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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 1)
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
ADT LIMITED
(Name of Subject Company)
ADT LIMITED
(Name of Person(s) Filing Statement)
Common Shares, par value $0.10 per share
(including the associated preference stock purchase rights)
(Title of Class of Securities)
000915 10 8
(CUSIP Number of Class of Securities)
Stephen J. Ruzika
c/o ADT, Inc.
1750 Clint Moore Road
Boca Raton, FL 33431-0835
(561) 988-3600
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
With a copy to:
David W. Ferguson, Esq.
Davis Polk & Wardwell
450 Lexington Ave.
New York, New York 10017
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INTRODUCTION
The Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") originally filed on March 4, 1997, by ADT Limited, a Bermuda
corporation ("ADT" or the "Company"), relates to an offer by Western
Resources, Inc., a Kansas corporation ("Western"), to exchange a combination
of Western common stock, par value $5.00 per share, and cash for any and all
of the outstanding common shares, par value $0.10 per share, including the
associated preference stock purchase rights, of ADT (the "Common Shares").
All capitalized terms used herein without definition have the respective
meanings set forth in the Schedule 14D-9.
Item 2. Tender Offer of the Bidder.
The response to Item 2 is hereby amended and supplemented by replacing
the first two paragraphs in their entirety with the following:
This Statement relates to the exchange offer disclosed in a Registration
Statement on Form S- 4 dated December 18, 1996, as amended by Amendment No.
1 dated February 3, 1997, Amendment No. 2 dated February 25, 1997,
Amendment No. 3 dated March 4, 1997 and Amendment No. 4 dated March 14,
1997 (the "Western S-4") by Western, to exchange a combination of Western
common stock, par value $5.00 per share, and cash for any and all of the
outstanding Common Shares (the "Western Offer"). On March 17, 1997 Western
commenced 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 $10.00 net in cash and a number of shares of Western common stock
valued at a maximum of $12.50 (depending on a pricing formula) for each of
the Common Shares validly tendered on or prior to the Expiration Date (as
defined in the Western S-4) of the Western Offer and not properly
withdrawn. The consideration proposed to be paid by Western pursuant to
the Western Offer is referred to herein as the "Exchange Consideration."
According to the Western S-4, Western intends, following consummation of
the Western Offer, to seek to merge a subsidiary of Western with and into ADT
pursuant to applicable law (the "Proposed Western Amalgamation").
Item 7. Certain Negotiations and Transactions by the Subject Company.
The response to Item 7 is hereby amended and supplemented by adding the
following:
On March 17, 1997, ADT issued the press release attached hereto as
Exhibit 99.38 and incorporated herein by reference.
On March 17, 1997, ADT issued the press release attached hereto as
Exhibit 99.39 and incorporated herein by reference.
ADT has retained Merrill Lynch to render financial advisory services in
connection with the transaction described in Exhibit 99.38. Pursuant to the
terms of an engagement letter dated March 17, 1997, ADT has agreed to pay
Merrill Lynch certain specified fees.
Item 8. Additional Information to be Furnished.
The response to Item 8 is hereby amended and supplemented by replacing
the description under the caption "Certain Litigation," in its entirety, with
the following:
Certain Litigation
On December 18, 1996, Westar Capital, Inc. ("WCI") 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
Industries, Inc. ("Republic"). The complaint alleges that the Company and its
directors breached their fiduciary duties to WCI and the Company's other
shareholders (i) by issuing to Republic a share purchase warrant for
15,000,000 Common Shares (the "Republic Warrant") in connection with a
proposed amalgamation with Republic in July 1996 (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 seeks 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 contains 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, alleges 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 in the Company's Bye-Laws. The
amended complaint seeks the same relief as the prior complaints and also
requests 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 contains the same
allegations as the amended complaint and in addition alleges (i) that the
Company and its directors breached their fiduciary duties by setting a July 8,
1997 date for a meeting of the Company's shareholders, and (ii) that the
Company and its directors violated Section 14(d) of the Securities Exchange
Act of 1934, as amended, by making a recommendation to the Company's
shareholders regarding the tender offer without first making certain filings
with the Securities and Exchange Commission ("SEC"). WCI asks for a court
order (i) enjoining the Company from holding the shareholders meeting (the
"Special General Meeting") on July 8, 1997, (ii) compelling the Company to
hold the Special General Meeting on or before March 20, 1997, and (iii)
declaring that the Company has 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 Special
General Meeting on July 8, 1997, and compelling the Company to hold the
Special General 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 Special General
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 Special General
Meeting are distributed. The Company and its directors have responded to this
supplemental motion. As of this date, 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. WCI has
filed papers in opposition to the motion. 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 contains the
same allegations as the second amended complaint and contains 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 has 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 to the Rights Plan implemented by the Company on
March 3, 1997. In addition to the relief previously requested, the fourth
amended complaint seeks judicial nullification of the Amendment to the Rights
Plan 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 the
WCI's fourth amended complaint are without merit and intend to vigorously
defend against them.
On December 26, 1996, Charles Gachot filed a complaint in the
Circuit Court for the Fifteenth Judicial Circuit in Palm Beach County, Florida
against the Company, certain of its 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.
The foregoing description of litigation is qualified in its entirety by
reference to Exhibits 99.15 through 99.37 hereto.
Item 9. Material to be Filed as Exhibits.
The response to Item 9 is hereby amended by adding the following new
exhibits:
Exhibit 99.31 Memorandum of the ADT Defendants in Reply to Plaintiff's
Supplemental Memorandum in Support of its Motion for a
Preliminary Injunction in Westar Capital, Inc. v. ADT Ltd.
(S.D. Fla.) dated March 10, 1997.
Exhibit 99.32 Memorandum of the ADT Defendants in Opposition to
Plaintiff's Motion for Expedited Trial Westar Capital, Inc.
v. ADT Ltd. (S.D. Fla.).
Exhibit 99.33 Plaintiff's Motion for Leave to File Fourth Amended
Complaint in Westar Capital, Inc. v. ADT Ltd. (S.D. Fla.)
dated March 10, 1997.
Exhibit 99.34 Memorandum of Law in Support of Plaintiff's Motion for
Leave to File Fourth Amended Complaint in Westar Capital,
Inc. v. ADT Ltd. (S.D. Fla.) dated March 10, 1997.
Exhibit 99.35 Fourth Amended Complaint in Westar Capital, Inc. v. ADT
Ltd. (S.D. Fla.) dated March 10, 1997.
Exhibit 99.36 Order denying plaintiff's motion for an expedited trial on
certain counts of the complaint and granting defendants'
motion for order permitting appearance pro hac vice in
Westar Capital, Inc. v. ADT Ltd. (S.D. Fla.) dated
March 12, 1997.
Exhibit 99.37 Form of Motion and Memorandum of the ADT Defendants in
Support of their Motion to Dismiss the Fourth Amended
Complaint in Westar Capital, Inc. v. ADT Ltd. (S.D. Fla.)
dated March 17, 1997.
Exhibit 99.38 ADT Press Release dated March 17, 1997.
Exhibit 99.39 ADT Press Release dated March 17, 1997.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
ADT LIMITED
By: /s/ Stephen J. Ruzika
_______________________________
Stephen J. Ruzika
Chief Financial Officer,
Executive Vice President
and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: March 17, 1997
Exhibit 99.31
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 96-8889-CIV-ZLOCH
Magistrate Judge Seltzer
WESTAR CAPITAL, INC.,
Plaintiff,
vs.
ADT LTD., MICHAEL A. ASHCROFT,
STEPHEN J. RUZIKA, JOHN E. MEMORANDUM OF THE ADT
DANNEBERG, ALAN B. HENDERSON, DEFENDANTS IN REPLY TO
JAMES S. PASMAN, JR., W. PETER PLAINTIFF'S SUPPLEMENTAL
SLUSSER, WILLIAM W. STINSON, MEMORANDUM IN SUPPORT
RAYMOND S. TROUBH, and OF ITS MOTION FOR A
REPUBLIC INDUSTRIES, INC., PRELIMINARY INJUNCTION
Defendants.
The ADT Defendants respectfully submit this memorandum in reply to
plaintiff's supplemental memorandum in support of its motion for a preliminary
injunction.
1. In its March 5, 1997 supplemental memorandum, plaintiff concedes
that holding a shareholders meeting before March 20, 1997 is now "impractical."
See Pl. Supp. Mem. at 3 n.2. The reason is that the Securities and Exchange
Commission (the "SEC") is still reviewing plaintiff's proposed tender offer
documents and has not yet approved those documents. After the SEC review is
completed, the federal securities laws require that there be a minimum time
period between when offer documents are approved by the SEC and distributed and
when any shareholder vote may take place. In short, plaintiff significantly
underestimated how long it would take to have its materials approved by the SEC
and to present its offer to ADT's shareholders.
2. Two things are noteworthy about this development. First, it further
demonstrates the reasonableness of ADT's decision to schedule the shareholders
meeting for July 8, 1997. Bermuda law does not permit ADT's board to cancel the
meeting after it has been noticed. So it has proved better to schedule a date
that can be kept rather than to schedule a date that would be too early. Had the
ADT board (or this Court) done what plaintiff previously requested and scheduled
the meeting for March 20, 1997, then plaintiff
<PAGE>
would not have been ready to proceed with the vote and much time and effort
would have been wasted.
3. Second, it now seems clear that March 20, 1997 was a date which
plaintiff simply pulled out of the air as the date on which it would like to
have a meeting and that nothing irreparable would happen if that date were
missed. Plaintiff makes no claim in its supplemental memorandum that having to
meet in April or sometime later, as opposed to March, will cause it any
irreparable harm. It also seems clear now that a July 8, 1997 meeting will also
cause plaintiff no irreparable harm either.
4. Plaintiff argues in its supplemental memorandum that ADT's rationale
for selecting a July 8 meeting date is now moot because the ADT board has
already rejected plaintiff's offer. Plaintiff's mootness argument is, we submit,
backward. It is plaintiff's motion that is now moot, not ADT's defense.
Plaintiff moved this Court for a preliminary injunction order that it now does
not want because it says March 20 is too early. Plaintiff now proposes to amend
the relief it is seeking in its motion and to ask the Court to set an
unspecified date at some point after the SEC approves plaintiff's offer
documents. We respectfully submit that the better procedure is for plaintiff's
existing motion to be denied as moot, and for plaintiff to refile its motion
after it is able to make a specific request for relief from this Court based on
known circumstances. 1
- --------
1 While plaintiff now states that it expects the SEC to approve its
offer materials "soon" (See Pl. Supp. Mem. at 3 n.2), plaintiff previously
represented that its materials would be approved and distributed in final form
"well in advance of March 20, 1997." See Memorandum of Law in Support of
Plaintiff's Motion for a Preliminary Injunction, dated Jan. 23, 1997, at 17 n.
11.
5. There is also no merit to plaintiff's attempt to characterize the
deposition testimony of Raymond Troubh, one of ADT's independent outside
directors, as an admission that a meeting date earlier than July should be set
now that ADT's board has concluded that plaintiff's current offer is too low.
