SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x]Preliminary Proxy Statement
[ ]Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ADT Limited
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x]No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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ADT Limited Letterhead
, 1997
IMPORTANT - SPECIAL GENERAL MEETING
July 8, 1997
Dear Fellow Shareholders:
You are cordially invited to attend a special general
meeting of shareholders of ADT Limited ("ADT") scheduled to be held on July
8, 1997 at 9:00 a.m., local time, at Cedar House, 41 Cedar Avenue, Hamilton
HM12, Bermuda.
As you know, on March 17, 1997, Western Resources, Inc.
(together with its subsidiaries, "Western") commenced a hostile offer (the
"Western Offer") to acquire your shares in ADT for a combination of cash and
Western stock with an aggregate maximum value that your Board of Directors
unanimously believes to be inadequate and less than fair value. As described
in the enclosed proxy statement, as part and parcel of its attempt to seize
control of ADT, Western has requisitioned this special general meeting. The
purpose of the special general meeting is to consider proposals (the "Western
Proposals") to remove the entire existing ADT Board of Directors (the
"Board"), including all of ADT's independent directors (who constitute a
majority of your Board), and install two of Western's own employees as the
only members of the Board.
Your Board has unanimously determined that the Western Offer is
inadequate and not in the best interests of ADT's shareholders. Following
your Board's rejection of the Western Offer, ADT entered into a merger
agreement with Tyco International Ltd. ("Tyco") on terms that have been
approved by your Board (the "Tyco Merger"). Your Board unanimously believes
that the Tyco Merger is far more attractive to ADT shareholders than the
Western Offer. ADT will be convening a separate special general meeting of ADT
shareholders (the "Tyco Meeting") to approve certain matters relating to the
Tyco Merger. ADT will be distributing to you a Joint Proxy
Statement/Prospectus describing the Tyco Merger in detail, the date of and the
proposals (the "Tyco Meeting Proposals") to be considered at the Tyco Meeting,
and the reasons why your Board recommends that you support the Tyco Merger.
Your Board of Directors unanimously recommends a vote "AGAINST" the
Western Proposals. Since your Board believes that the Tyco Merger is far
preferable to the Western Offer, we believe that you should support the Tyco
Merger and should therefore not elect Western's two employee nominees to ADT's
Board of Directors. Even if you do not support or have not yet made a
decision in respect of the Tyco Merger, we unanimously believe that you should
vote against the Western Proposals.
The Western Proposals are not contingent on the outcome of the
Western Offer, even though that offer is highly conditional and may never
succeed. You are therefore being asked by Western to hand over management
control of ADT to Western without any certainty that the Western Offer will
succeed. Nor are the Western Proposals contingent upon the Tyco Merger or
your approval of the matters to be considered at the Tyco Meeting. The
Western Meeting will be held even if the Tyco Meeting is held before the date
of the Western Meeting and the Tyco Meeting Proposals are approved. If the
Western Offer fails--as your Board believes that it should--the effect of
approving the Western Proposals would be to give Western management control of
ADT for nothing.
To ensure that this does not happen, we need your vote. It
will not help your Board for you to abstain from returning a proxy card, nor
will it help for you to return a Western proxy card voting to "abstain". The
only way for you to support your Board is to vote against the Western
Proposals on the white proxy card sent to you by your Board.
Action to be taken: Enclosed is a white proxy card. YOUR
BOARD URGES YOU TO COMPLETE, SIGN, DATE AND RETURN THE WHITE PROXY CARD IN THE
ACCOMPANYING ENVELOPE in accordance with the instructions on the card. As
noted on the card, to be valid, the card must be received by the Registrars of
ADT no later than July 7, 1997 at 9:00 a.m. (Bermuda time), being 24 hours
before the time of the Western Meeting. The addresses of ADT's Registrars and
agents to whom the white proxy card may be sent for delivery to the Registrar
are set forth on pages 15-16 of the Company's Proxy Statement dated ,
1997 enclosed herewith and are noted on the white proxy card.
On behalf of everyone at ADT, we thank you for your continued
support. We remain committed to acting in the best interests of you, our
fellow shareholders, and our Company. If you have any questions, please feel
free to call our proxy solicitor, D.F. King, at 1-800-488-8035 (toll-free in
the United States), at 0171-600-5005 (in the United Kingdom) or at
212-269-5550 in the United States (for outside the United States and the
United Kingdom).
Sincerely,
MICHAEL A. ASHCROFT STEPHEN J. RUZIKA
Chairman of the Board and Chief Financial Officer,
Chief Executive Officer Executive Vice President and Director
JOHN E. DANNEBERG ALAN B. HENDERSON JAMES S. PASMAN, JR.
Director Director Director
W. PETER SLUSSER WILLIAM W. STINSON RAYMOND S. TROUBH
Director Director Director
IMPORTANT
Your vote is important. Please sign, date and promptly mail your
white proxy card in the postage prepaid envelope provided. Remember, do
not return any proxy card sent to you by Western.
If your shares are registered in the name of a broker, only your
broker can execute a proxy and vote your shares and only after receiving
your specific instructions. Please contact the person responsible for your
account and direct him or her to execute on your behalf today the white
proxy card sent by ADT. If you have any questions or need further
assistance in voting, please contact the firm assisting us in the
solicitation of proxies:
D.F. King
Call 1-800-488-8035 (toll-free in the United States)
or 0171-600-5005 (in the United Kingdom)
or 212-269-5550 in the United States (for outside the United States
and the United Kingdom)
PRELIMINARY PROXY STATEMENT (SUBJECT TO COMPLETION)
ADT LIMITED
PROXY STATEMENT
BY THE BOARD OF DIRECTORS OF ADT LIMITED
IN OPPOSITION TO WESTERN PROPOSALS
This proxy statement is being furnished by the Board of Directors (the
"Board") of ADT Limited (together with its subsidiaries, "ADT" or the
"Company") to our shareholders. In this proxy statement, your Board opposes
Western Resources, Inc.'s (together with its subsidiaries, "Western")
solicitation of proxies (the "Western Solicitation") relating to a special
general meeting of shareholders to be held on July 8, 1997 at 9:00 a.m.
(Bermuda time), at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda (the
"Western Meeting"). This proxy statement and the enclosed proxy card are
first being mailed to you on or about , 1997.
At the Western Meeting, you will be asked to consider and vote upon
three proposals of Western (the "Western Proposals"). See "Matters to be
Voted upon at the Western Meeting." Western has stated that the Western
Proposals are in furtherance of its attempts to take over the Company by means
of its offer (the "Western Offer") to exchange all of ADT's common shares, par
value $0.10 per share (the "Common Shares"), for cash and shares of Western
common stock (the "Exchange Consideration"), as described in Western's
Registration Statement on Form S-4, as amended (the "Western S-4"), which
includes a Prospectus dated March 14, 1997 (the "Western Prospectus").
Western has also sent you a proxy statement dated March 14, 1997 (the "Western
Proxy") relating to the Western Meeting. If the Western Proposals are
successful, Western has announced its intention to proceed with an
amalgamation of ADT into a subsidiary of Western. At the Western Meeting, you
may also be asked to consider and vote upon any other business that may
properly come before the Western Meeting.
Your Board has unanimously determined that the Western Offer is
inadequate and not in the best interests of ADT's shareholders. Following
your Board's rejection of the Western Offer, ADT has entered into a merger
agreement with Tyco International Ltd. ("Tyco") on terms that have been
approved by your Board (the "Tyco Merger"). Your Board unanimously believes
that the Tyco Merger is far more attractive to you than the Western Offer.
ADT will be convening a separate special general meeting of ADT shareholders
(the "Tyco Meeting") to approve certain matters related to the Tyco Merger.
ADT will be distributing to you a Joint Proxy Statement/Prospectus describing
the Tyco Merger in detail, the date of and the proposals to be considered at
the Tyco Meeting, and the reasons why your Board recommends that you support
the Tyco Merger.
Your Board of Directors unanimously recommends a vote "Against" the
Western Proposals. Since your Board believes that the Tyco Merger is far
preferable to the Western Offer, we unanimously believe that you should
support the Tyco Merger. You should therefore not elect Western's nominees to
control ADT's Board. Even if you do not support or have not yet made a
decision in respect of the Tyco Merger, we unanimously believe that you should
vote against the Western Proposals. Western has left no doubt that its
objective in precipitating the Western Meeting is to obtain control of the
Company and to have its two employee nominees dismantle the Company's
shareholder protections so that Western can attempt to complete what your
Board believes is its inadequate offer for the Common Shares of the Company.
Even if you support the Western Offer, your Board unanimously believes that
you should not vote to give control of your Company to Western's two employee
nominees.
Enclosed is a white proxy card. YOUR BOARD URGES YOU TO COMPLETE, SIGN,
DATE AND RETURN THE WHITE PROXY CARD IN THE ACCOMPANYING ENVELOPE in
accordance with the instructions on the card. As noted on the card, to be
valid, the card must be received by the Registrar of ADT no later than July 7,
1997 at 9:00 a.m. (Bermuda time), being 24 hours before the Western Meeting.
The addresses of ADT's Registrar and agents to whom the white proxy card may
be sent for delivery to the Registrar are noted on the card. PLEASE NOTE THAT
IF YOU RETURN YOUR PROXY CARD IN THE ACCOMPANYING ENVELOPE ADDRESSED TO AN
AGENT, IT MUST BE RECEIVED BY THE AGENT, IN THE UNITED STATES, BY 8:00 A.M.
(EASTERN STANDARD TIME) ON JULY 7, 1997 OR, IN THE UNITED KINGDOM, BY 12:00
(NOON) (BRITISH SUMMER TIME) ON JULY 7, 1997, TO ALLOW TIME FOR DELIVERY BY
THE AGENT TO ADT'S REGISTRARS. In this regard, in the United States, please
note that July 4, 1997 is a public holiday and you should allow sufficient
time for your proxy card to be received by ADT's Registrars or agents in
advance of the public holiday.
Your Board urges you not to sign or return any green proxy card sent to
you by Western. If you have previously signed a proxy card sent by Western,
your Board urges you to sign, date and promptly mail the enclosed white proxy
card, which will revoke any earlier dated proxy cards solicited by Western
which you may have signed. Remember that it will not help your Board to
abstain from returning a proxy card, nor will it help to return a Western proxy
card voting to "abstain." The only way for you to support your Board is to
vote "AGAINST" the Western Proposals on the white proxy card sent to you by
your Board.
If you have any questions or need further assistance in voting your
shares, please contact:
D.F. King
Call 1-800-488-8035 (toll-free in the United States)
or 0171-600-5005 (in the United Kingdom)
or 212-269-5550 in the U.S. (for outside the United States and the United
Kingdom)
WHY YOU SHOULD VOTE AGAINST THE WESTERN PROPOSALS
AND REJECT THE WESTERN OFFER
Your Board unanimously recommends that you support the Tyco Merger and
vote "AGAINST" the Western Proposals. Having unanimously concluded that the
Western Offer is inadequate and not in your best interests, your Board urges
you to "REJECT" the Western Offer.
The Tyco Merger Is More Favorable to ADT Shareholders than the Western Offer
* Your Board has unanimously determined that the Tyco Merger is fair to
and in the best interests of ADT shareholders and recommends that ADT
shareholders support the Tyco Merger and approve the proposals to be
considered at the Tyco Meeting in connection with the Tyco Merger. The
reasons for the Board's view, in addition to the superior value offered
by the Tyco Merger, will be set out in detail in the Joint Proxy
Statement/Prospectus that will be distributed to you in connection with
the Tyco Meeting.
* The businesses of Tyco and ADT are complementary. Tyco is the world's
largest manufacturer and provider of fire protection systems. ADT is
the largest provider of electronic security services in North America
and the United Kingdom. We expect the combined company to grow not only
through the internal growth of their respective businesses but also by
marketing products and services to each other's customers, efficiently
serving customer needs for both fire protection systems and security
services. We also expect the combined company to achieve significant
cost reductions in the first year after consummation of the Tyco Merger
and to realize stronger cash flow through potential revenue growth and
cost reductions.
* The Tyco Merger will provide ADT with access to Tyco's world-wide
business presence, which spans over 50 countries, and will give ADT
shareholders an interest in a larger international enterprise, with
combined annual revenues of over $8.5 billion. Also, with its expanded
markets, financial resources, management, personnel and related
expertise of Tyco and ADT, the combined company should be better able to
capitalize on growth opportunities in the fire protection and commercial
electronic security markets.
* Over the past three years ADT's and Tyco's share prices have
significantly outperformed the market while Western's stock price has
significantly underperformed the market. The following chart compares
the three year relative stock price performance among ADT, Tyco,
Western, the S&P 400 and the S&P Utilities for the period March 1, 1994
through March 26, 1997:
[Chart comparing three-year relative stock price performance with the
following data points]
3/1/94 3/26/97
-------- ----------
ADT 100 260.49
Tyco 100 220.10
S&P 400 100 170.13
S&P Utilities 100 119.57
Western 100 102.05
Western's Offer Is Inadequate and Should Be Rejected
* The maximum stated value of the Western Offer is $22.50 per Common
Share. This maximum stated value is substantially less than the current
market price of our Common Shares (which as of the close of business on
April 2, 1997, was $25.00 per share) and substantially less than the
initial value per Common Share of the Tyco Merger ($29.00 per Common
Share based on the closing price per Common Share immediately prior to
the announcement of the Tyco Merger).
* Your Board has unanimously concluded that the Western Offer is
inadequate and not in the best interests of ADT's shareholders. Your
Board unanimously recommends a vote against the Western Proposals and
recommends that shareholders not tender their Common Shares in the
Western Offer.
* In reaching this conclusion, your Board received the opinion of Merrill
Lynch & Co. ("Merrill Lynch") that the consideration to be paid pursuant
to the Western Offer (the "Exchange Consideration") is inadequate, from
a financial point of view, to the shareholders of ADT other than Western
and its affiliates. A copy of this opinion setting forth the
assumptions made and matters considered by Merrill Lynch is attached
hereto as Schedule D and should be read in its entirety.
* In making its determination, your Board considered numerous factors in
addition to the Merrill Lynch opinion, including the following:
* your Board's familiarity with, and management's view of, the
Company's business, financial condition and results of operations
and your Board's belief that the Western Offer does not reflect
the inherent value of the Company;
* your Board's concerns about the long-term value and prospects of
Western's common stock;
* your Board's belief that many ADT shareholders who are oriented
toward growth investing may seek to sell the Western common stock
received in exchange for their Common Shares. Your Board believes
that this could create potential downward pressure on market
prices for Western's common stock;
* the fact that the Western Offer is taxable to U.S. shareholders of
ADT, thereby further reducing the value of the Western Offer;
* your Board's and management's commitment to protecting the best
interests of the shareholders of ADT and enhancing the value of
ADT;
* the uncertainties associated with the Western Offer, including:
* the uncertainties with respect to evaluating the numerous
transactions in which Western is currently involved,
including the dilutive effect of these transactions on
Western's common stock and the cost and availability of
financing;
* the uncertainties resulting from deregulation of the
electric utility industry, including among other things the
fact that increased competition may create greater risks to
the stability of Western's utility earnings; and
* the uncertainty with respect to availability, cost and terms
of financing for the Western Offer, and the likelihood that
such uncertainty may be heightened if Western increases its
offer for ADT; and
* your Board's belief that, given Western's lack of national
presence and small customer base relative to other utilities and
premier companies in other service-related industries, Western is
not a strong strategic partner for ADT.
* Although the Board reached its conclusion regarding the Western Offer
before it considered the Tyco Merger, your Board unanimously believes
that the Tyco Merger will produce greater short-term and long-term value
for you than the Western Offer.
The Actual Value of the Western Offer Is Likely to Be Lower than its Maximum
Stated Value
* Western has recently (i) completed the acquisition of the security
business of Westinghouse Security, (ii) announced a proposed merger with
Kansas City Power & Light Company ("KCP&L") and (iii) launched the
Western Offer for ADT. Taken as a whole, your Board believes that these
transactions are likely to result in substantial earnings dilution and
raise serious concerns about Western's ability to sustain its current
dividend practices without additional borrowings or reductions in
capital expenditures. Your Board believes that these factors may in
turn have an adverse effect on Western's financial condition (including
its creditworthiness) and could restrict its ability to support growth
in its non-utility businesses and, in particular, its security business.
