and at the
Closing Time and, if any Option Shares are purchased, at the relevant
Date of Delivery will have, good and valid title to the Purchased
Securities to be sold by such Selling Securityholder pursuant to this
Agreement and the International Purchase Agreement, as set forth on
Schedule B hereto, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind; and, upon
delivery of such Purchased Securities and payment of the purchase
price therefor as contemplated in this Agreement and the International
Purchase Agreement, each of the Underwriters will receive good and
valid title to the Purchased Securities purchased by it from such
Selling Securityholder, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind (other than
any pledge, lien, security interest, charge, claim, equity or
encumbrance created by or through any Underwriter). The owner of the
Purchased Securities, if other than such Selling Securityholder, is
precluded from asserting against the Underwriters the effectiveness of
any unauthorized endorsement. Such Selling Securityholder has not
entered into any agreement with any third party or taken any action
the effect of which could subject the shares of Common Stock issuable
upon exercise of such Warrants or obtainable upon exercise of the
Reallocation Rights, as the case may be, to any lien, charge or
encumbrance or any other claim of any third party.
(ix) Certificates for all of the Purchased Securities to be
sold by such Selling Securityholder pursuant to this Agreement and the
International Purchase Agreement, in suitable form for transfer by
delivery or accompanied by duly executed instruments of transfer or
assignment in blank with signatures guaranteed, have been placed in
custody with the Custodian with irrevocable conditional instructions
to deliver such Purchased Securities to the U.S. Underwriters at the
Closing pursuant to this Agreement and the Managers pursuant to the
International Purchase Agreement.
(x) For a period of 90 days from the date hereof, such
Selling Securityholder will not, without the prior written consent of
Merrill Lynch,
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<PAGE>
on behalf of the Underwriters, directly or indirectly, sell, offer to
sell, grant any option for the sale of, or otherwise dispose of any
shares of Common Stock or securities convertible into or exercisable
or exchangeable for Common Stock owned by such Selling Securityholder
or with respect to which such Selling Securityholder has the power of
disposition, other than to the U.S. Underwriters pursuant hereto or to
the Managers pursuant to the International Purchase Agreement,
provided that such Selling Securityholder may transfer Registrable
--------
Securities (as defined in the Registration Rights Agreement, dated as
of July 7, 1992, as amended, among Kendall and certain holders of
Kendall securities (the "Registration Rights Agreement") to Permitted
Transferees (as defined in the Registration Rights Agreement), so long
as such Permitted Transferee executes a lock-up agreement in favor of
the Underwriters in the same form as the lock-up agreement entered
into by such Selling Securityholder in connection with the
transactions contemplated hereby.
(xi) Such Selling Securityholder has not taken and will not
take, directly or indirectly, any action designed to, or that would
reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock; and such Selling
Securityholder has not distributed and will not distribute any
prospectus (as such term is defined in the 1933 Act and the 1933 Act
Regulations) in connection with the offering and sale of the Offered
Shares other than any preliminary prospectus filed with the Commission
or the Prospectuses or other material permitted by the 1933 Act or the
1933 Act Regulations.
(xii) Except as disclosed in writing to the U.S.
Underwriters, neither such Selling Securityholder nor any of its
affiliates directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, or has
any other association with (within the meaning of Article I, Section
1(m) of the By-laws of the National Association of Securities Dealers,
Inc.), any member firm of the National Association of Securities
Dealers, Inc.
(xiii) Such Selling Securityholder has duly executed and
delivered this Agreement and the International Purchase Agreement
either for itself or by and through its attorney-in-fact as appointed
under the Custody Agreement.
(II) Each of the Selling Securityholders that is also a New
Investor (as defined herein) severally represents and warrants to and agrees
with, each of the U. S. Underwriters as follows:
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<PAGE>
The Reallocation Agreement has been duly authorized,
executed and delivered by such New Investor and constitutes the valid
and binding obligation of such New Investor enforceable against such
New Investor in accordance with its terms.
(c) Any certificate signed by any officer of the Company or any
Subsidiary and delivered to you or to Fried, Frank, Harris, Shriver & Jacobson
as counsel for the Underwriters at or prior to the Closing Time pursuant to this
Agreement or the transactions contemplated hereby shall be deemed a
representation and warranty by the Company or such Subsidiary, as the case may
be, to each U.S. Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of any Selling Securityholder as such and
delivered to you or to counsel for the Underwriters at or prior to the Closing
Time pursuant to the terms of this Agreement or the transactions contemplated
hereby shall be deemed a representation and warranty by such Selling
Securityholder to each U.S. Underwriter, as to the matters covered thereby.
Section 2. Sale and Delivery to the U.S. Underwriters; Closing.
---------------------------------------------------
(a) On the basis of the representations and warranties herein contained, and
subject to the terms and conditions herein set forth, each Selling
Securityholder agrees, severally and not jointly, to sell to each U.S.
Underwriter, severally and not jointly, and each U.S. Underwriter agrees,
severally and not jointly, to purchase from each Selling Securityholder , at the
purchase price per security set forth in the U.S. Price Determination Agreement,
that proportion of the number of U.S. Securities being sold by each such Selling
Securityholder set forth on Schedule B opposite the name of each such Selling
Securityholder which the number of U.S. Securities set forth in Schedule A
opposite the name of such U.S. Underwriter (plus such additional number of U.S.
Securities that such U.S. Underwriter may become obligated to purchase pursuant
to Section 11 hereof) bears to the total number of U.S. Securities, subject, in
each case, to such adjustments as the U.S. Underwriters in their discretion
shall make to eliminate any sales or purchases of fractional shares.
(b) If the Company has elected not to rely upon Rule 430A, the
initial public offering price per share for the Initial U.S. Shares and the
purchase price per security for the U.S. Securities to be paid by the several
U.S. Underwriters shall be agreed upon and set forth in the U.S. Price
Determination Agreement, dated the date hereof, and an amendment to the
Registration Statement containing such per share price information will be filed
before the Registration Statement becomes effective.
(c) If the Company has elected to rely upon Rule 430A, the
initial public offering price per share for the Initial U.S. Shares and the
purchase price per security for the U.S. Securities to be paid by the several
U.S. Underwriters shall be agreed upon and set forth in the U.S. Price
Determination Agreement. In the event that the U.S. Price Determination
Agreement has not been executed by the close of business on the fourth
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<PAGE>
business day following the date on which the Registration Statement becomes
effective, this Agreement shall terminate forthwith, without liability of any
party to any other party except that Sections 7 and 8 shall remain in effect.
(d) In addition, on the basis of the representations, warranties
and covenants herein contained, and subject to the terms and conditions herein
set forth, the Selling Securityholders that are holders of Common Stock which
were not issued upon exercise of Warrants or Reallocation Rights subsequent to
October 19, 1994 hereby grant an option to the U.S. Underwriters, severally and
not jointly, to purchase up to the number of Option Shares set forth opposite
such Securityholder's name in Schedule A hereto at the same purchase price per
share as shall be applicable to the Initial U.S. Shares. The option hereby
granted to the U.S. Underwriters will expire 30 days after the date upon which
the Registration Statement becomes effective or, if the Company has elected to
rely upon Rule 430A, the date of the U.S. Price Determination Agreement, and, in
any case, may be exercised in whole or from time to time in part only for the
purpose of covering over-allotments that may be made in connection with the
offering and distribution of the Initial Shares upon delivery of notice by the
U.S. Underwriters to JLL Fund, C&D Fund IV and the Attorney-in-Fact under the
Custody Agreement on behalf of the other Selling Securityholders setting forth
the number of Option Shares as to which the several U.S. Underwriters are
exercising the option, and the time and date of payment and delivery thereof.
Such time and date of delivery (the "Date of Delivery") shall be determined by
the Underwriters but shall not be, without the consent of Merrill Lynch, on
behalf of the Underwriters, earlier than two full business days nor later than
five full business days after the exercise of such option, nor in any event
prior to the Closing Time. If the option is exercised as to all or any portion
of the Option Shares, the U.S. Option Shares as to which the option is exercised
shall be purchased by the U.S. Underwriters, severally and not jointly, in the
respective proportions that bear the same relationship to the number of U.S.
Option Shares to be purchased at the Date of Delivery as the number of Initial
U.S. Shares set forth opposite the name of each U.S. Underwriter in Schedule B
hereto bears to the total number of Initial U.S. Shares (such proportions are
hereinafter referred to as each U.S. Underwriter's "underwriting obligation
proportions"). If the option is exercised in part, the U.S. Underwriters shall
purchase the U.S. Option Shares from each Selling Securityholder providing such
option the number of U.S. Option Shares equal to the product of (x) the number
of U.S. Option Shares to be purchased multiplied by (y) a fraction in which the
numerator is the number of U.S. Option Shares set forth opposite the name of
such Selling Securityholder on Schedule A hereto and the denominator is the
total number of U.S. Option Shares set forth on Schedule A hereto.
(e) (i) Payment of the purchase price for, and delivery of
certificates for, the U.S. Securities, (ii) exercise of the U.S. Warrants and
delivery of certificates for the underlying shares of Common Stock by payment of
the exercise price under such Warrants and (iii) exercise of the U.S.
Reallocation Rights and delivery of certificates for
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<PAGE>
the underlying shares of Common Stock by payment of the exercise price under
such Reallocation Rights shall, in each case, be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004,
or at such other place as shall be agreed upon by the Company, the Selling
Securityholders and you, at 10:00 A.M. (New York time) either (x) on the fifth
full business day after the effective date of the Registration Statement, or (y)
if the Company has elected to rely upon Rule 430A, on the fifth full business
day after execution of the U.S. Price Determination Agreement (unless, in either
case, postponed pursuant to Section 11 or 12), or at such other time not more
than ten full business days thereafter as you, the Company and the Selling
Securityholders shall determine (such date and time of payment and delivery
being herein called the "Closing Time"). In addition, in the event that any or
all of the U.S. Option Shares are purchased by the U.S. Underwriters, payment of
the purchase price for, and delivery of certificates for, such U.S. Option
Shares shall be made at the offices of Fried, Frank, Harris, Shriver & Jacobson
set forth above, or at such other place as the Company, the Selling
Securityholders that are selling U.S. Option Shares and you shall determine, on
the Date of Delivery as specified in the notice from you to JLL Fund, C&D Fund
IV and the Attorney-in-Fact. Payment shall be made to the Selling
Securityholders and the New Investors upon exercise of the Reallocation Rights
by certified or official bank check or checks or wire transfer in New York
Clearing House funds payable to the order of the Custodian pursuant to the
Custody Agreement, the JLL Fund Custody Agreement, the C&D Fund IV Custody
Agreement or the Associates III Custody Agreement, as the case may be, or
directly to the Selling Securityholders or New Investors if so instructed by the
Custodian with the consent of the U.S. Underwriters against delivery to you for
the respective accounts of the several U.S. Underwriters of certificates for the
U.S. Securities to be purchased by them. Payment shall be made to the Company
for the exercise price of the Warrants by certified official bank check or
checks or wire transfer in New York Clearing House funds payable to the order of
the Company.
(f) At the Closing Time, the Custodian shall deliver the U.S.
Purchased Shares, the U.S. Warrants and the U.S. Reallocation Rights to the U.S.
Underwriters with any transfer taxes thereon duly paid by the Selling
Securityholder against payment thereof as described in paragraph (e) above.
Concurrently with the delivery of the U.S. Warrants to the U.S. Underwriters at
the Closing, the U.S. Underwriters shall exercise the U.S. Warrants by payment
of the exercise price thereof as described in paragraph (e) above and the
Company shall permit such exercise and shall cause the transfer agent for the
Common Stock (the "Transfer Agent") to immediately issue certificates for the
underlying shares of Common Stock and deliver them to the U.S. Underwriters.
Concurrently with the delivery of the U.S. Reallocation Rights to the U.S.
Underwriters at the Closing, the U.S. Underwriters shall exercise the U.S.
Reallocation Rights by payment of the exercise price thereof as described in
paragraph (e) above and the Company and the Selling Securityholders shall permit
such exercise and the Company
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<PAGE>
shall cause the reallocation agent under the Reallocation Agreement to
immediately deliver certificates for the underlying shares of Common Stock to
the U.S. Underwriters.
(g) Certificates for the Initial U.S. Shares and U.S. Option
Shares to be sold by the U.S. Underwriters shall be in such denominations and
registered in such names as you may request in writing at least two full
business days before the Closing Time or the Date of Delivery, as the case may
be. The certificates for the Initial U.S. Shares and U.S. Option Shares will be
made available in New York City for examination and packaging by you not later
than 10:00 A.M. (New York time) on the business day prior to the Closing Time or
the Date of Delivery, as the case may be.
(h) It is understood that each U.S. Underwriter has authorized
the U.S. Representatives, for its account, to accept delivery of, receipt for,
and make payment of the purchase price for, the U.S. Securities that it has
agreed to purchase. You, individually and not as U.S. Representatives, may (but
shall not be obligated to) make payment of the purchase price for the U.S.
Securities or U.S. Option Shares to be purchased by any U.S. Underwriter whose
check or checks shall not have been received by the Closing Time or the Date of
Delivery, as the case may be.
(i) The obligation of the Selling Securityholders, to sell to
each U.S. Underwriter the U.S. Securities and the U.S. Option Shares,
respectively, and the several and not joint obligations of the U.S. Underwriters
to purchase and pay for the U.S. Securities and the U.S. Option Shares,
respectively, upon the terms and subject to the conditions of this Agreement,
are subject to the concurrent closing of the sale of the International
Securities and the International Option Shares, respectively, to the Managers
pursuant to the terms of the International Purchase Agreement.
Section 3. Certain Covenants of the Company. The Company
--------------------------------
covenants with each U.S. Underwriter as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, if the Company elects to rely
upon Rule 430A and subject to Section 3(b), will comply with the requirements of
Rule 430A and will notify you promptly, (i) when the Registration Statement, or
any post-effective amendment to the Registration Statement, shall have become
effective, or any supplement to the Prospectuses or any amended Prospectuses
shall have been filed, (ii) of the receipt of any comments from the Commission,
(iii) of any request by the Commission to amend the Registration Statement, to
amend or supplement any Prospectus or for additional information and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the Offered
Shares for offering or sale in any jurisdiction, or of the institution or
threatening of any proceedings for any of such purposes. The Company will make
every reasonable effort
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<PAGE>
to prevent the issuance of any such stop order or of any order preventing or
suspending such use and, if any such order is issued, to obtain the lifting
thereof at the earliest possible moment.
(b) The Company will not at any time file or make any amendment
to the Registration Statement, or any amendment or supplement thereto, or any
document incorporated by reference therein (i) if the Company has not elected to
rely upon Rule 430A, to the Prospectuses or (ii) if the Company has elected to
rely upon Rule 430A, to either the prospectus included in the Registration
Statement at the time it becomes effective or to the Prospectuses, of which you
shall not have previously been advised and furnished a copy or to which you or
Fried, Frank, Harris, Shriver & Jacobson as counsel for the U.S. Underwriters
shall reasonably and timely object in writing.
(c) The Company has furnished or will furnish to you and your
counsel, without charge, one signed copy of the Registration Statement (as
originally filed) and of all amendments thereto (including exhibits filed
therewith and documents incorporated by reference therein), whether filed before
or after the Registration Statement becomes effective, copies of all exhibits
and documents filed therewith, and signed copies of all consents and
certificates of experts, and has furnished or will furnish to you, for each
other U.S. Underwriter, one conformed copy of the Registration Statement as
originally filed and each amendment thereto.
(d) The Company will deliver to each U.S. Underwriter, without
charge, from time to time until the effective date of the Registration Statement
(or, if the Company has elected to rely upon Rule 430A, until the time the U.S.
Price Determination Agreement is executed and delivered), as many copies of each
preliminary prospectus as such U.S. Underwriter may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will deliver to each U.S. Underwriter, without charge, as
soon as the Registration Statement shall have become effective (or, if the
Company has elected to rely upon Rule 430A, as soon as practicable after the
U.S. Price Determination Agreement has been executed and delivered) and
thereafter from time to time as requested during the period when the
Prospectuses are required to be delivered under the 1933 Act, such number of
copies of the Prospectuses (as supplemented or amended) as such U.S. Underwriter
may reasonably request.
(e) The Company will comply to the best of its ability with the
1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Offered
Shares as contemplated in this Agreement, the International Purchase Agreement
and the Prospectuses. If at any time when a prospectus is required by the 1933
Act to be delivered in connection with sales of the Offered Shares any event
shall occur or condition exist as a result of which it is necessary, in the
opinion of counsel for the U.S. Underwriters, to amend the Registration
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<PAGE>
Statement or amend or supplement any Prospectus in order that the Prospectuses
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement any
Prospectus in order to comply with the requirements of the 1933 Act, the 1933
Act Regulations, the 1934 Act or the 1934 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Registration Statement or the Prospectuses comply with
such requirements.
(f) The Company will endeavor, in cooperation with the U.S.
Underwriters, to qualify the Offered Shares for offering and sale under the
applicable securities laws of such states and other jurisdictions as you may
designate and to maintain such qualifications in effect for a period of not less
than one year from the effective date of the Registration Statement; provided,
--------
however, that neither the Company nor any Subsidiary shall be obligated to file
- -------
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company will file
such statements and reports as may be required by the laws of each jurisdiction
in which the Offered Shares have been qualified as above provided.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby, an earnings statement of the Company (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations), covering
a period of 12 months beginning after the effective date of the Registration
Statement but not later than the first day of the Company's fiscal quarter next
following such effective date.
(h) For a period of 90 days from the date hereof, the Company
will not, without the prior written consent of Merrill Lynch on behalf of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock, other than to
(i) the Managers pursuant to the International Purchase Agreement and
(ii) eligible participants in the Company's employee stock plans pursuant to the
terms thereof as in effect on the date hereof.
(i) The Company will use its best efforts to effect the listing
of the Common Stock on the New York Stock Exchange on the date of the U.S. Price
Determination Agreement.
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<PAGE>
(j) The Company, during the period when the Prospectuses are
required to be delivered under the 1933 Act or the 1934 Act, will file all
documents required to be filed with the Commission pursuant to Sections 13, 14
or 15 of the 1934 Act subsequent to the time the Registration Statement becomes
effective.
(k) For a period of five years after the Closing Time, the
Company will furnish to you and each U.S. Underwriter that so requests copies of
all annual reports, quarterly reports and current reports filed with the
Commission on Forms 10-K and 10-Q and, to the extent requested, Form 8-K or
such other similar forms as may be designated by the Commission, and such other
documents, reports and information as shall be furnished by the Company to its
stockholders
generally.
(l) If the Company has elected to rely upon Rule 430A, it will
take such steps as it deems necessary to ascertain promptly whether the forms of
prospectuses transmitted for filing under Rule 424(b) were received for filing
by the Commission and, in the event that they were not, it will promptly file
such prospectuses.
(m) The Company has complied, and will comply, with all of the
provisions of Florida H.B. 1771, as codified in sec. 517.075 Florida Statutes,
1987, as amended, and all regulations promulgated thereunder relating to issuers
or their affiliates doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(n) The Company will cooperate with, and take, or will cause
Kendall International, Inc. to take, such actions as reasonably requested by the
U.S. Underwriters to enforce all of its rights under Section 2.3 (c) of the
Registration Rights Agreement, dated as of July 7, 1992, as amended, among
Kendall International Inc. and the stockholders and other parties thereto
arising in connection with the transactions contemplated by this Agreement,
including informing the Transfer Agent and the agent for the Warrants and
Reallocation Rights as to the restrictions on transfer of the Company's
securities arising out of the transactions contemplated by this Agreement and
advising such agents not to transfer securities in contravention of such
restrictions.
Section 4. Payment of Expenses. (a) The Company agrees to pay
-------------------
all expenses incident to the performance of its obligations under this Agreement
and the International Purchase Agreement, including (i) the printing and filing
of the Registration Statement (including financial statements and exhibits), as
originally filed and as amended, the preliminary prospectuses and the
Prospectuses and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (ii) the copying or printing, as
applicable, and distribution of this Agreement (including the U.S. Price
Determination Agreement), the Intersyndicate Agreement among the U.S.
Underwriters and the Managers, the International Purchase Agreement (including
the International Price Determination Agreement), the Agreement among Managers,
the
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<PAGE>
certificates for the Offered Shares and a survey of state securities or blue sky
laws (the "Blue Sky Survey"), (iii) except for any expenses paid by the Selling
Securityholders pursuant to clause (b) below, the delivery of the certificates
for the Offered Shares to the Underwriters, including any capital duties, stamp
duties and stock or other transfer taxes payable upon the sale of the Offered
Shares to the Underwriters and the transfer of the Offered Shares between the
U.S. Underwriters and the Managers, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisers and one counsel for the
Selling Securityholders , (v) the qualification of the Offered Shares under the
applicable securities laws in accordance with Section 3(f) and any filing fees
for review of the offering with the National Association of Securities Dealers,
Inc., including filing fees and reasonable fees and disbursements of Fried,
Frank, Harris, Shriver & Jacobson as counsel for the Underwriters in connection
therewith and in connection with the Blue Sky Survey, (vi) the fees and expenses
of any transfer agent or registrar for the Offered Shares, (vii) the listing
fees and expenses incurred in connection with listing the Offered Shares on the
New York Stock Exchange, if any, and (viii) the fees and expenses of the
Custodian or the Attorney-in-Fact under the Custody Agreement.
(b) Each of the Selling Securityholders will pay any transfer
taxes attributable to the sale by it of U.S. Securities and any fees and
disbursements of its counsel and accountants, if any, not paid by the Company
pursuant to Section 4(a)(iv) or otherwise.
(c) If this Agreement is terminated by you in accordance with
the provisions of Section 5, 10(a)(i) or 12, the Company shall reimburse the
U.S. Underwriters through you for all of their reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of Fried, Frank,
Harris, Shriver & Jacobson as counsel for the U.S. Underwriters.