Plaintiff misleadingly makes it appear that ADT's board decided on July solely
because ADT's financial advisers, Merrill Lynch, believed they would need at
least that amount of time in order to provide the board with the necessary
opinions and advice. See Pl. Supp. Mem. at 2. To the contrary, Mr. Troubh, who
also sits on the board of other well-known corporations such as Time- Warner,
testified at length about the many factors that were considered by the board in
choosing the July date. Mr. Troubh explained that he was the ADT director who
first proposed July 8, 1997 as a date that would be fair to all interests and
that the July date was between the February date that plaintiff had demanded and
a date near the end of 1997 proposed by Merrill Lynch. See Deposition of Raymond
S. Troubh, dated Feb. 12, 1997 ("Troubh Dep."), at 61-65, 122-23 (attached as
Ex. A). Mr. Troubh stated that during the period between March and July, the
value of plaintiff's stock and the prospects
<PAGE>
for both plaintiff's business and ADT's business would become clearer and the
opportunities for a higher offer would become greater. See Troubh Dep. at 71-72,
86-91. These reasons are as sound today as they were when Mr. Troubh testified
four weeks ago.
6. There is another recent event which supports the ADT board's
decision to schedule the shareholders meeting in July. On March 3, two days
before plaintiff filed its supplemental brief, plaintiff changed the terms of
the offer it plans to make to ADT's shareholders whenever the SEC approves its
offer materials. Plaintiff increased the cash portion of its proposed offer by
$2.50 per share and lowered the stock portion of its offer by the same amount.
That changed further underscores the continuing uncertainty surrounding
plaintiff's proposed offer, and in particular the uncertainty created by
plaintiff's decision to make its offer based largely on stock as opposed to
cash. If additional time creates the possibility that different and better
offers may be made, then a July meeting date is entirely in the best interests
of ADT's shareholders.
Conclusion
For the foregoing reasons, the ADT Defendants respectfully request that
plaintiff's motion for preliminary injunction concerning the scheduling of the
ADT shareholders meeting be denied.
Certificate of Service
I HEREBY CERTIFY that on this 10th day of March 1997 a true and correct
copy of the foregoing was sent by telefax and mail to (i) John L. Hardiman,
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, counsel for
plaintiff, hand-delivery to (ii) Martin L. Steinberg, Holland & Knight, LLP, 701
Brickell Avenue, Miami, Florida 33101, counsel for plaintiff, (iii) Henry
Latimer, Eckert Seamans Cherin & Mellot, 450 Las Olas Boulevard, Ft. Lauderdale,
Florida 33301, counsel for Republican Industries, Inc. ("Republic"), and mail to
(iv) Thomas Allingham, Jr., Skadden, Arps, Slate, Meagher & Flom, One Rodney
Square, P.O. Box 636, Wilmington, Delaware 19889-0636, counsel for Republic.
Dated: Miami, Florida
March 10, 1997
PODHURST, ORSECK, JOSEFSBERG
EATON, MEADOW, OLIN & PERWIN,
P.A.
By: /s/ Robert C. Josefsberg by KWE
-----------------------------------
Robert C. Josefsberg
Florida Bar No. 040856
<PAGE>
By: /s/ Katherine W. Ezell
--------------------------
Katherine W. Ezell
Florida Bar No. 114771
Suite 800, City National bank Building
25 West Flagler Street
Miami, Florida 33130-1780
Tel: (305) 358-2800
Fax: (305) 358-2382
-and-
Of Counsel:
- -----------
Michael P. Carroll DAVIS POLK & WARDWELL
James H. R. Windels 450 Lexington Avenue
New York, New York 10017
Tel: (212) 450-4000
Fax: (212) 450-4800
Attorneys for the ADT Defendants
<PAGE>
[EXHIBIT A]
ORIGINAL
**CONFIDENTIAL**
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
FORT LAUDERDALE DIVISION
WESTAR CAPITAL, INC.,
Plaintiff,
-against-
ADT LTD., MICHAEL A. ASHCROFT
STEVEN J. RUZIKA, JOHN E.
DANNEBERG, ALAN B. HENDERSON,
JAMES S. PASMAN, JR., W. PETER Case No.
SLUSSER, WILLIAM W. STINSON, 96-8889-CIV-ZLOCH
RAYMOND S. TROUBH, and REPUBLIC
INDUSTRIES, INC.,
Defendants.
February 12, 1997
10:30 a.m.
Deposition of RAYMOND S. TROUBH, held at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, pursuant to Court Order, before David
Levy, CSR, a Notary Public of the State of New York.
Troubh - confidential [pages 61-65]
Q. Did you have an agenda with you before you attended the meeting?
A. I don't recall.
<PAGE>
Q. Was Westar's proposal for a special meeting discussed at that board
meeting?
A. Yes.
Q. Who participated in that discussion?
A. Well, all of the board members participated in the discussion, as
well as our financial advisers and our legal advisers.
Q. Was there a discussion as to when the special meeting called by
Westar should be held.
A. Yes.
Q. And could you tell me what was said on that subject.
A. My best recollection is that Mr. Ashcroft, as chairman, opened the
meeting, reiterating that a call had been made to Westar for a special meeting;
that he was going to ask our legal and financial advisers to comment, and then
the meeting would be open for discussion.
It's also my recollection that we had either received at that meeting
or just before a legal opinion as to the propriety of calling a special meeting,
a legal opinion signed by Allen & Overy, who were our London solicitors, and
Appleby & Sperling, who were our Bermuda solicitors, advising the board as to
its rights and obligations.
Q. Tell me how the board arrived at the July 8th date for the special
meeting, please, Mr. Troubh.
A. We asked Merrill Lynch, as financial advisers, to comment on how
quickly they could give us an advice as to the fairness of the offer; and they
had two senior people there, one an expert in the utility industry and
regulation, and one an expert on mergers and acquisitions.
Each spoke at length on his respective area of expertise. We learned
about the whole area of deregulation of U.S. energy companies, the uncertainty
prevailing as to how they would be valued in the marketplace, discussions of the
FERC, the Federal Energy Regulatory Commission, how they would react to various
mergers.
As you know, Westar was at that time negotiating or fighting with
Kansas City Power and Light, and that would, if they got together, that would be
a merger which would come under jurisdiction of FERC, so that was discussed.
<PAGE>
There as then a discussion as to what the real value of the purported
offer was. We hadn't received any documents from Westar, nor had, as far as I
know, had they filed anything with the SEC indicating with precision what -- the
offer was quite conditional at that time and still is, as far as I can tell.
So Merrill was not prepared at that time to give us an opinion as to
fairness or fair value to our shareholders. They wanted a lot of time. They had
to do pro formas. They had no idea whether in fact Westar were to merge with
Kansas City Power and Light, whether the ONEOK deal would do through, whether
they may make other offer. They are a very active utility, as you know.
My best recollection is that the legal advice was that --
MR. CARROLL: Just a second. We're going to maintain
privilege over the advice as to your rights and obligations
under Bermuda law, so I don't want you revealing substance of
the legal advice.
You have identified the fact that you received the
advice, and we're going to limit it to that; okay?
A. (Continuing) The upshot was, after a very thorough review of the
market climate, the regulatory climate, the merger and acquisition climate, the
uncertainty related to what the value of this security being offered would be
subsequently, Merrill wanted a good deal of time to be able to prepare their
opinion.
And in fact, my recollection is that they -- they would like to have
had 'till the end of the year. We discussed it. It was my suggestion that we
pick July as a date because that wouldn't carry the thing to its extreme. On the
other hand, it would give the board a good of time to get the proper investment
opinions. We might even have decided to bring in another investment adviser. It
would give us a chance to review the official SEC documents on this merger
proposal.
We would see whether in fact they were able to do the deal with Kansas
City Power and Light, which was only announced two days ago, at least the
agreement was announced two days ago. And we noticed, or I noticed in the
newspapers that the chairman of Kansas City said he probably -- he hoped to be
able to get through the federal regulatory authorities in, I think he said,
eight, nine months.
So in any event, it was I who suggested the July meeting date.
Q. What was Mr. Ashcroft's view on what the meeting date should be?
<PAGE>
A. Mr. Ashcroft asked the board to consider my proposal. It was
discussed. There was no dissent, and Mr. Ashcroft concurred. He did not lead the
board in any way on this issue.
Q. What alternative dates were suggested?
A. As I said, Merrill, Lynch asked for December in order to give them
more than enough time to give us a fair review of the offer.
THE WITNESS: Am I allowed to say what the legal
advice was as to the -- when you must call a meeting?
MR. CARROLL: No.
THE WITNESS: No?
<PAGE>
Troubh - confidential [pages 71-72]
can ask him whether the pendency of any other offers had any
bearing on the scheduling of the meeting date. I will permit
him to answer that.
But I will not permit you -- let me just finish so
it's clear -- I will not permit you to ask in the open whether
there have been any other offers since Western's. Okay?
Do you understand the distinction?
THE WITNESS: I'd like the question, please.
Q. The question is, was the prospect of any other offers a factor in
determining when to schedule the special meeting?
A. Well, it certainly was in my mind. I have a great deal of experience
in tender offers and takeovers, and in my view, time is an extremely important
function in helping to arouse the lust of other people in making offers.
My own view is that there are a number of likely candidates to come in
and match or exceed this offer whose currency, that is, their shares, would be
more attractive to us.
ADT at the time of the meeting in Toronto and subsequently is, I would
say, is on a roll. Things are developing extremely well. New products are being
developed, new relationships are being developed, cross-selling opportunities
are being presented. I think Wall Street is taking a more, closer look at us.
And I think we are -- I think the first six months have been kind of an
open sesame to what's going to happen.
So in my mind, then and now, there is a -- there are opportunities and
in fact, a likelihood of other offers coming in, competitive offers. And I would
like to have the opportunity, as a director, to review them before voting on
this one.
Q. Okay. Are there any offers currently pending, offers beside the
Western Offer?
DI MR. CARROLL: I will not permit him to answer that question.
I'm instructing. You are not allowed to probe, which is what you're
doing, Tariq, and I admire you for your fortitude and persistence, but
I don't agree that it's within the scope of in
<PAGE>
Troubh - confidential [pages 86-91]
Merrill, Lynch representatives who were present at the meeting?
A. There was a Mr. Gordon and a Mr. Johnson. I think it's Rich Johnson
and Rick Gordon.
Q. And you described earlier that they had expertise in utilities and
deregulation; is that correct?
A. I believe I said that one of them, who was a vice chairman of
Merrill, Lynch, Mr. Gordon, was an expert in the utility industry, including
deregulation. Regulation and deregulation.
Q. Okay. And what about Mr. Johnson?
A. Mr. Johnson's principal area of expertise I believe is corporate
finance generally, with a specificity in mergers and acquisitions, tender
offers.
Q. Was there any discussion at that meeting as to what information, if
information became available earlier, whether that would allow the meeting date
to be scheduled earlier than July 8th?
A. I can't recall with specificity. We discussed generally the
requirement to hold the meeting and what shareholders would need to have in hand
in order to vote intelligently. And I can't recall specifically what else was
discussed.
Q. What information do you think shareholders need to be able to vote
intelligently?
A. Well, on the issue of a hostile takeover, they need to know what
they are going to be getting with some precision. Where it's all cash, you have
at least, you have some precision. Where two-thirds of the offer is in paper,
subject to the whims and caprices of the stock market on an hourly or minute
basis, you can't know.
