<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 2, 1997
0-16979
(Commission File Number)
------------------------
TYCO INTERNATIONAL LTD.
(FORMERLY ADT LIMITED)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA NOT APPLICABLE
(Jurisdiction of Incorporation) (IRS Employer
Identification Number)
</TABLE>
CEDAR HOUSE, 41 CEDAR AVENUE, HAMILTON HM12, BERMUDA
(Address of registrant's principal executive office)
(441) 295-2244*
(Registrant's telephone number)
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* The executive offices of the subsidiary of the registrant which supervises the
registrant's North American activities are at One Tyco Place, Exeter, New
Hampshire 03833. The telephone number there is (603) 778-9700.
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ITEM 2. OTHER EVENTS
On July 2, 1997, Tyco International Ltd., a Massachusetts corporation ("Old
Tyco"), merged with a subsidiary of Tyco International Ltd. (formerly ADT
Limited), a Bermuda company limited by shares (the "Company"). As a result of
the merger, shareholders of Old Tyco received one share of the Company for each
share of Old Tyco stock held (approximately 168.4 million shares in the
aggregate) and Old Tyco became a wholly-owned subsidiary of the Company. In
addition, in connection with the merger and pursuant to action taken by the
Company's shareholders on July 2, 1997, pre-merger shareholders of the Company
received 0.48133 shares of the Company for each pre-merger share of the Company
held and the Company changed its name to Tyco International Ltd.
The supplemental consolidated financial statements filed herewith have been
prepared accounting for the merger using the pooling of interests method of
accounting. Upon publication of the Company's financial statements for a period
which includes July 2, 1997, these supplemental consolidated financial
statements will become the historical financial statements of the Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
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<C> <S>
3.1 Bye-Laws of Tyco International Ltd. (incorporating all amendments to 2nd July, 1997)
3.2 Certificate of Incorporation on Change of Name dated 2nd July, 1997.
23.1 Consent of Coopers & Lybrand.
23.2 Consent of Coopers & Lybrand L.L.P.
99.1 Supplemental Consolidated Financial Statements of Tyco International Ltd. at December
31, 1996 and 1995 and for the three years in the period ended December 31, 1996 and
Reports of Independent Accountants thereon.
99.2 Schedule II - Valuation and Qualifying Accounts for Tyco International Ltd.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TYCO INTERNATIONAL LTD.
/S/ MARK H. SWARTZ
By: ................................
MARK H. SWARTZ
VICE PRESIDENT -- CHIEF FINANCIAL
OFFICER
Date: July 10, 1997
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT
NUMBER TITLE PAGE
- ------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
3.1 Bye-Laws of Tyco International Ltd. (incorporating all amendments to 2nd
July, 1997)..................................................................
3.2 Certificate of Incorporation on Change of Name dated 2nd July, 1997..........
23.1 Consent of Coopers & Lybrand.................................................
23.2 Consent of Coopers & Lybrand L.L.P...........................................
99.1 Supplemental Consolidated Financial Statements of Tyco International Ltd. at
December 31, 1996 and 1995 and for the three years in the period ended
December 31, 1996 and Reports of Independent Accountants thereon.............
99.2 Schedule II - Valuation and Qualifying Accounts for Tyco International
Ltd..........................................................................
</TABLE>
<PAGE> 1
BYE-LAWS
OF
TYCO INTERNATIONAL LTD.
(incorporating all amendments to 2nd July, 1997)
1. INTERPRETATION
In these Bye-Laws, unless there is something in the subject or context
inconsistent therewith:-
"The Companies Acts" means every Bermuda statute from time to time in
force concerning companies insofar as the same applies to the Company.
"The Company" means ADT Limited.
"The Directors" means the Directors for the time being of the Company.
"Dividend" includes bonus.
"Member" means a person or body corporate registered in the Register as
the holder of shares in the Company.
"Month" means calendar month.
"Notice" means written notice unless otherwise specifically stated.
"Paid up" includes credited as paid up.
"The Register" means the Register of Members and includes any branch or
sub-register.
"The Registrar" means any person appointed to perform the duties of
Registrar and if no such person shall be appointed means the Secretary.
"The Seal" means the Common Seal of the Company or any Overseas Seal or
any Securities Seal.
"Secretary" means the person appointed to perform the duties of the
Secretary of the Company and includes any Assistant or Acting
Secretary.
"Signed" includes a signature or reproduction of a signature affixed by
mechanical means and cognate expressions shall be construed
accordingly.
"Subsidiary" means any company or other legal entity which is for the
time being controlled by the Company. For the purposes of this
definition, control includes the right or power of the Company, whether
directly or through some other company or legal entity which is so
controlled:-
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2
(i) to receive more than one-half of all distributions, whether of
capital or revenue, at any time made by the Company or entity;
or
(ii) to cast more than one-half of all the votes capable of being
cast at any general meeting of such company or entity (but
excluding any votes which are only exercisable upon the
occurrence of any contingency); or
(iii) to control the composition of the Board of Directors, Board of
Management or equivalent executive body (or, if there is more
than one such Board or body, any one of them) of, or otherwise
to direct the management or policies of, such company or
entity.
"In writing" and "written" include printing, lithography, photography
and other modes of representing or reproducing words in visible form.
"May" shall be construed as permissive.
"Shall" shall be construed as imperative.
References in these Bye-Laws to shares or other securities being listed
on a stock exchange shall include their being quoted or publicly traded
on a stock exchange or other securities market, unless the context
otherwise requires.
References in these Bye-Laws to any statute or statutory provision
shall include any statute or statutory provision which amends, extends,
consolidates or replaces the same, or which has been amended, extended,
consolidated or replaced by the same, and shall include any orders,
regulations, instruments or other subordinate legislation made under
the relevant statute.
Words importing the singular number only include the plural number and
vice versa.
Words importing the masculine gender only include the feminine and
neuter genders respectively.
Words importing persons include companies or associations or bodies of
persons, whether corporate or un-incorporate.
SHARE CAPITAL AND VARIATION OF RIGHTS
2. SHARE CAPITAL(4)
The authorised share capital of the Company shall be in the amount and
divided into the classes and having the rights set out in the Schedule
to these Bye-Laws (as amended from time to time), which shall be
deemed to be incorporated in and form part of this Bye-Law 2.
3. ALTERATION OF RIGHTS
If at any time the share capital is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by
the terms of issue of the shares of that class) may, whether or not the
Company is being wound up, be varied with the consent in writing of the
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(4) This Bye-Law was substituted for the previous Bye-Law 2 by Resolution
passed on 8th September, 1987.
<PAGE> 3
3
holders of three-fourths of the issued shares of that class, or with
the sanction of a resolution passed at a separate General Meeting of
the holders of the shares of that class by a majority of three-fourths
of such holders voting in person or by proxy. To any such separate
General Meeting, all the provisions of these Bye-Laws as to Special
General Meetings shall mutatis mutandis apply but so that:-
(a) the necessary quorum shall be three or more persons holding or
representing by proxy not less than one-third of the issued
shares of the class;
(b) every holder of shares of the class shall be entitled on a
poll to one vote for every share of such class held by him;
(c) any holder of shares of the class present in person or by
proxy may demand a poll; and
(d) at any adjourned meeting two holders of the shares of the
class present in person or by proxy (whatever the number of
shares held by them) shall be a quorum.
4. EFFECT OF ISSUING SHARES RANKING PARI PASSU WITH EXISTING SHARES
The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall not, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed
to be varied by the creation or issue of further shares ranking pari
passu therewith.
4A. ISSUE AND PURCHASE OF OWN SHARES
(1) Subject to the rights conferred upon the holders of any class of
shares, the Directors may exercise the powers of the Company to
purchase its own shares and to allot, grant options over or otherwise
dispose of shares which the Directors have been authorised to allot and
issue by the Company in General Meeting upon such terms and subject to
such conditions as they think fit.
(2) The Directors of the Company may, subject to the provisions of the
Companies Acts, at any time exercise the power of the Company to
purchase its own shares conferred by paragraph (1) of this Bye-Law up
to the maximum nominal amount of share capital authorised by resolution
of the Company in General Meeting from time to time. The Directors are
hereby authorised pursuant to Section 42A of The Companies Act 1981 of
Bermuda to take all steps required to effect any such purchase.
4B. REDEEMABLE PREFERENCE SHARES
The terms and manner of redemption of any redeemable preference shares
of the Company shall be either (a) as the Company may in General
Meeting determine or (b) in the event that the Company in General
Meeting may have so authorised, as the Directors or any committee
thereof may by resolution determine before the allotment of such
shares, such resolution to be attached as an appendix to these
Bye-Laws.
5. TRUSTS NOT RECOGNISED
Save as herein otherwise provided, the Company shall be entitled to
treat the registered holder of any share as the absolute owner thereof,
and accordingly shall not, except as by statute
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4
required, be bound to recognise any equitable or other claim or
interest in such share on the part of any other person.
5A. RENUNCIATION ON ALLOTMENT
The Directors may at any time after the allotment of any share but
before any person has been entered in the Register of Members as the
holder recognise a renunciation thereof by the allottee in favour of
some other person and may accord to any allottee of a share a right to
effect such renunciation upon and subject to such terms and conditions
as the Directors may think fit to impose.
6. RECEIPTS IN THE CASE OF JOINT HOLDERS
If two or more persons are registered as joint holders of any shares,
then any one of such joint holders may give effectual receipts for
dividends or other monies payable in respect of the shares held by them
as joint holders.
7. CERTIFICATES
Subject to the Companies Acts and to the conditions of issue of any
share or class of shares, every Member shall be entitled to a
certificate under the Seal specifying the shares held by him and
whether the same are fully paid up and, if not, how much has been paid
thereon provided that no certificate shall be issued to any Member who
is designated as a nominee of an internationally recognised stock
exchange unless such Member shall specifically request the Company to
issue the same or to any Member whose shares are of a category
designated by the Directors as being uncertificated. No certificate
shall be issued representing shares of more than one class.
8. NEW CERTIFICATES
If any share certificate be worn out or defaced, then, upon production
thereof to the Registrar, and on such reasonable indemnity as the
Directors deem adequate being given, they shall order the same to be
cancelled and shall issue a new certificate in lieu thereof without
charge. If any such certificate be lost or destroyed, then upon proof
thereof to the satisfaction of the Directors, and on such reasonable
indemnity as the Directors deem adequate being given, a new certificate
in lieu thereof shall be issued without charge. Subject as provided in
Bye-Law 7, a Member who has transferred part of the shares comprised in
his registered holding shall be entitled to a certificate for the
balance without charge. Any two or more certificates representing
shares of any one class held by any Member may at his request be
cancelled and a single new certificate for such shares issued in lieu
without charge. In the case of shares held jointly by several persons
any such request may be made by any one of the joint holders.
9. DELIVERY OF CERTIFICATES
The certificate for shares registered in the names of two or more
persons shall, unless otherwise directed by them in writing delivered
to the Secretary, be delivered to the person first named on the
Register.
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5
LIEN
10. COMPANY'S LIEN
The Company shall have a lien on every share (not being a fully paid
share) for all monies (whether presently payable or not) called or
payable at a fixed time in respect of that share, and the Company shall
also have a lien on all shares (other than fully paid shares) standing
registered in the name of a single person, for all monies presently
payable by him or his estate to the Company; but the Directors may at
any time declare any share to be wholly or in part exempt from the
provisions of this Bye-Law. The Company's lien, if any, on a share
shall extend to all dividends payable thereon.
10A. TAXATION
Whenever any law for the time being of any country, state or place
imposes or purports to impose any immediate or future or possible
liability upon the Company to make any payment or empowers any
government or taxing authority or government official to require the
Company to make any payment in respect of any shares registered in any
of the Company's registers as held either jointly or solely by any
Member or in respect of any dividends, bonuses or other monies due or
payable or accruing due or which may become due or payable to such
Member by the Company on or in respect of any shares registered as
aforesaid or for or on account or in respect of any Member and whether
in consequence of:-
(a) the death of such Member;
(b) the non-payment of any income tax or other tax by such Member;
(c) the non-payment of any estate, probate, succession, death,
stamp, or other duty by the executor or administrator of such
Member or by or out of his estate;
(d) any other act or thing;
in every such case (except to the extent that the rights conferred upon
holders of any class of shares render the Company liable to make
additional payments in respect of sums withheld on account of the
foregoing):-
(i) the Company shall be fully indemnified by such Member or his
executor or administrator from all liability;
(ii) the Company shall have a lien upon all dividends and other
monies payable in respect of the shares registered in any of
the Company's registers as held either jointly or solely by
such Member for all monies paid or payable by the Company in
respect of such shares or in respect of any dividends or other
monies as aforesaid thereon or for or on account or in respect
of such Member under or in consequence of any such law
together with interest at the rate of fifteen per cent. per
annum thereon from date of payment to date of repayment and
may deduct or set off against such dividends or other monies
payable as aforesaid any monies paid or payable by the Company
as aforesaid together with interest as aforesaid;
(iii) the Company may recover as a debt due from such Member or his
executor or administrator wherever constituted any monies paid
by the Company under or in
<PAGE> 6
6
consequence of any such law and interest thereon at the rate
and for the period aforesaid in excess of any dividends or
other monies as aforesaid then due or payable by the Company;
(iv) the Company may if any such money is paid or payable by it
under any such law as aforesaid refuse to register a transfer
of any shares by any such Member or his executor or
administrator until such money and interest as aforesaid is
set off or deducted as aforesaid or in case the same exceeds
the amount of any such dividends or other monies as aforesaid
then due or payable by the Company until such excess is paid
to the Company.
Subject to the rights conferred upon the holders of any class of shares
nothing herein contained shall prejudice or affect any right or remedy
which any law may confer or purport to confer on the Company and as
between the Company and every such Member as aforesaid, his executor,
administrator and estate wheresoever constituted or situate, any right
or remedy which such law shall confer or purport to confer on the
Company shall be enforceable by the Company.
11. POWER OF SALE
The Company may sell, in such manner as the Directors may think fit,
any shares on which the Company has a lien, but no sale shall be made
unless some sum in respect of which the lien exists, is presently
payable, nor until the expiration of fourteen days after a notice
stating and demanding payment of such part of the amount in respect of
which the lien exists as is presently payable, has been given to the
registered holder for the time being of the shares, or the person
entitled thereto by reason of his death or bankruptcy.
12. TRANSFER ON SALE UNDER LIEN
To give effect to such sale the Directors may authorise some person to
transfer the shares sold to the purchaser thereof. The purchaser shall
be registered as the holder of the shares comprised in such transfer,
and he shall not be bound to see to the application of the purchase
money, nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings in reference to the sale.
13. APPLICATION OF PROCEEDS OF SALE
The net proceeds of the sale after payment of the costs of such sale
shall be received by the Company and applied in payment of such part of
the amount in respect of which the lien exists as is presently payable
and the residue, if any, shall (subject to a like lien for sums not
presently payable as existed upon the shares before sale) be paid to
the persons entitled to the shares at the date of the sale.
CALLS ON SHARES
14. CALLS
The Directors may from time to time make calls upon the Members in
respect of any monies unpaid on their shares and not by the conditions
of the allotment thereof made payable at fixed times. A call may be
revoked or postponed as the Directors may determine.
<PAGE> 7
7
15. WHEN CALLS DEEMED TO BE MADE
A call shall be deemed to have been made at the time when the
resolution of the Directors authorising the call was passed and may be
required to be paid by instalments.
16. INTEREST ON CALLS
If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is due
shall pay interest on the sum from the day appointed for payment
thereof to the time of actual payment at such rate not exceeding
fifteen per cent. per annum as the Directors may determine, but the
Directors shall be at liberty to waive payment of such interest wholly
or in part.
17. SUMS PAYABLE ON ALLOTMENT DEEMED TO BE CALLS
Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date shall for the purposes of these Bye-Laws
be deemed to be a call duly made and payable on the date on which by
the terms of issue the same becomes payable, and in case of non-payment
all the relevant provisions of these Bye-Laws as to payment of interest
and expenses, forfeiture or otherwise shall apply as if such sum had
become payable by virtue of a call duly made and notified.
18. DIFFERENTIATION BETWEEN MEMBERS
The Directors may, on the issue of shares, differentiate between the
holders as to the amount of calls to be paid and the times of payment.
19. PAYMENT IN ADVANCE
The Directors may, if they think fit, receive from any Member willing
to advance the same, all or any part of the monies uncalled and unpaid
upon any shares held by him, and upon all or any of the monies so
advanced may pay interest at such rate not exceeding fifteen per cent.
per annum as may be agreed between the Directors and the Member paying
such sum in advance.
20. LIABILITY OF JOINT HOLDERS
The joint holders of any share shall be jointly and severally liable to
pay all calls in respect thereof.
REGISTRATION OF MEMBERS
21. REGISTRATION OF MEMBERS
The Directors shall cause to be entered in the Register the particulars
required by law and the Register shall be kept in such manner as to
show at all times the Members for the time being and the shares
respectively held by them. The Register shall be open for inspection at
the office of the Registrar between 10.00 a.m. and 12.00 noon on every
working day.
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8
TRANSFER AND TRANSMISSION OF SHARES
22. EXECUTION OF TRANSFER
Subject to the Companies Acts and these Bye-Laws, a share may be
transferred in any manner which the Directors may approve. The
Directors may require a transfer to be effected by an instrument signed
by the transferor and, in the case of a partly paid share, also by the
transferee. The transferor shall be deemed to remain the holder of such
share until the name of the transferee is entered in the Register in
respect thereof.
23. FORM OF TRANSFER
The instrument of transfer shall be in writing and in the usual common
form or in any other form which the Directors may approve. The
instrument of transfer may be on the back of the share certificate.
24. IN WHAT CASES DIRECTORS MAY DECLINE TO REGISTER TRANSFERS
(1) The Directors may decline to register any transfer of shares upon which
the Company has a lien, and in the case of shares not fully paid up,
may refuse to register or transfer to a transferee of whom they do not
approve.
(2) The Directors may decline to register any transfer of shares by a
transferor or to a transferee on whom the Company has duly served a
notice under Bye-Law 46 or under Bye-Law 104 (not being a transfer in
compliance with such notice) during a period of suspension of voting
and other rights in respect of such shares under Bye-Law 46.
25. TRANSFER TO BE LEFT AT OFFICE AND EVIDENCE TO BE GIVEN
Unless otherwise determined by the Directors, either generally or in
such cases as they may specify, every instrument of transfer shall be
left at the office of the Registrar for registration, accompanied by
the certificate of the shares to be transferred, and such other
evidence as the Registrar may require to prove the title of the
transferor, or his right to transfer the shares.
26. JOINT HOLDERS
Without prejudice to the generality of the provisions of Bye-Law 24,
the Directors may refuse to register any transfer of shares (whether
fully paid or not) in favour of more than four persons jointly.
27. NOTICE OF REFUSAL
If the Directors refuse to register a transfer they shall within two
months after the date on which the transfer was lodged with the Company
send to the transferee a notice of refusal.
28. RECOGNITION OF LEGAL PERSONAL REPRESENTATIVES OF DECEASED MEMBER
In the case of the death of a Member the survivor or survivors where
the deceased was a joint holder, and the legal personal representatives
of the deceased where he was a sole holder shall be the only persons
recognised by the Company as having any title to his interest in the
shares;
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9
but nothing in this Bye-Law contained shall release the estate of a
deceased joint holder from any liability in respect of any share which
had been jointly held by him with any other person.
29. RIGHTS ON DEATH
Any person becoming entitled to shares in consequence of the death of a
Member, upon producing such evidence as the Directors may deem
sufficient, may be registered as a Member in respect of such shares, or
may, subject to Bye-Law 24, transfer such shares to some other person
by executing an instrument of transfer in accordance with Bye-Law 23
above.
29A. DESTRUCTION OF RECORDS
The Company shall be entitled to destroy all instruments of transfer
which have been registered at any time after the expiration of six
years from the date of registration thereof and all dividend mandates
and notifications of change of address at any time after the expiration
of two years from the date of recording thereof and all share
certificates which have been cancelled at any time after the expiration
of one year from the date of the cancellation thereof and it shall
conclusively be presumed in favour of the Company that every entry in
the Register purporting to have been made on the basis of an instrument
of transfer or other document so destroyed was duly and properly made
and every instrument of transfer so destroyed was a valid and effective
certificate duly and properly cancelled and every other document
hereinbefore mentioned so destroyed was a valid and effective document
in accordance with the recorded particulars thereof in the books or
records of the Company.
Provided always that:-
(a) the provisions aforesaid shall apply only to the destruction
of a document in good faith and without notice of any claim
(regardless of the parties thereto) to which the document
might be relevant;
(b) nothing herein contained shall be construed as imposing upon
the Company any liability in respect of the destruction of any
such document earlier than as aforesaid or in any other
circumstances which would not attach to the Company in the
absence of this Bye-Law;
(c) references herein to the destruction of any document include
references to the disposal thereof in any manner.
29B. UNTRACED SHAREHOLDERS
The Company shall be entitled to sell at the best price reasonably
obtainable at the time of sale the shares of a Member or the shares to
which a person is entitled by virtue of the transmission on death or
bankruptcy if and provided that:
(i) during the period of six years prior to the date of the
publication of the advertisement referred to in paragraph (ii)
below no dividend (or cash option duly exercised in relation
to a capitalisation issue) in respect of those shares has been
claimed and all share certificates for shares issued under a
capitalisation issue or under a scrip dividend option for
which an election has duly been made have been returned to the
Company unclaimed provided that at least two payments of
dividends and/or
<PAGE> 10
10
capitalisation issues and/or scrip dividend issues have taken
place in relation to the shares in question during such six
year period; and
(ii) the Company shall on expiry of the said period of six years
have inserted an advertisement in a newspaper circulating in
the area of the address at which service of notices upon such
Member or other person may be effected in accordance with
these Bye-Laws, giving notice of its intention to sell the
said shares; and
(iii) during the said period of six years and the period of three
months following the publication of the said advertisement the
Company shall have received indication neither of the
whereabouts nor of the existence of such Member or person; and
(iv) notice shall have been given to any stock exchange upon which
the shares in question are listed for the time being of its
intention to make such sale.
To give effect to any such sale the Company may appoint any person to
execute as transferor an instrument of transfer of the said shares and
such instrument of transfer shall be as effective as if it had been
executed by the registered holder of or person entitled by transmission
to such shares and the title of the transferee shall not be affected by
any irregularity. The net proceeds of sale shall belong to the Company
which shall be obliged to account to the former Member or other person
previously entitled as aforesaid for an amount equal to such proceeds
and shall enter the name of such former Member or other person in the
books of the Company as a creditor for such amount. No trust shall be
created in respect of the debt, no interest shall be payable in respect
of the same and the Company shall not be required to account for any
money earned on the net proceeds, which may be employed in the business
of the Company or invested in such investments as the Directors may
from time to time think fit.
FORFEITURE OF SHARES
30. IF CALL OR INSTALMENT NOT PAID NOTICE MAY BE GIVEN
If any Member fails to pay any call or instalment on or before the day
appointed for payment of the same, the Directors may at any time
thereafter, during such time as the call or instalment remains unpaid,
serve a notice on such Member requiring him to pay the same, together
with any interest that may have accrued, and all expenses that may have
been incurred by the Company by reason of such non-payment.
31. FORM OF NOTICE
The notice shall name a day (not less than fourteen days from the date
of the notice), and a place on and at which such call or instalment and
such interest and expenses as aforesaid are to be paid. The notice
shall also state that in the event of non-payment at or before the time
and at the place appointed, the shares in respect of which the call was
made or instalment is payable will be liable to be forfeited.
32. IF NOTICE NOT COMPLIED WITH, SHARES MAY BE FORFEITED
If the requisitions of any such notice as aforesaid are not complied
with, any shares in respect of which such notice has been given may, at
any time thereafter, before payment of all calls or instalments,
interest and expenses due in respect thereof, be forfeited by
resolution of the
<PAGE> 11
11
Directors to that effect. Such forfeiture shall include all dividends
declared or accruing in respect of the forfeited shares, and not
actually paid before forfeiture.
33. NOTICE OF FORFEITURE
When any shares shall have been so forfeited, notice of the resolution
shall be given to the person in whose name it stood immediately before
the forfeiture, and an entry of the forfeiture, with the date thereof,
shall forthwith be made in the Register.
34. FORFEITED SHARE TO BECOME PROPERTY OF COMPANY
Any share so forfeited shall be deemed to be the property of the
Company, and the Directors may sell, re-allot, or otherwise dispose of
the same in such manner as they think fit. A statutory declaration in
writing that the declarant is a Director or the Secretary of the
Company and that a share has been duly forfeited or surrendered or sold
to satisfy a lien of the Company on a date stated in the declaration
shall be conclusive evidence of the facts therein stated as against all
persons claiming to be entitled to the share. Such declaration and the
receipt of the Company for the consideration (if any) given for the
share on the sale, reallotment or disposal thereof together with the
share certificate delivered to a purchaser or allottee thereof shall
(subject to the execution of a transfer if the same be required)
constitute good title to the share and the person to whom the share is
sold, reallotted or disposed of shall be registered as the holder of
the share and shall not be bound to see to the application of the
purchase money (if any) nor shall his title to the share be affected by
any irregularity or invalidity in the proceedings in reference to the
forfeiture, surrender, sale, reallotment or disposal of the share.
35. POWER TO ANNUL FORFEITURE
The Directors may, at any time before any shares so forfeited shall
have been sold, re-allotted or otherwise disposed of, annul the
forfeiture thereof upon such conditions as they think fit.
36. ARREARS TO BE PAID NOTWITHSTANDING FORFEITURE
Any person whose shares have been forfeited shall, notwithstanding, be
liable to pay, and shall forthwith pay to the Company, all calls,
instalments, interest and expenses owing upon or in respect of such
shares at the time of the forfeiture, together with interest thereon
from the time of forfeiture until payment at seven per cent. per annum,
and the Directors may enforce the payment thereof if they think fit.
ALTERATION OF CAPITAL
37. CONSOLIDATION AND SUB-DIVISION OF CAPITAL
Subject to the provisions of the Companies Acts, the Company in General
Meeting may by resolution:-
(a) consolidate and divide its share capital into shares of a
larger par value than that fixed by the Company's Memorandum
of Association;
(b) sub-divide its shares into shares of a smaller par value than
that fixed by the Company's Memorandum of Association;
<PAGE> 12
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(c) cancel shares which, at the date of the passing of such
resolution have not been taken or agreed to be taken by any
person, and diminish the amount of its share capital by the
amount of the shares so cancelled.
37A. PROCEDURE ON CONSOLIDATION
Upon any consolidation of fully-paid shares into shares of larger
amount the Directors may settle any difficulty which may arise with
regard thereto and in particular may as between the holders of shares
so consolidated determine which shares are consolidated into each
consolidated share and in the case of any shares registered in the name
of one holder (or joint holders) being consolidated with shares
registered in the name of another holder (or joint holders) may make
such arrangements for the allocation, acceptance or sale of the
consolidated share and for the distribution among the persons entitled
thereto of any monies received in respect thereof as may be thought fit
and for the purpose of giving effect thereto may appoint some person to
transfer the consolidated share or any fractions thereof and to receive
the purchase price thereof and any transfer executed in pursuance
thereof shall be effective and after such transfer has been registered
no person shall be entitled to question its validity.
38. INCREASE OF CAPITAL
Subject to the provisions of the Companies Acts, the Company in General
Meeting may by resolution increase its share capital to such sum as the
resolution shall prescribe.
39. REDUCTION OF CAPITAL
Subject to the provisions of the Companies Acts, the Company in General
Meeting may by resolution reduce its share capital to such sum not less
than the minimum share capital prescribed by the Company's Memorandum
of Association as the resolution shall prescribe.
MEETINGS OF THE COMPANY
40. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company shall be held once at least
in every calendar year at such place as may be designated in the notice
of meeting and a notice of such meeting shall be given by mail, telex
or cable to each Member at his address as shown in the Register, at
least five days before the meeting takes place, stating the time, date
and place and, as far as practicable, the objects of the meeting.
41. SPECIAL GENERAL MEETING
The Directors may convene a Special General Meeting of the Company at
such place as may be designated in the notice of meeting whenever in
their judgment such a meeting is necessary and such meeting shall be
convened by notice in like manner as the Annual General Meeting, at
least five days before the meeting takes place. Such notice shall state
the time, date and place, and as far as practicable, the objects of the
meeting.
42. MEETING CALLED ON REQUISITION
A Special General Meeting of the Company called on the written
requisition of Members holding at the date of the deposit of the
requisition not less than one tenth part in value of
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the paid-up capital of the Company as at the date of the deposit
carries the right of voting at General Meetings of the Company shall be
convened by notice in like manner as the Annual General Meeting.
43. QUORUM
At any General Meeting of the Company not less than two holders of
Common Shares present either in person or by proxy, shall form a quorum
for the transaction of business and if a quorum does not assemble
within half an hour after the time appointed for the meeting, the
meeting, if convened on the requisition of Members, shall be dissolved
and in any other case shall be adjourned to a future date as determined
by the Directors. The Directors shall give notice of the adjourned
meeting in such manner as they consider expedient.
44. VALIDITY OF MEETING CALLED ON SHORT NOTICE
A meeting of the Company shall, notwithstanding that it is called by
shorter notice than that specified in Bye-Laws 40 and 41, be deemed to
have been duly called if it is agreed (a) in the case of a meeting
called as the Annual General Meeting, by all the Members entitled to
attend and vote thereat and (b) in the case of any other meeting, by a
majority in number of the Members having a right to attend and vote
thereat, being a majority together holding not less than ninety-five
per cent. in nominal value of the shares giving the right to attend and
vote at the meeting.
45. POWER TO ADJOURN GENERAL MEETING(5)
The chairman of the meeting may, with the consent of the meeting, and
shall, if so directed by the meeting or (prior to or at the meeting) by
the Board of Directors (or a duly authorised committee thereof),
adjourn the meeting, from time to time and from place to place as the
chairman of the meeting shall determine (subject to any directions from
the Board of Directors or a duly authorised committee thereof).
Whenever a meeting is adjourned for more than five days, the Directors
shall give notice of the adjourned meeting in such manner as they
consider expedient. No business shall be transacted at any adjourned
meeting other than the business which might have been transacted at the
meeting from which the adjournment took place.
VOTING AT MEETINGS
46. VOTING RIGHTS
(1) Subject to any rights or restrictions attached to any class of shares,
at any meeting of the Company, each Member present in person shall be
entitled to one vote on any question to be decided on a show of hands
and each Member present in person or by proxy shall be entitled on a
poll to one vote for each share held by him.
PROVIDED THAT no Member shall be entitled (save as proxy for another
Member) to be present or vote at any meeting, either personally or by
proxy, or to exercise any privilege in relation to meetings of the
Company conferred by membership, or be reckoned in a quorum:-
- ------------------------
(5) This Bye-Law was substituted for the previous Bye-Law 45 by Resolution
passed on 2nd July, 1997.
<PAGE> 14
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(A) in respect of any share held by him (whether alone or jointly
with any other person) on which there shall not have been paid
all calls for the time being due and payable, together with
interest and expenses (if any); or
(B) in respect of any shares held by him in relation to which he
or any person appearing to be interested in such shares has
been duly served with a notice under paragraph (2) of this
Bye-Law which:-
(i) requires him or such other person to give information
to the Company in accordance with such paragraph; and
(ii) contains a statement to the effect that upon failure
to supply such information before the expiry of a
period specified in such notice (being such
reasonable period as the Directors shall determine
from the date of service of such notice) the
registered holder of such shares shall not be
entitled to vote or otherwise exercise the rights
referred to in this Bye-Law and the person on whom
such notice was served fails to supply such
information within the period so specified.
Provided that:
(a) the Company shall be entitled to serve a notice under
paragraph (2) of this Bye-Law which fulfils
sub-sub-paragraphs (i) and (ii) above on a person who
is not the registered holder of shares in the Company
only if the registered holder of the shares in
question has previously been, or is simultaneously
with the service of such a notice, served by the
Company with a notice under paragraph (2) of this
Bye-Law; and
(b) the disqualification provisions of this sub-paragraph
(B) shall take effect only upon the service on the
registered holder of the shares in question of a
notice to the effect that he has thereby become
subject to the said disqualification for so long as
the information requested pursuant to this
sub-paragraph (B) has not been supplied to the
Company and for a period of ninety days thereafter;
and
(c) for the purpose of this sub-paragraph (B) a person
shall be treated as appearing to be interested in any
shares if (after taking into account any information
supplied in response to any notice under paragraph
(2) of this Bye-Law and any other information) the
Company knows or has reasonable cause to believe that
the person in question is or may be interested in the
shares.
(C) in respect of any shares held by him in relation to which he
or any person appearing to be interested in such shares has
been duly served with a notice under Bye-Law 104 which:
(i) requires him or such other person to make an offer in
accordance with, or otherwise comply with the terms
of, such Bye-Law; and
(ii) contains a statement to the effect that upon failure
to make such an offer before the expiry of a period
specified in such notice (being not less than
twenty-eight days from the date of service of such
notice) or, having made
<PAGE> 15
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such an offer or acquired such shares in
contravention of a notice served under that Bye-Law,
otherwise fails to comply with the provisions of
Bye-Law 104 the registered holder of such shares
shall not be entitled to vote or otherwise exercise
the rights referred to in this Bye-Law and the person
on whom such notice was served fails to make such an
offer within the period so specified or fails to
remedy such non-compliance.
Provided that:-
(a) the Company shall be entitled to serve a notice under
paragraph (2) of this Bye-Law which fulfils
sub-sub-paragraphs (i) and (ii) above on a person who
is not the registered holder of shares in the Company
only if the registered holder of the shares in
question has previously been, or is, simultaneously
with the service of such a notice, served by the
Company with a notice under Bye-Law 104; and
(b) the disqualification provisions of this sub-paragraph
(C) shall take effect only upon the service on the
registered holder of the shares in question of a
notice to the effect that he has thereby become
subject to the said disqualification and shall
subsist until an offer is made in accordance with
Bye-Law 104 and such offer becomes or is declared
unconditional in all respects in accordance with its
terms.
(D) in respect of any shares in relation to which he and any
person specified in paragraph (3) of this Bye-Law has been
duly served with a notice under paragraph (3) which remains in
effect.
(2) (A) The Company may by notice in writing require any person whom
the Company knows or has reasonable cause to believe to be
interested in shares in the Company to indicate whether or not
it is the case and, where that person holds any interest in
any such shares, to give such further information as may be
required in accordance with sub-paragraph (B) below.
(B) Any such notice may require the person to whom it is addressed
to give particulars of his own present interests in shares in
the Company.
(C) The particulars referred to above include particulars of the
identity of persons interested in the shares in question and
of whether persons interested in the same shares are parties
to any agreement or arrangement relating to the exercise of
any of the rights conferred by the holding of the shares.
(D) A notice under this Bye-Law shall require any information
given in response to the notice to be given in writing within
such reasonable time as the Directors may determine and is
specified in the notice.
(E) For the purposes of this Bye-Law, a person who is interested
in a right to subscribe for or convert into shares in the
Company shall be deemed to be interested in shares in the
Company and references to interests in shares shall include
any interest whatsoever in such shares including, without
limitation, a right to control directly or indirectly the
exercise of any right conferred by the holding of shares alone
or in conjunction with a person deemed to be acting in concert
for the purposes of Bye-Law 104 and the interest
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of any person shall be deemed to include the interest of any
other person deemed to be acting in concert as aforesaid.
(F) A notice which has taken effect under this Bye-Law shall
remain in effect in accordance with its terms following a
transfer of the shares to which it relates unless and until
the Directors determine otherwise and notify the registered
holder accordingly.
(G) The right to receive payments of income or capital which
become due or payable in respect of any share during a period
of disqualification applicable to such share under this
Bye-Law shall be suspended during such period of
disqualification without any liability of the Company to the
Member for late payment or non-payment and the Company may
retain such sums for its own use and benefit during such
period of suspension and the holders of such shares may, in
the discretion of the Directors, be excluded from
participation in any further issue of shares by reference to
an existing holding of shares at a point in time during such
period of suspension. No trust shall be created in respect of
any such debt, no interest shall be payable in respect of the
same and the Company shall not be required to account for any
money earned on such amount, which may be employed in the
business of the Company or invested in such investments as the
Directors may from time to time think fit.
(3) (A) Where any person whether alone or in circumstances where for
the purposes of Bye-Law 104 he is acting in concert with other
persons acquires or has acquired interests in shares which
(including the interests of persons with whom he is acting in
concert as aforesaid) amount to three per cent. or more of the
issued share capital of any class of the Company he shall
within two days following the date on which he became aware
(or ought reasonably to have become aware) of the acquisition
of such an interest notify the Company of the existence of
such interest and shall in making such notification to the
Company also supply the particulars referred to in
sub-paragraphs (2)(B) and (2)(C) above and so long as his
interest as aforesaid amounts to three per cent. or more of
the issued share capital of any class of the Company he shall
notify the Company of any change in his interests (including
the interests of persons with whom he is acting in concert as
aforesaid) amounting to one per cent. or more of the issued
share capital of any class of the Company within two days
following the date on which he became aware (or ought
reasonably to have become aware) of such change.
(B) If any person has failed to make a notification in accordance
with sub-paragraph (3)(A) above (notwithstanding that such
notification has been made after the said period of two days)
the Directors may serve a notice on such person stating that
the registered holder of the shares in which that person is
interested shall not be entitled to vote or otherwise exercise
the rights referred to in this Bye-Law in respect of any
shares or a number of shares specified in the notice held by
that registered holder during the one hundred and eighty days
following the service of such notice provided that the
registered holder of such shares has previously been, or is
simultaneously with the service of such a notice, served with
a notice under this sub-paragraph.
(C) If the Directors resolve that they have reasonable cause to
believe that a person is or may be interested in shares of the
Company or that any such shares are or may be shares in which
any person is interested and that they have made reasonable
enquiries
<PAGE> 17
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to establish whether a person is so interested, or whether
they are such shares, as the case may be, such person shall
for the purposes of this Bye-Law be deemed to be interested in
shares or, as the case may be, such shares shall be deemed to
be shares in which such person is interested, from the date of
such resolution until any such time as the Directors resolve
otherwise.
(D) Any belief, resolution or decision of the Directors which is
held or made in pursuance or purported pursuance of any of the
provisions of this Bye-Law shall be conclusive, final and
binding on all persons concerned, and the validity of any act
or thing which is done or caused to be done by the Directors
in pursuance or purported pursuance of any of such provisions
shall not be capable of being impeached by anyone on the
ground that there was not any basis or reasonable basis on
which the Directors could have arrived at any such belief or
made any such resolution or decision, or on the ground that
any conclusion of fact on which the Directors relied or might
have relied for the purposes of arriving at any such belief or
making any such resolution or decision was incorrect, or on
any other ground whatsoever.
(E) In calculating the number of days allowed for any notification
to be made under this Bye-Law 46(3), any day which is a
Saturday or Sunday shall be disregarded.
47. JOINT HOLDERS
When there are joint holders of any shares any one of such persons may
exercise such voting rights as may attach to such shares, either
personally or by proxy, as if he were solely entitled thereto; and if
more than one of such joint holders be present at any General Meeting,
personally or by proxy, that one of the said persons whose name stands
first on the Register in respect of such shares shall alone be entitled
to exercise the voting rights in respect thereof. Several executors or
administrators of a deceased Member in whose name any share stands
shall for the purposes of this Bye-Law be deemed joint holders thereof.
48. INSTRUMENT APPOINTING PROXY TO BE IN WRITING
(1) The instrument appointing a proxy shall be in writing under the hand of
the appointer or of his attorney, or, if such appointer is a company,
either under the hand of any duly appointed director or officer of such
company or under its common seal. The instrument appointing a proxy
shall be in any usual or common form or any other form which the
Directors shall from time to time approve or accept. No person shall be
appointed a proxy who is not a Member.
(2) The provisions of paragraph (1) of this Bye-Law 48 are in addition to
and not in derogation of any other statutory or other provision
enabling a company (wherever incorporated) which is a Member in this
Company to authorise a person to act as its representative at a meeting
of the Members of this Company.
49. DELIVERY OF PROXY
An instrument either appointing a proxy or evidencing an authorisation
made in the manner referred to in paragraph (2) of Bye-Law 48 shall be
left with the Registrar (or such other person or persons as may be
stated in the form of proxy circulated with the notice of meeting) not
less than 24 hours, or such shorter time as may be stated in the form
of proxy circulated with the notice of the meeting, before the holding
of the meeting or adjourned meeting, as the case may be, at which the
person named in such instrument proposes to vote.
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50. METHOD OF DETERMINING QUESTIONS
(1) Subject to the provisions of paragraph (3) of this Bye-Law 50, any
question proposed for consideration of the Members at any meeting shall
be decided on a show of hands and in such case, but subject to Bye-Law
46, every Member present in person at such meeting shall be entitled to
one vote and shall cast such vote by raising his hand.
(2) At any meeting of the Members a declaration by the chairman that a
question proposed for consideration has, on a show of hands, been
carried, or carried unanimously or by a particular majority or lost
then, an entry to that effect in the minute book shall, subject to the
provisions of paragraph (3) of this Bye-Law 50, be conclusive evidence
of that fact without proof of the number or proportion of the votes
recorded in favour or against such question.
(3) Notwithstanding the provisions of paragraph (1) of this Bye-Law 50 but
subject to Bye-Law 46, at any General Meeting of the Company it shall
be lawful, in respect of any question proposed for consideration of
the Members (whether before or on the declaration of a show of hands
as provided for in paragraph (2) of this Bye-Law 50) for a poll to be
demanded by any of the following persons:-
(a) the Chairman of such meeting; or
(b) at least three Members present in person or represented by
proxy; or
(c) any Member or Members present in person or represented by
proxy holding shares in the Company conferring the right to
vote at such meeting, being shares on which an aggregate sum
has been paid up equal to not less than one-tenth of the total
sum paid up on all such shares conferring such rights.
51. VOTING ON POLL
Where a poll has been demanded, such poll shall be taken in the manner
provided by the Companies Acts.
DIRECTORS
52. NUMBER AND APPOINTMENT OF DIRECTORS
(A) The number of Directors shall be such number not less than two as the
Company in General Meeting may from time to time determine.
(B) No person other than a Director retiring at the meeting shall, unless
recommended by the Directors, be eligible for election to the office of
Director at any general meeting unless, not less than six and not more
than twenty-eight clear days before the day appointed for the meeting,
there has been given to the Secretary notice in writing by some Member
(not being the person to be proposed) entitled to attend and vote at
the meeting for which such notice is given of his intention to propose
such person for election and also notice in writing signed by the
person to be proposed of his willingness to be elected.
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53. QUALIFICATION OF DIRECTORS
The qualification of a Director shall be the holding of one share of
the Company.
54. WHEN OFFICE OF DIRECTOR TO BE VACATED
The office of a Director shall ipso facto be vacated:-
(1) if he ceases to be a Member;
(2) if by notice in writing to the Company he resigns his office;
(3) if he shall be removed from office pursuant to the provisions
of Bye-Law 71.
55. GENERAL POWERS OF COMPANY VESTED IN DIRECTORS
The business of the Company shall be managed outside the United Kingdom
by the Directors, who may pay all expenses incurred in promoting and
incorporating the Company, and who, in addition to the powers and
authorities by these Bye-Laws or otherwise expressly conferred upon
them, may exercise all such powers and do all such acts and things as
may be exercised or done by the Company and are not hereby or by
statute expressly directed to be exercised or done by the Company in
General Meeting subject nevertheless to the provisions of any statute,
and of these Bye-Laws.
56. APPOINTMENT OF ATTORNEY
The Directors may from time to time and at any time by power of
attorney appoint any person to be the attorney of the Company for such
purposes and with such powers, authorities and discretions (not
exceeding those vested in the Directors) and for such period and
subject to such conditions as they may think fit, and such powers of
attorney may contain such provisions for the protection and convenience
of persons dealing with any such attorneys as the Directors may think
fit and may also authorise any such attorney to delegate all or any of
the powers, authorities and discretions vested in him.
57. POWER TO FILL CASUAL VACANCIES
The Directors shall have power from time to time and at any time to
appoint any qualified person to fill a casual vacancy in the Board of
Directors who shall hold office until the next following Annual General
Meeting, and the continuing Directors may act notwithstanding any
vacancy in their number.
58. POWER TO APPOINT CHIEF EXECUTIVE OFFICER
The Directors may, from time to time, appoint one or more of their body
to be a Chief Executive Officer of the Company, either for a fixed term
or without any limitation as to the period for which he or they is or
are to hold such office, and may from time to time remove or dismiss
him or them from office and appoint another or others in his or their
place or places.
<PAGE> 20
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59. REMUNERATION OF CHIEF EXECUTIVE OFFICER
The remuneration of a Chief Executive Officer shall from time to time
be fixed by the Directors, and may be by way of salary, or commission,
or participation in profits, or by any or all of those modes.
60. POWERS OF CHIEF EXECUTIVE OFFICER
The Directors may from time to time entrust to and confer upon a Chief
Executive Officer for the time being such of the powers exercisable by
the Directors as they think fit, and may confer such powers for such
time, and to be exercised for such objects and purposes, and upon such
terms and conditions, and with such restrictions as they think
expedient; and they may confer such powers, either collaterally with,
or to the exclusion of, and in substitution for, all or any of the
powers of the Directors in that behalf; and may from time to time
revoke, withdraw, alter, or vary all or any of such powers.
61. POWER TO APPOINT SUPERVISOR OF FINANCIAL AFFAIRS
The Directors may from time to time appoint a person to exercise a
general supervision over the financial affairs of the Company in
accordance with and subject to the directions of the Directors. Such
person shall submit all accounts and vouchers to the Directors and/or
to the Auditors whenever so required and shall conform to such
regulations and directions as the Directors shall prescribe. Such
person shall give to the Company such security for the faithful
performance of his duties in such manner as the Directors shall from
time to time require.
62. DUTIES OF DIRECTORS
The Directors shall exercise a general supervision over the financial
affairs of the Company and shall be responsible for the correct keeping
of the books and for the safe keeping of all monies and securities of
the Company, and shall submit their accounts and vouchers to the
Auditors whenever required so to do.
63. POWER TO DELEGATE TO COMMITTEES
The Directors may delegate any of their powers to committees consisting
of two or more of the Directors and (if thought fit) one or more other
persons co-opted as hereinafter provided but every such committee shall
conform to such directions as the Directors shall impose on them. Any
such directions may provide for or authorise the co-option to the
committee of persons other than Directors and for such co-opted members
to have voting rights as members of the committee but so that (a) the
number of co-opted members shall be less than one half of the total
number of members of the committee and (b) no resolution of the
committee shall be effective unless a majority of the members of the
committee present at the meeting are Directors.
64. DIRECTORS' INTERESTS
(1) A Director may hold any other office or place of profit under the
Company (other than the office of Auditor) in conjunction with his
office of Director for such period and on such terms (as to
remuneration and otherwise) as the Company in General Meeting may from
time to time determine.
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(2) Any Director may act by himself or his firm in a professional capacity
for the Company, and he or his firm shall be entitled to remuneration
for professional services as if he were not a Director, provided that
nothing herein contained shall authorise a Director or his firm to act
as Auditor to the Company.
(3) A Director of the Company may be or become a director or other officer
of, or otherwise interested in, any company promoted by the Company or
in which the Company may be interested, and shall not be liable to
account to the Company or the Members for any remuneration, profit or
other benefit received by him as a director or officer of or from his
interest in such other company. The Director may also cause the voting
power conferred by the shares in any other company held or owned by the
Company to be exercised in such manner in all respects as it thinks
fit, including the exercise thereof in favour of any resolution
appointing the Directors or any of them to be directors or officers of
such other company, or voting or providing for the payment of
remuneration to the directors or officers of such other company.
(4) A Director shall not vote or be counted in the quorum on any resolution
of the Directors concerning his own appointment as the holder of any
office or place of profit with the Company or any other company in
which the Company is interested (including the arrangement or variation
of the terms thereof, or the termination thereof).
(5) Where arrangements are under consideration concerning the appointment
(including the arrangement or variation of the terms thereof, or the
termination thereof) of two or more Directors to offices or places of
profit with the Company or any other company in which the Company is
interested, a separate resolution may be put in relation to each
Director and in such case each of the Directors concerned shall be
entitled to vote (and be counted in the quorum) in respect of each
resolution except that concerning his own appointment (or the
arrangement or variation of the terms thereof, or the termination
thereof) and except (in the case of an office or place of profit with
any such other company as aforesaid) where the other company is a
company in which the Director owns one per cent. or more.
(6) Subject to the laws of Bermuda and to the next paragraph of this
Bye-Law, no Director or proposed or intending Director shall be
disqualified by his office from contracting with the Company, either
with regard to his tenure of any office or place of profit or as
vendor, purchaser or in any other manner whatever, nor shall any such
contract or any other contract or arrangement in which any Director is
in any way interested be liable to be avoided, nor shall any Director
so contracting or being so interested be liable to account to the
Company or the Members for any remuneration, profit or other benefits
realised by any such contract or arrangement by reason of such Director
holding that office or of the fiduciary relationship thereby
established.
(7) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or arrangement or proposed
contract or arrangement with the Company shall declare the nature of
his interest at the meeting of the Directors at which the question of
entering into the contract or arrangement is first taken into
consideration, if he knows his interest then exists, or in any other
case at the first meeting of the Directors after he knows that he is or
has become so interested. A general notice to the Directors given by a
Director to the effect that he is a member of a specified company or
firm and is to be regarded as interested in any contract or arrangement
which may after the date of the notice be made with such company or
firm shall be sufficient declaration of interest under this Bye-Law in
relation to any contract or arrangement so made; provided that no such
notice shall be effective unless either it is given at
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a meeting of the Directors or the Director giving the same takes
reasonable steps to secure that it is brought up and read at the next
meeting of the Directors after it is given.