* The Western Prospectus discusses certain significant risks facing
Western which should be considered by you before deciding whether to
accept the proposed Western Offer. The risk factors that Western has
outlined in the Western Prospectus are reproduced and attached hereto as
Schedule C. Although your Board believes that Western has put the best
face on these risk factors, the significance of these risks is obvious.
In particular, the Western Prospectus describes the following
significant risks with respect to Western and the Western Offer:
* The risks of deregulation of the utility industry, including the
risk that Western will not be able to recover its "stranded costs"
in a deregulated energy market.
* The risk that Western's "business plan" of bundling energy and
security services will require the allocation of substantial
capital and human resources with no assurance that the operations
of the two businesses will be successful.
* The fact that, historically, Western has grown more slowly than
ADT.
* The risk that under certain circumstances, the pre-tax value of
the Exchange Consideration may be less than $22.50.
* The fact that the Western Offer and a subsequent amalgamation of
ADT with a subsidiary of Western are expected to have a dilutive
effect on Western's reported earnings per share in the short term.
* The financial risks faced by Western, including increased earnings
and cash flow volatility, competitive pricing, the effects of new
technology and the potential negative impact of these issues on
Western's financial condition and creditworthiness.
* Your Board unanimously believes that the risks disclosed in the Western
Prospectus alone provide ample reason to vote AGAINST the Western
Proposals and REJECT the Western Offer.
Unlike Tyco, Western Is Not a Strong Strategic Partner for ADT
* Your Board believes that, unlike Tyco, Western does not possess the key
characteristics that ADT would consider to be most important in
identifying a strong strategic partner, including national market
position, demonstrated ability to be successful in a competitive
environment, range of demonstrated high value services, favorable cost
structure and prospects for nationwide services coverage.
* Western has argued that an amalgamation with ADT will benefit ADT
shareholders by combining "ADT's leading international presence and
quality brand equity in the security business" with Western's "fast
growing security business, strong core utility business and customer
service expertise." Your Board understands why shareholders of a
slow-growth Kansas utility would benefit by trying to acquire a
high-growth international electronic security services company, such as
ADT. However, Your Board does not accept Western's unsupported
assertion that ADT shareholders would benefit from an amalgamation with
Western. Your Board unanimously believes that ADT shareholders will
benefit much more from a combination with Tyco, which is also a
high-growth international company with a synergistic fire protection
business.
* Western has offered no support for the notion that ADT's nationwide
customer base would have any interest in buying electric power from a
Kansas utility. In the current regulated environment, Western does not
have the ability to sell power to ADT's national or international
customer base. Even assuming the consummation of Western's acquisition
of KCP&L, the combined company's utility customer base will still be
concentrated in Kansas, Missouri and Oklahoma. Both ADT and Tyco
currently operate throughout the United States, and not just in Kansas,
Missouri and Oklahoma. Tyco's geographic reach is even broader than
ADT's North American and European businesses, with a world-wide business
that spans over 50 countries.
* Western has not stated how it would manage ADT's commercial security
business, which ADT believes is far more sophisticated than Western's
primarily residential security business. Unlike Western's security
business, which is principally residential, ADT derives the majority of
its security business revenue from commercial customers.
* Given Western's lack of a national presence and small customer base
relative to other utilities and premier companies in other
service-related industries, your Board does not believe that an
amalgamation with Western would offer any meaningful strategic
opportunity to ADT. In contrast, the Board believes that the Tyco
Merger offers a significant strategic opportunity to combine the
strengths of two high growth complementary businesses.
Even if You Do Not Support the Tyco Merger, You Should Maintain a Board that
Is Independent from Western.
* Your Board unanimously recommends that you support the Tyco Merger.
However, even if you do not support or have not yet made a decision in
respect of the Tyco Merger, your Board unanimously believes that the
interests of the Company and all of its shareholders will be best served
by retaining the Company's current Board, a majority of whom are
independent. Your Board will continue to act on behalf of the Company
and all of its shareholders independently of the interests of Western.
* The Western Proposals are part of Western's unsolicited attempt to
obtain control of your Company and to complete its offer to acquire ADT
without paying you what your Board considers to be fair and adequate
value for your Common Shares. In effect, Western is asking you to
appoint two of its own employee representatives to determine whether,
and on what terms, your Company will be sold to Western. Western has
already stated that the Western nominees are committed to taking "all
actions necessary to expedite consummation of" the Western Offer and a
subsequent amalgamation of the Company with a subsidiary of Western.
* Western's two nominees are Western's employees. Your Board believes
that, as such, they are likely to act in a manner that will serve the
interests of Western. Western admits that the Western nominees'
interests could conflict with the interests of shareholders other than
Western because the Western nominees are employed by Western.
Furthermore, Western has taken the position that if the Western
Proposals are adopted, the shareholders of ADT will have effectively
approved the Western Offer. Your Board believes that ADT shareholders
should vote against the Western Proposals because, if the Western
nominees are elected, they will not seek to maximize value for all of
ADT's shareholders. In short, your Board believes that Western is
attempting to leverage its 24.4% holding to impose an unfavorable
transaction on the Company and the rest of its shareholders.
ADT Is the Market Leader in the Electronic Security Business. The Tyco Merger
Will Build on that Strength
* ADT is the market leader in the electronic security services business in
North America and in the United Kingdom. In the United States, ADT is
more than three times the size of the next largest competitor in terms
of revenue. ADT believes that its electronic security services business
enjoys high margins, has substantial operating leverage and generates
substantial cash flow for re-investment in the business. At the end of
1996, ADT had recurring contractual payments of approximately $920
million from approximately 1.8 million customers.
* Since 1988, ADT's residential security system unit sales have
experienced growth at a compound annual rate in excess of 36%. ADT
provides electronic security and related services to more than one
million residential customers across North America, and the Company
believes that, in 1996, through its various channels of distribution,
ADT installed a number of new residential security systems that is
greater than the entire residential customer base of any of its
competitors.
* Separately, as part of its efforts to broaden its distribution system
and enhance its marketing strategies, the Company is pursuing partnering
opportunities with premier companies in a variety of industries,
including local and long distance communications providers, consumer
electronics manufacturers, software developers, newspaper and
entertainment companies, insurance underwriters and property-management
service providers. The Company has recently entered into partnering
arrangements with the following companies:
* AT&T -- one of the leading telecommunications companies in the
world;
* Radio Shack -- ADT systems are now available in approximately
4,500 retail stores where numerous potential customers are exposed
to ADT's products;
* USAA -- approximately 3 million USAA members have the opportunity
to lower their premiums through the ADT/USAA Home Security
Program; and
* HFS (through its Century 21, ERA and Coldwell Banker businesses)
-- ADT home security systems are now offered through a national
network of approximately 10,000 real estate offices.
* The Tyco Merger will combine the favorable growth prospects of ADT with
the strengths of Tyco's businesses. Your Board believes that Tyco's
fire protection business will complement in particular ADT's commercial
electronic security business and will permit the combined company to
provide opportunities to achieve substantial benefits for its
shareholders that might not otherwise be available.
The Tyco Meeting
On March 17, 1997, ADT and Tyco announced the Tyco Merger. In
connection with the Tyco Merger, ADT will be distributing to you a Joint Proxy
Statement/Prospectus describing the Tyco Merger in detail, the date of and the
proposals to be considered at the Tyco Meeting, and the reasons why your Board
recommends that you support the Tyco Merger. The Tyco Meeting is expected to
be held prior to the Western Meeting. However, the Western Meeting could be
held prior to the Tyco Meeting if the Tyco Meeting is delayed beyond July 8,
1997 or if a court orders ADT to hold the Western Meeting at an earlier date
which is prior to the Tyco Meeting.
Background
According to Amendment No. 9 to Western's Schedule 13D with
respect to ADT filed with the Securities and Exchange Commission (the "SEC")
on December 18, 1996 (together with earlier amendments, the "Western Schedule
13D"), Western is currently the beneficial owner of 38,287,111 Common Shares
(including 14,115 shares issuable upon exchange of 500 Liquid Yield
Option[Trademark] Notes ("LYONs")). As of March 24, 1997, this constituted
approximately 24.4% of the total number of Common Shares then issued and
outstanding.
Since Western began acquiring its Common Shares in early 1996,
direct contacts between ADT and Western have been limited and have not
included discussions of a business combination. Senior representatives of ADT
and Western have met on only one occasion, in early 1996. On that occasion,
ADT Chairman Michael Ashcroft and one other ADT director met with
representatives of Western to discuss possible joint marketing opportunities
relating to certain energy products. However, before substantive discussions
could commence on the feasibility of a joint marketing program, it was
essential to resolve the issues arising from the fact that Western is a
competitor of ADT in the security marketplace. No substantive proposals were
put forward by Western, and no further discussions on this topic were held.
In May 1996, Western's Chairman made one brief call to Mr. Ashcroft to attempt
to arrange a subsequent meeting. In that call, Western's Chairman mentioned
the possibility of a business combination with ADT. However, Western never
came forward with any proposal regarding any such business combination, and no
further meetings were held.
Western notified ADT, by letter dated April 2, 1996, of its
intention to vote its shares in opposition to the proposed amendment to ADT's
1993 Long Term Incentive Plan (the "Plan Amendment") at ADT's annual general
meeting (the "Annual Meeting") on April 11, 1996 and urged the Board to
consider withdrawing it from consideration at the Annual Meeting. The Board
did not withdraw the Plan Amendment, and ADT's shareholders duly approved it
at the Annual Meeting.
On July 1, 1996, ADT entered into an amalgamation agreement
with Republic Industries, Inc. ("Republic"), pursuant to which Republic was to
enter into an amalgamation with ADT (the "Republic Merger"). In connection
with the Republic Merger, ADT issued to Republic a share purchase warrant for
15,000,000 Common Shares (the "Republic Warrant"). On the same day, Michael
A. Ashcroft telephoned Western's Chairman to inform him of the proposed
Republic Merger. On July 12, 1996, the Western Schedule 13D was amended to
indicate that Western might determine to oppose the Republic Merger and might
choose to exercise its appraisal rights under Bermuda law, although no final
decision had yet been taken. On September 13, 1996, the Western Schedule 13D
was amended to indicate that Western had determined to oppose the proposed
Republic Merger. The termination of the proposed Republic Merger was
announced on September 30, 1996.
On December 18, 1996, Western notified ADT of its intention to
file with the SEC a preliminary prospectus for the Western Offer. On December
18, 1996, Western filed a notice with ADT to requisition a special general
meeting of ADT's shareholders to consider the Western Proposals. Western has
stated that the purpose of the Western Proposals is to facilitate consummation
of the Western Offer. Western has stated that its directors, if elected,
intend to eliminate the protections for shareholders contained in ADT's
Bye-Laws and ADT's Rights Agreement dated as of November 6, 1996, as amended
(the "Rights Plan"). The Board believes Western's attempt to complete its
offer in this manner is not in the best interests of ADT shareholders. On
January 6, 1997, the Board met to consider the Western Proposals and the
Western Offer and set the date for the Western Meeting for July 8, 1997. On
January 7, 1997, the Company sent the notice of the Western Meeting to the
holders of its Common Shares that is set forth as Schedule B hereto.
On January 27, 1997, Western issued a press release announcing
that on December 23, 1996, Western made its required filing under the U.S.
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), with regard to the Western Offer, and that on January 23, 1997, the
30-day waiting period required under the HSR Act had expired with no action
being taken by the antitrust authorities.
On February 7, 1997, Western and KCP&L issued a joint press
release announcing that the two companies had entered into an Agreement and
Plan of Merger (the "Western/KCP&L Merger Agreement") pursuant to which KCP&L
would merge with and into Western. Under the terms of the Western/KCP&L
Merger Agreement, subject to certain conditions, each share of KCP&L common
stock would be converted into a number of shares of Western common stock, and
Western would be the surviving corporation.
Pursuant to a request by Republic, on February 10, 1997, ADT
filed a registration statement with the SEC on Form S-3 registering, among
other shares, the 15,000,000 Common Shares to be issued under the Republic
Warrant. As of the date of this proxy statement, the registration statement
has not yet been declared effective by the SEC.
On February 27, 1997, the Board met to review and deliberate
on the terms of the Western Offer with its legal and financial advisors, as
well as to consider certain other items of business, but did not take any
action on the Western Offer. On March 2, 1997, the Board again met with its
legal and financial advisors and concluded that the Western Offer as of that
date was inadequate.
On March 3, 1997, Western issued a press release (the "March
3rd Press Release") in which it announced an intention to change the mix of
consideration payable pursuant to the Western Offer, but without changing the
maximum value of such consideration. Prior to the March 3rd Press Release,
Western, in its preliminary prospectus, had stated that it intended to
commence the Western Offer, upon the terms and subject to the conditions set
forth in the Western S-4 and in a related Letter of Transmittal, to exchange
$7.50 net in cash and a number of shares of Western common stock valued at a
maximum of $15 (depending on a pricing formula) for each of the Common Shares
validly tendered in the Western Offer. In the March 3rd Press Release,
Western announced that it intended to amend the Western Offer to increase the
cash portion of its offer to $10.00 per Common Share and to decrease the
number of shares of Western common stock so that the maximum value of the
shares of Western common stock exchangeable for each Common Share would be
$12.50. The March 3rd Press Release stated that based on the closing price of
Western's common stock on February 28, 1997, ADT shareholders would receive
$10.00 in cash plus 0.41322 of a share of Western common stock for each Common
Share pursuant to the Western Offer. The precise formula for determining the
number of shares of Western common stock to be exchanged for each Common Share
pursuant to the Western Offer was not set forth in the March 3rd Press
Release. However, the press release does state that ADT shareholders would
not receive more than 0.42017 of a share of Western common stock for each
Common Share.
On March 3, 1997, the Board met again with its legal and
financial advisors and unanimously concluded that the Western Offer, as
amended by the March 3rd Press Release, was inadequate. ADT filed a Schedule
14D-9 setting forth some of the factors the Board considered in reaching its
conclusion.
In order to implement the Board's original intentions in
adopting the Rights Plan, on March 2, 1997, the Board resolved to effect
certain changes to the Rights Plan as set forth in the First Amendment to
Rights Agreement, dated as of March 3, 1997 (the "Amendment"). The Amendment
limits the ability to redeem or revoke the rights issued under the Rights
Agreement (the "Rights") by, among other things, (i) amending the definition
of a continuing director on the Board (a "Continuing Director") to exclude
persons elected to the Board as a result of a proxy solicitation or similar
shareholder initiative if any participant in such initiative has stated (or a
majority of the Board has determined in good faith) that such participant (or
its affiliates or associates) intends to take, or may consider taking, any
action that would result in (a) that person becoming a person (other than ADT
or any employee benefit plan of ADT) that has acquired beneficial ownership of
15% or more of the Common Shares issued and outstanding (or, in the case of
any person that beneficially owned more than 15% of the Common Shares on
November 4, 1996, that person acquires more than such person owned as of such
date) or (b) a merger, consolidation, or sale of a majority of the assets or
voting power of the Company which causes the rights to be triggered and (ii)
expanding the circumstances in which supplements, deletions or amendments to
the Rights Plan must be approved by a majority of Continuing Directors. If
the Western Proposals were adopted so that the only members of the Board were
the Western nominees, there would be no Continuing Directors on the Board. As
a result of the Amendment, the Western nominees would be unable to amend the
Rights Plan or redeem the rights issued thereunder, which would negatively
affect the ability of Western to complete the Western Offer.
On March 17, 1997, ADT and Tyco announced the Tyco Merger.
On March 17, 1997, Western commenced the Western Offer and
stated that it had mailed the Western Prospectus and the Western Proxy to
holders of ADT Common Shares.
On March 21, 1997, ADT and Republic announced that Republic
through Triangle Corporation, a Delaware corporation and wholly owned
subsidiary of Republic ("Triangle") had exercised the Republic Warrant,
purchasing 15,000,000 Common Shares at $20 per share. The Common Shares
issued to Triangle as a result of the warrant exercise represent approximately
9.6 per cent of the enlarged outstanding share capital of ADT. Under the
terms of the Republic Warrant, the Chairman of ADT has been granted an
irrevocable proxy to vote, at any meeting of ADT's shareholders, the
15,000,000 Common Shares issued under the Republic Warrant, with respect to any
matter to be voted upon by ADT's shareholders. The proxy expires as to any
such Common Shares on the earlier of (i) September 27, 1998 and (ii) the date
such shares are no longer held by Republic or any of its affiliates or
nominees. Mr. Ashcroft, in his capacity as Chairman of the Board, has advised
ADT that he intends to vote the 15,000,000 Common Shares as directed by the
Board.