In addition, the offeror here, Western or Westar, as you put it, you
sort of mushed them together as one entity, was in the midst of trying to take
over another company, an extremely hostile takeover battle where very nasty
things were said about the target and its officers, where they were trying to
make a deal with a major gas utility holding company, where the deregulation of
utilities was becoming a major issue, where utilities were doing business all
around the world, where you had no idea who your competitor might be from one
day to the next, and you have the example of Enron selling electric energy in
New
<PAGE>
Hampshire, Enron being a Texas company, so the same thing could happen to -- in
Kansas to Westar's operation.
The point was, you would have to do a hell of a lot of work and need a
lot more information that was then available, or in the near future, or in the
near time frame available, to figure out what the what the value of that paper
was, two-thirds of the offer.
You had no idea as to the sanctity of the dividend. Utilities generally
sell on a yield basis, and you have no idea whether taking over these other
companies, you then didn't know whether the Kansas City Power and Light deal
would be a cash deal or a stock deal, whether they would have to borrow money.
So those are things that required more certainty. You had to understand
where Western was planning to go. Was it going to continue to buy up utilities
in hostile battle around the country, around that area, how much would it cost
them? I mean, even in this deal with Kansas City Power and Light, they've got to
pay 59 or $60 million in a breakup fee.
So there's a lot of information -- who was going to be the management
of the new company, was it Kansas City Power and Light people? Were they going
to come in and take important managerial roles? How was the board going to be --
I mean, who was going to be buying our company, essentially. And what was going
to be the value of the currency.
Q. Why do you think shareholders would not have that information before
July 8th?
A. I had no idea when they would have it. I mean, since I'm -- maybe,
to be blamed for this date, or credited, as the case may be, I just wanted
enough time -- the financial advisers said, "Give us a lot more time because
there are so many uncertainties."
In addition, frankly, you had to look at where ADT was going. I mean,
the questions that a board needs to think about in these kinds of hostile take
overs is, A, is the price adequate; B, can we get somebody else to come in a
reasonable course of time to top it; C, is the company itself better off on its
own.
Each case, and I've been involved in many of these, have got to stand
on its own. I mean, information that we were getting about ADT with its new
mobile so-called car-cop service to monitor the whereabouts of cars and trucks
and other vehicles, our deals with HFS, our deals with Radio Shack, I mean, all
of which lead us to believe, I think board members generally, the independent
ones felt that this company is doing much better. This company could well sell
for 20 to $30 on its own in a year.
<PAGE>
Well, if I believe that, or I have reason to believe it, of if my
financial advisers, who I think are as competent as anybody else, tell me that's
the case, then I might well decide to reject all offers. So I want to see the
pro formas for Westar, which I haven't seen yet, for Westar, Western Resources,
whatever that combination -- that -- that group is called now whether it's
holding companies or subsidiaries or what, the whole mish-mash, together with
its 45-percent interest in ONEOK, together with its now hundred percent
ownership, hopefully, of Kansas City Power and Light, what the hell is that
going to look like?
I don't know. And as a responsible director and independent director
with no obligations to any one individual, management or otherwise, I want to
see what those are. That's why I suggested the July date.
Q. Mr. Troubh, are you aware of the SEC comment process?
A. SEC comment process?
Q. Yes.
A. On what?
Q. On Western's registration statement in connection with its offer for
ADT.
A. I'm generally aware of SEC comments on prospectuses or 10-Ks or
10-Qs but on this, you'll have to give me a little more information on that.
Q. Well, is it your understanding that Western Resources has filed its
proposed prospectus with the SEC in connection with its
<PAGE>
Troubh - confidential [pages 122-123]
constitutes a waiver.
MR. CARROLL: Just fine. Now, he can answer.
A. Look, I'm not sure I'm bright enough to understand what the
question --
MR. CARROLL: He wants to know what your understanding was at
the meeting on the 6th on what your -- go ahead and state it.
Q. As of January 6th, Mr. Troubh, I'd like to know what your
understanding was of your obligations to ADT shareholders in calling, in
scheduling the special meeting.
MR. CARROLL: You may answer.
A. I felt my obligation as a director was to do what I perceived to be
the fair and reasonable thing, recognizing that Western/Westar was a significant
shareholder company, with holdings amounting to 25 percent. I also recognized
that the other 75 percent was held by individuals and institutions.
So I felt I had to recognize the rights of both the dominant
shareholder, which was Westar, and everyone else.
I tried -- I had listened to lawyers, without specifying to you the
legal advice I obtained -- I had listened to lawyers and I understood roughly
the time frame permissible under the laws of whatever jurisdictions might apply.
I have a lot of experience in these kinds of takeovers, not only as a
director but as a shareholder of different companies. And I felt that, by
selecting this date, I was being fair -- or recommending this date, I was being
fair and reasonable in sort of giving a notion of stability to the atmosphere.
And my fellow directors agreed.
Q. Is it your position that the ADT board had an unfettered right to
call a meeting whenever it wished?
A. My understanding was that within 21 days of the request by Westar,
we had to notice a meeting.
It was also my understanding that roughly -- very roughly -- the board
had until, say, the end of the calendar year to set the actual meeting date.
That's my understanding. My recollection now.
<PAGE>
Exhibit 99.32
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 96-8889-CIV-ZLOCH
Magistrate Judge Seltzer
WESTAR CAPITAL, INC.,
Plaintiff,
vs.
ADT LTD., MICHAEL A. ASHCROFT,
STEPHEN J. RUZIKA, JOHN E. MEMORANDUM OF LAW OF
DANNEBERG, ALAN B. HENDERSON, THE ADT DEFENDANTS IN
JAMES S. PASMAN, JR., W. PETER OPPOSITION TO PLAINTIFF'S
SLUSSER, WILLIAM W. STINSON, MOTION FOR EXPEDITED
RAYMOND S. TROUBH, and TRIAL
REPUBLIC INDUSTRIES, INC.,
Defendants.
Defendants ADT Ltd. ("ADT"), Michael A. Ashcroft, Stephen J. Ruzika,
John E. Danneberg, Alan B. Henderson, James S. Pasman, Jr., W. Peter Slusser,
William W. Stinson, and Raymond S. Troubh (collectively, the "ADT Defendants")
respectfully submit this memorandum of law in opposition to plaintiff's motion
for an expedited trial.1
- --------
1 By appearing for purposes of opposing plaintiff's motion for an
expedited trial, the ADT Defendants are not intending to waive any arguments
based on lack of personal jurisdiction.
<PAGE>
As with plaintiff's other emergency requests in this case, the time
pressure that plaintiff claims to be under is self-imposed. Plaintiff first
chose March 20 as the date on which it wanted to have a shareholders meeting and
then argued that this deadline required expedited discovery and proceedings
before this Court. Plaintiff now claims that it must have an expedited trial on
its warrant claims by March 26 when the warrant is due to expire. However, it
was plaintiff that chose to make its tender offer conditional on the
invalidation of the warrant in order to reduce the price it was offering to pay
for ADT. In each instance, expedited relief is simply a means for plaintiff to
impose its takeover terms on ADT.
By its submission to the Court today, plaintiff has now stated that it
is not prepared to proceed with a shareholders meeting on or before March 20.
See Supplemental Memorandum of Law In Support Of Plaintiff's Motion for a
Preliminary Injunction, dated March 5, 1997, at 3 n.2. This admission undercuts
plaintiff's repeated claim that it is being irreparably harmed and its requests
for any expedited relief in this case.
Plaintiff's request for special preference on the Court's schedule is
undeserving in other respects as well. Plaintiff did not challenge the Republic
warrant when it was first announced in July 1996, but instead waited until
December, after a change in the market and after the announcement of its
proposed takeover offer. In July, Republic was offering $28 per share to acquire
ADT and the warrant price was above market. By December, plaintiff was offering
to acquire ADT at the bargain-basement price of no more than $22.50 per share,
and the market price of ADT stock had risen above the warrant price. In short,
<PAGE>
plaintiff's warrant claims are an opportunistic effort to profit from market
changes, not an attempt to address any legal wrong.
Finally, plaintiff's proposed expedited schedule would eliminate the
ADT Defendants' right to a fair hearing. Plaintiff has taken the position that
until the ADT Defendants file an answer and counterclaims they are not entitled
to pursue discovery. That position would force the ADT Defendants to waive
jurisdictional and other defenses in order to defend themselves on the merits at
an expedited hearing. The ADT Defendants' rights are no less important than
plaintiff's rights, however, and there is no authority for requiring a defendant
to waive any legal rights so that the plaintiff may proceed on an expedited
schedule of its own choosing.
A. Plaintiff Is Not Entitled To Special
Preference On The Court's Docket
------------------------------------
There is no authority for the notion that a plaintiff can demand
expedited treatment for his case simply by imposing his own deadlines. Courts
have held that a trial will only be expedited upon a showing of extraordinary
hardship, irreparable harm or other exceptional circumstances justifying the
priority of one civil case over another. See Andrew Corp. v. Gabriel Elec.,
Inc., 735 F. Supp. 24, 27 (D. Me. 1990) (denying request for expedited trial
because "the crush of the combined docket makes it difficult to give preferred
status to any case"); Zukowski v. Howard, Needles, Tammen and Bergendoff, 115
F.R.D. 55, 56-57 (D. Col. 1987) (denying request for expedited trial because no
showing of extraordinary
<PAGE>
hardship; describing crowded federal docket and stating that "[a]s a matter of
public interest, this case is not distinguishable from other cases involving the
private rights of a limited number of individuals"); Chrysler Corp. v. Fedders
Corp., 540 F. Supp. 706, 732 (S.D.N.Y. 1982) (denying request for expedited
trial because the case is not exceptional and "is surely not deserving of any
special preference on the Court's trail calendar"); Voinovich v. Cleveland Board
of Directors, 539 F. Supp. 1100, 1102 (N.D. Ohio 1982) (denying request for
expedited hearing because there was "no danger of irreparable harm"); Jones v.
Smith, 474 F. Supp. 1160, 1171 (S.D. Fla. 1979) (granting request for expedited
hearing where the plaintiff had shown irreparable harm).
Moreover, in making its application, plaintiff has ignored the system
of case management tracks set forth in this Court's local rules. Plaintiff has
not requested that this case be treated on an expedited basis under the local
rules or attempted to apply the factors enumerated in the local rules to guide
the proper classification of cases. See S.D. Fla. L.R. 16.1(A).
Finally, while plaintiff states that a trial of its claims concerning
the warrant would be "feasible" prior to March 26, 1997 (see Pl. Mem. at 3-4),
plaintiff ignores the inefficient use of resources that would result from this
Court trying certain of plaintiff's claims now and others later. Contrary to
plaintiff's arguments, its claims cannot be easily separated. All of plaintiff's
claims arise from actions by ADT and its board within a seven-month period in
response to a series of transactions and corporate events. Judicial resources
would surely be
<PAGE>
wasted in having to repeat testimony, evidence and other proceedings --
including background information about the parties and events, expert testimony
on the duties of corporate boards under Bermuda law, and jury selection and
instructions. Under these circumstances, conducting more than one trial is not
efficient or practical. See Charpentier v. Blue Streak Offshore, Inc., No.