(8) Save as otherwise provided by these Bye-Laws, a Director shall not vote
(nor be counted in the quorum) on any resolution of the Directors in
respect of any contract or arrangement in which he is to his knowledge
materially interested, and if he shall do so his vote shall not be
counted, but this prohibition shall not apply to any of the following
matters namely:-
(i) any contract or arrangement for giving to such Director any
security or indemnity in respect of money lent by him or
obligations undertaken by him at the request of or for the
benefit of the Company or any Subsidiary;
(ii) any contract or arrangement for the giving by the Company of
any security to a third party in respect of a debt or
obligation of the Company or any Subsidiary which the Director
has himself guaranteed or secured in whole or in part;
(iii) any contract or arrangement by a Director to subscribe for
shares, debentures or other securities of the Company issued
or to be issued pursuant to any offer or invitation to
shareholders or debenture holders of the Company or any class
thereof or to the public or any section thereof, or to
underwrite any shares, debentures or other securities of the
Company;
(iv) any contract or arrangement in which he is interested by
virtue of his interest in shares or debentures or other
securities of the Company or by reason of any other interest
in or through the Company;
(v) any contract or arrangement concerning any other company (not
being a company in which the Director owns one per cent. or
more) in which he is interested directly or indirectly whether
as an officer, shareholder, creditor or otherwise howsoever;
(vi) any proposal concerning the adoption, modification or
operation of a superannuation fund or retirement, death or
disability benefits scheme which relates both to Directors and
employees of the Company or of any of its Subsidiaries and
does not accord to any Director as such any privilege or
advantage not generally accorded to the employees to which
such scheme or fund relates; and
(vii) any arrangement for the benefit of employees of the Company or
of any of its Subsidiaries under which the Director benefits
in a similar manner as the employees and does not accord to
any Director as such any privilege or advantage not generally
accorded to the employees to whom such arrangement relates.
(9) A company shall be deemed to be a company in which a Director owns one
per cent. or more if and so long as (but only if and so long as) he is
(either directly or indirectly) the holder of or beneficially
interested in one per cent. or more of any class of the equity share
capital of such company or of the voting rights available to members of
such company. For the purpose of this paragraph there shall be
disregarded any shares held by a Director as bare or custodian trustee
and in which he has no beneficial interest, any shares comprised in a
trust in which the Director's interest is in reversion or remainder if
and so long as some other person is entitled to receive the income
thereof, and any shares comprised in an authorised unit trust scheme in
which the Director is interested only as a unit holder.
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(10) Where a company in which a Director holds one per cent. or more is
materially interested in a transaction, then that Director shall also
be deemed materially interested in such transaction.
(11) If any question shall arise at any meeting of the Directors as to the
materiality of the interest of a Director (other than the chairman of
the meeting) or as to the entitlement of any Director (other than such
chairman) to vote or be counted in the quorum and such question is not
resolved by his voluntarily agreeing to abstain from voting or not to
be counted in the quorum, such question shall be referred to the
chairman of the meeting and his ruling in relation to such other
Director shall be final and conclusive except in a case where the
nature or extent of the interest of the Director concerned as known to
such Director has not been fairly disclosed to the Directors. If any
question as aforesaid shall arise in respect of the chairman of the
meeting such question shall be decided by a resolution of the Directors
(for which purpose such chairman shall be counted in the quorum but
shall not vote thereon) and such resolution shall be final and
conclusive except in a case where the nature or extent of the interest
of such chairman as known to such chairman has not been fairly
disclosed to the Directors.
(12) The Company may by resolution suspend or relax the provisions of this
Bye-Law to any extent or ratify any transaction not duly authorised by
reason of a contravention of this Bye-Law.
65. REMUNERATION OF DIRECTORS
(1) Each Director (other than any Director who shall for the time being
hold an executive office or employment under the Company or a
Subsidiary of the Company) shall be paid out of the funds of the
Company by way of remuneration for his services as a Director such sum
not exceeding U.S.$25,000 per annum as the Directors may from time to
time determine or such larger sum as the Company in General Meeting
shall from time to time determine.
(2) The Directors shall also be paid out of the funds of the Company all
their travelling, hotel and other expenses properly incurred by them in
and about the discharge of their duties, including their expenses of
travelling to and from meetings of the Directors, or committee
meetings, or General Meetings.
(3) The Directors may grant special remuneration to any Director who, being
called upon, shall perform any special or extra services for or at the
request of the Company. Such special remuneration may be made payable
to such Director in addition to or in substitution for his ordinary
remuneration (if any) as a Director, and may be made payable by a lump
sum or by way of salary, or commission on the dividends or profits of
the Company or of any other company in which the Company is interested
or other participation in any such profits or otherwise, or by any or
all or partly by one and partly by another or other of those modes.
66. MEETINGS OF DIRECTORS
(1) The Directors may meet together for the dispatch of business, adjourn,
and otherwise regulate their meetings, as they think fit provided that
no meeting of the Directors may be held in the United Kingdom and any
decision reached or resolution passed at a meeting held in the United
Kingdom shall be void. Questions arising at any meeting shall be
decided by a majority of votes. In the case of an equality of votes the
motion shall be deemed to have been lost. A Director may, and the
Secretary on the requisition of a Director shall, at any time summon a
meeting of the Directors. Notice of meetings of the Directors may be by
telephone or otherwise.
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(2) Subject to paragraph (1) above and to Bye-Law 64, a Director may
participate in a meeting of the Directors by telephone or any other
form of communications equipment which allows him to hear each of the
other Directors addressing the meeting and to address the other
Directors himself and a Director so participating may be counted in the
quorum and shall be entitled to vote.
67. QUORUM
The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors, and unless so fixed shall be
two.
68. PROCEEDINGS OF COMMITTEE
The meetings and proceedings of any committee of the Directors
appointed under Bye-Law 63 shall be governed by the provisions of these
Bye-Laws for regulating the meetings and proceedings of the Directors,
so far as the same are applicable thereto. Without prejudice to the
generality of the foregoing no meeting of a committee may be held in
the United Kingdom and any decision reached or resolution passed at a
meeting held in the United Kingdom shall be void.
69. VALIDITY OF ACTS WHERE APPOINTMENT DEFECTIVE
All acts done by any meeting of the Directors or by any committee of
Directors, or by any person acting as a Director, shall,
notwithstanding that it be afterwards discovered that there was some
defect in the appointment of any such Director or person acting as
aforesaid, or that they or any of them were disqualified, be as valid
as if every such person had been duly appointed and was qualified to be
a Director.
70. RESOLUTION WITHOUT MEETING
A resolution in writing signed by all the Directors or any written
resolution as is referred to in paragraph (b) of Bye-Law 71, shall be
as valid and effectual as if it had been passed at a meeting of the
Directors duly called and constituted.
71. REMOVAL OF DIRECTOR
Any Director may at any time be removed from office as a Director of
the Company:-
(a) by resolution of the Members to that effect;
(b) upon a written resolution specifying that a Director has been
so removed signed by all the other Directors of the Company
for the time being having been deposited at the registered
office of the Company for the time being.
Any person who may have been appointed to be an Alternate Director of
the Company to a Director who has been removed from office as
hereinbefore provided, shall cease to be an Alternate Director
immediately upon the removal of such Director as aforesaid. If
appointment to an executive office thereby automatically terminates,
such removal shall be deemed to be an act of the Company and shall have
effect without prejudice to any claim for damages for breach of any
contract of service between such Director and the Company.
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72. ALTERNATE DIRECTORS
(1) At any General Meeting of the Company there may be elected a person or
persons to act as Alternate Directors to designated Directors and the
Company may at any such meeting authorise the Directors for the time
being in office to appoint such Alternate Directors.
(2) Any person appointed to be an Alternate Director shall have all the
rights and powers of the Directors to whom he is an alternate, save
that he shall not be entitled to attend and vote at any meeting of the
Directors otherwise than in the absence of such Director.
MINUTES
73. MINUTES TO BE RECORDED
(1) The Directors shall cause minutes to be duly entered in books provided
for the purpose:-
(a) of all appointments of officers;
(b) of the names of the Directors present at each meeting of the
Directors and of any committee of the Directors;
(c) of all orders made by the Directors and committees of
Directors; and
(d) of all resolutions and proceedings of General Meetings and of
meetings of the Directors and committees.
(2) Any such minutes of any meeting of the Directors, or of any committee,
or of the Company, if purporting to be signed by the chairman of that
meeting, or by the chairman of any succeeding meeting, shall be
receivable as prima facie evidence of the matters stated in such
minutes.
OFFICERS OTHER THAN DIRECTORS
74. OFFICERS
(1) The officers of the Company shall consist of a President, one or more
Vice-Presidents, a Secretary and such other officers as the Directors
may from time to time determine.
(2) The Directors shall as soon as conveniently may be after the election
of Directors choose or elect one of their number to be the President of
the Company, another to be the Vice-President of the Company and such
other person or persons to hold any other offices (including one or
more additional Vice-Presidencies) which the Directors may from time to
time determine as herein provided. If more than one person is proposed
for any of these offices, the election shall be by ballot or such
manner as the Directors may determine.
(3) The Secretary shall be appointed or elected by the Directors and shall
hold office during the pleasure of the Directors.
(4) A Treasurer may be appointed or elected by the Directors and if so
appointed or elected shall hold office during the pleasure of the
Directors.
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(5) The same person may hold the offices of Secretary and Treasurer. A
Vice-President may also be the Secretary or the Treasurer or the
Secretary-Treasurer.
75. WHO TO BE CHAIRMAN OF MEETING
The Chairman of the Board (if any) shall act as chairman at all
meetings of the Members or of the Directors at which he is present. In
his absence the President, if present, shall be chairman and, in the
absence of both of them, a Vice-President shall be appointed or elected
as chairman by those present at the meeting; if none of these is
present a chairman shall be appointed or elected by those present at
the meeting.
76. DUTIES OF SECRETARY
The Secretary shall attend all meetings of the Company and of the
Directors to keep correct minutes of such meetings and enter the same
in proper books provided for the purpose. He shall perform such other
duties as are prescribed by the Companies Acts or these Bye-Laws, or as
shall be prescribed by the Directors. The Secretary shall receive such
salary as the Directors shall from time to time determine.
DIVIDENDS
77. DECLARATION
The Directors may from time to time declare dividends but no dividend
shall be payable except out of the profits of the Company available for
the purpose.
78. REVENUE RESERVES
The Directors may from time to time before declaring a dividend set
aside out of the profits of the Company such sum as they think proper
as a reserve fund to be used to meet contingencies or for equalising
dividends or for any other special purpose.
79. DECLARATION AND PAYMENT ACCORDING TO AMOUNTS PAID OR CREDITED AS PAID
ON SHARES; APPORTIONMENT
Subject to the rights of persons, if any, entitled to shares with
special rights as to dividend, all dividends shall be declared and paid
according to the amounts paid or credited as paid on the shares in
respect whereof the dividend is paid, but no amount paid or credited as
paid on shares in advance of calls shall be treated for the purposes of
this Bye-Law as paid on the shares. All dividends shall be apportioned
and paid proportionately to the amounts paid or credited as paid on the
shares during any portion or portions of the period in respect of which
the dividend is paid; but if any shares are issued on terms providing
that they shall rank for dividend as from a particular date such shares
shall rank for dividend accordingly.
80. CASH DIVIDENDS TO BE PAYABLE IN POUNDS STERLING OR U.S. DOLLARS OR
OTHER CURRENCIES
(1) All cash dividends (which in this Bye-Law are referred to as
"dividends") in respect of every class of share of the Company shall be
declared in U.S. dollars.
(2) Unless a Member with a registered address in the United Kingdom of
Great Britain and Northern Ireland (who in these Bye-Laws is referred
to as a "U.K. Member") shall have elected
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by notice in writing to the Company in such form as the Company may
from time to time require to receive payment of dividends in U.S.
dollars, all dividends shall be paid to such U.K. Member in pounds
Sterling in accordance with the following provisions of this Bye-Law.
(3) Subject always to the rights or restrictions attaching to any class of
shares, where a dividend or other cash distribution is payable to a
Member whose registered address is outside the United States of America
and the United Kingdom, the Directors may, in their discretion,
determine that such dividend or other cash distribution be paid in the
currency of the country in which such Member has his registered address
and the amount of such payment shall be determined in accordance with
the following provisions of this Bye-Law.
(4) Subject always to any rights or restrictions attached to any class of
shares and to the provisions of paragraph (3) above, unless a Member
with a registered address outside the United Kingdom of Great Britain
and Northern Ireland (who in these Bye-Laws is referred to as a
"non-U.K. Member") shall have elected by notice in writing to the
Company in such form as the Company may from time to time require to
receive payment of dividends in pounds Sterling, all dividends shall be
paid to such non-U.K. Member in U.S. dollars in accordance with the
following provisions of this Bye-Law.
(5) Where any dividends are payable in a currency other than U.S. dollars
pursuant to the preceding provisions of this Bye-Law then the amount of
dividends payable shall be equal to the amount of dividends otherwise
payable in U.S. dollars translated into such other currency at such
rate and calculated on such date as the Directors may, in their
discretion, consider appropriate.
81. DEDUCTION FROM DIVIDENDS
The Directors may deduct from the dividends payable to any Member all
monies due by him to the Company on account of calls or otherwise in
relation to shares of the Company.
82. PAYMENT OTHERWISE THAN IN CASH
The Directors may direct payment of a dividend in whole or in part by
the distribution of specific assets (and in particular of paid up
shares or debentures of any other company), provided always that no
distribution shall be made which would amount to a reduction of capital
except in the manner appointed by law. Where any difficulty, including,
without limitation, any legal or practical problem under the laws of,
or the requirements of any recognised regulatory body, or any stock
exchange in, any territory, arises in regard to such distribution, the
Directors may settle the same as they think expedient and in particular
may issue fractional certificates, may fix the value for distribution
of such specific assets or any part thereof, may determine that cash
payments shall be made to any Members upon the footing of the value so
fixed in order to adjust the rights of all parties and may vest any
such specific assets in trustees as may seem expedient to the
Directors.
83. UNCLAIMED DIVIDENDS
All unclaimed dividends may be invested or otherwise made use of by the
Directors as they shall think fit, until the same be claimed and so
that the Company shall not thereby be constituted as a trustee in
respect thereof and any dividend unclaimed after a period of twelve
years from the date for payment of such dividend shall be forfeited and
shall revert to the Company.
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CAPITALISATION OF PROFITS AND RESERVES
84. POWER TO CAPITALISE
The Directors may resolve that it is desirable to capitalise such sum
as they may determine out of any undistributed profits of the Company
not required for paying the dividends on any shares carrying a fixed
preferential dividend and any profits or surpluses carried and standing
to the credit of any reserve or reserves or other special account and
any other amounts lawfully available for such purpose and that such sum
be capitalised and appropriated to the Members in the proportions in
which such sum would have been divisible amongst them had the same been
applied in paying dividends instead of being capitalised and that such
sum be applied on their behalf, either in or towards paying up the
amounts, if any, for the time being unpaid on any shares held by such
Members respectively or in paying up in full unissued shares,
debentures or securities of the Company of a nominal amount equal to
such profits to be allotted and distributed credited as fully paid up
to and amongst such Members in the proportions aforesaid, or partly in
the one way and partly in the other.
84A. POWER TO EFFECT A CAPITALISATION ISSUE WITH A CASH OPTION
(1) Where the Directors resolve that a capitalisation issue of Common
Shares be made under Bye-Law 84 they may also resolve that such
capitalisation issue be made with cash option whereunder, subject as
herein provided and to the provisions of The Companies Acts, each
Common Shareholder may elect to forego his entitlement under such
capitalisation issue (or such part thereof as the Directors may
determine) and to receive instead a payment in cash to the extent and
within the limits and on the terms and conditions set out in this
Bye-Law. The Directors shall cause an announcement to be made of any
resolution by them pursuant to this paragraph (1) and shall send to the
Common Shareholders affected thereby notices of election as soon as
practicable.
(2) If the Directors resolve as in paragraph (1) above, each holder of
Common Shares may (by notice in writing to the Company given in such
form and within such period as the Directors may from time to time
determine) elect to receive a payment in cash of an amount fixed by the
Directors and specified in the notice in lieu of each additional Common
Share to which he would otherwise be entitled, provided that the
Directors may fix a limit on the extent to which such an election shall
be effective, whether by reference to a part of any Common
Shareholder's total entitlement to additional Common Shares or to the
total number of additional Common Shares in respect of which all such
elections may be made on any occasion. Subject to any such limits, any
such election on the part of a Common Shareholder shall be irrevocable.
(3) Payments to those Common Shareholders who elect to receive cash instead
of their entitlement to Common Shares under such a capitalisation issue
("Cash Electors") may be made either (a) out of profits of the Company
available for the payment of dividends or (b) out of the net proceeds
of sale of the Common Shares to which the Cash Electors would have been
entitled under such capitalisation issue but for their election to
receive cash, or partly in one way and partly in the other, as the
Directors determine. To the extent that the Directors determine that
payment is to be made as in (b) above, the Directors shall be entitled
to sell the additional Common Shares to which the Cash Electors would
have been entitled, to appoint some person to execute a transfer of
those shares in the names of the Cash Electors and to receive and
deliver documents of title to those shares. Any such transfer shall be
as effective as if it had been executed by the registered holder of
such shares. The net proceeds of sale shall be applied
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in or towards payment of the amounts due to Cash Electors in respect of
their cash entitlement and, to the extent that they exceed that
entitlement, may be retained by the Company for its benefit.
(4) The Directors may on occasion determine that Common Shareholders
resident in territories where, in the opinion of the Directors,
compliance with local laws or regulations would be unduly onerous if
the shareholders were to receive additional Common Shares shall be
deemed to have exercised rights of election to receive cash.
(5) Unless a U.K. Member shall have served and not withdrawn such notice as
is referred to in paragraph (2) of Bye-Law 80, any cash sum to be paid
to such U.K. Member pursuant to this Bye-Law shall be paid in pounds
Sterling. Subject always to the provisions of paragraph (3) of Bye-Law
80 which shall apply, mutatis mutandis, to this Bye-Law unless a
non-U.K. Member shall have served and not withdrawn such notice as is
referred to in paragraph (4) of Bye-Law 80, any cash sum to be paid to
such non-U.K. Member pursuant to this Bye-Law shall be paid in U.S.
dollars.
(6) For the purpose of resolving the calculation referred to in this
Bye-Law, the Directors may convert U.S. Dollars to pounds Sterling and
vice versa at such rate and calculated on such date as the Directors
may, in their discretion, consider appropriate.
84B. POWER TO GRANT SCRIP DIVIDEND OPTIONS
(1) The Directors may, subject as herein provided and to the provisions of
The Companies Acts, resolve (at the same time as they resolve to
declare a dividend in cash on the Common Shares) that each Common
Shareholder may irrevocably elect to forego his right to participate in
such dividend (or such part thereof as the Directors may determine) and
to receive instead an allotment of further Common Shares to the extent
and within the limits and on the terms and conditions set out in this
Bye-Law. The Directors shall announce any such decision as aforesaid in
conjunction with any announcement of the relevant dividend and shall
send to the Common Shareholders affected thereby notices of election as
soon as practicable.
(2) If the Directors resolve as in paragraph (1) above, each holder of
Common Shares may (by notice in writing to the Company given in such
form and within such period as the Directors may from time to time
determine) irrevocably elect to forego the dividend in cash which
otherwise would have been paid (but only to the extent determined by
the Directors under paragraph (1) above) on all or so many of his
Common Shares as he shall specify in the notice of election and to
receive in lieu such number of further Common Shares to be allotted to
him credited as fully paid as is equal to the number resulting from
resolving the following fraction (but taking any fraction of a further
Common Share to the next higher whole number)
A x B
-----
C
where A equals the number of Common Shares in respect of which such
election has been made;
where B equals the amount per share of the dividend in cash foregone
(expressed in terms of U.S. dollars and cents); and
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where C equals the average of the middle market quotations for the
Common Shares on any securities market selected by the Directors and on
which those shares are listed for the five business days immediately
prior to the day on which the Directors' decision is announced after
deducting from that average the amount per share of the dividend
declared expressed in terms of U.S. dollars and cents, fractions of a
cent being rounded to the nearest whole cent and 0.5 cents being
rounded downwards.
(3) Following the receipt of a notice or notices of election the Directors
shall capitalise and appropriate out of the profits of the Company
available for distribution in accordance with The Companies Acts an
amount equal to the aggregate nominal value of the number of further
Common Shares required to be allotted to the holders of Common Shares
who have given notice of election as aforesaid and shall apply such
amount in paying up in full such number of further Common Shares.
(4) No scrip dividend option shall be made available unless the Company has
sufficient unissued shares and undistributed profits or reserves or
such other sums as may be lawfully applied for such purpose to give
effect to any elections which could be made thereunder.
(5) The Directors shall have power to authorise any person on behalf of the
electing Common Shareholders to enter into an agreement with the
Company providing for the allotment to them respectively of the Common
Shares to which they are entitled in lieu of their rights to the
dividend so foregone by them respectively and any agreement made under
such authority shall be effective and binding on the Common
Shareholders concerned.
(6) The Directors may on any occasion determine that rights of election
hereunder shall not be made available to, or (as the case may be) shall
be deemed to have been exercised by, Common Shareholders resident in
territories where, in the opinion of the Directors, compliance with
local laws and/or regulations would be unduly onerous.
(7) Unless a U.K. Member shall have served and not withdrawn such notice as
is referred to in paragraph (2) of Bye-Law 80, any cash sum to be paid
to such U.K. Member pursuant to this Bye-Law shall be paid in pounds
Sterling. Subject always to the provisions of paragraph (3) of Bye-Law
80 which shall apply, mutatis mutandis, to this Bye-Law unless a
non-U.K. Member shall have served and not withdrawn such notice as is
referred to in paragraph (4) of Bye-Law 80, any cash sum to be paid to
such non-U.K. Member pursuant to this Bye-Law shall be paid in U.S.
dollars.
(8) For the purpose of resolving the calculation referred to in this
Bye-Law, the Directors may convert U.S. dollars to pounds Sterling and
vice versa at such rate and calculated on such date as the Directors
may, in their discretion, consider appropriate.
85. POWERS INCIDENTAL THERETO
Whenever such a resolution as aforesaid whereunder a capitalisation
issue is or is to be made under Bye-Laws 84 to 84B (inclusive) shall
have been passed, the Directors shall make all appropriations and
applications of the undivided profits resolved to be capitalised
thereby, and all allotments and issues of fully paid shares, debentures
or securities, if any, and generally shall do all acts and things
required to give effect thereto, with full power to the Directors to
make such provision by the rounding up of fractions to the nearest
whole number of such shares, debentures or securities, by the issue of
fractional certificates or by payment in cash or otherwise as they
think fit for the case of shares, debentures or securities becoming
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distributable in fractions, and also to authorise any person to enter
on behalf of all the Members entitled thereto into an agreement with
the Company providing for the allotment to them respectively, credited
as fully paid up, of any further shares or debentures to which they may
be entitled upon such capitalisation or (as the case may require) for
the payment up by the Company on their behalf, by the application
thereto of their respective proportions of the profits resolved to be
capitalised, of the amounts or any part of the amounts remaining unpaid
on their existing shares, and any agreement made under such authority
shall be effective and binding on all such Members.
BORROWING POWERS
86. POWERS TO BORROW AND ISSUE SECURITIES
The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of the undertaking, property
and assets (present and future) and uncalled capital of the Company and
to issue debentures, bonds, notes and other securities, whether
outright or as collateral security for any debt, liability or
obligation of the Company or of any third party.
87. SPECIFIC MORTGAGES TO TRUSTEES
The Directors may, for the purpose of securing the payment of any such
bonds, debentures, or other securities as aforesaid, or the payment
with interest of any money so borrowed as aforesaid or payable under
contract or otherwise, make and carry into effect any arrangement which
they may deem expedient by assigning or conveying any property of the
Company, including its uncalled capital, to trustees.
ACCOUNTS
88. PROPER ACCOUNTS TO BE KEPT
The Directors shall cause proper records of account to be kept of all
transactions of the Company in such manner as to show the assets and
liabilities of the Company for the time being and the records of
account shall at all times be kept at the office of the Company or at
such place as the Directors may from time to time determine and shall
always be open to the inspection of the Directors subject always to the
provisions of the Companies Acts.
89. STATEMENT OF INCOME TO BE LAID BEFORE MEMBERS
At the Annual General Meeting in each year, the Directors shall lay
before the Members a Statement of Income.
90. BALANCE SHEET
The Directors shall cause to be made out in every calendar year and to
be laid before the Company in General Meeting a Balance Sheet as at the
date to which the Statement of Income is made up. Every Balance Sheet
laid before the Company in General Meeting shall be signed on behalf of
the Board by two of the Directors and the Auditors' Report shall be
attached to the Balance Sheet and the Auditors' Report shall be read to
the meeting and will be delivered or sent by post to the registered
address of every Member at such time as the Directors may
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determine, being not less than seven days prior to the Annual General
Meeting at which they are to be considered.
AUDIT
91. AUDITORS
At the Annual General Meeting or at a subsequent Special General
Meeting in each year an independent representative of the Members shall
be appointed by them as Auditors of the accounts of the Company and
such Auditors shall hold office until the Members shall appoint other
Auditors. Such Auditors may be Members but no Directors or officers of
the Company shall, during their continuance in office, be eligible as
Auditors.
92. REMUNERATION OF AUDITORS
The remuneration of the Auditors shall be fixed by the Members at the
time of their appointment or subsequently and they may delegate this
duty to the Directors.
93. VACANCIES IN OFFICE OF AUDITORS
The Directors may fill any casual vacancy in the office of Auditors.
94. DUTY TO EXAMINE BOOKS, ETC.
(1) The Auditors shall examine such books, accounts and vouchers as may be
necessary for the performance of their duties.
(2) The Auditors shall make a report to the Members in respect of the
accounts examined by them and on every Balance Sheet laid before the
Company in General Meeting during their tenure of office, and the
report shall state:-
(a) whether or not they have obtained all the information and
explanations they have required; and
(b) whether in their opinion the Balance Sheet referred to in the
report is properly drawn up so as to present fairly the
financial position of the Company and the results of its
operations for the period under review.
(3) REPORT TO BE READ
The report of the Auditors shall be read at the General Meeting at
which the Balance Sheet is submitted.
(4) AUDITORS TO BE FURNISHED WITH LIST OF BOOKS ETC.
The Auditors of the Company shall be furnished with a list of all books
kept by the Company and shall at all times have the right of access to
the books and accounts and vouchers of the Company, and shall be
entitled to require from the Directors and officers of the Company such
information and explanations as may be necessary for the performance of
their duties.
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(5) RIGHT TO ATTEND MEETINGS
The Auditors of the Company shall be entitled to attend any General
Meeting of the Company at which any accounts which have been examined
or reported on by them are to be laid before the Company and to make
any statement or explanations they may desire with respect to the
accounts, and notices of every such meeting shall be given to the
Auditors in the manner prescribed for Members.
NOTICES
95. HOW NOTICE TO BE SERVED
A notice may be served by the Company on any Member, either personally
or by sending it through the post prepaid in an envelope addressed to
such Member at his address as registered in the Register.
96. NOTICES TO JOINT HOLDERS
Any notice required to be given to the Members shall with respect to
any shares held jointly by two or more persons be given to the person
whose name appears first in the Register.
97. WHEN DEEMED DELIVERED
Any notice served by post shall be deemed to have been served at the
expiration of twenty-four hours after the envelope containing it was
posted and, in proving such service, it shall be sufficient to prove
that the envelope containing the notice was properly addressed and
prepaid and the time when it was posted.
98. MEMBERS RESIDENT ABROAD
All notices being posted to addresses overseas shall so far as may be
practicable be forwarded by air mail.
98A. NOTICES SERVED ON NON-MEMBERS
Any notice served on non-Members under Bye-Law 46 or 104 may be served
at the last known address of the non-Member concerned and otherwise in
accordance with the provisions of Bye-Laws 95 to 98 inclusive.
WINDING UP
99. DISTRIBUTION IN SPECIE
If the Company shall be wound up the liquidator may, with the sanction
of the Company in General Meeting divide amongst the Members in specie
or kind the whole or any part of the assets of the Company (whether
they shall consist of property of the same nature or not) and may, for
such purpose set such value as he deems fair upon any property to be
divided as aforesaid and may determine how such division shall be
carried out as between the Members or different classes of Members.
<PAGE> 34
34
The liquidator may, with like sanction, vest the whole or any part of
such assets in trustees upon such trusts for the benefit of the
contributories as the liquidator, with the like sanction, shall think
fit, but so that no Member shall be compelled to accept any shares or
other securities whereon there is any liability.
SEAL
100. CUSTODY OF SEAL
(A) The Directors shall provide for the safe custody of the Seal, which
shall only be used by the authority of the Directors or a committee of
the Directors authorised by the Directors in that behalf, and every
instrument to which the Seal shall be affixed shall be signed by a
Director and shall be countersigned by the Secretary or by a second
Director or by some other person appointed by the Directors for the
purpose, provided that the Secretary or any Director may affix the Seal
of the Company over his signature only to any authenticated copies of
these Bye-Laws, the Minutes of meetings or any other documents required
to be authenticated by him.
(8) Every certificate for shares or loan stock or representing any other
form of security of the Company (other than letters of allotment,
receipts for securities or certificates of deposit) shall be issued
under the Seal or under any official seal kept by the Company pursuant
to Bye-Law 100B.
(C) Each certificate to which the Seal shall be affixed shall bear the
autographic signatures of at least one Director and the Secretary or
other person acting in the place of the Secretary, provided that the
Directors may by resolution determine (either generally or in any
particular case or cases) that such signatures shall be dispensed with,
or shall be affixed by means of some method or system of mechanical
signature.
100A. OVERSEAS SEAL
(1) The Company may have for use in any territory, district, or place
elsewhere than in Bermuda an official seal (in these Bye-Laws referred
to as an "Overseas Seal"), which seal shall be a facsimile of the Seal.
(2) A deed or other document to which the Overseas Seal is duly affixed
shall bind the Company as if it had been sealed with the Seal.
(3) The Company having an Overseas Seal for use in any such territory,
district or place may, by writing under its Seal, authorise any person
or persons appointed for the purpose as its agent or agents in that
territory, district or place to affix the Overseas Seal to any deed or
other document to which the Company is party in that territory,
district or place.
(4) As between the Company and the person dealing with such an agent or
agents, the authority of such agent or agents continues during the
period (if any) mentioned in the instrument conferring the authority,
or if no period is there mentioned, then until notice of the revocation
or determination of the authority of such agent or agents has been
given to the person dealing with him.
(5) The person affixing the Overseas Seal shall certify in writing on the
deed or other instrument to which the Overseas Seal is affixed the date
on which it is affixed.
<PAGE> 35
35
(6) The powers referred to in this Bye-Law shall be vested in the Directors
and whenever in these Bye-Laws reference is made to the Seal the
reference shall, when and so far as may be applicable, be deemed to
include any Overseas Seal and any Securities Seal (as defined in
Bye-Law 100B below).
100B. SECURITIES SEAL
(1) The Company may have, for use for sealing securities issued by the
Company and for sealing documents creating or evidencing securities so
issued, an official seal (in these Bye-Laws referred to as a
"Securities Seal") which is a facsimile of the Seal with the addition
on its face of the word "Securities".
(2) Each certificate to which the Securities Seal shall be affixed need not
bear any signature.
ALTERATION OF BYE-LAWS
101. ALTERATION OF BYE-LAWS
The Directors may from time to time revoke, alter, amend or add to
these Bye-Laws provided that no such revocation, alteration, amendment
or addition shall be operative unless and until it is confirmed at a
subsequent General Meeting of the Company.
INDEMNITY
102. INDEMNITY
Every Director, Secretary and other officer of the Company shall be
indemnified by the Company against, and it shall be the duty of the
Directors out of the funds of the Company to pay all costs, losses and
expenses which any such officer may incur or become liable to by reason
of any contract entered into, or act or thing done by him as such
officer, or in any way in the discharge of his duties PROVIDED ALWAYS
that the indemnity contained in this Bye-Law shall not extend to any
matter which would render it void pursuant to the Companies Acts.
INDIVIDUAL RESPONSIBILITY OF DIRECTORS
103. INDIVIDUAL RESPONSIBILITY OF DIRECTORS
No Director, Secretary or other officer of the Company shall be liable
for the acts, receipts, neglects, or defaults of any other Director or
officer, or for joining in any receipt or other act for conformity, or
for any loss or expense happening to the Company through the
insufficiency or deficiency of title to any property acquired by order
of the Directors for or on behalf of the Company, or for the
insufficiency or deficiency of any security in or upon which any of the
monies of the Company shall be invested, or for any loss or damage
arising from the bankruptcy, insolvency, or tortious act of any person
with whom any monies, securities, or effects shall be deposited, or for
any loss occasioned by any error of judgment, omission, default, or
oversight on his part, or for any other loss, damage or misfortune
whatever which shall happen in relation to the execution of the duties
of his office or in relation thereto, unless the same happen through
his own wilful negligence, wilful default, fraud or dishonesty.
<PAGE> 36
36
TAKE-OVER OFFERS FOR THE COMPANY
104. TAKE-OVER OFFERS FOR THE COMPANY
(1) (A) Where any person is or becomes interested, whether as a result
of transactions over a period of time or not, in shares in the
capital of the Company in circumstances in which he would be
obliged to make or extend an offer or offers to shareholders
or holders of other securities or rights referred to in
paragraph (4) below of the Company under the Rules for the
time being of the City Code on Take-overs and Mergers of the
United Kingdom of Great Britain and Northern Ireland (the
"City Code", which expression shall include any revision or
modification thereof) issued by the Panel on Take-overs and
Mergers ("the Panel", which expression shall include any body
which succeeds to the functions of the said Panel) if the
Company was a company incorporated in the United Kingdom of
Great Britain and Northern Ireland to which the City Code
applied, the Directors may serve upon that person a notice
requiring him to make or extend an offer or offers in writing
in accordance with the requirements of the City Code in all
respects as if the City Code did apply to the Company but so
that references in the City Code to the Panel shall be
construed, for the purposes of this Bye-Law, as if they were
references to the Board of Directors of the Company.
(B) Where any person has acquired, is in the process of acquiring,
or appears to the Directors likely to acquire an interest in
shares in the capital of the Company in circumstances in which
he would be subject to the Rules Governing Substantial
Acquisitions of Shares (the "SARs", which expression shall
include any revision or modification thereof issued by the
Panel, if the Company was a company incorporated in the United
Kingdom of Great Britain and Northern Ireland to which the
SARs applied, the Directors may serve upon that person a
notice requiring him to comply with the provisions of the SARs
in relation to any acquisition made (after the date of
adoption of this paragraph (1)(B)) or proposed to be made by
him and if that person has made (after the date of adoption of
this paragraph (1)(B)) or subsequently makes any acquisition
in contravention of the provisions of the SARs such a notice
or a further notice issued by the Directors may require that
person to dispose or to procure the disposal by any person
with whom he has acted in concert of any interest in shares so
acquired within twenty-eight days of the date of such notice.
(C) If a notice served under paragraph (1)(B) requiring a disposal
of shares is not complied with in accordance with its terms
and has not been withdrawn, the Directors may, so far as they
are able, dispose of the shares to which such notice relates
at the best price reasonably obtainable in all the
circumstances in which case they shall give written notice of
such disposal to the person or persons on whom such notice was
served. Except as hereinafter provided such a disposal shall
be completed as soon as reasonably practicable after the
giving of a notice under this paragraph (1)(C) as may in the
opinion of the Directors be consistent with obtaining the best
price reasonably obtainable and in any event within thirty
days of expiry of such notice provided that a disposal under
this paragraph (1)(C) shall be suspended during the period
when dealings by the Directors in the Company's shares are not
permitted either by law or by the regulations of any stock
exchange upon which those shares of the Company which are to
be disposed of are listed, but any disposal under this
paragraph which is suspended as aforesaid shall be completed
within thirty days after expiry of the period of such
suspension and provided further that neither the Company nor
the Directors shall be liable to any holder or any person
having an interest in any share or other
<PAGE> 37
37
person for failing to obtain the best price so long as the
Directors act in good faith within the period specified above.
(D) For the purpose of effecting any disposal under paragraph
(1)(C) above, the Directors may authorise in writing any
officer or employee of the Company to execute any necessary
transfer on behalf of any holder and may issue a new
certificate to the purchaser. The net proceeds of such
disposal shall be received by the Company, whose receipt shall
be a good discharge for the purchase money, and shall be paid
(without any interest being payable thereon) to the former
holder upon surrender by him of the certificate in respect of
the shares sold and formerly held by him.
(E) The provisions of these Bye-Laws relating to the protection of
purchasers of shares sold under a lien or upon forfeiture
shall apply mutatis mutandis to disposals under this Bye-Law.
(2) Any notice served under paragraph (1) above may also require the person
on whom it is served to execute an undertaking under seal in favour of
the Directors (as trustees for all the holders of shares in the capital
of the Company) and in a form satisfactory to the Directors to observe
and perform the rules and requirements of the City Code or the SARs as
the case may be as if the same were applicable to the Company and in
the manner prescribed in paragraph (1) above.
(3) Where any person is interested, whether as a result of a series of
transactions over a period of time or not, in Common Shares which
(taken together with shares held or acquired by persons acting in
concert with him) represent 30 per cent. or more of all the Common
Shares for the time being in issue and the Directors determine that it
is not expedient to serve a notice under paragraph (1)(A) above or if
any person upon whom such a notice is served fails within thirty days
to comply with the same, the Directors may serve upon that person a
notice requiring him to make an offer in writing (the "Offer"), within
30 days of the date of such notice on the basis set out in the
following paragraphs, to the holders of every class of share capital of
the Company (whether voting or non-voting) to purchase all such shares
for cash on terms that payment in full therefor will be made within 21
days of the Offer becoming or being declared unconditional in all
respects.
(4) Where the Directors serve a notice upon any person in accordance with
paragraph (3) above, they may also include in that notice a requirement
that such person shall make an appropriate offer or proposal in writing
to the holders of every class of securities convertible into, or of
rights to subscribe for, share capital of the Company (whether such
share capital is voting or non-voting). Such appropriate offer or
proposal is referred to in this Bye-Law as a "Convertible Offer". The
Convertible Offer shall be made at the same time as the Offer. The
terms of the Convertible Offer shall be such terms as the Directors, in
their absolute discretion, consider to be fair and reasonable having
regard to the terms of the Offer and the Directors shall notify such
terms to the person specified in paragraph (3) above (the "Offeror").
The Convertible Offer shall be conditional only upon the Offer becoming
or being declared unconditional in all respects.
(5) In addition to the Offeror, the Directors may require, in their
absolute discretion, each of the principal members of a group of
persons acting in concert with him and who appear to be interested in
any shares in, or convertible securities of, the Company to make the
Offer and/or the Convertible Offer. For the purposes of this Bye-Law,
persons shall be deemed to be acting in concert if, pursuant to an
agreement or understanding (whether formal or informal) they
<PAGE> 38
38
actively co-operate in acquiring or seeking to acquire shares in, or
convertible securities of, the Company.
(6) Unless the Directors otherwise agree, an offer made under paragraphs
(3), (4) or (5) of this Bye-Law must, in respect of each class of share
capital or convertible securities involved, be in cash or be
accompanied by a cash alternative offer at not less than the highest
price paid by the Offeror or any person acting in concert with it for
shares or convertible securities of that class within the preceding 12
months. If such price cannot be ascertained by the Directors or if such
shares or convertible securities have been acquired other than for cash
pursuant to a bargain made on any recognised stock exchange or if the
Directors consider that such highest price is, for any reason,
inappropriate, unfair or unreasonable having regard to the size and
timing of the relevant purchases, the relationship (if any) between the
seller and purchaser of such shares or convertible securities or the
number of shares or convertible securities purchased in the preceding
12 months, the Directors may, in any such case, fix the price at which
the Offer, the Convertible Offer or the cash alternative offer is to be
made. The cash Offer, the cash Convertible Offer or the cash
alternative offer must, in each case, remain open for not less than 14
days after the date on which the Offer or the Convertible Offer, as the
case may be, has become or is declared to be unconditional as to
acceptances.
(7) Any person who makes or is about to make or who is or can be required
to make an offer under this Bye-Law or who has made such an offer which
has lapsed, shall observe and shall procure that any persons acting in
concert with him shall observe the rules and requirements of the City
Code both in letter and in spirit prior to, during the pursuit of and,
if applicable, after the failure of such an offer.
(8) For the purposes of this Bye-Law, any questions or disputes arising out
of the grant of consent by the Directors, the comparability of offers,
the terms of offers, any question as to whether any person shall be
regarded as acting in concert with another, any question regarding the
interpretation or application of the City Code and the meaning of any
terms or phrases used in this Bye-Law or the City Code shall be
determined by the Directors in their absolute discretion.
<PAGE> 39
A-1
SCHEDULE
(1) The authorised share capital of the Company is U.S.$275,750,000(6)
divided into 750,000,000 Common Shares of the nominal value of
U.S.$0.20 each ("Common Shares"), 125,000,000 Convertible Cumulative
Redeemable Preference Shares of the nominal value of U.S.$1 each (the
"First Preference Shares"), 225,000 Convertible Cumulative Redeemable
Preference Shares of the nominal value of U.S.$1 each (the "Third
Preference Shares"), 500,000 Convertible Cumulative Redeemable
Preference Shares 2002 of the nominal value of U.S.$1 each (the
"Fourth Preference Shares") and 25,000 Exchangeable Cumulative
Redeemable Preference Shares 2005 of the nominal value of U.S.$1 each
(the "Fifth Preference Shares")(7).
(2) The rights attaching to the First Preference Shares shall be as
follows:-
(i) Each First Preference Share shall have attached to it such
preferred, qualified or other rights and be subject to such
restrictions whether in regard to dividend, return of capital,
redemption, conversion into Common Shares or voting or
otherwise as the Directors may determine on or before its
allotment.
(ii) The Directors may allot the First Preference Shares in more
than one series and, if they do so, may designate each series
in such manner as they deem appropriate to reflect the
particular rights and restrictions attached to that series,
which may differ in all or any respects from any other series
of First Preference Shares.
(iii) The particular rights and restrictions attached to any First
Preference Share shall be recorded in the minutes of the
meeting of Directors and a copy shall be annexed as an
appendix to these Bye-Laws(8).
(iv) A First Preference Share shall not have attached to it any
right or restriction which is inconsistent with the special
rights and privileges attached to any other class of
preference share for the time being in issue.
- ------------------------
(6) This paragraph was amended and the authorised share capital of the
Company was increased to U.S.$275,750,000 by a Resolution passed on
2nd July, 1997.
(7) Following conversion of all issued Convertible Cumulative Redeemable
Preference Shares of the nominal value of U.S.$1 each (the "Second
Preference Shares") into Common Shares, the authorised but unissued
Second Preference Shares were cancelled by Resolution passed on
24th January, 1989.
(8) By a Resolution of the Directors passed on 4th November, 1996 2,500,000
First Preference Shares were designated as Series A First Preference
Shares. By a Resolution of the Directors which took effect on 2nd July,
1997 a further 5,000,000 First Preference Shares were designated as
Series A First Preference Shares, having the rights set out in Appendix
A to the Bye-Laws, as amended by the Resolution a copy of which is
annexed as Appendix B to the Bye-Laws.
<PAGE> 40
B-1
(3) [Paragraph 3 of the Schedule to the Bye-Laws, which set out the rights
attaching to the Convertible Cumulative Redeemable Preference Shares of
the nominal value of U.S.$1 each (previously known in these Bye-Laws as
"Second Preference Shares"), was deleted in its entirety pursuant to a
resolution passed on 24th January, 1989.]
<PAGE> 41
C-1
(4) The rights attaching to the Third Preference Shares shall be as
follows:-
(i) AS REGARDS INCOME
The holders of the Third Preference Shares (the "Third Preference
Shareholders") shall be entitled in priority to any payment of dividend
or other distribution on or in respect of any other class of shares of
the Company (other than shares ranking pari passu with the Third
Preference Shares) to a fixed cumulative preferential dividend at the
rate of 5 3/4 per cent. per annum on the aggregate of the capital and
premium paid up on issue thereof (for the purposes of this paragraph
(4), the "Issue Amount"), to be paid, if and so far as in the opinion
of the Directors the profits of the Company justify such payments,
half-yearly on 3rd January and 3rd July in each year in respect of the
half years ending on those dates except that the first such payment at
the aforesaid rate will be payable on 3rd July, 1987 in respect of the
period from 7th April, 1987 to such date. The Third Preference Shares
shall not entitle the holders thereof to any further or other right of
participation in the profits of the Company. The Third Preference
Shares shall rank for dividend pari passu as between themselves.
Dividends shall be calculated on the basis of a 360 day year consisting
of 12 months of 30 days each. Payments of such dividends and any other
distributions in respect of the Third Preference Shares (including
payments due on redemption) will be made (except in respect of the
dividend payable on 3rd July, 1987) by the Company posting a dividend
warrant or cheque in U.S. dollars to the registered addresses of the
Third Preference Shareholders as at the relevant record date for this
purpose (being the fifteenth day prior to the relevant 3rd January or
3rd July (as the case may be)), unless any other manner of payment is
agreed by the Directors.
(ii) AS REGARDS CAPITAL
On a return of capital on liquidation or otherwise (but not on
redemption) the assets of the Company available for distribution among
the Members shall be applied in priority to any payment to the holders
of any other class of shares of the Company (other than shares ranking
pari passu with the Third Preference Shares), save as provided below,
in repaying the Issue Amount of the Third Preference Shares, together
with a sum equal to any arrears or accruals of the fixed dividend
thereon, to be calculated down to and inclusive of the date of the
return of such Issue Amount and to be payable whether or not such
dividend has been declared or earned, but the Third Preference Shares
shall not entitle the holders thereof to any further or other right of
participation in the assets of the Company. The Third Preference Shares
shall rank for return of the Issue Amount in respect of such shares on
liquidation or otherwise pari passu as between themselves.
So long as any Conversion Right (as defined below) attaching to any
Third Preference Share shall remain exercisable the Company will
(unless such sanction has been given by the Third Preference
Shareholders as would be required for a variation of the special rights
attaching to the Third Preference Shares) not create and issue any
preference shares ranking as regards order in the participation in the
profits of the Company or in the assets of the Company on a winding up
or otherwise in priority to the Third Preference Shares, but the
Company may issue, without obtaining the consent of the Third
Preference Shareholders, preference shares ranking pari passu, in the
circumstances specified above, with the Third Preference Shares and
carrying such rights as to dividend, voting, redemption, conversion or
otherwise as the Company in Special General Meeting may determine.
<PAGE> 42
C-2
(iii) AS REGARDS CONVERSION
(A) A Third Preference Shareholder shall have the right, subject to the
provisions mentioned below, to convert all or any of his Third
Preference Shares into fully paid Common Shares (for the purposes of
this paragraph (4), the "Conversion Right"). The price at which Common
Shares shall be issued upon conversion (for the purposes of this
paragraph (4), the "Conversion Price") shall initially be 170p per
Common Share (with a Third Preference Share taken at the Issue Amount
thereof, at a fixed exchange rate of (pound)1 = U.S. $1.5750) but shall
be subject to adjustment in the circumstances set out below and in the
manner provided herein. The Conversion Right in respect of any Third
Preference Share shall terminate at the end of the eighth day prior to
any date fixed for redemption thereof as set out under paragraph (4)(v)
of this Schedule, unless there is default in making payment of the
redemption moneys due on such date, in which event the Conversion Right
shall extend up to and including the date on which the full amount of
such redemption moneys has been paid to the relevant Third Preference
Shareholder.
(B) The Conversion Right shall be exercisable at any time, save during the
periods mentioned herein and subject to the Companies Acts and any
other applicable fiscal or other laws or regulations, after the date
falling 90 days after completion of the distribution of the Third
Preference Shares, as determined by the Directors (for the purposes of
this paragraph (4), the "Exchange Date") up to and including 20th
December, 2001 (such period, for the purposes of this paragraph (4),
being hereinafter called the "Conversion Period") by completing the
notice of conversion in such form as may be specified by the Directors
in respect of the Third Preference Shares to be converted (for the
purposes of this paragraph (4) a "Conversion Notice") and delivering
the same, together with the certificates for such Third Preference
Shares and with such other evidence (if any) as the Directors may
reasonably require to prove the title of the person exercising such
right and payment of all taxes and stamp, issue and registration duties
(if any) arising on conversion in any jurisdiction (other than any
capital or any stamp duties payable in Bermuda which shall be payable
by the Company) to the office of the Registrar or to the office of any
agent of the Company appointed for such purpose at any time during the
Conversion Period. A Conversion Notice once given may not be withdrawn
without the consent in writing of the Company. Conversion shall take
place on the business day (in the place of delivery) after delivery of
the Conversion Notice (together with the relevant certificates,
evidence and payment) to the office of the Registrar or the office of
the agent referred to above (such date being, for the purposes of this
paragraph (4), hereinafter called the "Conversion Date").
(C) Conversion of the Third Preference Shares may be effected in such
manner as the Directors shall, subject to the provisions of these
Bye-Laws and the Companies Acts, from time to time determine and
without prejudice to the generality of the foregoing may be effected by
the redemption of Third Preference Shares at par. In the case of a
conversion effected by means of the redemption of Third Preference
Shares, the Directors may effect redemption of the relative Third
Preference Shares out of the amount paid up on such Third Preference
Shares, out of profits of the Company which would otherwise be
available for dividend, out of the proceeds of a fresh issue of shares
or in any other manner for the time being permitted by law. In the case
of redemption out of such profits the Directors shall apply the
redemption moneys in the name of the holder of the Third Preference
Share to be converted in subscribing for the appropriate number of
fully paid Common Shares at such premium (if any) as shall represent
the amount by which the redemption moneys exceed the nominal amount of
the Common Shares to be subscribed. In the case of redemption out of
the proceeds of a fresh issue of shares, the
<PAGE> 43
C-3
Directors may arrange for the issue of the appropriate number of Common
Shares to some person selected by the Directors on terms that such
person will:
(a) subscribe for such Common Shares at par or at such premium as
shall be necessary to provide the redemption moneys for the
redemption at par of the relative Third Preference Shares; and
(b) renounce the allotment of such Common Shares in favour of the
holder of the relative Third Preference Shares against payment
to such subscriber by the Company of the redemption moneys in
respect of the Third Preference Shares so redeemed.