Section 5. Conditions of U.S. Underwriters' Obligations. In
--------------------------------------------
addition to the execution and delivery of the U.S. Price Determination
Agreement, the obligations of the several U.S. Underwriters to purchase and pay
for the U.S. Shares that they have respectively agreed to purchase hereunder
(including any U.S. Option Shares as to which the option granted in Section 2(d)
has been exercised in the event the Date of Delivery determined by you is the
same as the Closing Time) are subject to the accuracy of the representations and
warranties of the Company and the Selling Securityholders contained herein
(including those contained in the U.S. Price Determination Agreement) or in
certificates of any officer of the Company or any Subsidiary and the Selling
Securityholders delivered pursuant to the provisions hereof, to the performance
by the Company and the Selling Securityholders of their respective obligations
hereunder in all material respects, and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date of this Agreement or, with your consent, at a
later time and
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date not later, however, than 5:30 P.M. on the first business day following the
date hereof, or at such later time or on such later date as you may agree to in
writing with the approval of a majority in interest of the several U.S.
Underwriters; and at the Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act and no
proceedings for that purpose shall have been instituted or shall be pending or,
to your knowledge or the knowledge of the Company, shall have been threatened by
the Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Fried, Frank, Harris, Shriver & Jacobson as counsel for the U.S. Underwriters.
If the Company has elected to rely upon Rule 430A, Prospectuses containing the
Rule 430A Information shall have been filed with the Commission in accordance
with Rule 424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the requirements of
Rule 430A).
(b) At the Closing Time, you shall have received signed opinions
of M. Brian Moroze, Esq., General Counsel for the Company, dated as of the
Closing Time, together with reproduced copies of such opinions for each of the
U.S. Underwriters, in form and substance satisfactory to counsel for the U.S.
Underwriters, to the effect that:
(i) The Company is a corporation validly organized and
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts.
(ii) The Company has the requisite power and authority
(corporate and other) to own, lease and operate its properties and to
conduct its business as described in the Prospectuses, and to enter
into and perform its obligations under this Agreement, the U.S. Price
Determination Agreement, the International Purchase Agreement and the
International Price Determination Agreement.
(iii) The Company is duly qualified as a foreign
corporation to transact business and is in good standing under the
laws of each other jurisdiction in which such qualification is
required except where the failure to be so qualified and be in good
standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one
enterprise.
(iv) Each of the Company's Significant Subsidiaries is a
corporation validly organized and existing as a corporation under the
laws of its jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and conduct its business
as described in the
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Prospectuses, is duly qualified as a foreign corporation to transact
business and is in good standing under the laws of each jurisdiction
in which the nature of its business or its ownership or leasing of its
properties requires qualification, except where the failure to be so
qualified or in good standing would not have a material adverse effect
on the condition (financial or otherwise), earnings, business affairs
or business prospects of the Company and the Subsidiaries considered
as one enterprise; and all the outstanding shares of capital stock of
each Significant Subsidiary of the Company have been duly authorized
and validly issued, are fully-paid and non-assessable, and (except for
non-material liens that have arisen in the ordinary course of business
and in the case of foreign subsidiaries, for directors, qualifying
shares) are owned by the Company, directly or indirectly, free and
clear of all liens, encumbrances, security interests and claims.
(v) Other than as disclosed in or contemplated by the
Prospectus, there are no legal or governmental proceedings pending or,
to the best of my knowledge, threatened to which the Company or any of
its Subsidiaries is or may be a party or to which any property of the
Company or its Subsidiaries is or may be the subject which, if
determined adversely to the Company or such Subsidiaries, could
individually or in the aggregate reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and
its Subsidiaries, considered as one enterprise.
(vi) To the best of my knowledge, no legal or governmental
proceedings are pending or threatened against the Company or any of
its Subsidiaries which are required to be disclosed in the
Registration Statement or the Prospectus, other than those disclosed
therein.
(vii) To the best of my knowledge, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or
other documents to which the Company or any Subsidiary is a party or
by which any of them may be bound that are required to be filed as an
exhibit to the Registration Statement or required to be described in
the Registration Statement or the Prospectuses, other than those so
filed or described as required.
(viii) Neither the Company nor any of its Subsidiaries
is, or, based upon presently existing circumstances with the giving of
notice or lapse of time or both would be, in violation of or in
default under, their respective restated articles of organization,
certificate of incorporation or other similar charter document or
by-laws or any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument known to me to
which the Company or any of its Subsidiaries is party or by which
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it or any of them or any of their respective properties is bound,
except for violations and defaults which individually and in the
aggregate are not material to the Company and the Subsidiaries taken
as a whole.
(ix) All descriptions in the Prospectuses of the agreements
set forth under "Description of Capital Stock" are accurate and
conform in all material respects to the terms of such agreements, and
the statements in the Prospectuses under "Legal Proceedings"
incorporated by reference from Item 3 of Part 1 of the Company's
Annual Report on Form 10-K for the year ended June 30, 1994, insofar
as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
or proceedings.
(x) This Agreement, the U.S. Price Determination Agreement,
the International Purchase Agreement and the International Price
Determination Agreement have been duly authorized, executed and
delivered by the Company.
(xi) All of the issued and outstanding shares of capital
stock of the Company, including the Offered Shares, have been duly
authorized and validly issued and are fully paid and non-assessable,
and were not issued in violation of any preemptive or similar rights
of the stockholders of the Company arising under the Corporation Law
of the Commonwealth of Massachusetts, under the charter or by-laws of
the Company, or, to the best of such counsel's knowledge, under any
agreement known to such counsel.
(xii) The obligations under the Warrants and the
International Warrants have been duly authorized and validly assumed
by the Company and, prior to their exercise, constituted binding
obligations of the Company, entitling the holders thereof to purchase
shares of Common Stock upon the terms and in the manner set forth
therein.
(xiii) The obligations of Kendall under the U.S.
Reallocation Rights and the International Reallocation Rights have
been duly and validly authorized and assumed by the Company and, prior
to their exercise, constitute binding obligations of the Company
enforceable against the Company in accordance with its terms entitling
the holder thereof to acquire shares of Common Stock upon the terms
and in the manner set forth therein. The obligations of Kendall under
the Reallocation Agreement has been duly and validly authorized and
assumed by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms.
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<PAGE>
(xiv) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectuses under the
caption entitled "Capitalization," as of the date stated therein.
(xv) Except as disclosed in or specifically contemplated by
the Prospectuses, to the best of such counsel's knowledge there are no
outstanding options, warrants or other rights created by the Company
calling for the issuance of, and no commitments or obligations to
issue, any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the Company.
(xvi) The execution and delivery of this Agreement, the
U.S. Price Determination Agreement, the International Purchase
Agreement and the International Price Determination Agreement by the
Company, the sale and delivery of the Offered Shares, the exercise of
the U.S. Warrants and the International Warrants and the delivery of
shares of Common Stock upon exercise thereof, the exercise of the U.S.
Reallocation Rights and the International Reallocation Rights, the
consummation by the Company and the Selling Securityholders of the
transactions contemplated in this Agreement and the International
Purchase Agreement and compliance by the Company and the Selling
Securityholders with the terms of the foregoing will not (a) violate
the Company's Restated Articles of Organization or by-laws, (b) breach
or result in a default under any contract, indenture, mortgage, deed
of trust, loan or credit agreement, bond, debenture, note, lease or
any other agreement or instrument known to me to which the Company or
any of its Subsidiaries is a party or by which it or any of them is
bound or to which any of the property or assets of the Company or any
of its Subsidiaries is bound, or (c) result in a violation by the
Company of any applicable law, statute, rule or regulation (other than
state securities or Blue Sky laws or regulations, as to which counsel
need not opine) applicable to the Company or any judgment, order,
writ, injunction, or decree of any jurisdiction, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or operations. In rendering
the opinion expressed in paragraph (xiv), as to violations of any
applicable law or statute, rule or regulation, I assume that neither
the Registration Statement nor the Prospectuses contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectuses, in light of the
circumstances under which they were made) not misleading.
(xvii) No consent, approval, authorization or license,
order, registration or qualification of or with any court or of any
government,
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governmental instrumentality or court is legally required to be
obtained by the Company in connection with the due authorization,
execution and delivery of this Agreement, the U.S. Price Determination
Agreement, the International Purchase Agreement and the International
Price Determination Agreement, the exercise of the U.S. Warrants and
the International Warrants and the delivery of shares of Common Stock
upon exercise thereof, the exercise of the U.S. Reallocation Rights
and the International Reallocation Rights and the sale and delivery
of the Offered Shares or the consummation of the transactions
contemplated by this Agreement, except such as may be required under
the 1933 Act and the 1933 Act Regulations, which have been obtained,
or as may be required under the securities or Blue Sky laws of the
various states, as to which such counsel need express no opinion.
(xviii) To the best of such counsel's knowledge, no
holders of the Company's securities have rights to the registration of
shares of Common Stock or other securities as a result of the filing
of the Registration Statement by the Company or the offering
contemplated hereby, except pursuant to the Registration Rights
Agreement, dated as of July 7, 1992, as amended, among Kendall
International, Inc. and the parties thereto.
(xix) Each document incorporated by reference in the
Registration Statement and the Prospectus, when filed with the
Commission under the Exchange Act, complied as to form in all material
respects with the requirements of the Exchange Act (except that such
counsel need not express an opinion as to financial statements, the
notes thereto and related schedules and other financial or accounting
data included in or omitted from any of the documents referred to in
this paragraph).
Although such counsel has not undertaken to determine
independently the accuracy and completeness of the statements contained in the
Registration Statement or the Prospectuses, such counsel has obtained
information as a result of discussions and meetings with officers and other
representatives of the Company and its Subsidiaries and discussions with
representatives of and independent public accountants of the Company, in
connection with the preparation of the Registration Statement and the
Prospectuses, and the examination of other information and documents requested
by such counsel. Although such counsel has not undertaken to determine
independently, and therefore, such counsel does not assume responsibility,
explicitly or implicitly, for the accuracy and completeness of the statements
contained in the Registration Statement or the Prospectuses, and such counsel
cannot provide assurance that the procedures described in the preceding sentence
would necessarily reveal matters of significance with respect to the following
comments, during the course of the above-described procedures, nothing has come
to such counsel's attention that has caused such counsel to believe that the
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<PAGE>
Registration Statement (including the Rule 430A Information, if applicable, and
any amendment thereto) or the Prospectuses (including, in each case, the
documents incorporated by reference therein), on the effective date thereof, or
on the date of the Agreement, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto, on the date hereof, contain an untrue statement
of a material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no view with respect to financial statements, the
notes thereto and related schedules and other financial or accounting data
included in the Registration Statement or the Prospectuses).
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement, the International Purchase
Agreement and the sale of the Offered Shares pursuant to this Agreement and the
International Purchase Agreement as counsel for the Underwriters may reasonably
request. In rendering such opinion, such counsel may rely as to all matters
governed by laws of jurisdictions other than the law of the Commonwealth of
Massachusetts and the federal law of the United States, upon opinions of local
counsel in such jurisdictions, who shall be counsel satisfactory to counsel for
the Underwriters in which case the opinion shall state that they believe you and
they are entitled to so rely. Such counsel may also state that, insofar as such
opinion involves factual matters, such counsel has relied, to the extent such
counsel deems proper, upon certificates of officers of the Company and the
Subsidiaries and certificates of public officials.
(c) At the Closing Time, you shall have received signed opinions
of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, counsel for the Company,
dated as of the Closing Time, together with reproduced copies of such opinions
for each of the U.S. Underwriters, in form and substance satisfactory to counsel
for the U.S. Underwriters, to the effect that:
(i) The statements made in the Prospectuses under
"Description of Capital Stock" insofar as they purport to constitute
summaries of the terms of the Common Stock constitute accurate and
fair summaries thereof in all material respects. The descriptions of
the A Warrants, the B Warrants and the Reallocation Rights set forth
in the Prospectuses under "Description of Capital Stock" conform in
all material respects to the terms of such instruments.
(ii) The Registration Statement has been declared effective
under the 1933 Act. Any required filing of the Prospectuses or any
supplement thereto has been made with the Commission pursuant to Rule
424(b); such
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<PAGE>
counsel does not know of the issuance of any stop order suspending the
effectiveness of the Registration Statement and no proceedings for
that purpose have been instituted or, to our knowledge, threatened.
(iii) The Registration Statement (including the Rule
430A Information, if applicable), the Prospectuses and each amendment
or supplement to the Registration Statement and Prospectuses (other
than the documents incorporated by reference) as of their respective
effective or issue dates, comply as to form in all material respects
to the requirements of the 1933 Act and the applicable 1933 Act
Regulations (except that such counsel need not express an opinion as
to financial or accounting data, statements, notes or schedules
included or omitted from any of the documents referred to in this
opinion).
(iv) The statements made in the Prospectuses under "Certain
United States Federal Tax Consequences to Non-U.S. Holders of Common
Stock," to the extent that they are statements of United States
federal laws or legal conclusions thereunder, have been reviewed by
such counsel and fairly present the information disclosed therein in
all material respects.
Although such counsel has not undertaken to determine
independently the accuracy and completeness of the statements contained in the
Registration Statement or the Prospectuses, such counsel has obtained
information as a result of discussions and meetings with officers and other
representatives of the Company and its Subsidiaries and discussions with
representatives of and independent public accountants of the Company, in
connection with the preparation of the Registration Statement and the
Prospectuses, and the examination of other information and documents requested
by such counsel. Although such counsel has not undertaken to determine
independently, and therefore, such counsel does not assume responsibility,
explicitly or implicitly, for the accuracy and completeness of the statements
contained in the Registration Statement or the Prospectuses, and such counsel
cannot provide assurance that the procedures described in the preceding sentence
would necessarily reveal matters of significance with respect to the following
comments, during the course of the above-described procedures, nothing has come
to such counsel's attention that has caused such counsel to believe that the
Registration Statement (including the Rule 430A Information, if applicable, and
any amendment thereto) or the Prospectuses (including, in each case, the
documents incorporated by reference therein), on the date or effective date
thereof, or on the date of the Agreement, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto, on the date hereof, contain
an untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being
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<PAGE>
understood that such counsel need express no view with respect to financial
statements, the notes thereto and related schedules and other financial or
accounting data included in the Registration Statement or the Prospectuses).
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement, the International Purchase
Agreement and the sale of the Offered Shares pursuant to this Agreement and the
International Purchase Agreement as counsel for the Underwriters may reasonably
request. In rendering such opinion, such counsel may rely as to all matters
governed by laws of jurisdictions other than the laws of the State of New York
and the federal law of the United States, upon opinions of local counsel in such
jurisdictions, who shall be counsel satisfactory to counsel for the Underwriters
in which case the opinion shall state that they believe you and they are
entitled to so rely. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Subsidiaries and certificates of
public officials.
(d)(i) At the Closing Time, you shall have received signed
opinions of counsel (who may be in-house counsel) for each of the Selling
Securityholders reasonably acceptable to you, as requested by the U.S.
Underwriters, dated as of the Closing Time, together with reproduced copies of
such opinions for each of the U.S. Underwriters, in form and substance
satisfactory to counsel for the U.S. Underwriters, to the effect set forth in
Annexes A-1, A-2 and A-3 hereto.
(ii) At the Closing Time, you shall have received signed opinions
of counsel (who may be in-house counsel) for each of the Selling Securityholders
that is also a New Investor, as requested by the U.S. Underwriters, dated as of
the Closing Time, together with reproduced copies of such opinions for each of
the U.S. Underwriters, in form and substance satisfactory to counsel for the
U.S. Underwriters, to the effect that:
The Reallocation Rights Agreement has been duly authorized,
executed and delivered by such New Investor and constitutes the valid
and binding obligation of such New Investor enforceable against such
New Investor in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(e) At the Closing Time, you shall have received the favorable
opinion of Fried, Frank, Harris, Shriver & Jacobson as counsel for the U.S.
Underwriters, dated as of the Closing Time, together with reproduced copies of
such opinion for each of the other U.S. Underwriters, to the effect that the
opinions delivered pursuant to Sections 5(b), (c), and (d) appear on their face
to be appropriately responsive to the requirements of this Agreement except,
specifying the same, to the extent waived by you, and with
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respect to the legal existence of the Company, the Purchased Securities, the
Offered Shares, this Agreement and the International Purchase Agreement, the
Registration Statement, the Prospectuses and such other related matters as you
may require. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the federal law of the United
States, the law of the State of New York, upon the opinions of counsel
satisfactory to you. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers or other appropriate representatives of the Company,
the Subsidiaries and the Selling Securityholders and certificates of public
officials.
(f) At the Closing Time, (i) the Registration Statement and the
Prospectuses, as they may then be amended or supplemented, shall conform in all
material respects to the requirements of the 1933 Act, the 1933 Act Regulations,
the 1934 Act and the 1934 Act Regulations, the Company shall have complied in
all material respects with Rule 430A (if it shall have elected to rely thereon),
the Registration Statement, as it may then be amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements in the
Registration Statement not misleading, and the Prospectuses, as they may be
amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements in the Prospectuses, in light of the circumstances under
which they were made, not misleading, (ii) there shall not have been, since the
respective dates as of which information is given in the Prospectuses, any
material adverse change in the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its Subsidiaries,
considered as one enterprise, whether or not arising in the ordinary course of
business, (iii) no action, suit or proceeding at law or in equity shall be
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary that would be required to be set forth in the Prospectuses other
than as set forth therein and no proceedings shall be pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
before or by any federal, state or other commission, board or administrative
agency that could reasonably be expected to materially and adversely affect the
condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one enterprise,
other than as set forth in the Prospectuses, (iv) the Company shall have
complied with all agreements and satisfied all conditions on their parts to be
performed or satisfied at or prior to the Closing Time, and (v) the other
representations and warranties of the Company set forth in Section 1(a) shall be
accurate as though expressly made at and as of the Closing Time. At the Closing
Time, you shall have received a certificate of the President or Vice President
and the chief financial officer or chief accounting officer of the Company,
dated as of the Closing Time, to such effect. As used in Section 5(f)(ii)
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and (iii), the term "Prospectuses" means the Prospectuses in the form first used
to confirm sales of the Offered Shares.
(g) At the Closing Time, (i) the representations and warranties
of each Selling Securityholder set forth in Section 1(b) and in any certificates
by or on behalf of the Selling Securityholders delivered pursuant to the
provisions hereof shall be accurate as though expressly made at and as of the
Closing Time, (ii) each Selling Securityholder shall have performed its
obligations under this Agreement and the International Purchase Agreement in all
material respects and (iii) you shall have received a certificate of each
Selling Securityholder to the effect set forth in the form previously delivered
to you.
(h) At the time that this Agreement is executed by the Company,
you shall have received from Coopers & Lybrand L.L.P. a letter, dated such date,
in form and substance satisfactory to you, together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters, confirming that
they are independent public accountants with respect to the Company within the
meaning of the 1933 Act and the applicable published 1933 Act Regulations, and
stating in effect that:
(i) in their opinion, the audited financial statements and
the related financial statement schedules included or incorporated by
reference in the Registration Statement and the Prospectuses comply as
to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations;
(ii) on the basis of procedures (but not an examination
in accordance with generally accepted auditing standards) consisting
of a reading of the minutes of all meetings of the stockholders and
directors of the Company and its Subsidiaries and each committee of
the board of directors of each of the Company and its Subsidiaries,
inquiries of certain officials of the Company and its Subsidiaries
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that at ________,
199_ and at a specified date not more than five days prior to the date
of this Agreement, there was any (i) change in the shareholders'
equity or (ii) increase in long-term debt of the Company and its
Subsidiaries as compared with the amounts shown in the latest balance
sheet included or incorporated by reference in the Registration
Statement, except in each case for changes, decreases or increases
that the Registration Statement discloses have occurred or may occur;
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(iii) in addition to the procedures referred to in
clause (ii) above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing or incorporated by
reference in the Registration Statement, which have previously been
specified by you and which shall be specified in such letter, and have
compared certain of such items with, and have found such items to be
in agreement with, the accounting and financial records of the Company
and its Subsidiaries; and
(iv) at the Closing Time, you shall have received from
Coopers & Lybrand L.L.P. a letter, in form and substance satisfactory
to you and dated as of the Closing Time, to the effect that for the
period from ________, 199_ to ___________, 199_ and to a specified
date not more than five days prior to the date of this Agreement,
there was any decrease in net current assets or sales, or in the total
or per-share amounts of net income before income taxes, extraordinary
item and cumulative effect of accounting changes or net income, or in
other items specified by the U.S. Representatives, in each case as
compared with the comparable period in the preceding year, except in
each case for any decreases that the Registration Statement discloses
have occurred or may occur and that they reaffirm the statements made
in the letter furnished pursuant to Section 5(h), except that the
specified date referred to shall be a date not more than five business
days prior to the Closing Time. In the event the Company relies on
Rule 430A and the final Prospectuses furnished to the Underwriters in
connection with the offering of the Offered Shares differ from the
Prospectuses included in the Registration Statement at the time of
effectiveness, such letter shall update the procedures referred to in
clauses 5(h)(ii) and (iii) above.
(j) At the Closing Time, you shall have received a certificate
of the Chief Financial Officer of the Company as to certain agreed upon
accounting matters.
(k) At the Closing Time, counsel for the Underwriters shall have
been furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Offered Shares as contemplated in this Agreement and the
International Purchase Agreement and the matters referred to in Section 5(f) and
in order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company and the Selling
Securityholders, the performance of any of the covenants of the Company and the
Selling Securityholders, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Company and the Selling
Securityholders at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Offered Shares as contemplated in this
Agreement and the International Purchase Agreement shall
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be reasonably satisfactory in form and substance to you and to Fried, Frank,
Harris, Shriver & Jacobson as counsel for the Underwriters.
(l) Each Selling Securityholder shall have delivered to you on
or prior to the Closing Time a properly completed and executed United States
Treasury Department Form W/9 (or other applicable form or statement specified by
Treasury Department regulations).