96-323, 1996 WL 383126, *1 (E.D. La. July 3, 1996) (denying request to bifurcate
case and expedite part of it for trial on grounds of judicial economy).
B. Plaintiff Has Not Alleged A Claim
Deserving Of Expedited Relief
---------------------------------
Plaintiff's warrant claims are not substantial enough on the merits to
deserve any preferential treatment. Instead, plaintiff's claims are riddled with
omissions and inconsistencies.
Plaintiff does not, and cannot, allege that there was anything illegal
about the warrant. Under Bermuda law, corporations are fully able to commit to
issue additional shares as they deem it appropriate. See, e.g., Howard Smith
Ltd. v. Ampol Petroleum Ltd., [1974] A.C. 821, 834-35 (issuance of stock by a
corporation in the interests of the company is permitted). The warrant was
nothing more than a commitment by ADT to issue additional shares at a fixed
price to Republic. So long as ADT's board issued the warrant to benefit the
interests of ADT and its shareholders, the warrant's issuance was entirely
proper.
Plaintiff also does not, and cannot, allege that is was improper to pay
Republic a fee
<PAGE>
in the event that the proposed merger with Republic fell through. Such fees,
known as "break-up" fees, are commonplace in large mergers. See, e.g., In re
Santa Pacific Corp. Shareholder Litig., 1995 WL 334258, *11 (Del. Ch. May 31,
1995). In fact, plaintiff itself recently agreed to a cash break-up fee of up to
$50 million in a recent merger agreement with another utility.
The only remaining issue is whether the form of the break-up fee in
this case -- a warrant for the issuance of stock -- was illegal or improper.
None of the case law which plaintiff cites in its brief addresses this issue and
it seems clear that, absent some extraordinary circumstances not present here,
stock warrants are a proper form of break-up fee. In fact, warrants may be less
burdensome than cash fees. Warrants improve a corporation's cash flow because
the corporation receives cash in exchange for the issuance of stock and, in this
case, the price of that exchange was set below the then current market price.
Plaintiff's attacks on the warrant are also internally inconsistent. On
the one hand, for example, plaintiff argues that the warrant was an unlawful
attempt by the ADT board to entrench itself in office. On the other hand,
however, plaintiff also alleges that the ADT board acted too quickly in agreeing
to merge itself out of existence in the transaction with Republic. How can a
board that agrees to be bought out at a higher price than plaintiff is now
offering be accused of entrenchment?
Plaintiff also argues that it was for purposes of entrenchment that the
proxy to vote
<PAGE>
the warrant shares was given to ADT's chairman. This argument assumes
(incorrectly) that it was ADT, not Republic, that first requested that Michael
Ashcroft, ADT's chairman, hold the proxy. In addition, the proxy can only be
exercised "assuming that Republic does not sell the shares in the open market."
See Pl. Mem. at 6. The warrant is hardly an effective entrenchment device when
the proxy on the warrant shares can be so easily terminated. In fact, as
plaintiff also acknowledges, Republic has asked for the shares to be registered
with the Securities and Exchange Commission (the "SEC"), a necessary
prerequisite to their being sold. See id. The scenario that plaintiff envisions
- -- first, that the warrant will be exercised; second, that Republic will decide
not to sell the warrant shares; and third, that ADT's chairman will still have
the proxy at the time of the shareholders meeting -- is thus utter speculation.
Without a strong argument that either the warrant or the proxy on the
warrant is improper, plaintiff is reduced to arguing that the mere issuance of
the additional shares pursuant to the warrant will dilute its position in ADT
stock and make it more difficult to win a proxy contest at a shareholders
meeting. See Pl. Mem. at 6. By plaintiff's own calculations, its ownership
interest in ADT will be reduced by only 2.6% -- hardly a material decline. See
id. Moreover, under plaintiff's line of reasoning, ADT should be prevented from
issuing any more stock so long as plaintiff is attempting to take control of
ADT, because any issuance would lead to dilution of plaintiff's ownership
position. Such a ruling would be completely at odds with the interests of ADT's
shareholders.
<PAGE>
None of the cases cited by plaintiff hold that the marginal dilution of
a shareholder's stock by the issuance of shares constitutes a breach of
fiduciary duty. Plaintiff's reliance on Howard Smith Ltd. v. Ampol Petroleum
Ltd. [1974] A.C. 821, and Piercy v. S. Mills & Co., Ltd., [1920] 1 CH. 77 (Ch.
D.), is misplaced. Those cases held that the defendant directors breached their
duties to the corporation when they issued stock for the improper purpose of
depriving a majority shareholder of his control position. See Piercy, at 79-80,
85; Howard Smith, at 837. This is not the issue in this case. Plaintiff is not a
majority shareholder, and the exercise of the warrant -- quite apart from not
depriving plaintiff of majority control --would only immaterially dilute its
ownership position. Moreover, it is inconceivable that ADT issued the warrant
solely for the purpose of diluting plaintiff's position when the warrant was
negotiated months before plaintiff launched its hostile tender offer and at a
time that plaintiff was representing in its filings with the SEC that its
holdings of ADT stock were for "investment purposes" and not to take control of
ADT.
The U.S. cases cited by plaintiff do not suggest that the warrant was
improper either. As with the English cases, the U.S. cases are inapplicable
because they involve the issuance of stock which either converts a majority
shareholder into a minority shareholder (see e.g., Condec Corp. v. Lunkenheimer
Co., 230 A.2d 769 (Del. Ch. 1967)) or completely eliminates the voting power of
the majority stockholder (see, e.g., Phillips v. Insituform of North America
Inc., 1987 WL 16285 (Del. Ch. 1987)). Like the English cases, Condec involved
only the issuance of stock for the "primary purpose" of depriving a majority
<PAGE>
shareholder. See Condec, 230 A.2d at 361-362.2
- --------
2 Plaintiff's citation to Beztak Co. v. Bank One Columbus, 811 F. Supp.
274 (E.D. Mich. 1992), is grossly misleading. Betzak did not involve the
issuance of stock at all. Rather, the case involved whether a bank could sell
stock pledged as collateral to secure a defaulted loan. While the merits of the
case were litigated, the court enjoined the bank's sale of the stock. See id.
at 278-79, 284-85.
C. Plaintiff Will Not Suffer Irreparable
Harm Without An Expected Trial
-------------------------------------
Plaintiff cannot make a showing of irreparable harm either. First,
plaintiff's argument that injunctive relief is required because plaintiff may
have to pay an additional $37.5 million to buy ADT's outstanding shares (see Pl.
Mem. at 6) is unfounded. Courts have repeatedly held that to find irreparable
harm and issue injunctive relief, the plaintiff's injury cannot be compensable
by money damages. See Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969,
975 (2d Cir. 1989).
Second, rather than speculate about how the warrant shares may be
voted, if at all, at a future shareholders meeting, this Court will be better
able to fashion relief after the meeting occurs. For example, if ADT's chairman
seeks to vote the warrant shares at the meeting and if those votes are material
to the outcome of the vote, plaintiff could seek relief at that time when the
Court and the parties would have all of the necessary facts before them. See
Union Pac. Corp. v. Santa Fe Pac Corp., Civ. A. Nos. 13778, 13587, 1994 WL
586924, at *1 (Del. Ch. Oct. 18, 1994) (ADT Ex. 10) ("under no scenario could a
<PAGE>
shareholder vote inflict harm that could not be remedied after the shareholders
meeting").3
- --------
3 The cases cited by plaintiff which find irreparable injury are
inapposite. In each case, the court found that the action to be enjoined would
have consequences which would be impossible to unscramble. See Sonesta Int'l
Hotels Corp. v. Wellington Asoc., 483 F.2d 247 (2d Cir. 1973) (enjoining a
tender offer because if the offer was consummated, any harm could not be
undone); Rievman v. Burlington Northern Railroad Co., 618 F. Supp 592 (S.D.N.Y.
1985) (enjoining exchange of securities where subsequent valuation would be
impossible to quantify).
D. Defendants Would Be Severely
Prejudiced By An Expedited Schedule
-----------------------------------
The ADT Defendants would be unfairly prejudiced by an expedited trial
of the warrant claims because they have not yet filed their affirmative defenses
or counterclaims with respect to those claims and have not been permitted to
conduct any discovery.
E. The Court Should Not Impose
A Five-Day Notice Period
------------------------
Plaintiff had cited no precedent for its request that this Court order
that it be given five days notice before the warrant is exercised. Such an order
would necessitate the entry by this Court of an injunction adding terms to the
warrant -- a privately negotiated contractual arrangement between ADT and
Republic. Plaintiff has met none of the requirements for such an extraordinary
injunction.
<PAGE>
Conclusion
For the reasons set forth above, the ADT Defendants respectfully
request that this Court deny plaintiff's motion for an expedited trial and for a
five days notice period.
<PAGE>
Certificate of Service
I HEREBY CERTIFY that on this 5th day of March 1997 a true and correct
copy of the foregoing was sent by facsimile to (i) John L. Hardiman, Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004, counsel for plaintiff,
(ii) Martin L. Steinberg, Holland & Knight, LLP, 701 Brickell Avenue, Miami,
Florida 33101, counsel for plaintiff, (iii) Henry Latimer, Eckert Seamans Cherin
& Mellot, 450 Las Olas Boulevard, Ft. Lauderdale, Florida 33301, counsel for
Republic Industries, Inc. ("Republic"), and (iv) Thomas Allingham, Jr., Skadden
Arps, Slate, Meagher & Flom, One Rodney Square, P.O. Box 636, Wilmington,
Delaware 19899-0636, counsel for Republic.
<PAGE>
Dated: Miami, Florida
PODHURST, ORSECK, JOSEFSBERG
EATON, MEADOW, OLIN & PERWIN, P.A.
By: /s/ Robert C. Josefsberg by KWE
-------------------------------
Robert C. Josefsberg
Florida Bar No. 040856
By: /s/ Katherine W. Ezell
------------------------------
Katherine W. Ezell
Florida Bar No. 114771
Suite 800, City National Bank Building
25 West Flagler Street
Miami, Florida 33130-1780
Tel: (305) 358-2800
Fax: (305) 358-2382
- and -
Of Counsel: DAVIS POLK & WARDWELL
Michael P. Carroll 450 Lexington Avenue
James H.R. Windels New York, New York 10017
Tel: (212) 450-4000
Fax: (212) 450-4800
Attorneys for the ADT Defendants
<PAGE>
Exhibit 99.33
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
(FORT LAUDERDALE)
WESTAR CAPITAL, INC.,
Plaintiff, Case No. 96-8889-CIV-ZLOCH
vs. Magistrate Judge Seltzer
ADT, Ltd., Michael A. Ashcroft,
Stephen J. Ruzika, John E. Danneberg,
Alan B. Henderson, James S. Pasman, Jr.,
W. Peter Slusser, William W. Stinson,
Raymond S. Troubh, and Republic PLAINTIFF'S MOTION FOR
Industries, Inc., LEAVE TO FILE FOURTH
AMENDED COMPLAINT
Defendants.