(D) The Third Preference Shares so converted shall carry the right to a
fixed preferential dividend on such Third Preference Shares in respect
of all periods up to and including the end of the half-year ending on
3rd January or 3rd July, as the case may be, preceding the relevant
Conversion Date but not in respect of any subsequent period. Third
Preference Shares surrendered for conversion during the period from the
close of business on any record date for entitlement to any fixed
preferential dividends in respect of such Third Preference Shares
immediately preceding 3rd January or 3rd July (as the case may be) to
the opening of business on such 3rd January or 3rd July (as the case
may be) must be accompanied by payment of an amount equal to the
dividend thereon which the registered holder is to receive.
(E) Notwithstanding the foregoing, unless the Company elects in its sole
discretion to register the Common Shares to be issued upon the
conversion of the Third Preference Shares under the Securities Act of
1933 of the United States or determines that an exemption from the
registration requirements of the said Act is applicable, no Conversion
Notice shall be effective unless it includes a statement that the
beneficial owner of the Third Preference Shares, and of the Common
Shares to be issued upon conversion thereof, either (i) is not a U.S.
person and such Third Preference Shares are not being converted with a
view to, or in connection with, any offer, sale or delivery of such
Common Shares in the United States or to a U.S. person or (ii) is a
sophisticated institutional investor in the United States which
purchased the Third Preference Shares in connection with their original
issuance and agrees not to offer, sell or deliver the Common Shares
acquired upon conversion in the United States or to U.S. persons. As
used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction; and "U.S.
person" means a citizen or resident of the United States, any
corporation, partnership or other entity created or organised in or
under the laws of the United States and any estate or trust the income
of which is subject to United States federal income taxation regardless
of its source.
(F) (1) A certificate for the Common Shares to which any Third
Preference Shareholder shall become entitled in consequence of
exercising his Conversion Right shall be issued not later than
28 days after the relevant Conversion Date and such Common
Shares shall rank pari passu with the Common Shares in issue
at the relevant Conversion Date, save that they will not be
entitled to any dividends or other distributions declared,
paid or made either in respect of any financial period ended
prior to such Conversion Date or by reference to a record date
prior to such Conversion Date.
(2) No fraction of a Common Share will be issued on conversion but
(except in respect of cases where such cash payment would
amount to less than U.S.$5 in respect of any single holding) a
cash payment in U.S. dollars will be made to any converting
Third Preference Shareholder in respect of any such fraction.
If with any one Conversion
<PAGE> 44
C-4
Notice more than one Third Preference Share shall fall to be
converted into Common Shares to be registered in the same
name, the number of Common Shares to be issued on conversion
thereof and any sum payable in respect of fractions shall be
calculated on the basis of the Issue Amount of the Third
Preference Shares to be converted.
(G) The Conversion Price shall be subject to adjustment in the following
circumstances:-
(1) any alteration of the nominal value of the Common Shares as a
result of consolidation or sub-division;
(2) the issue wholly for cash of any Common Shares at less than
the current market price per Common Share (as defined below)
on the dealing day immediately preceding the date of the
announcement of the terms of issue of such Common Shares
(other than Common Shares issued on exercise of the conversion
rights attaching to the Third Preference Shares or any other
convertible securities or upon the exercise of any rights,
options or warrants or any other rights attaching to any
securities exchangeable for or carrying rights to subscribe
for Common Shares);
(3) the issue wholly for cash of securities which by their terms
of issue are convertible into or exchangeable or carry rights
of subscription for Common Shares to be issued by the Company
("Convertible Securities") at a consideration per Common Share
which is less than the current market price per Common Share
on the dealing day immediately preceding the date of the
announcement of the terms of issue of such Convertible
Securities or the modification of the rights of conversion or
exchange or subscription attaching to such Convertible
Securities (otherwise than pursuant to the terms attaching to
such Convertible Securities) in circumstances where, following
such adjustment, the consideration per Common Share shall be
less than the current market price per Common Share on the
dealing day immediately preceding the announcement of the
proposals for such modification;
(4) the issue of Common Shares credited as fully paid to the
Common Shareholders by way of capitalisation of profits or
reserves (other than Common Shares paid up out of
distributable profits or reserves or contributed surplus and
issued with an option to receive cash in lieu thereof or
Common Shares issued paid up as aforesaid in lieu of a cash
dividend, being in either such case a dividend which the
shareholders concerned would or could otherwise have received
and which would not have constituted a capital distribution
(as defined below);
(5) any capital distribution by the Company to the Common
Shareholders;
(6) the issue of Common Shares to Common Shareholders by way of
rights or the grant to Common Shareholders of options or
rights to subscribe for or purchase Common Shares in each case
at less than the current market price per Common Share on the
dealing day immediately preceding the date of the announcement
of the terms of such issue or grant; and
(7) the issue of any securities (other than Common Shares) to
Common Shareholders by way of rights or the grant to Common
Shareholders of options or warrants to subscribe for or
purchase any securities by way of rights.
<PAGE> 45
C-5
(H) (1) The Conversion Price is subject to adjustment in the
circumstances set out above as follows:
(a) If and whenever there shall be an alteration of the
nominal value of the Common Shares as a result of
consolidation or sub-division, the Conversion Price
shall be adjusted in relation to subsequent
conversions of the Third Preference Shares by
multiplying the Conversion Price in effect
immediately prior to such alteration by a fraction of
which the numerator shall be the nominal value of one
Common Share immediately after such alteration and of
which the denominator shall be the nominal value of
one Common Share immediately before such alteration
and such adjustment shall become effective
immediately after such alteration takes effect;
(b) If and whenever the Company shall issue wholly for
cash any Common Shares at less than the current
market price per Common Share on the dealing day
immediately preceding the date of the announcement of
the terms of issue of such Common Shares, (other than
Common Shares issued on exercise of the conversion
rights attaching to the Third Preference Shares or
issued pursuant to any of the transactions described
in sub-paragraphs (c), (f) and (g) of this paragraph
(H)(1)) the Conversion Price shall be adjusted in
relation to subsequent conversions of the Third
Preference Shares by multiplying the Conversion Price
in effect immediately prior to such issue by a
fraction of which the numerator shall be the number
of Common Shares outstanding immediately prior to the
issue of such additional Common Shares plus the
number of Common Shares which the aggregate
consideration receivable for the issue of such
additional Common Shares (determined as provided in
sub-paragraph (2) of this paragraph (H)) would
purchase at such current market price per Common
Share and of which the denominator shall be the
number of Common Shares outstanding immediately after
the issue of such additional Common Shares. Such
adjustment shall become effective as at the date upon
which such additional Common Shares shall be issued.
(c) (i) If and whenever the Company shall issue wholly
for cash any Convertible Securities (other than the
First Preference Shares, the Third Preference Shares
or any securities issued pursuant to any of the
transactions described in sub-paragraphs (f) and (g)
of this paragraph (H)(1)) and the consideration per
Common Share receivable by the Company upon
conversion or exchange of, or upon exercise of such
rights of subscription attached to, such securities
(determined as provided in sub-paragraph (2) of this
paragraph (H)) shall be less than the current market
price per Common Share on the dealing day immediately
preceding the date of the announcement of the terms
of issue of such Convertible Securities, the
Conversion Price shall be adjusted in relation to
subsequent conversions of the Third Preference Shares
by multiplying the Conversion Price in effect
immediately prior to such issue by a fraction of
which the numerator shall be the number of Common
Shares outstanding on such date of issue plus the
number of Common Shares which the aggregate
consideration receivable by the Company for the
Common Shares to be issued upon conversion or
exchange of, or upon exercise of the rights of
subscription attached to, such Convertible Securities
(assuming conversion or exchange, or the exercise of
such rights, in full) determined as provided in
sub-paragraph (b) of this paragraph (H)(1) would
purchase at such current
<PAGE> 46
C-6
market price per Common Share and of which the
denominator shall be the number of Common Shares
outstanding on such date of issue plus the number of
Common Shares to be issued upon conversion or
exchange of such Convertible Securities or upon
exercise of such rights of subscription attached
thereto at the initial conversion, exchange or
subscription price or rate (assuming conversion or
exchange, or the exercise of such rights, in full).
Such adjustment shall become effective as at the date
upon which such Convertible Securities shall be
issued.
(ii) If and whenever the rights of conversion or exchange
or subscription attached to any Convertible
Securities are modified (otherwise than pursuant to
the terms attaching to such Convertible Securities)
in circumstances where, following such modification,
the consideration per Common Share receivable by the
Company upon conversion or exchange of, or upon
exercise of such rights of subscription attached to,
such Convertible Securities (assuming conversion or
exchange, or the exercise of such rights, in full)
(determined as provided in sub-paragraph (b) of this
paragraph (H)(1)) shall be less than the current
market price per Common Share on the dealing day
immediately preceding the date of the announcement of
the proposals for such modification, the Conversion
Price shall be adjusted in relation to subsequent
conversions of the Third Preference Shares by
multiplying the Conversion Price in effect
immediately prior to such modification by a fraction
of which the numerator shall be the number of Common
Shares outstanding on such date of modification plus
the number of Common Shares which the aggregate
consideration receivable by the Company for the
Common Shares to be issued upon conversion or
exchange or upon exercise of the rights of
subscription attached to the Convertible Securities
so modified (determined as provided in sub-paragraph
(2) of this paragraph (H)) would purchase at such
current market price per Common Share, or, if lower,
the existing conversion, exchange or subscription
price or rate, and of which the denominator shall be
the number of Common Shares outstanding on such date
of modification plus the maximum number of Common
Shares to be issued upon conversion or exchange of
such Convertible Securities or upon exercise of such
rights of subscription attached thereto at the
modified conversion, exchange or subscription price
or rate. Such adjustment shall become effective as at
the date upon which such modification shall take
effect. A right of conversion, exchange or
subscription shall not be treated as modified for the
foregoing purposes where it is adjusted to take
account of rights and capitalisation issues and other
events normally giving rise to adjustment of
conversion terms.
(d) If and whenever the Company shall issue any Common
Shares credited as fully paid to Common Shareholders
by way of capitalisation of profits or reserves
(other than Common Shares paid up out of
distributable profits or reserves or contributed
surplus and issued with an option to receive cash in
lieu thereof or Common Shares issued paid up as
aforesaid in lieu of a cash dividend, being in either
such case a dividend which the Common Shareholders
concerned would or could otherwise have received and
which would not have constituted a capital
distribution), the Conversion Price shall be adjusted
in relation to subsequent conversions of the Third
Preference Shares by multiplying the Conversion Price
in effect immediately prior to such issue by a
fraction of which the numerator shall be the
aggregate nominal
<PAGE> 47
C-7
value of the issued Common Shares immediately before
such issue and of which the denominator shall be the
aggregate nominal value of the issued Common Shares
immediately after such issue and such adjustment
shall become effective as at the date upon which such
additional Common Shares shall be issued.
(e) If and whenever the Company shall make any capital
distribution to the Common Shareholders, then, except
where the Conversion Price falls to be adjusted under
sub-paragraph (d) of this paragraph (H)(1), the
Conversion Price shall be adjusted in relation to
subsequent conversions of the Third Preference Shares
by multiplying the Conversion Price in effect
immediately prior to such capital distribution by a
fraction of which the numerator shall be the current
market price per Common Share after the Operative
Date (as defined below) and the denominator shall be
the current market price per Common Share on the
dealing day immediately preceding the Operative Date.
Such adjustment shall become effective as at the date
on which the capital distribution is actually made.
(f) If and whenever the Company shall issue to the Common
Shareholders any Common Shares by way of rights or
shall grant to the Common Shareholders any options or
rights to subscribe for or purchase Common Shares in
each case at, less than the current market price per
Common Share on the dealing day immediately preceding
the date of the announcement of the terms of such
issue or grant, the Conversion Price shall be
adjusted in relation to subsequent conversions of the
Third Preference Shares by multiplying the Conversion
Price in effect immediately prior to such date of
announcement by a fraction of which the numerator
shall be the number of Common Shares outstanding on
such date of announcement plus the number of Common
Shares which the aggregate amount payable for such
options or rights and for the total number of Common
Shares comprised therein would purchase at such
current market price per Common Share and of which
the denominator shall be the number of Common Shares
outstanding on such date of announcement plus the
aggregate number of additional Common Shares issued
or, as the case may be, comprised in the grant. Such
adjustment shall become effective as at the date of
issue of such Common Shares or the date of grant of
such options or rights (as the case may be).
(g) If and whenever the Company shall issue any
securities (other than Common Shares) by way of
rights to the Common Shareholders or shall grant any
options or warrants to the Common Shareholders to
subscribe for or purchase any securities by way of
rights (whether in any such case such securities are
of the Company or any other company, but excluding
any issue or grant which may result in an adjustment
of the Conversion Price pursuant to sub-paragraphs
(c) or (f) of this paragraph (H)(1)), the Conversion
Price shall be adjusted in relation to subsequent
conversions of the Third Preference Shares by
multiplying the Conversion Price in effect
immediately prior to the date of the announcement of
the terms of such issue or grant by the fraction:
D - E
-----
D
<PAGE> 48
C-8
where:
D is the current market price per Common Share
on the dealing day immediately preceding
such date of announcement; and
E is the fair market value as at such date of
announcement (as determined in good faith by
an internationally recognised merchant or
investment bank selected by the Company) of
the portion of the rights attributable to
one Common Share.
Such adjustment shall become effective as at the date
of issue of such securities or the date of grant of
such options or warrants (as the case may be).
(h) Where an event which gives or may give rise to an
adjustment to the Conversion Price occurs in such
proximity in time to another such event that in the
opinion of the Company the foregoing provisions would
need to be operated subject to some modification in
order to give the intended result, such modification
shall be made in the operation of the foregoing
provisions as may be advised by an internationally
recognised merchant or investment bank (selected by
the Company) to be in its opinion appropriate in
order to give such intended result.
(2) For the purposes of any calculation of the consideration
receivable pursuant to sub-paragraphs (b) or (c) of paragraph
(H)(1) the following provisions shall be applicable:-
(a) the aggregate consideration receivable for Common
Shares issued for cash shall be the amount of such
cash, provided that in no case shall any deduction be
made for any commissions or any expenses paid or
incurred by the Company for any underwriting of the
issue or otherwise in connection therewith; and
(b) (i) the aggregate consideration receivable for the
Common Shares to be issued upon the conversion or
exchange of any Convertible Securities shall be
deemed to be the consideration received or receivable
by the Company for such Convertible Securities and
(ii) the aggregate consideration receivable for the
Common Shares to be issued upon the exercise of
rights of subscription attached to any Convertible
Securities shall be deemed to be that part of the
consideration received or receivable by the Company
for such Convertible Securities which is attributed
by the Company to such rights of subscription or, if
no part of such consideration is so attributed, the
fair market value of such rights of subscription as
at the date of the announcement of the terms of issue
of such Convertible Securities (as determined in good
faith by an internationally recognised merchant or
investment bank selected by the Company), plus in the
case of (i) and (ii) above the additional minimum
consideration (if any) to be received by the Company
upon the conversion or exchange of such Convertible
Securities, or upon the exercise of such rights of
subscription attached thereto (the consideration in
all such cases to be determined subject to the
proviso in (a) immediately above) and (iii) the
consideration per Common Share receivable by the
Company upon the conversion or exchange of, or upon
the exercise of such rights of subscription
<PAGE> 49
C-9
attached to, such Convertible Securities shall be the
aggregate consideration referred to in (i) or (ii)
above (as the case may be) (converted into U.S.
dollars if expressed in a currency other than U.S.
dollars at such rate of exchange as may be determined
by a bank selected by the Company to be the spot rate
ruling at the close of business on the date of
announcement of the terms of issue of such
Convertible Securities) divided by the number of
Common Shares to be issued upon such conversion or
exchange or exercise at the initial conversion,
exchange or subscription price or rate.
(3) If the Conversion Date in relation to any Third Preference
Share shall be after the record date for any such issue,
distribution or grant (as the case may be) as is mentioned in
sub-paragraphs (d) to (g) inclusive of paragraph (H)(1) or
after the record date for any such issue as is mentioned in
sub-paragraph (b) or (c) of paragraph (H)(1) which is made to
the Common Shareholders or any of them but before the date of
issue of the Common Shares or other securities (in the case of
sub-paragraphs (b), (c) and (d) of paragraph (H)(1)) or before
the date that the capital distribution is actually made (in
the case of sub-paragraph (e) of paragraph (H)(1)) or before
the date on which the issue or grant is made (in the case of
sub-paragraph (f) or (g) of paragraph (H)(1)), the Company
shall procure that there shall be issued to the converting
Third Preference Shareholder or in accordance with the
instructions contained in the Conversion Notice (subject to
any applicable exchange control or other regulations) such
additional number of Common Shares as, together with the
Common Shares issued or to be issued on conversion of the
relevant Third Preference Shares, is equal to the number of
Common Shares which would have been required to be issued on
conversion of such Third Preference Shares if the relevant
adjustment (more particularly referred to in the said
sub-paragraphs) to the Conversion Price had in fact been made
immediately after the relevant record date. Such additional
Common Shares will be allotted as at, and within 28 days
after, the relevant Conversion Date and certificates for such
Common Shares will be dispatched within 28 days after the
relevant issue, distribution or grant.
(4) The following expressions where used in this paragraph (4) of
this Schedule shall have the following meanings:
(a) "announcement" shall include the release of an
announcement to the press or the delivery or
transmission by telephone, telex or otherwise of an
announcement to The Stock Exchange and "date of
announcement" shall mean the date on which the
announcement is first so released, delivered or
transmitted;
(b) "capital distribution" shall mean:
(i) any distribution of assets in specie whether
on a reduction of capital or otherwise (and
for these purposes a distribution of assets
in specie includes an issue of shares or
other securities credited as fully or partly
paid up by way of capitalisation of reserves
or other rights not referred to in
sub-clause (1) of this paragraph (H)) but
excluding (aa) a distribution of assets in
specie in lieu of, and to a value not
exceeding, a cash dividend which would not
have constituted a capital distribution
under sub-paragraph (ii) of this definition;
and (bb) a distribution of Common Shares
issued pursuant to Bye-Law 84B or
<PAGE> 50
C-10
issued in circumstances where such
capitalisation was made in conjunction with
a cash option pursuant to a resolution of
the Directors under Bye-Law 84A; and
(ii) any cash dividend or distribution of any
kind whatsoever described unless
(aa) it is paid out of the aggregate of
the net profits (less losses)
attributable to the Members for all
periods after 31st December, 1986
as shown in the audited
consolidated accounts of the
Company and its Subsidiaries; or
(bb) to the extent that (aa) immediately
above does not apply, the rate of
that dividend or distribution,
together with all other dividends
and distributions on the class of
capital in question charged or
provided for in the accounts of the
Company for the financial period in
question, does not exceed the
aggregate rate of dividend and
distribution on such class of
capital charged or provided for in
the accounts for the last preceding
financial period, and in computing
such rate such adjustments shall be
made as are, in the opinion of the
Auditors, appropriate in the
circumstances to make a fair
comparison;
(c) "the Closing Price" for any day shall mean
the average of the quotations of a Common
Share on that day as shown in The Stock
Exchange Daily Official List for that day;
(d) "current market price per Common Share" on
the dealing day immediately preceding any
date shall mean the average of the Closing
Prices of a Common Share on The Stock
Exchange for each of the 5 consecutive
dealing days ending immediately before such
date and "current market price per Common
Share" after any date shall mean the average
of the Closing Prices of a Common Share on
The Stock Exchange for each of the 5
consecutive dealing days commencing with the
dealing day after such date. If at any time
during the said 5-day period the Common
Shares shall have been quoted ex dividend
and during some other part of that period
the Common Shares shall have been quoted cum
dividend then the Closing Prices on the
dates on which the Common Shares shall have
been quoted ex dividend shall for the
purpose of this definition be deemed to be
the amount thereof increased by an amount
equal to the amount of that dividend per
Common Share. The said average shall be
certified by the Company's stockbrokers for
the time being or by such other person as
shall be selected by the Company and when so
certified shall be binding on all concerned.
The said average as so certified shall be
converted into U.S. dollars at such rate of
exchange as may be determined by a bank
selected by the Company to be the spot rate
ruling at the close of business on the last
of the 5 relevant dealing days. The price so
determined shall, if appropriate, be
adjusted in such manner as may be determined
in good faith by an internationally
recognised merchant or investment bank
selected by the Company as necessary to
exclude
<PAGE> 51
C-11
therefrom any investment currency or other
premium included therein by reason or as a
result of the operation of any exchange
control or other applicable laws, rules or
regulations;
(e) "dealing day" means a day on which The Stock
Exchange is open for business;
(f) "employees' share scheme" shall mean a
scheme for encouraging or facilitating the
holding of shares or debentures in a company
by or for the benefit of:-
(a) the bona fide Directors or former
Directors or employees or former
employees of the Company, the
Company's subsidiary or holding
companies or a subsidiary of any of
the Company's holding companies, or
(b) the wives, husbands, widows,
widowers or children or
step-children under the age of 18
of such employees or former
employees;
(g) "equity share capital" shall mean, in
relation to a company, its issued share
capital excluding any part of that capital
which, neither as respects dividends nor as
respects capital, carries any right to
participate beyond a specified amount in a
distribution;
(h) "issue" shall include allot;
(i) "Operative Date" shall mean the first date
on which the Common Shares in question shall
be quoted on The Stock Exchange ex the
benefit of the capital distribution in
question;
(j) "record date" in relation to any issue of
Common Shares, securities, rights, options
or warrants or any dividend or capital
distribution shall mean the date as at which
Common Shareholders must be registered in
order to participate therein;
(k) "reserves" shall include unappropriated
profits;
(l) "rights" shall include rights in whatsoever
form issued;
(m) "The Stock Exchange" shall mean The
International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited
or such other internationally recognised
stock exchange as shall from time to time be
determined in good faith by an
internationally recognised merchant or
investment bank selected by the Company to
be the main market for the Common Shares.
(5) No adjustment will be made if it would result in an increase
in the Conversion Price (otherwise than by reason of a
consolidation of Common Shares pursuant to sub-paragraph (a)
of paragraph (H)(1)).
<PAGE> 52
C-12
(6) The Conversion Price shall not be reduced so that on
conversion share capital would fall to be issued at a
discount.
(7) No adjustment will be made to the Conversion Price where
Common Shares or other securities or options, warrants or
rights to subscribe for Common Shares or other securities are
issued (i) to employees (including Directors) of the Company
or any Subsidiary in exercise of rights pursuant to any
employees' share scheme or to the trustees of any employees'
share scheme or (ii) pursuant to any option arrangements
entered into between the Company and/or any of the
Subsidiaries prior to 7th April, 1987.
(8) If, so long as any Conversion Right attaching to any Third
Preference Share remains exercisable, a resolution is passed,
or an order of a court of competent jurisdiction is made, that
the Company be wound up or dissolved, notice thereof shall
forthwith be given to the Third Preference Shareholders in
accordance with these Bye-Laws and each Third Preference
Shareholder shall (whether or not the Conversion Right
attaching to his Third Preference Share is then otherwise
exercisable) be entitled at any time after the passing of such
resolution or (as the case may be) the making of such order
until the expiration of six weeks after the date of such
notice (but not thereafter) to elect (by delivering as
aforesaid his Third Preference Share and the Conversion Notice
duly completed and otherwise complying with these provisions
for conversion) to be treated as if his Third Preference Share
had been converted at the date of the passing of such
resolution or (as the case may be) the making of such order.
Subject as provided in this sub-paragraph (8), the Conversion
Right shall lapse in the event of a resolution being passed or
an order of a court of competent jurisdiction being made that
the Company be wound up or dissolved. Dividends on any Third
Preference Share treated as so converted shall cease to accrue
as from the date of the passing of such resolution or (as the
case may be) the making of such order.
(9) If the Third Preference Shares shall become immediately due
and redeemable prematurely (otherwise than because of the
passing of a resolution or the making of an order of a court
of competent jurisdiction for the winding up or dissolution of
the Company) notice of such fact shall forthwith be given to
the Third Preference Shareholders in accordance with these
Bye-Laws and each Third Preference Shareholder shall (whether
or not the Conversion Right attaching to his Third Preference
Share is then otherwise exercisable) be entitled at any time
after the date on which the Third Preference Shares become so
redeemable until the expiration of six weeks after the date of
such notice to the Third Preference Shareholders (but not
thereafter) to elect (by delivering as aforesaid his Third
Preference Share and a Conversion Notice duly completed and
otherwise complying with these provisions for conversion), in
lieu of having his Third Preference Share redeemed, to convert
such Third Preference Share as at the date the Third
Preference Shares shall have become so redeemable. Subject as
provided in this sub-paragraph, the Conversion Right shall
lapse in the event that the Third Preference Shares shall
become so redeemable.
(10) A Third Preference Shareholder exercising his Conversion
Rights must pay all taxes and stamp, issue and registration
duties (if any) arising on conversion in any jurisdiction
(other than any capital or stamp duties payable in Bermuda and
all expenses of obtaining a listing for Common Shares, in each
case arising on conversion of the Third Preference Shares,
which shall be payable by the Company).
<PAGE> 53
C-13
(11) No adjustment will be made to the Conversion Price where such
adjustment would be less than one per cent. of the Conversion
Price then applicable. On any adjustment, the resultant
Conversion Price will be rounded down to the nearest penny.
Any adjustment not required to be made and any amount by which
the Conversion Price has been rounded down will be carried
forward and taken into account in any subsequent adjustment.
Third Preference Shareholders will be given notice of all
adjustments to the Conversion Price in accordance with these
Bye-Laws.
(I) So long as any Conversion Right attaching to any Third
Preference Share shall remain exercisable the Company will
(unless such sanction has been given by the Third Preference
Shareholders as would be required for a variation of the
special rights attaching to the Third Preference Shares save
that for the purposes of varying sub-paragraphs (2), (3) or
(4) below only a simple majority of the Third Preference
Shareholders shall be required):-
(1) keep available for issue free from pre-emptive rights
out of its authorised but unissued share capital such
number of Common Shares as would enable the
Conversion Rights and all other rights for the time
being outstanding of conversion into or exchange or
subscription for Common Shares to be satisfied in
full;
(2) not make any reduction of share capital, share
premium account or capital redemption reserve fund
involving any repayment to shareholders whether in
cash or in specie (other than to shareholders having
the right on a winding up of the Company to return of
capital in priority to the Common Shareholders) or
reduce any uncalled liability in respect thereof
unless in any such case the same gives rise (or would
but for the fact that the adjustment would be less
than one per cent. of the Conversion Price then in
effect give rise) to an adjustment of the Conversion
Price in accordance with these provisions for
conversion;
(3) not issue or pay up any securities by way of
capitalisation of profits or reserves other than (a)
by the issue of Common Shares to the Common
Shareholders (including the issue of Common Shares
pursuant to Bye-Law 84B or issued in circumstances
where such capitalisation was made in conjunction
with a cash option pursuant to a resolution of the
Directors under Bye-Law 84A) or (b) by the issue of
fully paid equity share capital (other than Common
Shares) to the holders of equity share capital of the
same class;
(4) not in any way modify the rights attaching to the
Common Shares as such or create or issue or permit to
be in issue any other class of equity share capital
carrying any right which is more favourable than the
corresponding right attaching to the Common Shares or
attach any special rights or privileges to any such
other class of equity share capital PROVIDED THAT
nothing in this sub-paragraph (4) shall prevent (a)
the issue of any equity share capital to staff and
employees (including Directors) of the Company or any
of the Subsidiaries or (b) any consolidation or
sub-division of the Common Shares;
(5) procure that at no time shall there be in issue
Common Shares of differing nominal values;
<PAGE> 54
C-14
(6) not make any issue, grant or distribution or take any
other action if the effect thereof would be that on
the exercise of the Conversion Rights it would be
required to issue Common Shares at a discount;
(7) if an offer is made to all Common Shareholders (or
all Common Shareholders other than the offeror and/or
company controlled by the offeror and/or persons
acting in concert with the offeror) to acquire all or
a proportion of the Common Shares, forthwith give
notice of such offer to the Third Preference
Shareholders in accordance with these Bye-Laws and
use all reasonable endeavours to procure that a like
offer is extended to the holders of any Common Shares
allotted or issued pursuant to the exercise by Third
Preference Shareholders of their Conversion Rights by
reference to a Conversion Date falling during the
period of such offer;
(8) simultaneously with the announcement of the terms of
any issue pursuant to sub-paragraphs (b) or (c) of
paragraph (H)(1), give notice to the Third Preference
Shareholders in accordance with these Bye-Laws
advising them of the date on which the relevant
adjustment of the Conversion Price is likely to
become effective and of the effect of exercising
their Conversion Rights pending such date;
(9) before the issue of any Common Shares or other
securities or the grant of any options or rights
pursuant to sub-paragraphs (b), (c), (f) or (g) of
paragraph (H)(1) (other than pursuant to an
employees' share scheme or to the trustees of an
employees' share scheme or pursuant to any option
arrangements entered into between the Company and/or
any of the Subsidiaries prior to 7th April, 1987),
make an announcement of the terms of issue or grant;
(10) not make any issue or grant pursuant to
sub-paragraphs (c) or (g) of paragraph (H)(1) unless
the internationally recognised merchant or investment
bank referred to in sub-paragraph (g) of paragraph
(H)(1) has been selected by the Company and has
agreed to make the determination of the fair market
value required by that sub-paragraph;
(11) whenever the Conversion Price falls to be adjusted
within fourteen days thereafter give notice to the
Third Preference Shareholders in accordance with
these Bye-Laws of the adjusted Conversion Price and
the date on which such adjustment takes effect;
(12) use all reasonable endeavours (a) to maintain a
listing for all the issued Common Shares on The Stock
Exchange or on such other equivalent internationally
recognised stock exchange (a "recognised stock
exchange") as the Company may from time to time
determine, (b) to obtain and maintain a listing on
The Stock Exchange (or a recognised stock exchange)
for all the Common Shares issued on the exercise of
the Conversion Rights attaching to the Third
Preference Shares and (c) to obtain a listing for all
the Common Shares issued on the exercise of the
Conversion Rights attaching to the Third Preference
Shares on any other stock exchange on which any of
the Common Shares are for the time being listed and
will forthwith give notice to the Third
<PAGE> 55
C-15
Preference Shareholders in accordance with these
Bye-Laws of the listing or delisting of the Common
Shares (as a class) by any such stock exchange; and
(l3) ensure that all Common Shares issued upon conversion
of Third Preference Shares will be duly and validly
issued fully paid and registered.
(iv) AS REGARDS VOTING
The Third Preference Shares shall not confer on the holders
thereof the right to receive notice of, or to attend and vote
at, a General Meeting of the Company, unless:-
(a) at the date when the notices of a General Meeting are
sent out the fixed cumulative dividend is six months
or more in arrears in which event the relevant Third
Preference Shares shall confer on the holders thereof
the right to receive notice of, and to attend and
vote at, that General Meeting; or
(b) a resolution is to be proposed at a General Meeting
for winding up the Company or which directly affects
the rights or privileges of the Third Preference
Shareholders, in which event the Third Preference
Shares shall confer on the holders thereof the right
to receive notice of, and to attend and vote at, that
General Meeting, save that such holders may not vote
upon any business dealt with at such General Meeting
except the election of a Chairman, any motion for
adjournment and the resolution for winding up or
which directly affects the rights and privileges of
the Third Preference Shareholders.
Where Third Preference Shareholders are entitled to vote on
any resolution, then at the relevant General Meeting on a show
of hands every Third Preference Shareholder who is present in
person or (being a corporation) present by a representative or
by proxy shall have one vote and on a poll every Third
Preference Shareholder who is present in person or (being a
corporation) present by a representative or by proxy shall
have such number of votes as he would have been entitled to as
a Common Shareholder if, immediately prior to such meeting, he
had exercised his Conversion Right in respect of all his Third
Preference Shares.
The provisions in these Bye-Laws relating to General Meetings
shall apply mutatis mutandis to all meetings of the Third
Preference Shareholders as a class.
(v) AS REGARDS REDEMPTION AND COMPULSORY CONVERSION
(A) Final Redemption
Unless previously redeemed or converted, the Company
shall be obliged to redeem on 3rd January, 2002 all
the Third Preference Shares then issued and
outstanding at the Issue Amount thereof together with
in each case a sum equal to any arrears or accruals
of dividend thereon to be calculated down to and
inclusive of the date of such redemption.
(B) Purchase
Subject to the provisions of the Companies Acts, the
Company or any of the Subsidiaries may at any time
purchase any of the Third Preference Shares at
<PAGE> 56
C-16
any price. The Directors are hereby authorised
pursuant to Section 42A of The Companies Act 1981 of
Bermuda to take all steps required to effect any such
purchase.
(C) Redemption at the Option of the Company
(a) The Company may, having given not less than
30 nor more than 60 days' notice to the
Third Preference Shareholders (which notice
shall be irrevocable), redeem all the Third
Preference Shares, or from time to time some
only, on or at any time after the date which
is 30 days after the Exchange Date at the
following redemption prices (expressed as
percentages of the Issue Amount of the Third
Preference Shares):
<TABLE>
<CAPTION>
Period ending 2nd January, Redemption price
<S> <C> <C> <C> <C> <C>
1988 ... ... ... ... 107 per cent.
1989 ... ... ... ... 106 per cent.
1990 ... ... ... ... 105 per cent.
1991 ... ... ... ... 104 per cent.
1992 ... ... ... ... 103 per cent.
1993 ... ... ... ... 102 per cent.
1994 ... ... ... ... 101 per cent.
and thereafter ... ... 100 per cent.
</TABLE>
together with in each case a sum equal to
any arrears or accruals of the dividend
thereon, to be calculated down to and
inclusive of the date of such redemption,
provided, however, that the Third Preference
Shares may not be so redeemed prior to 3rd
January, 1994 unless the average of the
Closing Price (as defined in paragraph
(2)(iii) of this Schedule) per Common Share,
on each dealing day on which there was such
a Closing Price within the 30 day period
ending on the fifteenth day immediately
preceding the date upon which notice of
redemption is first published in accordance
with these Bye-Laws, shall have been at
least 130 per cent. of the average of the
Conversion Price in effect or deemed to be
in effect on each such dealing day as
provided herein and provided further that
any notice of redemption given under this
paragraph (c) (a) to expire on or after 3rd
January, 1994 shall not prejudice the right
of any Third Preference Shareholder under
paragraph (E) below.
(b) If the Company would be required for reasons
outside its control to pay additional
amounts as provided in paragraph (4)(vi) of
this Schedule the Company may at its option
having given not less than 30 nor more than
60 days' notice to the Third Preference
Shareholders (which notice shall be
irrevocable) redeem all but not some only of
the Third Preference Shares at the Issue
Amount thereof together with in each case a
sum equal to any arrears or accruals of the
dividend thereon to be calculated down to
and inclusive of the date of such
redemption.
<PAGE> 57
C-17
(D) Conversion at the Option of the Company
The Company may, having given not less than 30 nor
more than 60 days' notice of the compulsory
conversion date to the Third Preference Shareholders
(which notice shall be irrevocable), on or at any
time after the Exchange Date, require the Third
Preference Shareholders to convert all outstanding
Third Preference Shares into Common Shares, provided
that the Company may not so require unless the
average of the Closing Price per Common Share, on
each dealing day on which there was such a Closing
Price within the 30 day period ending on the
fifteenth day immediately preceding the date upon
which notice of conversion is first published in
accordance with these Bye-Laws, shall have been at
least 130 per cent. of the average of the Conversion
Price in effect or deemed to be in effect on each
such dealing day as provided herein.
Upon such conversion the Third Preference
Shareholders will be required prior to such
compulsory conversion date to deliver to the Company
a statement as to non-U.S. beneficial ownership and
to pay any taxes and stamp, issue and registration
duties which may arise on conversion, both as set out
in paragraph (4)(iii) of this Schedule. In the event
that either of such requirements are not fulfilled by
the compulsory conversion date, the Company will sell
the relevant Common Shares which would have been
issued on conversion and the net proceeds (together
with any sum in respect of fractions but after
deduction of the expenses of sale) will be
distributed in due course to the relevant former
Third Preference Shareholders. If such net proceeds
in relation to any one holding amount to less than
U.S.$5 they will be retained for the benefit of the
Company.
(E) Redemption at the Option of the Third Preference
Shareholders
(a) The Company will, at the option of the
holder of any Third Preference Share, redeem
such Third Preference Share on 3rd January,
1994 at 119.625 per cent. of the Issue
Amount thereof together with in each case a
sum equal to any arrears or accruals of the
dividend thereon to be calculated down to
and inclusive of the date of such
redemption. To exercise such option the
holder must deposit the certificate for such
Third Preference Share at the office of the
Registrar not less than 45 nor more than 60
days prior to such date, together with a
duly completed notice requiring such
redemption in such form as may be specified
by the Directors. The certificate for any
such Third Preference Share, if so
deposited, may not be withdrawn without the
prior consent of the Company. Not less than
30 nor more than 45 days' notice of the
commencement of the period for the deposit
of certificates for Third Preference Shares
for redemption pursuant to this
sub-paragraph shall be published by the
Company in accordance with these Bye-Laws.
(b) The holders of at least 10 per cent. in
nominal value of the Third Preference Shares
then outstanding may give notice to the
Company that the Third Preference Shares
are, and they shall thereby become,
immediately redeemable at the Issue Amount
thereof together with in each case a sum
equal to any arrears or accruals of the
fixed dividend
<PAGE> 58
C-18
thereon to be calculated down to and
inclusive of the date of redemption in any
of the following events ("Redemption
Events"):-
(i) if, after the same shall have become due for
payment, default is made for a period of 7
days or more in the payment of the nominal
amount or premium or for a period of 14 days
or more in the payment of dividend after the
deemed due date therefore set out in
paragraph (4)(i) of this Schedule in respect
of the Third Preference Shares or any of
them; or
(ii) if the Company fails to perform or observe
any other obligation or right in respect of
the Third Preference Shares and such failure
continues for the period of 30 days next
following the service by any Third
Preference Shareholder on the Company of
notice requiring the same to be remedied; or
(iii) if any loan or other indebtedness for
borrowed money of the Company or any
Principal Subsidiary (as defined below)
having in any such case an aggregate
outstanding principal amount of at least
U.S.$5,000,000 (or its equivalent in any
other currency or currencies) becomes due
and repayable prematurely by reason of a
default on the part of the Company or any
Principal Subsidiary (notice of which
default has been served on the Company or
the relevant Principal Subsidiary (as the
case may be) and the same has not been
remedied by the Company or such Principal
Subsidiary within a period of 14 days of
receipt of such notice) or the Company or
any Principal Subsidiary fails to make any
repayment of principal in respect thereof on
the due date for such payment as extended by
any applicable grace period as originally
provided or within 14 days of such due date
(whichever is the longer) or if default is
made by the Company or any Principal
Subsidiary in making any payment due under
any guarantee and/or indemnity given by it
on the due date for such payment as extended
by any applicable grace period as originally
provided or within 14 days of such due date
(whichever is the longer) having in any such
case an aggregate principal amount of at
least U.S.$5,000,000 (or its equivalent in
any other currency or currencies). Provided
that nothing in sub-paragraph
(4)(v)(E)(b)(iii) shall apply to any loan or
other indebtedness alleged to be owing by
the Company or any of the Subsidiaries to a
third party (not being a bank or other
financial institution) and which is being
contested by the Company or any of the
Subsidiaries in good faith; or
(iv) if any order shall be made by any competent
court or resolution effectively passed for
the winding up or dissolution of the Company
or any Principal Subsidiary except where: -
(a) such winding up or dissolution is
for the purposes of a
reconstruction, reorganisation,
merger or amalgamation; or
<PAGE> 59
C-19
(b) such winding up is a members'
voluntary winding up of a Principal
Subsidiary in the course of which
the whole or substantially the
whole of the assets available for
distribution are distributed and
transferred to the Company or
another Subsidiary, in which event
the transferee (unless it is the
Company or a Principal Subsidiary)
shall become a Principal
Subsidiary; or
(c) such winding up is a creditors'
voluntary winding up of a Principal
Subsidiary in which the Company
and/or another Subsidiary are the
only creditors; or
(v) if the Company or any Principal Subsidiary
shall cease to carry on the whole or
substantially the whole of its business,
save in connection with the transfer by one
Principal Subsidiary of the whole or any
part of its business to the Company or to
another Subsidiary (in which event the
transferor shall thereupon cease to be a
Principal Subsidiary) and save that neither
a disposal on arm's length terms of the
whole or any part of the issued share
capital of any company (including a
Principal Subsidiary) or of the whole or any
part of the business, undertaking and/or
assets of a Principal Subsidiary nor any of
the events described in the exception to
sub-paragraph (4)(v)(E)(b)(iv) of this
Schedule shall be deemed to be a cessation
for the purposes of this sub-paragraph; or
(vi) if the Company or any Principal Subsidiary
shall stop payment or shall be unable to, or
shall admit inability to, pay its debts as
they fall due in any such case in respect of
a debt or debts of an aggregate principal
amount of at least U.S.$5,000,000 (or its
equivalent in any other currency or
currencies); or
(vii) if a receiver, administrator or other
similar official shall be appointed in
relation to the Company or any Principal
Subsidiary or in relation to the whole or
substantially the whole of the assets of any
of them in respect of a debt or debts of an
aggregate amount of at least U.S.$5,000,000
(or its equivalent in any other currency or
currencies) or an encumbrancer shall take
possession of any assets in respect of a
debt or debts of an aggregate principal
amount of at least U.S.$5,000,000 (or its
equivalent in any other currency or
currencies) or a distress or execution or
other process for the recovery or
enforcement of any debt shall be levied or
enforced upon or sued out against the whole
or substantially the whole of the assets of
the Company or any Principal Subsidiary in
respect of a debt or debts of an aggregate
amount of at least U.S.$5,000,000 (or its
equivalent in any other currency or
currencies), and in any of the foregoing
cases the same shall not be discharged or
removed within 30 days, provided that this
sub-paragraph (vii) shall not apply to any
asset acquired by the Company or any
Principal Subsidiary
<PAGE> 60
C-20
in the 12 month period prior to the
appointment of such receiver, administrator
or other similar official or the taking of
possession, levying of distress or execution
or other such process referred to above; or
(viii) if the Company or any Principal Subsidiary
shall initiate or consent to judicial
proceedings relating to itself under any
applicable liquidation, insolvency,
composition, reorganisation or other similar
laws or shall make a conveyance or
assignment for the benefit of, or shall
enter into any composition or other
arrangement with, its creditors generally
except where:
(a) such proceedings are for the
purpose of a reconstruction,
reorganisation, merger or
amalgamation;
(b) such proceedings relate to a
members' voluntary winding up of a
Principal Subsidiary in the course
of which the whole or substantially
the whole of the assets available
for distribution are distributed
and transferred to the Company or
another Subsidiary, in which event
the transferee (unless it is the
Company or a Principal Subsidiary)
shall thereupon become a Principal
Subsidiary; or
(c) such proceedings relate to a
creditors' voluntary winding up of
a Principal Subsidiary in which the
Company and/or another Subsidiary
are the only creditors.
For this purpose a Principal Subsidiary at
any time shall mean (i) a Subsidiary whose
net profits (before taxation and
extraordinary items) (consolidated in the
case of a Subsidiary which itself has
subsidiaries) or gross revenues
(consolidated in the case of a subsidiary
which itself has subsidiaries) in each case
attributable to the Company represents not
less than 20 per cent of the consolidated
net profits (before taxation and
extraordinary items) or, as the case may be,
consolidated gross revenues of the Company
and the Subsidiaries taken as a whole (in
each case attributable to the Company), all
as calculated by reference to the then
latest audited accounts (consolidated or, as
the case may be, unconsolidated) of such
Subsidiary and the then latest consolidated
audited accounts of the Company and the
Subsidiaries, (provided that (a) a
Subsidiary the net profits (before taxation
and extraordinary items) and gross revenues
of which (consolidated in the case of a
Subsidiary which itself has subsidiaries)
were not consolidated for the purpose of
preparing the latest consolidated audited
accounts of the Company shall be treated as
though it were not a Subsidiary for the
purposes of this definition and may
not therefore be a Principal Subsidiary;
<PAGE> 61
C-21
(b) if, in the case of any Subsidiary which
itself has subsidiaries, no consolidated
accounts are prepared and audited, its
consolidated net profits (before taxation
and extraordinary items) and consolidated
gross revenues shall be determined on the
basis of pro forma consolidated accounts of
the relevant Subsidiary and its subsidiaries
prepared for this purpose by the Auditors of
the Company or the auditors for the time
being of the relevant Subsidiary; and (c) a
Subsidiary acquired within a 12 month period
of any relevant event shall not be treated
for the purposes of this definition as a
Subsidiary and may not therefore be a
Principal Subsidiary) and (ii) Henlys Group
Limited ("Henlys"), until the earlier of 1st
July, 1988 and the date, if any, on which
the beneficial ownership by the Company
and/or any of the Subsidiaries in the total
issued share capital (on a fully diluted
basis, assuming full conversion of all
shares and other securities convertible into
issued voting shares) of Henlys falls below
50.1 per cent.
A report by the Auditors of the Company that
in their opinion a Subsidiary is or is not a
Principal Subsidiary shall, in the absence
of manifest error, be conclusive and binding
on all parties.
In the case of a partial redemption of Third
Preference Shares, the Third Preference
Shares to be redeemed will be selected
individually by lot in such place as the
Directors may select and in such manner as
the Directors shall deem to be appropriate
and fair, not more than 60 days prior to the
date fixed for redemption and a list of
Third Preference Shares called for
redemption will be published by the Company
in accordance with these Bye-Laws not less
than 30 days prior to such date.
The Company shall give notice to the Third
Preference Shareholders of any date fixed
for redemption (other than final redemption)
and the place at which certificates for such
Third Preference Shares are to be presented
for redemption. Upon any date for redemption
each Third Preference Shareholder shall be
bound to deliver to the Company at such
place the certificates for the Third
Preference Shares held by him in order that
the same may be cancelled. Upon such date
the Third Preference Shares shall be
redeemed and upon delivery on such date or
thereafter of the relevant Third Preference
Share certificates (or an appropriate form
of indemnity) the Company shall pay to each
such holder or former holder (or, in the
case of joint holders, to the holder whose
name stands first in the Register in respect
of such Third Preference Shares) the amount
due to him in respect of such redemption.
<PAGE> 62
C-22
(vi) AS REGARDS TAXATION
All payments of the nominal amount, premium and
dividend will be made without withholding or
deduction for or on account of any present or future
taxes, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of
Bermuda or any authority therein or thereof having
power to tax unless the withholding or deduction of
such taxes, duties, assessments or governmental
charges is required by law. In that event, the
Company will pay such additional amounts as may be
necessary in order that the net amounts received by
the Third Preference Shareholders after such
withholding or deduction shall equal the respective
amounts of the nominal amount, premium and dividend
which would have been receivable in respect of the
Third Preference Shares in the absence of such
withholding or deduction, except that no such
additional amounts shall be payable with respect to
any Third Preference Shareholder:
(a) who is liable to such taxes, duties,
assessments or governmental charges in
respect of his Third Preference Share(s) by
reason of his having some connection with
Bermuda other than being a Third Preference
Shareholder; or
(b) receiving such payment in Bermuda and who
would be able to avoid such withholding or
deduction by satisfying any statutory
requirements or by making a declaration of
non-residence or other similar claim for
exemption to the Bermudian tax authority but
fails to do so.
(vii) AS REGARDS NOTICES
Notices to Third Preference Shareholders will be
given in accordance with Bye-Law 95 and, so long as
the Third Preference Shares are listed on the
Luxembourg Stock Exchange, by publication in the
Luxemburger Wort in Luxembourg or such other
newspaper in Luxembourg as shall be designated by the
Company for such purposes.
(viii) CONVERSION RATES
Where pursuant to this Bye-Law any amount is required
to be converted into U.S. dollars such amount shall
be translated into U.S. dollars on the relevant date
by reference (where practicable) to the average of
the spot rates of exchange quoted at the close of
business on such day by an internationally recognised
merchant or investment bank selected by the Company
and (where not so practicable) by reference to such
other rates and/or dates as the Directors may
consider fair and reasonable.
(ix) AS REGARDS PRESCRIPTION
The holders of Third Preference Shares who have
failed to claim distributions and/or rights within 12
years of their having been made available to them
will not thereafter be able to claim such
distributions and/or rights.
<PAGE> 63
D-1
(5) The rights attaching to the Fourth Preference Shares shall be as
follows: -
(i) AS REGARDS INCOME
Each holder of a Fourth Preference Share (a "Fourth Preference
Shareholder") shall be entitled in priority to any payment of dividend
or other distribution on or in respect of any other class of shares of
the Company (other than shares ranking pari passu with the Fourth
Preference Shares) to a fixed cumulative preferential dividend at the
rate of 6 per cent per annum on the aggregate of the capital and
premium paid up on issue of such Fourth Preference Share (for the
purposes of this paragraph (5), the "Issue Amount"), to be paid, if and
so far as in the opinion of the Directors the profits of the Company
justify such payments, half-yearly on 3rd April and 3rd October in each
year in respect of the half years ending on those dates, except that
the first such payment at the aforesaid rate will be payable on 3rd
April, 1988 in respect of the period from the issue of the Fourth
Preference Shares to 3rd April, 1988. The Fourth Preference Shares
shall not entitle the holders thereof to any further or other right of
participation in the profits of the Company. The Fourth Preference
Shares shall rank for dividend pari passu as between themselves.
Dividends shall be calculated on the basis of a 360 day year consisting
of 12 months of 30 days each. Payments of such dividends and any other
distributions in respect of the Fourth Preference Shares (including
payments due on redemption) will be made (except in respect of any
dividend payable before the Exchange Date (as defined in sub-paragraph
(5)(iii)(B) of this Schedule)) by the Company posting a dividend
warrant or cheque in U.S. dollars to the registered addresses of the
Fourth Preference Shareholders as at the relevant record date for this
purpose (being the fifteenth day prior to the relevant 3rd April or 3rd
October (as the case may be)), unless any other manner of payment is
agreed by the Directors.