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company and the Selling
Securityholders at any time at or prior to the Closing Time, and such
termination shall be without liability of any party to any other party, except
as provided in Section 4 herein. Notwithstanding any such termination, the
provisions of Section 7 and 8 herein shall remain in effect.
Section 6. Conditions to Purchase of U.S. Option Shares. In the
--------------------------------------------
event that the U.S. Underwriters exercise their option granted in Section 2 to
purchase all or any of the U.S. Option Shares and the Date of Delivery
determined by you pursuant to Section 2 is later than the Closing Time, the
obligations of the several U.S. Underwriters to purchase and pay for the U.S.
Option Shares that they shall have respectively agreed to purchase pursuant to
this Agreement are subject to the accuracy of the representations and warranties
of the Company, and the Selling Securityholders that are selling Option Shares
herein contained, to the performance of the Company, and the Selling
Securityholders that are selling Option Shares of their respective obligations
in all material respects hereunder and to the following further conditions:
(a) The Registration Statement shall remain effective at the
Date of Delivery, and at the Date of Delivery no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or shall
be pending or, to your knowledge or the knowledge of the Company or the Selling
Securityholders that are selling Option Shares, shall have been threatened by
the Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Fried, Frank, Harris, Shriver & Jacobson as counsel for the U.S. Underwriters.
(b) At the Date of Delivery, the provisions of Section 5(f)
shall have been complied with at and as of the Date of Delivery and, at the Date
of Delivery, you shall have received a certificate of the President or a Vice
President and chief financial officer or chief accounting officer of the Company
with respect to the provisions of Section 5(f), dated as of the Date of
Delivery, to such effect.
- 37 -
<PAGE>
(c) At the Date of Delivery, the provisions of Section 5(g)
shall have been complied with at and as of the Date of Delivery.
(d) At the Date of Delivery, you shall have received the
favorable opinions of M. Brian Moroze, general counsel for the Company, Kramer,
Levin, Naftalis, Nessen, Kamin & Frankel, counsel for the Company and counsel
for each of the Selling Securityholders that are selling Option Shares together
with reproduced copies of such opinion for each of the other U.S. Underwriters
in form and substance satisfactory to Fried, Frank, Harris, Shriver & Jacobson
as counsel for the Underwriters, dated as of the Date of Delivery, relating to
the Option Shares and otherwise to the same effect as the opinions required by
Sections 5(b), (c) and (d)(i).
(e) At the Date of Delivery, you shall have received the
favorable opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
U.S. Underwriters, dated as of the Date of Delivery, relating to the U.S. Option
Shares and otherwise to the same effect as the opinion required by Section 5(e).
(f) At the Date of Delivery, you shall have received a letter
from Coopers & Lybrand L.L.P. in form and substance satisfactory to you and
dated as of the Date of Delivery, to the effect that they reaffirm the
statements made in the letter furnished pursuant to Section 5(i), except that
the specified date referred to shall be a date not more than five days prior to
the Date of Delivery.
(g) At the Date of Delivery, Fried, Frank, Harris, Shriver &
Jacobson as counsel for the U.S. Underwriters shall have been furnished with all
such documents, certificates and opinions as they may reasonably request for the
purpose of enabling them to pass upon the sale of the Option Shares as
contemplated in this Agreement and the matters referred to in Section 6(e) and
in order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company and the Selling
Securityholders that are selling Option Shares, the performance of any of the
covenants of the Company and the Selling Securityholders that are selling Option
Shares, or the fulfillment of any of the conditions herein contained; and all
actions taken by the Company and the Selling Securityholders that are selling
Option Shares at or prior to the Date of Delivery in connection with the
authorization, issuance and sale of the Option Shares as contemplated in this
Agreement shall be reasonably satisfactory in form and substance to you and to
Fried, Frank, Harris, Shriver & Jacobson as counsel for the U.S. Underwriters.
Section 7. Indemnification. (a) The Company agrees to
---------------
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
to the extent and in the manner set forth in clauses (i), (ii) and (iii) below.
In addition, subject to subsection (d) of this Section, each Selling
Securityholder, severally and not jointly (in the proportion
- 38 -
<PAGE>
that the number of U.S. Shares being sold by such Selling Securityholder bears
to the total number of U.S. Shares), agrees to indemnify and hold harmless each
U.S. Underwriter and each person, if any, who controls any U.S. Underwriter
within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of an untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectuses (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as
incurred (including, subject to the last sentence of Section 7(c),
fees and disbursements of counsel chosen by you), reasonably incurred
in investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that (i) this indemnity does not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectuses
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by any U.S. Underwriter expressly
for use in the Registration Statement (or any amendment thereto), (ii) such
indemnity with respect to any preliminary prospectus shall not inure to the
- 39 -
<PAGE>
benefit of any U.S. Underwriter (or any persons controlling such U.S.
Underwriter) from whom the person asserting such loss, claim, damage or
liability purchased the Offered Shares which are the subject thereof if such
person did not receive a copy of the U.S. Prospectus (or the U.S. Prospectus as
amended or supplemented) at or prior to the confirmation of the sale of such
Offered Shares to such person in any case where such delivery is required by the
1933 Act and the untrue statement or omission or alleged untrue statement or
omission of a material fact contained in such preliminary prospectus was
corrected in the U.S. Prospectus (or the U.S. Prospectus as amended or
supplemented), (iii) with respect to the indemnity by each Selling
Securityholder, the indemnity shall, in each case, apply only to the extent that
any untrue statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement (or any amendment thereto), including the
Rule 430A Information, if applicable, or any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished by such Selling Securityholder to
the Company or the Underwriters expressly for use in the Registration Statement
(or any amendment thereto), including the Rule 430A Information, if applicable,
or such preliminary prospectus or the Prospectuses (or any amendment or
supplement thereto) or (iv) with respect to the indemnity by the Company, this
indemnity does not apply to any loss, liability, claim, damage or expense to the
extent arising out of an untrue statement or omission or alleged untrue
statement or omission made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, if applicable, or any preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto) in
reliance upon an in conformity with written information furnished to the Company
by any Selling Shareholder for use in the Registration Statement or any
amendment thereto.
(b) Each U.S. Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, each of its officers who
signed the Registration Statement and, each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act and each Selling
Securityholder against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 7(a), as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information, if applicable, or any preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company by
such U.S. Underwriter expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or such
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity
- 40 -
<PAGE>
may be sought hereunder, but failure to so notify an indemnifying party shall
not relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. Any indemnifying party may participate at its own
expense in the defense of such action. If it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdictions arising out of the same general allegations or circumstances.
(d) No Selling Securityholder shall be responsible for the
payment of an amount, pursuant to this Section 7, which exceeds the net proceeds
received by the Selling Securityholder from the sale of the Offered Shares by
such Selling Securityholder hereunder and under the International Purchase
Agreement.
Section 8. Contribution. In order to provide for just and
------------
equitable contribution in circumstances under which the indemnity provided for
in Section 7 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, then each party hereto
(if and to the extent such party would have had indemnification obligations
under Section 7 but for the initial clause of this Section 8) shall severally
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company, the Selling
Securityholders and one or more of the U.S. Underwriters, as incurred, (a) in
such proportion as is appropriate to reflect not only the relative benefits
received by the Underwriters on the one hand and the Selling Securityholders and
the Company on the other hand but also the relative fault of the Underwriters on
the one hand and the Selling Securityholders and the Company on the other hand
or (b) if the allocation provided by clause (a) is not permitted by applicable
law, in such proportion as is appropriate to reflect the relative benefits
received by the Underwriters on the one hand and the Selling Securityholders and
the Company on the other hand; provided, that the parties agree that for
--------
purposes of the foregoing (a) the relative benefits received by the Underwriters
on the one hand and the Company and the Selling Securityholders on the other
shall be deemed to be in the same proportion as the underwriting discount
appearing on the cover page of the Prospectuses bears to the initial public
offering price appearing thereof; provided, further, that no person guilty of
-------- -------
fraudulent misrepresentation (within the meaning of
- 41 -
<PAGE>
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person, if any, who controls a U.S. Underwriter within the
meaning of Section 15 of the 1933 Act shall have the same rights to contribution
as the U.S. Underwriter, and each director of the Company, each officer of the
Company who signed the Registration Statement, each Selling Securityholder and
each director, officer or employee thereof and each person, if any, who controls
the Company or any Selling Securityholder within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as the Company and the
Selling Securityholders. Notwithstanding the provisions of this Section 8, no
Selling Securityholder shall be required to contribute any amount under this
Section 8 in excess of the amount by which the net proceeds received by such
Selling Securityholder in connection herewith exceed the aggregate amount such
Selling Securityholder has otherwise paid pursuant to Section 7(a).
Section 9. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements and other
- --------
statements of the Company, its officers and the Selling Securityholders set
forth in or made pursuant to this Agreement will remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Company, the Selling Securityholders or any U.S. Underwriter or controlling
person and will survive delivery of and payment for the Offered Shares.
Section 10. Termination of Agreement. (a) You may terminate
------------------------
this Agreement, by notice to the Company and the Selling Securityholders, at any
time at or prior to the Closing Time (i) if there has been, since the date as of
which information is given in the Prospectuses, any material adverse change, in
the condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business, (ii) a downgrading
shall have occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, or any such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities; (iii) if there has occurred any material adverse change in the
financial markets in the United States or any outbreak or escalation of
hostilities or other calamity or crisis the effect of which in each case is such
as to make it, in your judgment, impracticable to market the U.S. Offered Shares
or enforce contracts for the sale of the U.S. Offered Shares, (iv) if trading in
any securities of the Company has been suspended by the Commission or if trading
generally on the New York Stock Exchange or in the over-the-counter market has
been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of such
exchanges or by order of the Commission, the National Association of Securities
- 42 -
<PAGE>
Dealers, Inc. or any other governmental authority, or (v) if a banking
moratorium has been declared by either federal or New York authorities. As used
in this Section 10(a), the term "Prospectuses" means the Prospectuses in the
form first used to confirm sales of the Offered Shares.
(b) If this Agreement is terminated pursuant to this Section 10,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4 hereof. Notwithstanding any such
termination, the provisions of Sections 7 and 8 shall remain in effect.
(c) This Agreement may also terminate pursuant to the provisions
of Section 2 and Section 5, with the effect stated in such Section.
Section 11. Default by One or More of the U.S. Underwriters. If
-----------------------------------------------
one or more of the U.S. Underwriters shall fail at the Closing Time to purchase
the U.S. Securities that it or they are obligated to purchase pursuant to this
Agreement (the "Defaulted U.S. Securities"), you shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
U.S. Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted U.S. Securities in such amounts as may be agreed upon and
upon the terms set forth in this Agreement; if, however, you have not completed
such arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted U.S.
Securities does not exceed 10% of the total number of U.S. Securities to be
purchased pursuant to this Agreement, the non-defaulting U.S. Underwriters shall
be obligated to purchase the full amount thereof in the proportions that their
respective U.S. Securities underwriting obligation proportions bear to the
underwriting obligation proportions of all non-defaulting U.S. Underwriters, or
(b) if the aggregate principal amount of Defaulted U.S.
Securities exceeds 10% of the U.S. Securities, this Agreement shall terminate
without liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section 11 shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company or the Selling
Securityholders shall have the right to postpone the Closing Time for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements. As used herein, the term "U.S. Underwriter" includes any person
substituted for a U.S. Underwriter under this Section 11.
- 43 -
<PAGE>
Section 12. Default by Certain of the Selling Securityholders.
-------------------------------------------------
If either C&D Fund IV or JLL shall fail at the Closing Time to sell and deliver
the number of Purchased Securities that it is obligated to sell, then the U.S.
Representatives may, at their option, by notice to the Company and the non-
defaulting Selling Securityholders, either (a) terminate this Agreement without
any liability on the part of any non-defaulting party except to the extent
provided in Section 4 and except that the provisions of Sections 7 and 8 shall
remain in effect or (b) elect to purchase the Purchased Securities which the
non-defaulting party has agreed to sell hereunder. No action taken pursuant to
this Section shall relieve such Selling Securityholder from liability, if any,
in respect of such default.
Section 13. Notices. All notices and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered, mailed or transmitted by any standard form of telecommunication.
Notices to you shall be directed to you, c/o Merrill Lynch, Pierce, Fenner &
Smith Incorporated at Merrill Lynch World Headquarters, North Tower, World
Financial Center, New York, New York 10261, attention of Wood Steinberg, Esq.
with a copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, NY 10004-1980, attention of Valerie Ford Jacob, Esq.; and notices to the
Company shall be directed to the Company at One Tyco Park, Exeter, New Hampshire
03833, attention of M. Brian Moroze, Esq. with a copy to Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New York, NY 10022,
attention of Howard A. Sobel, Esq. and notices to the Selling Securityholders
shall be directed to the addresses set forth on Schedule A hereto.
Section 14. Parties. This Agreement is made solely for the
-------
benefit of the several U.S. Underwriters, the Selling Securityholders, the
Company, and, to the extent expressed, any person controlling the Company, or
any of the U.S. Underwriters, and the directors of the Company, the officers of
the Company who have signed the Registration Statement, and the executors,
administrators, successors and assigns of such persons and, no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several U.S. Underwriters of the U.S. Shares. All of the
obligations of the U.S. Underwriters hereunder are several and not joint.
SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
----------------------
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF THE DAY REFER
TO NEW YORK CITY TIME.
Section 16. Jurisdiction. Each of the undersigned hereby
------------
irrevocably submits in any suit, action or proceeding arising out of or in
relation to this Agreement, or any of the transactions contemplated hereby, to
the jurisdiction and venue of any federal or state court in the Borough of
Manhattan, City of New York, State of New York.
- 44 -
<PAGE>
Section 17. Counterparts. This Agreement may be executed in one
------------
or more counterparts and, when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return a counterpart hereof, whereupon this
instrument will become a
- 45 -
<PAGE>
binding agreement among the Company, each of the Selling Securityholders and the
several U.S. Underwriters in accordance with its terms.
Very truly yours,
TYCO INTERNATIONAL LTD.
By
------------------------------
Name:
Title:
THE SELLING SECURITYHOLDERS LISTED
IN SCHEDULE A HERETO (OTHER THAN
JOSEPH LITTLEJOHN & LEVY FUND,
L.P. AND THE CLAYTON & DUBILIER
PRIVATE EQUITY FUND IV LIMITED
PARTNERSHIP)
By
------------------------------
Name:
Title:
[Attorney-in-Fact acting on
behalf of the Selling
Securityholders]
JOSEPH LITTLEJOHN & LEVY FUND,
L.P.
By JLL ASSOCIATES L.P., its
general partner
By
------------------------------
Name:
Title:
THE CLAYTON & DUBILIER PRIVATE
EQUITY FUND IV LIMITED PARTNERSHIP
By
-------------------------------
Name:
Title:
CLAYTON & DUBILIER ASSOCIATES III
LIMITED PARTNERSHIP
By
-------------------------------
Name:
Title:
<PAGE>
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
---------------------------
Name:
Title:
For themselves and as U.S. Representatives of the
- -------------------------------------------------
other U.S. Underwriters named in Schedule B.
- -------------------------------------------
<PAGE>
Exhibit A
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Offering of
__________ Shares of Common Stock
U.S. PRICE DETERMINATION AGREEMENT
----------------------------------
____________________, 1995
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
As Representatives of the several U.S. Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10261-1201
Ladies and Gentlemen:
Reference is made to the U.S. Purchase Agreement dated as of
_________, 1995 (the "U.S. Purchase Agreement") among Tyco International Ltd., a
Massachusetts corporation (the "Company"), the Selling Securityholders listed in
Schedule A thereto and hereto (the "Selling Securityholders") and the several
U.S. Underwriters named in Schedule B thereto and hereto (the "U.S.
Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation and
Lehman Brothers Inc. are acting as representatives (the "U.S.
Representatives"). All terms not otherwise defined in this U.S. Price
Determination Agreement shall have the meanings set forth in the U.S. Purchase
Agreement. The U.S. Purchase Agreement provides for the purchase by the U.S.
Underwriters from the Selling Securityholders, subject to the terms and
conditions set forth therein, of an aggregate of _______________ Initial U.S.
Shares, _____ U.S.
A-1
<PAGE>
A Warrants, ____ U.S. B Warrants and ________ Reallocation Rights. This
Agreement is the U.S. Price Determination Agreement referred to in the U.S.
Purchase Agreement.
Pursuant to Section 2 of the U.S. Purchase Agreement, the
undersigned agree with the U.S. Underwriters as follows:
1. The initial public offering price per share for the Initial
U.S. Shares shall be $_____.
2. The purchase price per share for the U.S. Purchased Shares
to be paid by the several U.S. Underwriters shall be $_____,
representing an amount equal to the initial public offering price set
forth above, less $_____ per share.
3. The purchase price per U.S. A Warrant to be paid by the
several U. S. Underwriters shall be equal to the number obtained by
multiplying (i) the number of shares of Common Stock issuable upon
exercise of such U.S. A Warrant by (ii) $_____ (representing an amount
equal to the initial public offering price set forth above), less
$____ per share (representing the Underwriters' per share underwriting
discount), less $11.94 (the exercise price per share of Common Stock
issuable upon exercise of the U.S. A Warrants).
4. The purchase price per U.S. B Warrant to be paid by the
several U.S. Underwriters shall be equal to the number obtained by
multiplying (i) the number of shares of Common Stock issuable upon
exercise of such U.S. B Warrant by (ii) $____ (representing an amount
equal to the initial public offering price set forth above), less $__
per share (representing the Underwriters' per share underwriting
discount), less $16.92 per share (the exercise price per share of
Common Stock issuable upon exercise of the U.S. B Warrant).
5. The purchase price per U.S. Reallocation Right to be paid by
the several U.S. Underwriters shall be equal to the number obtained by
multiplying (i) the number of shares of Common Stock acquired upon
exercise of such U.S. Reallocation Right by (ii) $___ (representing an
amount equal to the initial public offering price set forth above),
less $_____ per share (representing the Underwriters' per share
underwriting discount), less $11.94 per share (the exercise price per
share of Common Stock acquirable upon exercise of the Reallocation
Rights).
A-2
<PAGE>
The Company represents and warrants to each of the U.S. Underwriters
that the representations and warranties of the Company set forth in Section 1(a)
of the U.S. Purchase Agreement are accurate as though expressly made at and as
of the date hereof.
Each of the Selling Securityholders represents and warrants to each of
the U.S. Underwriters that the representations and warranties of such Selling
Securityholder set forth in Section 1(b) of the U.S. Purchase Agreement is
accurate as though expressly made at and as of the date hereof.
As contemplated by Section 2 of the U.S. Purchase Agreement, attached
as Schedule A is a list of each of the Selling Securityholders and attached as
Schedule B is a complete list of the several U.S. Underwriters, which shall be a
part of this Agreement and the U.S. Purchase Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Securityholders
a counterpart hereof, whereupon this instrument along with all counterparts and
together with the U.S. Purchase Agreement shall be a binding agreement among the
U.S. Underwriters, the Company and the Selling Securityholders in accordance
with its terms and the terms of the U.S. Purchase Agreement.
Very truly yours,
TYCO INTERNATIONAL LTD.
By
--------------------------------
Name:
Title:
<PAGE>
THE SELLING SECURITYHOLDERS LISTED IN
SCHEDULE A HERETO (OTHER THAN JOSEPH
LITTLEJOHN & LEVY FUND, L.P. AND THE
CLAYTON & DUBILIER PRIVATE EQUITY
FUND IV LIMITED PARTNERSHIP)
By
-----------------------------------
Name:
Title: As Attorney-in-Fact acting on
behalf of the Selling Securityholders
JOSEPH LITTLEJOHN & LEVY FUND, L.P.
By JLL ASSOCIATES L.P., its general
partner
By
--------------------------------
Name:
Title:
THE CLAYTON & DUBILIER PRIVATE EQUITY
FUND IV LIMITED PARTNERSHIP
By
----------------------------------
Name:
Title:
CLAYTON & DUBILIER ASSOCIATES III
LIMITED PARTNERSHIP
By
-------------------------------
Name:
Title:
<PAGE>
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-------------------------------------------
Name:
Title:
For themselves and as U.S. Representatives of the other
- --------------------------------------------------------
U.S. Underwriters named in Schedule attached hereto.