On March 28, 1997, the Board resolved, by unanimous written
consent, to extend the Distribution Date (as defined in the Rights Plan) for
the Rights until August 15, 1997 or such earlier date as may be determined by
the Board.
Certain Litigation
On December 18, 1996, Westar Capital, Inc. ("WCI"), a
subsidiary of Western, filed a complaint in the U.S. District Court for the
Southern District of Florida (the "Court") against the Company, the directors
of the Company and Republic. The complaint alleged that the Company and its
directors breached their fiduciary duties to WCI and the Company's other
shareholders (i) by issuing to Republic the Republic Warrant in connection
with the Republic Merger, (ii) by adopting the Rights Plan and (iii) by
holding shares of the Company in one of the Company's subsidiaries with the
intention of voting those shares as needed to entrench existing management.
The complaint sought a court order (i) declaring the Republic Warrant null and
void or preventing the Company and Republic from exercising their rights under
the Republic Warrant, (ii) directing the Company to redeem the Rights Plan,
and (iii) preventing the Company from voting the shares held by its
subsidiary. On December 23, 1996, the Court entered an order dismissing the
complaint without prejudice on the grounds that the complaint contained
inadequate and improper allegations relating to the Court's jurisdiction over
the case.
On December 27, 1996, WCI filed a second complaint with the
Court which contained modified allegations relating to the Court's
jurisdiction and identical substantive allegations as the prior complaint. On
January 3, 1997, WCI filed an amended complaint which, in addition to the
allegations made in the prior complaints, alleged that the Company and its
directors have attempted to interfere with WCI's voting rights by seeking
certain information from WCI pursuant to procedures established under the
Company's Bye-Laws. The amended complaint sought the same relief as the prior
complaints and also requested that the Court confirm WCI's voting rights.
On January 21, 1997, the Court granted WCI leave to file a
second amended complaint. The second amended complaint contained the same
allegations as the amended complaint and in addition alleged (i) that the
Company and its directors breached their fiduciary duties by setting a July 8,
1997 date for the Western Meeting, and (ii) that the Company and its directors
violated Section 14(d) of the U.S. Securities Exchange Act of 1934, as amended
(the "Exchange Act"), by making a recommendation to the Company's shareholders
regarding the tender offer without first making certain filings with the SEC.
WCI asked for a court order (i) enjoining the Company from holding the Western
Meeting on July 8, 1997, (ii) compelling the Company to hold the Western
Meeting on or before March 20, 1997, and (iii) declaring that the Company had
violated Section 14(d) and enjoining the Company from making any further
recommendations relating to the tender offer until the required SEC filings
are made.
On January 23, 1997, WCI filed a motion for a preliminary
injunction asking the Court to enjoin the Company from holding the Western
Meeting on July 8, 1997, and compelling the Company to hold the Western
Meeting on or before March 20, 1997. The Company and its directors have filed
papers in opposition to WCI's motion. On March 4, 1997, WCI filed a
supplemental brief in support of its motion for a preliminary injunction
representing that WCI is no longer seeking a Western Meeting on or before
March 20, 1997 on the grounds that such a meeting date would now be
impractical. In its supplemental brief, WCI requests that the meeting date be
set 30 days after its proxy materials for the Western Meeting are distributed.
The Company and its directors have responded to this supplemental motion,
arguing among other things that WCI's motion is moot due to the passage of
time and changes in circumstances. As of the date of this proxy statement,
the Court has not rendered any decision with respect to plaintiff's motion for
a preliminary injunction.
On January 27, 1997, the Company and its directors filed a
motion to dismiss the second amended complaint based on, among other things,
the Court's lack of personal jurisdiction over the Company and its directors
and for failure to state a claim upon which relief can be granted. On
February 21, 1997, the Court entered an order ruling that the second amended
complaint did not adequately plead personal jurisdiction over the ADT
defendants. On February 27, 1997, WCI filed a third amended complaint. The
third amended complaint contained the same allegations as the second amended
complaint and contained additional allegations relating to personal
jurisdiction.
On February 19, 1997, WCI filed a motion for an expedited trial
on its claims relating to the Republic Warrant and the shares of ADT held by
one of ADT's subsidiaries. WCI also requested that the Court enter an order
providing that it be given five days' notice before the Republic Warrant is
exercised. On March 12, 1997, the Court denied that motion.
On March 11, 1997, the Court granted WCI leave to file a fourth
amended complaint. The fourth amended complaint contains the same allegations
as those in the third amended complaint as well as additional allegations
relating to the Amendment. In addition to the relief previously requested,
the fourth amended complaint seeks judicial nullification of the Amendment and
a rescission of actions by ADT if shown that a subsidiary of ADT cast decisive
votes as a shareholder with respect to those actions.
On March 17, 1997, the Company and its directors filed a motion
to dismiss the fourth amended complaint based on, among other things, the
Court's lack of personal jurisdiction over the Company and its directors and
for failure to state a claim upon which relief can be granted. The Company
and the Board believe that the allegations in WCI's fourth amended complaint
are without merit and intend to vigorously defend against them.
On March 24, 1997, WCI filed a motion for a preliminary
injunction (i) preventing Republic from selling or transferring any of the
Common Shares issued upon the exercise of the Republic Warrant and (ii)
preventing the Chairman of ADT from exercising the proxy in relation to those
shares. The Company and the Board have yet to respond to this motion. The
Company and the Board believe that the motion is meritless and intend to
vigorously oppose it.
On December 26, 1996, Charles Gachot filed a complaint in the
Florida Circuit Court for the Fifteenth Judicial Circuit in Palm Beach County,
Florida against the Company, certain of its present and former directors,
Western and WCI. The complaint was brought on behalf of a class of all
shareholders of the Company and alleges that Western and WCI have breached
their fiduciary duties to the Company's shareholders by offering an inadequate
price for the outstanding Common Shares. The complaint seeks to enjoin
Western and WCI from acquiring the outstanding Common Shares. The complaint
also alleges that the Company and its directors have refused to negotiate with
Western and WCI and that the Republic Warrant and the Rights Plan are
improper. The complaint seeks unspecified monetary relief from all
defendants. The Company and the Board believe that the allegations in
Gachot's complaint against the Company and the directors are without merit and
intend to vigorously defend against them.
On February 7, 1997, ADT Operations, Inc. ("ADT Operations"), a
subsidiary of ADT, filed a complaint in the Supreme Court of the State of New
York, County of New York against The Chase Manhattan Bank, N.A. ("Chase").
The complaint states that Chase has been an important lender and financial
advisor to ADT Operations since 1993 and that, in the course of this business
relationship, ADT Operations has disclosed confidential business information
to Chase. The complaint asserts that ADT Operations and Chase expressly
agreed that Chase would not aid any third party in a hostile takeover bid for
ADT. The complaint alleges that Chase is currently aiding Western in its
attempt to take control of ADT and that Chase's actions constitute: (i) a
breach of an express agreement between Chase and ADT Operations; (ii) a breach
of the implied covenant of good faith that is part of the express agreement
between Chase and ADT Operations; and (iii) a breach of the fiduciary duties
that Chase owes to ADT Operations. The complaint further alleges that Chase
breached a confidentiality agreement with ADT Operations by providing Western
with confidential and proprietary information about ADT Operations and ADT and
by using such information in assessing whether to aid Western in Western's
hostile takeover bid. The complaint also alleges that Chase negligently
and/or fraudulently failed to disclose to ADT Operations that Chase was
advising Western regarding a possible hostile takeover bid for ADT. The
complaint seeks $50 million in monetary damages. The complaint also seeks to
enjoin Chase from advising, funding, or participating in Western's attempts to
take control of ADT and from disclosing any confidential information regarding
ADT Operations and ADT. On March 3, 1997, Chase filed a motion for dismissal
of ADT Operations' complaint or, alternatively, summary judgment. This motion
is scheduled to be heard on April 11, 1997.
On February 7, 1997, ADT Operations filed a motion for a
preliminary injunction, seeking to enjoin Chase from: (i) advising, funding,
or assisting Western in its efforts to take over ADT or participating in these
efforts; and (ii) using or disclosing any confidential information that ADT
Operations provided to Chase. In addition, ADT Operations has sought
expedited discovery on issues regarding the preliminary injunction. On
February 19, 1997, Chase filed papers in opposition to this motion. The
motion was argued before the Court on February 24, 1997 and is currently
pending. As a result of a hearing held on March 25, 1997, ADT was granted the
right to take three depositions and obtain certain documents from Chase.
On March 11, 1997, Crandon Capital Partners ("CCP") filed a
complaint in the Florida Circuit Court for the Fifteenth Judicial Circuit in
Palm Beach County, Florida against the Company, certain of its current and
former directors, and Republic. The complaint was brought by CCP in a
derivative capacity on behalf of ADT. The complaint alleges that ADT's
directors breached their fiduciary duties and wasted corporate assets in
connection with (i) the granting of options to certain officers of ADT in
1996, (ii) the issuance of the Republic Warrant, (iii) the implementation of
the Rights Plan and (iv) the harassment and attempted disenfranchisement of
WCI. The complaint seeks an unspecified amount of damages and 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. The Company and the Board believe that the allegations in the
complaint brought by CCP are without merit and intend to vigorously defend
against them.
Matters to Be Voted upon at the Western Meeting
The Western Proposals
Western has presented the following resolutions for consideration at the
Western Meeting:
Proposal 1. The Western Removal Proposal.
1.RESOLVED, that subject to Resolutions 2 and 3 below being
passed all of the present members of the Board of Directors of the Company
(the "Board") and any other person who may be a director of the Company at the
time of the Meeting be and are hereby removed from the office of director.
Proposal 2. The Western Reduction Proposal.
2.RESOLVED, FURTHER, that the number of seats on the Board from
and after the date of this resolution shall be two (2).
Proposal 3. The Western Election Proposal.
3.RESOLVED, FINALLY, that the directors of the Company from and
after the date of this resolution until the next annual general meeting of the
Company or until their successors have been duly elected shall be Steven L.
Kitchen and Steven A. Millstein, or if either is unable to serve as a director
of the Company due to death, disability or otherwise, any other person
designated as a director nominee by Westar Capital, Inc.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" EACH OF THE WESTERN PROPOSALS.
General
Outstanding Voting Shares
Notice of the Western Meeting has been sent to all holders of
record of the Common Shares at the close of business on January 3, 1997, which
has been fixed as the record date for notice of the Western Meeting. Except
as provided in the Bye-Laws of the Company, all holders of record of the
Common Shares on the date of the Western Meeting will be entitled to attend,
and vote at, the Western Meeting. If the Tyco Merger has been consummated
prior to the date of the Western Meeting, all holders of record of Common
Shares issued in connection with the Tyco Merger will also, except as
aforesaid, be entitled to attend, and vote at, the Western Meeting.
Outstanding and entitled to vote, as of March 24, 1997, were 156,688,697
Common Shares, including 3,182,787 Common Shares owned by a subsidiary of the
Company and 15,000,000 Common Shares beneficially owned by Republic which are
subject to a proxy in favor of the Chairman of ADT. Except as provided in the
Company's Bye-Laws, all of such Common Shares are entitled to vote at the
Western Meeting and, on a poll, each Common Share is entitled to one vote on
each matter.
Vote Required
Common Shares will vote together as a single class with respect
to the Western Proposals. The affirmative vote of the majority of Common
Shares represented and voting at the Western Meeting is required for the
approval of each proposal to be put before the ADT shareholders at the Western
Meeting.
Pursuant to Bermuda law, only votes cast for a matter
constitute affirmative votes. Votes withheld, broker voted or abstaining from
voting are counted for quorum purposes only. At the Western Meeting not less
than two holders of Common Shares present 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 Western Meeting, the
Western Meeting shall be dissolved.
Voting Your Proxy
Your Board is soliciting proxies for the Western Meeting
AGAINST the Western Proposals.
Shares represented by such properly executed proxies will be
voted as directed therein (unless the proxy receives instructions from the
appointing shareholder altering the way in which the proxy is to vote, in
which case, the proxy will vote in accordance with the altered instructions).
In the absence of direction from a shareholder, proxies held by Michael A.
Ashcroft, Stephen J. Ruzika or John D. Campbell will be voted AGAINST the
Western Proposals. You may revoke your proxy by giving written notice of
revocation to the Secretary of the Company at any time before it is voted, by
submitting a later-dated form of proxy or by attending the Western Meeting and
voting your shares in person. A later-dated proxy, although effective to
revoke an earlier proxy if received any time before the Western Meeting, will
only be effective as a proxy if received by the Registrars of the Company at
least 24 hours before the time of the Western Meeting.
A form of proxy is enclosed with this document. You are
requested to complete and return this as soon as possible. In order to be
valid, a form of proxy for the Western Meeting must be completed in accordance
with the instructions on it and received by the times and dates set forth
below at any of the offices of the Company's Registrar and agents, whose names
and addresses are set out below:
In the United States, to the U.S. agent:
by hand delivery by 8:00 a.m. on July 7, 1997 (Eastern Standard
Time) at:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, New York 10005
by mail to be received by 8:00 a.m. on July 7, 1997 (Eastern
Standard Time) to:
D.F. King & Co., Inc.
Wall Street Station
P.O. Box 411
New York, New York 10269-0069
in each case for delivery to the Registrars of the Company.
In the United Kingdom, to the U.K. agent:
by hand delivery or by mail, in each case, to be received by 12:00
(noon) on July 7, 1997 (British Summer Time) at:
D.F. King (Europe) Limited
Royex House, Aldermanbury Square
London EC2V 7HR
United Kingdom
for delivery to the Registrars of the Company.
In Bermuda:
to the Registrar, by 9:00 a.m. on July 7, 1997 (Bermuda Time) by
hand or mail at:
AS&K Services Limited
Cedar House
P.O. Box HM 1179
41 Cedar Avenue
Hamilton HM EX
Bermuda
You may also return your proxy to the following offices of the Company's
Registrars in the United States and the United Kingdom:
In the United States, to the U.S. Registrars:
Citibank, N.A.
[address]
In the United Kingdom, to the U.K. Registrars:
Citibank, N.A.
[address]
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, with
respect to beneficial ownership (determined in accordance with Rule 13d-3
under the Exchange Act) of Common Shares by any person known by ADT to
beneficially own more than five per cent of the outstanding Common Shares (i)
as at December 31, 1996 by FMR Corp. ("FMR"); (ii) as at March 17, 1996 by
WCI; (iii) as at March 21, 1997 by Republic and (iv) as at March 24, 1997 by
(a) all directors of ADT, (b) the named directors and officers of ADT,
including three executive officers of subsidiaries of ADT, and (c) all
directors and executive officers of ADT as a group. An asterisk indicates
ownership of less than one per cent of outstanding Common Shares.
<TABLE>
<CAPTION>
Number of
Name of Beneficial Owner Common Shares % of
or Identity of Group Beneficially Owned(1),(2) Class(3)
- ---------------------------------------------------------------------- ------------------------- --------
<S> <C> <C>
Westar Capital, Inc.(4) 38,287,111 24.4%
818 Kansas Avenue
Topeka, Kansas 66601
FMR Corp.(5) 8,416,744 5.4%
82 Devonshire Street
Boston, Massachusetts 02109
Republic Industries, Inc.(6) 15,000,000 9.8%
450 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
M.A. Ashcroft(6)(7) 11,525,718 7.0%
J.E. Danneberg 102 *
R.A. Gross 2,000 *
A.B. Henderson 621 *
R.G. Lakey 25,000 *
J.S. Pasman, Jr. 2,000 *
M.J. Richardson 327,837 *
S.J. Ruzika 1,307,407 *
W.P. Slusser 2,800 *
W.W. Stinson 3,010 *
R.S. Troubh 2,500 *
All directors and executive officers as a group, 11 persons(8) 13,198,995 8.0%
<FN>
- ------------
(1) Includes Common Shares which may be acquired upon exercise of the
following number of options to purchase Common Shares from ADT
exercisable on or within 60 days of March 24, 1997 held by the
following persons: M.A. Ashcroft, 10,150,000 (excluding 15,000,000
Common Shares owned by Republic through Triangle for which Mr.
Ashcroft as Chairman of ADT presently holds a proxy as described in
footnote 6 but as to which Mr. Ashcroft disclaims beneficial
ownership); R.A. Gross, nil; R.G. Lakey, 25,000; M.J. Richardson,
315,000 and S.J. Ruzika, 1,291,665.