(ii) AS REGARDS CAPITAL
On a return of capital on liquidation or otherwise (but not on
redemption) the assets of the Company available for distribution among
the Members shall be applied in priority to any payment to the holders
of any other class of shares of the Company (other than shares ranking
pari passu with the Fourth Preference Shares), save as provided below,
in repaying the aggregate Issue Amount of the Fourth Preference Shares,
together with a sum equal to any arrears or accruals of the fixed
dividend thereon, to be calculated down to and inclusive of the date of
the return of such aggregate Issue Amount and to be payable whether or
not such dividend has been declared or earned, but the Fourth
Preference Shares shall not entitle the holders thereof to any further
or other right of participation in the assets of the Company. The
Fourth Preference Shares shall rank for return of the Issue Amount in
respect of each such Fourth Preference Share on liquidation or
otherwise pari passu as between themselves.
So long as any Conversion Right (as defined below) attaching to any
Fourth Preference Share shall remain exercisable the Company will
(unless such sanction has been given by the Fourth Preference
Shareholders as would be required for a variation of the special rights
attaching to the Fourth Preference Shares) not create and issue any
preference shares ranking as regards order in the participation in the
profits of the Company or in the assets of the Company on a winding up
or otherwise in priority to the Fourth Preference Shares, but the
Company may issue, without obtaining the consent of the Fourth
Preference Shareholders, preference shares ranking pari passu, in the
circumstances specified above, with the Fourth Preference Shares and
carrying such rights as to dividend, voting, redemption, conversion or
otherwise as the Company in Special General Meeting may determine.
<PAGE> 64
D-2
(iii) AS REGARDS CONVERSION
(A) A Fourth Preference Shareholder shall have the right, subject to the
provisions mentioned below, to convert all or any of his Fourth
Preference Shares into fully paid Common Shares (for the purposes of
this paragraph (5), the "Conversion Right"). The price at which Common
Shares shall be issued upon conversion (for the purposes of this
paragraph (5), the "Conversion Price") shall initially be 191p per
Common Share (with a Fourth Preference Share taken at the Issue Amount
thereof, at a fixed exchange rate of (pound)1 = U.S. $1.617) but shall
be subject to adjustment in the circumstances set out below in the
manner provided herein. The Conversion Right in respect of any Fourth
Preference Share shall terminate at the end of the eighth day prior to
any date fixed for redemption thereof as set out under paragraph (5)(v)
of this Schedule, unless there is default in making payment of the
redemption moneys due on such date, in which event the Conversion Right
shall extend up to and including the date on which the full amount of
such redemption moneys has been paid to the relevant Fourth Preference
Shareholder.
(B) The Conversion Right shall be exercisable at any time, save during the
periods mentioned herein and subject to the Companies Acts and any
other applicable fiscal or other laws or regulations, after the date
falling 90 days after completion of the distribution of the Fourth
Preference Shares, as determined by the Directors (for the purposes of
this paragraph (5), the "Exchange Date") up to and including 20th
September, 2002 (such period, for the purposes of this paragraph (5),
being hereinafter called the "Conversion Period"), by completing the
notice of conversion in such form as may be specified by the Directors
in respect of the Fourth Preference Shares to be converted (for the
purposes of this paragraph (5) a "Conversion Notice") and delivering
the same, together with the certificates for such Fourth Preference
Shares and with such other evidence (if any) as the Directors may
reasonably require to prove the title of the person exercising such
right and payment of all taxes and stamp, issue and registration duties
(if any) arising on conversion in any jurisdiction (other than any
capital or any stamp duties payable in Bermuda which shall be payable
by the Company) to the office of the Registrar or to the office of any
agent of the Company appointed for such purpose at any time during the
Conversion Period. A Conversion Notice once given may not be withdrawn
without the consent in writing of the Company.
Conversion shall take place on the business day (in the place of
delivery) after delivery of the Conversion Notice (together with the
relevant certificates, evidence and payment) to the office of the
Registrar or the office of the agent referred to above (such date
being, for the purposes of this paragraph (5), hereinafter called the
"Conversion Date").
(C) Conversion of the Fourth Preference Shares may be effected in such
manner as the Directors shall, subject to the provisions of these
Bye-Laws and the Companies Acts, from time to time determine and
without prejudice to the generality of the foregoing may be effected by
the redemption of Fourth Preference Shares at par. In the case of a
conversion effected by means of the redemption of Fourth Preference
Shares, the Directors may effect redemption of the relative Fourth
Preference Shares out of the amount paid up on such Fourth Preference
Shares, out of profits of the Company which would otherwise be
available for dividend, out of the proceeds of a fresh issue of shares
or in any other manner for the time being permitted by law. In the case
of redemption out of such profits the Directors shall apply the
redemption moneys in the name of the holder of the Fourth Preference
Share to be converted in subscribing for the appropriate number of
fully paid Common Shares at such premium (if any) as shall represent
the amount by which the redemption moneys exceed the nominal amount of
the Common
<PAGE> 65
D-3
Shares to be subscribed. In the case of redemption out of the proceeds
of a fresh issue of shares, the Directors may arrange for the issue of
the appropriate number of Common Shares to some person selected by the
Directors on terms that such person will:
(a) subscribe for such Common Shares at par or at such premium as
shall be necessary to provide the redemption moneys for the
redemption at par of the relative Fourth Preference Shares;
and
(b) renounce the allotment of such Common Shares in favour of the
holder of the relative Fourth Preference Shares against
payment to such subscriber by the Company of the redemption
moneys in respect of the Fourth Preference Shares so redeemed.
(D) The Fourth Preference Shares so converted shall carry the right to a
fixed preferential dividend on such Fourth Preference Shares in respect
of all periods up to and including the end of the half-year ending on
3rd April or 3rd October, as the case may be, preceding the relevant
Conversion Date but not in respect of any subsequent period. Fourth
Preference Shares surrendered for conversion during the period from the
close of business on any record date for entitlement to any fixed
preferential dividends in respect of such Fourth Preference Shares
immediately preceding 3rd April or 3rd October (as the case may be) to
the opening of business on such 3rd April or 3rd October (as the case
may be) must be accompanied by payment of an amount equal to the
relevant fixed preferential dividend thereon which the registered
holder is to receive.
(E) Notwithstanding the foregoing, unless the Company elects in its sole
discretion to register the Common Shares to be issued upon the
conversion of Fourth Preference Shares under the Securities Act of 1933
of the United States or determines that an exemption from the
registration requirements of the said Act is applicable, no Conversion
Notice shall be effective unless it includes a statement that the
beneficial owner of the Fourth Preference Shares, and of the Common
Shares to be issued upon conversion thereof, either (i) is not a U.S.
person and such Fourth Preference Shares are not being converted with a
view to, or in connection with, any offer, sale or delivery of such
Common Shares in the United States or to a U.S. person or (ii) is a
sophisticated institutional investor in the United States which
purchased the Fourth Preference Shares in connection with their
original issuance and agrees not to offer, sell or deliver the Common
Shares acquired upon conversion in the United States or to U.S.
persons. As used herein, "United States" means the United States of
America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its
jurisdiction; and "U.S. person" means a citizen or resident of the
United States, any corporation, partnership or other entity created or
organised in or under the laws of the United States and any estate or
trust the income of which is subject to United States federal income
taxation regardless of its source.
(F) (1) A certificate for the Common Shares to which any Fourth Preference
Shareholder shall become entitled in consequence of exercising his
Conversion Right shall be issued not later than 28 days after the
relevant Conversion Date and such Common Shares shall rank pari passu
with the Common Shares in issue at the relevant Conversion Date, save
that they will not be entitled to any dividends or other distributions
declared, paid or made either in respect of any financial period ended
prior to such Conversion Date or by reference to a record date prior to
such Conversion Date.
(2) No fraction of a Common Share will be issued on conversion but
(except in respect of cases where such cash payment would amount to
less than U.S $5 in respect of any single holding) a
<PAGE> 66
D-4
cash payment in U.S. dollars will be made to any converting Fourth
Preference Shareholder in respect of any such fraction. If with any one
Conversion Notice more than one Fourth Preference Share shall fall to
be converted into Common Shares, to be registered in the same name, the
number of Common Shares to be issued on conversion thereof and any sum
payable in respect of fractions shall be calculated on the basis of the
aggregate Issue Amount of the Fourth Preference Shares to be converted.
(G) The Conversion Price shall be subject to adjustment in the following
circumstances: -
(1) any alteration of the nominal value of the Common Shares as a
result of consolidation or sub-division;
(2) the issue wholly for cash of any Common Shares at less than
the current market price per Common Share (as defined below)
on the dealing day immediately preceding the date of the
announcement of the terms of issue of such Common Shares
(other than Common Shares issued on exercise of the conversion
rights attaching to the Fourth Preference Shares or any other
convertible securities or upon the exercise of any rights,
options or warrants or any other rights attaching to any
securities exchangeable for or carrying rights to subscribe
for Common Shares);
(3) the issue wholly for cash of securities which by their terms
of issue are convertible into or exchangeable or carry rights
of subscription for Common Shares to be issued by the Company
("Convertible Securities") at a consideration per Common Share
which is less than the current market price per Common Share
on the dealing day immediately preceding the date of the
announcement of the terms of issue of such Convertible
Securities or the modification of the rights of conversion or
exchange or subscription attaching to such Convertible
Securities (otherwise than pursuant to the terms attaching to
such Convertible Securities) in the circumstances where,
following such adjustment, the consideration per Common Share
shall be less than the current market price per Common Share
on the dealing day immediately preceding the announcement of
the proposals for such modification;
(4) the issue of Common Shares credited as fully paid to the
Common Shareholders by way of capitalisation of profits or
reserves (other than Common Shares paid up out of
distributable profits or reserves or contributed surplus and
issued with an option to receive cash in lieu thereof or
Common Shares issued paid up as aforesaid in lieu of a cash
dividend, being in either such case a dividend which the
shareholders concerned would or could otherwise have received
and which would not have constituted a capital distribution
(as defined below);
(5) any capital distribution by the Company to the Common
Shareholders;
(6) the issue of Common Shares to Common Shareholders by way of
rights or the grant to Common Shareholders of options or
rights to subscribe for or purchase Common Shares, in each
case at less than the current market price per Common Share on
the dealing day immediately preceding the date of the
announcement of the terms of such issue or grant; and
(7) the issue of any securities (other than Common Shares) to
Common Shareholders by way of rights or the grant to Common
Shareholders of options or warrants to subscribe for or
purchase any securities by way of rights.
<PAGE> 67
D-5
(H) (1) The Conversion Price is subject to adjustment in the
circumstances set out above follows:-
(a) If and whenever there shall be an alteration of the
nominal value of the Common Shares as a result of
consolidation or sub-division, the Conversion Price
shall be adjusted in relation to subsequent
conversions of the Fourth Preference Shares by
multiplying the Conversion Price in effect
immediately prior to such alteration by a fraction of
which the numerator shall be the nominal value of one
Common Share immediately after such alteration and of
which the denominator shall be the nominal value of
one Common Share immediately before such alteration
and such adjustment shall become effective
immediately after such alteration takes effect;
(b) If and whenever the Company shall issue wholly for
cash any Common Shares at less than the current
market price per Common Share on the dealing day
immediately preceding the date of the announcement of
the terms of issue of such Common Shares (other than
Common Shares issued on exercise of the conversion
rights attaching to the Fourth Preference Shares or
issued pursuant to any of the transactions described
in sub-paragraphs (c), (f) and (g) of this paragraph
(H)(1)) the Conversion Price shall be adjusted in
relation to subsequent conversions of the Fourth
Preference Shares by multiplying the Conversion Price
in effect immediately prior to such issue by a
fraction of which the numerator shall be the number
of Common Shares outstanding immediately prior to the
issue of such additional Common Shares plus the
number of Common Shares which the aggregate
consideration receivable for the issue of such
additional Common Shares (determined as provided in
sub-paragraph (2) of this paragraph (H)) would
purchase at such current market price per Common
Share and of which the denominator shall be the
number of Common Shares outstanding immediately after
the issue of such additional Common Shares. Such
adjustment shall become effective as at the date upon
which such additional Common Shares shall be issued.
(c) (i) If and whenever the Company shall issue wholly
for cash any Convertible Securities (other than the
First Preference Shares, the Third Preference Shares,
the Fourth Preference Shares or any securities issued
pursuant to any of the transactions described in
sub-paragraphs (f) and (g) of this paragraph (H) (1))
and the consideration per Common Share receivable by
the Company upon conversion or exchange of, or upon
exercise of such rights of subscription attached to,
such securities (determined as provided in
sub-paragraph (2) of this paragraph (H)) shall be
less than the current market price per Common Share
on the dealing day immediately preceding the date of
the announcement of the terms of issue of such
Convertible Securities, the Conversion Price shall be
adjusted in relation to subsequent conversions of the
Fourth Preference Shares by multiplying the
Conversion Price in effect immediately prior to such
issue by a fraction of which the numerator shall be
the number of Common Shares outstanding on such date
of issue plus the number of Common Shares which the
aggregate consideration receivable by the Company for
the Common Shares to be issued upon conversion or
exchange of, or upon exercise of the rights of
subscription attached to, such Convertible Securities
(assuming conversion or exchange, or the exercise of
such rights, in full) determined as
<PAGE> 68
D-6
provided in sub-paragraph (b) of this paragraph
(H)(1) would purchase at such current market price
per Common Share and of which the denominator shall
be the number of Common Shares outstanding on such
date of issue plus the number of Common Shares to be
issued upon conversion or exchange of such
Convertible Securities or upon exercise of such
rights of subscription attached thereto at the
initial conversion, exchange or subscription price
or rate (assuming conversion or exchange, or the
exercise of such rights, in full). Such adjustment
shall become effective as at the date upon which
such Convertible Securities shall issued.
(ii) If and whenever the rights of conversion or
exchange or subscription attached to any Convertible
Securities are modified (otherwise than pursuant to
the terms attaching to such Convertible Securities)
in circumstances where, following such modification,
the consideration per Common Share receivable by the
Company upon conversion or exchange of, or upon
exercise of such rights of subscription attached to,
such Convertible Securities (assuming conversion or
exchange, or the exercise of such rights, in full)
(determined as provided in sub-paragraph (b) of this
paragraph (H)(1)) shall be less than the current
market price per Common Share on the dealing day
immediately preceding the date of the announcement of
the proposals for such modification, the Conversion
Price shall be adjusted in relation to subsequent
conversions of the Fourth Preference Shares by
multiplying the Conversion Price in effect
immediately prior to such modification by a fraction
of which the numerator shall be the number of Common
Shares outstanding on such date of modification plus
the number of Common Shares which the aggregate
consideration receivable by the Company for the
Common Shares to be issued upon conversion or
exchange or upon exercise of the rights of
subscription attached to the Convertible Securities
so modified (determined as provided in sub-paragraph
(2) of this paragraph (H)) would purchase at such
current market price per Common Share, or, if lower,
the existing conversion, exchange or subscription
price or rate, and of which the denominator shall be
the number of Common Shares outstanding on such date
of modification plus the maximum number of Common
Shares to be issued upon conversion or exchange of
such Convertible Securities or upon exercise of such
rights of subscription attached thereto at the
modified conversion, exchange or subscription price
or rate. Such adjustment shall become effective as at
the date upon which such modification shall take
effect. A right of conversion, exchange or
subscription shall not be treated as modified for
the foregoing purposes where it is adjusted to take
account of rights and capitalisation issues and other
events normally giving rise to adjustment of
conversion terms.
(d) If and whenever the Company shall issue any Common
Shares credited as fully paid to Common Shareholders
by way of capitalisation of profits or reserves
(other than Common Shares paid up out of
distributable profits or reserves or contributed
surplus and issued with an option to receive cash in
lieu thereof or Common Shares issued paid up as
aforesaid in lieu of a cash dividend, being in either
such case a dividend which the Common Shareholders
concerned would or could otherwise have received and
which would not have constituted a capital
distribution), the Conversion Price shall be adjusted
in relation to subsequent conversions of the Fourth
Preference Shares by multiplying the Conversion Price
in effect immediately prior to such issue by a
<PAGE> 69
D-7
fraction of which the numerator shall be the
aggregate nominal value of the issued Common Shares
immediately before such issue and of which the
denominator shall be the aggregate nominal value of
the issued Common Shares immediately after such issue
and such adjustment shall become effective as at the
date upon which such additional Common Shares shall
be issued.
(e) If and whenever the Company shall make any capital
distribution to the Common Shareholders, then, except
where the Conversion Price falls to be adjusted under
sub-paragraph (d) of this paragraph (H)(1), the
Conversion Price shall be adjusted in relation to
subsequent conversions of the Fourth Preference
Shares by multiplying the Conversion Price in effect
immediately prior to such capital distribution by a
fraction of which the numerator shall be the current
market price per Common Share after the Operative
Date (as defined below) and the denominator shall be
the current market price per Common Share on the
dealing day immediately preceding the Operative Date.
Such adjustment shall become effective as at the date
on which the capital distribution is actually made.
(f) If and whenever the Company shall issue to the Common
Shareholders any Common Shares by way of rights or
shall grant to the Common Shareholders any options or
rights to subscribe for or purchase Common Shares in
each case at, less than the current market price per
Common Share on the dealing day immediately preceding
the date of the announcement of the terms of such
issue or grant, the Conversion Price shall be
adjusted in relation to subsequent conversions of the
Fourth Preference Shares by multiplying the
Conversion Price in effect immediately prior to such
date of announcement by a fraction of which the
numerator shall be the number of Common Shares
outstanding on such date of announcement plus the
number of Common Shares which the aggregate amount
payable for such options or rights and for the total
number of Common Shares comprised therein would
purchase at such current market price per Common
Share and of which the denominator shall be the
number of Common Shares outstanding on such date of
announcement plus the aggregate number of additional
Common Shares issued or, as the case may be,
comprised in the grant. Such adjustment shall become
effective as at the date of issue of such Common
Shares or the date of grant of such options or rights
(as the case may be).
(g) If and whenever the Company shall issue any
securities (other than Common Shares) by way of
rights to the Common Shareholders or shall grant any
options or warrants to the Common Shareholders to
subscribe for or purchase any securities by way of
rights (whether in any such case such securities are
of the Company or any other company, but excluding
any issue or grant which may result in an adjustment
of the Conversion Price pursuant to sub-paragraphs
(c) or (f) of this paragraph (H)(1)), the Conversion
Price shall be adjusted in relation to subsequent
conversions of the Fourth Preference Shares by
multiplying the Conversion Price in effect
immediately prior to the date of the announcement of
the terms of such issue or grant by the fraction:
D - E
-----
D
<PAGE> 70
D-8
where:
D is the current market price per Common Share
on the dealing day immediately preceding
such date of announcement; and
E is the fair market value as at such date of
announcement (as determined in good faith by
an internationally recognised merchant or
investment bank selected by the Company) of
the portion of the rights attributable to
one Common Share.
Such adjustment shall become effective as at the date
of issue of such securities or the date of grant of
such options or warrants (as the case may be).
(h) Where an event which gives or may give rise to an
adjustment to the Conversion Price occurs in such
proximity in time to another such event that in the
opinion of the Company the foregoing provisions would
need to be operated subject to some modification in
order to give the intended result, such modification
shall be made in the operation of the foregoing
provisions as may be advised by an internationally
recognised merchant or investment bank (selected by
the Company) to be in its opinion appropriate in
order to give such intended result.
(2) For the purposes of any calculation of the consideration
receivable pursuant to sub-paragraphs (b) or (c) of paragraph
(H) (1) the following provisions shall be applicable:-
(a) the aggregate consideration receivable for Common
Shares issued for cash shall be the amount of such
cash, provided that in no case shall any deduction be
made for any commissions or any expenses paid or
incurred by the Company for any underwriting of the
issue or otherwise in connection therewith; and
(b) (i) the aggregate consideration receivable for the
Common Shares to be issued upon the conversion or
exchange of any Convertible Securities shall be
deemed to be the consideration received or receivable
by the Company for such Convertible Securities and
(ii) the aggregate consideration receivable for the
Common Shares to be issued upon the exercise of
rights of subscription attached to any Convertible
Securities shall be deemed to be that part of the
consideration received or receivable by the Company
for such Convertible Securities which is attributed
by the Company to such rights of subscription or, if
no part of such consideration is so attributed, the
fair market value of such rights of subscription as
at the date of the announcement of the terms of issue
of such Convertible Securities (as determined in good
faith by an internationally recognised merchant or
investment bank selected by the Company), plus in the
case of (i) and (ii) above the additional minimum
consideration (if any) to be received by the Company
upon the
<PAGE> 71
D-9
conversion or exchange of such Convertible
Securities, or upon the exercise of such rights of
subscription attached thereto (the consideration in
all such cases to be determined subject to the
proviso in (a) immediately above) and (iii) the
consideration per Common Share receivable by the
Company upon the conversion or exchange of, or upon
the exercise of such rights of subscription attached
to, such Convertible Securities shall be the
aggregate consideration referred to in (i) or (ii)
above (as the case may be) (converted into U.S.
dollars if expressed in a currency other than U.S.
dollars at such rate of exchange as may be determined
by a bank selected by the Company to be the spot rate
ruling at the close of business on the date of
announcement of the terms of issue of such
Convertible Securities) divided by the number of
Common Shares to be issued upon such conversion or
exchange or exercise at the initial conversion,
exchange or subscription price or rate.
(3) If the Conversion Date in relation to any Fourth Preference
Share shall be after the record date for any such issue,
distribution or grant (as the case may be) as is mentioned in
sub-paragraphs (d) to (g) inclusive of paragraph (H) (1) or
after the record date for any such issue as is mentioned in
sub-paragraph (b) or (c) of paragraph (H) (1) which is made to
the Common Shareholders or any of them but before the date of
issue of the Common Shares or other securities (in the case of
sub-paragraphs (b), (c) and (d) of paragraph (H)(1)) or before
the date that the capital distribution is actually made (in
the case of sub-paragraph (e) of paragraph (H) (1)) or before
the date on which the issue or grant is made (in the case of
sub-paragraph (f) or (g) of paragraph (H)(1)), the Company
shall procure that there shall be issued to the converting
Fourth Preference Shareholder or in accordance with the
instructions contained in the Conversion Notice (subject to
any applicable exchange control or other regulations) such
additional number of Common Shares as, together with the
Common Shares issued or to be issued on conversion of the
relevant Fourth Preference Shares, is equal to the number of
Common Shares which would have been required to be issued on
conversion of such Fourth Preference Shares if the relevant
adjustment (more particularly referred to in the said
sub-paragraphs) to the Conversion Price had in fact been made
immediately after the relevant record date. Such additional
Common Shares will be allotted as at, and within 28 days
after, the relevant Conversion Date and certificates for such
Common Shares will be dispatched within 28 days after the
relevant issue, distribution or grant.
(4) The following expressions where used in this paragraph (5) of
this Schedule shall have the following meanings:
(a) "announcement" shall include the release of an
announcement to the press or the delivery or
transmission by telephone, telex or otherwise of an
announcement to The Stock Exchange and "date of
announcement" shall mean the date on which the
announcement is first so released, delivered or
transmitted;
(b) "capital distribution" shall mean:
(i) any distribution of assets in specie whether
on a reduction of capital or otherwise (and
for these purposes a distribution of assets
in specie includes an issue of shares or
other securities credited as fully or partly
paid up by way of capitalisation of reserves
or other rights not referred to in
sub-clause (1) of this paragraph (H)) but
excluding (aa) a distribution of assets in
specie in lieu of, and to a value not
exceeding, a cash dividend which would not
have constituted a capital distribution
under sub-paragraph (ii) of this definition;
and (bb) a
<PAGE> 72
D-10
distribution of Common Shares issued
pursuant to Bye-Law 84B or issued in
circumstances where such capitalisation was
made in conjunction with a cash option
pursuant to a resolution of the Directors
under Bye-Law 84A; and
(ii) any cash dividend or distribution of any
kind whatsoever described unless
(aa) it is paid out of the aggregate of
the net profits (less losses)
attributable to the Members for all
periods after 31st December, 1986
as shown in the audited
consolidated accounts of the
Company and its Subsidiaries; or
(bb) to the extent that (aa) immediately
above does not apply, the rate of
that dividend or distribution,
together with all other dividends
and distributions on the class of
capital in question charged or
provided for in the accounts of the
Company for the financial period in
question, does not exceed the
aggregate rate of dividend and
distribution on such class of
capital charged or provided for in
the accounts for the last preceding
financial period, and in computing
such rate such adjustments shall be
made as are, in the opinion of the
Auditors, appropriate in the
circumstances to make a fair
comparison;
(c) "the Closing Price" for any day shall mean the
average of the quotations of a Common Share on that
day as shown in The Stock Exchange Daily Official
List for that day;
(d) "current market price per Common Share" on the
dealing day immediately preceding any date shall mean
the average of the Closing Prices of a Common Share
on The Stock Exchange for each of the 5 consecutive
dealing days ending immediately before such date and
"current market price per Common Share" after any
date shall mean the average of the Closing Prices of
a Common Share on The Stock Exchange for each of the
5 consecutive dealing days commencing with the
dealing day after such date. If at any time during
the said 5-day period the Common Shares shall have
been quoted ex dividend and during some other part of
that period the Common Shares shall have been quoted
cum dividend then the Closing Prices on the dates on
which the Common Shares shall have been quoted ex
dividend shall for the purpose of this definition be
deemed to be the amount thereof increased by an
amount equal to the amount of that dividend per
Common Share. The said average shall be certified by
the Company's stockbrokers for the time being or by
such other person as shall be selected by the Company
and when so certified shall be binding on all
concerned. The said average as so certified shall be
converted into U.S. dollars at such rate of exchange
as may be determined by a bank selected by the
Company to be the spot rate ruling at the close of
business on the last of the 5 relevant dealing days.
The price so determined shall, if appropriate, be
adjusted in such manner as may be determined in good
faith by an internationally recognised merchant or
investment bank selected by the Company as necessary
to exclude therefrom any investment currency or
<PAGE> 73
D-11
other premium included therein by reason or as a
result of the operation of any exchange control or
other applicable laws, rules or regulations;
(e) "dealing day" means a day on which The Stock Exchange
is open for business;
(f) "employees' share scheme" shall mean a scheme for
encouraging or facilitating the holding of shares or
debentures in a company by or for the benefit of:-
(a) the bona fide Directors or former Directors
or employees or former employees of the
Company, the Company's subsidiary or holding
companies or a subsidiary of any of the
Company's holding companies, or
(b) the wives, husbands, widows, widowers or
children or step-children under the age of
18 of such employees or former employees;
(g) "equity share capital" shall mean, in relation to a
company, its issued share capital excluding any part
of that capital which, neither as respects dividends
nor as respects capital, carries any right to
participate beyond a specified amount in a
distribution;
(h) "issue" shall include allot;
(i) "Operative Date" shall mean the first date on which
the Common Shares in question shall be quoted on The
Stock Exchange ex the benefit of the capital
distribution in question;
(j) "record date" in relation to any issue of Common
Shares, securities, rights, options or warrants or
any dividend or capital distribution shall mean the
date as at which Common Shareholders must be
registered in order to participate therein;
(k) "reserves" shall include unappropriated profits;
(l) "rights" shall include rights in whatsoever form
issued;
(m) "The Stock Exchange" shall mean The International
Stock Exchange of the United Kingdom and the Republic
of Ireland Limited or such other internationally
recognised stock exchange as shall from time to time
be determined in good faith by an internationally
recognised merchant or investment bank selected by
the Company to be the main market for the Common
Shares.
(5) No adjustment will be made if it would result in an increase
in the Conversion Price (otherwise than by reason of a
consolidation of Common Shares pursuant to sub-paragraph (a)
of paragraph (H) (1)).
(6) The Conversion Price shall not be reduced so that on
conversion share capital would fall to be issued at a
discount.
<PAGE> 74
D-12
(7) No adjustment will be made to the Conversion Price where
Common Shares or other securities or options, warrants or
rights to subscribe for Common Shares or other securities are
issued (i) to employees (including Directors) of the Company
or any Subsidiary in exercise of rights pursuant to any
employees' share scheme or to the trustees of any employees'
share scheme or (ii) pursuant to any option arrangements
entered into by the Company and/or any of the Subsidiaries
prior to 17th August, 1987.
(8) If, so long as any Conversion Right attaching to any Fourth
Preference Share remains exercisable, a resolution is passed,
or an order of a court of competent jurisdiction is made, that
the Company be wound up or dissolved, notice thereof shall
forthwith be given to the Fourth Preference Shareholders in
accordance with these Bye-Laws and each Fourth Preference
Shareholder shall (whether or not the Conversion Right
attaching to his Fourth Preference Share is then otherwise
exercisable) be entitled at any time after the passing of such
resolution or (as the case may be) the making of such order
until the expiration of six weeks after the date of such
notice (but not thereafter) to elect (by delivering as
aforesaid his Fourth Preference Share and the Conversion
Notice duly completed and otherwise complying with these
provisions for conversion) to be treated as if his Fourth
Preference Share had been converted at the date of the passing
of such resolution or (as the case may be) the making of such
order. Subject as provided in this sub-paragraph (8), the
Conversion Right shall lapse in the event of a resolution
being passed or an order of a court of competent jurisdiction
being made that the Company be wound up or dissolved.
Dividends on any Fourth Preference Share treated as so
converted shall cease to accrue as from the date of the
passing of such resolution or (as the case may be) the making
of such order.
(9) If the Fourth Preference Shares shall become immediately due
and redeemable prematurely (otherwise than because of the
passing of a resolution or the making of an order of a court
of competent jurisdiction for the winding up or dissolution of
the Company) notice of such fact shall forthwith be given to
the Fourth Preference Shareholders in accordance with these
Bye-Laws and each Fourth Preference Shareholder shall (whether
or not the Conversion Right attaching to his Fourth Preference
Share is then otherwise exercisable) be entitled at any time
after the date on which the Fourth Preference Shares become so
redeemable until the expiration of six weeks after the date of
such notice to the Fourth Preference Shareholders (but not
thereafter) to elect (by delivering as aforesaid his Fourth
Preference Share and a Conversion Notice duly completed and
otherwise complying with these provisions for conversion), in
lieu of having his Fourth Preference Share redeemed, to
convert such Fourth Preference Share as at the date the Fourth
Preference Shares shall have become so redeemable. Subject as
provided in this sub-paragraph, the Conversion Right shall
lapse in the event that the Fourth Preference Shares shall
become so redeemable.
(10) A Fourth Preference Shareholder exercising his Conversion
Rights must pay all taxes and stamp, issue and registration
duties (if any) arising on conversion in any jurisdiction
(other than any capital or stamp duties payable in Bermuda and
all expenses of obtaining a listing for Common Shares, in each
case arising on conversion of the Fourth Preference Shares,
which shall be payable by the Company).
(11) No adjustment will be made to the Conversion Price where such
adjustment would be less than one per cent. of the Conversion
Price then applicable. On any adjustment, the resultant
Conversion Price will be rounded down to the nearest penny.
Any adjustment
<PAGE> 75
D-13
not required to be made and any amount by which the Conversion
Price has been rounded down will be carried forward and taken
into account in any subsequent adjustment. Fourth Preference
Shareholders will be given notice of all adjustments to the
Conversion Price in accordance with these Bye-Laws.
(I) So long as any Conversion Right attaching to any Fourth
Preference Share shall remain exercisable the Company will
(unless such sanction has been given by the Fourth Preference
Shareholders as would be required for a variation of the
special rights attaching to the Fourth Preference Shares save
that for the purposes of varying sub-paragraphs (2), (3) or
(4) below only a simple majority of the Fourth Preference
Shareholders shall be required):-
(1) keep available for issue free from pre-emptive rights
out of its authorised but unissued share capital such
number of Common Shares as would enable the
Conversion Rights and all other rights for the time
being outstanding of conversion into or exchange or
subscription for Common Shares to be satisfied in
full;
(2) not make any reduction of share capital, share
premium account or capital redemption reserve fund
involving any repayment to shareholders whether in
cash or in specie (other than to shareholders having
the right on a winding up of the Company to return of
capital in priority to the Common Shareholders) or
reduce any uncalled liability in respect thereof
unless in any such case the same gives rise (or would
but for the fact that the adjustment would be less
than one per cent. of the Conversion Price then in
effect give rise) to an adjustment of the Conversion
Price in accordance with these provisions for
conversion;
(3) not issue or pay up any securities by way of
capitalisation of profits or reserves other than (a)
by the issue of Common Shares to the Common
Shareholders (including the issue of Common Shares
pursuant to Bye-Law 84B or issued in circumstances
where such capitalisation was made in conjunction
with a cash option pursuant to a resolution of the
Directors under Bye-Law 84A) or (b) by the issue of
fully paid equity share capital (other than Common
Shares) to the holders of equity share capital of the
same class;
(4) not in any way modify the rights attaching to the
Common Shares as such or create or issue or permit to
be in issue any other class of equity share capital
carrying any right which is more favourable than the
corresponding right attaching to the Common Shares or
attach any special rights or privileges to any such
other class of equity share capital PROVIDED THAT
nothing in this sub-paragraph (4) shall prevent (a)
the issue of any equity share capital to staff and
employees (including Directors) of the Company or any
of the Subsidiaries or (b) any consolidation or
sub-division of the Common Shares;
(5) procure that at no time shall there be in issue
Common Shares of differing nominal values;
(6) not make any issue, grant or distribution or take any
other action if the effect thereof would be that on
the exercise of the Conversion Rights it would be
required to issue Common Shares at a discount;
<PAGE> 76
D-14
(7) if an offer is made to all Common Shareholders (or
all Common Shareholders other than the offeror and/or
company controlled by the offeror and/or persons
acting in concert with the offeror) to acquire all or
a proportion of the Common Shares, forthwith give
notice of such offer to the Fourth Preference
Shareholders in accordance with these Bye-Laws and
use all reasonable endeavours to procure that a like
offer is extended to the holders of any Common Shares
allotted or issued pursuant to the exercise by Fourth
Preference Shareholders of their Conversion Rights by
reference to a Conversion Date falling during the
period of such offer;
(8) simultaneously with the announcement of the terms of
any issue pursuant to sub-paragraphs (b) or (c) of
paragraph (H) (1), give notice to the Fourth
Preference Shareholders in accordance with these
Bye-Laws advising them of the date on which the
relevant adjustment of the Conversion Price is likely
to become effective and of the effect of exercising
their Conversion Rights pending such date;
(9) before the issue of any Common Shares or other
securities or the grant of any options or rights
pursuant to sub-paragraphs (b), (c), (f) or (g) of
paragraph (H)(1) (other than pursuant to an
employees' share scheme or to the trustees of an
employees' share scheme or pursuant to any option
arrangements entered into between the Company and/or
any of the Subsidiaries prior to 17th August, 1987),
make an announcement of the terms of issue or grant;
(10) not make any issue or grant pursuant to
sub-paragraphs (c) or (g) of paragraph (H)(1) unless
the internationally recognised merchant or investment
bank referred to in sub-paragraph (g) of paragraph
(H)(1) has been selected by the Company and has
agreed to make the determination of the fair market
value required by that sub-paragraph;
(11) whenever the Conversion Price falls to be adjusted
within fourteen days thereafter give notice to the
Fourth Preference Shareholders in accordance with
these Bye-Laws of the adjusted Conversion Price and
the date on which such adjustment takes effect;
(12) use all reasonable endeavours (a) to maintain a
listing for all the issued Common Shares on The Stock
Exchange or on such other equivalent internationally
recognised stock exchange (a "recognised stock
exchange") as the Company may from time to time
determine, (b) to obtain and maintain a listing on
The Stock Exchange (or a recognised stock exchange)
for all the Common Shares issued on the exercise of
the Conversion Rights attaching to the Fourth
Preference Shares and (c) to obtain a listing for all
the Common Shares issued on the exercise of the
Conversion Rights attaching to the Fourth Preference
Shares on any other stock exchange on which any of
the Common Shares are for the time being listed and
will forthwith give notice to the Fourth Preference
Shareholders in accordance with these Bye-Laws of the
listing or delisting of the Common Shares (as a
class) by any such stock exchange; and
(13) ensure that all Common Shares issued upon conversion
of Fourth Preference Shares will be duly and validly
issued fully paid and registered.
<PAGE> 77
D-15
(iv) AS REGARDS VOTING
The Fourth Preference Shares shall not confer on the holders thereof
the right to receive notice of, or to attend and vote at, a General
Meeting of the Company, unless:-
(a) at the date when the notices of a General Meeting are sent out
the fixed cumulative dividend is six months or more in arrears
in which event the relevant Fourth Preference Shares shall
confer on the holders thereof the right to receive notice of,
and to attend and vote at, that General Meeting; or
(b) a resolution is to be proposed at a General Meeting for
winding up the Company or which directly affects the rights or
privileges of the Fourth Preference Shareholders, in which
event the Fourth Preference Shares shall confer on the holders
thereof the right to receive notice of, and to attend and vote
at, that General Meeting, save that such holders may not vote
upon any business dealt with at such General Meeting except
the election of a Chairman, any motion for adjournment and the
resolution for winding up or which directly affects the rights
and privileges of the Fourth Preference Shareholders.
Where Fourth Preference Shareholders are entitled to vote on any
resolution, then at the relevant General Meeting on a show of hands
every Fourth Preference Shareholder who is present in person or (being
a corporation) present by a representative or by proxy shall have one
vote and on a poll every Fourth Preference Shareholder who is present
in person or (being a corporation) present by a representative or by
proxy shall have such number of votes as he would have been entitled to
as a Common Shareholder if, immediately prior to such meeting, he had
exercised his Conversion Right in respect of all his Fourth Preference
Shares.
The provisions in these Bye-Laws relating to General Meetings shall
apply mutatis mutandis to all meetings of the Fourth Preference
Shareholders as a class.
(v) AS REGARDS REDEMPTION AND COMPULSORY CONVERSION
(A) Final Redemption
Unless previously redeemed or converted, the Company shall be obliged
to redeem on 3rd October, 2002 each Fourth Preference Share then issued
and outstanding at its Issue Amount together with in each case a sum
equal to any arrears or accruals of dividend thereon to be calculated
down to and inclusive of the date of such redemption.
(B) Purchase
Subject to the provisions of the Companies Acts, the Company or any of
the Subsidiaries may at any time purchase any of the Fourth Preference
Shares at any price. The Directors are hereby authorised pursuant to
Section 42A of The Companies Act 1981 of Bermuda to take all steps
required to effect any such purchase.
(C) Redemption at the Option of the Company
(a) The Company may, having given not less than 30 nor more than
60 days' notice to the Fourth Preference Shareholders (which
notice shall be irrevocable), redeem all the
<PAGE> 78
D-16
Fourth Preference Shares, or from time to time some only, on
or at any time after the date which is 30 days after the
Exchange Date at the following redemption prices (expressed as
percentages of the Issue Amount):-
<TABLE>
<CAPTION>
Period ending 2nd October, Redemption price
<S> <C> <C> <C> <C> <C> <C> <C>
1988 ... ... ... ... 107 per cent.
1989 ... ... ... ... 106 per cent.
1990 ... ... ... ... 105 per cent.
1991 ... ... ... ... 104 per cent.
1992 ... ... ... ... 103 per cent.
1993 ... ... ... ... 102 per cent.
1994 ... ... ... ... 101 per cent.
and thereafter ... ... 100 per cent.
</TABLE>
together with in each case a sum equal to any arrears or
accruals of the dividend thereon, to be calculated down to and
inclusive of the date of such redemption, provided, however,
that the Fourth Preference Shares may not be so redeemed prior
to 3rd October, 1994 unless the average of the Closing Price
(as defined in paragraph (5) (iii) of this Schedule) per
Common Share, on each dealing day on which there was such a
Closing Price within the 30 day period ending on the fifteenth
day immediately preceding the date upon which notice of
redemption is first published in accordance with these
Bye-Laws, shall have been at least 130 per cent. of the
average of the Conversion Price in effect or deemed to be in
effect on each such dealing day as provided herein and
provided further that any notice of redemption given under
this paragraph (c) (a) to expire on or after 3rd October, 1994
shall not prejudice the right of any Fourth Preference
Shareholder under paragraph (E) below.
(b) If the Company would be required for reasons outside its
control to pay additional amounts as provided in paragraph (5)
(vi) of this Schedule the Company may at its option having
given not less than 30 nor more than 60 days' notice to the
Fourth Preference Shareholders (which notice shall be
irrevocable) redeem all but not some only of the Fourth
Preference Shares at the Issue Amount thereof together with in
each case a sum equal to any arrears or accruals of the
dividend thereon to be calculated down to and inclusive of the
date of such redemption.
(D) Conversion at the Option of the Company
The Company may, having given not less than 30 nor more than 60 days'
notice of the compulsory conversion date to the Fourth Preference
Shareholders (which notice shall be irrevocable), on or at any time
after the Exchange Date require the Fourth Preference Shareholders to
convert all outstanding Fourth Preference Shares into Common Shares,
provided that the Company may not so require unless the average of the
Closing Price per Common Share, on each dealing day on which there was
such a Closing Price within the 30 day period ending on the fifteenth
day immediately preceding the date upon which notice of conversion is
first published in accordance with these Bye-Laws, shall have been at
least 130 per cent. of the average of the Conversion Price in effect or
deemed to be in effect on each such dealing day as provided herein.
Upon such conversion the Fourth Preference Shareholders will be
required prior to such compulsory conversion date to deliver to the
Company a statement as to beneficial ownership and to pay any taxes and
stamp, issue and registration duties which may arise on conversion,
<PAGE> 79
D-17
both as set out in paragraph (5) (iii) of this Schedule. In the event
that either of such requirements are not fulfilled by the compulsory
conversion date, the Company will sell the relevant Common Shares which
would have been issued on conversion and the net proceeds (together
with any sum in respect of fractions but after deduction of the
expenses of sale) will be distributed in due course to the relevant
former Fourth Preference Shareholders.
(E) Redemption at the Option of the Fourth Preference Shareholders
(a) The Company will, at the option of the holder of any Fourth
Preference Share, redeem such Fourth Preference Share on 3rd
October, 1994 at 138.375 per cent. of the Issue Amount thereof
together with in each case a sum equal to any arrears or
accruals of the dividend thereon to be calculated down to and
inclusive of the date of such redemption. To exercise such
option the holder must deposit the certificate for such Fourth
Preference Share at the office of the Registrar not less than
45 nor more than 60 days prior to such date, together with a
duly completed notice requiring such redemption in such form
as may be specified by the Directors. The certificate for any
such Fourth Preference Share, if so deposited, may not be
withdrawn without the prior consent of the Company. Not less
than 30 nor more than 45 days' notice of the commencement of
the period for the deposit of certificates for Fourth
Preference Shares for redemption pursuant to this
sub-paragraph shall be published by the Company in accordance
with these Bye-Laws.
(b) The holders of at least 10 per cent. in nominal value of the
Fourth Preference Shares then outstanding may give notice to
the Company that each of the Fourth Preference Shares is, and
it shall thereby become, immediately redeemable at its Issue
Amount together with a sum equal to any arrears or accruals of
the fixed dividend thereon to be calculated down to and
inclusive of the date of redemption in any of the following
events ("Redemption Events"):-
(i) if, after the same shall have become due for payment,
default is made for a period of seven days or more in
the payment of the nominal amount or premium or for a
period of 14 days or more in the payment of dividend
after the deemed due date therefore set out in
paragraph (5) (i) of this Schedule in respect of the
Fourth Preference Shares or any of them; or
(ii) if the Company fails to perform or observe any other
obligation or right in respect of the Fourth
Preference Shares and such failure continues for the
period of 30 days next following the service by any
Fourth Preference Shareholder on the Company of
notice requiring the same to be remedied; or
(iii) if any loan or other indebtedness for borrowed money
of the Company or any Principal Subsidiary (as
defined below) having in any such case an aggregate
outstanding principal amount of at least
U.S.$5,000,000 (or its equivalent in any other
currency or currencies) becomes due and repayable
prematurely by reason of a default on the part of the
Company or any Principal Subsidiary (notice of which
default has been served on the Company or the
relevant Principal Subsidiary (as the case may be)
and the same has not been remedied by the Company or
such Principal Subsidiary within a period of 14 days
of receipt of such notice) or the Company or any
Principal Subsidiary fails to make any repayment of
principal in respect thereof on the due date for such
payment as extended by any applicable grace period as
originally provided or
<PAGE> 80
D-18
within 14 days of such due date (whichever is the
longer) or if default is made by the Company or any
Principal Subsidiary in making any payment due under
any guarantee and/or indemnity given by it on the due
date for such payment as extended by any applicable
grace period as originally provided or within 14 days
of such due date (whichever is the longer) having in
any such case an aggregate principal amount of at
least U.S.$5,000,000 (or its equivalent in any other
currency or currencies). Provided that nothing in
sub-paragraph (5) (v) (E) (b) (iii) shall apply to
any loan or other indebtedness alleged to be owing by
the Company or any of the Subsidiaries to a third
party (not being a bank or other financial
institution) and which is being contested by the
Company or any of the Subsidiaries in good faith; or
(iv) if any order shall be made by any competent court or
resolution effectively passed for the winding up or
dissolution of the Company or any Principal
Subsidiary except where:-
(a) such winding up or dissolution is for the
purposes of a reconstruction,
reorganisation, merger or amalgamation; or
(b) such winding up is a members' voluntary
winding up of a Principal Subsidiary in the
course of which the whole or substantially
the whole of the assets available for
distribution are distributed and transferred
to the Company or another Subsidiary, in
which event the transferee (unless it is the
Company or a Principal Subsidiary) shall
become a Principal Subsidiary; or
(c) such winding up is a creditors' voluntary
winding up of a Principal Subsidiary in
which the Company and/or another Subsidiary
are the only creditors; or
(v) if the Company or any Principal Subsidiary shall
cease to carry on the whole or substantially the
whole of its business, save in connection with the
transfer by one Principal Subsidiary of the whole or
any part of its business to the Company or to another
Subsidiary (in which event the transferor shall
thereupon cease to be a Principal Subsidiary) and
save that neither a disposal on arm's length terms of
the whole or any part of the issued share capital of
any company (including a Principal Subsidiary) or of
the whole or any part of the business, undertaking or
assets of a Principal Subsidiary nor any of the
events described in the exceptions to sub-paragraph
(5) (v) (E) (b) (iv) of this Schedule shall be deemed
to be a cessation for the purposes of this
sub-paragraph (v); or
(vi) if the Company or any Principal Subsidiary shall stop
payment or shall be unable to, or shall admit
inability to, pay its debts as they fall due in any
such case in respect of a debt or debts of an
aggregate principal amount of at least U.S.$5,000,000
(or its equivalent in any other currency or
currencies); or
(vii) if a receiver, administrator or other similar
official shall be appointed in relation to the
Company or any Principal Subsidiary or in relation to
the whole or substantially the whole of the assets of
any of them in respect of a debt or debts of an
aggregate amount of at least U.S.$5,000,000 (or its
equivalent in
<PAGE> 81
D-19
any other currency or currencies) or an encumbrancer
shall take possession of any assets in respect of a
debt or debts of an aggregate principal amount of at
least U.S.$5,000,000 (or its equivalent in any other
currency or currencies) or a distress or execution or
other process for the recovery or enforcement of any
debt shall be levied or enforced upon or sued out
against the whole or substantially the whole of the
assets of the Company or any Principal Subsidiary in
respect of a debt or debts of an aggregate amount of
at least U.S.$5,000,000 (or its equivalent in any
other currency or currencies), and in any of the
foregoing cases the same shall not be discharged or
removed within 30 days, provided that this
sub-paragraph (vii) shall not apply to any asset
acquired by the Company or any Principal Subsidiary
in the 12 month period prior to the appointment of
such receiver, administrator or other similar
official or the taking of possession, levying of
distress or execution or other such process referred
to above; or
(viii) if the Company or any Principal Subsidiary shall
initiate or consent to judicial proceedings relating
to itself under any applicable liquidation,
insolvency, composition, reorganisation or other
similar laws or shall make a conveyance or assignment
for the benefit of, or shall enter into any
composition or other arrangement with, its creditors
generally except where:-
(a) such proceedings are for the purpose of a
reconstruction, reorganisation, merger or
amalgamation;
(b) such proceedings relate to a members'
voluntary winding up of a Principal
Subsidiary in the course of which the whole
or substantially the whole of the assets
available for distribution are distributed
and transferred to the Company or another
Subsidiary, in which event the transferee
(unless it is the Company or a Principal
Subsidiary) shall thereupon become a
Principal Subsidiary; or
(c) such proceedings relate to a creditors'
voluntary winding up of a Principal
Subsidiary in which the Company and/or
another Subsidiary are the only creditors.
For this purpose a Principal Subsidiary at any time
shall mean (i) a Subsidiary whose net profits (before
taxation and extraordinary items) (consolidated in
the case of a Subsidiary which itself has
subsidiaries) or gross revenues (consolidated in the
case of a Subsidiary which itself has subsidiaries)
in each case attributable to the Company represents
not less than 20 per cent. of the consolidated net
profits (before taxation and extraordinary items) or,
as the case may be, consolidated gross revenues of
the Company and the Subsidiaries taken as a whole (in
each case attributable to the Company), all as
calculated by reference to the then latest audited
accounts (consolidated or, as the case may be,
unconsolidated) of such Subsidiary and the then
latest consolidated audited accounts of the Company
and the Subsidiaries (provided that (a) a Subsidiary
the net profits (before taxation and extraordinary
items) and gross revenues of which (consolidated in
the case of a Subsidiary which itself has
subsidiaries) were not consolidated for the purpose
of preparing the latest consolidated audited accounts
of the Company shall be treated as though it were not
a Subsidiary for the purposes of this definition and
may not therefore
<PAGE> 82
D-20
be a Principal Subsidiary; (b) if, in the case of any
Subsidiary which itself has subsidiaries, no
consolidated accounts are prepared and audited, its
consolidated net profits (before taxation and
extraordinary items) and consolidated gross revenues
shall be determined on the basis of pro forma
consolidated accounts of the relevant Subsidiary and
its subsidiaries prepared for this purpose by the
Auditors of the Company or the auditors for the time
being of the relevant Subsidiary; and (c) a
Subsidiary acquired within a 12 month period of any
relevant event shall not be treated for the purposes
of this definition as a Subsidiary and may not
therefore be a Principal Subsidiary) and (ii) Henlys
Group Limited ("Henlys"), until the earlier of 1st
July, 1988 anial ownership by the Company and/or any
of the Subsidiaries in the total issued share capital
(on a fully diluted basis, assuming full conversion
of all shares and other securities convertible into
issued voting shares) of Henlys falls below 50.1 per
cent.