- ------------------------------------------------------------------------
<PAGE>
SCHEDULE A
Total
Number of Total
International Number of
Selling Share to be A Warrants to be
Securityholder Address Sold Sold
- -------------- ------- ---- ----
Total
-------- -------- ---------- --------------
Total Number of Total Number of
Shares Issuable Total Number of Shares Issuable
Upon Exercise of B Warrants to be Upon Exercise of
A Warrants Sold B Warrants
---------- ---- ----------
Total
---------- --------------- ---------------
Total Number of
Shares Acquirable Total Number
Total Number of Upon Exercise of of International
Reallocation Such Reallocation Option Shares
Rights to be sold Rights To be sold
----------------- ------ ----------
Total
----------- --------------- --------------
<PAGE>
SCHEDULE B
Number of Total Total Number of
International Number of Shares Issuable
Shares to be A Warrants to Upon Exercise of
Managers Purchased be Purchased A Warrants
-------- --------- ------------ ----------
Merrill Lynch
International
Limited
Goldman, Sachs
International
Donaldson, Lufkin
& Jenrette Securities
Corporation
Lehman Brothers
International
(Europe)
Total
--------- ------------ ----------
Total Number of Total Number of
Total Number of Shares Issuable Reallocation
B Warrants to be Upon Exercise of Rights to be
Purchased B Warrants Purchased
--------- ---------- ---------
Merrill Lynch
International
Limited
Goldman, Sachs
International
Donaldson, Lufkin
& Jenrette Securities
Corporation
Lehman Brothers
International
(Europe)
Total
--------- ---------- ---------
Total Number of
International
Option Shares
Total Number of to be Purchased
Shares Acquirable Upon Exercise
Upon Exercise of of Over-
Such Reallocation allotment
Rights Option
------ ------
Merrill Lynch
International
Limited
Goldman, Sachs
International
Donaldson, Lufkin
& Jenrette Securities
Corporation
Lehman Brothers
International
(Europe)
Total
--------------- ---------------
<PAGE>
SCHEDULE C
Subsidiaries
- ------------
Exhibit 1(b)
DRAFT 2/22/95
================================================================================
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Offering of
Shares of Common Stock
----------
FORM OF
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
Dated: , 1995
-----------------
================================================================================
<PAGE>
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Offering of
Shares of Common Stock
------------------
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
, 1995
--------------------------
Merrill Lynch International Limited
Goldman Sachs International
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers International (Europe)
As Lead Managers of the several Managers
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Tyco International Ltd., a Massachusetts corporation (the "Company"),
and each of the holders of securities of the Company listed in Schedule A hereto
(the "Selling Securityholders"), confirm their respective agreements with
Merrill Lynch International Limited, Goldman Sachs International, Donaldson,
Lufkin & Jenrette Securities Corporation, Lehman Brothers International
(Europe), and each of the other Underwriters named in Schedule B hereto
(collectively, the "Managers," which term shall also include any underwriter
substituted as hereinafter provided in Section 11), for whom Merrill Lynch
International Limited, Goldman, Sachs International, Donaldson, Lufkin &
Jenrette Securities Corporation and Lehman Brothers International (Europe) are
acting as representatives (in such capacity, the "Lead Managers"), with respect
to (i) the sale by the Selling Securityholders, acting severally and not
jointly, of the respective number of
<PAGE>
Securities (as defined below) set forth opposite such Selling Securityholder's
name in Schedule A hereto and the purchase by the Managers, acting severally and
not jointly, of the respective number of Securities opposite such Manager's name
in Schedule B hereto and (ii) the grant by the Selling Securityholders, that are
holders of shares of Common Stock (as defined below) which were not issued upon
exercise of Warrants or Reallocation Rights (as defined below) subsequent to
October 19, 1994, to the Managers, acting severally and not jointly, of the
option described in Section 2(d) hereof to purchase all or any part of the
Managers' pro rata portion of the respective number of additional shares of
Common Stock set forth opposite such Selling Securityholder's name in Schedule A
hereto, to cover over-allotments. The term "Securities" is defined to mean the
shares of common stock of the Company, par value $.50 per share ("Common
Stock"), the A warrants (the "A Warrants") and the B warrants (the "B Warrants";
the A Warrants and the B Warrants are collectively referred to herein as the
"Warrants") to acquire shares of Common Stock and the reallocation rights to
acquire shares of Common Stock ("Reallocation Rights") (issued pursuant to the
Equity Reallocation Agreement, dated July 7, 1992, among Kendall International,
Inc. (formerly known as CDK Holding Corporation) ("Kendall"), the New Investors
(as defined therein) and Mellon Bank, N.A., as successor Escrow Agent, for the
benefit of certain holders of old equity securities of Kendall (the
"Reallocation Agreement)). The Securities to be purchased by the Managers
pursuant to this Agreement are collectively hereinafter called the
"International Securities." The shares of Common Stock to be purchased by the
International Underwriters are collectively hereinafter called the
"International Purchased Shares." The Reallocation Rights to be purchased by
the International Underwriters are collectively hereinafter called the
"International Reallocation Rights." The Warrants to be purchased by the
International Underwriters are collectively hereinafter called the
"International Warrants." The International Purchased Shares, the shares of
Common Stock issuable upon the exercise of the International Warrants to be
purchased by the Managers and the shares of Common Stock acquirable upon
exercise of the International Reallocation Rights, in each case at the Closing
Time, are collectively hereinafter called the "Initial International Shares" and
all or any part of the shares of Common Stock subject to the options described
in Section 2(d) hereof are collectively hereinafter called the "International
Option Shares." The Initial International Shares and the International Option
Shares are collectively hereinafter called the "International Shares."
It is understood that the Company and the Selling Securityholders are
entering into an agreement, dated the date hereof (the "U.S. Purchase
Agreement"), providing for the sale by the Selling Securityholders of an
aggregate of shares of Common Stock (the "U.S. Purchased Shares"),
---------
Warrants (the "U.S. Warrants") and Reallocation Rights
- ---------- ----------
(the "U.S. Reallocations Rights" and, together with the U.S. Purchased Shares
and the International Warrants, the "International Securities"), through
arrangements with certain underwriters inside the United States and Canada (the
"U.S. Underwriters" and, together with the Managers, the "Underwriters"), for
whom
2
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation, and Lehman Brothers Inc.
are acting as representatives (the "U.S. Representatives") and the grant by the
Selling Securityholders, that are holders of shares of Common Stock which were
not issued upon exercise of Warrants or Reallocation Rights subsequent to
October 19, 1994, to the U.S. Underwriters, acting severally and not jointly, of
an option described in Section 2(d) of the International Purchase Agreement to
purchase all or any part of the U.S. Underwriters' pro rata portion of the
respective number of additional shares of Common Stock (the "U.S. Option
Shares") set forth opposite such Selling Securityholder's name in Schedule A to
the U.S. Purchase Agreement to cover over-allotments. The U.S. Securities and
the International Securities are referred to herein as the "Purchased
Securities." It is understood that the Selling Securityholders are not
obligated to sell, and the Managers are not obligated to purchase, any
International Securities unless all of the U.S. Securities are contemporaneously
purchased by the U.S. Underwriters.
The International Securities and the U.S. Securities are collectively
hereinafter referred to as the "Purchased Securities." The shares of Common
Stock to be purchased directly by the Managers, the shares of Common Stock
acquirable upon the exercise of the Warrants to be purchased by the Managers and
the shares of Common Stock acquirable upon exercise of the Reallocation Rights
are collectively hereinafter called the "Initial International Shares" and all
or any part of the ____ shares of Common Stock subject to the options described
in Section 2(d) hereof to be purchased by the Managers are collectively
hereinafter called the "U.S. Option Shares." The Initial U.S. Shares and the
U.S. Option Shares are collectively hereinafter called the "U.S. Shares." The
International Shares and the U.S. Shares are hereinafter collectively referred
to as the "Offered Shares." The International Option Shares and the U.S. Option
Shares are hereinafter collectively called the "Option Shares."
The Company and the Selling Securityholders understand that the
Managers will simultaneously enter into an agreement with the U.S. Underwriters
dated the date hereof (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Managers and the U.S.
Underwriters.
You have advised the Selling Securityholders that you and the other
Managers, acting severally and not jointly, desire to purchase the International
Securities and, if the Managers so elect, the International Option Shares, and
that you have been authorized by the other Managers to execute this Agreement
and the International Price Determination Agreement referred to below on their
behalf.
Prior to the purchase of the International Securities and public
offering of the International Offered Shares by the several Managers, the
Company, the Selling Securityholders and the Lead Managers, acting on behalf of
the Managers shall enter into a separate written instrument substantially in the
form of Exhibit A hereto (the
3
<PAGE>
"International Price Determination Agreement"). The International Price
Determination Agreement may take the form of an exchange of any standard form of
written telecommunication between the Company, the Selling Securityholders and
the Lead Managers and shall specify such applicable information as included in
Exhibit A hereto. The purchase of the International Securities and the offering
of the International Shares will be governed by this Agreement, as supplemented
by the International Price Determination Agreement. From and after the date of
the execution and delivery of the International Price Determination Agreement,
this Agreement shall be deemed to incorporate, and all references herein to
"this Agreement" or "herein" shall be deemed to include, the International Price
Determination Agreement.
The initial public offering price per U.S. Share and the purchase
price per U.S. Security to be paid by the U.S. Underwriters pursuant to the U.S.
Purchase Agreement shall be set forth in a separate agreement (the "U.S. Price
Determination Agreement"), the form of which is attached to the U.S. Purchase
Agreement. The purchase price per security for the U.S. Securities to be paid
by the several U.S. Underwriters shall be identical to the purchase price per
share for the International Securities to be paid by the several Managers
hereunder. This Agreement (including the related International Price
Determination Agreement) and the U.S. Purchase Agreement (including the related
U.S. Price Determination Agreement) are collectively referred to herein as the
"Purchase Agreements."
It is understood and agreed that all Offered Shares and all Option
Shares sold hereunder or pursuant to the U.S. Purchase Agreement are being
purchased by the U.S. Underwriters or the Managers, as the case may be, on an
ex-dividend basis, and that no U.S. Underwriter or Manager, or any purchaser of
Offered Shares or Option Shares from any U.S. Underwriter or Manager, shall be
entitled to receive any dividend, in cash or in kind, on the Common Stock if
such dividend has a record date or payment date preceding the date of this
Agreement or the U.S. Purchase Agreement.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File
No. 33-57509) covering the registration of the Offered Shares under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectus or prospectuses, and either (A) has prepared and proposes
to file, prior to the effective date of such registration statement, an
amendment to such registration statement, including final prospectuses, or (B)
if the Company has elected to rely upon Rule 430A ("Rule 430A") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations"),
will prepare and file prospectuses, in accordance with the provisions of
4
<PAGE>
Rule 430A and Rule 424(b) ("Rule 424(b)") of the 1933 Act Regulations, promptly
after execution and delivery of the International Price Determination
Agreement.*1 The information, if any, included in such prospectuses that was
omitted from any prospectus included in such registration statement at the time
it becomes effective but that is deemed, pursuant to Rule 430A(b), to be part of
such registration statement at the time it becomes effective is referred to
herein as the "Rule 430A Information." Each form of International Prospectus
and form of U.S. Prospectus used before the time such registration statement
becomes effective, and any form of International Prospectus and form of U.S.
Prospectus that omits the Rule 430A Information that is used after such
effectiveness and prior to the execution and delivery of the International Price
Determination Agreement or the U.S. Price Determination Agreement, is herein
called a "preliminary prospectus." Any reference to any preliminary prospectus
shall be deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act as of the date of
such preliminary prospectus. Such registration statement, including the
exhibits thereto and the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the 1933 Act, as amended at the time it becomes
effective and including, if applicable, the Rule 430A Information, is herein
called the "Registration Statement," and the form of International Prospectus,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act and form of U.S. Prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act included in the Registration Statement at the time it becomes effective are
herein called the "International Prospectus" and the "U.S. Prospectus,"
respectively, and, collectively, the "Prospectuses" and, individually, a
"Prospectus," except that, if the final International Prospectus or U.S.
Prospectus, as the case may be, first furnished to the Managers or the U.S.
Underwriters after the execution of the International Price Determination
Agreement or the U.S. Price Determination Agreement for use in connection with
the offering of the Offered Shares differs from the prospectuses included in the
Registration Statement at the time it becomes effective (whether or not such
prospectuses are required to be filed pursuant to Rule 424(b)), the terms
"International Prospectus," "U.S. Prospectus," "Prospectuses" and "Prospectus"
shall refer to the final International Prospectus or U.S. Prospectus, as the
--------------------
* Two forms of prospectus are to be used in connection with the offering and
sale of the Offered Shares: one relating to the International Shares (the "Form
of International Prospectus") and one relating to the U.S. Shares (the "Form of
U.S. Prospectus"). The Form of U.S. Prospectus is identical to the Form of
International Prospectus, except for the front cover page, the section captioned
"Certain United States Tax Consequences to Non-U.S. Holders," the section
captioned "Underwriting," the section captioned "Validity of Shares," the
section captioned "Available Information," the section captioned "Incorporation
of Certain Information by Reference," the section captioned "Experts" and the
back cover page.
5
<PAGE>
case may be, first furnished to the Managers or the U.S. Underwriters, as the
case may be, for such use.
The Company and the Selling Securityholders understand that the
Managers propose to make a public offering of the International Shares as soon
as you deem advisable after the Registration Statement becomes effective and the
International Price Determination Agreement has been executed and delivered.
Section 1. Representations and Warranties. (a) The Company
------------------------------
represents and warrants to and agrees with each of the Managers that:
(i) The Company meets the requirements for use of Form S-3 under
the 1933 Act, and when the Registration Statement shall become
effective, and if the Company has elected to rely upon Rule 430A, on
the date of the International Price Determination Agreement or the
U.S. Price Determination Agreement, and on the effective or issue date
of each amendment or supplement to the Registration Statement or the
Prospectuses, and at the Closing Time referred to below, and if any
International Option Shares are purchased, up to and including the
Date of Delivery referred to below, (A) the Registration Statement and
any amendments and supplements thereto will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations; (B) neither the Registration Statement nor any amendment
or supplement thereto will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
(C) neither of the Prospectuses nor any amendment or supplement to
either of them include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, this representation
and warranty does not apply to statements or omissions from the
Registration Statement or the Prospectuses or any amendments or
supplements thereto made in reliance upon and in conformity with
information furnished or confirmed in writing to the Company by or on
behalf of any Managers through you or the U.S. Representatives or by
or on behalf of the Selling Securityholders expressly for use in the
Registration Statement or the Prospectuses or any amendments or
supplements thereto.
(ii) The documents incorporated by reference in the Prospectuses
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time they
were filed with the Commission, conformed in all material respects
with the requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations of the
Commission thereunder
6
<PAGE>
(the "1934 Act Regulations"), and, when read together with the
information in the Prospectuses, at the time the Registration
Statement shall become effective, and if the Company has elected to
rely upon Rule 430A, on the date of the International Price
Determination Agreement or the U.S. Price Determination Agreement, and
on the effective or issue date of each amendment or supplement to the
Registration Statement or the Prospectuses, and at the Closing Time
referred to below, and if any Option Shares are purchased, on the Date
of Delivery referred to below, will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(iii) Coopers & Lybrand L.L.P. and Price Waterhouse, who are
reporting upon the audited consolidated financial statements and
schedules included or incorporated by reference in the Registration
Statement, are independent public accountants as required by the 1933
Act, the 1934 Act, the 1933 Act Regulations and the 1934 Act
Regulations.
(iv) This Agreement and the U.S. Purchase Agreement have been,
and the International Price Determination Agreement and the U.S. Price
Determination Agreement on the date thereof will be, duly authorized,
executed and delivered by the Company.
(v) The consolidated financial statements included or
incorporated by reference in the Registration Statement and the
Prospectuses, together with the related schedules and notes, present
fairly, in all material respects, the consolidated financial position
of the Company and its Subsidiaries (as hereinafter defined) as of the
dates indicated and the consolidated statements of income,
shareholders' equity and cash flows of the Company and its
Subsidiaries for the periods specified. Except as otherwise stated in
the Registration Statement, such financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods
involved. The financial statement schedules, if any, included or
incorporated by reference in the Registration Statement present fairly
in accordance with GAAP the information required to be stated therein
and have been compiled on a basis consistent with that of the audited
consolidated financial statements included in the Registration
Statement. The selected financial data and the summary financial
information included in the Prospectuses present fairly in accordance
with GAAP the information shown therein and have been compiled on a
basis consistent with that of the
7
<PAGE>
audited consolidated financial statements included
in the Registration Statement.
(vi) The Company is a corporation validly organized and existing
and in good standing under the laws of the Commonwealth of
Massachusetts with power and authority (corporate and other) under
such laws to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and
perform its obligations under this Agreement, the International Price
Determination Agreement, the U.S. Purchase Agreement and the U.S.
Price Determination Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing under
the laws of each other jurisdiction in which the nature of its
business or its ownership or leasing of its properties requires
qualification, except to the extent that the failure to so qualify or
be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its Subsidiaries (as defined
below), considered as one enterprise.
(vii) Each of the Company's significant subsidiaries (as such
term is defined in the Regulation S-X promulgated by the Commission,
each such subsidiary is hereinafter referred to as a "Significant
Subsidiary," and all of the Company's subsidiaries are collectively
hereinafter referred to as the "Subsidiaries") is a corporation
validly organized and existing as a corporation under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in
the Prospectuses, is duly qualified as a foreign corporation to
transact business and is in good standing under the laws of each
jurisdiction in which the nature of its business of its ownership or
leasing of its properties required qualification, except where the
failure to be so qualified or in good standing would not have a
material adverse effect on the condition (financial or otherwise)
earnings, business affairs and business prospects of the Company and
the Subsidiaries considered as one enterprise; and all the outstanding
shares of capital stock of each Significant Subsidiary of the Company
have been duly authorized and validly issued, are fully-paid and non-
assessable, and (except for non-material liens that have arisen in the
ordinary course of business and in the case of foreign subsidiaries,
for directors qualifying shares) are owned by the Company, directly or
indirectly, free and clear of all liens, encumbrances, security
interests and claims.
(viii) The Company had at the date indicated in the
Prospectuses a duly authorized, issued and outstanding capitalization
as set forth in the
8
<PAGE>
Prospectuses under the caption "Capitalization," and the Common Stock,
A Warrants, B Warrants and Reallocation Rights conform in all material
respects to the descriptions thereof contained under the caption
"Description of Capital Stock" in the Prospectuses.
(ix) All of the outstanding shares of capital stock of the
Company, including the International Purchased Shares, the U.S.
Purchased Shares and the shares of Common Stock to be acquired by the
Underwriters upon the exercise of the Reallocation Rights pursuant to
this Agreement and the International Purchase Agreement, have been
duly authorized and validly issued and are fully paid and non-
assessable.
(x) The obligations under the International Warrants and the
U.S. Warrants have been duly and validly authorized and assumed by the
Company and constitute binding obligations of the Company entitling
the holders thereof to purchase shares of Common Stock upon the terms
and in the manner set forth therein. The shares of Common Stock to be
sold by the Company to the Underwriters upon exercise of the Warrants
and the U.S. Warrants have been duly authorized and validly reserved
for issuance upon exercise of the Warrants and the U.S. Warrants, and
when certificates for such shares of Common Stock have been issued and
delivered by the Company to the Underwriters upon receipt of the
exercise price for the underlying Warrant in accordance with this
Agreement, such shares will be validly issued, fully paid and non-
assessable shares of the Common Stock of the Company and will conform
in all material respects to the description thereof in the
Prospectuses.
(xi) The obligations of Kendall under the International
Reallocation Rights and the U.S. Reallocation Rights and the
Reallocation Agreement have been duly and validly authorized and
assumed by the Company and constitute binding obligations of the
Company enforceable against the Company in accordance with their terms
entitling the holders thereof to acquire shares of Common Stock upon
the terms and in the manner set forth therein. The shares of Common
Stock to be acquired by the Underwriters upon exercise of the
Reallocation Rights have been duly authorized and, upon exercise of
such Reallocation Rights by the Underwriters, will be validly issued
and are fully paid and non-assessable and will conform in all material
respects to the description thereof in the Prospectuses.
(xii) Except as disclosed in the Prospectuses, there are no
outstanding options, warrants or other rights calling for issuance of,
and no commitments, plans or arrangements to issue, any shares of
capital stock of
9
<PAGE>
the Company or any of its Subsidiaries or any security convertible
into or exchangeable for capital stock of the Company or any of its
Subsidiaries. Except as set forth in the Prospectuses, there are no
holders of securities (debt or equity) of the Company or any of the
Subsidiaries, or holders of rights (including, without limitation,
preemptive rights), warrants or options to obtain securities of the
Company or its Subsidiaries, who have the right to request the Company
or any of its Subsidiaries to register securities held by them under
the 1933 Act, other than holders who are participating in the
Offerings or who have elected not to exercise such rights. None of
the outstanding shares of Common Stock of the Company was issued in
violation of the preemptive or other similar rights of any stockholder
of the Company arising by operation of law, under the charter or by-
laws of the Company or under any agreement to which the Company or any
of its Subsidiaries is a party.
(xiii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectuses, except as
otherwise stated therein or contemplated thereby, there has not been
(A) any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise, whether or
not arising in the ordinary course of business, (B) any transaction
entered into by the Company or any Subsidiary, other than in the
ordinary course of business, that is material to the Company and its
Subsidiaries, considered as one enterprise, or (C) any dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(xiv) Neither the Company nor any Subsidiary is in violation
of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject, except for such defaults that would
not in the aggregate have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one
enterprise.
(xv) The purchase of the Purchased Securities, the sale and
delivery of the Offered Shares, the execution, delivery and
performance of this Agreement, the International Price Determination
Agreement, the U.S. Purchase Agreement and the U.S. Price
Determination Agreement, the exercise of the International Warrants
and the U.S. Warrants and the
10
<PAGE>
delivery of shares of Common Stock upon exercise thereof, the exercise
of the International Reallocation Rights and the U.S. Reallocation
Rights and the delivery of shares of Common Stock upon the exercise
thereof, the consummation by the Company of the transactions
contemplated thereby and in the Registration Statement and compliance
by the Company with the terms of the foregoing have been duly
authorized by all necessary corporate action on the part of the
Company and do not and will not result in any violation of the
Articles of Organization or by-laws of the Company or any Subsidiary,
and do not, and at the Closing Time will not, conflict with, or result
in a breach or violation by the Company of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien or encumbrance upon any property or
assets of the Company or any Subsidiary under (A) any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is
bound or to which any of their respective properties or assets are
subject, except for such conflicts, breaches, violations or defaults
or liens or encumbrances that would not in the aggregate have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and
the Subsidiaries, considered as one enterprise, or (B) any law,
statute, rule, regulation, judgment, order, writ or decree applicable
to the Company or any of any government, governmental instrumentality
or court, domestic or foreign, having jurisdiction over the Company or
any Subsidiary or any of their respective properties, assets or
operations.
(xvi) No authorization, approval, consent or license of any
government, governmental instrumentality or court (other than under
the 1933 Act and the 1933 Act Regulations and the securities or blue
sky laws of the various states) is necessary in connection with the
due authorization, execution, delivery and performance by the Company
of this Agreement, the International Price Determination Agreement,
the U.S. Purchase Agreement and the U.S. Price Determination
Agreement, the exercise of the International Warrants and the U.S.
Warrants and the delivery of shares of Common Stock upon exercise
thereof, the exercise of the International Reallocation Rights and the
U.S. Reallocation Rights and the acquisition of shares of Common Stock
by the Underwriters upon exercise thereof and the valid sale and
delivery of the Offered Shares.