______________________/
Plaintiff Westar Capital, Inc. ("Westar") moves this Court for an
Order, pursuant to Rule 15 of the Federal Rules of Civil Procedure, granting
Westar leave to file a Fourth Amended Complaint, a copy of which is annexed
hereto as Exhibit A, based on material facts that have occurred since plaintiff
filed its Third Amended Complaint on February 27, 1997.1
- --------
1 For the reasons set forth in Plaintiff's Memorandum of Law in support
of Plaintiff's Motion for Leave to File Fourth Amended Complaint, Westar
requests, pursuant to Local Rule 7.1E, that the Court order that this motion be
treated on an expedited schedule and that (i) defendants submit any opposition
by March 12, 1997 and (ii) Westar serve any reply thereto by March 14, 1997.
Expedition is required because Westar and ADT's shareholders need to know prior
to the special meeting whether Westar's nominees to the ADT board will be able
to redeem the shareholder rights plan at issue in this litigation. Expedition
will permit Westar to promptly file a motion for preliminary injunction on the
new claims asserted in the proposed Fourth Amended Complaint.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Plaintiff's motion is supported by the accompanying Memorandum of Law
in Support of Plaintiff's Motion for Leave to File Fourth Amended Complaint.
Dated: March 10, 1997 Respectfully submitted,
SULLIVAN & CROMWELL HOLLAND & KNIGHT LLP
John L. Hardiman Attorneys for Plaintiff
Tariq Mundiya 701 Brickell Avenue
John C. Stellabotte P.O. Box 015441
125 Broad Street Miami, FL 33101
New York, NY 10004 phone: (305) 374-8500
phone: (212) 558-4000 fax: (305) 789-7799
fax: (212) 558-3588
By: /s/ Illegible /for MLS
-----------------------
MARTY L. STEINBERG
Florida Bar No. 187293
JUDITH M. MERCIER
Florida Bar No. 0032727
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing was
served via Federal Express to Michael P. Carroll, Davis, Polk & Wardwell, 450
Lexington Avenue, New York, N.Y. 10017 as attorneys for ADT Defendants, and
Thomas J. Allingham, II, Skadden, Arps, Meagher & Flom, One Rodney Square, P.O.
Box 636, Wilmington, Delaware 19899 as attorneys for Republic Industries Inc.,
and via hand-delivery to Robert C. Josefsberg, Katherine W. Ezell, Podhurst,
Orseck, Josefsberg, et al., 25 West Flagler Street, Suite 800, City National
Bank Building, Miami, Florida 33130 as attorneys for ADT Defendants and Henry
Latimer, Eckert, Seamans, Cherin & Mellot, 450 East Las Olas Blvd., Ft.
Lauderdale, Florida
<PAGE>
CASE NO. 96-8889-Civ-Zloch
33301 as attorneys for Republic Industries, Inc. on this 10th day of
March, 1997.
/s/ Illegible
-------------
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
(FORT LAUDERDALE)
WESTAR CAPITAL, INC.,
Plaintiff, Case No. 96-8889-CIV-ZLOCH
vs. Magistrate Judge Seltzer
ADT, Ltd., Michael A. Ashcroft,
Stephen J. Ruzika, John E. Danneberg,
Alan B. Henderson, James S. Pasman, Jr.,
W. Peter Slusser, William W. Stinson,
Raymond S. Troubh, and Republic Industries, Inc.,
Defendants.
______________________/
ORDER
THIS CAUSE came before the Court upon Plaintiff's Motion for Leave to
File Fourth Amended Complaint;
THE COURT, having considered the motion and the record, and being
otherwise duly advised, it is ORDERED that Plaintiff's Motion for Leave to File
Fourth Amended Complaint is GRANTED.
SO ORDERED this ___ day of March, 1997.
----------------------------
UNITED STATES DISTRICT JUDGE
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
(FORT LAUDERDALE)
WESTAR CAPITAL, INC.,
Plaintiff, Case No. 96-8889-CIV-ZLOCH
vs. Magistrate Judge Seltzer
ADT, Ltd., Michael A. Ashcroft,
Stephen J. Ruzika, John E. Danneberg,
Alan B. Henderson, James S. Pasman, Jr.,
W. Peter Slusser, William W. Stinson,
Raymond S. Troubh, and Republic Industries, Inc.,
Defendants.
______________________/
ORDER
THIS CAUSE came before the Court upon Plaintiff's Motion for Leave to
File Fourth Amended Complaint.
THE COURT, having considered the motion and the record, and being
otherwise duly advised, it is ORDERED that Defendants' opposition to Plaintiffs'
motion must be filed and served by 5 p.m. on March 12, 1997 and any reply
thereto be filed and served by 5 p.m. on March 14, 1997.
SO ORDERED this ___ day of March, 1997.
----------------------------
UNITED STATES DISTRICT JUDGE
FTL1-234206
Exhibit 99.34
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
(FORT LAUDERDALE)
WESTAR CAPITAL, INC.,
Plaintiff, Case No. 96-8889-CIV-ZLOCH
vs. Magistrate Judge Seltzer
ADT, Ltd., Michael A.
Ashcroft, Stephen J. Ruzika,
John E. Danneberg, Alan B.
Henderson, James S. Pasman, Jr.,
W. Peter Slusser, William W.
Stinson, Raymond S. Troubh, and
Republic Industries, Inc., MEMORANDUM OF LAW IN
SUPPORT OF PLAINTIFF'S MOTION
FOR LEAVE TO FILE FOURTH
Defendants. AMENDED COMPLAINT
______________________/
Westar Capital, Inc. ("Westar") submits this memorandum of law in
support of its motion for leave to file a Fourth Amended Complaint.
PRELIMINARY STATEMENT
On March 3, 1997 -- three days after Westar filed its Third Amended
Complaint (the "Complaint") -- the board of directors of ADT Ltd. ("ADT Board")
announced an important change to the shareholder rights plan (or "Poison Pill")
that is challenged in Count I of the Complaint. The ADT Board added an unusual
"Continuing Directors" provision to the Poison Pill, which is intended to
prevent Westar nominees to the ADT Board from redeeming the Poison Pill even if
CASE NO. 96-8889-Civ-Zloch
they are elected to replace the current board.1 Continuing directors
provisions have been labeled "dead hand" provisions because "people
who are no longer directors . . . are trying to rule from the grave."
Steve Lipin, J&J Goes to Court to Disarm Cordis of a Seldom-Used
Poison Pill Defense, Wall Street Journal, Oct. 27, 1995.
The Poison Pill, as originally adopted, effectively prevents Westar or
any party from acquiring control of ADT without first obtaining the approval of
ADT's board of directors. Westar is seeking to elect a slate of directors at a
special meeting of ADT's shareholders (the "Special Meeting") who "have stated
their intention to take, subject to the fulfillment of the fiduciary duties they
would have as directors of ADT, all actions necessary and desirable to
facilitate consummation of the [Western Resources Offer] including . . . either
redeeming the [rights issued under the Poison Pill] or amending [the Poison
Pill] to make the Rights inapplicable to the [Western Resources] Offer. . ."
(Preliminary S-4 filed with the Securities Exchange Commission at page 26).
The ADT Board has now attempted to moot the vote at the Special Meeting
by adopting the Dead Hand provisions which state that only current board members
can redeem the pill even if they are voted out of office at the Special Meeting.
The "Dead Hand" provisions, which were adopted less than three months
after Westar announced its proposal to replace the entire ADT Board, have no
proper purpose. Moreover, they are directed at, discriminate against, and
severely penalize Westar. The only purpose of the provisions is to entrench the
ADT Board
- --------
1 A complete description of the Poison Pill and the amendments thereto
is contained in the proposed complaint, annexed to the accompanying Motion.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
in office by preserving their control over the company "from the grave" -- even
if that is contrary to the wishes and interests of a majority of ADT's
shareholders. One recent commentator has summarized the effect of such Dead Hand
provisions:
When continuing directors provisions are employed to defend against
takeover contests, the principal purpose of the directors implementing the
provisions is to preserve their incumbent positions. Moreover, continuing
directors provisions increase the risk of board entrenchment while failing to
provide any additional shareholder protection against coercive moves by bidders.
For these reasons, the provisions interfere with the shareholder vote and are of
little utility in protecting shareholders against coercion in proxy or consent
solicitations . . . .
Scrutiny of any such provision must result in
invalidation . . . . Thus, continuing directors provisions in
poison pills should be found per se invalid on the ground that
they serve no purpose but to entrench management and consequently
infringe shareholder sovereignty.
See Note, Preventing Control from the Grave: A Proposal for Judicial
Treatment of Dead Hand Provisions in Poison Pills, 96 Colum. L. Rev. 2175, 2212
(1996) (emphasis added).
In its Proposed Fourth Amended Complaint, Westar challenges the
adoption of the Dead Hand provisions as a breach of fiduciary duty. (See Exhibit
A to the Motion)2
- --------
2 The ADT Board's amendment of the Poison Pill for the improper purpose
of frustrating a shareholder vote on the Western Resources Offer and to entrench
themselves in office also does not withstand scrutiny under Bermuda law. See,
e.g., Howard Smith Ltd. v. Ampol Petroleum Ltd., [1974] A.C. 821 (P.C. 1974)
(holding that a board's use of its powers to frustrate a shareholder vote was a
breach of duty); Piercy v. S. Mills & Co., Ltd., [1920] Ch. 77, 84 (Ch. D.).
<PAGE>
CASE NO. 96-8889-Civ-Zloch
ARGUMENT
--------
I.
WESTAR SHOULD BE GRANTED
LEAVE TO FILE ITS FOURTH AMENDED COMPLAINT.
-------------------------------------------
Under Rule 15(a) of the Federal Rules of Civil Procedure, "[A] party may
amend the party's pleading only by leave of court or by written consent of the
adverse party; and leave shall be freely given when justice so requires." "In
the absence of any apparent or declared reason -- such as undue delay, bad faith
or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of the amendment etc. --
the leave sought should, as the rules require, be 'freely given.'" Foman v.
Davis, 371 U.S. 178, 182 (1962). Similar factors are relevant under Rule 15(d)
Federal Rules of Civil Procedure (governing leave to file a supplemental
pleading).
Like the claims in the Third Amended Complaint, the new claim in the
Fourth Amended Complaint arises out of the efforts by Westar and its parent
Western Resources to acquire ADT and ADT's response thereto. Thus, the new claim
in the Fourth Amended Complaint will not change the focus of this litigation.
Nor will Defendants be prejudiced by the amendment because the new claim relates
only to whether the ADT Board breached its fiduciary duties by amending the
Poison Pill; whether the ADT Board breached its fiduciary duties by adopting and
continuing to deploy the Poison Pill has been an issue in this case since Westar
commenced the action on December 27, 1996.
Once the Court grants Westar's motion, Westar intends to file a motion
to enjoin the ADT Board from implementing the Dead Hand provisions and
compelling the ADT Board to make the provisions inapplicable to Westar and
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Western Resources. The need for immediate relief prior to the Special Meeting --
where Westar's proposal will be considered -- is obvious. Westar and ADT's other
shareholders are entitled to know before exercising their vote whether Westar's
nominees will be able to redeem the Poison Pill and allow the Western Resources
Offer to proceed. Under the lenient standards set forth in Rule 15(a), Westar's
motion to amend the complaint should be granted.3
CONCLUSION
For the foregoing reasons, Westar respectfully requests that this Court
enter an order granting Westar's motion for leave to file a Fourth Amended
Complaint.