A report by the Auditors of the Company that in their
opinion a Subsidiary is or is not a Principal
Subsidiary shall, in the absence of manifest error,
be conclusive and binding on all parties.
In the case of a partial redemption of Fourth
Preference Shares, the Fourth Preference Shares to be
redeemed will be selected individually by lot in such
place as the Directors may select and in such manner
as the Directors shall deem to be appropriate and
fair not more than 60 days prior to the date fixed
for redemption and a list of Fourth Preference Shares
called for redemption will be published by the
Company in accordance with these Bye-Laws not less
than 30 days prior to such date.
The Company shall give notice to the Fourth
Preference Shareholders of any date fixed for
redemption (other than final redemption) and the
place at which certificates for such Fourth
Preference Shares are to be presented for redemption.
Upon any date for redemption each Fourth Preference
Shareholder shall be bound to deliver to the Company
at such place the certificates for the Fourth
Preference Shares held by him in order that the same
may be cancelled. Upon such date the Fourth
Preference Shares shall be redeemed and upon delivery
on such date or thereafter of the relevant Fourth
Preference Share certificates (or an appropriate form
of indemnity) the Company shall pay to each such
holder or former holder (or, in the case of joint
holders, to the holder whose name stands first in the
Register in respect of such Fourth Preference Shares)
the amount due to him in respect of such redemption.
(vi) AS REGARDS TAXATION
All payments of the nominal amount, premium and dividend will be made
without withholding or deduction for or on account of any present or
future taxes, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of Bermuda or any authority
therein or thereof having power to tax unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, the Company will pay such additional
amounts as may be necessary in order that the net amounts received by
the Fourth Preference Shareholders after such withholding or deduction
shall equal the respective amounts of the nominal amount, premium and
dividend which would have been
<PAGE> 83
D-21
receivable in respect of the Fourth Preference Shares in the absence of
such withholding or deduction, except that no such additional amounts
shall be payable with respect to any Fourth Preference Shareholder:
(a) who is liable to such taxes, duties, assessments or
governmental charges in respect of his Fourth Preference
Share(s) by reason of his having some connection with Bermuda
other than being a Fourth Preference Shareholder; or
(b) who receives such payment in Bermuda and who would be able to
avoid such withholding or deduction by satisfying any
statutory requirements or by making a declaration of
non-residence or other similar claim for exemption to the
Bermudian tax authority but fails to do so.
(vii) AS REGARDS NOTICES
Notices to Fourth Preference Shareholders will be given in accordance
with Bye-Law 95 and, so long as the Fourth Preference Shares are listed
on the Luxembourg Stock Exchange, by publication in the Luxemburger
Wort in Luxembourg or such other newspaper in Luxembourg as shall be
designated by the Company for such purposes.
(viii) CONVERSION RATES
Where pursuant to this Schedule any amount is required to be converted
into U.S. dollars such amount shall be translated into U.S. dollars on
the relevant date by reference (where practicable) to the average of
the spot rates of exchange quoted at the close of business on such day
by an internationally recognised merchant or investment bank selected
by the Company and (where not so practicable) by reference to such
other rates and/or dates as the Directors may consider fair and
reasonable.
(ix) AS REGARDS PRESCRIPTION
The holders of Fourth Preference Shares who have failed to claim
distributions and/or rights within 12 years of their having been made
available to them will not thereafter be able to claim such
distributions and/or rights.
<PAGE> 84
E-1
(6) The rights attaching to the Fifth Preference Shares shall be as
follows:
(i) DEFINITIONS
(A) In this paragraph (6) unless there is something in the subject or
context inconsistent therewith:
"Additional Put Date" means a Dividend Payment Date falling after
the Put Date which immediately follows an
Additional Put Notice in which the Company
offers to pay an Additional Put Price;
"Additional Put Notice" means a notice given by the Company to the
Fifth Preference Shareholders in accordance
with paragraph (viii) (A) below;
"Additional Put Period" means the period beginning and ending on a
Dividend Payment Date specified by the
Company in an Additional Put Notice in which
the Company offers to pay a different rate
of dividend in accordance with paragraph
(viii)(A)(b) below;
"Additional Put Price" means a specified amount or amounts
expressed as a percentage of the Issue
Amount or, in the case where a floating rate
of dividend is also offered under paragraph
(viii) (A) (b) below, expressed by reference
to a formula approved by a Bank;
"Agent" means such person(s) as the Company may
from time to time designate as Agent(s) by
notice to the Fifth Preference Shareholders;
"Auditors" means the auditors of the Company for the
time being;
"Average Dividend means:
Return"
(i) in the case of a dividend at a
fixed rate, the yield to the
relevant date from the immediately
preceding Put Date (the "Preceding
Put Date") calculated on the basis
of the Put Value on each of those
dates, any Put Waiver Amount
payable on the Preceding Put Date
and the rate of dividend in the
period between each of those dates,
calculated according to the method
of calculation described in
paragraph (viii)(E)(d) below; and
(ii) in the case of a dividend at a
floating rate, the yield to the
relevant date from the Preceding
Put Date calculated as described in
paragraph (viii)(E)(d) below;
"BAA" means BAA plc, a public limited company
incorporated in England with registered
number 1970855;
<PAGE> 85
E-2
"BAA Shares" means fully paid ordinary shares of 25p each
in the capital of BAA and, after a
Sub-division or Consolidation, a Rights
Issue, a Relevant Event or an Offer, means
or includes such resulting, additional or
replacement securities, as the case may be;
"Bank" means an independent investment bank of
international repute (acting as an expert)
appointed by the Directors;
"business day" means any day on which the London Stock
Exchange is open for business;
"Beneficial Owner" means ADT Retirement International Fund
Limited as beneficial owner of the BAA
Shares which will initially comprise the
Exchange Property and includes any other
person who is the beneficial owner for the
time being of any of the Exchange Property;
"Capital Distribution" means any dividend or other distribution
(including a distribution in specie) paid or
made (whether on a return of capital or
otherwise) by a Relevant Company in respect
of Relevant Securities to the extent that
the amount of such dividend or distribution
exceeds the amount calculated by reference
to the following formula:
P - D
where:
P = the aggregate of the net consolidated
profit less the aggregate of the net
consolidated losses of the Relevant Company
and its subsidiaries after taxation and
minority interests but before extraordinary
items and excluding any profits applied in
paying up shares or other securities
credited as fully paid by way of
capitalisation of profits, in respect of the
first financial period ending on or after
31st March, 1988; and each subsequent
financial period in respect of which an
audited consolidated profit and loss account
of the Relevant Company and its subsidiaries
has been published, as shown by such profit
and loss accounts;
D = the aggregate amount of all dividends or
other distributions paid or made by the
Relevant Company on the Relevant Securities
in respect of any and all financial periods
ending on or after 31st March, 1988 provided
that if such amount is greater than "P" then
"D" shall be deemed to be equal to "P";
and for these purposes:
<PAGE> 86
E-3
(i) the amount of any distribution made
otherwise than in cash shall be deemed to be
equal to the Current Market Value of the
relevant assets as at the date on which the
distribution is made;
(ii) a distribution shall be deemed to be
paid or made in respect of the financial
period in respect of which it is expressed
by the Relevant Company to be an interim or
final distribution or, in the case of a
distribution which is not so expressed to be
in respect of any financial period, in
respect of the financial period in which it
is paid or made;
(iii) the issue of shares or other
securities credited as fully paid by way of
capitalisation of profits, reserves or any
other account of the Relevant Company shall
be deemed not to be a dividend or
distribution within the meaning of this
definition (whether or not preceded by a
declaration of dividend); and
(iv) Current Market Value shall bear the
same meaning as the definition of "Current
Market Value" below, except that the value
of publicly traded securities and assets
(other than cash) shall be determined as at
the date of the distribution and not by
reference to each day during a period of
five consecutive business days ending on the
second business day prior to an Exchange
Date;
"Cash Amount" means an amount in Sterling equal to the
Current Market Value of the relevant
Exchange Property;
"Current Market Value" means the aggregate of:
(i) the value of publicly traded securities
included in the Exchange Property, which
shall be deemed to be the average of, in the
case of an election by the Company under
paragraph (iv) (D) below, the closing bid
price or, for any other purposes, the
mid-market price of such securities on each
business day during a period of five
consecutive business days ending on the
second business day prior to the relevant
Exchange Date (in the case of BAA Shares, as
taken from the London Stock Exchange Daily
Official List and, in the case of any other
publicly traded securities, by reference to
such stock exchange or other securities
market on which such securities are
principally traded, as the Company shall
determine on the advice of a Bank and
converted (if necessary) into Sterling at
the spot buying rate prevailing on the
relevant Exchange Date of a Bank);
(ii) the amount of any cash comprised in the
Exchange Property (converted, if necessary,
as aforesaid); and
<PAGE> 87
E-4
(iii) the value of all other assets and of
publicly traded securities, for which a
value cannot be determined pursuant to
paragraph (i) shall be deemed to be the
average value for the said five business day
period (converted, if necessary, as
aforesaid) as certified (in the case of
securities) by a Bank or (in the case of
other assets) by an independent appraiser of
international repute (acting as expert)
appointed by the Directors;
"dividend" includes any different rate of dividend
payable by the Company pursuant to paragraph
(viii) (A) (b) below;
"Dividend Payment Date" means 31st January or 31st July in each
year;
"Dollars", "U.S. $" and means dollars and cents being the lawful
"cents" currency for the time being of the United
States of America;
"Exchange Date" means, in relation to any Fifth Preference
Share, the business day following the date
of delivery of the certificate for the
relevant Fifth Preference Share together
with a duly completed Exchange Notice and
any payment then due by the Fifth Preference
Shareholder (including all taxes and stamp,
issue and registration duties (if any)
arising on exchange in any jurisdiction,
other than capital or stamp duties payable
in Bermuda (if any)); provided that the
certificate for a Fifth Preference Share
delivered during any suspension of Exchange
Rights shall be deemed to have been so
delivered on the day on which such
suspension ends;
"Exchange Notice" means a notice in such form as may be
specified from time to time by the Directors
in relation to the exercise by a Fifth
Preference Shareholder of an Exchange Right;
"Exchange Property" means, in relation to each Fifth Preference
Share, initially 2,268 fully paid ordinary
shares of 25p each in BAA or such other BAA
Shares as may be deemed by this paragraph
(6) for the time being to be, or to be part
of, the Exchange Property and/or such other
property as may be deemed by this paragraph
(6) for the time being to be, or to be part
of, the Exchange Property but excluding such
property as may be deemed by this paragraph
(6) to have ceased to be, or to be part of,
the Exchange Property;
"Exchange Right" means the right of a Fifth Preference
Shareholder to require the Company to
procure the delivery of Exchange Property on
the terms of this paragraph (6);
"Fifth Preference" means a person in whose name a Fifth
Shareholder" Preference Share is registered;
<PAGE> 88
E-5
"Final Date" means, in relation to any Offer, the date
such Offer becomes or is declared
unconditional in all respects;
"First Put Date" means 31st July, 1995;
"Floating Rate Equation" means an equation determined by a Bank for
the purposes set out in paragraph
(v)(C)(a)(2) below;
"Global Exchange Date" means the day following expiry of a period
of 90 days following completion of the
distribution of Fifth Preference Shares as
determined by the Directors;
"Issue Amount" means, in relation to a Fifth Preference
Share, the aggregate of the capital and
premium paid up on the issue of such Fifth
Preference Share;
"the London Stock means The International Stock Exchange of
Exchange" the United Kingdom and the Republic of
Ireland Limited;
"Offer" means an offer to acquire any Relevant
Securities whether expressed as a legal
offer, an invitation to treat or in any
other way, in circumstances where such offer
is available to all holders of the
applicable Relevant Securities or all such
holders other than any holder who is, or is
connected with, or is or is deemed to be
acting in concert with, the person making
such offer;
"Option Notice" means a notice in such form as may be
specified from time to time by the Directors
to be given by a Fifth Preference
Shareholder to the Company to exercise a Put
Option;
"Principal Subsidiary" means a Subsidiary whose net profits (before
taxation and extraordinary items)
(consolidated in a case of a Subsidiary
which itself has Subsidiaries) or gross
revenues (consolidated in the case of a
Subsidiary which itself has Subsidiaries) in
each case attributable to the Company
represents not less than 20 per cent. of the
consolidated net profits (before taxation
and extraordinary items) or, as the case may
be, consolidated gross revenues of the
Company and the Subsidiaries taken as a
whole (in each case attributable to the
Company), all as calculated by reference to
the then latest audited accounts
(consolidated or, as the case may be,
unconsolidated) of such Subsidiary and the
then latest consolidated audited accounts of
the Company and the Subsidiaries (provided
that: (a) a Subsidiary the net profits
(before taxation and extraordinary items)
and gross revenues of which (consolidated in
the case of a Subsidiary which itself has
Subsidiaries) were not consolidated for the
purpose of preparing the latest consolidated
audited accounts of the Company shall be
treated as though it were not a Subsidiary
for the purposes of this definition and may
not therefore be a Principal Subsidiary; (b)
<PAGE> 89
E-6
if, in the case of any Subsidiary which
itself has Subsidiaries, no consolidated
accounts are prepared and audited, its
consolidated net profits (before taxation
and extraordinary items) and consolidated
gross revenues shall be determined on the
basis of pro forma consolidated accounts of
the relevant Subsidiary and its Subsidiaries
prepared for this purpose by the Auditors or
the auditors for the time being of the
relevant Subsidiary; (c) a Subsidiary
acquired within 12 months before any
relevant event shall not be treated for the
purposes of this definition as a Subsidiary
and may not therefore be a Principal
Subsidiary; and (d) no account shall be
taken of any revenues from any transaction
between the Company and any Subsidiary or
between any Subsidiary and another
Subsidiary); a report by the Auditors that
in their opinion a Subsidiary is or is not,
or was or was not at any particular time, a
Principal Subsidiary shall, in the absence
of manifest error, be conclusive and binding
on all parties;
"Put Date" means the First Put Date and any Additional
Put Date;
"Put Option" means the right of a Fifth Preference
Shareholder to require the Company to redeem
a Fifth Preference Share on the dates and at
the amounts set out in paragraph (v)(F)
below;
"Put Value" means in respect of the First Put Date
141.73 per cent. of the Issue Amount or in
respect of an Additional Put Date the
Additional Put Price specified in a relevant
Additional Put Notice;
"Put Waiver Amount" means a specified amount payable by the
Company in the circumstances specified in
paragraph (viii)(A)(c) below;
"record date" means, in relation to any issue of Fifth
Preference Shares, securities, rights,
options or warrants or any dividend or
capital distribution, the date as at which
Fifth Preference Shareholders must be
registered in order to participate therein
or, in relation to BAA Shares or other
Registered Securities comprised in the
Exchange Property, securities, rights,
options or warrants or any dividend or
capital distribution, the date as at which
the holder of such BAA Shares or other
Registered Securities must be registered in
order to participate therein;
"Reference Stock" means a stock or security specified by the
Directors by reference to which a rate of
dividend may be determined;
"Registered means securities in registered form;
Securities"
"Registration Date" means the date on which a Fifth Preference
Shareholder, having exercised his Exchange
Rights, is registered as the
<PAGE> 90
E-7
holder of such Relevant Securities as are
Registered Securities;
"Relevant Company" means a company whose securities for the
time being comprise Relevant Securities;
"Relevant Event", "Rights Issue" and "Sub-division and Consolidation"
have the meanings respectively assigned to them by paragraph (iv) (C)
below;
"relevant date" has the meaning assigned to it in paragraph
(v)(C)(a)(2) below;
"Relevant Redemption means the amount calculated in accordance
Amount" with the equation set out in
paragraph (v)(C)(a)(2) below and:
(i) in the case of redemption on or
prior to 31st January, 1991, the
equation will be applied on the
following basis:
"c" will be taken as zero;
"p" will be taken as 100 per cent;
"r" will be taken as 6.84 per cent.
(expressed as a fraction) and "n"
will be determined by reference to
the relevant period elapsed from
the date of issue of the Fifth
Preference Shares to the date of
redemption; and
"z" will be taken as 100 per cent;
or
(ii) in the case of redemption on or
prior to 31st July, 1995 but after
31st January, 1991, the equation
will be applied on the following
basis:
"c" will be taken as 4 per cent;
"p" will be taken as 104.38 per
cent;
"r" will be taken as 6.84 per cent.
(expressed as a fraction) and "n"
and "i" will be determined by
reference to the relevant period
elapsed from 31st January, 1991 to
the date of redemption; and
"z" will be taken as zero; or
(iii) in the case of a redemption date
after 31st July, 1995, the equation
will be as specified in paragraph
(v)(C)(a)(2) below, provided that
if the due date of redemption is
after 31st July, 1995 and there is
no Put Date falling after the due
date for
<PAGE> 91
E-8
redemption the Relevant Redemption
Amount shall be the Issue Amount;
or
(iv) where the Floating Rate Equation is
applicable to any Additional Put
Period or Additional Put Date and
any redemption of Fifth Preference
Shares takes place during such
period or on such date and a
Relevant Redemption Amount is
payable on that redemption then the
reference to the equation in
paragraph (v)(C) (a) (2) below
shall instead be a reference to the
Floating Rate Equation;
"Relevant Securities" means the BAA Shares and/or any other
securities for the time being comprised in
the Exchange Property;
"shares" includes, save where the context does not
admit of the same or as otherwise herein
expressly provided, fractions of shares;
"Sterling" "(pound)" "p" means pounds sterling and pence being the
and "pence" lawful currency for the time being of the
United Kingdom;
"Specified Date" means, in relation to any Offer, the
eleventh day following that on which such
Offer was made;
"United Kingdom" means the United Kingdom of Great Britain
and Northern Ireland; and
"United States" means the United States of America, its
territories and possessions.
(B) In this paragraph (6), unless there is something in the subject or
context inconsistent therewith, references to:
(a) companies include references to any bodies corporate however
and wherever incorporated; and
(b) property include references to shares, securities, cash and
other assets or rights of any nature.
(ii) AS REGARDS INCOME
Each Fifth Preference Shareholder shall be entitled in respect of each
Fifth Preference Share held by him in priority to any payment of
dividend or other distribution on or in respect of any other class of
shares of the Company (other than shares ranking pari passu with the
Fifth Preference Shares) initially to a fixed cumulative preferential
dividend at the rate of 8 per cent. per annum on the Issue Amount, to
be paid, if and so far as in the opinion of the Directors the profits
of the Company justify such payments, half-yearly on each Dividend
Payment Date in respect of the half years ending on those dates, except
that the first such dividend payment on any Fifth Preference Shares
issued on or before 31st July, 1990 will be payable on 31st January,
1991 in respect of the period from (and including) the date of issue of
the relevant Fifth Preference Shares to (but excluding) 31st January,
1991 and the first such
<PAGE> 92
E-9
payment on any Fifth Preference Share issued after 31st July, 1990 will
be payable on the Dividend Payment Date immediately following the date
of issue of that Fifth Preference Share in respect of the period from
(and including) the date of issue to (but excluding) that Dividend
Payment Date. The Fifth Preference Shares shall not entitle the holders
thereof to any further or other right of participation in the profits
of the Company. The Fifth Preference Shares shall rank for dividend
pari passu as between themselves.
Dividends shall be calculated on the basis of a 360 day year consisting
of 12 months of 30 days each and, in the case of an incomplete month,
the number of days elapsed. Payments of such dividends and any other
distributions (other than the Cash Amount) in respect of the Fifth
Preference Shares (including payments due on redemption) will be made
(except prior to the Global Exchange Date) by the Company posting a
dividend warrant or cheque in Sterling to the registered addresses of
the Fifth Preference Shareholders as at the relevant record date which
(until the Company gives notice of a change) shall be the fifteenth day
prior to the relevant Dividend Payment Date, unless any other manner of
payment is agreed by the Directors.
(iii) AS REGARDS CAPITAL
On a return of capital on liquidation or otherwise (but not on
redemption) the assets of the Company available for distribution among
the Members shall be applied in priority to any payment to the holders
of any other class of shares of the Company (other than shares ranking
pari passu with the Fifth Preference Shares), save as provided below,
in repaying the aggregate Issue Amount (or, where applicable, the
Relevant Redemption Amount) of the Fifth Preference Shares, together
with a sum equal to any arrears or accruals of the dividend thereon, to
be calculated down to and inclusive of the date of the return of such
aggregate Issue Amount (or, as the case may be, the Relevant Redemption
Amount) and to be payable whether or not such dividend has been
declared or earned, but the Fifth Preference Shares shall not entitle
the holders thereof to any further or other right of participation in
the assets of the Company. The Fifth Preference Shares shall rank for
return of the Issue Amount (or, as the case may be, the Relevant
Redemption Amount) in respect of each such Fifth Preference Share on
liquidation or otherwise pari passu as between themselves.
So long as any Fifth Preference Share remains in issue, the Company
will not (unless such sanction has been given by the Fifth Preference
Shareholders as would be required for a variation of the special rights
attaching to the Fifth Preference Shares) create and issue any shares
ranking as regards order in the participation in the profits of the
Company or in the assets of the Company on a winding up or otherwise in
priority to the Fifth Preference Shares, but the Company may issue,
without obtaining the consent of the Fifth Preference Shareholders or
any of them, shares ranking pari passu, in the circumstances specified
above, with the Fifth Preference Shares and carrying such rights as to
dividend, voting, redemption, conversion, exchange or otherwise as the
Directors or the Company in General Meeting may determine.
(iv) AS REGARDS EXCHANGE
(A) (a) A Fifth Preference Shareholder may, subject as provided in
this paragraph (iv)(A) and in paragraphs (iv)(D) and (iv)(E)
below, exercise an Exchange Right from the later of 3rd
November, 1990 and the Global Exchange Date (or, if earlier,
from the date an Offer is made), to the close of business (at
the place where the certificate for the relevant Fifth
Preference Share is deposited) on the seventh business day
(subject to the third paragraph in paragraph (v)(F)(a) below)
preceding 31st July, 2005 or any earlier date for redemption
of the relevant Fifth Preference Share, subject in each case
to
<PAGE> 93
E-10
compliance with any relevant Bermudian legislation and any
applicable fiscal or other laws or regulations applicable at
the place aforesaid and to the suspension of Exchange Rights
pursuant to paragraph (iv)(E) below.
(b) An Exchange Right may be exercised by the delivery of the
certificate for the relevant Fifth Preference Share to the
specified office of any Agent during the usual business hours
of such Agent, accompanied by a duly completed and signed
Exchange Notice. An Exchange Notice once delivered shall be
irrevocable.
A Fifth Preference Shareholder exercising an Exchange Right
shall not be required to pay any capital or stamp duties
payable in Bermuda (if any) in respect of the exercise of such
Exchange Right and/or on the delivery or other disposition of
Exchange Property by or on behalf of, or at the direction of,
the Company to or to the order of the relevant Fifth
Preference Shareholder and any such duties so payable shall be
paid by the Company. Neither the Company nor any Agents will
impose any charge on exchange of any of the Fifth Preference
Shares.
If, at any time when delivery of the Exchange Property (or any
part thereof) other than cash is required, it appears to the
Directors that such delivery would be unlawful or illegal
under the laws of any applicable jurisdiction the Company will
pay the Cash Amount.
(c) A Fifth Preference Shareholder shall, when delivering an
Exchange Notice, notify the relevant Agent of the account or
accounts to which payment of any cash sum (other than
dividends and other distributions in respect of the Fifth
Preference Shares which will be paid in the manner provided in
paragraph (ii) above) which such Fifth Preference Shareholder
is entitled to receive (whether pursuant to an election by the
Company under paragraph (iv)(D) below or otherwise) shall be
made. Where such payment is in Sterling or in Dollars, such
account shall be with a bank in London and in any other case
it shall be with a bank in the principal financial centre of
the currency concerned.
(d) The Company shall procure the delivery of the relevant
transfer forms and/or certificates for any Registered
Securities comprised in the Exchange Property and the delivery
(or, as the case may be, payment) of any other assets
comprised in the Exchange Property deliverable (or, as the
case may be, payable) upon exchange to the relevant Fifth
Preference Shareholder not later than 21 days after the
relevant Exchange Date. Notwithstanding the above, if the
Exchange Property has changed, in whole or in part, as a
result of the acceptance of an Offer as described in paragraph
(iv)(C) below (or will change as a result of any Offer
becoming unconditional in all respects), then the time period
for such delivery (or, as the case may be, payment) shall be
the longer of the period set out above and two business days
following the date of receipt of the consideration under the
Offer.
In the absence of appropriate changes in applicable securities
laws, delivery (or, as the case may be, payment) of any BAA
Shares or other Exchange Property or any document of title in
respect thereof to an address in the United States or to any
person who is unable to make the certification provided for in
the Exchange Notice will not be authorised.
<PAGE> 94
E-11
If:
(1) the day of exercise of an Exchange Right is after the
date of any announcement affecting the composition of
any part of the Exchange Property (other than BAA
Shares or Registered Securities in circumstances
where the relevant entitlement is determined by
reference to a record date in respect thereof), but
before the date on which such change is effective and
such change is effective on or before the date for
delivery of Exchange Property under this paragraph
(iv)(A)(d); or
(2) the Exchange Date is after the record date in respect
of any Rights Issue, Sub-division or Consolidation,
or Relevant Event (as defined in paragraph (iv)(C)
below) in respect of any Registered Securities
comprised in the Exchange Property but before the
date of issue or grant or exercise of such rights in
respect of any Rights Issue or before the date that
such Sub-division or Consolidation or Relevant Event
takes place or is effective or is made or any Capital
Distribution is deemed to be received or receivable
in respect of the Exchange Property or made; or
(3) the Exchange Date is on or before the record date in
respect of a Rights Issue or Sub-division or
Consolidation or Relevant Event in respect of any
Registered Securities comprised in the Exchange
Property in circumstances where the Registration Date
in respect of such Registered Securities is after
such record date;
then the relevant Fifth Preference Shareholder shall be
entitled to receive, in respect of the exercise of the
relevant Exchange Rights, the Exchange Property which would
have been receivable had the relevant Exchange Date been
immediately after the date on which such change in the
composition of the Exchange Property is effective or, as the
case may be, had the relevant Registration Date in respect of
such Registered Securities been immediately before such record
date.
(e) The Fifth Preference Shares so exchanged shall carry the right
to any dividends in respect of any period up to (and
including) the end of a six month period ending on the
Dividend Payment Date immediately preceding the relevant
Exchange Date but not in respect of any subsequent period and
in the case of an exchange prior to 31st January, 1991 shall
carry no right to any dividend; provided always that if any
notice requiring the redemption of any Fifth Preference Share
is given pursuant to paragraph (v)(C) below during the ten
business day period prior to any record date and up to the
relevant record date in respect of any dividend payable in
respect of BAA Shares or other Registered Securities which at
that time comprise over 50 per cent. of the Exchange Property
where such notice specifies a date for redemption falling on
or prior to the next Dividend Payment Date, dividends shall
accrue (except to the extent already taken into account in
paragraph (v)(C)(a)(2) below) on any such Fifth Preference
Shares called for redemption which are exchanged and have an
Exchange Date on or after the relevant record date to (but
excluding) such Exchange Date. If any such notice of
redemption is given by the Company specifying a date for
redemption falling on or after 14th May, 1995 and on or prior
to 31st July, 1995, dividends shall accrue on any Fifth
Preference Shares delivered for exchange during the period
from 14th May, 1995 to 31st July, 1995 (both dates inclusive)
from the preceding 31st January to the
<PAGE> 95
E-12
Exchange Date in respect of such Fifth Preference Shares. Any
such dividends shall be paid by the Company not later than 21
days after the relevant Exchange Date.
An Exchange Notice given by a Fifth Preference Shareholder on
or after a record date in respect of a Dividend Payment Date
but before that Dividend Payment Date must be accompanied by
payment of an amount equal to the dividend payable on such
date.
(f) Subject to paragraph (iv) (A) (d) above and as otherwise
provided in this paragraph (6), Exchange Property shall not
include any dividends or other income thereon or other
distributions or rights in respect thereof, declared, paid or
made by reference to a record date prior to the relevant
Exchange Date.
(g) No fraction of a BAA Share or any security or any other
property comprised in the Exchange Property which is not
divisible shall be delivered on the exercise of Exchange
Rights but (except in respect of cases where such cash payment
would amount to less than (pound)5 in respect of any Fifth
Preference Share) a cash payment of an amount equal to the
value of such fraction (such amount to be rounded down to the
nearest penny) shall be made by the Company to the relevant
Fifth Preference Shareholder, pursuant to directions given to
the relevant Agent by the Fifth Preference Shareholder, as
provided in paragraph (iv)(A)(c) above, not later than 21 days
after the relevant Exchange Date.
(h) Exchange of the Fifth Preference Shares may be effected in
such manner as the Directors may, subject to the provisions of
these Bye-Laws and the Companies Acts, from time to time
determine and without prejudice to the generality of the
foregoing may be effected by the redemption or purchase of
Fifth Preference Shares in such manner and at such price as
the Directors may determine. In the case of an exchange
effected by means of the redemption or purchase of Fifth
Preference Shares, the Directors may effect redemption or
purchase of the relative Fifth Preference Shares out of the
amount paid up on such Fifth Preference Shares, out of
profits of the Company which would otherwise be available for
dividend, out of the proceeds of a fresh issue of shares or
in any other manner for the time being permitted by law.
(B) The Fifth Preference Shareholders shall have no proprietary or other
interest in the BAA Shares, other Relevant Securities or any other
property comprising part of the Exchange Property prior to exchange and
the Beneficial Owner shall at all times have absolute discretion to
exercise, or to direct the exercise of, its voting and all other
rights in respect of such BAA Shares, Relevant Securities and any
other property comprising part of the Exchange Property prior to
exchange without any liability on its part.
In the event of an Offer, the Beneficial Owner shall have absolute
discretion to accept, or direct the acceptance of, such Offer
(including as to any alternative consideration) or to reject such
Offer, provided that it may not accept any such Offer prior to the
Specified Date in respect thereof.
Except as provided in paragraphs (iv)(A), (B), (D) and (F) and
(v)(C)(c) below, the Company shall exercise any discretions affecting
the Exchange Property in such a manner that all Fifth Preference Shares
shall be treated the same.
(C) If at any time whilst any of the Fifth Preference Shares remains in
issue:
<PAGE> 96
E-13
(a) Relevant Securities are sub-divided or consolidated (a
"Sub-division or Consolidation") then the securities resulting
from such Sub-division or Consolidation, so far as
attributable to the Exchange Property, shall be, or be
included in, the Exchange Property;
(b) further shares or other securities, or options, warrants or
rights to subscribe or purchase further shares or other
securities, shall be offered by way of rights to the holders
of Relevant Securities (a "Rights Issue"), then the Company
shall procure the addition to the Exchange Property of either
(i) such number of shares or other securities, or options,
warrants or rights as would have been subscribed or purchased
if, on the seventh day prior to the latest day for accepting
or taking up any such rights (or, if such day is not a
business day, the immediately preceding such business day),
sufficient rights had been sold to enable the whole of the
balance of such rights to be so taken up together with an
amount equal to what would have been any such excess sales
proceeds remaining after taking up such balance (except where
such cash proceeds would amount to less than (pound)3) or (ii)
cash equal to the Current Market Value of such rights nil paid
(for this purpose Current Market Value shall be calculated by
reference to the last day that the Rights Issue is open for
acceptance rather than the Exchange Date); such number of
shares or other securities or options, warrants or rights
(together with an amount equal to what would have been such
excess sales proceeds) or the relevant cash (as the case may
be) shall become part of the Exchange Property and pending the
foregoing, such rights shall form part of the Exchange
Property;
(c) any of the following events occurs (a "Relevant Event"):
(i) shares or other securities are issued credited as
fully paid to holders of Relevant Securities by way
of capitalisation of profits or reserves otherwise
than pursuant to a dividend plan which includes a
scrip alternative or an issue of warrants or options;
or
(ii) any Capital Distribution is made; or
(iii) pursuant to any scheme of arrangement,
reorganisation, amalgamation or reconstruction of any
company or companies (whether or not involving
liquidation or dissolution), any further shares or
other securities are issued or transferred to holders
of Relevant Securities;
then the further shares, securities or other assets received
in relation to the Relevant Event, so far as attributable to
the Exchange Property, shall be included as part of the
Exchange Property; or
(d) an Offer is accepted or any Relevant Securities are subject to
compulsory acquisition then, with effect from the Final Date,
the Exchange Property will consist, in whole or in part, of
the cash consideration, if any, and any other consideration
received for such Relevant Securities acquired under the Offer
or pursuant to such compulsory acquisition.
To the extent that Exchange Property consists of different types of
securities, this provision shall apply mutatis mutandis.
<PAGE> 97
E-14
The Company shall give notice to the Fifth Preference Shareholders of
any change in composition of the Exchange Property as soon as
reasonably practicable following such change, and shall give details of
the Exchange Property to which the holder of a Fifth Preference Share
would be entitled upon exercise of the Exchange Rights.
(D) The Company may elect from time to time (notwithstanding that a valid
Exchange Notice has been delivered) by not less than two business days'
prior written notice to the relevant Agent (who shall inform a Fifth
Preference Shareholder upon request or on exercise of his Exchange
Right(s) (if notice is given prior to exercise thereof)), in lieu of
procuring the delivery of the Exchange Property otherwise deliverable
on the relevant Exchange Date, to pay to the relevant Fifth Preference
Shareholder the Cash Amount. Where a valid Exchange Notice has been
delivered, the election of the Company shall only be valid in relation
to the relevant Fifth Preference Shareholder if the notice is given not
later than two business days after the relevant Exchange Date.
Any such notice may be given subject to such conditions, if any, as the
Directors shall think fit and may be given generally or in relation to
a specific Exchange Notice. If given generally, such notice may be for
all exchanges in a specified period or until further notice and may be
expressed to be revocable or irrevocable, and, in the case of an
irrevocable notice, the relevant Exchange Right(s) shall thereupon
terminate. Such election, if revocable, may only be revoked upon not
less than two business days' prior written notice to the relevant
Agent.
Where the Company has made such an election which remains in effect on
the Exchange Date in relation to any Fifth Preference Share, the
Company shall procure that the relevant Cash Amount is paid to the
relevant Fifth Preference Shareholder not later than nine business days
after such Exchange Date in accordance with directions given to the
relevant Agent pursuant to paragraph (iv)(A)(c) above.
(E) The Exchange Rights shall be suspended from (i) the Specified Date
until any acceptances made by the Beneficial Owner of the relevant
Offer are withdrawn or the relevant Offer lapses or becomes or is
declared unconditional in all respects, and (ii) the date any vote is
cast in relation to any applicable scheme of arrangement,
reorganisation, amalgamation or reconstruction which is approved by the
required majority until the same is approved or rejected by the
relevant judicial or other authorities. The Company shall give notice
to the Fifth Preference Shareholders of the beginning and end of any
such suspension as soon as reasonably practicable after it becomes
aware of the same (which notification may be given before or after such
suspension has begun).
(F) If a Fifth Preference Shareholder exercises an Exchange Right, the
Company may, by notice to such Fifth Preference Shareholder and where
permitted by, and subject to such additional conditions (if any) as the
Directors shall deem necessary to comply with, applicable law, offer,
as an alternative to procuring the delivery (or, as the case may be,
payment) of the Exchange Property otherwise deliverable (or, as the
case may be, payable) on the relevant Exchange Date, to issue and
deliver fully paid shares in the Company in lieu of the Exchange
Property otherwise deliverable (or, as the case may be, payable) on the
relevant Exchange Date. If the Company makes such an offer, it shall
specify the number and class of shares in the Company offered and the
value attributed thereto. Such Fifth Preference Shareholder may accept
such offer in the manner specified in the notice not later than six
business days following the relevant Exchange Date and, on acceptance,
shall give instructions for the delivery of such shares in the Company.
The Company shall then be bound to issue and deliver such shares in the
Company in the manner specified by the Fifth Preference Shareholder.
<PAGE> 98
E-15
(v) AS REGARDS PURCHASE AND REDEMPTION
(A) Purchase
Subject to the provisions of the Companies Acts or other applicable
legislation, the Company or any of its Subsidiaries may at any time
purchase any of the Fifth Preference Shares at any price. The Directors
are hereby authorised pursuant to Section 42A of the Companies Act 1981
to take all steps required to effect any such purchase.
(B) Final Redemption
Unless previously redeemed, purchased or exchanged, the Company shall
be obliged to redeem on 31st July, 2005 each Fifth Preference Share
then issued and outstanding at its Issue Amount together with in each
case a sum equal to any arrears or accruals of dividend thereon to be
calculated down to (but excluding) the date of such redemption.
(C) Redemption at the Option of the Company
(a) The Company may, subject to the restrictions contained in this
paragraph (C), from time to time, on giving not less than 45
nor more than 60 days' notice to the Fifth Preference
Shareholders, redeem all or, from time to time, some (being
100 in number or an integral multiple thereof) of the Fifth
Preference Shares, at their Issue Amount, together with
dividends accrued up to (but excluding) the date fixed for
redemption, provided that:
(1) Fifth Preference Shares may not be so redeemed prior
to 31st July, 1993 and may only be so redeemed on or
after such date but on or prior to 31st July, 1995 if
(i) at least 90 per cent. in Issue Amount of the
Fifth Preference Shares have already been exchanged,
redeemed or purchased or (ii) the average of the
Current Market Values of the Exchange Property into
which a Fifth Preference Share is exchangeable for
each business day within the 30 day period ending on
the third business day prior to the date on which
such notice is given to Fifth Preference Shareholders
shall have been at least 141.73 per cent. of the
Issue Amount.
(2) If an Additional Put Notice has been given pursuant
to paragraph (viii)(A) below specifying an Additional
Put Date no notice pursuant to this paragraph
(v)(C)(a) may be given where the date of redemption
specified therein is after 31st July, 1995 but on or
prior to the next Put Date that has been specified
therein (such Put Date being a "relevant date")
unless (i) at least 90 per cent. in Issue Amount of
the Fifth Preference Shares have already been
exchanged, redeemed or purchased or (ii) the average
of the Current Market Values of the Exchange Property
into which a Fifth Preference Share is exchangeable
for each business day within the 30 day period ending
on the third business day prior to the date on which
such notice of redemption is given to Fifth
Preference Shareholders shall have been at least
equal to the Issue Amount multiplied by the sum of
(x) the amount of dividend (expressed as a percentage
of the Issue Amount of the Fifth Preference Shares)
which has accrued unpaid on the Fifth Preference
Shares to (but excluding) the date of redemption and
(y) the amount (expressed as a percentage of the
Issue
<PAGE> 99
E-16
Amount) which would (together with such accrued
dividend) result in the Fifth Preference Shares
yielding the Average Dividend Return.
As used in this paragraph (v)(C), Current Market
Value shall bear the same meaning as in paragraph
(i)(A) above, except that the value of publicly
traded securities and assets (other than cash) shall
be determined by reference to each business day
within the 30 day period ending on the third business
day prior to the date on which notice is given to the
Preference Shareholders under this paragraph (v)(C)
and not by reference to each day during a period of
five consecutive business days ending on the second
business day prior to an Exchange Date.
Where the dividend referred to in (x) above is at a
fixed rate, the amount in (y) shall be calculated in
accordance with the following equation:
<TABLE>
<S> <C>
Amount = [p(1+r)(n) - c(n-i) - (C)[(1 -(1+r)(-i))(1+r)(n)]-0.04 x z x n]
r
</TABLE>
For the purposes of the equation set out above the
symbols used have the following meanings:
"c" means the dividend rate (expressed as a
percentage of the Issue Amount) payable
semi-annually on the Fifth Preference Shares
in respect of the period in which the
calculation is made;
"p" means the Put Value on the Preceding Put
Date less any Put Waiver Amount (expressed
as a percentage of the Issue Amount) payable
on the Preceding Put Date;
"r" means half of the Average Dividend Return;
"n" means the number of semi-annual compounding
periods and parts thereof elapsed from the
Preceding Put Date to the date of redemption
calculated in accordance with the procedure
described in paragraph (viii)(E)(d) below;
"i" means the number of complete semi-annual
compounding periods elapsed from the Put
Date; and
"z" means zero except as under paragraph (v)(F)
(b) below.
Where the dividend referred to in (x) is at a
floating rate, then the amount referred to in (y)
shall be calculated in accordance with the Floating
Rate Equation set out in the relevant Additional Put
Notice.
(3) If no Additional Put Notice is given specifying an
Additional Put Date, or after any Put Date where no
notice of a further Put Date has been given, each
Fifth Preference Share to be redeemed may be redeemed
by the Company at its Issue Amount.
<PAGE> 100
E-17
(b) In addition to the rights of the Company to redeem all or some
of the Fifth Preference Shares, the Company may, on giving not
less than 45 nor more than 60 days' notice to the Fifth
Preference Shareholders, redeem all (but not some only) of the
outstanding Fifth Preference Shares (other than those in
respect of which an option to redeem has been exercised (and
not rescinded) under paragraph (v)(F) below), on a Put Date at
the Put Value applicable to such Put Date.
(c) The Company may offer a Fifth Preference Shareholder, as an
alternative to payment of the Put Value, the Exchange Property
attributable to the relevant Fifth Preference Share, plus an
amount of cash as it may determine. If such offer is made, it
shall specify the Exchange Property offered for such Fifth
Preference Share, the value attributed thereto and the cash
amount offered. The Fifth Preference Shareholder may accept
such offer, in the manner specified in the notice, not later
than seven days prior to the relevant Put Date, and if such
offer is so accepted, the Company shall be bound to deliver
such Exchange Property and cash in the manner referred to in
paragraph (iv)(A)(d) above and such delivery shall satisfy the
Fifth Preference Shareholder's right to payment of the Put
Value.
(d) Any notice given by the Company under this paragraph (v)(C) to
redeem Fifth Preference Shares will be without prejudice to
the right of any Fifth Preference Shareholder to exercise a
Put Option under paragraph (v)(F)(a) or (viii)(A) below so
long as such Put Option takes effect on or prior to the
relevant redemption date.
(D) Redemption for taxation reasons
If the Company would be required for reasons outside its control to pay
additional amounts as provided in paragraph (vi) below, the Company may
having given not less than 30 nor more than 60 days' notice to the
Fifth Preference Shareholders (which notice shall be irrevocable)
redeem all (but not some only) of the Fifth Preference Shares at the
Relevant Redemption Amount together with, in each case, a sum equal to
any arrears or accruals of the dividend thereon to be calculated down
to (but excluding) the date of such redemption.
(E) Purchase in lieu of redemption
The Company may give not more than 30 days' notice prior to any
relevant Put Date, stating that it has, if such is the case, entered
into arrangements to procure the purchase by a third party or third
parties of all Fifth Preference Shares which would otherwise be
redeemed by the Company pursuant to the Put Option referred to in
paragraph (v)(F)(a) below at a price at least equal to the relevant Put
Value in respect thereof and accrued dividends.
Such notice shall be irrevocable and shall oblige the Company to
procure each such purchase and shall oblige each Fifth Preference
Shareholder exercising the said Put Option to sell his Fifth Preference
Share or Fifth Preference Shares without the Fifth Preference
Shareholder taking any action other than that which would have been
required were the Fifth Preference Shares to be redeemed in accordance
with paragraphs (v)(F)(a) below. In such case, such notice shall also
contain details of the price at which such purchase is to be effected
and the arrangements in relation to payment of such purchase price to
Fifth Preference Shareholders (which arrangements shall as far as
practicable be similar to the arrangements set out above in paragraph
(ii) above and shall be such as to result in no delay in payment to
Fifth Preference Shareholders).
<PAGE> 101
E-18
If payment in respect of the Fifth Preference Shares to be so purchased
pursuant to this paragraph (v)(E) is not made within three business
days of the due date therefor the Company shall upon the expiry of that
three business day period redeem such Fifth Preference Shares at the
applicable Put Value, together with dividends accrued to (but
excluding) the date of payment as if the option to purchase in lieu of
redemption had not been exercised and as if the due date for redemption
was the date upon which the purchase price should have been paid.
(F) Redemption at the Option of Fifth Preference Shareholders
(a) The holder of each Fifth Preference Share shall have a Put
Option (subject to the Company's right to arrange for purchase
in lieu of redemption as described in paragraph (v)(E) above)
on 31st July, 1995 at an amount equal to 141.73 per cent. of
the Issue Amount, or on an Additional Put Date at the relevant
Put Value. Dividends will accrue on such Fifth Preference
Share up to (but excluding) such Put Date.
To exercise a Put Option the holder must deposit the
certificate for such Fifth Preference Share with the relevant
Agent, not less than seven nor more than 21 days prior to the
relevant Put Date, together with a duly completed Option
Notice. The certificate for any such Fifth Preference Share,
if so deposited, may not be withdrawn without the prior
consent of the Company.
An Option Notice, once given, shall be irrevocable save that a
Fifth Preference Shareholder giving an Option Notice in
respect of any Fifth Preference Share shall retain the right
to require such Fifth Preference Share to be exchanged for
Exchange Property by following the procedure set out in
paragraph (iv)(A)(b) above (other than delivery of the
certificate for the relevant Fifth Preference Share) prior to
the close of business on the relevant Put Date, in which case
the relevant Fifth Preference Shareholder shall no longer be
treated as having exercised a Put Option.
Not less than 30 nor more than 45 days' prior notice of the
commencement of the period for the deposit of certificates for
Fifth Preference Shares for redemption pursuant to this
paragraph (v)(F)(a) shall be given by the Company.
(b) The holders of at least 10 per cent. in nominal value of the
Fifth Preference Shares then outstanding may give notice to
the Company that each of the Fifth Preference Shares is, and
it shall thereby become, immediately redeemable at its
Relevant Redemption Amount together with a sum equal to any
arrears or accruals of the dividend thereon to be calculated
down to but exclusive of the date of redemption in any of the
following events:
(1) if, after the same shall have become due for payment,
default is made for a period of seven days or more in
the payment of the nominal or paid up amount or
premium or for a period of 14 days or more in the
payment of dividend after the deemed due date
therefor; or
(2) if the Company fails to perform or observe any other
obligation or right in respect of the Fifth
Preference Shares and such failure continues for the
period of 30 days next following the service by any
Fifth Preference Shareholder on the Company of notice
requiring the same to be remedied; or
<PAGE> 102
E-19
(3) if any loan or other indebtedness for borrowed money
of the Company or any Principal Subsidiary having in
any such case an aggregate outstanding principal
amount of at least U.S.$10,000,000 (or its equivalent
in any other currency or currencies) becomes due and
repayable prematurely by reason of a default on the
part of the Company or any Principal Subsidiary
(notice of which default has been served on the
Company or the relevant Principal Subsidiary (as the
case may be) and the same has not been remedied by
the Company or such Principal Subsidiary within a
period of 14 days of receipt of such notice) or the
Company or any Principal Subsidiary fails to make any
repayment of principal in respect thereof on the due
date for such payment as extended by any applicable
grace period as originally provided or within 14 days
of such due date (whichever is the longer) or if
default is made by the Company or any Principal
Subsidiary in making any payment due under any
guarantee and/or indemnity given by it on the due
date for such payment as extended by any applicable
grace period as originally provided or within 14 days
of such due date (whichever is the longer) having in
any such case an aggregate principal amount of at
least U.S.$10,000,000 (or its equivalent in any other
currency or currencies). Provided that nothing in
this paragraph (3) shall apply to any loan or other
indebtedness alleged to be owing by the Company or
any of its Subsidiaries to a third party and which is
being contested by the Company or any of its
Subsidiaries in good faith; or
(4) if any order shall be made by any competent court or
resolution effectively passed for the winding up or
dissolution of the Company or any Principal
Subsidiary except where:
(aa) such winding up or dissolution is for the
purposes of a reconstruction,
reorganisation, merger or amalgamation; or
(bb) such winding up is a members' voluntary
winding up of a Principal Subsidiary in the
course of which the whole or substantially
the whole of the assets available for
distribution are distributed and transferred
to the Company or another Subsidiary of the
Company, in which event the transferee
(unless it is the Company or a Principal
Subsidiary) shall become a Principal
Subsidiary; or
(cc) such winding up is a creditors' voluntary
winding up of a Principal Subsidiary in
which the Company and/or another Subsidiary
are the only creditors; or
(5) if the Company or any Principal Subsidiary shall
cease to carry on the whole or substantially the
whole of its business, save in connection with the
transfer by one Principal Subsidiary of the whole or
any part of its business to the Company or to another
Subsidiary of the Company (in which event the
transferor shall thereupon cease to be a Principal
Subsidiary) and save that neither a disposal on arm's
length terms of the whole or any part of the issued
share capital of any company (including a Principal
Subsidiary) or of the whole or any part of the
business, undertaking or assets of a Principal
Subsidiary nor any of the events described in the
exceptions to paragraph (v)(F)(b)(4) above shall be
deemed to be a cessation for the purposes of this
paragraph (5); or
<PAGE> 103
E-20
(6) if the Company or any Principal Subsidiary shall stop
payment or shall be unable to, or shall admit
inability to, pay its debts as they fall due in any
such case in respect of a debt or debts of an
aggregate principal amount of at least
U.S.$10,000,000 (or its equivalent in any other
currency or currencies); or
(7) if a receiver, administrator or other similar
official shall be appointed in relation to the
Company or any Principal Subsidiary or in relation to
the whole or substantially the whole of the assets of
any of them in respect of a debt or debts of an
aggregate amount of at least U.S.$10,000,000 (or its
equivalent in any other currency or currencies) or an
encumbrancer shall with proper cause take possession
of any assets in respect of a debt or debts of an
aggregate principal amount of at least
U.S.$10,000,000 (or its equivalent in any other
currency or currencies) or a distress or execution or
other process for the recovery or enforcement of any
debt shall be levied or enforced upon or sued out
against the whole or substantially the whole of the
assets of the Company or any Principal Subsidiary in
respect of a debt or debts of an aggregate amount of
at least U.S.$10,000,000 (or its equivalent in any
other currency or currencies), and in any of the
foregoing cases the same shall not be discharged or
removed within 30 days, provided that this paragraph
(7) shall not apply to any asset acquired by the
Company or any of its Principal Subsidiaries in the
12 month period prior to the appointment of such
receiver, administrator or other similar official or
the taking of possession, levying of distress or
execution or other such process referred to above; or
(8) if the Company or any Principal Subsidiary shall
initiate or consent to judicial proceedings relating
to itself under any applicable liquidation,
insolvency, composition, reorganisation or other
similar laws or shall make a conveyance or assignment
for the benefit of, or shall enter into any
composition or other arrangement with, its creditors
generally except where:
(aa) such proceedings are for the purpose of
reconstruction, reorganisation, merger or
amalgamation; or
(bb) such proceedings relate to a members'
voluntary winding up of a Principal
Subsidiary in the course of which the whole
or substantially the whole of the assets
available for distribution are distributed
and transferred to the Company or another
Subsidiary, in which event the transferee
(unless it is the Company or a Principal
Subsidiary) shall thereupon become a
Principal Subsidiary; or
(cc) such proceedings relate to a creditors'
voluntary winding up of a Principal
Subsidiary in which the Company and/or
another Subsidiary are the only creditors.