(xvii) Except as disclosed in the Prospectuses, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against or affecting the Company
or
11
<PAGE>
any Subsidiary that is required to be disclosed in the Registration
Statement or Prospectuses or that, if determined adversely to the
Company or any of its Subsidiaries, could individually or in the
aggregate reasonably be expected to have a material adverse change in
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its Subsidiaries, considered as
one enterprise, or which might materially and adversely affect the
consummation of the transactions contemplated in this Agreement, the
U.S. Purchase Agreement and in the Registration Statement.
(xviii) There are no contracts or documents of a character to
which the Company or any Subsidiary is a party or by which any of them
are bound required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to
be filed as exhibits thereto that are not described and filed as
required.
(xix) The Company and its Subsidiaries are in compliance
with, and each such entity has not received any notice of any
outstanding violation of, all laws, ordinances, rules and regulations
applicable to it and its operations except, in either case, where any
failure by the Company or any Subsidiary to comply with any such law,
regulation, ordinance or rule would not have, individually or in the
aggregate, a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise.
(xx) Neither the Company nor any of its affiliates has taken or
will take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Offered Shares; and neither the
Company nor any of its affiliates has distributed or will distribute
any prospectus (as such term is defined in the 1933 Act and the 1933
Act Regulations) in connection with the offering and sale of the
Offered Shares other than any preliminary prospectus filed with the
Commission or the Prospectuses or other material permitted by the 1933
Act or the 1933 Act Regulations.
(xxi) The Company is not an investment company within the
meaning of the Investment Company Act of 1940, as amended.
(xxii) No labor dispute exists with the Company's employees or
with employees of its Subsidiaries or, to the knowledge of the
Company, is imminent that could reasonably be expected to materially
and adversely affect the condition (financial or otherwise), earnings,
business affairs or
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business prospects of the Company and its Subsidiaries, considered as
one enterprise.
(b) (I) Each of the Selling Securityholders severally represents and
warrants to, and agrees with, each of the Managers as follows:
(i) To the extent that any statements or omissions made in the
Registration Statement, any preliminary prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Securityholder expressly for use therein, such preliminary
prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement
and the Prospectus will, when they become effective or are filed with
the Commission, as the case may be, not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(ii) Each Selling Securityholder has full right, power and
authority to enter into this Agreement, the U.S. Purchase Agreement,
the International Price Determination Agreement, the U.S. Price
Determination Agreement and the Custody Agreement, the JLL Fund
Custody Agreement, the C&D Fund IV Custody Agreement or the Associates
III Custody Agreement, as the case may be, (each as defined below) and
to sell, transfer and deliver the International Securities it is
selling pursuant to this Agreement and the U.S. Securities it is
selling pursuant to the U.S. Purchase Agreement; and this Agreement,
the U.S. Purchase Agreement and the Custody Agreement have been, and
the International Price Determination Agreement and the U.S. Price
Determination Agreement on the date thereof will be, duly authorized,
executed and delivered by such Selling Securityholder and the Custody
Agreement will be a valid and binding obligation of such Selling
Securityholder enforceable against such Selling Securityholder in
accordance with its terms.
(iii) Except as set forth in the Prospectuses, there is no
action, suit, investigation (of which such Selling Securityholder has
received written notice) or proceeding before or by any government,
governmental instrumentality or court, domestic or foreign, now
pending or, to the knowledge of such Selling Securityholder,
threatened, to which such Selling Securityholder is or would be a
party or to which the property of such Selling Securityholder is or
would be subject, that (i) seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the sale of the
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International Securities or the U.S. Securities by such Selling
Securityholder or any of the other transactions contemplated hereby or
(ii) questions the legality or validity of any such transactions or
seeks to recover damages or obtain other relief in connection with any
such transactions.
(iv) Such Selling Securityholder (other than Joseph Littlejohn &
Levy Fund, L.P. ("JLL Fund"), The Clayton & Dubilier Private Equity
Fund IV ("C&D Fund IV") and Clayton & Dubilier Associates III Limited
Partnership ("Associates III")) has duly executed and delivered, in
the form heretofore furnished to you, an irrevocable power of attorney
and custody agreement (the "Custody Agreement") with Mellon Bank, N.A.
as custodian (the "Custodian") and Clayton, Dubilier & Rice, Inc. the
Attorney-in-Fact (through one or more of William A. Barbe, Kevin J.
Conway or Alberto Cribiore, or any other officer, employee, agent or
representative of the Attorney-in-Fact (each of Messrs. Barbe, Conway
and Cribiore and such other officers, employees, agents and
representatives, a "Proxy"), or through any additional Attorney-in-
Fact duly appointed as such by the Attorney-in-Fact); the Attorney-in-
Fact is authorized to execute and deliver this Agreement (including
the International Price Determination Agreement) and the U.S. Purchase
Agreement (including the U.S. Price Determination Agreement) on behalf
of such Selling Securityholder (other than JLL Fund, C&D Fund IV and
Associates III), to determine, among other things, (a) the number of
securities to be sold to the U.S. Underwriters and the Managers
pursuant to the Purchase Agreements and (b) the purchase price per
security to be paid by the Managers and U.S. Underwriters to such
Selling Securityholder (other than JLL Fund, C&D Fund IV and
Associates III), as provided in Section 2(a) hereof, and otherwise to
act on behalf of such Selling Securityholder (other than JLL Fund, C&D
Fund IV and Associates III) in connection with this Agreement and the
U.S. Purchase Agreement, and the Attorney-in-Fact and the Custodian is
authorized to deliver the Purchased Securities to be sold by such
Selling Securityholder (other than JLL Fund, C&D Fund IV and
Associates III) pursuant to this Agreement and the U.S. Purchase
Agreement upon the authorization of the Attorney-in-Fact and to accept
payment therefor.
(v) Each of JLL Fund, C&D Fund IV and Associates III have duly
executed and delivered a custody agreement (the "JLL Fund Custody
Agreement," the "C&D Fund IV Custody Agreement" and the "Associates
III Custody Agreement," respectively) with Mellon Bank, N.A. as
custodian (the "Custodian"); each of JLL Fund, C&D Fund IV and
Associates III is authorized to execute and deliver this Agreement
(including the
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<PAGE>
International Price Determination Agreement) and the U.S. Purchase
Agreement (including the U.S. Price Determination Agreement), to
determine, among other things, (a) the number of securities to be sold
to the U.S. Underwriters and the Managers pursuant to the Purchase
Agreements, the purchase price per security to be paid by the Managers
and the U.S. Underwriters to each of JLL Fund, C&D Fund IV and
Associates III, as provided in Section 2(a) hereof; and the Custodian
is authorized to deliver the Purchased Securities to be sold by each
of JLL Fund, C&D Fund IV and Associates III pursuant to this Agreement
and the U.S. Purchase Agreement upon the authorization of each of JLL
Fund, C&D Fund IV and Associates III and to accept payment therefor.
(vi) No authorization, approval, consent or license of any
government, governmental instrumentality or court (other than under
the 1933 Act and the 1933 Act Regulations and the securities or blue
sky laws of the various states and the securities laws of any
jurisdiction outside the United States in which International Shares
are offered or sold by the Managers pursuant to this Agreement) is
required for the execution and delivery by such Selling Securityholder
of the Custody Agreement, the execution and delivery by or on behalf
of such Selling Securityholder of this Agreement, the U.S. Purchase
Agreement, the International Price Determination Agreement and the
U.S. Price Determination Agreement and the valid sale and delivery of
the Purchased Securities to be sold by such Selling Securityholder
hereunder and thereunder.
(vii) The execution and delivery of this Agreement, the U.S.
Purchase Agreement, the International Price Determination Agreement,
the U.S. Price Determination Agreement and the Custody Agreement and
the consummation of the transactions contemplated herein and therein,
including the sale to the Underwriters of the Purchased Securities,
will not result in a violation of the charter, by-laws or other
governing document of such Selling Securityholder and will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which such Selling Securityholder is a party or by which
such Selling Securityholder is bound or to which the properties or
assets of such Selling Securityholder are subject nor will such action
result in any violation of the provisions of any statute applicable to
such Selling Securityholder or its legal or regulatory status or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Selling Securityholder or the property
of such Selling Securityholder, which order, rule or regulation is
applicable to such Selling Securityholder or the property of such
Selling Securityholder.
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<PAGE>
(viii) Such Selling Securityholder has, and at the Closing
Time and, if any Option Shares are purchased, at the relevant Date of
Delivery will have, good and valid title to the Purchased Securities
to be sold by such Selling Securityholder pursuant to this Agreement
and the U.S. Purchase Agreement, as set forth on Schedule B hereto,
free and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind; and, upon delivery of such
Purchased Securities and payment of the purchase price therefor as
contemplated in this Agreement and the U.S. Purchase Agreement, each
of the Underwriters will receive good and valid title to the Purchased
Securities purchased by it from such Selling Securityholder, free and
clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind (other than any pledge, lien, security
interest, charge, claim, equity or encumbrance created by or through
any Underwriter). The owner of the Purchased Securities, if other
than such Selling Securityholder, is precluded from asserting against
the Underwriters the effectiveness of any unauthorized endorsement.
Such Selling Securityholder has not entered into any agreement with
any third party or taken any action the effect of which could subject
the shares of Common Stock issuable upon exercise of such Warrants or
obtainable upon exercise of the Reallocation Rights, as the case may
be, to any lien, charge or encumbrance or any other claim of any third
party.
(ix) Certificates for all of the Purchase Securities to be sold
by such Selling Securityholder pursuant to this Agreement and the U.S.
Purchase Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Purchased Securities to the Managers at the Closing pursuant to this
Agreement and the U.S. Underwriters pursuant to the U.S. Purchase
Agreement.
(x) For a period of 90 days from the date hereof, such Selling
Securityholder will not, without the prior written consent of Merrill
Lynch, on behalf of the Underwriters, directly or indirectly, sell,
offer to sell, grant any option for the sale of, or otherwise dispose
of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock owned by such Selling
Securityholder or with respect to which such Selling Securityholder
has the power of disposition, other than to the International
Underwriters pursuant hereto or to the Managers pursuant to the U.S.
Purchase Agreement, provided that such Selling Securityholder may
--------
transfer Registrable Securities (as defined in the Registration Rights
Agreement, dated as of July 7, 1992, as amended,
16
<PAGE>
among Kendall and certain holders of Kendall securities (the
"Registration Rights Agreement") to Permitted Transferees (as
defined in the Registration Rights Agreement), so long as such
Permitted Transferee executes a lock-up agreement in favor of the
Managers in the same form as the lock-up agreement entered into by
such Selling Securityholder in connection with the transactions
contemplated hereby.
(xi) Such Selling Securityholder has not taken and will not take,
directly or indirectly, any action designed to, or that would
reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock; and such Selling
Securityholder has not distributed and will not distribute any
prospectus (as such term is defined in the 1933 Act and the 1933 Act
Regulations) in connection with the offering and sale of the Offered
Shares other than any preliminary prospectus filed with the Commission
or the Prospectuses or other material permitted by the 1933 Act or the
1933 Act Regulations.
(xii) Except as disclosed in writing to the Managers, neither
such Selling Securityholder nor any of its affiliates directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other
association with (within the meaning of Article I, Section 1(m) of the
By-laws of the National Association of Securities Dealers, Inc.), any
member firm of the National Association of Securities Dealers, Inc.
(xiii) Such Selling Securityholder has duly executed and
delivered this Agreement and the U.S. Purchase Agreement either for
itself or by and through its attorney-in-fact as appointed under the
Custody Agreement.
(II) Each of the Selling Securityholders that is also a New
Investor (as defined herein) severally represents and warrants to and agrees
with, each of the International Underwriters as follows:
The Reallocation Agreement has been duly authorized,
executed and delivered by such New Investor and constitutes the valid
and binding obligation of such New Investor enforceable against such
New Investor in accordance with its terms.
(c) Any certificate signed by any officer of the Company or any
Subsidiary and delivered to you or to Fried, Frank, Harris, Shriver & Jacobson
as counsel for the Underwriters at or prior to the Closing Time pursuant to this
Agreement or the transactions contemplated hereby shall be deemed a
representation and warranty by the Company or such Subsidiary, as the case may
be, to each Manager as to the matters
17
<PAGE>
covered thereby; and any certificate signed by or on behalf of any Selling
Securityholder as such and delivered to you or to counsel for the Underwriters
at or prior to the Closing Time pursuant to the terms of this Agreement or the
transactions contemplated hereby shall be deemed a representation and warranty
by such Selling Securityholder to each Manager, as to the matters covered
thereby.
Section 2. Sale and Delivery to the U.S. Underwriters; Closing.
---------------------------------------------------
(a) On the basis of the representations and warranties herein contained, and
subject to the terms and conditions herein set forth, each Selling
Securityholder agrees, severally and not jointly, to sell to each Manager,
severally and not jointly, and each Manager agrees, severally and not jointly,
to purchase from each Selling Securityholder, at the purchase price per security
set forth in the International Price Determination Agreement, that proportion of
the number of International Securities being sold by each such Selling
Securityholder set forth on Schedule B opposite the name of each such Selling
Securityholder which the number of International Securities set forth in
Schedule A opposite the name of such Manager (plus such additional number of
International Securities that such Manager may become obligated to purchase
pursuant to Section 11 hereof) bears to the total number of International
Securities, subject, in each case, to such adjustments as the Managers in their
discretion shall make to eliminate any sales or purchases of fractional shares.
(b) If the Company has elected not to rely upon Rule 430A, the
initial public offering price per share for the Initial International Shares and
the purchase price per security for the International Securities to be paid by
the several Managers shall be agreed upon and set forth in the International
Price Determination Agreement, dated the date hereof, and an amendment to the
Registration Statement containing such per share price information will be filed
before the Registration Statement becomes effective.
(c) If the Company has elected to rely upon Rule 430A, the initial
public offering price per share for the Initial International Shares and the
purchase price per security for the International Securities to be paid by the
several Managers shall be agreed upon and set forth in the International Price
Determination Agreement. In the event that the International Price
Determination Agreement has not been executed by the close of business on the
fourth business day following the date on which the Registration Statement
becomes effective, this Agreement shall terminate forthwith, without liability
of any party to any other party except that Sections 7 and 8 shall remain in
effect.
(d) In addition, on the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Selling Stockholders that are holders of shares of Common Stock which
were not issued upon exercise of Warrants or Reallocation Rights subsequent to
October 19, 1994 hereby grant an option to the Managers, severally and not
jointly, to purchase up to the number of Option Shares set forth opposite such
Securityholder's name in Schedule A hereto at the same purchase price per share
as shall be applicable to the Initial International Shares.
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<PAGE>
The option hereby granted to the Managers will expire 30 days after the date
upon which the Registration Statement becomes effective or, if the Company has
elected to rely upon Rule 430A, the date of the International Price
Determination Agreement, and, in any case, may be exercised in whole or from
time to time in part only for the purpose of covering over-allotments that may
be made in connection with the offering and distribution of the Initial Shares
upon delivery of notice by the Managers to JLL Fund, C&D Fund IV and the
Attorney-in-Fact under the Custody Agreement on behalf of the other Selling
Securityholders setting forth the number of Option Shares as to which the
several Managers are exercising the option, and the time and date of payment and
delivery thereof. Such time and date of delivery (the "Date of Delivery") shall
be determined by the Underwriters but shall not be, without the consent of
Merrill Lynch, on behalf of the Underwriters, earlier than two full business
days nor later than five full business days after the exercise of such option,
nor in any event prior to the Closing Time. If the option is exercised as to
all or any portion of the Option Shares, the International Option Shares as to
which the option is exercised shall be purchased by the Managers, severally and
not jointly, in the respective proportions that bear the same relationship to
the number of International Option Shares to be purchased at the Date of
Delivery as the number of Initial International Shares set forth opposite the
name of each Manager in Schedule B hereto bears to the total number of Initial
International Shares (such proportions are hereinafter referred to as each
Manager's "underwriting obligation proportions"). If the option is exercised in
part, the Managers shall purchase the International Option Shares from each
Selling Securityholder providing such option the number of International Option
Shares equal to the product of (x) the number of International Option Shares to
be purchased multiplied by (y) a fraction in which the numerator is the number
of International Option Shares set forth opposite the name of such Selling
Securityholder on Schedule A hereto and the denominator is the total number of
the International Option Shares set forth on Schedule A hereto.
(e) (i) Payment of the purchase price for, and delivery of
certificates for, the International Securities, (ii) exercise of the
International Warrants and delivery of certificates for the underlying shares of
Common Stock by payment of the exercise price under such Warrants and (iii)
exercise of the International Reallocation Rights and delivery of certificates
for the underlying shares of Common Stock by payment of the exercise price under
such Reallocation Rights shall, in each case, be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004,
or at such other place as shall be agreed upon by the Company, the Selling
Securityholders and you, at 10:00 A.M. (New York time) either (x) on the fifth
full business day after the effective date of the Registration Statement, or (y)
if the Company has elected to rely upon Rule 430A, on the fifth full business
day after execution of the U.S. Price Determination Agreement (unless, in either
case, postponed pursuant to Section 11 or 12), or at such other time not more
than ten full business days thereafter as you, the Company and the Selling
Securityholders shall determine (such date and time of
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<PAGE>
payment and delivery being herein called the "Closing Time"). In addition, in
the event that any or all of the International Option Shares are purchased by
the Managers, payment of the purchase price for, and delivery of certificates
for, such International Option Shares shall be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson set forth above, or at such other place as the
Company, the Selling Securityholders that are selling Option Shares and you
shall determine, on the Date of Delivery as specified in the notice from you to
JLL Fund, C&D Fund IV and the Attorney-in-Fact. Payment shall be made to the
Selling Securityholders and the New Investors upon exercise of the Reallocation
Rights by certified or official bank check or checks or wire transfer in New
York Clearing House funds payable to the order of the Custodian pursuant to the
Custody Agreement, the JLL Fund Custody Agreement, the C&D Fund IV Custody
Agreement or the Associates III Custody Agreement, as the case may be, or
directly to the Selling Securityholders or new Investors if so instructed by the
Custodian with the consent of the Managers against delivery to you for the
respective accounts of the several Managers of certificates for the
International Securities to be purchased by them. Payment shall be made to the
Company for the exercise price of the Warrants by certified official bank check
or checks or wire transfer in New York Clearing House funds payable to the order
of the Company.
(f) At the Closing Time, the Custodian shall deliver the
International Purchased Shares, the International Warrants and the International
Reallocation Rights to the Managers with any transfer taxes thereon duly paid by
the Selling Securityholder against payment thereof as described in paragraph (e)
above. Concurrently with the delivery of the International Warrants to the
Managers at the Closing, the Managers shall exercise the International Warrants
by payment of the exercise price thereof as described in paragraph (e) above and
the Company shall permit such exercise and shall cause the transfer agent for
the Common Stock (the "Transfer Agent") to immediately issue certificates for
the underlying shares of Common Stock and deliver them to the Managers.
Concurrently with the delivery of the International Reallocation Rights to the
Managers at the Closing, the Managers shall exercise the International
Reallocation Rights by payment of the exercise price thereof as described in
paragraph (e) above and the Company and the Selling Securityholders shall permit
such exercise and the Company shall cause the reallocation agent under the
Reallocation Agreement to immediately deliver certificates for the underlying
shares of Common Stock to the Managers.
(g) Certificates for the Initial International Shares and U.S. Option
Shares to be sold by the Managers shall be in such denominations and registered
in such names as you may request in writing at least two full business days
before the Closing Time or the Date of Delivery, as the case may be. The
certificates for the Initial International Shares and International Option
Shares will be made available in New York City for examination and packaging by
you not later than 10:00 A.M. (New York time) on the business day prior to the
Closing Time or the Date of Delivery, as the case may be.
20
<PAGE>
(h) It is understood that each Manager has authorized the U.S.
Representatives, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the International Securities that it has
agreed to purchase. You, individually and not as Lead Managers, may (but shall
not be obligated to) make payment of the purchase price for the International
Securities or International Option Shares to be purchased by any Manager whose
check or checks shall not have been received by the Closing Time or the Date of
Delivery, as the case may be.
(i) The obligation of the Selling Securityholders to sell to each
Manager the International Securities and the International Option Shares,
respectively, and the several and not joint obligations of the Managers to
purchase and pay for the International Securities and the International Option
Shares, respectively, upon the terms and subject to the conditions of this
Agreement, are subject to the concurrent closing of the sale of the U.S.
Securities and the U.S. Option Shares, respectively, to the U.S. Underwriters
pursuant to the terms of the U.S. Purchase Agreement.
Section 3. Certain Covenants of the Company. The Company covenants
--------------------------------
with each Manager as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and, if the Company elects to rely upon Rule 430A
and subject to Section 3(b), will comply with the requirements of Rule 430A and
will notify you promptly, (i) when the Registration Statement, or any post-
effective amendment to the Registration Statement, shall have become effective,
or any supplement to the Prospectuses or any amended Prospectuses shall have
been filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission to amend the Registration Statement, to amend or
supplement any Prospectus or for additional information and (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the Offered
Shares for offering or sale in any jurisdiction, or of the institution or
threatening of any proceedings for any of such purposes. The Company will make
every reasonable effort to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued, to
obtain the lifting thereof at the earliest possible moment.
(b) The Company will not at any time file or make any amendment to
the Registration Statement, or any amendment or supplement thereto, or any
document incorporated by reference therein (i) if the Company has not elected to
rely upon Rule 430A, to the Prospectuses or (ii) if the Company has elected to
rely upon Rule 430A, to either the prospectus included in the Registration
Statement at the time it becomes effective or to the Prospectuses, of which you
shall not have previously been
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<PAGE>
advised and furnished a copy or to which you or Fried, Frank, Harris, Shriver &
Jacobson as counsel for the Managers shall reasonably and timely object in
writing.