Dated: March 10, 1997 Respectfully submitted,
SULLIVAN & CROMWELL HOLLAND & KNIGHT LLP
John L. Hardiman Attorneys for Plaintiff
Tariq Mundiya 701 Brickell Avenue
John C. Stellabotte P.O. Box 015441
125 Broad Street Miami, FL 33101
New York, NY 10004 phone: (305) 374-8500
phone: (212) 558-4000 fax: (305) 789-7799
fax: (212) 558-3588
By: /s/ Illegible /for MLS
-----------------------
MARTY L. STEINBERG
Florida Bar No. 187293
JUDITH M. MERCIER
Florida Bar No. 0032727
- --------
3 Westar has also amended the claim in the Complaint challenging the
propriety of an ADT-controlled subsidiary voting ADT shares to seek not only
prospective relief against such voting in the future but also to void any past
ADT votes that turned on the vote of the subsidiary. This amendment does not
redirect the focus of this litigation and is, therefore, appropriate at this
time.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
CERTIFICATE OF SERVICE
----------------------
I HEREBY CERTIFY that a true and correct copy of the foregoing was
served via Federal Express to Michael P. Carroll, Davis, Polk & Wardwell, 450
Lexington Avenue, New York, N.Y. 10017 as attorneys for ADT Defendants, and
Thomas J. Allingham, II, Skadden, Arps, Meagher & Flom, One Rodney Square, P.O.
Box 636, Wilmington, Delaware 19899 as attorneys for Republic Industries Inc.,
and via hand-delivery to Robert C. Josefsberg, Katherine W. Ezell, Podhurst,
Orseck, Josefsberg, et al., 25 West Flagler Street, Suite 800, City National
Bank Building, Miami, Florida 33130 as attorneys for ADT Defendants and Henry
Latimer, Eckert, Seamans, Cherin & Mellot, 450 East Las Olas Blvd., Ft.
Lauderdale, Florida 33301 as attorneys for Republic Industries, Inc. on this
10th day of March, 1997.
/s/ Illegible
-------------
FTL1-234205
<PAGE>
Exhibit 99.35
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
(FORT LAUDERDALE)
WESTAR CAPITAL, INC.,
Plaintiff, Case No. 96-8889-CIV-ZLOCH
vs. Magistrate Judge Seltzer
ADT, Ltd., Michael A. Ashcroft,
Stephen J. Ruzika, John E.
Danneberg, Alan B. Henderson,
James S. Pasman, Jr., W. Peter Slusser,
William W. Stinson, Raymond S. Troubh,
and Republic Industries, Inc.,
Defendants.
__________________________________ FOURTH AMENDED COMPLAINT
Westar Capital, Inc. ("Westar"), a shareholder of ADT Ltd. ("ADT"), by
its undersigned attorneys, individually and derivatively, alleges as follows:
NATURE OF THESE PROCEEDINGS
1. ADT's Board of Directors, led by its Chairman and Chief
Executive Officer Michael A. Ashcroft, has, over the last several months,
adopted a series of measures that will permit it to entrench itself in office at
the expense of ADT and its shareholders. Indeed, Mr. Ashcroft's lucrative
compensation package at ADT -- over $5.2 million in salary, bonuses and other
benefits and 12 million stock options -- provides ample motivation for Mr.
Ashcroft to retain his position as long as possible. This comfortable status quo
has been threatened by Westar, an ADT shareholder who has been accumulating ADT
stock since January 1996, and its parent company, Western Resources, Inc.
("Western Resources").
2. On December 18, 1996, Western Resources announced an
intention
<PAGE>
CASE NO. 96-8889-Civ-Zloch
to offer to acquire all outstanding shares of ADT for a package of cash and
securities worth $22.50 per ADT share ("Western Resources Offer") and, to
facilitate this offer, Westar is seeking to replace the entire ADT Board of
Directors ("ADT Board"), including Mr. Ashcroft, with Westar nominees (the
"Westar Proposal"). On the same day, Westar exercised its rights under Bermuda
law to demand that ADT convene a special meeting of ADT's shareholders (the
"Special Meeting") so that a shareholder vote can be held on the Westar
Proposal. The ADT Board has scheduled the Special Meeting for July 8, 1997.
3. In preparation for a potential unsolicited takeover proposal by
Westar or someone else, the ADT Board has been increasing its ability to thwart
such a bid. Central to this entrenchment scheme is a shareholder rights plan
(commonly known as a "Poison Pill") that the ADT Board adopted on November 4,
1996. The Poison Pill effectively prevents Westar or any party from acquiring
control of ADT without first obtaining the approval of ADT's board of directors.
The Pill can, however, be redeemed by ADT's board of directors. The Westar
Proposal is intended to permit shareholders to replace the current ADT board --
which has expressed its opposition to the Western Resources Offer -- with a new
board that may be more amenable to the Offer.
4. On March 3, 1997, the ADT Board attempted to moot any shareholder
vote putting them out of office by amending the Poison Pill so that even if the
Westar Proposal is successful -- and the ADT Board is replaced with Westar's
nominees at the Special Meeting -- the newly-elected Board members will be
precluded from amending or redeeming the Poison Pill. The ADT Board's mechanism
for accomplishing this is a "Continuing Directors" provision of the Poison Pill
which permits only incumbent ADT Board members to redeem the Pill and disables
any directors elected pursuant to the Westar Proposal from doing so.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Such "Continuing Directors" provisions have been described as "Dead Hand"
provisions because "people who are no longer directors . . . are trying to rule
from the grave." Steve Lipin, J&J Goes to Court to Disarm Cordis of a
Seldom-Used Poison Pill Defense, Wall Street Journal, Oct. 27, 1995.
5. A more blatant disregard for shareholder democracy is hard
to imagine. Dead hand provisions are abject refusals of the current board to
cede control of the company even if voted out of office by the shareholders. As
one recent commentator has written about Dead Hand provisions:
[T]he principal purpose of the directors implementing [Dead Hand]
provisions is to preserve their incumbent positions. . . .
Thus, continuing directors provisions in poison pills should
be found per se invalid on the ground that they serve no
purpose but to entrench management and consequently infringe
shareholder sovereignty.
See Note, Preventing Control from the Grave: A Proposal for Judicial Treatment
of Dead Hand Provisions in Poison Pills, 96 Colum. L. Rev. 2175, 2210 (1996).
6. The Dead Hand provisions are not the only examples of the
ADT Board interfering with shareholder voting. The board has also parked
approximately 2% of ADT common shares in a subsidiary that, upon information and
belief, it controls. Unless stopped by this Court, these shares could be used by
the board to affect a close proxy contest such as the one that ensued earlier
this year when a board proposal to increase Mr. Ashcroft's option package passed
by a margin of approximately 1% of ADT's outstanding stock.
7. Mr. Ashcroft and the ADT Board also used the occasion of a
"merger" announced earlier this year with Republic Industries, Inc.
("Republic"), to fortify
<PAGE>
CASE NO. 96-8889-Civ-Zloch
their control of the company. The "merger" itself was something of an illusion
because it was subject to ADT's receiving an opinion from an independent
financial advisor that the merger consideration -- .92857 shares of Republic
common stock -- was fair to ADT's shareholders. No opinion was ever obtained and
Republic's stock price plummeted immediately after the merger was publicly
announced on July 1, 1996. The merger agreement between ADT and Republic (the
"Merger Agreement") was terminated barely three months later on September 27,
1996.
8. However, in connection with the merger discussions, ADT
gave to Republic the right for a 180-day period upon termination of the Merger
Agreement to purchase from ADT approximately 10% of ADT's outstanding shares at
an exercise price of $20 per share --- a discount on the $26 value ADT had
placed on its shares in the merger agreement (the "Warrant"). The Warrant
provides Mr. Ashcroft with a proxy over any shares purchased pursuant to the
Warrant and retained by Republic, thus providing a means by which Mr. Ashcroft
can control approximately 10% of ADT's voting power if the Warrant is exercised.
9. While giving Republic an opportunity to purchase a
significant ADT asset at a very favorable price, the Warrant provided no value
to ADT's shareholders. The ADT Board's granting the Warrant unconditionally in
the context of a merger that was conditioned on the receipt of a fairness
opinion was not in the best interests of ADT or its shareholders. However, the
Warrant did provide the ADT Board and Mr. Ashcroft with two weapons against an
unsolicited bid for the company: (1) it makes such a bid more expensive and
dilutes Westar's interests in ADT because of the additional stock that would be
issued pursuant to the Warrant; and (2) if exercised, it can place a block of
votes under Mr.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Ashcroft's control.
10. In responding to Westar's December 18, 1996 request for
the Special Meeting, the ADT Board again vividly demonstrated its willingness to
interfere with and frustrate shareholder rights. On January 8, 1997, the ADT
Board announced that the Special Meeting might be held as late as July 8, 1997
- -- seven months after Westar called upon ADT to hold the meeting. The delay in
holding the Special Meeting is unreasonable and contrary to Bermuda law in that
(i) it is in breach of the fiduciary duties owed by the directors of ADT, (ii)
it is in breach of the Bermuda Companies Act 1981 (the "Companies Act") and
ADT's Bye-laws, (iii) it interferes with Westar's rights under ADT's Bye-laws
and the Bermuda Companies Act to call a special meeting, and (iv) it frustrates
the ADT shareholders' full and free exercise of their franchise.
11. The ADT Board continues to lose sight of its obligations
to the corporation in its quest to retain control over the corporation. Its
entrenching behavior constitutes a continuing breach of the board's fiduciary
duties and can only be remedied by this Court.
JURISDICTION AND VENUE
12. This Court has subject matter jurisdiction pursuant to 15
U.S.C. ss. 78aa and 28 U.S.C. ss.ss. 1331, 1332, 1367, and the amount in
controversy exceeds $50,000. Venue is proper because, upon information and
belief, certain of the acts and transactions giving rise to the claims alleged
herein occurred in this district. Moreover, ADT engages in "substantial and not
isolated activity" in this district; defendant Republic has its principal place
of business in this district; and the individual defendants either reside in
this district or, upon information and belief, travel to the district and/or
project themselves into the district
<PAGE>
CASE NO. 96-8889-Civ-Zloch
on ADT business.
THE PARTIES
13. Plaintiff Westar is a Kansas corporation that currently
owns 38,287,111 shares (including ADT's Liquid Yield Option Notes) or
approximately 27% of ADT's outstanding shares. Westar is a wholly-owned
subsidiary of Western Resources which is also a Kansas corporation. Westar and
Western Resources have their principal places of business in Topeka, Kansas.
14. On December 18, 1996, Western Resources and Westar
announced an intention to commence the Western Resources Offer. The Western
Resources Offer consists of a package of stock and cash for each share of ADT
stock in the amount of $22.50. Westar has requested that the ADT Board hold the
Special Meeting at which it will present the Westar Proposal to ADT's
shareholders to (i) remove the current ADT Board, (ii) reduce to two the number
of directors on the board, and (iii) elect two Western Resources nominees to the
board. Consummation of the Western Resources Offer is conditioned upon, among
other things, (1) redemption of the Poison Pill, (2) election of Western
Resources' two nominees to the ADT Board, and (3) the Warrant being declared
invalid.