(2) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any Common Shares which such person has
the right to acquire on or within 60 days after March 24, 1997. For
purposes of computing the percentage of outstanding Common Shares held
by each person or group of persons named above, any security which such
person or persons has or have the right to acquire on or within 60 days
after March 24, 1997 is deemed to be outstanding, but is not deemed to
be outstanding for the purpose of computing the percentage ownership of
any other person.
(3) Based upon Common Shares outstanding on March 24, 1997, but excluding
3,182,787 Common Shares owned by a subsidiary of ADT.
(4) ADT has received an Amendment No. 10 to Schedule 13D dated March 17,
1997 filed with the SEC by WCI, a wholly owned subsidiary of Western, in
respect of ownership of 38,287,111 Common Shares. ADT has not attempted
to verify independently any of the information contained in the Schedule
13D.
(5) ADT has received an Amendment No. 4 to Schedule 13G dated February 14,
1997 filed with the SEC by FMR in respect of ownership of 8,416,744 of
Common Shares at December 31, 1996 by accounts under the discretionary
investment management of its wholly owned subsidiaries Fidelity
Management Research Company and Fidelity Management Trust Company
(together "FMR Corp."). As of December 31, 1996, FMR Corp. exercised
sole voting power with respect to 112,714 Common Shares and sole
dispositive power with respect to 8,416,744 Common Shares. ADT has not
attempted to independently verify any of the information contained in
the Schedule 13G.
(6) The Company has received Amendment No. 2 to Schedule 13D dated March 26,
1997, describing that on March 21, 1997, Republic, through Triangle,
purchased 15,000,000 Common Shares by exercise of the Republic Warrant.
Under the terms of the Republic Warrant, Triangle has granted the Chairman
of ADT an irrevocable proxy to vote, at any meeting of ADT's shareholders,
the 15,000,000 Common Shares issued under the Republic Warrant, with
respect to any matter which shall be voted upon by ADT's shareholders.
The proxy expires as to any such Common Shares on the earlier of (i)
September 27, 1998 and (ii) the date such shares are no longer held by
Republic or any of its affiliates or nominees. Mr. Ashcroft, in his
capacity as Chairman of the Board, has advised ADT that he intends to
vote the 15,000,000 Common Shares as directed by the Board. Mr.
Ashcroft disclaims beneficial ownership of the Common Shares held by
Triangle.
(7) The number of Common Shares beneficially owned by Mr. Ashcroft includes
718 Common Shares owned by Mr. Ashcroft's wife.
(8) The address for these officers and directors is the address of ADT.
</TABLE>
Directors and Executive Officers
Directors of the Company
Set forth below are the names, ages, positions and certain
other information concerning the current directors and executive officers of
the Company and three executive officers of subsidiaries of the Company as at
December 31, 1996.
<TABLE>
<CAPTION>
Name Age Position with Company
- -------------------------- ---- ------------------------------------------------------------
<S> <C> <C>
Michael A. Ashcroft 50 Chairman of the Board; Chief Executive Officer
John E. Danneberg 50 Director
Raymond A. Gross 47 Senior Vice President of ADT Security Services, Inc.
Alan B. Henderson 63 Director
Ronnie G. Lakey 42 Director of ADT (UK) Holdings PLC
James S. Pasman, Jr. 66 Director
Michael J. Richardson 60 President and Chief Executive Officer of ADT Automotive, Inc.
Stephen J. Ruzika 41 Chief Financial Officer; Executive Vice President; Director
W. Peter Slusser 67 Director
William W. Stinson 63 Director
Raymond S. Troubh 70 Director
</TABLE>
- ------------
Mr. Ashcroft has been Chairman and Chief Executive Officer of
the Company since 1984 and is Chairman of the Executive Committee. He was
Chairman and Chief Executive Officer of the Company's predecessor company,
Hawley Group PLC, from 1977 to 1984. He is the non-executive Chairman of BHI
Corporation.
Mr. Danneberg has been a director of the Company since December
1991 and was previously a director of the Company from 1984 to June 1991. He
was the President of Foliage Plant Systems, Inc., an interior landscape
contractor, from 1988 to October 1995.
Mr. Gross has been a Senior Vice President of ADT Security
Services, Inc. since March 1, 1996. From August 1993, he was President and
Chief Executive Officer of Alert Centre, Inc., which was acquired by ADT in
December 1995, and prior to that he was President/General Manager of Cellular
One of Ohio from November 1988.
Mr. Henderson has been a director of the Company since 1992 and
is a member of the Audit and Remuneration Committees. He is Chairman of
Ranger Oil (UK) Limited, an oil exploration and production company, and has
been a director of Ranger Oil (UK) Limited since 1972. He is also Chairman of
Abtrust Emerging Economies Investment Trust Plc and Abtrust New Thai Investment
Trust Plc, and is a director of Abtrust New Dawn Investment Trust Plc, Energy
Capital Investment Company PLC and Greenfriar Investment Company PLC.
Mr. Lakey has been a director of ADT (UK) Holdings PLC since
its incorporation in 1996. He has operational responsibility for the
Company's electronic security services operations in Canada and Europe. He
has held various positions with the Company since joining in 1987.
Mr. Pasman has been a director of the Company since 1992 and is
a member of the Audit and Remuneration Committees. He was President and Chief
Operating Officer of National Intergroup, Inc., an industrial holding company,
from 1989 to 1991 and was Chairman and Chief Executive Officer of Kaiser
Aluminum and Chemical Corp., an aluminum and chemical company, from 1987 to
1989. He is a director of BEA Income Fund, Inc., BEA Strategic Income Fund,
Inc. and BT Insurance Funds Trust.
Mr. Richardson has been since 1982 the President and Chief
Executive Officer of ADT Automotive, Inc., which supervises ADT's vehicle
auction services business.
Mr. Ruzika has been a director and Executive Vice President of
the Company since 1987, has been Chief Financial Officer since 1989 and
President of ADT Security Services, Inc. since 1996. He is a member of the
Executive Committee. He was previously Chief Financial Officer of the
Company's United States operations. He is also a non-executive director of
BHI Corporation.
Mr. Slusser has been a director of the Company since 1992 and
is a member of the Audit and Remuneration Committees. He has been the
President of Slusser Associates, Inc., a private investment banking firm in
New York City, since 1988 and was previously a managing director and head of
mergers and acquisitions at PaineWebber Incorporated. He is a director of
Ampex Corporation, a leading producer of high performance television and data
storage recording systems.
Mr. Stinson has been a director of the Company since 1991. He
retired as Chairman and Chief Executive Officer of Canadian Pacific Limited in
1996 after serving as Chief Executive Officer for 11 years. He remains a
director of that company. He is also a director of Laidlaw, Inc., Western
Star Trucks Inc., Sun Life Assurance Company of Canada, and a number of other
corporations.
Mr. Troubh has been a director of the Company since 1991 and is
a member of the Audit and Remuneration Committees. He has been an independent
financial consultant since 1974. He is a director of America West Airlines,
Inc., ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company, Diamond
Offshore Drilling, Inc., Foundation Health Corporation, General American
Investors Company, Inc., Olsten Corporation, Petrie Stores Corporation, Time
Warner Inc., Triarc Companies, Inc. and WHX Corporation.
Each director is currently serving a term which expires at the
next annual general meeting. Under the Bye-Laws of the Company, no person
other than a director retiring at a general meeting of the Company shall,
unless recommended by the directors, be eligible for election to the office of
director unless, between six and 28 days before the meeting date, the
Secretary of the Company has been given, by a shareholder of the Company
(other than the person to be proposed) entitled to attend and vote at the
meeting for which such notice is given, written notice of his intention to
propose such person for election and also written notice, signed by the person
to be proposed, of his willingness to be elected. A director may hold any
other office or position of profit under the Company (other than the office of
Auditor) in conjunction with this office of director for such period and on
such terms as the Company may from time to time determine in general meeting.
Meetings and Committees of the Board
During 1996, there were eleven meetings of the Board. All
directors attended at least 75 per cent of the meetings of the Board and of
the committees of which they were members.
The Board has several committees, including an Audit Committee
and a Remuneration Committee. The Audit Committee, formed in 1991, and the
Remuneration Committee, formed in 1992, each consist entirely of independent
directors who are Messrs. Henderson, Pasman, Slusser and Troubh. During 1996,
there were four meetings of the Audit Committee and four meetings of the
Remuneration Committee. The function of the Audit Committee is to review the
services performed by the Company's independent accountants and to review and
act or report to the Board with respect to the scope of audit procedures and
accounting practices. The function of the Remuneration Committee is to review
and approve compensation and other employment benefits afforded certain
executive officers. The Company has no standing nominating committee.
Compensation of Directors
Directors who are not employees of the Company are paid an
annual director's fee of $25,000 each and are reimbursed for reasonable and
customary travel and other expenses incurred in performing their duties.
In addition, Messrs. Henderson, Pasman, Slusser and Troubh are each paid
an annual sum of $15,000 for their services on the Audit and Remuneration
Committees.
Directors of Tyco
The merger agreement entered into by ADT and Tyco in
connection with the Tyco Merger provides that ADT shareholders will be
asked at the Tyco Meeting to vote to increase the number of directors on
the Board to eleven, to remove all but three of the current members of the
Board and to elect the eight current directors of Tyco listed below to the
board of directors of the combined company effective at the effective time
of the Tyco Merger. If the Tyco Meeting is held prior to the Western
Meeting and this proposal is approved at the Tyco Meeting by the requisite
vote of ADT shareholders, the directors of Tyco listed below will become
directors of ADT. In that event, the Western Removal Proposal will be to
remove all eleven of the then current members of the Board, including the
three current members of the Board and the eight current directors of Tyco.
Set forth below are the names and ages of the eight current
directors of Tyco as of ________, 1997, each such person's principal
occupation or employment during the past five years, and any directorships
held by such person in any other company with a class of securities
registered under the Securities Exchange Act of 1934, as amended. None of
these individuals currently owns any Common Shares.
<TABLE>
<CAPTION>
Name Age Position with Company
- -------------------- --- -----------------------------------------------------------------
<S> <C> <C>
L. Dennis Kozlowski 50 Chairman of the Board of Tyco (January 1993--present); Chief
Executive Officer of Tyco (July 1992--present); President of the
Tyco (December 1989--present); President, Grinnell Corporation
(January 1984--present); Director, Thiokol Corp., (aerospace and
defense products) (August 1993--present); Director, Applied Power
Inc. (control products) (July 1994--present); Director, Raytheon
Company (electronic systems and equipment) June 1995--present);
Director, RJR Nabisco Holdings Corp. June 1996--present).
Joshua M. Berman 58 Counsel to Kramer, Levin, Naftalis & Frankel (counselors at law)
(April 1985--present); Secretary of Tyco.
Richard S. Bodman 58 Managing General Partner, AT&T Ventures LLC (May
1996--present); Senior Vice President, Corporate Strategy and
Development, AT&T Corporation (communications) (August
1990--May 1996); Director, Reed Elsevier, plc (publishing) (June
1996--present); Director, Lin Television (broadcasting) (May
1996--present); Director, National Housing Partnerships Inc. (real
estate) (August--present).
John F. Fort, III 54 Chairman of the Board of Tyco (1982--December 1992); Chief
Executive Officer of Tyco (1982--June 1992); Director, Dover
Corporation (diversified manufacturer) (November 1989--present);
Director, Roper Industries (diversified products) (December
1995--present).
Stephen W. Foss 54 Chairman, President and Chief Executive Officer, Foss
Manufacturing Company Inc. (manufacturer of non-woven fabrics)
(for more than five years); Director, Ameron International
(diversified manufacturer) (1994--present).
Richard A. Gilleland 52 Director, DePuy International (medical products) (July
1996--present); President and Chief Executive Officer, AMSCO
International, Inc. (infection control products) (July 1995--July 1996);
Senior Vice President of Tyco (October 1994--July 1995); Chairman,
President and Chief Executive Officer, The Kendall Company (July
1990--July 1995); Director, Remington Arms Company, Inc.
(firearms and ammunition) (March 1994--present); Director,
Physicians Resource Group (physician practice management services)
(June 1995--present).
Philip M. Hampton 63 Co-Managing Director, R.H. Arnold & Co. (investment bank) (April
1997--present); Chairman of the Board, Metzler Corporation
(investment bank) (October 1989--March 1997); Director and Vice
Chairman (Retired), Bankers Trust New York Corporation
(1986--1989).
Frank E. Walsh, Jr. 55 Chairman, Sandyhill Foundation (charitable organization) (August
1996--present); Chairman, Wesray Capital Corporation (private
investment firm) (October 1989--January 1996); Director, Outlet
Communications, Inc. (broadcasting) (1986--1996).
</TABLE>
Executive Compensation
Summary Compensation Table
Shown below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal
years ended December 31, 1996, 1995 and 1994, of those persons who were, at
December 31, 1996 (i) the Chief Executive Officer and (ii) the other four most
highly compensated executive officers of the Company, including three
executive officers of a subsidiaries of the Company (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation(1) Awards
----------------------------------- ---------------
Securities
Underlying Stock All Other
Name and principal position Year Salary Bonus Options (#) Compensation
- --------------------------- ---- ---------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Michael A. Ashcroft(2) 1996 $1,143,844 $2,344,880 5,000,000 $1,330,380(3)
Chairman of the Board; 1995 $1,089,375 $2,233,219 1,500,000 $1,921,939
Chief Executive Officer 1994 $1,037,500 $1,945,313 750,000 $783,403
Raymond A. Gross 1996 $183,353(4) $82,500 100,000 -0-
Senior Vice President of 1995 -0- -0- -0- -0-
ADT Security Services, Inc. 1994 -0- -0- -0- -0-
Ronnie G. Lakey 1996 $248,962 $125,000 100,000 $27,020(5)
Director of ADT (UK) 1995 $195,866 $140,000 20,000 $14,822
Holdings PLC 1994 $188,827 $135,000 25,000 $14,138
Michael J. Richardson(5) 1996 $335,000 $222,705 40,000 $6,461(7)
Chief Executive Officer of 1995 $314,000 $145,245 50,000 $6,461
ADT Automotive, Inc. 1994 $300,000 $115,000 45,000 $6,480
Stephen J. Ruzika(7) 1996 $686,306 $1,100,000(9) 208,333 $40,323(10)
Chief Financial Officer; 1995 $653,625 $250,000 500,000 $37,432
Executive Vice President; 1994 $622,500 $200,000 250,000 $35,639
Director
<FN>
- ------------
(1) While officers enjoy certain perquisites, such perquisites did not exceed
the lesser of $50,000 or 10 per cent of each officer's salary and bonus.
Except as set forth below under "Employment Contracts, Termination of
Employment and Change in Control Arrangements", a change in control of the
Company does not of itself require the payment of any moneys to any of the
Named Officers. However, such an event does accelerate the vesting of
certain pension rights and the exercisability of certain stock options.
(2) The salary, bonus and all other compensation shown in respect of 1994 and
1995 represent Mr. Ashcroft's entitlement to those amounts. Mr. Ashcroft
utilized $2,500,000 of the compensation due to him for 1995, being the
whole of his bonus entitlement of $2,233,219 and $266,781 of his other
compensation to subscribe for options, at the rate of $2.50 per option, to
subscribe for Common Shares. Mr. Ashcroft also utilized $2,500,000 of the
compensation due to him for 1994, being the whole of his bonus entitlement
of $1,945,313 and $554,687 of his other compensation entitlement to
subscribe for these options.
(3) The other compensation due to Mr. Ashcroft in respect of 1996 represents
the US dollar equivalent of Pound Sterling851,344 being an amount in lieu
of providing Mr. Ashcroft with retirement and death benefits under a
defined pension plan. The amounts in respect of 1995 and 1994, and which
are referred to in note (2) above, were the equivalents of Pound
Sterling1,217,341 and Pound Sterling511,126, respectively.
(4) Represents salary since joining ADT Security Services, Inc. in March 1996.
Mr. Gross's annualized salary for 1996 was $220,000.
(5) Represents $27,020, $14,822 and $14,138 for the amount contributed to Mr.
Lakey's retirement income plan for 1996, 1995 and 1994, respectively.
(6) The salary amount shown for 1996 represents Mr. Richardson's entitlement
to salary in the year. Prior to becoming entitled to receive certain
salary, however, Mr. Richardson elected to receive options at the rate of
$2.50 per option, to subscribe for Common Shares at an exercise price of
$8.625 per share, in lieu of receiving $69,444, $83,333 and $97,222 in
salary in 1996, 1995 and 1994, respectively.