(G) Funding of Cash Amount/Redemption Amounts
The Directors may at any time issue shares in the Company to any person
sufficient to fund all or any part of the Cash Amount, the Issue
Amount, the Put Value or, as the case may be, the Relevant Redemption
Amount and any arrears or accruals of dividend (if any) payable on
<PAGE> 104
E-21
redemption of any Fifth Preference Share. Any such issue of shares in
the Company will not affect the rights of Fifth Preference
Shareholders.
(H) Partial Redemption
In the case of a partial redemption of Fifth Preference Shares, the
Fifth Preference Shares to be redeemed will be selected individually by
lot in such place as the Directors may select and in such manner as the
Directors shall deem to be appropriate and fair not more than 60 days
prior to the date fixed for redemption and a list of Fifth Preference
Shares called for redemption will be published by the Company in
accordance with these Bye-Laws not less than 30 days prior to such
date.
(I) Procedure on Redemption
The Company shall give notice to the Fifth Preference Shareholders of
any date fixed for redemption pursuant to paragraph (v)(C) or (v)(D)
above and the place at which certificates for their Fifth Preference
Shares are to be presented for redemption. Upon any date for redemption
each Fifth Preference Shareholder shall be bound to deliver to the
Company at such place the certificates for the relevant Fifth
Preference Shares held by him in order that they may be cancelled. Upon
delivery on that date or thereafter of the relevant Fifth Preference
Share certificates (or an appropriate form of indemnity) the Company
shall pay to each such holder or former holder (or, in the case of
joint holders, to the holder whose name stands first in the Register in
respect of such Fifth Preference Shares) the amount due to him in
respect of such redemption and such Fifth Preference Shares shall be
redeemed.
(vi) AS REGARDS TAXATION
All payments due in respect of the Fifth Preference Shares will be made
without withholding or deduction for or on account of any present or
future taxes, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of Bermuda or any authority
therein or thereof having power to tax unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, the Company will pay such additional
amounts as may be necessary in order that the net amounts received by
the Fifth Preference Shareholders after such withholding or deduction
shall equal the respective amounts which would have been receivable in
respect of the Fifth Preference Shares in the absence of such
withholding or deduction, except that no such additional amount shall
be payable with respect to any Fifth Preference Shareholder:
(a) who is liable to such taxes, duties, assessments or
governmental charges in respect of his Fifth Preference
Share(s) by reason of his having some connection with Bermuda
other than being a Fifth Preference Shareholder; or
(b) who receives such payment in Bermuda and who would be able to
avoid such withholding or deduction by satisfying any
statutory requirements or by making a declaration of
non-residence or other similar claim for exemption to the
Bermudian tax authority but fails to do so.
(vii) AS REGARDS VOTING
The Fifth Preference Shares shall not confer on the holders thereof the
right to receive notice of, or to attend and vote at, a General Meeting
of the Company, unless:
<PAGE> 105
E-22
(a) at the date when the notices of a General Meeting are sent out
the dividend (or any part thereof) is six months or more in
arrears in which event the relevant Fifth Preference Shares
shall confer on the holders thereof the right to receive
notice of, and to attend and vote at, that General Meeting; or
(b) a resolution is to be proposed at a General Meeting for
winding up the Company or which directly affects the rights or
privileges of the Fifth Preference Shareholders, in which
event the Fifth Preference Shares shall confer on the holders
thereof the right to receive notice of, and to attend and vote
at, that General Meeting, save that such holders may not vote
upon any business dealt with at such General Meeting except
the election of a Chairman, any motion for adjournment and the
resolution for winding up or which directly affects the rights
or privileges of the Fifth Preference Shareholders.
Where Fifth Preference Shareholders are entitled to vote on any
resolution, then at the relevant General Meeting on a show of hands
every Fifth Preference Shareholder who is present in person or (being a
corporation) present by a representative or by proxy shall have one
vote and on a poll every Fifth Preference Shareholder who is present in
person or (being a corporation) present by a representative or by proxy
shall have 5,000 votes for every Fifth Preference Share held by him.
The provisions in these Bye-Laws relating to General Meetings shall
apply mutatis mutandis to all meetings of the Fifth Preference
Shareholders as a class.
(viii) AS REGARDS VARIATION OF CERTAIN TERMS
(A) The Company may, not less than 14 nor more than 90 days prior to any
Put Date, give an Additional Put Notice to all the Fifth Preference
Shareholders, making one or more of the following irrevocable offers:
(a) to pay an Additional Put Price, which shall be at least 100
per cent. of the Issue Amount, to Fifth Preference
Shareholders electing to redeem their Fifth Preference Shares
on an Additional Put Date falling after the Put Date
immediately following that Additional Put Notice;
(b) to pay a different rate of dividend on the Fifth Preference
Shares during the Additional Put Period specified in the
Additional Put Notice, which, if at a fixed rate, shall not be
less than the rate of dividend specified in paragraph (ii)
above or, if at a floating rate, or at a fixed rate by
reference to a Reference Stock, shall be determined not later
than the Put Date immediately following that Additional Put
Notice, shall be on terms that the minimum rate payable in any
circumstances shall not be less than the dividend specified in
paragraph (ii) above;
(c) to pay a Put Waiver Amount on the Put Date immediately
following the Additional Put Notice in respect of each Fifth
Preference Share which is not redeemed on such Put Date
pursuant to paragraph (v)(F)(a) above;
(d) to waive, to the extent and for the period specified in the
Additional Put Notice, its rights to redeem the Fifth
Preference Shares under paragraph (v)(C) above.
<PAGE> 106
E-23
(B) A dividend at a floating rate may only be offered pursuant to paragraph
(viii)(A)(b) above if there shall be no dividend at a fixed rate in
respect of any period falling in the Additional Put Period(s) during
which such floating rate will be payable.
(C) Only one Additional Put Notice may be given in respect of any
Additional Put Date or any Additional Put Period save that a further
Additional Put Notice may specify a Put Waiver Amount in respect of
each Additional Put Date which has already been specified.
(D) No Additional Put Notice shall affect any other obligation of the
Company, nor any rights of any Fifth Preference Shareholder, in respect
of any Fifth Preference Share, but any Fifth Preference Shareholder who
does not redeem his Fifth Preference Share(s) on the Put Date
immediately following that Additional Put Notice shall be deemed to
have accepted the relevant offer or offers and the terms of the Fifth
Preference Shares shall be deemed amended accordingly.
(E) Each Additional Put Notice shall specify (in each case where relevant):
(a) the Additional Put Date or Dates and the Additional Put Price
payable on such dates;
(b) (if a fixed rate) the new rate of dividend, or (if a floating
rate) the method by which a new rate of dividend will be
calculated, any relevant margin and the minimum rate of
dividend, or (if it is to be calculated by reference to a
Reference Stock) the Reference Stock, any relevant margin, the
method of calculation, the date of determination of the rate
and the minimum rate of dividend, and, in each case, the
Additional Put Period in respect of which the relevant new
rate of dividend is payable;
(c) the Put Waiver Amount and the Put Date on which it is payable;
(d) the yield (calculated by a Bank) to each Put Date (if any) or
the final date of each Additional Put Period (if any), taking
into account the offer or offers made, and the method of
calculation of such yield (which shall, in any event, be on
the basis of a semi-annual compound yield and a 360 day year
comprising 12 months of 30 days each (and, in the case of an
incomplete month, the number of days elapsed)), except that
such yield shall not be stated in the relevant Additional Put
Notice if any new rate of dividend is at a floating rate or is
to be fixed by reference to a Reference Stock but, in the case
of a fixed rate determined by reference to a Reference Stock,
shall be specified by the Company in a notice to Fifth
Preference Shareholders not later than five days after the Put
Date immediately following the relevant Additional Put Notice;
(e) where the new rate of dividend is at a floating rate, a
Floating Rate Equation which shall be approved by a Bank, for
the purposes described in paragraph (v)(C)(a)(2) above;
(f) the Company's rights to redeem the Fifth Preference Shares
under paragraph (v)(C) above, whether or not any of them have
been waived and the extent and period of any such waiver.
(F) Any Additional Put Notice may be given in relation to all, or from time
to time, some only of the Fifth Preference Shares and any Additional
Put Notice shall specify the Fifth Preference Shares in respect of
which it is given save that all holders of Fifth Preference Shares
issued on the same date shall be treated the same.
<PAGE> 107
E-24
(ix) AS REGARDS NOTICES
Notices to Fifth Preference Shareholders shall be given in accordance
with Bye-Law 95 and, so long as the Fifth Preference Shares are listed
on the Luxembourg Stock Exchange, by publication in the Luxemburger
Wort in Luxembourg or such other newspaper in Luxembourg as shall be
designated by the Company for such purposes. Notwithstanding the
provisions of Bye-Law 97, notices to the Fifth Preference Shareholders
shall be deemed to have been served on the date on which they are
posted or published (if that is then required), whichever shall occur
first.
(x) AS REGARDS PRESCRIPTION
A Fifth Preference Shareholder who has failed to claim distributions
and/or rights within 12 years of their having been made available to
him will not thereafter be able to claim such distributions and/or
rights.
<PAGE> 108
F-1
(7) For the avoidance of doubt, the provisions of the Bye-Laws shall have
effect subject to the provisions of this Schedule and in particular
(but without prejudice to the generality of the foregoing):-
(i) the term "Member" in each of Bye-Laws 40 and 43 shall not
include a First Preference Shareholder, a Third Preference
Shareholder, a Fourth Preference Shareholder, a Fifth
Preference Shareholder;
(ii) First Preference Shareholders, Third Preference Shareholders,
Fourth Preference Shareholders and Fifth Preference
Shareholders shall have no right to requisition Special
General Meetings of the Company and Bye-Law 42 shall have
effect accordingly;
(iii) Bye-Laws 80(2), 99 and 101 shall have effect subject to the
rights and restrictions attached to the First Preference
Shares, Third Preference Shares, Fourth Preference Shares and
Fifth Preference Shares.
<PAGE> 109
G-1
APPENDIX A
TO THE BYE-LAWS OF TYCO INTERNATIONAL LTD.
Extract from the minutes of a
Meeting of the Board of Directors of Tyco International Ltd.
(formerly ADT Limited)
held on November 4, 1996
relating to the creation of a series of
First Preference Shares
(as defined in the Bye-Laws of the Company)
"IT WAS RESOLVED THAT, subject to the powers of the directors of the Company or
any duly authorised committee of the board of directors of the Company to revoke
this resolution or in any way amend the rights and restrictions attached to the
Series A First Preference Shares by this resolution at any time before the
allotment of any such shares:
(1) 2,500,000 of the First Preference Shares be and are hereby designated
as Series A First Preference Shares of US$1 each and shall have
attached to them the rights and shall be subject to the restrictions
set out in Exhibit A and Exhibit A shall be attached to these minutes
for the purpose of recording the same in these minutes; and
(2) in accordance with paragraph (2)(iii) of the schedule to the bye-laws
of the Company, a copy of Exhibit A be annexed as an appendix to the
bye-laws of the Company.
EXHIBIT A(9)
The rights attaching to the Series A First Preference Shares shall be as
follows:
Section 1. AS REGARDS INCOME
(A) A holder of a Series A First Preference Share shall be entitled to
receive, when, as and if declared by the Directors out of funds legally
available for the purpose, quarterly dividends payable on March 31,
June 30, September 30 and December 31 of each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issue of any Series A First Preference Share, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) US$1.00 and
(b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate amount or value of all cash dividends or other
distributions and 100 times the aggregate amount or value of all
non-cash dividends or other distributions (other than (i) a dividend
payable in Common Shares or (ii) a subdivision of the Common Shares (by
reclassification or otherwise)), declared on each Common Share since
the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issue of any Series A First Preference Share. If the Company shall at
any time after November 4, 1996 (the "Rights Date") pay any dividend on
Common Shares payable in Common Shares or effect a subdivision or
consolidation of the Common Shares (by reclassification or otherwise)
into a greater or lesser number of Common Shares, then in each such
case the amount to which a
- ------------------------
(9) As amended by the Resolution set out in Appendix B to the Bye-Laws.
<PAGE> 110
G-2
holder of a Series A First Preference Share is entitled under (b) of
the preceding sentence shall be adjusted by multiplying the amount to
which that holder would have been entitled (absent this adjustment)
under (b) of the preceding sentence by a fraction the numerator of
which is the number of Common Shares in issue immediately after such
event and the denominator of which is the number of Common Shares that
were in issue immediately prior to such event.
(B) The Company shall declare a dividend or distribution on the Series A
First Preference Shares as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Shares
(other than as described in (i) and (ii) of the first sentence of
paragraph (A) above); provided that if no dividend or distribution
shall have been declared on the Common Shares during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date (or, with respect to the first Quarterly Dividend
Payment Date, the period between the first issue of any Series A First
Preference Share and such first Quarterly Dividend Payment Date), a
dividend of US$1.00 per share on each Series A First Preference Share
shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on a Series A First
Preference Share from the Quarterly Dividend Payment Date next
preceding the date of issue of such Series A First Preference Share,
unless the date of issue of such share is on or before the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such share shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on a Series A First Preference Share in
an amount less than the total amount of such dividends at the time
accrued and payable on such share shall be allocated pro rata among all
such shares at the time in issue. The Directors may fix a record date
for the determination of holders of Series A First Preference Shares
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall not be more than 60 days prior to the
date fixed for the payment thereof.
Section 2. AS REGARDS CAPITAL
Upon any liquidation, dissolution or winding up of the Company, no
distribution shall be made (1) to the holders of shares ranking in
order of priority after (either as regards income or capital) the
Series A First Preference Shares unless, prior thereto, the holders of
Series A First Preference Shares shall have received US$1.00 per share,
plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment; provided
that the holders of shares of Series A First Preference Shares shall be
entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of Common
Shares, or (2) to the holders of shares ranking in order of priority
pari passu with the Series A First Preference Shares (either as regards
income or capital), except distributions made rateably on the Series A
First Preference Shares and all such other shares ranking in order of
priority pari passu with the Series A First Preference Shares in
proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. If the
Company shall at any time after the Rights Date pay any dividend on
Common Shares payable in Common Shares or effect a subdivision or
consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a greater or lesser number of Common Shares, then in
each such case the aggregate amount to which holders of shares of
Series A First Preference Shares is entitled under the proviso in (1)
of the preceding sentence shall be adjusted by multiplying the amount
to which those holders
<PAGE> 111
G-3
would have been entitled (absent this adjustment) under the proviso in
(1) of the preceding sentence by a fraction the numerator of which is
the number of Common Shares that were outstanding immediately after
such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
Section 3. AS REGARDS VOTING
Subject to and in accordance with the provisions of the Companies Acts
and the Bye-laws of the Company (in particular, without limitation,
paragraph (7) of the Schedule to the Bye-laws of the Company) at any
meeting of the Company each holder of a Series A First Preference Share
present in person shall be entitled to one vote on any question to be
decided on a show of hands and each such holder present in person or by
proxy shall be entitled on a poll to one vote for each Series A
Preference Share held by him.
Section 4. AS TO CONVERSION
The Series A First Preference Shares shall not be convertible into all
or any other shares or securities of the Company.
Section 5. AS TO REDEMPTION
The Series A First Preference Shares shall not be redeemable.
Section 6. CERTAIN RESTRICTIONS
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A First Preference Shares as provided in Section
1 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on issued Series A First
Preference Shares shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, or make any other distributions
on, any shares ranking in order of priority after the Series A
First Preference Shares (either as regards income or capital);
(ii) declare or pay dividends on, or make any other distributions
on, any shares ranking in order of priority pari passu with
the Series A First Preference Shares (either as regards income
or capital), except dividends paid rateably on the Series A
First Preference Shares and all such other shares ranking pari
passu with them on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any shares
ranking in order of priority after the Series A First
Preference Shares (either as regards income or capital) to the
Series A First Preference Shares; provided that the Company
may at any time redeem, purchase or otherwise acquire shares
ranking in order of priority after the Series A First
Preference Shares in exchange for shares of the Company
ranking in order of priority after the Series A First
Preference Shares (either as regards income or capital); or
(iv) purchase or otherwise acquire for value any Series A First
Preference Shares, or any shares ranking pari passu with the
Series A First Preference Shares (either as regards
<PAGE> 112
G-4
income or capital), except in accordance with a purchase offer
made in writing or by publication (as determined by the
Directors) to all holders of Series A First Preference Shares
and all such other shares ranking pari passu upon such terms
as the Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective classes and series, shall determine in good
faith will result in fair and equitable treatment among the
respective classes or series.
(B) The Company shall not enter into any consolidation, amalgamation,
combination or other transaction under any applicable law in which the
Common Shares are exchanged for or changed into other shares or
securities, cash or any other property, unless in any such case the
Series A First Preference Shares shall at the same time be similarly
exchanged for or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount of shares, securities, cash or any other property, as
the case may be, into which or for which each Common Share is changed
or exchanged. If the Company shall at any time after the Rights Date
pay any dividend on Common Shares payable in Common Shares or effect a
subdivision or consolidation of the Common Shares (by reclassification
or otherwise) into a greater or lesser number of Common Shares, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A First
Preference Shares shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of Common Shares in issue
immediately after such event and the denominator of which is the number
of Common Shares that were in issue immediately prior to such event.
Section 7. OTHER RIGHTS
(A) Any Series A First Preference Share purchased or otherwise acquired by
the Company in any manner whatsoever shall be cancelled on acquisition
thereof.
(B) The Series A First Preference Shares shall rank in order of priority
(as regards income and capital) after all other classes and series of
the Company's preference shares from time to time except any class or
series that expressly provides that such class or series shall rank in
order of priority after the Series A First Preference Shares. The
rights conferred upon the holders of Series A First Preference Shares
shall not be deemed to be varied by the creation or issue of further
shares ranking in order of priority before, pari passu with or after
the Series A First Preference Shares.
Terms defined in the Bye-Laws (including the Schedule) of the Company shall have
the same meanings in this resolution of the Directors attached as an Appendix to
the Bye-Laws."
<PAGE> 113
G-5
APPENDIX B
TO THE BYE-LAWS OF TYCO INTERNATIONAL LTD.
Extract from Resolutions
of the Board of Directors of Tyco International Ltd. (formerly ADT Limited)
effective on July 2, 1997
relating to the creation of further Series A
First Preference Shares
"RESOLVED that, subject to the powers of the Directors or any duly authorized
committee of the Board of Directors of the Company to revoke this resolution or
in any way amend the rights and restrictions attached to the Series A First
Preference Shares at any time before the allotment of any such shares, with
effect from the Effective Time(10):
(i) an additional 5,000,000 of the First Preference Shares be and are
hereby designated as Series A First Preference Shares of US$1.00 each,
so as to form a single series with the 2,500,000 Series A First
Preference Shares designated as such by a resolution of the Board of
Directors passed on November 4, 1996, and shall have attached to them
the rights and shall be subject to the restrictions set out in Exhibit
A in Appendix A to the bye-laws of the Company, as such rights and
restrictions are amended by paragraph (ii) below;
(ii) the rights and restrictions attached to all the Series A First
Preference Shares, as set out in Appendix A to the bye-laws of the
Company, be and are hereby amended by:
(a) deleting from the last sentence of paragraph (A) of Section 1
of Exhibit A the words "was entitled immediately prior to such
event under (b) of the preceding sentence shall be adjusted by
multiplying such amount" and substituting therefor the words:
"is entitled under (b) of the preceding sentence shall be
adjusted by multiplying the amount to which that holder would
have been entitled (absent this adjustment) under (b) of the
preceding sentence"; and
(b) deleting from the last sentence of Section 2 of Exhibit A the
words "were entitled immediately prior to such event under the
proviso in (1) of the preceding sentence shall be adjusted by
multiplying such amount" and substituting therefor the words
"is entitled under the proviso in (1) of the preceding
sentence shall be adjusted by multiplying the amount to which
those holders would have been entitled (absent this
adjustment) under the proviso in (1) of the preceding
sentence"; and
(iii) in accordance with paragraph (2)(iii) of the schedule to the bye-laws
of the Company, a copy of this resolution be annexed as Appendix B to
the bye-laws of the Company."
- ------------------------
(10) The "Effective Time" was July 2, 1997.
<PAGE> 1
EXHIBIT 3.2
Registration No. EC 10930
BERMUDA
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
I HEREBY CERTIFY that in accordance with the provisions of section 10 of the
Companies Act 1981 ADT Limited by resolution and with the approval of the
Registrar of Companies has changed its name and was registered as TYCO
INTERNATIONAL LTD. on the 2nd day of July 1997.
SEAL OF THE REGISTRAR Given under my hand and the Seal of the
OF COMPANIES, BERMUDA REGISTRAR OF COMPANIES this 2nd
day of July, 1997.
Pamela L. Adams
for Registrar of Companies
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-3 (File No. 333-21425) and on Form S-8 (File No. 33-38249) and on Form
S-8 (File No. 33-26970) and on Form S-8 (File No. 333-03975) of Tyco
International Ltd. (formerly named ADT Limited) of our report dated July 10,
1997, on our examination of the combination of the historical consolidated
financial statements and consolidated financial statement schedule of ADT
Limited and Tyco International Ltd. (prior to the merger) after restatement for
the pooling of interests as described in Note 1 to the supplemental consolidated
financial statements, which report is included in this Current Report on Form
8-K.
COOPERS & LYBRAND
Hamilton, Bermuda
July 10, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-3 (File No. 333-21425) and on Form S-8 (File Nos. 33-38249, 33-26970
and 333-03975) of our report dated July 10, 1997 which is included in this
current report on Form 8-K on our audits of the consolidated financial
statements and the consolidated financial statement schedule of Tyco
International Ltd. as of December 31, 1996 and June 30, 1995 and for the years
ended December 31, 1996, June 30, 1995 and June 30, 1994 (not presented
separately herein).
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 10, 1997
<PAGE> 1
EXHIBIT 99.1
TYCO INTERNATIONAL LTD.
(FORMERLY ADT LIMITED)
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Tyco International Ltd. (formerly named ADT Limited)
Our report, dated March 26, 1997, on the consolidated financial statements
and consolidated financial statement schedule of ADT Limited (since renamed Tyco
International Ltd.) as at December 31, 1996 and 1995 and for each of the three
years in the period ended December 31,1996 (not presented separately herein) has
been incorporated by reference in this Form 8-K from page F-2 of the Annual
Report on Form 10-K of ADT Limited for the fiscal year ended December 31, 1996.
The consolidated financial statements and consolidated financial statement
schedule of Tyco International Ltd. (prior to the merger) as of December 31,
1996 and June 30, 1995 and for the year ended December 31, 1996 and for each of
the two years in the period ended June 30, 1995, were audited by other auditors,
whose report dated July 10, 1997, expressed an unqualified opinion on those
statements.
The accompanying supplemental consolidated financial statements give
retroactive effect to the merger of ADT Limited and Tyco International Ltd. on
July 2, 1997, which has been accounted for as a pooling of interests as
described in Note 1 to the supplemental consolidated financial statements.
Generally accepted accounting principles in the United States proscribe giving
effect to a consummated business combination accounted for by the pooling of
interests method in consolidated financial statements that do not include the
date of consummation. These supplemental consolidated financial statements do
not extend through the date of consummation; however, they will become the
historical consolidated financial statements of Tyco International Ltd. after
consolidated financial statements covering the date of consummation of the
business combination are issued.
As described in Note 1 to the supplemental consolidated financial
statements, prior to the merger ADT Limited had a calendar year end and Tyco
International Ltd. had a June 30 fiscal year end. Upon consummation of the
merger, ADT Limited (the surviving corporation) changed its name to Tyco
International Ltd. As described in Note 1 to the supplemental consolidated
financial statements, the accompanying supplemental consolidated balance sheet
at December 31, 1995 and the related consolidation statements of operations,
shareholders' equity and cash flow for each of the two years in the period ended
December 31, 1995 reflect the combination of the calendar year historical
consolidated financial position, results of operations and cash flows of ADT
Limited and the June 30, fiscal year historical consolidated financial position,
results of operations and cash flows of Tyco International Ltd. (prior to the
merger).
We have examined the combination of the historical financial statements and
consolidated financial statement schedule of ADT Limited and Tyco International
Ltd. (prior to the merger), after restatement for the pooling of interests as
described in Note 1 to the supplemental consolidated financial statements. In
our opinion, such consolidated financial statements and consolidated financial
statement schedule have been properly combined on the basis described in Note 1
to the supplemental consolidation financial statements.
Coopers & Lybrand
Hamilton, Bermuda
July 10, 1997
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Tyco International Ltd.:
We have audited the consolidated balance sheets of Tyco International Ltd.
as of December 31, 1996 and June 30, 1995 and the related consolidated
statements of income, shareholders' equity and cash flows and the related
consolidated financial statement schedule for the years ended December 31, 1996,
June 30, 1995 and June 30, 1994 (not presented separately herein). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tyco
International Ltd. as of December 31, 1996 and June 30, 1995, and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1996, June 30, 1995 and June 30, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the consolidated
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 10, 1997
2
<PAGE> 4
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 299.4 $ 416.9
Receivables, less allowance for doubtful accounts of $55.2 in 1996
and $46.6 in 1995................................................ 1,125.5 724.4
Contracts in process................................................ 131.6 104.5
Inventories......................................................... 804.4 630.2
Deferred income taxes............................................... 144.9 108.1
Prepaid expenses and other current assets........................... 211.1 87.6
-------- --------
Total current assets........................................ 2,716.9 2,071.7
Property, plant and equipment, net.................................... 2,437.8 2,229.8
Goodwill and other intangible assets, net............................. 2,295.3 2,058.1
Reorganization value in excess of identifiable assets................. 99.4 108.8
Investment in and loans to associates................................. -- 88.8
Long-term investments................................................. 100.6 2.0
Deferred income taxes................................................. 67.2 101.7
Other assets.......................................................... 211.3 140.3
-------- --------
Total assets................................................ $7,928.5 $6,801.2
======== ========
Current liabilities:
Loans payable and current maturities of long-term debt.............. $ 572.0 $ 129.3
Accounts payable.................................................... 681.5 512.7
Accrued expenses and other current liabilities...................... 933.4 655.3
Contracts in process -- billings in excess of costs................. 153.3 75.5
Deferred revenue.................................................... 146.1 137.4
Income taxes........................................................ 116.7 84.4
Deferred income taxes............................................... 12.9 11.6
-------- --------
Total current liabilities................................... 2,615.9 1,606.2
Long-term debt........................................................ 1,803.8 1,681.2
Other long-term liabilities........................................... 400.5 281.3
Deferred income taxes................................................. 120.5 152.0
Minority interest..................................................... -- 15.6
-------- --------
Total liabilities........................................... 4,940.7 3,736.3
-------- --------
Commitments and contingencies
Convertible redeemable preference shares.............................. -- 4.9
Shareholders' equity:
Common shares, $.20 par value, 750,000,000 shares authorized;
223,177,085 shares outstanding in 1996 and 218,047,743 shares
outstanding in 1995, net of reacquired shares of 14,586,650 in
1996 and 17,453,451 in 1995 (at cost)............................ 44.6 43.6
Capital in excess:
Share premium.................................................... 882.5 858.0
Contributed surplus net of deferred compensation of $27.9 in 1996
and $21.6 in 1995............................................... 2,278.4 2,112.6
Currency translation adjustment..................................... (46.1) (36.1)
Retained (deficit) earnings......................................... (171.6) 81.9
-------- --------
Total shareholders' equity.................................. 2,987.8 3,060.0
-------- --------
Total liabilities and shareholders' equity.................. $7,928.5 $6,801.2
======== ========
</TABLE>
See notes to supplemental consolidated financial statements.
3
<PAGE> 5
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................................. $ 7,425.8 $ 6,318.5 $ 5,705.8
Cost of sales............................................. (5,052.3) (4,303.7) (3,916.6)
Selling, general and administrative expenses.............. (1,485.6) (1,294.3) (1,188.1)
Merger and transaction related costs...................... (8.8) (37.2) --
Restructuring and other nonrecurring charges.............. (237.3) (34.2) (4.5)
Charge for the impairment of long-lived assets............ (744.7) -- --
--------- --------- ---------
Operating (loss) income................................... (102.9) 649.1 596.6
Interest income........................................... 30.5 17.8 15.7
Interest expense.......................................... (185.3) (181.3) (162.2)
Gain (loss) on disposal of businesses..................... 1.7 (36.6) (0.3)
Other income less expenses................................ 128.8 (5.0) (4.1)
--------- --------- ---------
(Loss) income from continuing operations before income
taxes................................................... (127.2) 444.0 445.7
Income taxes.............................................. (211.4) (196.4) (173.9)
--------- --------- ---------
(Loss) income from continuing operations.................. (338.6) 247.6 271.8
Loss from discontinued operations......................... -- -- (3.3)
--------- --------- ---------
(Loss) income before extraordinary items.................. (338.6) 247.6 268.5
Extraordinary items, net of taxes......................... (8.4) (12.4) --
--------- --------- ---------
Net (loss) income......................................... (347.0) 235.2 268.5
Dividends on preference shares............................ (0.3) (0.3) (13.3)
--------- --------- ---------
Net (loss) income available to common shareholders........ $ (347.3) $ 234.9 $ 255.2
========= ========= =========
Primary and fully diluted (loss) earnings per common
share:
(Loss) income from continuing operations................ $ (1.53) $ 1.14 $ 1.21
Loss from discontinued operations....................... -- -- (0.01)
Extraordinary items..................................... (0.04) (0.06) --
--------- --------- ---------
Net (loss) income per common share........................ $ (1.57) $ 1.08 $ 1.20
========= ========= =========
Weighted average common and common equivalent shares
outstanding............................................. 220.5 217.6 213.1
========= ========= =========
</TABLE>
See notes to supplemental consolidated financial statements.
4
<PAGE> 6
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
COMMON
SHARES, CURRENCY RETAINED
$.20 SHARE CONTRIBUTED TRANSLATION (DEFICIT)
PAR VALUE PREMIUM SURPLUS ADJUSTMENTS EARNINGS
----------- ------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
January 1, 1994 as previously reported...... $12.1 $710.8 $1,340.7 $ (45.4) $(1,060.9)
Pooling of interests with the Former Tyco
(as defined in Note 1).................... 28.4 565.5 (89.4) 634.2
Pooling of interests with ASH (as defined in
Note 2)................................... 0.7 133.1 126.5 (29.9) 77.1
----- ------ -------- ------- ---------
Balance at January 1, 1994, as restated..... 41.2 843.9 2,032.7 (164.7) (349.6)
Exchange of non-voting exchangeable
shares................................. 0.1 14.9
Reversal of redemption premium on
convertible preference shares.......... 1.8
Net income................................ 268.5
Dividends................................. (36.1)
Management equity compensation............ 1.3
Restricted stock grants, cancellations,
tax benefits and other................. 2.5
Warrants and options exercised............ 0.1 7.2 2.3
Purchase of warrant....................... (0.6)
Amortization of deferred compensation..... 3.7
Currency translation adjustments.......... 74.4
----- ------ -------- ------- ---------
Balance at December 31, 1994................ 41.4 851.1 2,058.6 (90.3) (117.2)
Conversion of convertible preference
shares................................. 0.3
Net income................................ 235.2
Dividends................................. (30.0)
Restricted stock grants, cancellations,
tax benefits and other................. 0.7 16.9
Warrants and options exercised............ 1.7 6.9 47.7
Purchase of treasury stock................ (0.2) (19.2)
Amortization of deferred compensation..... 8.3
Minimum pension liability adjustment...... (6.1)
Currency translation adjustments.......... 30.9
Currency translation adjustments
transferred on disposal of businesses
and associates......................... 23.3
----- ------ -------- ------- ---------
Balance at December 31, 1995................ 43.6 858.0 2,112.6 (36.1) 81.9
Effect of the Former Tyco's excluded
activity (as described in Note 1)...... 2.9 (19.6) 121.2
Exchange of Liquid Yield Option Notes..... 0.3
Net loss.................................. (347.0)
Dividends................................. (31.3)
Restricted stock grants, cancellations,
tax benefits and other................. 0.1 24.8
Warrants and options exercised............ 0.2 24.5 4.0
Purchase of treasury stock................ (4.4)
Amortization of deferred compensation..... 14.6
Minimum pension liability adjustment...... 3.6
Issuance of stock for acquisition......... 0.7 129.7
Other treasury stock transactions......... (5.8)
Currency translation and other
adjustments............................ (0.3) 9.6
----- ------ -------- ------- ---------
Balance at December 31, 1996................ $44.6 $882.5 $2,278.4 $ (46.1) $ (171.6)
===== ====== ======== ======= =========
</TABLE>
See notes to supplemental consolidated financial statements.
5
<PAGE> 7
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................................................ $ (347.0) $ 235.2 $ 268.5
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Charge for the impairment of long-lived assets................................. 744.7 -- --
Depreciation................................................................... 314.7 297.1 272.0
Goodwill and other intangibles amortization.................................... 82.1 84.0 85.9
Debt and refinancing cost amortization......................................... 25.5 15.8 6.3
Restructuring and other non-recurring charges.................................. 217.4 32.7 4.5
Interest on ITS vendor note.................................................... (8.9) -- --
Deferred income taxes.......................................................... 30.8 39.4 56.4
Extraordinary items............................................................ 8.4 12.4 --
(Gain) loss on disposal of businesses.......................................... (1.7) 36.6 0.3
(Gain) loss on disposal of investment in associates............................ (1.2) 5.1 (4.2)
Gain arising from the ownership of investments................................. (53.2) (0.1) (17.3)
Write off in value of associates............................................... -- -- 30.7
Settlement gain................................................................ (69.7) -- --
Gain on currency transactions.................................................. (9.7) (0.9) (2.1)
Loss on disposal of discontinued operations.................................... -- -- 3.7
Provisions for losses on accounts receivable and inventory..................... 36.2 21.4 18.8
Changes in assets and liabilities:
Receivables.................................................................. (98.2) (90.1) (59.5)
Proceeds from accounts receivable sale....................................... -- 75.0 150.0
Contracts in process......................................................... 17.8 (9.4) 12.5
Inventories.................................................................. (60.0) (50.8) (15.7)
Accounts payable, accruals and other liabilities............................. (121.5) 35.6 (6.0)
Income taxes payable......................................................... (10.9) (8.8) 17.8
Deferred revenue............................................................. 4.3 2.7 8.0
Other, net................................................................... 36.3 15.1 33.9
--------- ------- -------
Net cash provided by operating activities.................................. 736.2 748.0 864.5
--------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment........................................ (505.1) (444.8) (372.4)
Acquisition of businesses........................................................ (788.0) (198.6) (87.5)
Purchase of customer contracts................................................... (34.6) (0.5) (2.3)
Purchase of other investments.................................................... (6.8) (0.4) (6.1)
Disposal of businesses........................................................... 3.0 254.8 28.1
Disposal of discontinued operations.............................................. -- -- 4.6
Disposal of investment in and loans to associates................................ 15.4 7.8 40.2
Disposal of other investments.................................................... 54.1 0.2 72.5
--------- ------- -------
Net cash utilized by investing activities.................................. (1,262.0) (381.5) (322.9)
--------- ------- -------
Cash flows from financing activities:
Net receipts (repayments) of short-term debt..................................... 246.9 (411.5) (435.9)
Repayments of long-term debt..................................................... (265.4) (256.5) (1.3)
Proceeds from long-term debt..................................................... 385.3 458.9 345.2
Debt refinancing costs........................................................... -- (12.0) (1.3)
Purchase of senior subordinated notes............................................ (24.0) (33.7) --
Proceeds from issue of common shares............................................. 31.6 56.3 9.6
Redemption of convertible redeemable preference shares........................... (4.9) -- (420.2)
Dividends paid................................................................... (31.0) (29.1) (39.9)
Purchase of treasury stock and warrant........................................... (9.7) (19.4) (0.6)
Other............................................................................ -- (0.3) (11.7)
--------- ------- -------
Net cash provided (utilized) by financing activities....................... 328.8 (247.3) (556.1)
--------- ------- -------
Net (decrease) increase in cash and cash equivalents............................... (197.0) 119.2 (14.5)
Cash and cash equivalents at beginning of year..................................... 416.9 297.7 312.2
Effect of the Former Tyco's excluded results (as described in Note 1).............. 79.5 -- --
--------- ------- -------
Cash and cash equivalents at end of year........................................... $ 299.4 $ 416.9 $ 297.7
========= ======= =======
Supplementary cash flow disclosure:
Interest paid.................................................................... $ 158.5 $ 168.1 $ 155.1
========= ======= =======
Income taxes paid (net of refunds)............................................... $ 128.9 $ 112.0 $ 84.1
========= ======= =======
</TABLE>
See notes to supplemental consolidated financial statements.
6
<PAGE> 8
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The supplemental consolidated financial statements have been prepared in
United States dollars in accordance with generally accepted accounting
principles in the United States. As described more fully in Note 2, on July 2,
1997 a wholly-owned subsidiary of what was formerly called ADT Limited ("ADT")
merged with Tyco International Ltd. (the "Former Tyco"); the transaction is
referred to herein as the "merger". Upon consummation of the merger, ADT (the
surviving corporation) changed its name to Tyco International Ltd. (the
"Company" or "Tyco"). These supplemental consolidated financial statements
include the consolidated accounts of Tyco, a company incorporated in Bermuda,
and its subsidiaries. They have been prepared following the pooling of interests
method of accounting for the merger and therefore reflect the combined financial
position, operating results and cash flows of ADT and the Former Tyco as if they
had been combined for all periods presented. Prior to the merger, ADT had a
calendar year end and the Former Tyco had a June 30 fiscal year end. The
supplemental consolidated balance sheet as of December 31, 1996 and the
supplemental consolidated statements of operations, shareholders' equity and
cash flows for the year ended December 31, 1996 reflect the combination of the
calendar year end consolidated financial position, results of operations and
cash flows for both ADT and the Former Tyco. The supplemental consolidated
balance sheet as of December 31, 1995 and the consolidated supplemental
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1995 reflect the combination of the
calendar year end financial position, results of operations and cash flows of
ADT and the June 30, 1995 fiscal year end financial position and the June 30,
1995 and 1994 fiscal year end results of operations and cash flows of the Former
Tyco. The results of operations and cash flows for the Former Tyco from July 1,
1995 to December 31, 1995 which have been excluded from these supplemental
consolidated financial statements are reflected as adjustments in the 1996
supplemental consolidated statements of shareholders' equity and cash flows.
Upon publication of the Company's consolidated financial statements for a period
which includes July 2, 1997, these supplemental consolidated financial
statements will become the historical consolidated financial statements of the
Company.
Principles of Consolidation
Tyco is a holding company with no independent business operations or assets
other than its investment in its subsidiaries, intercompany balances and
holdings of cash and cash equivalents. The Company's businesses are conducted
through its subsidiaries. The Company consolidates companies in which it owns or
controls more than fifty percent of the voting shares unless control is likely
to be temporary. The results of subsidiary companies acquired or disposed of
during the financial year are included in the supplemental consolidated
financial statements from the effective date of acquisition or up to the date of
disposal except in the case of pooling of interests (see Note 2). All
significant intercompany balances and transactions have been eliminated in
consolidation.
Cash Equivalents
All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents.
Inventories
Inventories are recorded at the lower of cost (first in, first out) or
market value.
7
<PAGE> 9
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are principally recorded at cost less
accumulated depreciation. 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 as follows:
<TABLE>
<S> <C>
Buildings and related improvements...... 2 to 50 years
Leasehold improvements.................. remaining term of the lease
Subscriber systems...................... shorter of actual contract duration or
10 to 14 years
Other plant, machinery, equipment and
furniture and fixtures................ 2 to 20 years
</TABLE>
Gains and losses arising on the disposal of property, plant and equipment
are included in the supplemental consolidated statements of operations.
Associates
For investments in which the Company owns or controls more than twenty
percent of the voting shares, or over which it exerts significant influence over
operating and financial policies, the equity method of accounting is used. The
investment in associates is shown as the Company's proportion of the underlying
net assets of these companies plus any goodwill attributable to the acquisitions
less any write off required for a permanent diminution in value. The
supplemental consolidated statements of operations include the Company's share
of net income of associates less applicable goodwill amortization.
Goodwill and Other Intangible Assets
Goodwill is being amortized on a straight-line basis over periods ranging
from 10 to 40 years. Goodwill arising on the acquisition of associates is
included in investment in associates. Accumulated amortization amounted to
$234.8 million at December 31, 1996 and $345.3 million at December 31, 1995.
Impairment of goodwill, if any, is measured periodically on the basis of whether
anticipated undiscounted operating cash flows generated by the acquired
businesses will recover the recorded net goodwill balances over the remaining
amortization period.
Other intangible assets include patents, trademarks, customer contracts and
other items which are being amortized on a straight-line basis over lives
ranging from 2 to 30 years. At December 31, 1996 and 1995, accumulated
amortization amounted to $31.5 million and $47.3 million, respectively.
Reorganization Value in Excess of Identifiable Assets
As described more fully in Note 2, on October 19, 1994 a wholly-owned
subsidiary of the Former Tyco merged with Kendall International, Inc.
("Kendall"). The merger was accounted for under the pooling of interests method
of accounting and these supplemental consolidated financial statements reflect
the combined financial position, operating results and cash flows of the Former
Tyco and Kendall as if they had been combined for all periods presented. 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,
effective June 30, 1992. Based on the allocation of reorganization value in
conformity with procedures specified by Statement of Position 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. Reorganization value is being amortized using the
straight-line method over 20 years. Accumulated amortization amounted to $32.8
million and $23.4 million at December 31, 1996 and 1995, respectively.
8
<PAGE> 10
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Revenue from the sale of services or products is recognized as services are
rendered or deliveries are made. Service charges, which consist of subscriber
billings for services not yet rendered, are deferred and taken into income as
earned and the deferred element is included in liabilities. Revenue from the
installation of electronic security systems is recognized when installations are
completed.
Contract sales for installation of fire protection systems and other
construction related projects 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.
Accounts receivable include amounts billed under retainage provisions for
fire protection contracts. Retention balances of $39.9 million at December 31,
1996 which become due upon contract completion and acceptance are expected to be
substantially collected during 1997.
Share Premium and Contributed Surplus
In accordance with the Bermuda Companies Act 1981, when the Company issues
shares for cash at a premium to their par value, the resulting premium is
credited to a share premium account, a non-distributable reserve. When the
Company issues shares in exchange for shares of another company, the excess of
the fair value of the shares acquired over the par value of the shares issued by
the Company is credited, where applicable, to contributed surplus which is,
subject to certain conditions, a distributable reserve.
Income Taxes
Deferred tax liabilities and assets are recognized for the expected future
tax consequences of events that have been included in the consolidated financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the differences between the consolidated financial statements and tax
bases of assets and liabilities, using tax rates in effect for the years in
which the differences are expected to reverse. A valuation allowance is required
to offset any net deferred tax assets if, based upon the available evidence, it
is more likely than not that some or all of the deferred tax assets will not be
realized.
Research and Development
Research and development expenditures are expensed when incurred.
Translation of Foreign Currency
Assets and liabilities of the Company's subsidiaries operating outside of
the United States which account in a functional currency other than U.S.
dollars, other than those operating in highly inflationary environments, are
translated into U.S. dollars using year-end exchange rates. Revenues and
expenses 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 material, are included in net income.
9
<PAGE> 11
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Rate Swaps, Currency Options and Other Contracts
The Company enters into a variety of interest rate swaps, currency options,
and cross-currency swaps in its management of interest costs and foreign
currency exposures.
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 is recognized over the life of the agreement as an
adjustment to interest expense.
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 expenses. Under the Company's cross-currency swap, which
hedges certain net foreign investments, changes in valuation are recorded in the
currency translation adjustment account. The interest differentials from this
swap are recorded in interest expense.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make extensive
use of certain estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported periods. Significant estimates in
these supplemental consolidated financial statements include allowances for
doubtful accounts receivable, estimates of future cash flows associated with
assets, asset impairments, useful lives for depreciation and amortization, loss
contingencies, net realizable value of inventories, estimated contract revenues
and related costs, environmental liabilities, income taxes and tax valuation
reserves, and the determination of discount and other rate assumptions for
pension and post-retirement employee benefit expenses. Actual results could
differ from those estimates.
Income Per Share
Net income per share is calculated on the basis of net income available to
common shareholders divided by the weighted average number of shares
outstanding, which includes common equivalents shares to reflect stock options
and warrants using the treasury stock method except where their effect would be
anti-dilutive.
Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share", which is effective for fiscal years ending after December 15, 1997,
including interim periods. Earlier adoption is not permitted. However, an entity
is permitted to disclose pro forma earnings per share amounts computed under
SFAS 128 in the notes to the financial statements in periods prior to adoption.
The statement requires restatement of all prior period earnings per share data
presented after the effective date. SFAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share and is
substantially similar to the standard recently issued by the International
Accounting Standards Committee entitled International Accounting Standards,
"Earnings Per Share". The Company has not yet determined its impact.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
10
<PAGE> 12
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. MERGERS:
ADT's Merger with the Former Tyco
On July 2, 1997 a wholly owned subsidiary of ADT merged with the Former
Tyco. Shareholders of ADT, through a reverse stock split, received .48133 shares
of the Company's common stock for each share of ADT common stock outstanding,
and the Former Tyco shareholders received one share of the Company's common
stock for each share of the Former Tyco common stock outstanding (approximately
168.4 million shares issued to Former Tyco shareholders). 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. The historical consolidated financial statements for periods prior
to the consummation of the combination are restated as though the companies had
been combined during such periods (see Note 1). In addition, all historical
common share and per share data of the Company have been retroactively restated
to reflect the reverse stock split described above.
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 supplemental
consolidated statement of operations, but will be reflected in the consolidated
statement of operations of the Company for the quarter ended September 30, 1997.
Such fees and expenses are currently estimated to be approximately $694.0
million (unaudited). This includes transaction costs of approximately $94.0
million relating to legal, printing, accounting, financial advisory services,
severance costs payable at the effective time of the merger and other direct
expenses. It also includes a restructuring charge of approximately $600.0
million to reflect the combination of the two companies, including amounts with
respect to the elimination of excess facilities, the write-off of certain
goodwill and fixed assets, severance costs and the satisfaction of certain
liabilities.
Combined and separate results of ADT and the Former Tyco for the periods
preceding the merger were as follows:
<TABLE>
<CAPTION>
FORMER
ADT TYCO COMBINED
-------- -------- --------
<S> <C> <C> <C>
Year ended December 31, 1996
Net sales.......................................... $1,704.0 $5,721.8 $7,425.8
Extraordinary items................................ (8.4) -- (8.4)
Net (loss) income.................................. (695.1) 348.1 (347.0)
Year ended December 31, 1995(i)
Net sales.......................................... 1,783.8 4,534.7 6,318.5
Extraordinary items................................ (9.8) (2.6) (12.4)
Net income......................................... 21.2 214.0 235.2
Year ended December 31, 1994(i)
Net sales.......................................... 1,629.4 4,076.4 5,705.8
Net income......................................... 79.3 189.2 268.5
</TABLE>
- ---------------
(i) Prior to the merger ADT had a calendar year end and the Former Tyco had a
June 30 fiscal year end. The historical results have been combined using a
calendar year end for both ADT and the Former Tyco for the year ended
December 31, 1996. For 1995 and 1994 the results reflect the combination of
ADT with a calendar year end and the Former Tyco with a June 30 fiscal year
end. Net sales and net income for the Former Tyco for the period July 1,
1995 through December 31, 1995 (which results are not included in the
historical combined results) were $2,460.1 million and $136.4 million,
respectively.
11
<PAGE> 13
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADT's Merger with Automated Security (Holdings) PLC ("ASH")
In September 1996, ADT merged with and acquired the whole of the issued
capital of ASH, a United Kingdom quoted company (the "ASH merger"). ASH is
engaged in the provision of electronic security services in North America and
Europe. Under the terms of the transaction, ASH shareholders received 3 ADT
common shares for every 92 ASH ordinary shares, 2 ADT common shares for every 31
ASH 5 percent convertible cumulative redeemable preference shares and 2 ADT
common shares for every 31 ASH 6 percent convertible cumulative redeemable
preference shares. The total consideration in respect of the whole of the issued
capital of ASH consisted of the issue of 7,034,940 ADT common shares (3,386,128
shares as adjusted for the reverse stock split discussed above). The ASH merger
was accounted for as a pooling of interests.
The consolidated financial statements of ASH have previously been presented
in pounds sterling, ASH's functional currency. For the purposes of these
supplemental consolidated financial statements, ASH's consolidated financial
statements have been translated into United States dollars at the appropriate
exchange rates. In addition, ASH's fiscal year end was November 30. It is these
November fiscal years which have been used to give effect to the pooling of
interests with ADT. Certain figures of ASH for all periods presented have been
reclassified to conform to the ADT presentation.