Jurisdictional Allegations over ADT and its Board of Directors
--------------------------------------------------------------
15. This Court has jurisdiction over ADT and the ADT Board
pursuant to F1. St. ss.ss. 48.193(2) and 48.193(1)(a) and (b).
Fl. St. ss. 48.193(2)
16. ADT is "engaged in substantial and not isolated activity
within this state" under ss. 48.193(2). The following facts, taken from ADT's
own public filings and
<PAGE>
CASE NO. 96-8889-Civ-Zloch
public records, support this allegation:
(a) ADT is a corporation that oversees a worldwide security
services and automotive auction business. Much of this business is conducted
through ADT subsidiaries located in Florida and elsewhere but ADT manages and
directs the operations of its subsidiaries from Florida. ADT's executive office
in the United States is located in Boca Raton, Florida. (ADT derives over 75% of
its revenues ($1.525 billion in 1995) from its North American activities)
(b) ADT's 1991-1995 Annual Reports, which are filed with the
Securities and Exchange Commission ("SEC"), identify the address of its
"Executive Office" in the United States as One Boca Place, 2255 Glades Road,
P.O. Box 5035, Boca Raton, Florida. (ADT's 1996 Annual Report is not yet
available). Confirming this fact, in June 1993, ADT, through one of its
subsidiaries, filed an affidavit of David Hammond -- ADT's Deputy Chairman until
February 1996 -- in a Connecticut federal court stating that "ADT has executive
offices, which supervise ADT's substantial North American operations, in Boca
Raton, Florida where the Chairman of ADT and ADT's Chief Financial Officer
maintain offices." Furthermore, J. William Grant -- another ADT employee --
filed an affidavit in the same litigation, also dated June 25, 1993, identifying
Boca Raton as the location of "ADT's corporate office." This litigation, Itoba
Ltd. v. Lep Group plc, 92 CV 592 (D. Conn.), is still pending and, upon
information and belief, the statements contained in the affidavits of Messrs.
Hammond and Grant have never been withdrawn by ADT.
(c) From March 1993 through 1996, ADT issued over 40 press
releases. Further emphasizing ADT's presence here, each release was issued from
Florida. These releases announced developments about every aspect of ADT's
business -- including
<PAGE>
CASE NO. 96-8889-Civ-Zloch
earnings announcements, litigation developments, and ADT's corporate
acquisitions and sales -- as well as the adoption of the Poison Pill, execution
of the Merger Agreement and Warrant with Republic, and termination of the Merger
Agreement. With one exception, every press release provided a Florida phone
number for investors to call for information.
(d) ADT has made filings with the SEC stating that the
business address of its executive officers is Boca Raton, Florida. These
executive officers are Michael Ashcroft, Chairman and Chief Executive Officer,
and Stephen Ruzika, ADT's President and Chief Financial Officer.
(e) The ADT Board has conducted face-to-face meetings in
Florida. In addition, telephonic meetings of the ADT Board have been arranged by
a secretary of Mr. Ashcroft's who is located at ADT's office in Florida.
(f) In addition to its own activities in Boca Raton, ADT's
principal subsidiaries in the United States are also located in Boca Raton and
they occupy the same offices as ADT. The subsidiaries include ADT, Inc. a
Florida corporation; and ADT Holdings, Inc. and ADT Operations, Inc. According
to public sources, Mr. Ruzika is one of only two executive officers of these
subsidiaries, acting as President of ADT Holdings, Inc., ADT Operations, Inc.
and ADT, Inc. Upon information and belief, these subsidiaries are used by ADT as
agents on operational aspects of its United States business.
17. In short, as the following press reports over the years
have repeatedly confirmed, ADT's operations are managed out of Florida (Westar
has been unable to find any press reports indicating that ADT has objected to,
demanded a retraction of, or in any other way taken exception to anything
contained in any of these articles.):
(a) An article in the Daily Telegraph of London dated
July 13, 1996,
<PAGE>
CASE NO. 96-8889-Civ-Zloch
states in pertinent part:
Relaxing in his Florida home this weekend, Michael Ashcroft
has every reason to feel pleased with his week's work . . .
Ashcroft has not fully crystallized his plans, but they involve
backing other entrepreneurs, using the considerable fortune he
has amassed, rather than devoting his energies to building a
single business again. Republic's bid for ADT caught everyone
by surprise. It is one in the eye for the City, which never
appreciated the business or accepted Ashcroft. This poor
reception was one of the main reasons Ashcroft moved the
head office and the main listing of the Bermuda-registered
company to the U.S. . . .
It is unlikely that all Ashcroft's new ventures will carry him
back to Britain. Boca Raton is now his home and he sees that
the service sector is far larger in the US and offers him more
opportunities. Ashcroft keeps his British passport and has no
intention of swapping it for one with an eagle on the front,
but while his heart may still lie in Britain, his business
mind is firmly anchored in Florida.
(b) An article in the Financial Times dated July 4, 1996
entitled "The Americas: Friendship the basis of ADT deal: Entrepreneurial new
chairman gets the chance to make a new business-building start" states in
pertinent part:
Mr. Ashcroft, British in origin, runs the Bermuda-registered
ADT out of Florida, and has extensive private interests in
Central America.
(c) An article in the Florida Sun-Sentinel of July 2, 1996
entitled "ADT Acquisition Gives republic a Brand Name; $5 Billion Deal Boosts
Cars, Security" states in pertinent part:
ADT, based in Bermuda, moved its executive offices to Boca
Raton in June 1990 where it is building the first phase of a
three-story office building.
(d) An article in the English newspaper, The Observer, dated
May 29, 1994 entitled "Global Warning Spoils Ashcroft's Sunshine" states in
pertinent part:
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Attempts to contact the reclusive Ashcroft at ADT's
headquarters in Boca Raton, Florida, on Friday were
unsuccessful.
(e) An article dated September 27, 1993 in the Automotive News publication
states in pertinent part:
Anglo American Auto Auctions has changed its name to ADT
Automotive, Inc. to underscore its move into non-auction
business segments and to better identify with ADT Ltd., its
Florida-based parent company.
(f) An article in the Reuters Financial Service dated
September 18, 1990, states in pertinent part that:
Chairman and president, Michael Ashcroft, said ADT's
businesses had "in a period of global economic uncertainty
demonstrated their recession-resistant features."
The firm said its operational headquarters has now been
established in Boca Raton, Florida, because 75 pct of the
company's sales are from North America.
18. By contrast to ADT's substantial contacts with Florida,
ADT's contacts with Bermuda, its place of incorporation, are minimal. ADT's
"office" in Bermuda is the office of its local Bermuda counsel, Appleby,
Spurling & Kempe. Furthermore, as ADT's 1995 Annual Report discloses, ADT is an
"exempt company" in Bermuda and is prohibited from "carrying on of any business
of any kind in Bermuda, except as necessary in furtherance of the business of
ADT Limited carried on outside Bermuda." Upon information and belief, ADT
maintains only a nominal office in Bermuda and has virtually no operations or
employees in Bermuda.
19. Thus, despite being incorporated in Bermuda, ADT's base of
operations, on a "substantial and not isolated" basis, is clearly Florida.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
F1. St. ss.ss. 48.193(1)(b)
---------------------------
20. ADT and the ADT Board have submitted themselves to the
jurisdiction of this Court by "[c]ommitting a tortious act within this state."
See Fl. St. ss. 48.193(1)(b).
21. Upon information and belief, ADT and Republic negotiated
the terms of the Warrant -- which is alleged to constitute a breach of fiduciary
duty (see P. P. 51-55 infra) -- in Florida. Thus, one newspaper reported:
["]We talked [the Merger] over in London, but couldn't agree
terms," says Ashcroft. So we decided to meet a week later at
Wayne's office in Florida." There, after negotiating through
the night, Ashcroft and Huizenga thrashed out a deal valuing
ADT at $4.4 billion.
See July 7, 1996 article in Sunday Times of London entitled the "Media Man"
(emphasis added). The ADT Board subsequently agreed to the Merger Agreement and
Warrant in a board conference call that, upon information and belief, was
arranged out of Florida.
22. Furthermore, upon information and belief, tortious conduct
of ADT and the ADT Board that is challenged in the Complaint -- adopting the
Poison Pill and placing 3,182,787 shares in a subsidiary controlled by ADT --
was approved at in-person board meetings either held in Florida or telephonic
board meetings arranged out of Florida.
23. This tortious conduct has caused and is causing direct and
substantial injury to Westar and Western Resources in Florida. (Western
Resources has 2364 registered shareholders who are Florida residents owning
1.375 million shares of Western Resources) Additionally, the tortious conduct of
ADT and the ADT Board is harming other shareholders of ADT who are Florida
residents.
Fl. St. ss. 48.193(1)(a)
------------------------
24. Although ADT is nominally registered in Bermuda, as
demonstrated
<PAGE>
CASE NO. 96-8889-Civ-Zloch
above, ADT is in fact "[o]perating, conducting, engaging in, or carrying on a
business or business venture in this state or having an office in this state"
(Fl. St. ss. 48.193(1)(a)) and, at the very least, the conduct challenged in
this Complaint regarding the execution of the Warrant and Merger Agreement
arises out of that activity.
The Individual Directors
25. Defendant Michael Ashcroft is Chairman and Chief Executive
Officer of ADT and, upon information and belief, is a citizen of the United
Kingdom. Mr. Ashcroft owns a residence at 471 Alexander Palm Road, Boca Raton,
Florida. According to at least one newspaper article, Boca Raton is Mr.
Ashcroft's "home." See July 13, 1996 Daily Telegraph article (P. 14(a) above).
Moreover, and upon information and belief, Mr. Ashcroft's business address for
ADT is ADT's executive office in Florida.
26. Defendant Stephen J. Ruzika is a director of ADT and ADT's
Chief Financial Officer and Executive Vice President. Mr. Ruzika's business
address is ADT's executive office in Boca Raton. Mr. Ruzika resides at 5753 St.
Annes Way, Boca Raton, Florida and, upon information and belief, is a citizen of
the state of Florida.
27. Defendant John E. Danneberg is a director of ADT. Mr.
Danneberg resides at 10 Dellwood Avenue, Chatham, New Jersey and, upon
information and belief is a citizen of the state of New Jersey.
28. Defendant Alan B. Henderson is a director of ADT, a
resident of the United Kingdom and, upon information and belief, a citizen of
the United Kingdom.
29. Defendant James S. Pasman, Jr. is a director of ADT. Mr.
Pasman resides at 29 The Trillium, Pittsburgh, Pennsylvania and, upon
information and belief, is a citizen of the state of Pennsylvania.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
30. Defendant W. Peter Slusser is a director of ADT. Mr.
Slusser resides at 901 Lexington Avenue, New York, New York and, upon
information and belief, is a citizen of the state of New York.
31. Defendant William W. Stinson is a director of ADT. Mr.
Stinson is a resident of Calgary, Canada, and, upon information and belief, a
citizen of Calgary, Canada.