(7) Represents $4,500 contributed for 1996, 1995 and 1994 to a defined
contribution 401(k) pension benefit plan, and $1,961, $1,961 and $1,980 for
1996, 1995 and 1994, respectively, which is the aggregate incremental cost
to the Company of providing Mr. Richardson with enhanced group term life
insurance benefits.
(8) The salary amount shown for 1996 represents Mr. Ruzika's entitlement to
salary in the year. Prior to becoming entitled to receive certain salary,
however, Mr. Ruzika elected to receive options at the rate of $2.50 per
option, to subscribe for Common Shares at an exercise price of $8.625 per
share, in lieu of receiving $80,136, $104,167 and $128,198 in salary in
1996, 1995 and 1994, respectively.
(9) Mr. Ruzika earned a bonus for 1996 of $1,100,000 (1995 - $250,000) under a
bonus arrangement by which payments are related directly to the performance
of the Common Share price.
(10) Represents $37,639, $35,777 and $34,003 contributed to Mr. Ruzika's
retirement income plan in 1996, 1995 and 1994, respectively, and
$2,684, $1,655 and $1,636 for 1996, 1995 and 1994, respectively, which
is the estimated aggregate incremental cost to the Company of
providing Mr. Ruzika with supplemental term life insurance.
</TABLE>
Option Grants in Last Fiscal Year
Shown below are all grants of share options to the Named
Officers during the fiscal year ended December 31, 1996. The following table
shows, along with certain information, hypothetical realizable values of share
options granted for the last fiscal year, at assumed rates of cumulative share
price appreciation over the ten-year life of such options. These assumed
rates of appreciation are set by the rules of the SEC and are not intended to
forecast appreciation of the price of the Common Shares. These hypothetical
values have not been discounted to reflect their present values.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Share Price Appreciation
Individual Grants for Option Term(2)
------------------------------------------------------------ ----------------------------
% of Total Exercise
Options Granted or
Options to Employees Base Price
Name Granted(1) in Fiscal Year ($/share) Expiration Date 5% 10%
- ---------------------- ---------- --------------- ---------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft(2) 5,000,000 78.3% $15.00 Aug 4, 2003 $30,968,000 $74,713,000
Raymond A. Gross 100,000 1.6% $16.50 May 6, 2006 $1,017,000 $2,597,000
Ronnie G. Lakey 100,000 1.6% $16.50 May 6, 2006 $1,017,000 $2,597,000
Michael J. Richardson 40,000 0.6% $16.50 May 6, 2006 $407,000 $1,039,000
Stephen J. Ruzika(2) 208,333 3.3% $15.00 April 29, 2004 $1,452,000 $3,567,000
<FN>
- -------------
(1) The options granted to Mr. Ashcroft and Mr. Ruzika represent the net
increase in the number of options which were received by Mr. Ashcroft
and Mr Ruzika in connection with an amendment to a previously granted
option on 3,000,000 and 125,000 Common Shares, respectively. At the
same time as the number of such options was increased, the exercise
price was also increased from $8.625 to $15.00. All the other terms
and conditions of the options, including the expiry dates, remained
unchanged. All of these options are currently exercisable.
Of the options granted to Mr. Gross, Mr. Lakey and Mr. Richardson, 50 per
cent are exercisable after three years from the date of grant, 25 per cent
are exercisable after four years from the date of grant, 25 per cent are
exercisable after four years from the date of grant and 25 per cent are
exercisable after five years from the date of grant. It is currently
intended that all such options will become immediately exercisable upon
consummation of the Tyco Merger.
(2) Gains are reported net of the option exercise price but before taxes
associated with exercise. These amounts represent certain assumed
rates of appreciation only. Actual gains, if any, on option exercises
are dependent on the future price performance of the Common Shares as
well as the option holders' continued employment through the vesting
period. The potential realizable values reflected in this table may
not necessarily be achieved.
</TABLE>
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Shown below is information with respect to aggregate option
exercises by the Named Officers in the fiscal year ended December 31, 1996 and
with respect to unexercised options to purchase Common Shares granted in
fiscal 1996 and prior years to the Named Officers and held by them at December
31, 1996.
<TABLE>
<CAPTION> Value of Unexercised
Number of Unexercised In-the-Money Options
Shares Acquired on Value Realized on Options at Fiscal Year End at Fiscal Year End(1)(2)
Exercise of Options Exercise of Option ---------------------------- ---------------------------
Name in Fiscal Year in Fiscal Year Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft 825,000 $6,626,250 9,700,000 1,550,000 $78,437,190 $17,493,125
Raymond A. Gross -0- -0- -0- 100,000 -0- $637,500
Ronnie G. Lakey 32,000 $256,016 15,000 145,000 $208,125 $1,209,375
Michael J. Richardson 45,000 $318,125 270,000 135,000 $3,496,750 $1,441,875
Stephen J. Ruzika 12,000 $54,900 1,141,663 516,670 $12,951,731 $5,831,080
<FN>
- ------------
(1) Based on the closing price of $22.875 per Common Share on December 31,
1996.
(2) Messrs. Ashcroft, Richardson and Ruzika have been granted certain options
for which they have paid a subscription price of $2.50 per option.
Accordingly, for the purpose of valuing these options, $2.50 has been added
to the relevant exercise prices.
</TABLE>
Certain Defined Benefit Plans
The Company does not maintain any defined benefit or actuarial
retirement plans ("pension plans"). However, Mr. Lakey, Mr. Richardson and Mr.
Ruzika participate in pension plans that are maintained by indirect, wholly
owned subsidiaries of the Company. Certain information is set forth below
regarding the pension plans in which Mr. Lakey, Mr. Richardson and Mr. Ruzika,
as well as other employees of the Company's subsidiaries, participate.
Mr. Richardson is a participant in the ADT Pension Plan
maintained by ADT Group PLC ("ADT Group"). Mr. Richardson is the only Named
Officer who participates in the ADT Group's Pension Plan (the "ADT Group
Plan"). The ADT Group Plan provides Mr. Richardson an annual benefit payable
for life beginning at age 60. The annual benefit is equal to 66.7 per cent of
base salary for the three years of the most recent ten years prior to
retirement that produce the highest average. Mr. Richardson's annual benefit
payable at age 60 for life is Pound Sterling146,095. Since Mr. Richardson
has already attained age 60, the benefit payable to him upon his actual
retirement will be adjusted based upon his actual retirement date. Benefits
payable under the ADT Group Plan are not offset by Social Security benefits.
ADT, Inc. maintains a supplemental executive retirement plan
(the "ADT SERP"). Mr. Lakey and Mr. Ruzika are the only Named Officers who
participate in the ADT SERP. Benefits for Mr. Ruzika under the ADT SERP are
also supplemented under a Supplemental Benefit Agreement between Mr. Ruzika
and ADT Management Services Limited (the "Supplemental Benefit Agreement").
The ADT SERP provides benefits to Mr. Lakey for a total of 20
years, beginning at age 60. This annual benefit is equal to 60 per cent of
Mr. Lakey's base salary for the three consecutive years that produce the
highest average. This benefit is reduced by the value of any benefits derived
from employer contributions under any other retirement plan maintained by ADT,
Inc. or its affiliates. Mr. Lakey's estimated annual benefit payable at age
60 for a total of 20 years, net of the estimated offset attributable to
employer contributions under certain defined contribution plans, is $30,764.
The estimated offset is based on the assumption that Mr. Lakey will have 27
years of service at age 60. Benefits are not offset by Social Security
benefits.
The ADT SERP and Supplemental Benefit Agreement together
provide benefits payable to Mr. Ruzika for a total of 20 years beginning at
age 55. This annual benefit is equal to 65 per cent of base salary and
bonuses for the three consecutive years that produce the highest average.
Effective for benefits accrued after December 31, 1994, the benefit is
calculated using base salary including, for this purpose, the purchase price
of any options to purchase the Company's shares received in lieu of base
salary. This benefit is reduced by the value of any benefits derived from
employer contributions under any other retirement plan maintained by ADT, Inc.
or its affiliates.
Mr. Ruzika's estimated annual benefit payable at age 55 for a
total of 20 years, net of the estimated offset attributable to employer
contributions under certain defined contribution plans, is $361,802. The
estimated offset is based upon the assumption that Mr. Ruzika will have 28
years of service at age 55. Benefits are not offset by Social Security
benefits.
For a discussion of certain change of control provisions in the
ADT SERP, see "--Employment Contracts, Termination of Employment and Change in
Control Arrangements."
Compliance with Reporting Requirements
The Company believes that, during 1996, all filing requirements
under Section 16(a) of the Exchange Act applicable to its officers, directors
and beneficial owners of more than 10 per cent of equity securities were
complied with on a timely basis.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Company has entered into a written employment agreement
with Mr. Ashcroft, dated as of May 8, 1993. An amendment to the agreement was
approved on November 4, 1996, which provides that Mr. Ashcroft shall serve as
Chairman of the Board and Chief Executive Officer until March 31, 2000,
subject to renewal for additional two-year terms thereafter. Mr. Ashcroft's
initial base salary was $1,000,000 per annum subject to annual review and
adjustment by the Board but may only be reduced by a maximum of 15 per cent
during the term of the agreement without Mr. Ashcroft's consent. During 1996,
Mr. Ashcroft's base salary was increased to $1,157,625 per annum. Mr.
Ashcroft is also eligible for annual bonus payments based upon an
earnings-per-share target for the Common Shares set each year, subject to a
maximum bonus of $4,000,000. The maximum bonus is payable upon attaining
117.5 per cent of the targeted earnings per share. As a term of the contract,
Mr. Ashcroft was granted options to purchase 1,000,000 Common Shares under the
ADT 1993 Long Term Incentive Plan, with 50 per cent of such options
exercisable at market value on the date of grant, as defined, 25 per cent
exercisable at 110 per cent of market value, and 25 per cent exercisable at
120 per cent of market value, vesting in equal annual installments over a
three-year period commencing one year from the date of grant and exercisable
over a ten-year period. The Company will make annual payments to Mr. Ashcroft
calculated to provide him with retirement and death benefits no less favorable
than if he were a member of ADT Group Plan. Such annual payments will not be
less than $450,000. The Company may terminate the agreement upon Mr.
Ashcroft's death, when Mr. Ashcroft attains the age of 60, if Mr. Ashcroft is
unable to perform his duties for 180 days due to ill heath, accident or
otherwise, if Mr. Ashcroft fails to discharge his duties or engages in conduct
that is materially injurious to the Company, or if Mr. Ashcroft willfully and
continually commits a material breach of the agreement. Mr. Ashcroft may
terminate the agreement upon, among other reasons, a breach by the Company
which breach (except for a material breach) is not cured within 30 days, if he
is removed from his position as Chairman of the Board or his position as Chief
Executive Officer, or if the scope of his duties and responsibilities becomes
inconsistent with his position as an officer of the Company.
Mr. Ashcroft may also terminate the agreement without cause at
any time upon 90 days notice. In the event the agreement is terminated
pursuant to its terms by the Company or without cause by Mr. Ashcroft upon 90
days notice, Mr. Ashcroft will be entitled to the pro rata portion of his base
salary, bonus payment, pension payment and other benefits but will not be
entitled to any additional payments. If the agreement is terminated due to a
disability, Mr. Ashcroft will be entitled to an additional payment equal to
two times his highest base salary. In the event the agreement is terminated
by the Company without cause or by Mr. Ashcroft with cause, Mr. Ashcroft will
be entitled to a severance payment equal to two times his highest base salary
and average bonus payment, annual pension payments for the year of termination
and the following two years, and one year of any other benefits previously
provided.
Mr. Ruzika entered into an employment agreement with ADT as of
February 26, 1997. The agreement provides that Mr. Ruzika will serve as Chief
Financial Officer of ADT and as President of ADT Security Services, Inc., ADT
Operations, Inc. and ADT, Inc., subsidiaries of ADT, from March 1, 1997 until
February 28, 1999, subject to renewal for additional two-year terms
thereafter. Mr. Ruzika's initial annual base salary will be $694,500 and will
be subject to annual review for possible adjustments. Mr. Ruzika will also be
eligible for annual bonus payments at the discretion of the Company as well as
other compensation and benefit plans of the Company including stock option
plans. The termination provisions of this agreement provide that in the event
that agreement is terminated by ADT without cause or by Mr. Ruzika with cause,
Mr. Ruzika will be entitled to receive a severance payment equal to twice his
base salary, bonus and certain fringe benefits.
Mr. Lakey entered into an employment agreement with ADT, Inc.
as of January 16, 1997. The agreement provides that Mr. Lakey will have
operational responsibility for ADT's electronic security operations in Canada
and Europe from January 16, 1997 until December 31, 1999, subject to renewal
for additional two-year terms thereafter. Mr. Lakey's initial annual base
salary will be $265,000. Mr. Lakey will also be eligible for annual bonus
payments at the discretion of the Company as well as certain other enumerated
benefits and relocation expenses. The termination provisions of this
agreement include a term to the effect that, in the event that agreement is
terminated by ADT without cause or by Mr. Lakey with cause, Mr. Lakey will be
entitled to receive his base salary and certain fringe benefits for two years.
Under the ADT SERP (and, in the case of Mr. Ruzika, the
Supplemental Benefit Agreement), Mr. Ruzika and Mr. Lakey become fully vested
in the accrued benefits thereunder upon a Change in Control (as defined below)
of the Company or ADT, Inc. Mr. Ruzika also becomes fully vested upon a
Change in Control (as defined below) of ADT Management Services Limited. If
Mr. Ruzika or Mr. Lakey's employment is terminated within one year from the
date of a Change in Control, the terminated executive will receive, in lieu of
all other amounts due to him under the ADT SERP (and, in Mr. Ruzika's case,
the Supplemental Benefit Agreement), a lump-sum distribution equal to the
present value of his accrued benefit and an additional amount calculated under
a formula intended to put him in the same after-tax position that he would
have been in if he had received a lump-sum distribution of his accrued benefit
on his normal retirement date. Under this formula Mr. Ruzika would currently
receive an additional amount of approximately $653,295 and Mr. Lakey would
currently receive an additional amount of approximately $54,253.
A "Change in Control" is deemed to have occurred under the ADT
SERP if : (1) any person (other than Laidlaw, Inc. or its affiliates,
collectively the "Laidlaw Group") acquires more than 40 per cent of the
Company's voting stock (the triggering percentage has been reduced from 40 per
cent to 35 per cent because the Laidlaw Group's beneficial ownership of the
Company's voting stock is less than 20 per cent); (2) the Laidlaw Group
becomes the beneficial owner of more than 45 per cent of the Company's
outstanding voting stock; (3) there is a change of 50 per cent or more in the
composition of the Company's directors during any 3-year period (unless the
change in directors was approved by two thirds of the directors in office at
the beginning of such 3-year period or directors who had previously been
elected with the requisite two thirds approval); (4) a person acquires the
legal right to direct the management and policies of the Company (other than
by virtue of membership on the board of directors or a committee of the
board); (5) the Company ceases to own, directly or indirectly through
subsidiaries, at least 80 per cent of the voting stock of ADT, Inc. or (6) the
shareholders of either the Company or ADT, Inc. approve a merger,
consolidation or a sale or disposition of all, or substantially all, of the
assets of the Company or ADT, Inc. as the case may be, with the relevant
company not surviving. In the case of Mr. Ruzika, the provisions of (4), (5),
and (6) above include a change in the ownership of ADT Management Services
Limited (as well as the Company or ADT, Inc.).
Mr. Richardson entered into an employment agreement with ADT
Automotive Holdings, Inc. ("ADT Automotive Holdings"), the corporate parent of
ADT Automotive, Inc., as of November 30, 1993. The agreement provides that
Mr. Richardson will serve as Chief Executive Officer of ADT Automotive
Holdings and its subsidiaries from December 1, 1993 until July 31, 1996,
subject to renewal for additional one-year terms thereafter. The agreement
was renewed on a year-to-year basis as of July 31, 1996. The agreement
provides that the term will be extended for an additional one year period
thereafter unless either ADT Automotive Holdings or Mr. Richardson shall have
given the other notice of intention not to extend the term six months prior to
July 31, 1997. On January 29, 1997, ADT Automotive Holdings and Mr.
Richardson entered into an agreement which provides that Mr. Richardson's time
to give such notice is extended to and including April 30, 1997. Mr.