(c) The Company has furnished or will furnish to you and your
counsel, without charge, one signed copy of the Registration Statement (as
originally filed) and of all amendments thereto (including exhibits filed
therewith and documents incorporated by reference therein), whether filed before
or after the Registration Statement becomes effective, copies of all exhibits
and documents filed therewith, and signed copies of all consents and
certificates of experts, and has furnished or will furnish to you, for each
other Manager, one conformed copy of the Registration Statement as originally
filed and each amendment thereto.
(d) The Company will deliver to each Manager, without charge, from
time to time until the effective date of the Registration Statement (or, if the
Company has elected to rely upon Rule 430A, until the time the International
Price Determination Agreement is executed and delivered), as many copies of each
preliminary prospectus as such Manager may reasonably request, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will deliver to each Manager, without charge, as soon as the
Registration Statement shall have become effective (or, if the Company has
elected to rely upon Rule 430A, as soon as practicable after the International
Price Determination Agreement has been executed and delivered) and thereafter
from time to time as requested during the period when the Prospectuses are
required to be delivered under the 1933 Act, such number of copies of the
Prospectuses (as supplemented or amended) as such Manager may reasonably
request.
(e) The Company will comply to the best of its ability with the 1933
Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations
so as to permit the completion of the distribution of the Offered Shares as
contemplated in this Agreement, the U.S. Purchase Agreement and the
Prospectuses. If at any time when a prospectus is required by the 1933 Act to
be delivered in connection with sales of the Offered Shares any event shall
occur or condition exist as a result of which it is necessary, in the opinion of
counsel for the Managers, to amend the Registration Statement or amend or
supplement any Prospectus in order that the Prospectuses will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act, the 1933 Act Regulations, the 1934
Act or the 1934 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such untrue statement or omission or to make the
Registration Statement or the Prospectuses comply with such requirements.
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<PAGE>
(f) The Company will endeavor, in cooperation with the Managers, to
qualify the Offered Shares for offering and sale under the applicable securities
laws of such states and other jurisdictions as you may designate and to maintain
such qualifications in effect for a period of not less than one year from the
effective date of the Registration Statement; provided, however, that neither
-------- -------
the Company nor any Subsidiary shall be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. The Company will file such statements and reports
as may be required by the laws of each jurisdiction in which the Offered Shares
have been qualified as above provided.
(g) The Company will make generally available to its security holders
as soon as practicable, but not later than 60 days after the close of the period
covered thereby, an earnings statement of the Company (in form complying with
the provisions of Rule 158 of the 1933 Act Regulations), covering a period of 12
months beginning after the effective date of the Registration Statement but not
later than the first day of the Company's fiscal quarter next following such
effective date.
(h) For a period of 90 days from the date hereof, the Company will
not, without the prior written consent of Merrill Lynch on behalf of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock, other than to
(i) the U.S. Underwriters pursuant to the U.S. Purchase Agreement and
(ii) eligible participants in the Company's employee stock plans pursuant to the
terms thereof as in effect on the date hereof.
(i) The Company will use its best efforts to effect the listing of
the Common Stock on the New York Stock Exchange on the date of the International
Price Determination Agreement.
(j) The Company, during the period when the Prospectuses are required
to be delivered under the 1933 Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to Sections 13, 14 or 15 of
the 1934 Act subsequent to the time the Registration Statement becomes
effective.
(k) For a period of five years after the Closing Time, the Company
will furnish to you and each Manager that so requests copies of all annual
reports, quarterly reports and current reports filed with the Commission on
Forms 10-K and 10-Q and, to the extent requested, Form 8-K or such other similar
forms as may be designated by the Commission, and such other documents, reports
and information as shall be furnished by the Company to its stockholders
generally.
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(l) If the Company has elected to rely upon Rule 430A, it will take
such steps as it deems necessary to ascertain promptly whether the forms of
prospectuses transmitted for filing under Rule 424(b) were received for filing
by the Commission and, in the event that they were not, it will promptly file
such prospectuses.
(m) The Company has complied, and will comply, with all of the
provisions of Florida H.B. 1771, as codified in sec. 517.075 Florida Statutes,
1987, as amended, and all regulations promulgated thereunder relating to issuers
or their affiliates doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(n) The Company will cooperate with, and take, or will cause Kendall
International, Inc. to take, such actions as reasonably requested by the
Managers to enforce all of its rights under Section 2.3(c) of the Registration
Rights Agreement, dated as of July 7, 1992, as amended, among Kendall
International Inc. and the stockholders and other parties thereto arising in
connection with the transactions contemplated by this Agreement, including
informing the Transfer Agent and the agent for the Warrants and Reallocation
Rights as to the restrictions on transfer of the Company's securities arising
out of the transactions contemplated by this Agreement and advising such agents
not to transfer securities in contravention of such restrictions.
Section 4. Payment of Expenses. (a) The Company agrees to pay all
-------------------
expenses incident to the performance of its obligations under this Agreement and
the U.S. Purchase Agreement, including (i) the printing and filing of the
Registration Statement (including financial statements and exhibits), as
originally filed and as amended, the preliminary prospectuses and the
Prospectuses and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (ii) the copying or printing, as
applicable, and distribution of this Agreement (including the International
Price Determination Agreement), the Intersyndicate Agreement among the Managers
and the U.S. Underwriters, the U.S. Purchase Agreement (including the U.S. Price
Determination Agreement), the Agreement among Managers, the certificates for the
Offered Shares and a survey of state securities or blue sky laws (the "Blue Sky
Survey"), (iii) except for any expenses paid by the Selling Securityholders
pursuant to clause (b) below, the delivery of the certificates for the Offered
Shares to the Underwriters, including any capital duties, stamp duties and stock
or other transfer taxes payable upon the sale of the Offered Shares to the
Underwriters and the transfer of the Offered Shares between the Managers and the
U.S. Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisers and one counsel for the Selling Securityholders,
(v) the qualification of the Offered Shares under the applicable securities laws
in accordance with Section 3(f) and any filing fees for review of the offering
with the National Association of Securities Dealers, Inc., including filing fees
and reasonable fees and disbursements of Fried, Frank, Harris, Shriver &
Jacobson as counsel for the Underwriters in connection therewith and in
connection with the Blue Sky Survey, (vi)
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the fees and expenses of any transfer agent or registrar for the Offered Shares
,(vii) the listing fees and expenses incurred in connection with listing the
Offered Shares on the New York Stock Exchange, if any, and (viii) the fees and
expenses of the Custodian or the Attorney-in-Fact under the Custody Agreement.
(b) Each of the Selling Securityholders will pay any transfer taxes
attributable to the sale by it of International Securities and any fees and
disbursements of its counsel and accountants, if any, not paid by the Company
pursuant to Section 4(a)(iv) or otherwise.
(c) If this Agreement is terminated by you in accordance with the
provisions of Section 5, 10(a)(i) or 12, the Company shall reimburse the
Managers through you for all of their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of Fried, Frank, Harris, Shriver
& Jacobson as counsel for the Managers.
Section 5. Conditions of Managers' Obligations. In addition to the
-----------------------------------
execution and delivery of the International Price Determination Agreement, the
obligations of the several Managers to purchase and pay for the International
Shares that they have respectively agreed to purchase hereunder (including any
International Option Shares as to which the option granted in Section 2(d) has
been exercised in the event the Date of Delivery determined by you is the same
as the Closing Time) are subject to the accuracy of the representations and
warranties of the Company and the Selling Securityholders contained herein
(including those contained in the International Price Determination Agreement)
or in certificates of any officer of the Company or any Subsidiary and the
Selling Securityholders delivered pursuant to the provisions hereof, to the
performance by the Company and the Selling Securityholders of their respective
obligations hereunder in all material respects, and to the following further
conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date of this Agreement or, with your consent, at a later
time and date not later, however, than 5:30 P.M. on the first business day
following the date hereof, or at such later time or on such later date as you
may agree to in writing with the approval of a majority in interest of the
several Managers; and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or shall
be pending or, to your knowledge or the knowledge of the Company, shall have
been threatened by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of Fried, Frank, Harris, Shriver & Jacobson as counsel for the
Managers. If the Company has elected to rely upon Rule 430A, Prospectuses
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-
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effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A).
(b) At the Closing Time, you shall have received signed opinions of
M. Brian Moroze, Esq., General Counsel for the Company, dated as of the Closing
Time, together with reproduced copies of such opinions for each of the Managers,
in form and substance satisfactory to counsel for the Managers, to the effect
that:
(i) The Company is a corporation validly organized and validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts.
(ii) The Company has the requisite power and authority (corporate
and other) to own, lease and operate its properties and to conduct its
business as described in the Prospectuses, and to enter into and
perform its obligations under this Agreement, the International Price
Determination Agreement, the U.S. Purchase Agreement and the U.S.
Price Determination Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing under the laws of each
other jurisdiction in which such qualification is required except
where the failure to be so qualified and be in good standing would not
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its Subsidiaries, considered as one enterprise.
(iv) Each of the Company's Significant Subsidiaries is a
corporation validly organized and existing as a corporation under the
laws of its jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and conduct its business
as described in Prospectuses, is duly qualified as a foreign
corporation to transact business and is in good standing under the
laws of each jurisdiction in which the nature of its business or its
ownership or leasing of its properties requires qualification , except
where the failure to be so qualified or in good standing would not
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and the Subsidiaries considered as one enterprise; and all the
outstanding shares of capital stock of each Significant Subsidiary of
the Company have been duly authorized and validly issued, are fully-
paid and non-assessable, and (except for non-material liens that have
arisen in the ordinary course of business and in the case of foreign
subsidiaries, for directors' qualifying shares) are owned by the
Company, directly or
26
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indirectly, free and clear of all liens, encumbrances, security
interests and claims.
(v) Other than as disclosed in or contemplated by the
Prospectus, there are no legal or governmental proceedings pending or,
to the best of my knowledge, threatened to which the Company or any of
its Subsidiaries is or may be a party or to which any property of the
Company or its Subsidiaries is or may be the subject which, if
determined adversely to the Company or such Subsidiaries, could
individually or in the aggregate reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and
its Subsidiaries, considered as one enterprise.
(vi) To the best of my knowledge, no legal or governmental
proceedings are pending or threatened against the Company or any of
its Subsidiaries which are required to be disclosed in the
Registration Statement or the Prospectus, other than those disclosed
therein.
(vii) To the best of my knowledge, there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other
documents to which the Company or any Subsidiary is a party or by
which any of them may be bound that are required to be filed as an
exhibit to the Registration Statement or required to be described in
the Registration Statement or the Prospectuses, other than those so
filed or described as required.
(viii) Neither the Company nor any of its Subsidiaries is, or,
based upon presently existing circumstances with the giving of notice
or lapse of time or both would be, in violation of or in default
under, their respective restated articles of organization, certificate
of incorporation or other similar charter document or by-laws or any
contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument known to me to which the
Company or any of its Subsidiaries is party or by which it or any of
them or any of their respective properties is bound, except for
violations and defaults which individually and in the aggregate are
not material to the Company and the Subsidiaries taken as a whole.
(ix) All descriptions in the Prospectuses of the agreements set
forth under "Description of Capital Stock" are accurate and conform in
all material respects to the terms of such agreements, and the
statements in the Prospectuses under "Legal Proceedings" incorporated
by reference from Item 3 of Part 1 of the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly
27
<PAGE>
present the information called for with
respect to such legal matters, documents or proceedings.
(x) This Agreement, the International Price Determination
Agreement, the U.S. Purchase Agreement and the U.S. Price
Determination Agreement have been duly authorized, executed and
delivered by the Company.
(xi) All of the issued and outstanding shares of capital stock of
the Company, including the Offered Shares, have been duly authorized
and validly issued and are fully paid and non-assessable, and were not
issued in violation of any preemptive or similar rights of the
stockholders of the Company arising under the Corporation Law of the
Commonwealth of Massachusetts, under the charter or by-laws of the
Company, or, to the best of such counsel's knowledge, under any
agreement known to such counsel.
(xii) The obligations under the Warrants and the U.S.
Warrants have been duly authorized and validly assumed by the Company
and, prior to their exercise, constituted binding obligations of the
Company, entitling the holders thereof to purchase shares of Common
Stock upon the terms and in the manner set forth therein.
(xiii) The obligations of Kendall under the International
Reallocation Rights and the U.S. Reallocation Rights have been duly
and validly authorized and assumed by the Company and, prior to their
exercise, constitute binding obligations of the Company enforceable
against the Company in accordance with its terms entitling the holder
thereof to acquire shares of Common Stock upon the terms and in the
manner set forth therein. The obligations of Kendall under the
Reallocation Agreement has been duly and validly authorized and
assumed by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms.
(xiv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectuses under the caption
entitled "Capitalization," as of the date stated therein.
(xv) Except as disclosed in or specifically contemplated by the
Prospectuses, to the best of such counsel's knowledge there are no
outstanding options, warrants or other rights created by the Company
calling for the issuance of, and no commitments or obligations to
issue, any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the Company.
28
<PAGE>
(xvi) The execution and delivery of this Agreement, the
International Price Determination Agreement, the U.S. Purchase
Agreement and the U.S. Price Determination Agreement by the Company,
the sale and delivery of the Offered Shares, the exercise of the
International Warrants and the U.S. Warrants and the delivery of
shares of Common Stock upon exercise thereof, the exercise of the
International Reallocation Rights and the U.S. Reallocation Rights,
the consummation by the Company and the Selling Securityholders of the
transactions contemplated in this Agreement and the U.S. Purchase
Agreement and compliance by the Company and the Selling
Securityholders with the terms of the foregoing will not (a) violate
the Company's Restated Articles of Organization or by-laws, (b) breach
or result in a default under any contract, indenture, mortgage, deed
of trust, loan or credit agreement, bond, debenture, note, lease or
any other agreement or instrument known to me to which the Company or
any of its Subsidiaries is a party or by which it or any of them is
bound or to which any of the property or assets of the Company or any
of its Subsidiaries is bound, or (c) result in a violation by the
Company of any applicable law, statute, rule or regulation (other than
state securities or Blue Sky laws or regulations, as to which counsel
need not opine) applicable to the Company or any judgment, order,
writ, injunction, or decree of any jurisdiction, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or operations. In rendering
the opinion expressed in paragraph (xiv), as to violations of any
applicable law or statute, rule or regulation, I assume that neither
the Registration Statement nor the Prospectuses contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectuses, in light of the
circumstances under which they were made) not misleading.
(xvii) No consent, approval, authorization or license, order,
registration or qualification of or with any court or of any
government, governmental instrumentality or court is legally required
to be obtained by the Company in connection with the due
authorization, execution and delivery of this Agreement, the
International Price Determination Agreement, the U.S. Purchase
Agreement and the U.S. Price Determination Agreement, the exercise of
the International Warrants and the U.S. Warrants and the delivery of
shares of Common Stock upon exercise thereof, the exercise of the
International Reallocation Rights and the U.S. Reallocation Rights and
the sale and delivery of the Offered Shares or the consummation of the
transactions contemplated by this Agreement, except such as may be
required under the 1933 Act and the 1933 Act Regulations,
29
<PAGE>
which have been obtained, or as may be required under the securities
or Blue Sky laws of the various states, as to which such counsel need
express no opinion.
(xviii) To the best of such counsel's knowledge, no holders of
the Company's securities have rights to the registration of shares of
Common Stock or other securities as a result of the filing of the
Registration Statement by the Company or the offering contemplated
hereby, except pursuant to the Registration Rights Agreement, dated as
of July 7, 1992, as amended, among Kendall International, Inc. and the
parties thereto.
(xix) Each document incorporated by reference in the
Registration Statement and the Prospectus, when filed with the
Commission under the Exchange Act, complied as to form in all material
respects with the requirements of the Exchange Act (except that such
counsel need not express an opinion as to financial statements, the
notes thereto and related schedules and other financial or accounting
data included in or omitted from any of the documents referred to in
this paragraph).
Although such counsel has not undertaken to determine independently
the accuracy and completeness of the statements contained in the Registration
Statement or the Prospectuses, such counsel has obtained information as a result
of discussions and meetings with officers and other representatives of the
Company and its Subsidiaries and discussions with representatives of and
independent public accountants of the Company, in connection with the
preparation of the Registration Statement and the Prospectuses, and the
examination of other information and documents requested by such counsel.
Although such counsel has not undertaken to determine independently, and
therefore, such counsel does not assume responsibility, explicitly or
implicitly, for the accuracy and completeness of the statements contained in the
Registration Statement or the Prospectuses, and such counsel cannot provide
assurance that the procedures described in the preceding sentence would
necessarily reveal matters of significance with respect to the following
comments, during the course of the above-described procedures, nothing has come
to such counsel's attention that has caused such counsel to believe that the
Registration Statement (including the Rule 430A Information, if applicable, and
any amendment thereto) or the Prospectuses (including, in each case, the
documents incorporated by reference therein), on the effective date thereof, or
on the date of the Agreement, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto, on the date hereof, contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no view with respect to financial
statements,
30
<PAGE>
the notes thereto and related schedules and other financial or accounting data
included in the Registration Statement or the Prospectuses).
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement, the U.S. Purchase Agreement and the
sale of the Offered Shares pursuant to this Agreement and the U.S. Purchase
Agreement as counsel for the Underwriters may reasonably request. In rendering
such opinion, such counsel may rely as to all matters governed by laws of
jurisdictions other than the law of the Commonwealth of Massachusetts and the
federal law of the United States, upon opinions of local counsel in such
jurisdictions, who shall be counsel satisfactory to counsel for the Underwriters
in which case the opinion shall state that they believe you and they are
entitled to so rely. Such counsel may also state that, insofar as such opinion
involves factual matters, such counsel has relied, to the extent such counsel
deems proper, upon certificates of officers of the Company and the Subsidiaries
and certificates of public officials.
(c) At the Closing Time, you shall have received signed opinions of
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, counsel for the Company, dated
as of the Closing Time, together with reproduced copies of such opinions for
each of the Managers, in form and substance satisfactory to counsel for the
Managers, to the effect that:
(i) The statements made in the Prospectuses under "Description
of Capital Stock" insofar as they purport to constitute summaries of
the terms of the Common Stock constitute accurate and fair summaries
thereof in all material respects. The description of the A Warrants,
the B Warrants and the Reallocation Rights set forth in the
Prospectuses under "Description of Capital Stock" conform in all
materials respects to the terms of such instruments.
(ii) The Registration Statement has been declared effective under
the 1933 Act. Any required filing of the Prospectuses or any
supplement thereto has been made with the Commission pursuant to
Rule 424(b); such counsel does not know of the issuance of any stop
order suspending the effectiveness of the Registration Statement and
no proceedings for that purpose have been instituted or, to our
knowledge, threatened.
(iii) The Registration Statement (including the Rule 430A
Information, if applicable), the Prospectuses and each amendment or
supplement to the Registration Statement and Prospectuses (other than
the documents incorporated by reference) as of their respective
effective or issue dates, comply as to form in all material respects
to the requirements of the 1933 Act and the applicable 1933 Act
Regulations (except that such
31
<PAGE>
counsel need not express an opinion as to financial or accounting
data, statements, notes or schedules included or omitted from any of
the documents referred to in this opinion).
(iv) The statements made in the Prospectuses under "Certain
United States Federal Tax Consequences to Non-U.S. Holders of Common
Stock," to the extent that they are statements of United States
federal laws or legal conclusions thereunder, have been reviewed by
such counsel and fairly present the information disclosed therein in
all material respects.
Although such counsel has not undertaken to determine independently
the accuracy and completeness of the statements contained in the Registration
Statement or the Prospectuses, such counsel has obtained information as a result
of discussions and meetings with officers and other representatives of the
Company and its Subsidiaries and discussions with representatives of and
independent public accountants of the Company, in connection with the
preparation of the Registration Statement and the Prospectuses, and the
examination of other information and documents requested by such counsel.
Although such counsel has not undertaken to determine independently, and
therefore, such counsel does not assume responsibility, explicitly or
implicitly, for the accuracy and completeness of the statements contained in the
Registration Statement or the Prospectuses, and such counsel cannot provide
assurance that the procedures described in the preceding sentence would
necessarily reveal matters of significance with respect to the following
comments, during the course of the above-described procedures, nothing has come
to such counsel's attention that has caused such counsel to believe that the
Registration Statement (including the Rule 430A Information, if applicable, and
any amendment thereto) or the Prospectuses (including, in each case, the
documents incorporated by reference therein), on the date or effective date
thereof, or on the date of the Agreement, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto, on the date hereof, contain
an untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no view with respect to
financial statements, the notes thereto and related schedules and other
financial or accounting data included in the Registration Statement or the
Prospectuses).
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement, the U.S. Purchase Agreement and the
sale of the Offered Shares pursuant to this Agreement and the U.S. Purchase
Agreement as counsel for the Underwriters may reasonably request. In rendering
such opinion, such counsel may rely as to all matters governed by laws of
jurisdictions other than the laws of the State of New York and the federal law
of the United States, upon opinions of local
32
<PAGE>
counsel in such jurisdictions, who shall be counsel satisfactory to counsel for
the Underwriters in which case the opinion shall state that they believe you and
they are entitled to so rely. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and the Subsidiaries and
certificates of public officials.
(d)(i) At the Closing Time, you shall have received signed opinions
of counsel (who may be in-house counsel) for each of the Selling Securityholders
reasonably acceptable to you, as requested by the International Underwriters,
dated as of the Closing Time, together with reproduced copies of such opinions
for each of the Managers, in form and substance satisfactory to counsel for the
Managers, to the effect set forth in Annexes A-1, A-2 and A-3 hereto.