Combined and separate results of ADT and ASH for the periods preceding the
ADT and ASH merger were as follows:
<TABLE>
<CAPTION>
ADT ASH ADJUSTMENTS COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Six months ended June 30, 1996 (unaudited)
Net sales...................................... $ 715.6 $ 118.1 $ -- $ 833.7
Extraordinary items............................ (1.2) -- -- (1.2)
Net loss....................................... (347.7) (328.9) 0.5(i) (676.1)
Year ended December 31, 1995
Net sales...................................... 1,525.4 258.4 -- 1,783.8
Extraordinary items............................ (9.8) -- -- (9.8)
Net income (loss).............................. 41.5 (18.7) (1.6)(ii) 21.2
Year ended December 31, 1994
Net sales...................................... 1,375.9 253.5 -- 1,629.4
Net income (loss).............................. 111.0 (31.7) -- 79.3
</TABLE>
- ---------------
(i) Income tax adjustment arising on preference share dividends accrued by the
ASH group but not payable following merger.
(ii) Income tax adjustment of $0.6 million credit referred to in (i) above, and
a $2.2 million charge relating to cumulative currency translation
adjustments on the disposal of businesses and associates by the ASH group
whose consolidated financial statements were prepared in pounds
sterling -- its functional currency.
All fees and expenses related to the ASH merger have been expensed as
required under the pooling of interests accounting method. Such fees and
expenses amounted to $8.8 million in 1996.
The Former Tyco's Merger with Kendall International, Inc.
On October 19, 1994, a wholly-owned subsidiary of the Former Tyco merged
with Kendall International, Inc. ("Kendall"). Shareholders of Kendall received
1.29485 shares of the Former Tyco common stock for each share of Kendall common
stock. The transaction was accounted for as a pooling of interests. Accordingly,
the historical financial statements of the Former Tyco and Kendall for periods
prior to the consummation of the combination were restated as though the
companies had been combined during such periods. Revenues
12
<PAGE> 14
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and net income for the quarter ended September 30, 1994 (the most recent interim
period prior to the pooling) were $827.6 million and $32.6 million,
respectively, for the Former Tyco and $226.6 million and $20.7 million,
respectively, for Kendall.
All fees and expenses related to the Kendall 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 in
1995.
3. ACQUISITIONS AND DIVESTITURES:
During 1996, the Company acquired companies in each of its business
segments for an aggregate of $1.1 billion, including $788.0 million in cash, 3.5
million shares of the Company's common stock valued at $130.4 million and the
assumption of approximately $155.0 million in debt. The cash acquisitions were
made utilizing cash on hand as well as borrowings under the Company's
uncommitted lines of credit. Each of the acquisitions was accounted for as a
purchase and the results of operations of the acquired companies were included
in the consolidated results of the Company from their respective acquisition
dates. As a result of the acquisitions, approximately $859.2 million in goodwill
was recorded by the Company, which reflects the adjustments necessary to
allocate the individual purchase prices to the fair value of assets acquired,
liabilities assumed and additional purchase liabilities recorded. Additional
purchase liabilities recorded include approximately $27.0 million for
transaction and other direct costs, $44.0 million for severance and related
costs and $23.5 million for costs associated with the shut down and
consolidation of certain acquired facilities. At December 31, 1996 liabilities
for approximately $19.0 million in transaction and other costs, $24.9 million in
severance costs and $15.5 million for facility related costs remained on the
balance sheet. The Company expects to complete its termination of employees and
consolidation of facilities in 1997.
On December 29, 1995, the Company sold certain assets, including trademarks
and patents, of the Curad(R) and Futuro(R) consumer healthcare products business
owned by its Kendall subsidiary. Under the agreements, Kendall will continue to
manufacture certain Curad(R) and Futuro(R) products for the buyer under
long-term supply agreements. The Company received net cash proceeds of $49.8
million on the sale of the brand names and certain domestic assets. The Company
will continue to receive other payments, including payments under royalty and
noncompete agreements, through 2000. The Company has also granted to the buyer
options to acquire certain additional trademarks, patents and other
international assets. The gain on the sale was not material to the Company's
results of operations.
During 1995, the Company acquired companies in its flow control products,
disposable and specialty products, and fire and safety services segments for an
aggregate of $198.6 million in cash. During 1994, the Company acquired companies
in its disposable and specialty products, flow control products, fire and safety
services segments for an aggregate of $87.4 million in cash and a note payable
of $3.6 million. The acquisitions were accounted for as purchases, and the
results of operations of the acquired companies were included in the
consolidated results of the Company from their respective acquisition dates. The
effect of these transactions on the Company's financial position and results of
operations in the year of acquisition was not significant.
During 1995 the Company disposed of an interest in its United Kingdom and
Continental European vehicle auction services businesses ("European Auctions"),
its entire European electronic article surveillance business and certain
European electronic security services operations for net cash proceeds of $254.8
million, notes receivable of $87.9 million, shares received of $0.9 million and
deferred consideration of $5.6 million. The loss on the sale of these businesses
was $36.6 million.
During 1994, the Company sold certain of its European fire products
manufacturing and distribution businesses and certain North American and
Australasian electronic security services businesses for cash proceeds of $28.1
million and notes receivable of $25.3 million. The loss on the sale of these
businesses was not material.
13
<PAGE> 15
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INDEBTEDNESS:
Long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
(IN MILLIONS)
<S> <C> <C>
Bank and acceptance facilities.................................. $ 50.6 $ 39.4
Bank credit agreement--Former Tyco(i)........................... 100.0 --
Bank credit agreement--ADT(i)................................... 83.0 15.0
Bank credit agreement -- ASH(iii)............................... -- 126.2
Uncommitted lines of credit(iv)................................. 254.7 --
8.9% insurance company note(v).................................. -- 55.0
8.28% senior notes due 1998 -- ASH(ii).......................... -- 56.8
8.125% public notes due 1999.................................... 144.9 144.9
8.25% senior notes due 2000(vi)................................. 250.0 250.0
6.5% public notes due 2001(vii)................................. 298.5 --
9.25% senior subordinated notes due 2003(viii).................. 294.1 317.2
6.375% public notes due 2004.................................... 104.4 104.3
9.5% convertible capital bonds due 2006(ix)..................... 75.6 68.7
Zero coupon Liquid Yield Option Notes due 2010(x)............... 326.8 306.8
9.5% public debentures due 2022................................. 199.6 199.6
8.0% public debentures due 2023................................. 50.0 50.0
Other........................................................... 143.6 76.6
-------- --------
Total debt...................................................... 2,375.8 1,810.5
Less current portion............................................ 572.0 129.3
-------- --------
Long-term debt.................................................. $1,803.8 $1,681.2
======== ========
</TABLE>
- ---------------
(i) Under the Company's credit agreement with a group of commercial banks,
which was renegotiated in December 1996, the Company has the right to
borrow $300 million or a portion thereof until December 2001 for its
general corporate purposes. The principal amount then outstanding will be
due and payable at that time. At December 31, 1996, $100.0 million
(1995 -- $0) was outstanding under the agreement. Interest payable on
borrowings is variable based upon the Company's option of selecting a
Eurodollar rate plus 0.21%, a certificate of deposit rate plus 0.335% or
a base rate, as defined. The interest rate at December 31, 1996 was 6.0%.
In August 1995, ADT Operations, Inc., an indirect wholly-owned subsidiary
of the Company, entered into a new $300 million revolving bank credit
agreement which replaced in full its previous bank credit agreement. The
new agreement has a term of five years and is guaranteed on a senior
basis by the Company and certain subsidiaries of ADT Operations, Inc.
Amounts under this facility are available for borrowing and reborrowing
(or issuance and reissuance in the case of letters of credit up to a
maximum of $100 million), subject to certain conditions at that time,
until June 2000 at which time all amounts are repayable in full. At
December 31, 1996, $83.0 million (1995 -- $15.0 million) was drawn down
under the agreement, plus letters of credit amounting to $81.1 million
(1995 -- $81.0 million) which have been issued and have terms of less
than one year. The Company utilizes letters of credit to back certain
financing arrangements and insurance policies as well as for trade
purposes. The letters of credit approximately reflect fair value as a
condition of their underlying purpose. The Company expects the
counterparties to fully perform under the terms of the agreements.
14
<PAGE> 16
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amounts drawn down under the revolving bank credit agreement bear
interest at a floating rate equal, at the option of ADT Operations, Inc.,
to either the alternative base rate plus a margin or the reserve adjusted
LIBOR plus a margin. The average rate of interest at December 31, 1996
was 6.5% (1995 -- 7.6%).
The revolving bank credit agreements contain certain financial and
operating covenants, including restrictions on the Company's ability to
incur additional indebtedness, limitations on certain payments, including
dividends on the common shares of the Company and ADT Operations, Inc.,
and certain other financial covenants, including a minimum cash flow
coverage ratio, a minimum debt to total capitalization ratio and a
minimum level of shareholders' equity, and certain change in control
provisions. As a result of the merger the Company is in the process of
refinancing certain indebtedness and renegotiating financial covenants
(See Note 26).
In December 1996, ADT Operations, Inc. entered into a new $200 million
revolving bank credit agreement, subject to completion of certain
additional documentation which was signed in January 1997, which replaced
in full its previous bank credit agreement, and which was subsequently
canceled. The new agreement has a term of one year and is guaranteed on a
senior basis by the Company and certain subsidiaries of ADT Operations,
Inc. Amounts available under this new facility are available for
borrowing and reborrowing (or issuance and reissuance in the case of
letters of credit up to a maximum of $100 million), subject to certain
conditions at that time, until January 1998, at which time all amounts
are repayable in full. The interest rates and financial and operating
covenants in place under the new facility are substantially the same as
those referred to above for the previous bank credit agreement.
(ii) During 1994, ASH issued $60.7 million of its 8.28% senior notes due
January 1998 of which $5.6 million was in respect of yield maintenance.
The senior notes were collateralized obligations of the ASH group. The
yield maintenance amortization on the senior notes has been charged as
interest expense through the consolidated statements of operations. The
yield maintenance amortization for 1996 amounted to $1.5 million
(1995 -- $1.1 million; 1994 -- $0.6 million). The effective rate of
interest including yield maintenance was 10.7%.
(iii) During 1995, ASH entered into a bank credit agreement totaling
approximately $134 million with a maturity date in January 1998. The
amounts drawn under the agreement were collateralized obligations of the
ASH group and bore interest principally at LIBOR plus a margin.
In September 1996, the Company repaid in full all amounts owed by the ASH
group under its senior notes and bank credit agreement, which were
subsequently canceled, and which was financed from cash on hand and loans
drawn under the ADT revolving bank credit agreement. The loss arising on
repayment of $4.2 million, and related costs of $0.4 million, was
included in extraordinary items (Note 14).
(iv) 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
weighted average interest rate was 6.1% at December 31, 1996.
(v) In June 1996, the Company repaid the 8.9% insurance company note,
utilizing borrowings under its uncommitted lines of credit.
(vi) The $250.0 million 8.25% senior notes due August 2000 were issued in
August 1993, through a public offering, by ADT Operations, Inc. and are
guaranteed on a senior basis by the Company and certain subsidiaries of
ADT Operations, Inc. The senior notes are not redeemable prior to
maturity, and interest is payable semi-annually. The indentures governing
the senior notes contain certain covenants including limitations on
indebtedness, limitations on certain payments, including dividends on the
15
<PAGE> 17
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's common shares, and compliance with various financial and
operating covenants and prohibitions, and certain change in control
provisions. The non-collateralized senior obligations of ADT
Operations, Inc. rank pari passu in right of payment with all other
existing and future senior indebtedness of ADT Operations, Inc.
including indebtedness under the revolving bank credit agreement.
(vii) In October 1996, the Company issued $300 million principal amount of
6.5% notes due 2001. The net proceeds were used to redeem debt assumed
with the Company's acquisition of Carlisle Plastics, Inc. as well as
to reduce certain amounts outstanding under the Company's credit
agreement and uncommitted lines of credit.
(viii) The $350.0 million 9.25% senior subordinated notes due August 2003 were
issued in August 1993, through a public offering by ADT Operations,
Inc., and are guaranteed on a senior subordinated basis by the Company.
The notes are redeemable in whole or in part, at the option of ADT
Operations, Inc., at any time after August 1998 at the following
redemption prices: during the twelve month period beginning (a) August
1998 at 103.75%, (b) August 1999 at 102.50%, (c) August 2000 at 101.25%,
and thereafter at 100.00% of the principal amount. Interest is payable
semi-annually. The indentures governing the senior subordinated notes
contain certain covenants as set out above for the 8.25% senior notes
due August 2000. The non-collateralized, senior subordinated obligations
of ADT Operations, Inc. rank pari passu with, or senior in right of
payment to, all other existing and future indebtedness of ADT
Operations, Inc. During 1996 the Company reacquired in the market $23.1
million (1995 -- $32.8 million) face value of the senior subordinated
notes at a purchase cost of $24.0 million (1995 -- $33.7 million) which
was financed from cash on hand. The loss arising on reacquisition of
$0.9 million (1995 -- $0.9 million), and related costs of $0.5 million
(1995 -- $0.8 million), were included in extraordinary items (Note 14).
(ix) The 9.5% sterling denominated convertible capital bonds due July 2006
were issued by ASH Capital Finance (Jersey) Limited, a company
incorporated in Jersey and an indirect wholly-owned subsidiary of the
Company, and are unconditionally and irrevocably guaranteed on a
non-collateralized and subordinated basis by the Company. Interest is
payable semi-annually. The capital bonds are convertible, at the option
of the holder, into fully paid 2.0% (fixed cumulative dividend)
exchangeable redeemable preference shares in ASH Capital Finance
(Jersey) Limited with a nominal value of one pence each. The preference
shares are unconditionally and irrevocably guaranteed on a
non-collateralized and subordinated basis by the Company. The
preference shares are redeemable at their paid up value of L 1 each and
they are also exchangeable, at the option of the holder, for fully paid
common shares of the Company at a price of L 159.27 per common share,
the price for which is subject to adjustment under certain
circumstances. The capital bonds are unconditionally and irrevocably
guaranteed on a non-collateralized and subordinated basis by ASH, and
were formerly convertible into ordinary shares of ASH. Under the terms
of the issue, the Company can require conversion of any outstanding
capital bond if 85% of the issue has been previously converted or
purchased and canceled, in which case the bond holders may elect for
redemption in lieu of conversion. On or after June 1, 1996, the Company
may exercise a call option at 100% of the aggregate paid up amounts of
the capital bonds outstanding.
In December 1996, ASH Capital Finance (Jersey) Limited gave notice to
all bond holders that in January 1997 it would redeem all of the
capital bonds then outstanding at a price equating to the denomination
of each capital bond together with all accrued interest due.
Accordingly, in January 1997 the capital bonds were fully redeemed at
their carrying amount, which was financed from cash on hand and amounts
drawn down under the sterling denominated bank credit facility (see
below) and at December 31, 1996 have been classified in the current
portion of long-term debt.
(x) In July 1995, ADT Operations, Inc. issued $776.3 million aggregate
principal amount at maturity of its zero coupon subordinated Liquid
Yield Option Notes ("Notes") maturing July 2010. The net proceeds
16
<PAGE> 18
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of the issue amounted to $287.4 million which was used to repay in full
all amounts outstanding under ADT Operations Inc.'s previous bank credit
agreement, which was subsequently canceled. The issue price per Note was
$383.09, being 38.309% of the principal amount of $1,000 per Note at
maturity, reflecting a yield to maturity of 6.5% per annum (computed on a
semi-annual bond equivalent basis). There are no periodic payments of
interest. The discount amortization on the Notes is being charged as
interest expense through the supplemental consolidated statements of
operations on a basis linked to the yield to maturity. The Notes discount
amortization for 1996 amounted to $20.3 million (1995 -- $9.4 million).
Each Note is exchangeable for common shares of the Company at the option
of the holder at any time prior to maturity, unless previously redeemed or
otherwise purchased by ADT Operations, Inc. at an exchange rate of 13.588
common shares per Note. During 1996, 619 Notes with a carrying value of
$0.3 million were exchanged, at the option of the holders, for 8,410
common shares of the Company. Any Note will be purchased by ADT
Operations, Inc., at the option of the holder, as of July 2002 for a
purchase price per Note of $599.46. At this time, if the holder exercises
the option, the Company has the right to deliver all or a portion of the
purchase price in the form of common shares of the Company. Beginning July
2002 the Notes are redeemable for cash at any time at the option of ADT
Operations, Inc., in whole or in part, at redemption prices equal to the
issue price plus accrued original issue discount to the date of
redemption. The Notes are guaranteed on a subordinated basis by the
Company. If, on or prior to maturity, there is a change in control, the
holder has the right to require ADT Operations, Inc., to purchase the
Notes at the change in control purchase price.
In January 1997, the Company entered into a sterling denominated bank
credit facility which is repayable on demand. The amount drawn down under the
facility amounted to $26 million which was used to repay, in part, the amounts
owed under the sterling denominated convertible capital bonds due July 2006. The
facility is guaranteed by the Company and certain of its subsidiaries. Interest
is payable at LIBOR plus a margin.
In March 1997, the Company entered into a new $154 million sterling
denominated bank credit facility of which $146 million is a term loan facility
and $8 million is a revolving credit facility. The term loan facility was fully
drawn down and, in part, was used to repay in full the $26 million drawn down
under the sterling denominated bank credit facility. The new facility has a term
of five years and is guaranteed by the Company and certain of its subsidiaries.
Interest is payable at LIBOR plus a margin.
The average rate of interest on all long-term debt during the year was 8.0%
(1995 -- 8.3%; 1994 -- 8.5%).
The aggregate amounts of total debt maturing during the next five years are
as follows (in millions): $572.0 in 1997, $45.1 in 1998, $35.4 in 1999, $397.4
in 2000 and $299.8 in 2001.
In July 1997 the Company tendered for certain of its public debt (See Note
26).
At December 31, 1996, the Company had interest rate swap agreements with a
number of financial institutions having a total notional amount of $150 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 6.64%
and will make payments based on six month LIBOR, which, at December 31, 1996,
was 5.60%. These agreements expire in the amounts of $100 million in May 1997
and $50 million in March 1998. The impact of the Company's interest rate swap
activities on its weighted average borrowing rate was not material in any year.
The impact on reported interest was a reduction of $1.8 million, an increase of
$1.0 million and a reduction of $7.0 million for 1996, 1995 and 1994,
respectively.
5. SALE OF ACCOUNTS RECEIVABLE:
The Company has an agreement under which it sells participating interests
in a defined pool of trade accounts receivable. 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 maximum permitted by the
agreement. Under the terms of the agreement the Company has retained
substantially the same risk of credit
17
<PAGE> 19
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
loss as if the receivables had not been sold and, accordingly, the full amount
of the allowance for doubtful accounts has been retained. The Company sold $150
million of accounts receivable at the program's inception in 1994. In June 1995,
the Company increased the maximum permitted under the agreement to $225 million
from $150 million, and correspondingly sold an additional $75 million. At
December 31, 1996 the $225 million available under the program was fully
utilized. The proceeds from the sales were used to reduce borrowings under
uncommitted lines of credit and are reported as operating cash flows in the
Company's supplemental consolidated statements of cash flows in 1995 and 1994
and a reduction of receivables in the Company's supplemental consolidated
balance sheets in 1996 and 1995. The proceeds of sale are less than the face
amount of accounts receivable sold by an amount that approximates the
purchaser's financing cost of issuing its own commercial paper backed by these
accounts receivable. The discount from the face amount represented a loss on the
sale of receivables of $12.1 million, $8.2 million and $4.1 million during the
years ended December 31, 1996, 1995 and 1994, respectively, and has been
included in selling, general and administrative expense in the Company's
consolidated statements of operations. The Company, as servicing agent for the
purchaser, retains collection and administrative responsibilities for the
participating interests in the defined pool. Subsequent to December 31, 1996 the
Company increased the maximum permitted under the agreement to $300 million.
In June 1996 the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." The standard
defines criteria for recognizing transfers of financial assets as a sale or a
financing activity and is effective for all transfers of financial assets
occurring after December 31, 1996. The Company amended their agreement for the
sale of accounts receivable subsequent to December 31, 1996 to comply with the
requirements of SFAS 125 and will continue to account for the transfer of
receivables as a sale.
6. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt and interest rate swaps. In
addition, the Company has entered into a cross-currency swap under which it has
exchanged $50.0 million of U.S. dollar debt for deutsche mark denominated debt.
At December 31, 1996 and 1995 the fair value of interest rate swaps approximated
book value, and the fair value of long-term debt was approximately $1,964.0
million (1995 -- approximately $1,862.7 million), based on current interest
rates. The fair value of financial instruments included 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 a counterparty failed to
perform according to the terms of its agreement.
18
<PAGE> 20
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
The (benefit) provision for income taxes and the differences between the
(benefit) provisions at the United States federal statutory rate and the amounts
provided are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
(Benefit) provision at statutory rate.................... $(44.6) $155.4 $156.0
State income taxes....................................... 22.2 18.7 14.7
SFAS 121 impairment...................................... 150.2 -- --
Non U.S. net losses (earnings)........................... 75.0 14.0 (7.9)
Other.................................................... 8.6 8.3 11.1
------ ------ ------
Provision for income taxes............................... 211.4 196.4 173.9
Deferred provision....................................... (36.8) (46.8) (46.0)
------ ------ ------
Current provision........................................ $174.6 $149.6 $127.9
====== ====== ======
</TABLE>
In the normal course, the Company's United States federal income tax
returns are examined by the Internal Revenue Service ("IRS") and, in connection
with such examinations, significant assessments could arise. During 1995, the
IRS examined the Former Tyco's 1991 and 1992 income tax returns. In connection
with such examination, one item is currently under review by the IRS National
Office, which could result in a significant assessment of additional taxes.
Ultimate resolution of this matter is not expected to have a material adverse
effect on the Company's financial position, results of operations or liquidity.
The provisions for 1996, 1995 and 1994 included $28.4 million, $28.7
million and $31.6 million, respectively, for non-U.S. income taxes. The non-U.S.
component of (loss) income before income taxes was $(152.9) million, $38.3
million and $99.4 million, for 1996, 1995 and 1994, respectively. Generally, no
provision has been made for U.S. or additional non-U.S. income taxes on the
undistributed earnings of non-U.S. 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.
19
<PAGE> 21
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
(IN MILLIONS)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves....................... $ 218.7 $ 139.4
Accrued postretirement benefit obligation.............. 60.2 57.6
Tax loss carryforwards................................. 319.7 361.8
Property, plant and equipment.......................... 22.6 --
Interest............................................... 51.8 34.9
Other.................................................. 15.1 1.3
------- -------
688.1 595.0
------- -------
Deferred tax liabilities:
Property, plant and equipment.......................... (409.2) (414.8)
Contracts.............................................. (6.8) (10.5)
Accrued liabilities and reserves....................... (12.2) (3.5)
Other.................................................. (24.9) (17.6)
------- -------
(453.1) (446.4)
------- -------
Net deferred income tax asset before valuation
allowance.............................................. 235.0 148.6
Valuation allowance...................................... (156.3) (102.4)
------- -------
Net deferred income tax asset............................ $ 78.7 $ 46.2
======= =======
</TABLE>
As of December 31, 1996, the Company had approximately $184.7 million of
net operating loss carryforwards in certain non-U.S. jurisdictions. Of these,
$164.6 million have no expiration, and the remaining $20.1 million will expire
in the years 1997 to 2003. U.S. operating loss carryforwards at December 31,
1996 were approximately $570.6 million and will expire in the years 1999 to
2008. A valuation allowance has been provided for operating loss carryforwards
that are not expected to be utilized.
8. KEY EMPLOYEE LOAN PROGRAM:
Loans are made by the Former Tyco to employees of the Company under the
Former Tyco 1983 Key Employee Loan Program for the payment of taxes upon the
vesting of shares granted under the Former Tyco's Restricted Stock Ownership
Plans. The loans are unsecured and bear interest, payable annually, at a rate
which approximates the Former Tyco's incremental short-term borrowing rate.
Loans are generally repayable in ten years, except that earlier payments are
required under certain circumstances. Loans under this program were $15.3
million and $8.4 million at December 31, 1996 and 1995, respectively.
20
<PAGE> 22
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. CONVERTIBLE REDEEMABLE PREFERENCE SHARES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Authorized:
225,000 5 3/4% convertible cumulative redeemable
preference shares 2002 of $1 each (1995 -- 225,000;
1994 -- 225,000)(i)................................. $ 0.2 $ 0.2 $ 0.2
500,000 6% convertible cumulative redeemable preference
shares 2002 of $1 each (1995 -- 500,000; 1994 --
500,000)(ii)........................................ 0.5 0.5 0.5
125,000,000 convertible cumulative redeemable
preference shares of $1 each (1995 -- 125,000,000;
1994 -- 125,000,000)(iii)........................... 125.0 125.0 125.0
------ ------ ------
$125.7 $125.7 $125.7
====== ====== ======
</TABLE>
The movement in convertible redeemable preference shares since January 1,
1994 has been as follows:
<TABLE>
<CAPTION>
5 3/4% SHARES 6% SHARES
------------------------- --------------------------
NUMBER $ NUMBER $
------- ------------- -------- -------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Issued and outstanding:
At January 1, 1994............................ 29,738 $ 35.5 283,030 $ 391.7
Reacquired in the market at purchase cost..... (25) -- -- --
Redeemed...................................... (28,957) (34.6) (278,625) (385.6)
Reversal of redemption premium on shares not
redeemed.................................... -- (0.1) -- (1.7)
------- ------ --------- -------
At December 31, 1994.......................... 756 0.8 4,405 4.4
Converted into common shares.................. -- -- (225) (0.3)
------- ------ --------- -------
At December 31, 1995.......................... 756 0.8 4,180 4.1
Redeemed...................................... (756) (0.8) (4,180) (4.1)
------- ------ --------- -------
At December 31, 1996.......................... -- $ -- -- $ --
======= ====== ========= =======
</TABLE>
In January 1994, the Company redeemed 28,957 of its 5 3/4% convertible
redeemable preference shares for an aggregate consideration, including
redemption premium, of $34.6 million. The Company funded the redemption from
cash on hand.
In October 1994, the Company redeemed 278,625 of its 6% convertible
redeemable preference shares for an aggregate consideration, including
redemption premium, of $385.6 million. The Company funded the redemption through
the drawdown of $231.6 million under a previous ADT bank credit agreement and
$154.0 million from cash on hand.
In November 1996, the Company redeemed 756 of its 5 3/4% convertible
redeemable preference shares and 4,180 of its 6% convertible redeemable
preference shares for an aggregate consideration of $4.9 million. The Company
funded the redemption from cash on hand.
21
<PAGE> 23
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dividends on convertible redeemable preference shares amounted to:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
(IN MILLIONS)
<S> <C> <C> <C>
5 3/4% convertible redeemable preference shares............... $ -- $ -- $ --
6% convertible redeemable preference shares................... 0.3 0.3 13.3
---- ---- -----
$0.3 $0.3 $13.3
==== ==== =====
</TABLE>
- ---------------
(i) 5 3/4% convertible cumulative redeemable preference shares 2002 (par value
$1 each)
In April 1987, 175,000 of these mandatorily redeemable preference shares
were issued for cash at a price of $1,000 each, and during the period to
December 31, 1996, 139,262 of these preference shares were converted into
common shares of the Company. The holders of these preference shares were
entitled to a fixed cumulative preferential dividend at the rate of 5 3/4%
per annum. These preference shares were subject to redemption, at the
option of the holders, in January 1994 at 119.625% of their issue amount.
The Company had the right to require redemption or conversion of the
preference shares in certain circumstances. This right was exercised in
November 1996 and all remaining preference shares were redeemed at their
carrying amount.
(ii) 6% convertible cumulative redeemable preference shares 2002 (par value $1
each)
In September 1987, 400,000 of these mandatorily redeemable preference
shares were issued for cash at a price of $1,000 each, and during the
period to December 31, 1996, 225 of these preference shares were converted
into common shares of the Company. The holders of these preference shares
were entitled to a fixed cumulative preferential dividend at the rate of
6% per annum. These preference shares were subject to redemption, at the
option of the holders, in October 1994 at 138.375% of their issue amount.
The Company had the right to require redemption or conversion of the
preference shares in certain circumstances. This right was exercised in
November 1996 and all remaining preference shares were redeemed at their
carrying amount.
(iii) Convertible cumulative redeemable preference shares (par value $1 each)
In November 1996, the Board of Directors of the Company determined that
2.5 million of the 125 million authorized convertible cumulative
redeemable preference shares of $1 each be classified as Series A First
Preference Shares, which have been reserved for issuance upon exercise of
Series A First Preference Share Purchase Rights, pursuant to the
Shareholders Rights Plan referred to below. In July 1997 the Board of
Directors of the Company determined that an additional 5 million (making
7.5 million in total) of the said preference shares be classified as
Series A First Preference Shares and reserved for issuance for this
purpose.
The rights attaching to the balance of 117.5 million convertible cumulative
redeemable preference shares of $1 each, none of which are issued and
outstanding, as to dividends, return of capital, redemption, conversion, voting
and otherwise may be determined by the Company on or before the time of
allotment.
In November 1996, the Board of Directors of the Company adopted a
Shareholder Rights Plan, as amended in March 1997 and July 1997 (the "Plan").
Under the Plan, each common shareholder has received a distribution of rights
for each common share held. Each right entitles the holder to purchase from the
Company shares of a new series of first preference shares at an initial purchase
price of $90 per one-hundredth of a first preference share. The rights will
become exercisable and will detach from the common shares a specified period of
time after any person becomes the beneficial owner of 15% or more of the
Company's common shares, or commences a tender or exchange offer which, if
consummated, would result in any person becoming the beneficial owner of 15% or
more of the Company's common shares. The rights did not become exercisable on
account of any person being the beneficial owner of 15% or more of the Company's
common
22
<PAGE> 24
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares when the Plan was adopted, but become exercisable if such a person
increases their beneficial ownership after that time.
If any person becomes the beneficial owner of 15% or more of the Company's
common shares or, if any person who was already the beneficial owner of 15% or
more of the Company's common shares when the Plan was adopted increases their
beneficial ownership, each right will enable the holder, other than the
acquiring person, to purchase, for the rights purchase price, common shares
having a market value of twice the rights purchase price.
If, following an acquisition of 15% or more of the Company's common shares,
the Company is involved in any mergers or other business combinations or sells
or transfers more than 50% of its assets or earnings power, each right will
entitle the holder to purchase, for the rights purchase price, common shares of
the other party to such transaction, having a market value of twice the rights
purchase price. The merger between ADT and the Former Tyco (see Note 2) was
specifically excluded from these provisions by an amendment to the Plan in July
1997.
The Company may redeem the rights at a price of $0.01 per right at any time
prior to the specified period of time after a person has become the beneficial
owner of 15% or more of the Company's common shares. The rights will expire in
November 2005 unless exercised or redeemed earlier.
In the event of liquidation of the Company, the holders of all of the
Company's convertible redeemable preference shares are together entitled to
payment to them of the amount for which the preference shares were subscribed
and any unpaid dividends, prior to any payment to the common shareholders.
10. SHAREHOLDERS' EQUITY:
Information with respect to ADT common shares and options has been
retroactively restated to reflect the ratio of 0.48133 share of ADT for each
share or option outstanding and the issuance of one share for each share of the
Former Tyco outstanding (see Note 2).
Non-Voting Exchangeable Shares
In March 1991, ADT Finance Inc., an indirect wholly-owned Canadian
subsidiary of the Company, issued 481,330 non-voting exchangeable shares
exchangeable for common shares of the Company at the option of the holder, at
any time, on a one-for-one basis. Holders of non-voting exchangeable shares were
entitled only to dividends equivalent to dividends declared and paid on common
shares of the Company. During fiscal 1994, 444,089 shares were exchanged into
common shares held as treasury shares and during fiscal 1995 the remaining 1,400
shares were exchanged. There are no shares of this class remaining.
Treasury Stock
In July 1994, the Former Tyco's Board of Directors authorized the
repurchase of up to 5.8 million of its common shares.
In January 1996, the Company repurchased 201,000 shares for $6.9 million.
In April and May 1995 the Company repurchased 435,070 and 297,556 shares
respectively, of its common stock from the President of Kendall at $26.47 and
$26.22 per share, respectively, the shares then fair market value, for an
aggregate purchase price of $19.3 million to provide for required income tax
withholdings as permitted in the underlying Kendall restricted stock grant
agreement. The total cost of reacquired shares at December 31, 1996 and 1995 was
$62.5 million and $169.1 million, respectively.
In June 1994, the Company repurchased for $0.6 million a warrant which
entitled the holder, Tyco Investments (Australia) Limited, formerly Wormald
International Limited, to purchase ten million Former Tyco shares at a price of
$35 per share.
23
<PAGE> 25
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Restricted Stock
The Former Tyco's 1978 Restricted Stock Ownership Plan (the "1978 Plan")
provided for the award of 4,800,000 shares of common stock to key employees
through November 30, 1988. Under the 1978 Plan, 4,776,800 shares were granted,
net of surrenders. The 1983 Restricted Stock Ownership Plan (the "1983 Plan")
provided for the award of 6,800,000 shares of common stock to key employees
through October 18, 1993. Under the 1983 Plan, 5,797,516 shares were awarded,
net of surrenders. The Former Tyco's 1994 Restricted Stock Ownership Plan (the
"1994 Plan") provides for the award of an initial amount of shares of common
stock plus an amount equal to one-half of one percent of the total shares
outstanding at the beginning of each fiscal year. At December 31, 1996, there
were 2,929,134 shares available, of which 1,323,069 shares had been granted.
Common shares are awarded subject to certain restrictions with vesting varying
over periods of up to ten years.
For grants that vest through passage of time, the fair market value of the
shares at the time of the grant is amortized (net of tax benefit) to expense
over the period of vesting. The unamortized portion of deferred compensation
expense is recorded as a reduction of shareholders' equity. For grants which
vest based on certain specified performance criteria, the fair market value of
the shares at the date of vesting is expensed over the period the performance
criteria are measured. Recipients of all restricted shares have the right to
vote such shares and receive dividends. Income tax benefits resulting from 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 grants and from the payment of dividends on
unvested shares are credited to capital in excess of par value. Compensation
expense of $14.6 million, $8.3 million and $3.7 million was recorded for
restricted stock grant vestings during 1996, 1995 and 1994, respectively.
Kendall had a restricted stock grant agreement that provided for the
issuance of up to 2,000,000 shares of its common stock to its President. As a
result of the Kendall merger, up to 2,589,700 shares of the Former Tyco's common
stock became issuable under the agreement. As of June 30, 1995 all shares under
the grant agreement had vested. As discussed above, the Company repurchased
732,626 of such shares. Compensation expense of $0.6 million and $1.3 million
was recorded for the grant during fiscal 1995 and 1994, respectively.
Former Tyco and Subsidiary Stock Option Plans
Kendall maintained a number of stock incentive plans under which its
officers, directors and key employees were granted options and other awards to
purchase common stock, generally at prices equal to at least 100% of the market
price on the date of grant. As a result of the Kendall merger, these options
became exercisable for Former Tyco common stock. Transactions under these plans
during 1996, 1995 and 1994 are included in the table below after giving
retroactive effect to the conversion of Kendall shares to Former Tyco shares at
the Tyco/Kendall merger exchange ratio.
During 1995, the Former Tyco established a stock option plan under which
certain employees, excluding officers and directors, have been granted options
to purchase common stock at a price equal to fair market value on the date of
grant. The options vest on a pro-rata basis over five years, with 50% becoming
exercisable at the end of the third year and the remaining exercisable at the
end of the fifth year. The Company has reserved 8,000,000 shares of common stock
for issuance under the plan. Grants are for periods generally not in excess of
ten years. At December 31, 1996, there were 4,448,529 shares available for
future grant.
During 1996 the Former Tyco assumed 545,106 options in connection with
certain acquisitions, all of which immediately became exercisable.
24
<PAGE> 26
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions relating to the options described above during 1996, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- ---------------
<S> <C> <C>
Outstanding June 30, 1993........................ 2,673,866 $4.21
Granted........................................ 659,078 17.04
Exercised...................................... (157,972) 3.98
Canceled....................................... (62,152) 3.98
----------
Outstanding June 30, 1994........................ 3,112,820 6.94
Granted........................................ 3,034,500 26.69
Exercised...................................... (2,963,912) 6.47
Canceled....................................... (119,644) 18.23
----------
Outstanding June 30, 1995........................ 3,063,764 26.52
Effect of Former Tyco's excluded activity........ 19,750
Assumed from acquisitions...................... 545,106 32.53
Granted........................................ 757,321 43.59
Exercised...................................... (176,669) 22.23
Canceled....................................... (292,487) 31.40
----------
Outstanding December 31, 1996.................... 3,916,785 $30.62
==========
</TABLE>
The following table summarizes information about outstanding and
exercisable options at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -------------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
RANGE OF NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE
EXERCISE PRICES ($) OUTSTANDING PRICE ($) LIFE -- YEARS EXERCISABLE PRICE ($)
- --------------------- ----------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
0.00 to 0.22 2,197 .17 3.8 2,197 .17
3.13 to 4.60 15,214 4.26 2.1 15,214 4.26
5.04 to 7.21 4,423 5.49 8.2 4,423 5.49
7.60 to 9.90 28,815 9.26 6.4 28,815 9.26
13.85 to 15.20 18,779 15.17 5.4 18,779 15.17
22.53 to 33.13 2,956,421 26.77 8.3 157,271 25.30
34.85 to 52.12 847,038 43.44 9.3 94,717 41.86
55.17 to 58.10 25,346 57.95 7.3 25,346 57.95
93.91 to 105.64 18,552 101.23 4.3 18,552 101.23
--------- ------- --- -------- ------
3,916,785 30.62 365,314 32.66
========= ======= ======== ======
</TABLE>
ADT Stock Options
The Company has granted employee share options which are issued under five
fixed share option plans and schemes which reserve common shares for issuance to
the Company's executives and managers. The majority of options have been granted
under the ADT 1993 Long-Term Incentive Plan (the "Incentive Plan"). The
Incentive Plan was originally approved by shareholders of ADT in October 1993
and certain subsequent amendments to the Incentive Plan were approved by
shareholders of the Company in April 1996 and July 1997. The Incentive Plan is
administered by the remuneration committee of the Board of Directors of
25
<PAGE> 27
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company, which consists exclusively of independent non-executive directors
of the Company. Options are generally granted to purchase the Company common
shares at prices which equate to or are above the market price of the common
shares on the date the option is granted. Conditions of vesting are determined
at the time of grant. Certain options have been granted in which participants
were required to pay a subscription price as a condition of vesting. Options
which have been granted under the Incentive Plan to date have generally vested
and become exercisable in installments over a three year period from the date of
grant and have a maximum term of ten years.
The movement in executive share options outstanding since January 1, 1994
has been as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OUTSTANDING PRICE
----------- --------
<S> <C> <C>
At January 1, 1994.................................................... 5,010,850 $23.52
Granted............................................................... 950,627 19.20
Exercised............................................................. (16,847) 18.55
Lapsed/surrendered.................................................... (81,656) 32.93
----------
At December 31, 1994.................................................. 5,862,974 23.02
Granted............................................................... 1,443,990 24.87
Exercised............................................................. (375,614) 18.37
Canceled on purchase.................................................. (316,634) 18.91
Lapsed/surrendered.................................................... (121,004) 26.34
----------
At December 31, 1995.................................................. 6,493,712 23.93
Granted............................................................... 3,103,776 31.83
Exercised............................................................. (1,193,612) 20.73
Lapsed/surrendered.................................................... (99,778) 35.82
----------
At December 31, 1996.................................................. 8,304,098 $27.13
==========
</TABLE>
The following table summarizes information about outstanding and
exercisable executive share options at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ------------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
RANGE OF NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE
EXERCISE PRICES ($) OUTSTANDING PRICE ($) LIFE-YEARS EXERCISABLE PRICE ($)
- ------------------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
16.64 to 20.78....................... 2,065,989 18.51 6.9 1,736,517 18.43
20.79 to 27.01....................... 1,442,666 24.27 5.6 242,148 23.93
27.02 to 31.16....................... 4,182,950 31.06 6.8 4,102,728 31.10
31.17 to 41.55....................... 559,787 34.24 9.1 20,697 33.12
41.56 to 62.33....................... 52,706 54.91 2.5 52,706 54.91
--------- ----- --------- -----
8,304,098 27.13 6,154,796 27.44
========= ===== ========= =====
</TABLE>
Stock Based Compensation
During 1996, the Company was required to adopt SFAS No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"). SFAS 123 allows companies to measure
compensation cost in connection
26
<PAGE> 28
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with executive share option plans and schemes using a fair value based method,
or to continue to use an intrinsic value based method which generally does not
result in a compensation cost. The Company has decided to continue to use the
intrinsic value based method and no compensation cost has been recorded. Had the
fair value based method been adopted consistent with the provisions of SFAS 123,
the Company's proforma net (loss) income and proforma net (loss) income per
common share for the years ended December 31, 1996 and 1995 would have been as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1996 1995
------- ------
(IN MILLIONS)
<S> <C> <C>
Net (loss) income -- proforma............................. $(376.4) $231.3
------- ------
Net (loss) income per common share -- proforma............ $ (1.71) $ 1.06
======= ======
</TABLE>
The estimated weighted average fair value of ADT and Former Tyco options
granted during 1996 was $9.00 and $13.54, respectively, on the date of grant
using the option-pricing model and assumptions referred to below.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
ADT FORMER TYCO
--------- ---------------
<S> <C> <C>
Expected stock price volatility.................... 28% 22%
Risk free interest rate............................ 5.9% 5.8%
Expected annual dividends.......................... -- $0.20 per share
Expected life of options........................... 3.7 years 3.7 years
</TABLE>
The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995
and additional awards in future years are anticipated.
Stock Warrants
The Company has outstanding warrants to purchase common stock at per share
exercise prices of $5.97 (the "A Warrants") and $7.96 (the "B Warrants"),
respectively (together, the "Warrants"). The Warrants expire on July 7, 1999.
During 1996, 15,120 A Warrants and 12,560 B Warrants were exercised. During
1995, 2,599,228 A Warrants and 2,719,434 B Warrants were exercised. At December
31, 1996, 135,330 A Warrants and 87,780 B Warrants were issued and outstanding.
In July 1996, as part of the then agreement to combine with Republic
Industries, Inc. ("Republic"), ADT granted to Republic a warrant (the "Warrant")
to acquire 7,219,950 common shares of the Company at an exercise price of $41.55
per common share. Following termination of the agreement to combine with
Republic, the Warrant vested and was exercisable by Republic in the six month
period commencing September 27, 1996. In March 1997, the Warrant was exercised
by Republic and the Company received $300 million in cash.
Dividends
Former Tyco paid cash dividends of $0.20 per Former Tyco common share in
1996, 1995 and 1994. ADT paid no dividends on its common shares in 1996, 1995
and 1994.
27
<PAGE> 29
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. CHARGE FOR THE IMPAIRMENT OF LONG-LIVED ASSETS:
Effective January 1, 1996, the Company was required to adopt SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121"). SFAS 121 prescribes a methodology for assessing
and measuring an impairment loss that is significantly different from previous
guidelines and procedures.
SFAS 121 requires the recoverability of the carrying value of long-lived
assets, primarily property, plant and equipment, and related goodwill, and other
intangible assets, to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. Under SFAS 121 it is necessary to evaluate for and calculate an
impairment loss at the lowest level of asset grouping for which there are
identifiable cash flows. Under SFAS 121, if an asset being tested for
recoverability was acquired in a business combination accounted for using the
purchase method, the goodwill that arose in the transaction is included in the
impairment evaluation of that asset.
SFAS 121 requires that an impairment loss is recognized when the carrying
amount of an asset exceeds the sum of the estimated undiscounted future cash
flows of the asset. Under SFAS 121 an impairment loss is calculated as the
difference between the carrying amount of the asset, including the related
goodwill, and its estimated fair value. The carrying amount of the related
goodwill is eliminated before making any reduction in the carrying amount of any
other impaired long-lived asset.
Prior to the adoption of SFAS 121, the Company's policy was to evaluate for
impairment of long-lived assets, including goodwill, on an aggregate basis for
each business segment. Management has determined that within the electronic
security services business the lowest level of asset grouping referred to above
can be determined on a country by country basis and, with effect from the first
quarter of 1996, further split principally in terms of commercial and
residential sectors. The assets principally comprise subscriber systems
installed at customers' premises, which are included in property, plant and
equipment, and the related goodwill, and other intangible assets. Within the
vehicle auction services business the lowest level of asset grouping can be
determined principally on an individual auction center basis, and the assets
principally comprise land and real estate, which are included in property, plant
and equipment, and the related goodwill. Management has estimated the fair
values referred to above by using an analysis of estimated discounted future
cash flows as the best available estimate of fair value. The basis of the
calculation was the Company's business strategy, plans and financial
projections, and an appropriate discount factor based on the Company's estimated
cost of capital.
Following the adoption of SFAS 121, in particular the change in methodology
requiring the Company to evaluate assets at the lowest level of asset grouping,
rather than on an aggregate basis, in the first quarter of 1996 the Company
recorded an aggregate non-cash charge for the impairment of long-lived assets of
$744.7 million, as a separate line item in the supplemental consolidated
statement of operations, with a consequential tax credit of $10.8 million.
The $744.7 million impairment charge comprised (i) $731.7 million relating
to the electronic security services business and (ii) $13.0 million relating to
the vehicle auction services business.
(i) The $731.7 million impairment charge in the electronic security services
business comprised $397.1 million related to the ADT group and $334.6
million related to the ASH group.
The $397.1 million impairment charge in the electronic security services
business of the ADT group related to an impairment in the carrying value of
subscriber systems principally in the commercial sector, including related
goodwill which principally arose on the acquisition of ADT Security Services
in 1987 of $395.3 million and other assets of $1.8 million. Since 1989 the
Company's electronic security services operations in the residential sector
have developed at a very rapid rate based principally on internally
generated growth. As a consequence, the Company's operations in the
commercial sector, which were
28
<PAGE> 30
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquired principally in 1987, have now been complemented by a significant
residential electronic security services operation. This was a major factor
in the Company's decision to commence the Re-Engineering Project (see Note
16) in 1995, which is on-going. In the context of the Re-Engineering Project
and changes in the electronic security services business environment, the
electronic security services operations have now been reorganized along
separate commercial and residential business lines, rather than on an
aggregate geographic basis, with effect from the first quarter of 1996, and
which is fully supported by management and financial reporting systems that
now record the results and cash flows of each sector separately. When the
financial projections and estimated future cash flows of the commercial
sector were analyzed separately, they indicated that the carrying amount of
the related assets may not be fully recoverable. This is reflective of
increased competition and other pricing factors as well as changes in the
business environment. Accordingly, upon adoption of SFAS 121 the Company
evaluated the commercial sector assets for impairment with a resultant
charge being recorded. In the United States the impairment charge amounted
to $303.4 million. In Canada, where the business performance has continued
to be disappointing, the impairment charge amounted to $56.7 million. In
Europe, the impairment charge amounted to $37.0 million, principally due to
the business performance of certain countries not meeting previous
expectations.
The $334.6 million impairment charge in the electronic security services
business of the ASH group related to an impairment in the carrying value of
subscriber systems of $121.0 million, and the carrying value of related
goodwill and other intangibles of $213.6 million which principally arose on
the acquisition of certain of the businesses of Modern Security Systems in
1989 and 1990, API Security in 1989 and the Sonitrol Group in 1992. The
impairment charge amounted to $211.2 million and $123.4 million in the
United Kingdom and the United States, respectively. In both the United
Kingdom and the United States, the adoption of SFAS 121 coincided with a
reorganization of both the commercial and residential business sectors to
address, in part, changes in the electronic security services business
environment and performance similar to those being addressed by the ADT
group. In addition, the aggregate fair value of ADT common shares issued to
ASH shareholders on merger was significantly less than ASH's consolidated
net asset value. It was for all these reasons that the Company reviewed the
assets for impairment upon adoption of SFAS 121.
(ii) The $13.0 million impairment charge in the vehicle auction services
business related to an impairment in the carrying value of property and
related improvements, including related goodwill which principally arose on
the acquisition of ADT Automotive in 1987.
12. OTHER INCOME LESS EXPENSES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Gains and losses arising from the ownership of:
Short-term investments................................... $ -- $ -- $ 3.0
Long-term investments (i)................................ 54.4 (5.0) 18.5
Write off in value of associate (ii)..................... -- -- (30.7)
Settlement gain (iii).................................... 65.0 -- --
Gains and losses on currency transactions................ 9.7 0.9 2.1
Other income less expenses -- net........................ (0.3) (0.9) 3.0
------ ----- -----
$128.8 $(5.0) $(4.1)
====== ===== =====
</TABLE>
(i) Realized gains and losses arising from the ownership of short-term and
long-term investments are principally stated before carrying costs of
interest, administrative and other expenses. During 1996 gains
29
<PAGE> 31
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
arising from the ownership of long-term investments comprised a net gain of
$53.4 million relating to the disposal in November 1996 of the Company's
entire investment in Limelight Group plc, a United Kingdom quoted company,
which was previously valued and accounted for by the Company at a nominal
amount, a net gain of $1.2 million relating to the disposal of the Company's
equity investment in Integrated Transport Systems Limited (Notes 18 and 20)
and other net losses of $0.2 million principally arising from the disposal
of other investments.
During 1995 losses arising from the ownership of long-term investments
comprised $5.1 million relating to the disposal, principally during the
second quarter of 1995, of the Company's entire equity investments in
Compagnie General de Protection et Securite SA ("CGPS") and Microtech
Security (UK) Limited ("Microtech") which were held by the ASH group (Note
18), and other net gains of $0.1 million principally arising from the
disposal of other investments. The net loss on disposal of $5.0 million
included $7.3 million relating to the write off of net unamortized goodwill
and other intangibles and a $1.1 million charge relating to cumulative
currency translation adjustments.
During 1994 gains arising from the ownership of long-term investments
comprised $4.2 million relating to the disposal of the Company's entire
equity investments in Nu-Swift plc, a United Kingdom quoted company, and
other net gains of $14.3 million principally arising from the disposal of
other investments.