Richardson's initial annual base salary will be $300,000 and will be subject
to annual review for possible increases. Mr. Richardson will also be eligible
for annual bonus payments at the discretion of the Company. The termination
provisions of this agreement include a term to the effect that, in the event
that the agreement is terminated by ADT Automotive Holdings without cause or
by Mr. Richardson with cause, Mr. Richardson will be entitled to receive his
base salary and certain fringe benefits for two years or the remaining term of
the agreement, whichever is longer.
The Remuneration Committee of the Board has considered the
recommendations of the Company's outside independent human resources
consultants, and has reviewed industry practices concerning change in control
severance benefits. In view of the need to minimize employee distractions and
to retain employee loyalty and dedication to the Company and to assure
attention to the Company's performance pending resolution of the Western
Offer, on February 27, on the recommendation of the Remuneration Committee,
the Board unanimously approved a severance agreement between Mr. Gross and ADT
Security Services, Inc. in the event of a change of control, which severance
arrangement it has determined is fair and consistent with industry practices.
The agreement provides that in the event that there is a "Severance Change in
Control" (as defined below) of ADT prior to February 9, 2000, and either (x)
Mr. Gross's employment is terminated without cause or (y) Mr. Gross terminates
his employment for good reason, Mr. Gross shall be entitled to (a) an amount
of severance pay equal to twice the total of (i) the higher of his annual full
base salary as of the date of termination or as of the date of the Severance
Change in Control, calculated on an annualized basis, plus (ii) the amount of
the bonus awarded to Mr. Gross, if any, in the year prior to the date of
termination and (b) for the twelve-month period following such termination,
benefits substantially similar to the higher of those which Mr. Gross is
receiving immediately prior to the date of termination or as of the date of
the Severance Change in Control. A "Severance Change in Control" is deemed to
have occurred under the severance agreement if: (1) any person becomes the
beneficial owner of more than 50 per cent of ADT's then-outstanding voting
securities; (2) there is a change of 50 per cent or more in the composition of
the Company's directors during the term of the agreement (unless the change in
directors was approved by two thirds of the directors in office at the
beginning of such term or directors who had previously been elected with the
requisite two thirds approval); (3) a person acquires the legal right to
direct the management and policies of the Company (other than by virtue of
membership on the board of directors or a committee of the board); or (4) the
shareholders of ADT approve a merger, consolidation or a sale or disposition
of all, or substantially all, of the assets of ADT in which ADT is not the
surviving entity. It is currently intended that the consummation of the Tyco
Merger will constitute a "change of control" of ADT for purposes of the
severance agreement between Mr. Gross and ADT Security Services, Inc.
In 1996, the Remuneration Committee of the Board resolved to
increase the subscription price and size of certain share options held by Mr.
Ashcroft and Mr. Ruzika. In 1993, Mr. Ashcroft and Mr. Ruzika were granted
options to subscribe for 3,000,000 and 125,000 Common Shares respectively at
an exercise price of $8.625 per share for which each was required to pay $2.50
per option, representing a total payment of $7,500,000 and $312,500
respectively, as a condition of vesting. In 1996, the exercise price of these
options was increased to $15 and the number of related shares was increased to
8,000,000 and 333,333 respectively. All the other material terms and
conditions remained unchanged. These changes were approved by the shareholders
of the Company. At the time that the Remuneration Committee approved these
changes, the closing price of the Common Shares was $14.75. In November 1996,
the Remuneration Committee resolved that the options of Mr. Ashcroft be
transferable and, at the same time, in return, Mr. Ashcroft agreed to extend
the termination date of his employment agreement from March 31, 1998 to March
31, 2000.
In November 1996, the Remuneration Committee also approved a
bonus plan under which Mr. Ruzika is to receive a bonus of $200,000 when the
Common Share price exceeds $21.00 for a continuous period of 30 trading days
and $200,000 each time the Common Share price exceeds by $1.00 for a
continuous period of 30 trading days the share price level at which a bonus
payment was previously made. The plan is due to expire in 2001 or such
earlier date as the Common Share price exceeds $30.00 for a continuous period
of 30 trading days. Should the share price exceed $30.00 within two and one
half years, Mr. Ruzika will receive an additional payment of $1,000,000.
Certain Relationships and Related Transactions
ADT, Inc., a wholly owned subsidiary of ADT, entered into a
consulting agreement with John E. Danneberg, one of ADT's directors, as of
August 28, 1996. The agreement provides that Mr. Danneberg, as an independent
consultant, will serve as Chief Executive Officer of Sonitrol Corporation
("Franchisor") and certain franchisees of Franchisor owned or acquired by
affiliates of ADT, Inc. The agreement provides that the initial term of such
engagement shall be for a period of six months commencing on September 1, 1996
and shall be automatically renewed on a month to month basis unless written
notice is given by ADT, Inc. or Mr. Danneberg not to renew the agreement at
least 30 days before the end of such initial term, which notice was not given.
Under the terms of the agreement, ADT, Inc. pays Mr. Danneberg a monthly fee
of $15,000 and Mr. Danneberg is reimbursed directly for all reasonable
out-of-pocket business expenses.
Other Business
The Company's management does not know of any other matter to
be presented for action at the Western Meeting.
Miscellaneous
Solicitation of Proxies
The costs of this solicitation of proxies will be borne by the
Company. While no precise estimate of this cost can be made at the present
time, the Company currently estimates that it will spend a total of
approximately $ for its solicitation of proxies, including expenditures
for attorneys, solicitors, and public relations advisors and advertising,
pricing, transportation, litigation and related expenses, but excluding the
salaries and wages for regular employees and officers and the normal expenses
of an uncontested proxy solicitation for the election of directors. As of
March , 1997 the Company has incurred proxy solicitation expenses of
approximately $ excluding costs normally expended for a solicitation
for an election of directors in the absence of a contest and excluding costs
represented by salaries and wages of regular employees and officers.
In addition to the use of the mails, certain directors,
officers or employees of the Company may solicit proxies by telephone,
telecopy or personal contact. The Company will pay for the cost of these
solicitations, but these individuals will receive no additional compensation
for these solicitation services. The Company has retained D.F. King & Co.,
Inc. and its affiliate D.F. King (Europe) Limited (collectively, "D.F. King")
at combined estimated fees of not more than $ in the aggregate, plus
reasonable out-of-pocket expenses, to participate in the solicitation of
proxies and revocations. The Company also has agreed to indemnify D.F. King
against certain liabilities and expenses. The Company estimates that
approximately 130 employees of D.F. King will be involved in the solicitation
of proxies on behalf of the Company. The Company will also reimburse brokers,
fiduciaries, custodians and other nominees, as well as persons holding stock
for others who have the right to give voting instructions, for reasonable
out-of-pocket expenses incurred in forwarding this proxy statement and related
materials to, and obtaining instructions or authorizations relating to such
materials from, beneficial owners of the Company's capital stock.
ADT has retained Merrill Lynch to render financial advisory
services to ADT in connection with the evaluation and response to the Western
Offer and in connection with strategic, financial and shareholder relations
matters arising during the term of Merrill Lynch's engagement. Pursuant to the
terms of an engagement letter dated March 3, 1997 (the "March 3 Engagement
Letter"), ADT has agreed to pay Merrill Lynch for its financial advisory
services an initial retainer fee of $1,500,000 and an additional fee of
$1,500,000 that is payable on the earlier of (i) the day of the Western
Meeting and (ii) July 8, 1997. If the Western Proposals are defeated at the
Western Meeting and Western votes in favor of the Western Proposals, ADT has
agreed to pay Merrill Lynch an additional fee of $3,000,000; alternatively,
however, if (i) Western withdraws its Western Meeting requisition or (ii) the
Western Meeting is canceled or (iii) Western abstains or votes against the
Western Proposals, ADT has agreed to pay Merrill Lynch an additional fee of
$1,500,000. In addition, ADT has agreed to pay Merrill Lynch a fee of
$2,000,000 on or before July 8, 1997; provided, however, that if during the
period Merrill Lynch is retained by ADT under such engagement letter or within
one year thereafter, the Company enters into certain specified transactions,
and, in connection therewith, the Company has retained Merrill Lynch pursuant
to a separate engagement letter, then the Company and Merrill Lynch have
agreed that such $2,000,000 fee shall be credited against any fee due and
payable to Merrill Lynch pursuant to the terms of such separate engagement
letter. ADT has agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses incurred in connection with Merrill Lynch's activities
under the March 3 Engagement Letter, including the reasonable fees and
distributions of its legal counsel. ADT has agreed to indemnify Merrill Lynch
against certain liabilities arising out of or in connection with its
engagement. Merrill Lynch does not admit that it or any of its directors,
officers or employees is a "participant," as defined in Schedule 14A
promulgated under the Exchange Act, in the solicitation of proxies. In
connection with Merrill Lynch's engagement as financial advisor, certain
employees of Merrill Lynch may communicate in person, by telephone or
otherwise with a limited number of institutions, brokers or other persons who
are shareholders of the Company. Merrill Lynch will not receive any fee for
or in connection with such activities by their respective employees apart from
the fees they are otherwise entitled to receive as described above.
Separately, the Board engaged Merrill Lynch to act as its
financial advisor in connection with the Tyco Merger pursuant to an engagement
letter dated March 17, 1997 (the "March 17 Engagement Letter"). The fees
payable to Merrill Lynch pursuant to the March 17 Engagement Letter would
offset all fees payable, and be offset by all fees previously paid, to Merrill
Lynch under the March 3 Engagement Letter.
Shareholder Proposals for 1997 Annual General Meeting
Shareholder proposals intended to be considered for action at
the 1997 Annual General Meeting were required to have been received by ADT on
or before November 16, 1996 for review and consideration for inclusion in the
proxy statement and form of proxy relating to such meeting.
SEC rules set forth standards as to what shareholder proposals
are required to be included in a proxy statement for an annual meeting.
Absence of Appraisal Rights
ADT Shareholders do not have appraisal rights with respect to
the matters to be voted on at the Western Meeting.
If the proposed amalgamation with Western (the "Amalgamation")
were proposed and submitted to a vote by ADT shareholders, pursuant to Section
106(6) of the Companies Act, a registered holder of Common Shares who did not
vote in favor of the Amalgamation, and who was not satisfied that he or she
had been offered fair value for his or her Common Shares, could, within one
month of the giving of the notice of the general meeting of ADT shareholders,
apply to the Supreme Court of Bermuda (the "Supreme Court") to have the fair
value of such Common Shares appraised by the Supreme Court.
Western has stated that it intends to condition the
Amalgamation upon, among other things, holders of not more than 5 per cent of
the outstanding Common Shares having perfected appraisal rights with respect
to the Amalgamation.
Forward Looking Statements
ADT may occasionally make statements regarding its business
and the markets for its services, including projections of future
performance, statements of management's plans and objective's, forecasts of
market trends and other matters which, to the extent that they are not
historical fact, may constitute "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Certain statements contained herein constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. In particular, statements contained herein regarding the
consummation and benefits of future acquisitions, as well as expectations with
respect to future sales, operating efficiencies and product expansion, are
subject to known and unknown risks, uncertainties and contingencies, many of
which are beyond the control of ADT, which may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. Factors that might affect such forward looking
statements include, among others, overall economic and business conditions,
the demand for ADT's services, competitive factors in the industry, regulatory
approvals and uncertainty about the consummation of future acquisitions.
Registered and Principal Executive Offices
The registered and principal executive offices of the Company
are located at Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda. The
telephone number there is 441-295-2244. The executive offices of the
subsidiary which supervises the North American activities of the Company's
subsidiaries are located in the United States at 1750 Clint Moore Road, Boca
Raton, Florida 33431, USA. The telephone number there is 561-988-3600.
Bermuda, , 1997
JOHN D. CAMPBELL, Secretary
SCHEDULE A
Because of the nature of the proposals which are to be brought
before the Western Meeting, the rules of the SEC require the Company to make
available to its shareholders certain additional information with respect to
"participants" (as such term is defined in Rule 14a-11(b) promulgated under
the Exchange Act) in the Board's solicitation. Pursuant to the rules of the
SEC, the persons named below together with the directors set forth in this
Preliminary Proxy Statement under the heading "Directors and Executive
Officers" may be deemed to be participants (each, a "Participant" and
collectively, the "Participants") in the solicitation by the Board in
opposition to the Western Proposals. As such, set forth below is certain
information required pursuant to the rules of the SEC with respect to
Participants in such solicitation.
The following information is with respect to an employee of a
subsidiary of ADT Limited who is deemed to be a Participant in the Board's
solicitation.
Number of Shares
Name Position Beneficially Owned
- ---------------- ------------------------------------ ------------------
Angela Entwistle Marketing & Corporate Communications 29,500
Manager
The business address of such subsidiary of ADT Limited is 1750
Clint Moore Road, Boca Raton, Florida 33431, USA.
Except as set forth below, none of the Participants has
purchased or sold or otherwise obtained or disposed of any securities of the
Company since April 2, 1995. None of the Participants owns any securities of
the Company of record but not beneficially. Furthermore, none of the
Participants has borrowed or otherwise obtained funds for the purpose of
acquiring or holding any securities of the Company purchased or sold or
otherwise obtained or disposed of within the past two years.
Set forth below is a summary of the securities of the Company
purchased or sold or otherwise acquired since April 2, 1995 by each of the
Participants.
<TABLE>
<CAPTION>
Individual Share Activity
- ----------------------- -------------------------------------------------------------------
<S> <C>
M. A. Ashcroft Exercised options to purchase 825,000 Common Shares on April 10,
1996.
J.E. Danneberg None.
A.B. Henderson None.
J.S. Pasman, Jr. None.
S.J. Ruzika Exercised options to purchase 7,000 Common Shares on August 8, 1996.
Exercised options to purchase 5,000 Common Shares on November 14,
1996.
W.P. Slusser Purchased 300 Common Shares in the market on November 8, 1996.
W.W. Stinson Purchased 3,000 Common Shares in the market on November 7, 1996.
R.S. Troubh None.
M.J. Richardson Exercised options to purchase 30,000 Common Shares on April 25,
1995.
Exercised options to purchase 20,000 Common Shares on October 12,
1995.
Exercised options to purchase 20,000 Common Shares on January 5,
1996.
Exercised options to purchase 25,000 Common Shares on March 21,
1996.
Sold 30,000 Common Shares on April 25, 1995.
Sold 20,000 Common Shares on October 12, 1995.
Sold 20,000 Common Shares on January 5, 1996.
Sold 25,000 Common Shares on March 21, 1996.
</TABLE>
Certain contracts, agreements, arrangements and understandings
between the Company and each of the employees and directors who are deemed to
be Participants with respect to securities of the Company are more fully
described under the headings "Executive Compensation" and "Certain
Relationship and Related Transactions" in this Preliminary Proxy Statement.
Additionally, certain arrangements between the Company and certain officers
who are deemed to be Participants with respect to any future employment by the
Company or its affiliates and any future transactions to which the Company or
any of its affiliates will or may be a party and more fully described under the
headings "Executive Compensation" and "Certain Relationship and Related
Transactions" of this Preliminary Proxy Statement.
Other than as disclosed in this Schedule and in the Preliminary
Proxy Statement, to the knowledge of the Company, none of ADT, or any of its
directors, executive officers or the employees of ADT named in this Schedule
has any substantial interest, direct or indirect, by security holdings or
otherwise, in any matter to be acted upon at the Western Meeting.
Other than as disclosed in this Schedule and in the Preliminary
Proxy Statement, to the knowledge of the Company, none of ADT, or any of its
directors, executive officers or the employees of ADT named in this Schedule
is, or has been within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of ADT,
including, but not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or guarantees of profit, division of
losses or profits, or the giving or withholding of proxies.
Other than as set forth in this Schedule and in the Preliminary
Proxy Statement, to the knowledge of the Company, none of ADT, or any of its
directors, executive officers or the employees of ADT named in this Schedule
or any of their associates, has had or will have a direct or indirect material
interest in any transaction or series of similar transactions since the
beginning of ADT's last fiscal year or any currently proposed transactions, or
series of similar transactions, to which ADT or any of its subsidiaries was or
is to be a party in which the amount involved exceeds $60,000.
Other than as set forth in this Schedule and in the Preliminary
Proxy Statement or as contemplated in connection with the Tyco Merger, to the
knowledge of the Company, none of ADT, or any of its directors, executive
officers or the employees of ADT named in this Schedule or any of their
associates, has any arrangements or understandings with any person with
respect to any future employment by ADT or its affiliates or with respect to
any future transactions to which ADT or any of its affiliates will or may be a
party.