(ii) At the Closing Time, you shall have received signed opinions of
counsel (who may be in-house counsel) for each of the Selling Securityholders
that is also a New Investor, as requested by the Managers, dated as of the
Closing Time, together with reproduced copies of such opinions for each of the
Managers, in form and substance satisfactory to counsel for the Managers, to the
effect that:
The Reallocation Rights Agreement has been duly authorized,
executed and delivered by such New Investor and constitutes the valid
and binding obligation of such New Investor enforceable against such
New Investor in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(e) At the Closing Time, you shall have received the favorable
opinion of Fried, Frank, Harris, Shriver & Jacobson as counsel for the Managers,
dated as of the Closing Time, together with reproduced copies of such opinion
for each of the other Managers, to the effect that the opinions delivered
pursuant to Sections 5(b), (c), and (d) appear on their face to be appropriately
responsive to the requirements of this Agreement except, specifying the same, to
the extent waived by you, and with respect to the legal existence of the
Company, the Purchased Securities, the Offered Shares, this Agreement and the
U.S. Purchase Agreement, the Registration Statement, the Prospectuses and such
other related matters as you may require. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
federal law of the United States, the law of the State of New York, upon the
opinions of counsel satisfactory to you. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers or other appropriate
representatives of the Company, the Subsidiaries and the Selling Securityholders
and certificates of public officials.
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(f) At the Closing Time, (i) the Registration Statement and the
Prospectuses, as they may then be amended or supplemented, shall conform in all
material respects to the requirements of the 1933 Act, the 1933 Act Regulations,
the 1934 Act and the 1934 Act Regulations, the Company shall have complied in
all material respects with Rule 430A (if it shall have elected to rely thereon),
the Registration Statement, as it may then be amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements in the
Registration Statement not misleading, and the Prospectuses, as they may be
amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements in the Prospectuses, in light of the circumstances under
which they were made, not misleading, (ii) there shall not have been, since the
respective dates as of which information is given in the Prospectuses, any
material adverse change in the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its Subsidiaries,
considered as one enterprise, whether or not arising in the ordinary course of
business, (iii) no action, suit or proceeding at law or in equity shall be
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary that would be required to be set forth in the Prospectuses other
than as set forth therein and no proceedings shall be pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
before or by any federal, state or other commission, board or administrative
agency that could reasonably be expected to materially and adversely affect the
condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one enterprise,
other than as set forth in the Prospectuses, (iv) the Company shall have
complied with all agreements and satisfied all conditions on their parts to be
performed or satisfied at or prior to the Closing Time, and (v) the other
representations and warranties of the Company set forth in Section 1(a) shall be
accurate as though expressly made at and as of the Closing Time. At the Closing
Time, you shall have received a certificate of the President or Vice President
and the chief financial officer or chief accounting officer of the Company,
dated as of the Closing Time, to such effect. As used in Section 5(f)(ii) and
(iii), the term "Prospectuses" means the Prospectuses in the form first used to
confirm sales of the Offered Shares.
(g) At the Closing Time, (i) the representations and warranties of
each Selling Securityholder set forth in Section 1(b) and in any certificates by
or on behalf of the Selling Securityholders delivered pursuant to the provisions
hereof shall be accurate as though expressly made at and as of the Closing Time,
(ii) each Selling Securityholder shall have performed its obligations under this
Agreement and the U.S. Purchase Agreement in all material respects and (iii) you
shall have received a certificate of each Selling Securityholder to the effect
set forth in the form previously delivered to you.
(h) At the time that this Agreement is executed by the Company, you
shall have received from Coopers & Lybrand L.L.P. a letter, dated such date, in
form and
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substance satisfactory to you, together with signed or reproduced copies of such
letter for each of the other Managers, confirming that they are independent
public accountants with respect to the Company within the meaning of the 1933
Act and the applicable published 1933 Act Regulations, and stating in effect
that:
(i) in their opinion, the audited financial statements and the
related financial statement schedules included or incorporated by
reference in the Registration Statement and the Prospectuses comply as
to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations;
(ii) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of a
reading of the minutes of all meetings of the stockholders and
directors of the Company and its Subsidiaries and each committee of
the board of directors of each of the Company and its Subsidiaries,
inquiries of certain officials of the Company and its Subsidiaries
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that at ________,
199_ and at a specified date not more than five days prior to the date
of this Agreement, there was any (i) change in the shareholders'
equity or (ii) increase in long-term debt of the Company and its
Subsidiaries as compared with the amounts shown in the latest balance
sheet included or incorporated by reference in the Registration
Statement, except in each case for changes, decreases or increases
that the Registration Statement discloses have occurred or may occur;
(iii) in addition to the procedures referred to in clause
(ii) above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing or incorporated by
reference in the Registration Statement, which have previously been
specified by you and which shall be specified in such letter, and have
compared certain of such items with, and have found such items to be
in agreement with, the accounting and financial records of the Company
and its Subsidiaries; and
(iv) at the Closing Time, you shall have received from Coopers &
Lybrand L.L.P. a letter, in form and substance satisfactory to you and
dated as of the Closing Time, to the effect that for the period from
________, 199_ to ___________, 199_ and to a specified date not more
than five days prior to the Closing Time, there was any decrease in
net current assets or in sales, or in the total or per-share amounts
of net income before income taxes, extraordinary item and cumulative
effect of accounting changes or
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net income, or in other items specified by the Lead Managers, in each
case as compared with the comparable period in the preceding year,
except in each case for any decreases that the Registration Statement
discloses have occurred or may occur and that they reaffirm the
statements made in the letter furnished pursuant to Section 5(h),
except that the specified date referred to shall be a date not more
than five business days prior to the Closing Time. In the event the
Company relies on Rule 430A and the final Prospectuses furnished to
the Underwriters in connection with the offering of the Offered Shares
differ from the Prospectuses included in the Registration Statement at
the time of effectiveness, such letter shall update the procedures
referred to in clauses 5(h)(ii) and (iii) above.
(j) At the Closing Time, you shall have received a certificate of the
Chief Financial Officer of the Company as to certain agreed upon accounting
matters.
(k) At the Closing Time, counsel for the Underwriters shall have been
furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Offered Shares as contemplated in this Agreement and the U.S.
Purchase Agreement and the matters referred to in Section 5(f) and in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company and the Selling Securityholders, the performance of
any of the covenants of the Company and the Selling Securityholders, or the
fulfillment of any of the conditions herein contained; and all proceedings taken
by the Company and the Selling Securityholders at or prior to the Closing Time
in connection with the authorization, issuance and sale of the Offered Shares as
contemplated in this Agreement and the U.S. Purchase Agreement shall be
reasonably satisfactory in form and substance to you and to Fried, Frank,
Harris, Shriver & Jacobson as counsel for the Underwriters.
(l) Each Selling Securityholder shall have delivered to you on or
prior to the Closing Time a properly completed and executed United States
Treasury Department Form W/9 (or other applicable form or statement specified by
Treasury Department regulations).
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company and the Selling
Securityholders at any time at or prior to the Closing Time, and such
termination shall be without liability of any party to any other party, except
as provided in Section 4 herein. Notwithstanding any such termination, the
provisions of Sections 7 and 8 herein shall remain in effect.
Section 6. Conditions to Purchase of International Option Shares. In
-----------------------------------------------------
the event that the Managers exercise their option granted in Section 2 to
purchase all or any
36
<PAGE>
of the International Option Shares and the Date of Delivery determined by you
pursuant to Section 2 is later than the Closing Time, the obligations of the
several Managers to purchase and pay for the International Option Shares that
they shall have respectively agreed to purchase pursuant to this Agreement are
subject to the accuracy of the representations and warranties of the Company and
the Selling Securityholders that are selling Option Shares herein contained, to
the performance of the Company and the Selling Securityholders that are selling
Option Shares of their respective obligations in all material respects hereunder
and to the following further conditions:
(a) The Registration Statement shall remain effective at the Date of
Delivery, and at the Date of Delivery no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act and no
proceedings for that purpose shall have been instituted or shall be pending or,
to your knowledge or the knowledge of the Company or the Selling Securityholders
that are selling Option Shares, shall have been threatened by the Commission,
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of Fried, Frank, Harris,
Shriver & Jacobson as counsel for the Managers.
(b) At the Date of Delivery, the provisions of Section 5(f) shall
have been complied with at and as of the Date of Delivery and, at the Date of
Delivery, you shall have received a certificate of the President or a Vice
President and chief financial officer or chief accounting officer of the Company
with respect to the provisions of Section 5(f), dated as of the Date of
Delivery, to such effect.
(c) At the Date of Delivery, the provisions of Section 5(g) shall
have been complied with at and as of the Date of Delivery.
(d) At the Date of Delivery, you shall have received the favorable
opinions of M. Brian Moroze, general counsel for the Company, Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel, counsel for the Company and counsel for each
of the Selling Securityholders that are selling Option Shares together with
reproduced copies of such opinion for each of the other Managers in form and
substance satisfactory to Fried, Frank, Harris, Shriver & Jacobson as counsel
for the Managers, dated as of the Date of Delivery, relating to the Option
Shares and otherwise to the same effect as the opinions required by
Sections 5(b), (c) and (d)(i).
(e) At the Date of Delivery, you shall have received the favorable
opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel for the Managers,
dated as of the Date of Delivery, relating to the International Option Shares
and otherwise to the same effect as the opinion required by Section 5(e).
(f) At the Date of Delivery, you shall have received a letter from
Coopers & Lybrand L.L.P. in form and substance satisfactory to you and dated as
of the
37
<PAGE>
Date of Delivery, to the effect that they reaffirm the statements made in the
letter furnished pursuant to Section 5(i), except that the specified date
referred to shall be a date not more than five days prior to the Date of
Delivery.
(g) At the Date of Delivery, Fried, Frank, Harris, Shriver & Jacobson
as counsel for the Managers shall have been furnished with all such documents,
certificates and opinions as they may reasonably request for the purpose of
enabling them to pass upon the sale of the Option Shares as contemplated in this
Agreement and the matters referred to in Section 6(e) and in order to evidence
the accuracy and completeness of any of the representations, warranties or
statements of the Company and the Selling Securityholders that are selling
Option Shares, the performance of any of the covenants of the Company and the
Selling Securityholders that are selling Option Shares, or the fulfillment of
any of the conditions herein contained; and all actions taken by the Company and
the Selling Securityholders that are selling Option Shares at or prior to the
Date of Delivery in connection with the authorization, issuance and sale of the
Option Shares as contemplated in this Agreement shall be reasonably satisfactory
in form and substance to you and to Fried, Frank, Harris, Shriver & Jacobson as
counsel for the Managers.
Section 7. Indemnification. (a) The Company agrees to indemnify and
---------------
hold harmless each Manager and each person, if any, who controls any Manager
within the meaning of Section 15 of the 1933 Act to the extent and in the manner
set forth in clauses (i), (ii) and (iii) below. In addition, subject to
subsection (d) of this Section, each Selling Securityholder, severally and not
jointly (in the proportion that the number of International Shares being sold by
such Selling Securityholder bears to the total number of International Shares),
agrees to indemnify and hold harmless each Manager and each person, if any, who
controls any Manager within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of an untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectuses (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
38
<PAGE>
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to the last sentence of Section 7(c), fees and
disbursements of counsel chosen by you), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that (i) this indemnity does not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectuses
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by any Manager expressly for use in
the Registration Statement (or any amendment thereto), (ii) such indemnity with
respect to any preliminary prospectus shall not inure to the benefit of any
Manager (or any persons controlling such Manager) from whom the person asserting
such loss, claim, damage or liability purchased the Offered Shares which are the
subject thereof if such person did not receive a copy of the International
Prospectus (or the International Prospectus as amended or supplemented) at or
prior to the confirmation of the sale of such Offered Shares to such person in
any case where such delivery is required by the 1933 Act and the untrue
statement or omission or alleged untrue statement or omission of a material fact
contained in such preliminary prospectus was corrected in the International
Prospectus (or the International Prospectus as amended or supplemented), (iii)
with respect to the indemnity by each Selling Securityholder, the indemnity
shall, in each case, apply only to the extent that any untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectuses
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished by such Selling Securityholder to the Company or
the Underwriters expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or such
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto) or (iv) with respect to the indemnity by the Company, this indemnity
39
<PAGE>
does not apply to any loss, liability, claim, damage or expense to the extent
arising out of an untrue statement or omission or alleged untrue statement or
omission made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information, if applciable, or any preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto) in
reference upon and in conformity with written information furnished to the
Company by any Selling Securityholder for use in the Registration Statement or
any amendment thereto.
(b) Each Manager agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, each of its officers who signed the
Registration Statement and, each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act and each Selling Securityholder
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 7(a), as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto), including the Rule
430A Information, if applicable, or any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto) in reliance upon and in
conformity with information furnished to the Company by such Manager expressly
for use in the Registration Statement (or any amendment thereto), including the
Rule 430A Information, if applicable, or such preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. Any indemnifying party may participate
at its own expense in the defense of such action. If it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and approved by the indemnified
parties defendant in such action, unless such indemnified parties reasonably
object to such assumption on the ground that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying party or parties be liable for
the fees and expenses of more than one counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdictions arising out of the same general allegations or circumstances.
(d) No Selling Securityholder shall be responsible for the payment of
an amount, pursuant to this Section 7, which exceeds the net proceeds received
by the
40
<PAGE>
Selling Securityholder from the sale of the Offered Shares by such Selling
Securityholder hereunder and under the U.S. Purchase Agreement.
Section 8. Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity provided for in
Section 7 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, then each party hereto (if and
to the extent such party would have had indemnification obligations under
Section 7 but for the initial clause of this Section 8) shall severally
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company, the Selling
Securityholders and one or more of the Managers, as incurred, (a) in such
proportion as is appropriate to reflect not only the relative benefits received
by the Underwriters on the one hand and the Selling Securityholders and the
Company on the other hand but also the relative fault of the Underwriters on the
one hand and the Selling Securityholders and the Company on the other hand or
(b) if the allocation provided by clause (a) is not permitted by applicable law,
in such proportion as is appropriate to reflect the relative benefits received
by the Underwriters on the one hand and the Selling Securityholders and the
Company on the other hand; provided, that the parties agree that for purposes of
--------
the foregoing (a) the relative benefits received by the Underwriters on the one
hand and the Company and the Selling Securityholders on the other shall be
deemed to be in the same proportion as the underwriting discount appearing on
the cover page of the Prospectuses bears to the initial public offering price
appearing thereof; provided, further, that no person guilty of fraudulent
-------- -------
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls a Manager within the meaning of Section 15 of the 1933 Act shall have
the same rights to contribution as the Manager, and each director of the
Company, each officer of the Company who signed the Registration Statement, each
Selling Securityholder and each director, officer or employee thereof and each
person, if any, who controls the Company or any Selling Securityholder within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company and the Selling Securityholders. Notwithstanding
the provisions of this Section 8, no Selling Securityholder shall be required to
contribute any amount under this Section 8 in excess of the amount by which the
net proceeds received by such Selling Securityholder in connection herewith
exceed the aggregate amount such Selling Securityholder has otherwise paid
pursuant to Section 7(a).
Section 9. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements
- ------------------
and other statements of the Company, its officers and the Selling
Securityholders set forth in or made pursuant to this Agreement will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Company, the Selling Securityholders or any
41
<PAGE>
Manager or controlling person and will survive delivery of and payment for the
Offered Shares.
Section 10. Termination of Agreement. (a) You may terminate this
------------------------
Agreement, by notice to the Company and the Selling Securityholders, at any time
at or prior to the Closing Time (i) if there has been, since the date as of
which information is given in the Prospectuses, any material adverse change, in
the condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its Subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business, (ii) a downgrading
shall have occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, or any such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities, (iii) if there has occurred any material adverse change in the
financial markets in the United States or any outbreak or escalation of
hostilities or other calamity or crisis the effect of which in each case is such
as to make it, in your judgment, impracticable to market the International
Offered Shares or enforce contracts for the sale of the International Offered
Shares, (iv) if trading in any securities of the Company has been suspended by
the Commission or if trading generally on the New York Stock Exchange or in the
over-the-counter market has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of such exchanges or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (v) if a banking moratorium has been declared by either federal or
New York authorities. As used in this Section 10(a), the term "Prospectuses "
means the Prospectuses in the form first used to confirm sales of the Offered
Shares.
(b) If this Agreement is terminated pursuant to this Section 10, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4 hereof. Notwithstanding any such
termination, the provisions of Sections 7 and 8 shall remain in effect.
(c) This Agreement may also terminate pursuant to the provisions of
Section 2 and Section 5, with the effect stated in such Section.
Section 11. Default by One or More of the Managers. If one or more
--------------------------------------
of the Managers shall fail at the Closing Time to purchase the International
Securities that it or they are obligated to purchase pursuant to this Agreement
(the "Defaulted International Securities"), you shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Managers, or any other underwriters, to purchase all, but not less than all, of
the Defaulted International Securities in such amounts as may
42
<PAGE>
be agreed upon and upon the terms set forth in this Agreement; if, however, you
have not completed such arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted International
Securities does not exceed 10% of the total number of International Securities
to be purchased pursuant to this Agreement, the non-defaulting Managers shall be
obligated to purchase the full amount thereof in the proportions that their
respective International Securities underwriting obligation proportions bear to
the underwriting obligation proportions of all non-defaulting Managers, or
(b) if the aggregate principal amount of Defaulted International
Securities exceeds 10% of the International Securities, this Agreement shall
terminate without liability on the part of any non-defaulting Manager.
No action taken pursuant to this Section 11 shall relieve any
defaulting Manager from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement, either you or the Company or the Selling Securityholders
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectuses or in any other documents or arrangements. As used herein, the
term "Manager" includes any person substituted for a Manager under this
Section 11.
Section 12. Default by Certain of the Selling Securityholders. If
-------------------------------------------------
either C&D Fund IV or JLL shall fail at the Closing Time to sell and deliver the
number of Purchased Securities that it is obligated to sell, then the Lead
Managers may, at their option, by notice to the Company and the non-defaulting
Selling Securityholders, either (a) terminate this Agreement without any
liability on the part of any non-defaulting party except to the extent provided
in Section 4 and except that the provisions of Sections 7 and 8 shall remain in
effect or (b) elect to purchase the Purchased Securities which the non-
defaulting party has agreed to sell hereunder. No action taken pursuant to this
Section shall relieve such Selling Securityholder from liability, if any, in
respect of such default.
Section 13. Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to you shall be directed to you, c/o Merrill Lynch International Limited
at Ropemaker Place, 25 Ropemaker Street, London ECZY, 9LY England, attention of
Michael Rowan with a copy to Fried, Frank, Harris, Shriver & Jacobson, One New
York Plaza, New York, NY 10004-1980, attention of Valerie Ford Jacob, Esq.; and
notices to the Company shall be directed to the Company at One Tyco Park,
Exeter, New Hampshire 03833, attention of M. Brian Moroze, Esq. with a copy to
Kramer, Levin, Naftalis, Nessen, Kamin &
43
<PAGE>
Frankel, 919 Third Avenue, New York, NY 10022, attention of Howard A. Sobel,
Esq. and notices to the Selling Securityholders shall be directed to the
addresses set forth on Schedule A hereto.
Section 14. Parties. This Agreement is made solely for the benefit
-------
of the several Managers, the Selling Securityholders, the Company, and, to the
extent expressed, any person controlling the Company, or any of the Managers,
and the directors of the Company, the officers of the Company who have signed
the Registration Statement, and the executors, administrators, successors and
assigns of such persons and, no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include any purchaser, as such purchaser, from any of the several Managers
of the International Shares. All of the obligations of the Managers hereunder
are several and not joint.
SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF THE DAY REFER TO NEW
YORK CITY TIME.
Section 16. Jurisdiction. Each of the undersigned hereby irrevocably
------------
submits in any suit, action or proceeding arising out of or in relation to this
Agreement, or any of the transactions contemplated hereby, to the jurisdiction
and venue of any federal or state court in the Borough of Manhattan, City of New
York, State of New York.
Section 17. Counterparts. This Agreement may be executed in one or
------------
more counterparts and, when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return a counterpart hereof, whereupon this instrument will
become a
44
<PAGE>
binding agreement among the Company, each of the Selling Securityholders and the
several Managers in accordance with its terms.
Very truly yours,
TYCO INTERNATIONAL LTD.
By _______________________________
Name:
Title:
THE SELLING SECURITYHOLDERS LISTED IN SCHEDULE A
HERETO (OTHER THAN JOSEPH LITTLEJOHN & LEVY FUND,
L.P. AND THE CLAYTON & DUBILIER PRIVATE EQUITY
FUND IV LIMITED PARTNERSHIP)
By ________________________________
Name:
Title:
[Attorney-in-Fact acting on behalf of the
Selling Securityholders]
JOSEPH LITTLEJOHN & LEVY FUND, L.P.
By: JLL ASSOCIATES L.P., its general partner
By ________________________________
Name:
Title:
THE CLAYTON & DUBILIER PRIVATE EQUITY FUND IV
LIMITED PARTNERSHIP
By _______________________________
Name:
Title:
CLAYTON & DUBILIER ASSOCIATES III
LIMITED PARTNERSHIP
By ________________________________
Name:
Title:
<PAGE>
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By: MERRILL LYNCH INTERNATIONAL LIMITED
By
-------------------------
Name:
Title:
For themselves and as Lead Managers of the
- ------------------------------------------
other Managers named in Schedule B.
- ----------------------------------
<PAGE>
Exhibit A
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Offering of
__________ Shares of Common Stock
INTERNATIONAL PRICE DETERMINATION AGREEMENT
-------------------------------------------
____________________, 1995
MERRILL LYNCH INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
As Representatives of the several Managers
c/o Merrill Lynch International Limited
Ropemaker Place
25 Ropemaker Street
London ECZY
9LY ENGLAND
Ladies and Gentlemen:
Reference is made to the International Purchase Agreement dated as of
_________, 1995 (the "International Purchase Agreement") among Tyco
International Ltd., a Massachusetts corporation (the "Company"), the Selling
Securityholders listed in Schedule A thereto and hereto (the "Selling
Securityholders") and the several Managers named in Schedule B thereto and
hereto (the "Managers"), for whom Merrill Lynch International Limited, Goldman
Sachs International, Donaldson, Lufkin & Jenrette Securities Corporation and
Lehman Brothers International (Europe) are acting as representatives (the "Lead
Managers"). All terms not otherwise defined in this International Price
Determination Agreement shall have the meanings set forth in the International
Purchase Agreement. The International Purchase Agreement provides for the
purchase by the Managers from the Selling Securityholders, subject to the terms
and conditions set forth therein, of an aggregate of _______________ Initial
International Shares, International A Warrants,
---------- ----------
International B Warrants and
----------
A-1
<PAGE>
Reallocation Rights. This Agreement is the International Price Determination
Agreement referred to in the U.S. Purchase Agreement.