(ii) The write off in value of associate in 1994 related to the Company's
entire equity investment in Arius, Inc. ("Arius"), a United States
unquoted company, which was held by the ASH group. A detailed assessment
of the investment in Arius was carried out during 1994 and as a result a
net write off of $30.7 million was recorded, of which $26.5 million
related to the write off of net unamortized goodwill and other intangibles
and $2.9 million related to other provisions. During 1995 Arius went into
voluntary liquidation.
(iii) During 1991 a lengthy review and evaluation of the businesses and assets
acquired in 1990 in respect of Britannia Security Group PLC ("Britannia")
was undertaken by the Company. This review revealed that, at the time of
the acquisition of Britannia by ADT certain assets, particularly
subscriber systems installed at customer premises, had been included in
the consolidated financial statements of Britannia at values materially in
excess of their net realizable value. During 1992 the Company commenced
legal proceedings against Britannia's auditors at the time of acquisition,
BDO Binder Hamlyn ("BDO"), to seek recovery of the damages suffered. In
December 1995 the High Court of Justice in England awarded damages of
approximately $160 million (including interest) against BDO, plus the
reimbursement of certain legal costs incurred in connection with the
litigation. BDO then appealed against the judgment. At December 31 1995
the Company did not recognize the award of any damages in its supplemental
consolidated statements of income and had deferred certain legal costs
incurred in connection with the litigation amounting to $11.1 million in
order to match these costs with the award when recognized. These deferred
costs were included in other long-term assets.
In December 1996 the Company and BDO entered into a settlement agreement,
subject to completion of certain additional documentation which was signed
in February 1997, which included the payment to the Company of $77.5
million in cash (included in other current assets) together with a further
deferred payment of $8.6 million, in full and final settlement of the
aforementioned proceedings, including the judgment, accrued interest and
costs. As a result of the settlement BDO have withdrawn their appeal. The
net gain arising on this settlement amounted to $69.7 million, of which
$65.0 million was included in other income less expenses and $4.7 million
was included in interest income.
13. LOSS FROM DISCONTINUED OPERATIONS:
During 1994 the Company disposed of certain businesses, principally the
Insight Travel Group. The aggregate cash consideration on these disposals
amounted to $11.2 million and the net loss amounted to $3.7
30
<PAGE> 32
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million, which included $19.1 million relating to the write off of net
unamortized goodwill and other intangibles. The net income from these operations
for 1994 amounted to $0.4 million on net sales of $80.6 million.
14. EXTRAORDINARY ITEMS:
During 1996 and 1995 the Company reacquired in the market certain of its
senior subordinated notes, which was financed from cash on hand. Extraordinary
items included the loss arising on reacquisition of $0.9 million (1995 -- $0.9
million) and the write off of net unamortized deferred refinancing costs of $0.5
million (1995 -- $0.8 million) relating to the early extinguishment of certain
amounts outstanding under the senior subordinated notes, and were stated net of
applicable income taxes of $0.2 million (1995 -- $0.2 million).
In September 1996 the Company repaid in full all amounts owed by the ASH
group under its senior notes and bank credit agreement, which were subsequently
canceled, and which was financed from cash on hand and loans drawn under the
revolving bank credit agreement. Extraordinary items included the loss arising
on repayment of $4.2 million and the write off of net unamortized deferred
refinancing costs of $0.4 million relating to the early extinguishment of all
amounts outstanding under the senior notes and bank credit agreement owed by the
ASH group, with no consequential tax effect.
In December 1996 the Company gave notice to all convertible capital bond
holders that all of the outstanding capital bonds owed by the ASH group would be
fully redeemed by the Company, and subsequently canceled, and which was financed
from cash on hand and amounts drawn down under the sterling denominated bank
credit facility. Extraordinary items included the write off of net unamortized
deferred refinancing costs of $1.6 million relating to the early extinguishment
of all amounts outstanding under the convertible capital bonds owed by the ASH
group, with no consequential tax effect.
In December 1996 the Company entered into a new bank credit agreement,
subject to completion of certain additional documentation which was signed in
January 1997, which replaced in full its previous bank credit agreement and
which was subsequently canceled. Extraordinary items included the write off of
net unamortized deferred refinancing costs of $1.5 million relating to the early
extinguishment of all amounts outstanding under the bank credit agreement owed
by the ADT group, and were stated net of applicable income taxes of $0.5
million.
In July 1995 the Company repaid in full all amounts owed by the ADT group
under its previous bank credit agreement, which was subsequently canceled. The
Company funded the repayment from the net proceeds of the issue of its Liquid
Yield Option Notes. Extraordinary items included the write off of net
unamortized deferred refinancing costs of $12.8 million relating to the early
extinguishment of all amounts outstanding under the previous bank credit
agreement owed by the ADT group, and were stated net of applicable income taxes
of $4.5 million.
In connection with the refinancing of Kendall's subordinated notes, the
Former Tyco 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 during 1995.
15. (LOSS) EARNINGS PER COMMON SHARE:
The calculation of primary (loss) earnings per common share was based on
the weighted average of 220,465,000 (1995 -- 217,578,000; 1994 -- 213,072,000)
common shares in issue during the year which in 1996 did not allow for the
allotment of common shares under executive share option and restricted stock
plans, which are considered common stock equivalents, because their effect was
anti-dilutive as a consequence of the net loss for the year. Common stock
equivalents included in the weighted average number of common shares in issue
during 1995 and 1994 were 4,535,100 and 6,760,800, respectively. Primary (loss)
earnings per common share from continuing operations was based on adjusted net
loss from continuing operations available
31
<PAGE> 33
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to common shareholders of $338.9 million (1995 -- $247.3 million net income;
1994 -- $258.5 million net income).
16. RESTRUCTURING AND OTHER NON-RECURRING CHARGES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------ ----- ----
(IN MILLIONS)
<S> <C> <C> <C>
Electronic security services(i)............................. $232.5 $21.4 $ --
Corporate(ii)............................................... 4.8 12.8 4.5
------ ----- ----
$237.3 $34.2 $4.5
====== ===== ====
</TABLE>
During 1995 the Company commenced a strategic review of its electronic
security services business operations and ADT's related corporate organizational
structure with a view to developing a business strategy which would place the
Company in a stronger position to deal with the changing electronic security
business environment and challenges facing its electronic security service
businesses in the late 1990s. During 1996 this strategic review process
continued and was extended to include a significantly expanded agenda.
(i) As part of the strategic review the Company commenced an evaluation of the
administrative, accounting, management information systems and technological
infrastructures of its United States electronic security services business
(the "Re-Engineering Project"). The Re-Engineering Project, which is
on-going, is intended to modify and improve the entire structure of the
business operations. As a consequence of the Re-Engineering Project, and
incorporating the effects of the acquisition of Alert Centre, Inc.
("Alert"), in each of the fourth quarters of 1996 and 1995 senior executive
management approved a restructuring plan which resulted in a charge for
restructuring and other non-recurring items in the United States electronic
security services business of $131.6 million and $19.4 million,
respectively.
The United States electronic security services business restructuring charge
in 1996 was principally attributable to planned technological infrastructure
enhancements to facilitate further consolidation of the Company's entire
customer monitoring center network together with all related operations,
which it is expected will be substantially completed by December 1997. The
restructuring charge included the write off of certain property, plant and
equipment of $82.6 million, provision for idle property leases of $18.9
million, the termination of certain contractual obligations and other
settlement costs of $9.4 million, and other integration and restructuring
costs of $20.7 million. The amounts paid and charged in 1996 against the
provisions for the termination of certain contractual obligations and other
settlement costs, and against other integration and restructuring costs,
amounted to $4.8 million and $4.3 million, respectively.
The United States electronic security services business restructuring charge
in 1995 was principally attributable to the closure of the Parsippany, New
Jersey facility and associated corporate offices, which will be
substantially completed in 1997. Full implementation of the restructuring
plan will result in the termination of approximately 250 employees of which
approximately 180 employees had been terminated by December 31, 1996.
Employee severance and other associated costs included in the restructuring
charge amounted to $13.6 million, the write off of certain property, plant
and equipment amounted to $1.9 million, and other integration and
restructuring costs amounted to $3.9 million. The amounts paid and charged
in 1996 against the provisions for employee severance and other associated
costs, and against other integration and restructuring costs, amounted to
$7.1 million and $3.5 million, respectively.
During the fourth quarter of 1996, the Company commenced a strategic and
detailed review of the electronic security services businesses acquired as
part of the acquisition of ASH in September 1996. In December 1996 senior
executive management approved a restructuring plan which is intended to
merge and integrate fully the ASH group into the ADT group by December 1997,
and which resulted in a charge
32
<PAGE> 34
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for restructuring and other non-recurring items in the United Kingdom and
the United States electronic security services divisions of $68.6 million
and $29.2 million, respectively.
The restructuring charge included the write off of certain property, plant
and equipment of $13.2 million, provision for idle property leases of $22.5
million, the termination of certain contractual obligations and other
settlement costs of $35.2 million, and other integration and restructuring
costs of $26.9 million. The amounts paid and charged in 1996 against the
provisions for the termination of certain contractual obligations and other
settlement costs, and against other integration and restructuring costs,
amounted to $7.2 million and $1.0 million, respectively.
As part of the strategic review, in 1996 the Company also commenced an
evaluation of the customer monitoring center network in its Canadian
electronic security services business which resulted in a charge for
restructuring and other non-recurring items of $3.1 million. The
restructuring charge included the write off of certain property, plant and
equipment of $1.3 million and provision for idle property leases of $1.8
million, of which $0.2 million was paid and charged in 1996.
As part of the strategic review, in 1995 the Company also commenced an
evaluation of the management information systems of its United Kingdom
electronic security services business which resulted in a charge for
restructuring and other non-recurring items in 1995 of $2.0 million
principally relating to the write off of certain property, plant and
equipment.
(ii) The effects of the Re-Engineering Project and the merger of the ASH group
into the ADT group resulted in a related charge for restructuring and other
non-recurring items at the ADT corporate level in 1996 of $4.8 million,
comprising other integration and restructuring costs, of which $3.0 million
was paid and charged in 1996.
During 1995 the Company also evaluated the ADT group corporate structure,
in particular in the United Kingdom. As a result, in the fourth quarter of
1995, senior executive management approved a restructuring plan, which was
substantially completed by December 1996, which resulted in a charge for
restructuring and other non-recurring items at the corporate level of $12.8
million.
The restructuring charge included the provision for idle property leases of
$5.6 million, the termination of certain contractual obligations and other
settlement costs of $4.8 million, and employee severance for four
executives, all of whom were terminated during 1996, and other associated
costs, of $2.4 million. The amounts paid and charged in 1996 against the
provisions in the aforementioned categories were $0.6 million, $4.8 million
and $1.8 million, respectively.
The corporate restructuring charge in 1994 of $4.5 million was principally
attributable to ADT's corporate administration in the United Kingdom and
related to a provision for idle property leases.
17. COMMITMENTS AND CONTINGENCIES:
The Company occupies certain facilities under leases that expire at various
dates through the year 2021. Rental expense under these leases and leases for
equipment was $171.4 million, $146.6 million and $129.0 million for 1996, 1995
and 1994, respectively. At December 31, 1996, the minimum lease payment
obligations under noncancelable operating leases were as follows: $132.8 million
in 1997, $104.0 million in 1998, $78.5 million in 1999, $53.2 million in 2000,
$37.4 million in 2001 and an aggregate of $127.6 million in years 2002 through
2021.
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.
33
<PAGE> 35
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is involved in various stages of investigation and cleanup
related to environmental remediation matters at a number of sites. 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 at least a reasonable possibility that remedial costs will be incurred with
respect to these sites in an aggregate amount in the range of $10.4 million to
$39.8 million. At December 31, 1996, the Company has concluded that the most
probable amount that will be incurred within this range is $18.6 million, and
such amount is included in the caption "accrued expenses" in the accompanying
supplemental consolidated balance sheet. Based upon information available to the
Company, at those sites where there has been an allocation of the liability for
cleanup costs among a number of parties, including the Company, and such
liability could be joint and several, management believes it is probable that
other responsible parties will fully pay the cost allocated 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 $18.6 million, the Company has concluded that its payment of such
estimated amounts will not have a material effect on its financial position,
results of operations or liquidity.
In December 1996, Westar Capital, Inc. ("WCI"), a wholly owned subsidiary
of Western Resources, Inc. and then a 27% shareholder of ADT, filed a complaint
(as subsequently amended) in the US Courts against ADT, certain of its current
and former directors, and one other. The complaint alleges, among other things,
that ADT and its directors breached their fiduciary duties to WCI and ADT's
other shareholders (a) by adopting and amending the Shareholder Rights Plan, and
(b) by issuing to Republic the Warrant. The complaint seeks a court order (a)
directing ADT to redeem the Shareholder Rights Plan, and (b) declaring the
Warrant issued to Republic null and void. The complaint also seeks unspecified
damages, attorneys' fees and costs. Accordingly, an estimate of any potential
loss or range of possible losses, if any, cannot be made. ADT and its board of
directors believe that the allegations in WCI's complaint against ADT and its
directors are without merit and intend to vigorously defend against them.
In March 1997 Crandon Capital Partners ("CCP") filed a complaint in the US
Courts against ADT and certain of its current and former directors, among
others. The complaint was brought by CCP in a derivative capacity on behalf of
ADT. The complaint alleges, among other things, that ADT's directors breached
their fiduciary duties and wasted corporate assets in connection with (a) the
granting of options to certain officers of ADT in 1996, (b) the implementation
of the Shareholder Rights Plan, and (c) the issuance to Republic of the Warrant.
The complaint seeks a court order directing ADT's directors to establish a
system of internal controls to prevent repetition of the alleged breaches of
fiduciary duty and corporate waste, and an unspecified amount of damages.
Accordingly, an estimate of any potential loss or range of possible losses, if
any, cannot be made. ADT and its directors believe that the allegations in CCP's
complaint against ADT and certain of its directors are without merit and intend
to vigorously defend against them.
The Company is a defendant in a number of other pending legal proceedings
incidental to present and former operations, acquisitions and dispositions. The
Company does not expect the outcome of these proceedings either individually or
in the aggregate to have a material adverse effect on its financial position,
results of operations or liquidity.
34
<PAGE> 36
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. INVESTMENT IN AND LOANS TO ASSOCIATES:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
---- -----
(IN MILLIONS)
<S> <C> <C>
Vendor Note................................................... $-- $83.9
Shareholder Loan Notes........................................ -- 13.9
--- -----
-- 97.8
Less: unamortized discount.................................... -- (9.9)
--- -----
-- 87.9
Investment in ordinary share capital.......................... -- 0.9
--- -----
$-- $88.8
=== =====
</TABLE>
In December 1995, the Company disposed of an interest in European Auctions
to Integrated Transport Systems Limited ("ITS") (Note 20) for an aggregate
consideration of $334.9 million.
The aggregate consideration received by the Company on closing was
comprised of cash of $235.1 million, $187.6 million aggregate principal amount
at maturity of a subordinated deep discount zero coupon loan note issued by ITS
maturing in March 2004 ("Vendor Note"), $31.1 million aggregate principal amount
at maturity of subordinated deep discount zero coupon loan notes issued by ITS
maturing in March 2004 ("Shareholder Loan Notes"), and a 43.1% interest in the
ordinary share capital of ITS at an issue price of $2.0 million.
The Vendor Note is a sterling loan note with an issue price of $83.9
million, reflecting a yield to maturity of 10.0% per annum, and was valued by
the Company at $74.6 million. There are no periodic payments of interest. The
Vendor Note is a subordinated, non-collateralized obligation of ITS and is
transferable, under certain conditions, after December 1998. The discount on the
Vendor Note of $9.3 million will be amortized on a basis linked to the yield to
maturity over the life of the loan note as a credit to interest income, and
represents the difference between the stated yield to maturity and the
prevailing market yield to maturity of approximately 11.5% per annum, for
similar types of loan notes at the time the Vendor Note was issued in December
1995. The interest yield and discount amortization for 1996 amounted to $8.6
million and $0.3 million, respectively.
The Shareholder Loan Notes are transferable sterling loan notes with an
issue price of $13.9 million, reflecting a yield to maturity of 10.0% per annum,
and were valued by the Company at $13.3 million. There are no periodic payments
of interest. The Shareholder Loan Notes are subordinated, non-collateralized
obligations of ITS and are also subordinated to the Vendor Note.
The aggregate fair market value of the Vendor Note and Shareholder Loan
Notes at December 31, 1995 amounted to $87.9 million, and was based on
discounting the loan notes at estimated current sterling interest rates on
similar term financial instruments.
The 43.1% interest in the ordinary share capital of ITS was valued and
accounted for by the Company at $0.9 million.
In February 1996 the Company disposed of its entire interest in Shareholder
Loan Notes with an issue price of $13.9 million and valued by the Company at
$13.3 million (net of unamortized discount of $0.6 million), and 33.1% of the
ordinary share capital of ITS valued by the Company at $0.9 million, for an
aggregate cash consideration of $15.4 million. The net gain arising on the
transaction amounted to $1.2 million which was included in other income less
expenses (Note 12(i)).
35
<PAGE> 37
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of the above transaction, the Company now holds a 10.0%
interest in the ordinary share capital of ITS, valued and accounted for by the
Company at a nominal amount, together with the Vendor Note, which at December
31, 1996 is included in long-term investments on the balance sheet and has been
accounted for at its amortized cost (the fair market value of the Vendor Note at
December 31, 1996 amounted to $89.7 million).
The movement in the carrying value of investment in and loans to associates
since January 1, 1995 has been as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
At January 1............................................... $ 88.8 $ 12.6
Acquisitions............................................... -- 88.8
Disposals.................................................. (14.2) (12.6)
Reclassifications.......................................... (74.6) --
------ ------
At December 31............................................. -- $ 88.8
====== ======
</TABLE>
During 1995 the Company disposed of its entire equity investments in CGPS,
a French unquoted company, and Microtech, a United Kingdom unquoted company, for
an aggregate consideration of $8.6 million comprising cash of $7.8 million and
notes receivable of $0.8 million. The net loss on disposal of $5.1 million,
including $7.3 million relating to the write off of net unamortized goodwill and
other intangibles and a $1.1 million charge relating to cumulative currency
translation adjustments, was included in other income less expenses (Note
12(i)).
19. RETIREMENT PLANS:
Former Tyco Retirement Plans
The Former Tyco has a number of noncontributory defined benefit retirement
plans covering certain of its U.S. and non-U.S. employees. The Former Tyco'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
includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost............................................. $ 13.3 $ 12.7 $ 12.5
Interest cost............................................ 33.2 28.7 26.7
Actual return on assets.................................. (39.8) (40.3) (7.7)
Net amortization and deferral............................ 1.7 11.5 (19.4)
------ ------ ------
Net periodic pension cost................................ $ 8.4 $ 12.6 $ 12.1
====== ====== ======
</TABLE>
36
<PAGE> 38
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued (prepaid) pension cost at December 31, 1996 for defined benefit
plans is as follows:
<TABLE>
<CAPTION>
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS TOTAL
----------- ----------- ------
(IN MILLIONS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested........................................... $357.6 $115.6 $473.2
Non-vested....................................... 9.2 10.1 19.3
------ ------ ------
Total.............................................. 366.8 125.7 492.5
Effect of future salary increases.................. 6.6 4.2 10.8
------ ------ ------
Projected benefit obligations...................... 373.4 129.9 503.3
Plan assets at fair value.......................... 415.9 58.6 474.5
------ ------ ------
Plan assets (in excess of) less than projected
benefit obligations.............................. (42.5) 71.3 28.8
Unrecognized transition asset (liability).......... 0.2 (0.8) (0.6)
Unrecognized prior service cost.................... (1.8) (6.8) (8.6)
Additional minimum liability....................... -- 10.6 10.6
Unrecognized net (loss) gain....................... (20.9) (0.9) (21.8)
------ ------ ------
Accrued (prepaid) pension cost..................... $(65.0) $ 73.4 $ 8.4
====== ====== ======
</TABLE>
1995 accrued (prepaid) pension cost for defined benefit plans is as
follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS TOTAL
------------- ------------- ------
(IN MILLIONS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested......................................... $230.7 $127.3 $358.0
Non-vested..................................... 9.4 9.7 19.1
------ ------ ------
Total............................................ 240.1 137.0 377.1
Effect of future salary increases................ 5.3 5.0 10.3
------ ------ ------
Projected benefit obligations.................... 245.4 142.0 387.4
Plan assets at fair value........................ 266.7 79.1 345.8
------ ------ ------
Plan assets (in excess of) less than projected
benefit obligations............................ (21.3) 62.9 41.6
Unrecognized transition asset (liability)........ 0.3 (1.0) (0.7)
Unrecognized prior service cost.................. (0.6) (7.0) (7.6)
Additional minimum liability..................... -- 17.2 17.2
Unrecognized net (loss) gain..................... (19.3) (6.9) (26.2)
------ ------ ------
Accrued (prepaid) pension cost................... $(40.9) $ 65.2 $ 24.3
====== ====== ======
</TABLE>
Pursuant to the provisions of SFAS 87, "Employers' Accounting for
Pensions," the Former Tyco recorded, in other liabilities, an additional minimum
pension liability adjustment of $10.6 million and $17.2 million as of December
31, 1996 and 1995, respectively, representing the amount by which the
accumulated benefit obligation exceeded the fair value of plan assets plus
accrued amounts previously recorded. The additional liability has been offset by
an intangible asset, included in goodwill and other intangible assets, to
37
<PAGE> 39
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the extent of previously unrecognized prior service cost. The amount in excess
of previously unrecognized prior service cost is recorded, net of the related
deferred tax benefit, as a reduction of shareholders' equity in the amount of
$2.5 million and $6.1 million at December 31, 1996 and 1995, respectively.
In 1996, 1995 and 1994, the Former Tyco terminated certain defined benefit
pension plans and distributed the plans' assets to the participants. Also in
1994, in connection with the sale of the European fire products businesses,
there was a settlement of a pension plan in Germany. Gains and losses resulting
from the above were not material.
Of the total plan obligations in 1996, 49% relate to U.S. plans and 51%
relate to non-U.S. plans (in 1995, 59% and 41%, respectively). The average
discount rate used in determining the actuarial present value of the projected
benefit obligation, weighted in relation to plan obligations, was 7.6% and 7.8%,
respectively, at December 31, 1996 and 1995. The average rate of increase in
future compensation levels was 4.8% and 5.1%, respectively, at December 31, 1996
and 1995. The weighted average long-term rate of return on assets was 10.0% and
10.2%, respectively, at December 31, 1996 and 1995. Plan assets are invested
principally in equity and fixed income instruments.
The Former Tyco also has several defined contribution plans. Pension
expense for the defined contribution plans is computed as a percentage of
participants' compensation and was $25.3 million, $18.0 million and $15.6
million for 1996, 1995 and 1994, respectively. During 1995, the Former Tyco
established an unfunded Supplemental Executive Retirement Plan ("SERP"). This
plan is nonqualified and restores the employer match that certain employees lose
due to IRS limits on eligible compensation under the defined contribution plans.
Expense related to the SERP was $1.7 million and $0.4 million in 1996 and 1995,
respectively. The Former Tyco also participates in a number of multi-employer
defined benefit plans on behalf of certain employees. Pension expense related to
multi-employer plans was $2.0 million, $2.5 million and $6.7 million for 1996,
1995 and 1994, respectively.
The Company generally does not provide post-retirement benefits other than
pensions for its employees. Certain of the Former Tyco's acquired operations
provide these benefits to employees who were eligible at the date of
acquisition.
Net periodic post-retirement benefit cost reflects the following
components:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................ $ 0.2 $ 0.4 $ 0.4
Interest cost............................................... 4.3 4.7 5.8
Net amortization and deferral............................... (3.0) (2.9) (1.3)
----- ----- -----
Net periodic post-retirement benefit cost................... $ 1.5 $ 2.2 $ 4.9
===== ===== =====
</TABLE>
38
<PAGE> 40
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the accrued post-retirement benefit obligation, all of
which are unfunded, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------
1996 1995
------ -----
(IN MILLIONS)
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.................................................. $43.7 $44.8
Fully eligible active plan participants................... 11.1 9.5
Other active plan participants............................ 1.2 6.6
----- -----
56.0 60.9
Unrecognized prior service benefit.......................... 16.5 23.9
Unrecognized net gain....................................... 19.0 14.6
----- -----
Accrued post-retirement benefit cost........................ $91.5 $99.4
===== =====
</TABLE>
For measurement purposes, in 1996 a 9.6% composite annual rate of increase
in the per capita cost of covered health care benefits was assumed. The rate was
assumed to decrease gradually to 5.0% by the year 2008 and remain 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 rate by one percentage point would increase the accumulated
post-retirement benefit obligation as of December 31, 1996 by $2.9 million and
the aggregate of the service and interest cost component of net periodic
post-retirement benefit cost for the year then ended by $0.3 million. The
weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.75%, 7.5% and 8.3% at December 31,
1996, 1995 and 1994, respectively.
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.
ADT Retirement Plans
The Company operates various defined benefit pension plans designed in
accordance with conditions and practices in the countries concerned.
Contributions are based on periodic actuarial valuations which use the projected
unit credit method of calculation and are charged to the consolidated statements
of operations on a systematic basis over the expected average remaining service
lives of current employees. The net pension expense is assessed in accordance
with the advice of professionally qualified actuaries in the countries concerned
or is based on subsequent formal reviews for the purpose.
The Company's United States electronic security services operation has a
non-contributory, funded, defined benefit pension plan covering substantially
all of its employees.
The Company has two contributory, funded, defined benefit pension plans in
the United Kingdom covering substantially all salaried and non-salaried
employees.
39
<PAGE> 41
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Details of the most recent independent actuarial valuations or formal
reviews are set out below:
United States Plan
The net pension expense for the United States plan included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during year................. $ 6.5 $ 5.1 $ 6.1
Interest cost on projected benefit obligations........... 13.3 12.9 11.9
Return on assets......................................... (17.1) (16.3) (16.1)
Net amortization and deferral............................ 4.9 (0.8) 0.1
------ ------ ------
Net pension expense...................................... $ 7.6 $ 0.9 $ 2.0
====== ====== ======
</TABLE>
As a result of an early retirement plan implemented during 1996, a
curtailment loss of $4.8 million is included in the net amortization and
deferral component of net pension expense for the year ended December 31, 1996.
The following table sets forth the actuarial present value of accumulated
benefit obligations and funded status for the Company's United States plan:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
Accumulated benefit obligations, including vested benefits
of $155.4 million (1995 -- $157.8 million)............... $169.5 $164.4
====== ======
Total projected benefit obligations........................ 193.5 189.4
------ ------
Plan assets at fair value, primarily stocks, bonds and
money market funds....................................... 192.6 183.5
Less: Unrecognized net gain................................ (28.1) (15.4)
Plus: Unrecognized prior service costs..................... 0.6 0.7
------ ------
165.1 168.8
------ ------
Net pension liability...................................... $ 28.4 $ 20.6
====== ======
</TABLE>
The actuarial assumptions for the expected long-term rate of return on plan
assets, weighted average discount rate, and rate of increase of future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations for 1996 were 10.0%, 7.5% and 4.0%, respectively
(1995 -- 10.0%, 7.0% and 4.0%, respectively).
40
<PAGE> 42
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
United Kingdom Plans
The aggregate net pension (income) expense for the United Kingdom plans
included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------ ------ -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during year.................. $ 3.6 $ 3.9 $ 5.0
Interest cost on projected benefit obligations............ 7.1 8.8 7.0
Return on assets.......................................... (11.5) (17.3) --
Net amortization and deferral............................. (2.2) 6.8 (9.7)
------ ------ ------
Net pension (income) expense.............................. $ (3.0) $ 2.2 $ 2.3
====== ====== ======
</TABLE>
As a result of the disposal of an interest in European Auctions a
curtailment gain of $2.7 million is included in the net amortization and
deferral component of net pension income for the year ended December 31, 1996.
The following table sets forth the aggregate actuarial present value of
accumulated benefit obligations and funded status for the Company's United
Kingdom plans:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
Accumulated benefit obligations, including vested benefits
of $92.8 million (1995 -- $82.4 million)................. $ 92.8 $ 82.4
====== ======
Total projected benefit obligations........................ 101.4 91.6
------ ------
Plan assets at fair value, primarily stocks, bonds and
money market funds....................................... 133.3 116.7
Less: Unamortized net assets............................... (13.0) (6.1)
Less: Unrecognized net gain................................ (12.1) (21.1)
Plus: Unrecognized prior service costs..................... -- 2.1
------ ------
108.2 91.6
------ ------
Net pension asset.......................................... $ 6.8 $ --
====== ======
</TABLE>
The actuarial assumptions for the expected long-term rate of return on plan
assets, weighted average discount rate, and rate of increase of future
compensation levels used in determining the actuarial present value of
accumulated benefit obligations for 1996 were 9.5%, 8.5% and 7.0%, respectively
(1995 -- 9.0%, 8.3% and 6.5%, respectively.)
The aggregate net pension expense for the year in respect of the United
States and United Kingdom plans amounted to $4.6 million (1995 -- $3.1 million;
1994 -- $4.3 million).
The Company's United States electronic security services operation sponsors
an unfunded defined benefit post-retirement plan which covers both salaried and
non-salaried employees and which provides medical and other benefits. This
post-retirement health care plan is contributory, with retiree contributions
adjusted annually.
41
<PAGE> 43
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net post-retirement benefit expense included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................ $ 0.7 $ 0.5 $ 0.6
Interest cost............................................... 2.5 2.4 2.3
Net amortization and deferral............................... (1.2) (1.3) (1.3)
----- ----- -----
Net post-retirement benefit expense......................... $ 2.0 $ 1.6 $ 1.6
===== ===== =====
</TABLE>
The following table sets forth the components of the plan's accumulated
post-retirement benefit obligations and benefit liability:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
----- -----
(IN MILLIONS)
<S> <C> <C>
Retirees..................................................... $27.6 $22.8
Fully eligible active plan participants...................... 5.0 7.7
Other active plan participants............................... 6.4 4.8
----- -----
Accumulated post-retirement benefit obligations.............. 39.0 35.3
Less: Unrecognized net loss.................................. (5.3) (3.3)
Plus: Unrecognized prior service credit...................... 14.5 15.8
----- -----
Post-retirement benefit liability............................ $48.2 $47.8
===== =====
</TABLE>
During 1992 the Company adopted amendments to the plan that reduced
benefits attributable to prior service. These amendments resulted in
approximately a $20 million decrease in the obligation for benefits attributable
to prior service. This decrease is being amortized as a reduction of plan costs
on an actuarially calculated basis over a period of approximately twenty years
beginning January 1992. Effective January 1995 the Company implemented a defined
dollar benefit cap for all current and future retirees, regardless of age.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligations was 7.5% (1995 -- 7.0%).
20. RELATED PARTY TRANSACTIONS:
In December 1995 the Company entered into an agreement with Integrated
Transport Systems Limited ("ITS"), a United Kingdom unquoted company, and its
wholly owned subsidiaries Loanoption Limited and ITS Finance Limited, under
which the Company disposed of an interest in European Auctions. (note 18)
The aggregate consideration received by the Company on closing was
comprised of cash of $235.1 million, $187.6 million Vendor Note with an issue
price of $83.9 million and valued by the Company at $74.6 million, $31.1 million
Shareholder Loan Notes with an issue price of $13.9 million and valued by the
Company at $13.3 million, and a 43.1% interest in the ordinary share capital of
ITS at an issue price of $2.0 million and valued by the Company at $0.9 million.
In February 1996 the Company disposed of its entire interest in Shareholder
Loan Notes and 33.1% of the ordinary share capital of ITS for an aggregate cash
consideration of $15.4 million. As a result, the Company now holds a 10.0%
interest in the ordinary share capital of ITS, valued and accounted for by the
Company at a nominal amount, together with the Vendor Note which has been
accounted for at its amortized cost.
42
<PAGE> 44
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mr. D.B. Hammond and Mr. T.J. Gibson are both directors of ITS. Mr. Hammond
was, until April 1996, Deputy Chairman of ADT and Mr. Gibson was the Chief
Executive Officer of ADT Auction Group Limited.
Mr. Hammond and Mr. Gibson subscribed $10.4 million and $0.8 million, in
total, respectively, to the capital of ITS and, as a result, were interested in
Shareholder Loan Notes with issue prices of $9.4 million and $0.7 million,
respectively, and 22.3% and 1.7%, respectively, of the ordinary share capital of
ITS. Other senior management and employees of European Auctions subscribed $3.7
million to the capital of ITS and, as a group, were interested in Shareholder
Loan Notes with an issue price of $3.3 million and 8.0% of the ordinary share
capital of ITS. In addition, at closing, Mr. M.A. Ashcroft, who was, until July
1997, Chairman and Chief Executive Officer of ADT, subscribed $7.0 million to
the capital of ITS and, as a result, was interested in Shareholder Loan Notes
with an issue price of $6.3 million and 15.0% of the ordinary share capital of
ITS, which interest he continues to hold. Mr. Ashcroft is not an officer or
director of ITS or any of its subsidiaries and has no involvement in the day to
day management of ITS or any of its subsidiaries.
Upon the disposal by the Company of an interest in European Auctions, ADT
share options held by directors and employees of European Auctions became
immediately exercisable. ADT entered into arrangements with Mr. Gibson under
which share options held by him at the time of the disposal by the Company of an
interest in European Auctions were purchased by ADT for an aggregate economic
value totaling $1.2 million, based on ADT's common share price on December 19,
1995, of which Mr. Gibson invested $0.8 million in the capital of ITS, referred
to above. ADT also entered into similar arrangements with other senior
management and employees of European Auctions under which ADT purchased share
options held by them for an aggregate economic value totaling $0.6 million, in
order to enable them to invest in the capital of ITS. In addition, in order to
further enable Mr. Hammond to invest in the capital of ITS, ADT purchased from
him share options with an aggregate economic value totaling $1.1 million, based
on ADT's common share price on December 19, 1995, which would otherwise have
been exercisable in March 1996.
Upon the disposal by the Company of an interest in European Auctions, Mr.
Gibson received a severance payment of $0.3 million and other senior management
and employees of European Auctions, as a group, received severance payments
totaling $0.4 million.
A company controlled by Mr. Ashcroft made non-collateralized loans to Mr.
Hammond, or companies controlled by him, of an aggregate of $7.8 million, solely
for the purpose of enabling Mr. Hammond or these companies to invest in the
capital of ITS.
The cash consideration paid to the Company on closing was obtained by the
ITS group through the subscription of $26.5 million in the capital of ITS and
approximately $209.7 million through the drawdown of sterling term loans under a
bank credit agreement entered into between the ITS group and a group of banks.
The bank credit agreement has a term of seven years and obligations thereunder
are guaranteed and collateralized by a first priority pledge of the shares and
assets of all the companies comprising European Auctions and the ITS group.
At closing, the Company entered into an agreement with the ITS group
whereby the Company granted to ITS and its subsidiaries permission to use the
ADT name and certain trademarks for a period of up to three years for a total
cash consideration, paid at closing, of $0.6 million.
At closing, the Company entered into an option agreement with Mr. Ashcroft
which, if exercised, would have required Mr. Ashcroft to purchase from the
Company, for cash fifty days after closing, Shareholder Loan Notes with an issue
price of up to $8.2 million and up to 19.6% of the ordinary share capital of
ITS. In addition, at closing, ITS entered into an agreement with the Company and
Mr. Ashcroft under which ITS agreed to use its reasonable efforts, for a
forty-five day period after closing, to find unrelated third party investors to
purchase Shareholder Loan Notes and ordinary share capital of ITS from the
Company and Mr. Ashcroft, and under which the Company and Mr. Ashcroft agreed to
certain voting restrictions in respect
43
<PAGE> 45
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of their holdings of the ordinary share capital of ITS as described below. In
February 1996 the Company and Mr. Ashcroft agreed that the mutual obligations
under the option agreement be released.
At December 31, 1995 the Company's investment in the ordinary share capital
of ITS was accounted for as an unconsolidated subsidiary under temporary
control, due to an agreement between ITS, the Company and Mr. Ashcroft limiting
the voting rights of each of the Company and Mr. Ashcroft to 15.0% of the voting
rights of ITS and due to the fact that Mr. Hammond did not seek re-election to
the board of directors of ADT at the 1996 annual general meeting. Accordingly,
at December 31, 1995 the equity method of accounting was used in the
consolidated financial statements, and the Vendor Note and Shareholder Loan
Notes were accounted for at their amortized cost.
An opinion regarding the fair value of the transactions described above was
provided to the independent non-executive directors of ADT by a leading European
investment banking firm and the transactions were approved unanimously by the
independent non-executive directors of ADT.
44
<PAGE> 46
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
21. CONSOLIDATED SEGMENT DATA:
Selected information by industry segment is presented below.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Sales:
Disposable and specialty products...................... $2,001.0 $1,819.7 $1,575.3
Fire and safety services............................... 3,694.9 3,054.3 2,779.2
Flow control products.................................. 1,250.9 1,014.4 914.4
Electrical and electronic components................... 479.0 430.1 436.9
-------- -------- --------
$7,425.8 $6,318.5 $5,705.8
======== ======== ========
Operating (loss) income:
Disposable and specialty products...................... $ 358.9(1) $ 331.4 $ 254.4
Fire and safety services............................... (632.7)(2) 217.1(3) 213.5(5)
Flow control products.................................. 125.3 90.4 74.1
Electrical and electronic components................... 89.0 76.4 72.5
Corporate and other expenses........................... (43.4) (66.2)(4) (17.9)
-------- -------- --------
$ (102.9) $ 649.1 $ 596.6
======== ======== ========
Total Assets:
Disposable and specialty products...................... $1,961.3 $1,281.7 $1,696.6
Fire and safety services............................... 4,343.1 4,238.1 3,741.4
Flow control products.................................. 1,216.0 1,030.4 861.4
Electrical and electronic components................... 283.9 165.6 178.3
Corporate assets....................................... 124.2 85.4 79.2
-------- -------- --------
$7,928.5 $6,801.2 $6,556.9
======== ======== ========
Depreciation and Amortization:
Disposable and specialty products...................... $ 67.8 $ 65.3 $ 64.1
Fire and safety services............................... 254.0 254.3 239.1
Flow control products.................................. 47.8 41.9 39.4
Electrical and electronic components................... 11.7 11.0 11.3
Corporate.............................................. 15.5 8.6 4.0
-------- -------- --------
$ 396.8 $ 381.1 $ 357.9
======== ======== ========
Capital Expenditures:
Disposable and specialty products...................... $ 90.5 $ 78.2 $ 49.4
Fire and safety services............................... 362.0 318.4 277.1
Flow control products.................................. 41.6 36.6 33.9
Electrical and electronic components................... 9.7 10.9 11.7
Corporate.............................................. 1.3 0.7 0.3
-------- -------- --------
$ 505.1 $ 444.8 $ 372.4
======== ======== ========
</TABLE>
- ---------------
(1) Includes a charge of $13.0 million related to the impairment of long-lived
assets in ADT's vehicle auction services operations.
45
<PAGE> 47
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) Includes charges of $731.7 million related to the impairment of long-lived
assets and $232.5 million relating to restructuring and other non-recurring
items in ADT's electronic security services operations, $4.8 million related
to restructuring and other non-recurring items in ADT's corporate operations
and $12.9 million related to professional and other transaction costs in
connection with the ASH merger, ADT's terminated merger with Republic and
refinancing costs incurred by ASH prior to its merger with ADT.
(3) Includes charges of $21.4 million related to restructuring and other
non-recurring items in ADT's electronic security services operations and
$12.8 million related to restructuring and other non-recurring items in
ADT's corporate operations.
(4) Includes a charge of $37.2 million related to professional and other
transaction costs in connection with the Kendall merger.
(5) Includes a charge of $4.5 million related to restructuring and other
non-recurring items in ADT's corporate operations.
22. CONSOLIDATED GEOGRAPHIC DATA:
Selected information by geographic area is presented below.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Sales:
Americas (primarily U.S.)............................ $5,403.7 $4,513.5 $4,133.5
Europe............................................... 1,361.1 1,312.3 1,196.1
Asia-Pacific......................................... 661.0 492.7 376.2
-------- -------- --------
$7,425.8 $6,318.5 $5,705.8
======== ======== ========
Operating (loss) income:
Americas (primarily U.S.)............................ $ 100.9 $ 555.3 $ 501.7
Europe............................................... (234.5) 76.4 83.5
Asia-Pacific......................................... 30.7 17.4 11.4
-------- -------- --------
$ (102.9) $ 649.1 $ 596.6
======== ======== ========
Total Assets:
Americas (primarily U.S.)............................ $5,887.5 $4,736.7 $4,402.4
Europe............................................... 1,516.1 1,658.1 1,804.6
Asia-Pacific......................................... 400.7 321.0 270.7
Corporate assets..................................... 124.2 85.4 79.2
-------- -------- --------
$7,928.5 $6,801.2 $6,556.9
======== ======== ========
</TABLE>
46
<PAGE> 48
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
23. SUPPLEMENTARY BALANCE SHEET INFORMATION:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Inventories:
Purchased materials and manufactured parts.......... $ 229.9 $ 170.0
Work in process..................................... 138.6 112.3
Finished goods...................................... 435.9 347.9
--------- ---------
$ 804.4 $ 630.2
========= =========
Property, Plant and Equipment:
Land................................................ $ 192.3 $ 173.7
Buildings........................................... 486.0 384.7
Subscriber systems.................................. 1,977.5 1,874.0
Machinery and equipment............................. 1,309.2 983.7
Leasehold improvements.............................. 61.0 51.8
Construction in progress............................ 99.2 46.2
Accumulated depreciation............................ (1,687.4) (1,284.3)
--------- ---------
$ 2,437.8 $ 2,229.8
========= =========
Accrued payroll and payroll related costs............. $ 153.1 $ 119.2
========= =========
</TABLE>
24. SUPPLEMENTARY INCOME STATEMENT INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Research and development.................................... $33.4 $34.2 $35.8
Advertising................................................. 90.9 95.1 79.0
</TABLE>
25. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
1ST(1) 2ND(2)(3) 3RD(2)(3) 4TH(3)(4)(5)
-------- --------- --------- ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.......................................... $1,668.9 $1,794.5 $1,907.1 $2,055.3
Gross profit................................... 537.3 59.4 605.1 637.3
(Loss) income before extraordinary item........ (626.1) 124.9 106.3 56.3
Net (loss) income.............................. (626.1) 123.7 101.7 53.7
(Loss) income per share before extraordinary
items........................................ (2.87) 0.56 0.48 0.25
Net (loss) income per share.................... (2.87) 0.56 0.45 0.24
</TABLE>
47
<PAGE> 49
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------
1ST 2ND(3)(6) 3RD(3) 4TH(3)(4)(7)
-------- -------- -------- ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales............................................. $1,487.6 $1,546.1 $1,579.1 $1,705.7
Gross profit...................................... 481.1 492.4 501.4 539.9
Income before extraordinary item.................. 78.0 36.9 91.0 41.7
Net income........................................ 78.0 34.3 83.0 39.9
Income per share before extraordinary item........ 0.36 0.17 0.42 0.19
Net income per share.............................. 0.36 0.16 0.38 0.18
</TABLE>
- ---------------
(1) Includes a charge of $744.7 million related to the impairment of long-lived
assets.
(2) Includes a charge of $0.4 million the second quarter and $10.9 million in
the third quarter related to professional and other transaction costs
arising in connection with the merger of ADT and ASH and the terminated
merger with Republic.
(3) Extraordinary items principally were comprised of losses on repayment and
the write off of net unamoritized deferred refinancing costs relating to the
early extinguishment of debt.
(4) Includes a charge of $237.3 million in 1996 and $34.2 million in 1995
related to restructuring and other non-recurring charges in ADT's electronic
security services and corporate operations.
(5) Includes a net gain arising from the sale of the Company's investment on
Limelight Group plc of $54.4 million and a net gain on litigation settlement
with BDO of $65.0 million.
(6) Includes a charge of $37.2 million related to professional and other
transaction costs arising in connection with the merger of Former Tyco and
Kendall.
(7) Includes a net loss of $65.8 million arising on the disposal of an interest
in European Auctions and a net gain of $31.4 million arising on the disposal
of the Company's entire European electronic article surveillance business.
26. SUBSEQUENT EVENTS:
In January 1997 the Former Tyco acquired all of the outstanding shares of
ElectroStar, Inc. ("ElectroStar"). ElectroStar, a leading manufacturer of
complex printed circuit boards, has annual revenues of approximately $70
million. Also in January 1997 the Former Tyco acquired the Sempell Valve Group,
a manufacturer and servicer of specialty valves used in industrial and power
generation applications with annual revenues of approximately $130 million. In
February 1997 the Former Tyco acquired American Tube and Pipe Co., Inc., a
manufacturer of steel pipe and tubing for the fire protection and fence markets
and steel studs/trusses for the residential and commercial construction markets
with annual revenues of approximately $120 million. These purchases were made
utilizing cash on hand as well as borrowings under the Company's uncommitted
lines of credit. The acquisitions, which had an aggregate purchase price of
approximately $266 million, will be accounted for as purchases.
In January 1997 the Former Tyco filed a shelf registration to enable it to
offer from time to time unsecured debt securities or shares of common stock, or
any combination of the foregoing, at an aggregate initial offering price not to
exceed $900 million. In March and April 1997 the Former Tyco sold an aggregate
of 11.5 million shares of common stock off the shelf at $57.75 per share. The
net proceeds from the sale of $645.2 million were used to repay indebtedness
incurred for previous acquisitions.
In April 1997, the Former Tyco entered into an agreement with AT&T to
acquire its submarine systems business ("SSI") for approximately $850 million in
cash. SSI is a world leader in the design, development, manufacture, supply,
installation, and maintenance of undersea fiber optic telecommunication cable
systems, with expected calendar 1997 revenues of approximately $1 billion. The
acquisition, which was consummated
48
<PAGE> 50
TYCO INTERNATIONAL LTD.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in July 1997, will be accounted for as a purchase. The Company has increased its
bank credit facilities which were used to partially fund the purchase of SSI.
In May 1997, the Former Tyco entered into a definitive merger agreement for
the acquisition of INBRAND Corporation ("INBRAND") in a stock for stock
transaction valued at approximately $320 million. INBRAND, with annual revenues
of $240 million, manufactures and distributes adult incontinence products, as
well as feminine hygiene products and disposable baby diapers, to hospitals,
retail outlets and alternate care sites throughout North America and Europe. The
acquisition, which will be accounted for as a pooling of interests, will be
structured with INBRAND shareholders receiving 0.43 of a Company share for each
share of INBRAND common stock outstanding. According to publicly filed
documents, as of May 12, 1997, INBRAND has 11.8 million shares of common stock
outstanding. The transaction is contingent upon customary regulatory review and
approval by the INBRAND shareholders and is expected to be consummated in
September 1997.
In May 1997, the Former Tyco entered into a definitive merger agreement for
the acquisition of Keystone International, Inc. ("Keystone") in a stock for
stock transaction valued at approximately $1.2 billion. Keystone, with annual
revenues of approximately $700 million, designs, manufactures and markets on a
worldwide basis, industrial valves, actuators and accessories used to control
the flow of liquids, gases and solid materials. Keystone products are sold to
the food and beverage, water and sewage, petroleum production and refining,
natural gas, chemical, power, and pulp and paper industries. The transaction,
which will be accounted for as a pooling of interests, will be structured with
Keystone shareholders receiving 0.54183 of a Company share for each share of
Keystone common stock outstanding. According to publicly filed documents, as of
May 1, 1997, Keystone had 35.6 million shares of common stock outstanding. The
exchange ratio may be adjusted depending on the trading value of the Company's
shares. The transaction is contingent upon customary regulatory review and
approval by the Keystone shareholders and is expected to be consummated in
September 1997.
The Company reviews acquisition opportunities in the ordinary course of its
business, some of which may be material and some of which are currently under
investigation, discussion or negotiation.
In May 1997, a Tyco subsidiary entered into a 60 million pounds sterling
term loan, due in March 1998, with a bank to refinance certain intercompany
loans with external debt. Interest rates under this term loan are substantially
the same as those under the Company's $300 million credit agreement.
In June 1997, the Company entered into a new $1.75 billion credit
agreement, consisting of a $500 million five-year revolving credit facility, a
$750 million 364-day revolving credit facility and a $500 million bridge credit
facility (expiring in December 1997) with a group of commercial banks and
simultaneously canceled its existing $300 million credit agreement. Interest
rates and financial and operating covenants under the new facilities are
substantially the same as those under the canceled credit agreement. In July
1997, the Company borrowed $600 million under the new credit agreement at a
weighted average interest rate of 5.92% to partially fund the SSI acquisition
discussed above. Also in July 1997 the Company borrowed $800 million under the
new credit agreement to fund the debt tenders discussed below.
In July 1997 the Company tendered for its $145,000,000 8.125% public notes
due 1999, $250,000,000 8.25% senior notes due 2000, $294,085,000 9.25% senior
subordinated notes due 2003 and $200,000,000 9.5% public debentures due 2022.
92.8% of the 8.125% notes, 96.2% of the 8.25% notes, 95.2% of the 9.25% notes
and 75.5% of the 9.5% debentures were tendered. The Company will pay an
aggregate amount, including accrued interest, of approximately $900.8 million to
the note holders, of which $800.0 million was financed from the new credit
agreement discussed above.
49
<PAGE> 1
EXHIBIT 99.2
TYCO INTERNATIONAL LTD.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DEDUCTIONS -- ACQUISITIONS, BALANCE AT
BEGINNING OF CHARGED TO PRIMARILY DISPOSALS END OF
YEAR INCOME WRITE-OFFS AND OTHER YEAR
------------ ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended December 31, 1994... $ 51.1 11.9 15.0 (1.8) $ 46.2
Year ended December 31, 1995... $ 46.2 14.0 11.8 (1.8) $ 46.6
Year ended December 31, 1996... $ 46.6 24.6 15.5 (0.5) $ 55.2
</TABLE>