INFORMATION CONCERNING MERRILL LYNCH
ADT has retained Merrill Lynch to act as its financial advisor
in connection with the transactions described in the Preliminary Proxy
Statement. In addition, Merrill Lynch was retained by ADT in 1996 to act as
its financial advisor in connection with the proposed Republic Merger.
Merrill Lynch is an investment banking firm that provides a full range of
financial services for institutional and individual clients. Merrill Lynch
does not admit that it or any of its directors, officers or employees is a
"participant," (as such term is defined in Schedule 14A promulgated under the
Exchange Act), in the solicitation by the Board or that such Rule requires the
disclosure in the Preliminary Proxy Statement or this Schedule of certain
information concerning Merrill Lynch.
In connection with Merrill Lynch's role as financial advisor to
ADT with respect to the transactions in the Preliminary Proxy Statement,
Merrill Lynch and the following employees of Merrill Lynch (the "Merrill Lynch
Individuals") will communicate in person, by telephone or otherwise with a
limited number of institutions, brokers or other persons who are shareholders
of ADT:
Name Position
- --------------- ------------------------
Barry Friedberg Executive Vice President
Richard Johnson Managing Director
Huston McCollough Managing Director
Hugh O'Hare Vice President
Robert Simensky Vice President
Paul Bastone Associate
Each Merrill Lynch Individual is engaged in the investment banking business at
Merrill Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281-1328, USA, and is
employed by Merrill Lynch in the capacity listed beside his or her name.
In the normal course of its business, Merrill Lynch and its
associates (as defined in Rule 14a-1 promulgated under the Exchange Act)
regularly buy and sell securities issued by ADT and its affiliates ("ADT
Securities") for their own account and for the accounts of their customers,
which transactions may result from time to time in Merrill Lynch and its
associates having a net "long" or net "short" position in ADT Securities or
option contracts or other derivatives in or relating to ADT Securities. It is
impracticable, however, owing to the volume of transactions effected by Merrill
Lynch and its associates as principal in connection with market making and
other dealer activities, as agent in connection with brokerage activities, and
as investment advisor in connection with investment advisory activities, to
list such transactions involving ADT Securities for the past two years for the
purpose of the Preliminary Proxy Statement.
As of February 28, 1997, Merrill Lynch held positions in ADT
Securities as principal as follows: (i) net "short" 769,995 Common Shares;
(ii) net "long" $51,000 par amount of 9.25% Guaranteed Senior Subordinated
Notes due August 1, 2003; and (iii) net "long" 31,509 LYONs due 2010,
exchangeable for 889,499 Common Shares.
As of February 28, 1997, Merrill Lynch held positions in ADT
Securities as agent as follows: (i) net "long" 2,195,181 Common Shares; (ii)
net "long" $4,717,000 par amount of 8.25% Guaranteed Senior Notes due August
1, 2000; (iii) net "long" $2,830,000 par amount of 9.25% Guaranteed Senior
Subordinated Notes due August 1, 2003; and (iv) net "long" 31,820 LYONs,
exchangeable for 898,278 Common Shares.
None of the Merrill Lynch Individuals or their associates owned
of record or beneficially any ADT Securities as of February 28, 1997. None of
the Merrill Lynch Individuals or their associates purchased or sold for their
own account any ADT Securities within the past two years.
In the normal course of its business, Merrill Lynch finances
the securities positions of Merrill Lynch by bank and other borrowings and
securities repurchase and borrowing transactions. None of such borrowings or
repurchase transactions were entered into specifically for the purpose of
financing the purchase ADT Securities.
Except as disclosed elsewhere in this Schedule or the
Preliminary Proxy Statement, and except for customary arrangements with
respect to ADT Securities held by Merrill Lynch for the accounts of its
customers, none of the Merrill Lynch Individuals, Merrill Lynch or any
associate of such persons is or has been, within the past year, a party to any
contract, arrangement or understanding with any person with respect to any ADT
Securities, including, but not limited to, joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies.
Except as disclosed elsewhere in this Schedule or the Preliminary Proxy
Statement, none of the Merrill Lynch Individuals, Merrill Lynch or any
associate of such persons has any arrangement or understanding with any person
with respect to any future employment by ADT or its affiliates or any future
transactions to which ADT or any of its affiliates will or may be a party, nor
any material interest, direct or indirect, in any transaction which has
occurred since the beginning of ADT's last fiscal year or any currently
proposed transaction, or series of similar transactions, to which ADT or any
of its affiliates was or is to be a party and in which the amount involved
exceeds $60,000.
SCHEDULE B
ADT LIMITED
NOTICE OF SPECIAL MEETING
Notice is hereby given that a Special General Meeting (the "Meeting") of
ADT Limited (the "Company"), will be held on July 8, 1997 at 9:00 a.m.,
local time, at Cedar House, 41 Cedar Avenue, Hamilton, Bermuda for the
purpose of considering and voting upon the following resolutions:
RESOLUTIONS
1. RESOLVED, that subject to Resolutions 2 and 3 below being passed all of
the present members of the Board of Directors of the Company (the
"Board") and any other person who may be a director of the Company at
the time of the Meeting be and are hereby removed from the office of
director;
2. RESOLVED, FURTHER, that the number of seats on the Board from and after
the date of this resolution shall be two (2);
3. RESOLVED, FINALLY, that the directors of the Company from and after the
date of this resolution until the next annual general meeting of the
Company or until their successors have been duly elected shall be Steven
L. Kitchen and Steven A. Millstein, or if either of them is unable to
serve as a director of the Company due to death, disability or
otherwise, any other person designated as a director nominee by Westar
Capital, Inc.
By Order of the Board of Directors,
John D. Campbell, Secretary
41 Cedar Avenue
Hamilton HM12
Bermuda
January 7, 1997
SCHEDULE C
WESTERN RISK FACTORS
The following information, which was prepared by Western, is taken directly
from the Prospectus dated March 14, 1997 (the "Western Prospectus") forming
part of Amendment No. 4 to the Registration Statement on Form S-4 filed by
Western with the Securities and Exchange Commission on March 14, 1997 (the
"Western S-4"). No authority has been sought or received to quote from, or
refer to, the Western S-4. While ADT has reproduced all of the risk factors
from the Western Prospectus in this Schedule A, ADT is not affiliated with
either Western or Kansas City Power & Light Company ("KCP&L"). Information
concerning Western and KCP&L which has not been made public is not available
to ADT. Although ADT has no knowledge that would indicate that statements
relating to Western or KCP&L in the following risk factors discussion are
inaccurate or incomplete, ADT was not involved in the preparation of such
information and statements and, for the foregoing reasons, is not in a
position to verify any such information or statements.
"RISK FACTORS"
"In addition to the other information in this Prospectus, the following are
certain factors that should be considered by ADT Shareholders in evaluating
the Offer and an investment in Western Resources Common Stock. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. Western Resources' actual results may differ significantly
from the results discussed in the forward looking statements. Factors that
might cause such differences are discussed below.
"Regulatory Uncertainties; Changing Regulatory Environment; Approval of the
KCPL Merger
"Electric and natural gas utilities have historically operated in a
rate-regulated environment. Federal and state regulatory agencies having
jurisdiction over the rates and services of Western Resources and other
utilities are in the process of initiating steps that are expected to result
in a more competitive environment for utilities services. Increased
competition may create greater risks to the stability of utility earnings. In
a deregulated environment, formerly regulated utility companies that are not
responsive to a competitive energy marketplace may suffer erosion in market
share, revenues and profits as competitors gain access to their service
territories. This anticipated increased competition for retail electricity
sales may in the future reduce Western Resources' earnings in its formerly
regulated businesses.
"In addition, Western Resources' plan to market together energy and
security services is dependent upon the pace of deregulation. While it is
impossible to predict with certainty the time period in which such
deregulation will occur, if at all, Western Resources presently anticipates
that such deregulation will occur prior to the end of 1999. However, if
deregulation fails to occur or does not occur as quickly as may be expected,
Western Resources may be hindered in its ability to market energy and security
services and such hindrance may negatively impact Western Resources' future
earnings and cash flows.
"ADT Shareholders should consider that through ownership of Western
Resources Common Stock they will participate in the vicissitudes of the
evolving electric and natural gas utility industries and the deregulation
thereof. There can be no assurance that future regulatory and legislative
initiatives will not constrain Western Resources' efforts to market together
energy and security services.
"In addition, consummation by Western Resources of the KCPL Merger requires
the approval of certain regulatory authorities, including the FERC. Western
Resources currently contemplates that the KCPL Merger could be completed in
the first half of 1998; however, there can be no assurance that it will have
received all requisite regulatory approvals prior to such time. Nor can there
be any assurance that the KCPL Merger will be consummated or, if consummated,
that it will occur by the first half of 1998.
"Stranded Costs
"The term "stranded costs" as it relates to capital intensive utilities has
been defined as the carrying costs associated with property, plant and
equipment and other regulatory assets in excess of the level which can be
recovered in the competitive market in which the utility operates. Regulatory
changes, including the introduction of competition, could adversely impact
Western Resources' ability to recover its costs in these assets. Based upon
its current evaluation of the various factors and conditions that are expected
to impact future cost recovery, Western Resources believes that recovery of
these costs is probable. However, there can be no assurance that such
recovery will occur as the effect of competition and the amount of regulatory
assets which could be recovered in a competitive environment cannot be
predicted with any certainty at this time.
"The staff of the KCC has testified in Western Resources' electric rate
proceeding in 1996 that "stranded costs" are not presently quantifiable.
Western Resources, KCPL and ONEOK, collectively, have assets of approximately
$10.7 billion, including regulatory assets aggregating approximately $1.1
billion (10.3% of total combined assets). Of this amount, $166 million is
attributable to ONEOK, primarily related to take-or-pay settlements entered
into with natural gas suppliers. ONEOK has disclosed that this regulatory
asset is being recovered, pursuant to an order from the OCC, from a
combination of a customer surcharge and transportation revenues. ADT
Shareholders should note, however, that Western Resources will acquire only a
9.9% common equity ownership interest in ONEOK as a result of Western
Resources' proposed strategic alliance with ONEOK. Western Resources'
potential risk with respect to ONEOK's exposure would therefore be limited to
its equity ownership in ONEOK. Finally, unlike the electric utility industry
which is in the infant stages of deregulation, the natural gas distribution
industry, in which ONEOK is a participant, has already experienced significant
deregulation, thereby reducing the risk that stranded costs will occur.
"Regulatory assets of Western Resources include approximately $300 million
relating to the acquisition premium paid in Western Resources' acquisition of
KGE in 1992, which is currently being recovered pursuant to an order from the
KCC, as well as a receivable for income tax benefits flowed through to Western
Resources' customers, debt issuance costs, deferred post employment/retirement
benefits and deferred contract settlement costs. Regulatory assets of KCPL
include approximately $126 million at December 31, 1996 for recoverable future
income taxes and a receivable from customers for income tax benefits which
have been flowed-through to customers.
"Finally, Western Resources' ability to fully recover its utility plant
investments in, and decommissioning costs for, generating facilities,
particularly its 47% ownership interest in Wolf Creek, may be at risk in a
competitive environment. This risk will increase as a result of the KCPL
Merger as KCPL also presently owns a 47% undivided interest in Wolf Creek.
Amounts associated with Western Resources' recovery of environmental
remediation costs and long-term fuel contract costs cannot be estimated with
any certainty, but also represent items that could give rise to "stranded
costs" in a competitive environment. In the event that Western Resources was
not allowed to recover any of its "stranded costs," the accounting impact
would be a charge to its results of operations that would be material.
"Certain states, including California, have either adopted rules or are
considering rules to address stranded costs, most of which provide for the
opportunity to recover stranded costs. Proposals in Connecticut, Illinois,
Maine, Massachusetts, Michigan and other states have been introduced that all
permit varying degrees of recovery of stranded costs, most allowing for
recovery during defined interim periods for all prudently incurred costs. The
Kansas legislature is presently reviewing potential proposals, but has not
advanced any specific plan. Western Resources believes any legislative or
regulatory plan adopted would, consistent with other state plans and the rules
adopted by the FERC, include a plan for recovering stranded costs.
"Business Plan; Difficulty of Integrating Energy and Security Business
"As deregulation in the electric and natural gas utilities industries
continues, Western Resources believes that a provider that can market
additional services with energy-related services to provide customer
convenience will have a market advantage. Western Resources has developed its
strategy to expand its business in the deregulated marketplace and has
identified the security business as a high growth industry with a product that
can be marketed with energy. There can, however, be no assurance that Western
Resources' business plan to market together energy and security services will
be successful. The fact that Western Resources' business plan involves a
market that is as yet undeveloped makes uncertain the extent to which a viable
market for marketing energy and security will develop at all.
"To date, Western Resources has committed substantial capital and human
resources to the security industry through Westar Security and the recent
acquisition of Westinghouse Security. However, obtaining control of ADT would
significantly increase the relative amount of management time and resources
that Western Resources allocates to its security business. There can be no
assurance that this added commitment will result in continued growth or
profitability in Western Resources' security business. There can also be no
assurance that Western Resources will be able to integrate successfully the
operations of its existing security business with ADT. Difficulties of such
assimilation will include the coordination of security operations and the
integration of personnel.
"Comparatively Slower Growth than ADT
"Western Resources' growth has historically been slower than ADT's as such
growth has been limited to the growth of Western Resources' customer base
within its franchised service territory. During the past few years Western
Resources' electric sales have grown at an annual rate of approximately 4%.
Prior to deregulation, the only opportunity for utilities to experience
significant growth was through business combinations with other regulated
utilities. Such combinations presented growth opportunities within a finite
market. As the energy industry deregulates, Western Resources believes that
its combination of security with energy will provide Western Resources with
an opportunity to achieve higher growth than could be expected in the
historically regulated energy market. However, there can be no assurance that
such growth will occur.
"The Exchange Ratio
"In considering whether to tender their Shares to Western Resources
pursuant to the Offer, ADT Shareholders should consider that, depending on the
price of Western Resources Common Stock prior to the Expiration Date, there
may be certain circumstances in which the Stock Consideration paid to ADT
Shareholders may be less than $12.50 in Western Resources Common Stock.
Pursuant to the Offer, each Share will be exchanged for $10.00 net in cash and
$12.50 of Western Resources Common Stock as long as the Western Resources
Average Price is $29.75 or higher. If the Western Resources Average Price is
less than $29.75, each Share will be exchanged for $10.00 net in cash and less
than $12.50 in Western Resources Common Stock. ADT Shareholders should be
aware that depending upon the Western Resources Average Price, the Offer
Consideration paid per Share may be less than $22.50 and, depending upon the
per Share price immediately prior to the Expiration Date, may represent a
discount to the price per Share at the Expiration Date.
"Effect of the Offer and the Amalgamation on Western Resources' Financial
Status
"Expansion into the high growth security business presents financial risks
to Western Resources. Western Resources' earnings and cash flow may
experience increased volatility due to additional business risks. Such risks
include possible slower than expected growth in the security business,
competitive pressures on prices and changes in technology.
"The Offer and the Amalgamation are expected to have a dilutive effect on
Western Resources' reported earnings per share in the short term due to the
amortization of goodwill. There can also be no assurance that the Offer and
Amalgamation will not have a negative impact on Western Resources' financial
strength or debt rating, including its ability to raise capital in the future.
Following public announcement of Western Resources' proposal to merge with
KCPL, debt of Western Resources was placed on CreditWatch with negative
implications, a practice that Western Resources believes is standard with
respect to companies involved in an announced merger proposal. Since public
announcement of the Offer, Standard and Poors has downgraded the credit rating
on Western Resources' senior secured debt from A- to BBB+. Moody's has placed
Western Resources' debt on review for possible downgrade following public
announcement of the Offer, but continues to rate Western Resources First
Mortgage Bonds A3. Western Resources does not believe that these changes in
its credit rating will materially and adversely impact the business and
operations of Western Resources following the Offer and the Amalgamation.
However, such changes may increase Western Resources' cost of capital on
additional borrowings.