Pursuant to Section 2 of the International Purchase Agreement, the
undersigned agree with the Managers as follows:
1. The initial public offering price per share for the Initial
International Shares shall be $_____.
2. The purchase price per share for the International Purchased
Shares to be paid by the several Managers shall be $_____,
representing an amount equal to the initial public offering price set
forth above, less $_____ per share.
3. The purchase price per International A Warrant to be paid by
the several Managers shall be equal to the number obtained by
multiplying (i) the number of shares of Common Stock issuable upon
exercise of such International A Warrant by (ii) $_____ (representing
an amount equal to the initial public offering price set forth above),
less $____ per share (representing the Managers' per share
underwriting discount), less $11.94 (the exercise price per share of
Common Stock issuable upon exercise of the International A Warrants).
4. The purchase price per International B Warrant to be paid by
the several Managers shall be equal to the number obtained by
multiplying (i) the number of shares of Common Stock issuable upon
exercise of such International B Warrant by (ii) $____ (representing
an amount equal to the initial public offering price set forth above),
less $__ per share (representing the Underwriter's per share
underwriting discount), less $16.92 per share (the exercise price per
share of Common Stock issuable upon exercise of the International B
Warrant).
5. The purchase price per International Reallocation Right to
be paid by the several Managers shall be equal to the number obtained
by multiplying (i) the number of shares of Common Stock acquired upon
exercise of such International Reallocation Right by (ii) $___
(representing an amount equal to the initial public offering price set
forth above), less $_____ per share (representing the Managers' per
share underwriting discount), less $11.94 per share (the exercise
price per share of Common Stock acquirable upon exercise of the
Reallocation Rights).
The Company represents and warrants to each of the Managers that the
representations and warranties of the Company set forth in Section 1(a) of the
<PAGE>
International Purchase Agreement are accurate as though expressly made at and as
of the date hereof.
Each of the Selling Securityholders represents and warrants to each of
the Managers that the representations and warranties of such Selling
Securityholder set forth in Section 1(b) of the International Purchase Agreement
is accurate as though expressly made at and as of the date hereof.
As contemplated by Section 2 of the International Purchase Agreement,
attached as Schedule A is a list of each of the Selling Securityholders and
attached as Schedule B is a complete list of the several Managers, which shall
be a part of this Agreement and the International Purchase Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Securityholders
a counterpart hereof, whereupon this instrument along with all counterparts and
together with the International Purchase Agreement shall be a binding agreement
among the Managers, the Company and the Selling Securityholders in accordance
with its terms and the terms of the International Purchase Agreement.
Very truly yours,
TYCO INTERNATIONAL LTD.
By ________________________
Name:
Title:
<PAGE>
THE SELLING SECURITYHOLDERS LISTED IN SCHEDULE A
HERETO (OTHER THAN JOSEPH LITTLEJOHN & LEVY FUND,
L.P. AND THE CLAYTON & DUBILIER PRIVATE EQUITY
FUND IV LIMITED PARTNERSHIP)
By
----------------------------
Name:
Title: As Attorney-in-Fact acting on
behalf of the Selling Securityholders
JOSEPH LITTLEJOHN & LEVY FUND, L.P.
By JLL ASSOCIATES L.P., its general partner
By
----------------------------
Name:
Title:
THE CLAYTON & DUBILIER PRIVATE EQUITY FUND IV
LIMITED PARTNERSHIP
By____________________________
Name:
Title:
CLAYTON & DUBILIER ASSOCIATES III
LIMITED PARTNERSHIP
By____________________________
Name:
Title:
<PAGE>
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By: MERRILL LYNCH INTERNATIONAL LIMITED
By
---------------------------------------
Name:
Title:
For themselves and as Lead Managers of the other
- -------------------------------------------------
Managers named in Schedule attached hereto.
- ---------------------------------------------------------------
<PAGE>
SCHEDULE A
Total
Number of Total
International Number of
Selling Share to be A Warrants to be
Securityholder Address Sold Sold
- -------------- ------- ---- ----
Total
-------- -------- ---------- --------------
Total Number of Total Number of
Shares Issuable Total Number of Shares Issuable
Upon Exercise of B Warrants to be Upon Exercise of
A Warrants Sold B Warrants
---------- ---- ----------
Total
---------- --------------- ---------------
Total Number of
Shares Acquirable Total Number
Total Number of Upon Exercise of of International
Reallocation Such Reallocation Option Shares
Rights to be sold Rights To be sold
----------------- ------ ----------
Total
----------- --------------- --------------
<PAGE>
SCHEDULE B
Number of Total Total Number of
International Number of Shares Issuable
Shares to be A Warrants to Upon Exercise of
Managers Purchased be Purchased A Warrants
-------- --------- ------------ ----------
Merrill Lynch
International
Limited
Goldman, Sachs
International
Donaldson, Lufkin
& Jenrette Securities
Corporation
Lehman Brothers
International
(Europe)
Total
--------- ------------ ----------
Total Number of Total Number of
Total Number of Shares Issuable Reallocation
B Warrants to be Upon Exercise of Rights to be
Purchased B Warrants Purchased
--------- ---------- ---------
Merrill Lynch
International
Limited
Goldman, Sachs
International
Donaldson, Lufkin
& Jenrette Securities
Corporation
Lehman Brothers
International
(Europe)
Total
--------- ---------- ---------
Total Number of
International
Option Shares
Total Number of to be Purchased
Shares Acquirable Upon Exercise
Upon Exercise of of Over-
Such Reallocation allotment
Rights Option
------ ------
Merrill Lynch
International
Limited
Goldman, Sachs
International
Donaldson, Lufkin
& Jenrette Securities
Corporation
Lehman Brothers
International
(Europe)
Total
--------------- ---------------
<PAGE>
SCHEDULE C
Subsidiaries
- ------------
EXHIBIT 1.(c)
2/23/95
__________ Shares
TYCO INTERNATIONAL LTD.
(a Massachusetts corporation)
Common Stock
(Par Value $.50 Per Share)
INTERSYNDICATE AGREEMENT
------------------------
Agreement, dated February 23, 1995, among (A) Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch
(NY)"), Goldman, Sachs & Co., Donaldson Lufkin & Jenrette
Securities Corporation and Lehman Brothers Inc. (together, the
"U.S. Representatives") for the U.S. Underwriters (the "U.S.
Underwriters") listed in Schedule B to the U.S. Purchase
Agreement (the "U.S. Purchase Agreement"), dated February 23,
1995, with Tyco International Ltd., a Massachusetts corporation
(the "Company") and each of the Stockholders of the Company
listed in Schedule A to the U.S. Purchase Agreement
(collectively, the "Selling Securityholders") and (B) Merrill
Lynch International Limited ("MLI"), Goldman Sachs International,
Donaldson Lufkin & Jenrette Securities Corporation and Lehman
Brothers International (Europe) (together, the "Lead Managers")
for the Managers (the "Managers") listed in Schedule B to the
International Purchase Agreement (the "International Purchase
Agreement"), dated February 23, 1995, with the Company and the
Selling Securityholders. The U.S. Purchase Agreement and the
International Purchase Agreement are together referred to herein
as the "Purchase Agreements." Terms not defined herein are used
as defined in the Purchase Agreements referred to above.
The U.S. Underwriters, pursuant to the U.S. Purchase
Agreement, have agreed to purchase the U.S. Purchased Shares,
U.S. Warrants and U.S. Reallocation Rights and have been granted
an option by the Selling Securityholders to purchase the U.S.
Underwriters' pro rata portion of the U.S. Option Shares to cover
over-allotments, and the Managers, pursuant to the International
Purchase Agreement, have agreed to purchase the International
Purchased Shares, International Warrants and International
Reallocation Rights and have been granted an option by the
Selling Securityholders to purchase the Managers' pro rata
portion of the International Option Shares to cover over-
allotments. In connection with the foregoing, the U.S.
Underwriters and the Managers deem it necessary and advisable
that certain of the activities of the U.S. Underwriters and the
Managers be coordinated pursuant to this Agreement.
<PAGE>
1. The U.S. Underwriters, acting through the U.S.
Representatives and the Managers, acting through the Lead
Managers, agree that they will consult each other as to the
availability of the U.S. Purchased Shares, the shares of Common
Stock issuable upon exercise of the U.S. Warrants or the shares of
Common Stock acquirable upon exercise of the U.S. Reallocation
Rights, pursuant to the U.S. Purchase Agreement (collectively, the
"Initial U.S. Shares") and the U.S. Option Shares (the Initial
U.S. Shares and the U.S. Option Shares are collectively
hereinafter called the "U.S. Shares") and as to the availability
of the International Purchased Shares, the shares of Common Stock
issuable upon exercise of the International Warrants or the shares
of Common Stock acquirable upon exercise of the International
Reallocation Rights (collectively, the "Initial International
Shares") and the International Option Shares (the Initial
International Shares and the International Option Shares are
collectively hereinafter called the "International Shares"),
pursuant to the International Purchase Agreement, in either case,
from time to time until the termination of the selling
restrictions applicable to the respective offerings by the U.S.
Representatives and the Lead Managers. Based upon information
received from the Managers and the U.S. Underwriters,
respectively, MLI on behalf of the Managers agrees to advise the
U.S. Representatives and Merrill Lynch (NY) on behalf of the U.S.
Underwriters agrees to advise the Lead Managers from time to time
upon request during the consultation period contemplated above, of
the respective number of securities purchased pursuant to the
International Purchase Agreement and securities purchased pursuant
to the U.S. Purchase Agreement remaining unsold. From time to
time as mutually agreed upon between MLI on behalf of the Managers
and Merrill Lynch (NY) on behalf of the U.S. Underwriters, (a) MLI
on behalf of the Managers will sell for the account of one or more
Managers to Merrill Lynch (NY) on behalf of the U.S. Underwriters,
for the account of one or more U.S. Underwriters, such number of
International Shares (or the underlying securities exercisable
into such International Shares) purchased pursuant to the
International Purchase Agreement and remaining unsold; and (b)
Merrill Lynch (NY) on behalf of the U.S. Underwriters will sell
for the account of one or more U.S. Underwriters to MLI on behalf
of the Managers, for the account of one or more Managers, such
number of U.S. Shares (or the underlying securities exercisable
into such U.S. Shares) purchased pursuant to the U.S. Purchase
Agreement and remaining unsold.
Unless otherwise determined by mutual agreement of the
U.S. Representatives and the Lead Managers, (a) the price of any
shares of Common Stock so sold shall be the initial public
offering price less the selling concession in each case as set
forth in the U.S. Prospectus and (b) the price of any Warrants or
Reallocation Rights shall be as set forth in the Purchase
Agreements. Settlement between the U.S. Representatives and the
Lead Managers with respect to any securities transferred hereunder
at least three business days prior to the Closing Time shall be
made at Closing Time and, in the case of purchases and sales made
thereafter, as promptly as practicable but in no event later than
five business days after the transfer date. Certificates
-2-
<PAGE>
representing the Common Stock (or the underlying securities
exercisable into such Common Stock) so purchased shall be
delivered on or about the respective settlement dates. The
liability for payment to the Selling Securityholders of the
purchase price of the securities being purchased by the U.S.
Underwriters and the Managers under the Purchase Agreements shall
not be affected by the provisions of this Agreement.
Each U.S. Underwriter, acting through the U.S.
Representatives, agrees that, except for purchases and sales
pursuant to this Agreement and stabilization transactions
contemplated hereunder conducted by it, it will offer, sell or
deliver Common Stock, directly or indirectly, only to persons whom
it believes may be a United States Person or a Canadian Person (as
such terms are defined below) and persons whom it believes intend
to reoffer, resell or deliver directly or indirectly the same to a
United States Person or a Canadian Person, and any dealer to whom
such U.S. Underwriter may sell Common Stock will agree that it
will only offer, resell or deliver Common Stock directly or
indirectly to persons whom such dealer believes may be a United
States Person or a Canadian Person or at a reallowance only to
other dealers who so agree.
Each Manager, acting through the Lead Managers, agrees
that, except for purchases and sales pursuant to this Agreement
and stabilization transactions contemplated hereunder, it will not
offer, sell or deliver Common Stock, directly or indirectly, to
any person whom it believes may be a United States Person or a
Canadian Person or any person whom it believes may intend to
reoffer, resell or deliver directly or indirectly the same to any
United States Person or any Canadian Person, and any dealer, bank
or broker to whom such Manager may sell Common Stock will agree
that it will not offer, resell or deliver any Common Stock
directly or indirectly to any person whom such dealer, bank or
broker believes may be a United States Person or a Canadian Person
nor at a reallowance to other dealers, bankers or brokers who do
not so agree.
For purposes of this Agreement, "United States Person"
shall mean any individual who is resident in the United States, or
any corporation, pension, profit-sharing or other trust or entity
organized under or governed by the laws of the United States or
any political subdivision thereof (other than the foreign branch
or office of any United States Person), and shall include any
United States branch of a person other than a United States
Person. "United States" shall mean the United States of America,
its territories, its possessions and all areas subject to its
jurisdiction. "Canadian Person" shall mean any individual who is
resident in Canada, or any corporation, pension, profit-sharing or
other trust or entity organized under or governed by the laws of
Canada or any political subdivision thereof (other than the
foreign branch or office of any Canadian Person), and shall
include any Canadian branch or office of a person other than a
-3-
<PAGE>
Canadian Person. "Canada" shall mean Canada, its territories, its
possessions and all areas subject to its jurisdiction.
2. All stabilization transactions shall be conducted
at the direction and subject to the control of Merrill Lynch (NY)
as hereinafter provided, so that stabilization activities
worldwide shall be coordinated and conducted in compliance with
any applicable laws and regulations. From time to time upon the
request of MLI, Merrill Lynch (NY) will inform MLI of
stabilization transactions effected pursuant to this Section.
a. The Lead Managers undertake, and agree to cause all
Managers to undertake, that in connection with the distribution of
Common Stock they will comply: with the applicable rules and
regulations of the United States National Association of Securities
Dealers, Inc.; with the prohibitions against trading by persons
interested in a distribution; and with the requirements for the filing
of all notices and reports relating thereto set forth in Rules 10b-6,
10b-7 and 17a-2 under the United States Securities Exchange Act of
1934 and the Agreement Among Managers entered into by the Managers
(the "AAM"). The Lead Managers will cause each dealer which has
agreed to participate or is participating in the distribution to
give a similar undertaking.
b.
Merrill Lynch (NY) shall have sole responsibility with respect to
any action which they may take to make over-allotments in
arranging for sales of U.S. Option Shares and International Option
Shares and shall have direction and control of any action taken
for stabilizing the market price of the Common Stock, whether in
the United States or on European stock exchanges or otherwise.
All stabilization transactions by Merrill Lynch (NY) shall be for
the respective accounts of the several U.S. Underwriters and
Managers in the proportions set forth in Section 4 hereof. The
net commitment for long or short accounts of the U.S. Underwriters
or the Managers pursuant to such stabilization transactions shall
not exceed the number of U.S. Option Shares or International
Option Shares, as the case may be. The exercise by the U.S.
Underwriters and the Managers of their respective options to
purchase U.S. Option Shares and International Option Shares shall
be at the direction of Merrill Lynch (NY).
3. Merrill Lynch (NY) and MLI shall consult with each
other as to the reservations for sale of the International Shares
made under the AAM, and upon reaching agreement with respect
thereto, MLI shall reserve for sale and sell to the U.S.
Underwriters, dealers, bankers, brokers and others indicated by
Merrill Lynch (NY), for the account of the respective Managers,
International Shares to be purchased by such Managers, in the
manner and at the price contemplated by Section 1 hereof.
4. The U.S. Representatives and the Lead Managers
shall agree as to the expenses which will constitute expenses of
-4-
<PAGE>
the underwriting and distribution of the Common Stock to the U.S.
Underwriters and the Managers, which expenses, as well as any
stabilizing profits or losses, shall be allocated among the U.S.
Underwriters and the Managers in the same proportion as the number
of U.S. Shares (including shares of Common Stock issuable upon
exercise of acquired warrants or reallocation rights) purchased
under the U.S. Purchase Agreement, and the number of International
Shares (including shares of Common Stock issuable upon exercise of
acquired Warrants or Reallocation Rights) purchased under the
International Purchase Agreement bear to the aggregate number of
shares of Common Stock purchased under the Purchase Agreements.
Except with respect to such common expenses, the Managers will pay
the aggregate expenses incurred in connection with the purchase,
carrying or sale of the International Shares purchased by the
Managers from the Selling Securityholders and the U.S.
Underwriters will pay the aggregate expenses incurred in
connection with the purchase, carrying or sale of the U.S. Shares
purchased by the U.S. Underwriters from the Selling
Securityholders.
5. The U.S. Representatives and the Lead Managers
agree that:
a. if the Closing Time is not on the day provided
in the Purchase Agreements, the U.S. Representatives and the Lead
Managers will mutually agree on a postponed date within the time
permitted by the Purchase Agreements and the settlement dates
herein provided shall be adjusted accordingly;
b. changes in the offering price to the public or
in the concession and reallowance to dealers, bankers or brokers
will be made only after consultation, but in accordance with the
direction of the U.S. Representatives, during the consultation
period specified in the first sentence of Section 1 hereof;
c. the U.S. Representatives and the Lead Managers
will each keep the other fully informed of the progress of the
offering and distribution of the Common Stock;
d. the Lead Managers agree that they will cause
the termination of the AAM at such time as the U.S.
Representatives shall determine; and
e. advertising with respect to the offering shall
be as mutually agreed upon by the U.S. Representatives and the
Lead Managers.
6. This Agreement may be amended prior to the Closing
Time by mutual written consent.
7. This Agreement may be signed in various
counterparts, which together shall constitute one and the same
instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as
of the date and year first above written.
Acting on behalf of themselves and the other U.S.
Underwriters:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: ______________________________________
Acting on behalf of themselves and the other Managers:
Merrill Lynch International Limited
Goldman Sachs International
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers International (Europe)
By: Merrill Lynch International Limited
By: ______________________________________
-6-
Exhibit 5
February 23, 1995
Tyco International Ltd.
One Tyco Park
Exeter, New Hampshire 03833
Dear Sirs:
I am General Counsel of Tyco International Ltd., a Massachusetts corporation
(the "Company"). I refer to the registration statement on Form S-3 (File No.
33-57509; the "Registration Statement") filed by the Company with the Securities
and Exchange Commission (the "Commission"), relating to the offering of a
maximum of 8,700,000 shares (the "Shares") of the Company's common stock par
value $.50 per share (the "Common Stock") in connection with underwritten public
offerings inside the United States and Canada and outside the United States and
Canada (the "Offerings") pursuant to the Registration Statement. The Shares
include shares (the "Warrant Shares") of Common Stock issuable upon exercise of
Warrants to be purchased by the Underwriters (the "Underwriters") from the
holders of such Warrants and shares (the "Reallocated Shares") of Common Stock
deliverable upon exercise of Reallocation Rights to be purchased by the
Underwriters from the holders of such Reallocation Rights. Capitalized terms
used without definition have the meanings assigned to them in the Registration
Statement.
I have reviewed such documents and records as I have deemed necessary to enable
me to express an opinion on the matters covered hereby, and I have also examined
and relied upon representations, statements or certificates of public officials
and officers and representatives of the Company.
Based on the foregoing, I am of the opinion that the Shares, when sold as
described in the Registration Statement, including, in the case of the Warrant
Shares, the prior issuance thereof upon exercise of the respective Warrants in
accordance with their terms, and, in the case of the Reallocated Shares, the
prior delivery thereof upon exercise of the respective Reallocation Rights in
accordance with their terms, will be legally issued, fully paid and non-
assessable.
I am an attorney admitted to practice in the Commonwealth of Massachusetts and
the State of New York. I express no opinion concerning the laws of any
jurisdiction other than the laws of the United States of America, the
Commonwealth of Massachusetts and the State of New York.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Validity of Shares" in
the Prospectus included in the Registration Statement. In giving this consent,
I do not thereby admit that I am within the category of persons whose consent is
<PAGE>
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Commission thereunder.
I am delivering this opinion to the Company, and no person other than the
Company may rely on it.
Very truly yours,
/s/ M. Brian Moroze
- -------------------
General Counsel
EXHIBIT 23.(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Pre-Effective Amendment No. 2 to the
registration statement on Form S-3 of
(a) our report dated December 22, 1994 on our audit of the consolidated
financial statements of Tyco International Ltd. which report is included on page
F-2.
(b) our report dated August 1, 1994 on our audit of the consolidated
financial statements of Tyco International Ltd. which report is included in Form
10-K for the year ended June 30, 1994 incorporated by reference in this Form
S-3.
(c) our report dated August 1, 1994 on our audit of the consolidated
financial statements of Tyco International Ltd. for the year ended June 30, 1994
which report is included in Form 8-K dated August 17, 1994 and Form 8-K/A dated
September 19, 1994 incorporated by reference in this Form S-3.
(d) our report dated January 28, 1993 on our audit of the consolidated
financial statements of Kendall International, Inc. for the year ended December
31, 1993, the six month periods ended December 31, 1992 and June 30, 1992 and
the year ended December 31, 1991 which report is included in Form 8-K dated
October 28, 1994 and Forms 8-K/A dated November 1, 1994 and November 2, 1994
incorporated herein by reference.
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 23, 1995
EXHIBIT 23.(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Pre-Effective Amendment No. 2 to the Registration
Statement on Form S-3 of our reports dated August 3, 1993 appearing on pages 7
and 32 of the Current Report on Form 8-K of Tyco International Ltd. dated
January 10, 1995. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 23, 1995