"Certain Debt Instruments of ADT Operations
"It is Western Resources' current view that satisfaction of the ADT
Shareholder Approval Condition and the consummation of the Offer will (i)
enable the holders of certain debt instruments of ADT Operations to require
repurchase of the securities outstanding thereunder by ADT Operations and (ii)
result in the acceleration of certain credit facilities currently available to
ADT Operations. See "The Offer -- Source and Amount of Funds." According to
ADT's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996,
the total amount of outstanding debt of ADT Operations under which
satisfaction of the ADT Shareholder Approval Condition could constitute a
change of control was approximately $1 billion. Since it does not presently
appear to be financially attractive for the holders of such debt to require
the repurchase of their securities, or to accelerate credit facilities of ADT
Operations, Western Resources does not currently believe that these
obligations present a material risk to the liquidity of Western Resources
following consummation of the Offer and the Amalgamation. Should interest
rates increase, however, it may become more financially attractive for certain
debt holders of ADT Operations to require the repurchase of their securities,
or to accelerate credit facilities of ADT Operations. LYONS are exchangeable
for Shares and such exchange could thereby potentially have a dilutive impact
on, among other things, earnings per share. See "Notes to Unaudited Pro Forma
Combined Financial Information."
"Financing of the Offer and the Amalgamation
"Western Resources has received a letter from Chase Manhattan Bank and
Chase in which they state that they are highly confident that they can arrange
credit facilities in the amount necessary to fund payment of the Cash
Consideration with Chase Manhattan Bank and other lenders. Their view is
based, among other things, upon their review of the terms of the Offer, their
understanding of Western Resources and public information regarding ADT, and
current conditions in the banking and syndicated loan markets, and such view
is subject to certain customary conditions. See "The Offer--Source and Amount
of Funds." There can be no assurance, however, that Chase Manhattan Bank and
Chase will be able to arrange the credit facilities necessary to fund payment
of the Cash Consideration. Definitive documentation with respect to such
credit facilities has not yet been negotiated. There can be no assurance that
such documentation, if definitively negotiated, will not contain restrictions
on Western Resources' ability to pay dividends.
"Future Dividends on Western Resources Common Stock
"Although Western Resources does not currently anticipate any significant
change with respect to its dividend practice as a result of the Offer or the
Amalgamation, assuming that Western Resources' dividend remains at or above
the level of its current annual indicated dividend, Western Resources
presently expects that its dividend pay-out ratio will increase to
approximately 100% in the first full year following consummation of the
Amalgamation and will decline to approximately 75% by the third year following
the Amalgamation. Assuming consummation of the Amalgamation and the KCPL
Merger, Western Resources' forecasted dividend pay-out ration will be
approximately 120%, including transaction costs of the KCPL Merger charged to
income following consummation of the KCPL Merger, or 100%, excluding such
transaction costs, in the first full year following the Amalgamation and will
decline to approximately 80% by the third year following the Amalgamation.
Over the past five years, Western Resources' dividend pay-out ratio has
averaged approximately 77%.
"On a pro forma combined basis assuming completion of the Offer, the
Amalgamation and the KCPL Merger, pro forma combined earnings plus
depreciation, amortization and restructuring and non-recurring charges for the
year ended December 31, 1995 and the nine months ended September 30, 1996
would have been approximately $691,000,000 and $609,000,000, respectively. On
a pro forma combined basis assuming completion of the Offer, the Amalgamation
and the KCPL Merger, approximately 190,000,000 shares of Western Resources
Common Stock would have been outstanding during the year ended December 31,
1995 and the nine months ended September 30, 1996, in which case the total
amount of cash required to pay Western Resources' annual indicated dividend of
$2.10 would have been approximately $400,000,000 and $300,000,000 for the
twelve and nine months, respectively. Based on publicly available
information, on a pro forma combined basis assuming completion of the Offer,
the Amalgamation and KCPL Merger, pro forma combined capital expenditures for
the year ended September 30, 1996, respectively, would have been approximately
$636,000,000 and $462,000,000. Historical pro forma combined earnings plus
depreciation, amortization and restructuring and non-recurring charges and
historical pro forma combined capital expenditures do not necessarily reflect
future pro forma combined operating cash flows and future pro forma combined
capital expenditures. If, however, future pro forma combined operating cash
flows and future pro form combined capital expenditures are similar to
historical pro forma combined earnings plus deprecation, amortization and
restructuring and non-recurring charges and historical pro forma combined
capital expenditures, there can be no assurance that Western Resources will be
able, after paying dividends consistent with historical levels, to maintain
capital expenditures at historical levels without moderating their timing or
amount, or from time to time funding such capital expenditures through
external financing. See "Reasons for the Offer--Offer Premium and Dividend
Impact."
"In the future, the Western Resources Board will se annual dividend
payments at amounts which are determined to be reasonable and consistent with
Western Resources' long-term strategy. However, there can be no assurance
that Western Resources will maintain its past practice with respect to the
payment of dividends since the declaration of future dividends will depend upon
Western Resources' future earnings, the financial condition of Western
Resources and other factors.
"Certain Tax Consequences of the Offer and the Amalgamation
"The exchange of Shares for cash and Western Resources Common Stock
pursuant to the Offer and the Amalgamation will be a taxable transaction for
U.S. federal income tax purposes and may also be taxable under applicable
state, local and foreign tax laws. See "The Offer--Certain Federal Income Tax
Consequences." ADT Shareholders should be aware that depending upon, among
other things, their particular facts and circumstances, including their basis
in Shares and tax status, the value of the after-tax proceeds that they
receive in the Offer and the Amalgamation may be less than $22.50. Each ADT
Shareholder is urged to, and should, consult such holder's own tax advisor with
respect to the specific tax consequences of the Offer and the Amalgamation to
such holder."
SCHEDULE D
[Merrill Lynch Letterhead]
March 3, 1997
Board of Directors
ADT Limited
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda:
Members of the Board: We understand that Western Resources,
Inc. ("Western") has proposed an exchange offer (the "Offer") for any and
all of the outstanding common shares (the "Shares") of ADT Limited ("ADT"),
other than Shares owned by Western and its affiliates, pursuant to which
the holders of each outstanding Share will be entitled to receive $10.00
per Share net to the seller in cash and $12.50 of Western common stock, par
value $5.00 per share (subject to downward adjustment as set forth in the
Offer) (the "Exchange Consideration"), for each of their Shares purchased
pursuant to the Offer, all as set forth more fully in the draft Offer to
Exchange contained in Western's Registration Statement on Form S-4 dated
December 18, 1996 ("Western's S-4") and related proxy materials (the "Proxy
Materials") filed under Section 14(a) of the Securities Exchange Act of
1934, each as amended to the date hereof.
You have asked us whether, in our opinion, the proposed
Exchange Consideration is adequate to the shareholders of ADT, other than
Western and its affiliates, from a financial point of view.
In arriving at the opinion set forth below, we have among other
things:
(1) reviewed Western's Annual Reports on Form 10-K and related
audited financial statements for the five fiscal years ended
December 31, 1995, Western's Quarterly Reports on Form 10-Q and the
related unaudited financial statements for the quarterly periods
ending March 31, 1996 and June 30, 1996 and September 30, 1996,
Western's Current Report on Form 8-K, dated December 12, 1996, in
connection with the pending sale of its natural gas assets to ONEOK,
Inc. ("ONEOK"), Western's Registration Statement on Form S-4 and
related proxy materials, as amended to the date hereof, in
connection with its exchange offer for all of the outstanding share
capital of Kansas City Power & Light Company ("KCPL") and Western's
Current Report on Form 8-K including the exhibits thereto, dated
February 7, 1997;
(2) reviewed ADT's Annual Reports on Form 10-K and related
audited financial statements for the five fiscal years ended
December 31, 1995, ADT's Quarterly Reports on Form 10-Q and the
related unaudited financial statements for the quarterly periods
ending March 31, 1996, June 30, 1996 and September 30, 1996, ADT's
filings with the SEC in connection with the proposed merger with
Republic Industries, Inc. that was terminated in September 1996 and
ADT's Current Report on Form 8-K, as amended to September 5, 1996,
filed in connection with the acquisition by ADT of Automated Security
(Holdings) PLC;
(3) reviewed Western's S-4 and the Proxy Materials, each as
amended to the date hereof;
(4) reviewed KCPL's Annual Report on Form 10-K and related
audited financial statements of KCPL for the fiscal year ended
December 31, 1995 and KCPL's Quarterly Reports on Form 10-Q and
related unaudited financial statements for the quarterly periods
ended March 31, 1996, June 30, 1996 and September 30, 1996;
(5) reviewed ONEOK's Annual Report on Form 10-K and related
audited financial statements for the fiscal year ended August 31,
1996 and ONEOK's Quarterly Report on Form 10-Q and related unaudited
financial statements for the quarterly period ended November 30,
1996;
(6) reviewed certain financial information, including financial
forecasts, relating to the financial condition, business, earnings,
cash flow, assets, liabilities, and prospects of ADT, that were
furnished to us by ADT;
(7) conducted discussions with members of senior management of
ADT concerning its financial condition, business, earnings, cash
flow, assets, liabilities, operations, contingencies and prospects;
(8) reviewed the historical market prices and trading activity
for the Shares and Western's common stock and compared such data
with indices that we deemed relevant;
(9) compared the respective financial condition and results of
operations of ADT with that of certain publicly traded companies
that we deemed to be relevant;
(10) compared the proposed financial terms of the Offer with
the financial terms of certain other mergers and acquisitions that
we deemed to be relevant;
(11) considered, based upon information provided by ADT and
publicly available for Western, Westinghouse Security, Inc.
("Westinghouse Security"), ONEOK and KCPL, the pro forma impact of
Western's acquisition of Westinghouse Security, the pending sale to
ONEOK of Western's natural gas business, Western's proposed merger
with KCPL and the Offer on the income statement, balance sheet and
cash flows of Western, including earnings and dividends per share,
consolidated capitalization and certain balance sheet, income
statement and cash flow data and ratios of Western; and
(12) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other
matters as we deemed necessary.
In preparing our opinion, with your consent we have relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, and we have not assumed responsibility for independently
verifying such information or undertaken an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, nor have we
been furnished any such evaluation or appraisal. In addition, with your
consent, we have relied upon the management of ADT as to the reasonableness
and achievability of the financial forecasts (and the assumptions and bases
therefor) provided to, and discussed with, us with respect to ADT. In that
regard, we have assumed and relied with your consent that such forecasts
reflect the best currently available estimates, allocations and judgments of
ADT as to the future financial performance of ADT. Our opinion is necessarily
based on economic market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have been retained by the Board of Directors of ADT as an
independent contractor to act as financial advisor to ADT with respect to the
Offer and will receive a fee for our services. We have, in the past, provided
financial advisory and financing services to ADT and received customary fees
for the rendering of such services. In addition, in the ordinary course of
our securities business, we may actively trade debt and/or equity securities
of Western and ADT and their respective affiliates for our own account and the
accounts of our customers, and we therefore may from time to time hold a long
or short position in such securities. In addition, ADT has been advised by us
that we are currently acting as financial adviser to KCPL in connection with
its merger with Western.
Our opinion is directed to the Board of Directors of ADT and
does not constitute a recommendation to any shareholder of ADT as to how such
shareholder should vote at any shareholder meeting of ADT held in connection
with the Offer.
On the basis of, and subject to the foregoing, we are of the
opinion that the proposed Exchange Consideration pursuant to the Offer is
inadequate to the shareholders of ADT, other than Western and its affiliates,
from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By ________________________________
Managing Director
Investment Banking Group
[Front of Proxy Card]
This proxy must be received, at the appropriate address indicated below,
by D.F. King & Co., Inc., (in the U.S.) prior to 8:00 a.m. (Eastern Standard
Time) on July 7, 1997
or by D.F. King (Europe) Limited (in the U.K.) prior to to 12 noon (British
Summer Time) on July 7, 1997
or by Citibank, N.A. (in the U.S.) prior to 9:00 a.m. (Eastern Standard Time)
on July 7, 1997
or by Citibank N.A. (in the U.K.) prior to 2:00 p.m. (British Summer Time) on
July 7, 1997
or by AS&K Services Limited (in Bermuda), prior to 9:00 a.m. (Bermuda time) on
July 7, 1997,
in the case of D.F. King & Co., Inc. and D.F. King (Europe) Limited, for
delivery to the Registrars of the Company
prior to 9:00 a.m. (Bermuda Time) on July 7, 1997.
Proxy Solicited by the Board of Directors of ADT Limited, a company organized
under the laws of Bermuda,
for the Special General Meeting of Shareholders to be held on July 8, 1997 at
9:00 a.m.,
at Cedar House, 41 Cedar Avenue, Hamilton, Bermuda.
The undersigned, being a holder of common shares, par value $0.10 per share
(the "Shares"), of ADT Limited ("ADT"), hereby appoints Michael A. Ashcroft or
failing him Stephen J. Ruzika or failing him John D. Campbell as his proxy at
the Special General Meeting to be held on July 8, 1997 (and any adjournment
thereof) and to vote on behalf of the undersigned (or abstain from voting) as
indicated on the reverse of this card or, to the extent that no such
indication is given, as the proxy determines in his discretion. The Special
General Meeting has been convened to consider proposals (the "Western
Proposals") to: (i) remove all of the present members of the Board of
Directors of ADT (the "ADT Board") and any person or persons elected or
designated by any of such directors to fill any vacancy or newly created
directorship, (ii) reduce the number of seats on the ADT Board to two, and
(iii) elect Steven L. Kitchen and Steven A. Millstein as the directors of ADT
or, if either is unable to serve as a director of ADT due to death, disability
or otherwise, any other person designated as a nominee by Westar Capital, Inc.
(the "Western Nominees"). In their discretion the proxies are authorized to
vote upon such other business as may properly come before the meeting or any
adjournments thereof, including any motion to adjourn the meeting. The
undersigned hereby revokes any previously dated proxies with respect to the
Special General Meeting.
- ------------------------------------------------------------------------------
Please indicate on the reverse of this card how your shares are to be voted.
The ADT Board recommends a vote AGAINST each of the Western Proposals. If
this card is returned signed but not marked with any indication as to how to
vote, the undersigned will be deemed to have directed the proxy to vote
AGAINST each of the Western Proposals.
- ------------------------------------------------------------------------------
Completed proxy cards should be returned to: D.F. King & Co., Inc., 77 Water
Street, 20th Floor, New York, NY 10005, USA (if by hand)
or D. F. King & Co., Inc., Wall Street Station, P.O. Box 411, New York, New
York 10269-0069, USA (if by mail)
or D. F. King (Europe) Limited, Royex House, Aldermanbury Square, London EC2V
7HR, United Kingdom (by hand or mail)
or Citibank, N.A. [address] USA (if by hand)
or Citibank, N.A. [address] USA (if by mail)
or Citibank N.A., c/o Independent Registrars Group, Balfour House, High Road,
Ilford, Essex IG1 1NQ, United Kingdom (by hand or mail
or AS&K Services Limited, Cedar House, P.O. Box 1179, 41 Cedar Avenue,
Hamilton HM EX, Bermuda (by hand or mail),
in the case of D.F. King & Co., Inc. and D.F. King (Europe) Limited, for
delivery to the Registrars of the Company.
[Reverse of Proxy Card]
-------------------------
THE BOARD OF DIRECTORS OF ADT LIMITED RECOMMENDS A VOTE AGAINST EACH OF THE
WESTERN PROPOSALS.
PROPOSAL TO REMOVE ALL PRESENT MEMBERS OF ADT BOARD.
[ ] AGAINST [ ] FOR [ ] ABSTAIN
PROPOSAL TO REDUCE NUMBER OF SEATS ON ADT BOARD TO TWO.
[ ] AGAINST [ ] FOR [ ] ABSTAIN
PROPOSAL TO ELECT WESTERN NOMINEES STEVEN L. KITCHEN AND
STEVEN A. MILLSTEIN OR ANY OTHER WESTERN NOMINEE
AS DIRECTORS.
[ ] AGAINST [ ]FOR [ ] ABSTAIN
To withhold authority to vote for any Western Nominee, write his name
below:
______________________________________.
Date:
___________________________________,
1997
_____________________________________________
Signature (and Title, if any)
Please sign your name below exactly as it
appears hereon. When signing as attorney,
executor, administrator, trustee or other
representative capacity, please give full title
as such. If a corporation, please sign in full
corporate name by a duly authorized director or
other officer, indicating title, or execute
under the corporation's common seal. In the
case of joint holders, any one may sign but the
first-named in the share register may exclude
the voting rights of the other joint holder(s)
by voting in person or by proxy.
IF YOU HAVE QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT D.F. KING at
1-800-488-8035 (toll-free in the United States), at 0171-600-5005 (in the
United Kingdom) or at 212-269-5550 in the United States (for outside the
United States and the United Kingdom).