32. Defendant Raymond S. Troubh is a director of ADT. Mr.
Troubh resides at 770 Park Avenue, New York, New York and, upon information and
belief, is a citizen of the state of New York.
33. Defendant Republic is a Delaware corporation with its
principal executive offices at Fort Lauderdale, Florida.
34. Upon information and belief, none of the defendants is a
citizen or domiciliary of Kansas.
35. Upon information and belief, each of the individual
defendants has traveled to or projected himself into Florida on ADT business on
a "substantial and not isolated" basis by participating in board meetings either
in person in Florida or through conference calls that were arranged out of
Florida. Also, upon information and belief, certain of the tortious conduct
challenged herein, including the adoption of the Poison Pill and the parking of
3,182,787 shares in an ADT subsidiary, was approved at such board meetings.
Derivative Allegations
36. Westar asserts the claims herein individually. However, to
the extent any of these claims could be considered to be derivative claims,
Westar did not make demands upon the ADT board of directors to institute an
action asserting the claims herein because, under the circumstances, demand was
not required, not necessary, and futile. The individual
<PAGE>
CASE NO. 96-8889-Civ-Zloch
defendants participated in, acquiesced in, and approved the wrongs alleged
herein and did so in an affirmative violation of their duties to ADT and to
ADT's shareholders.
BACKGROUND FACTS
37. According to ADT's public filings, over the last three
years Mr. Ashcroft has been compensated handsomely by the ADT Board:
Options to purchase ADT
common shares purchased or
Total Compensation otherwise received each year
------------------ ----------------------------
1993 $3,649,414 4,750,000
1994 $3,766,216 750,000
1995 $5,244,533 1,500,000
---------- ---------
Total $12,660,163 7,000,000
38. Additionally, in February 1996, ADT's board of directors
approved and proposed to shareholders a further enhancement to Mr. Ashcroft's
option package. Specifically, under the new package Mr. Ashcroft would be
permitted to exchange 3 million of his existing options (which he purchased for
only $2.50 per option) for 8 million new options at a higher exercise price
(giving Mr. Ashcroft a net gain of 5 million options). Shareholder opposition to
the proposal was strong, and the proposal only passed by 1,440,934 votes --
approximately 1% of ADT's outstanding shares. Upon information and belief, ADT
achieved this margin by voting in favor of the proposal 3,182,787 ADT shares
owned by a subsidiary controlled by ADT.
39. Besides his employment relationship with ADT, Mr. Ashcroft
has also engaged in business dealings with the company. According to ADT's
public filings, in December 1995, ADT sold its European vehicle auction business
to an entity in which Mr.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Ashcroft held an interest. In connection with this transaction, ADT disclosed
that "a leading European investment banking firm" had opined that the value
received by ADT from the Ashcroft group was "fair" but provided no other
information regarding the opinion, including who provided it, under what
circumstances, and what else it said.
40. In stark contrast to the benefits ADT has bestowed upon
Mr. Ashcroft, the company's performance has declined. ADT's 1995 net income
decreased by over 50%, with earnings per share dropping from 76(cent) to
31(cent).
41. Perhaps concerned about increasing Westar ownership of ADT
stock (Westar first announced its acquisition of an 11.7% interest in ADT in
January 1996 and increased that ownership to approximately 24% by March 1996),
and perhaps disconcerted by the extremely close margin of the vote on his 1996
option package, Mr. Ashcroft has led the ADT Board on a campaign of entrenchment
over the last few months pursuant to which the ADT Board has adopted a series of
measures that will enhance its ability to impede a takeover proposal for the
company.
The Poison Pill
---------------
42. Central to the ADT Board's entrenchment scheme is the
Poison Pill that was adopted on November 4, 1996. (A November 4, 1996 ADT press
release announcing adoption of the Poison Pill was disseminated from Boca Raton,
Florida.) The Poison Pill is designed to prevent an acquisition of the Company
by rendering a purchase of 15% or more of ADT's shares prohibitively expensive.
43. The Poison Pill disseminates rights to ADT shareholders
which are triggered when any person "become[s] the beneficial owner of 15 per
cent or more of ADT's common shares or has commenced a tender or exchange offer
which, if consummated, would
<PAGE>
CASE NO. 96-8889-Civ-Zloch
result in any person becoming the beneficial owner of 15 per cent or more of
ADT's common shares." The Poison Pill is not triggered by the fact that some
shareholders, such as Westar, owned over 15% of ADT's shares at the time of the
Pill's adoption, but is triggered if such shareholders purchase any additional
ADT stock. The current ADT Board can redeem the rights at its discretion at any
point before they are triggered. Significantly, the potential acquiror who
triggers the issuance of the rights does not receive such rights.
44. The rights permit the holder "to purchase, for the rights
purchase price, ADT common shares having a market value of twice the rights
purchase price." The theory behind the Poison Pill is that prospective acquirors
will not dare to trigger this half-price bargain because it will result in so
many rights being exercised and, consequently, so much additional ADT stock
being issued that the prospective acquiror will not be able to afford to buy
enough of the stock to obtain control over the company.
45. The Poison Pill acts to peculiarly discriminate against
Westar in two ways: first, as mentioned previously, because Westar is already a
27% ADT shareholder, it, unlike other ADT shareholders, is effectively precluded
from purchasing a single additional ADT share; second, the Poison Pill makes it
impossible for Westar to sell its 27% interest in a single block because, by
doing so, the purchaser would trigger the Pill.
46. The Western Resources Offer is conditioned on either (i)
redemption of the rights issued under the Poison Pill, or (ii) amendment to the
Poison Pill so that those rights are inapplicable to the Western Resources
Offer, or (iii) Western Resources being satisfied that the rights are invalid or
inapplicable to the Western Resources Offer. In connection with the Westar
Proposal, Westar stated that its board nominees are "committed to taking,
subject to the fulfillment of the fiduciary duties they would have as directors
of ADT, all action
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CASE NO. 96-8889-Civ-Zloch
necessary and desirable to facilitate consummation of the [Western Resources
Offer] including . . . either redeeming the [rights issued under the Poison
Pill] or amending [the Poison Pill] to make the [rights] inapplicable to the
[Western Resources] Offer."
ADT Amends the Poison Pill
--------------------------
47. On March 3, 1997 -- on the same day it announced its
rejection of the Western Resources offer -- the ADT Board also announced that it
had amended the Poison Pill to add the Dead Hand provisions. Those provisions
provide that any amendment or redemption of the Poison Pill must be approved by
a majority of "Continuing Directors" of ADT-- defined to exclude those persons
elected to the ADT 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 the Company or
any employee benefit plan of the Company) 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 [poison pill] rights to be triggered.
(See ADT Schedule 14D-9, publicly filed with the Securities and Exchange
Commission on March 4, 1997.)
48. The Dead Hand provisions are obviously intended to
frustrate the Westar Proposal because, if elected, Westar's nominees to the ADT
Board would not be "Continuing Directors" under the Dead Hand provisions and,
thus, would be precluded from redeeming the Poison Pill. Thus, even if ADT
shareholders disagree with the ADT Board's
<PAGE>
CASE NO. 96-8889-Civ-Zloch
rejection of the Western Resources Offer and vote to replace the ADT Board at
the Special Meeting, the Dead Hand Provisions have been put in place to nullify
that vote by precluding the newly-elected directors from redeeming the Poison
Pill.
49. In fact, ADT has admitted that it intended the Dead Hand
provisions to have a negative impact on the Westar Proposal and the Western
Resources Offer:
If Westar's Proposals were adopted so that the only members of
the ADT Board were the Western Resources nominees, there would
be no Continuing Directors on the ADT Board. As a result of
the [Dead Hand provisions], Western Resources' 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.
(See ADT Schedule 14D-9, publicly filed with the Securities and Exchange
Commission on March 4, 1997.)
50. ADT has advertised the impact of the Dead Hand provisions
because they are intended not only to nullify a vote for the Westar Proposal,
but also to discourage it. ADT Shareholders will obviously want to understand
the impact of their vote before the Special Meeting. If a vote in favor of the
Westar Proposal will not facilitate the Western Resources Offer, shareholders
may be more inclined to vote for management on the theory that management will
be exercising control "from the grave" anyway because of the Dead Hand
provisions.
51. The Dead Hand provisions also have the effect of
preventing Westar- nominated directors elected at the Special Meeting from
exercising their fiduciary duties in an unfettered manner. Once elected, if they
wish to consider business transactions that they believe are in the best
interests of the corporation and its shareholders, they cannot redeem the
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Poison Pill to pursue such opportunities.
52. The Dead Hand provisions are designed to penalize, and
unfairly discriminate against, shareholders such as Westar who initiate a proxy
contest in order to facilitate a sale of the company. They are also intended to
disenfranchise ADT's shareholders and entrench the ADT Board by discouraging and
nullifying a vote to remove the Board from office.
53. The ADT Board's fiduciary duties require the ADT Board
either to abrogate the Dead Hand provisions or amend them to make them
inapplicable to the Westar Proposal and the Western Resources Offer.
The Republic Warrant
--------------------
54. The Poison Pill was adopted only after another alternative
had collapsed -- an ADT-supported merger with Republic pursuant to which Mr.
Ashcroft could have realized millions of dollars of profits on his options and
maintained his high-salaried position with ADT.
55. On July 1, 1996, Republic and ADT announced that they had
executed the Merger Agreement. Pursuant to the Merger Agreement, ADT
shareholders were to receive 0.92857 shares of Republic common stock for each
share of ADT common stock and ADT would become a wholly-owned subsidiary of
Republic. Furthermore, according to public sources, Mr. Ashcroft would remain
Chairman of ADT and be appointed to Republic's board of directors. A joint Press
Release describing the Merger Agreement was disseminated from Fort Lauderdale,
Florida and stated, "[t]he [Republic/ADT] transaction [was] valued at
approximately $5 billion. The exchange ratio was based on a price of $26 for
each share of ADT Common Stock."
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CASE NO. 96-8889-Civ-Zloch
56. In a highly unusual decision, the ADT Board did not obtain
an opinion from an investment banker that the merger consideration was fair to
ADT's shareholders before it entered into the Merger Agreement with Republic.
Instead, the Merger Agreement was conditioned on ADT's subsequent receipt of a
fairness opinion and gave either party the right to terminate the Merger
Agreement if ADT did not receive such an opinion by July 15, 1996. This
provision of the Merger Agreement was subsequently amended to extend the time
for ADT to obtain a fairness opinion -- and concomitant right to terminate --
until the time a proxy statement was distributed to ADT's shareholders regarding
the Merger.
57. The impact of the Merger Agreement on the additional
options granted to Mr. Ashcroft earlier in 1996 was significant. As a Business
Week article, dated July 29, 1996, and entitled "Playing the Options Shuffle",
explained:
Here's an interesting coincidence. In February, ADT
Chairman Michael Ashcroft traded 3 million
in-the-money company options for 8 million new
options at a higher strike price. If he had cashed
out his old options instead, he would have bagged at
least a $7.2 million profit.
Turns out that the new options became even more
valuable. Come early July, H. Wayne Huizenga's
Republic Industries agreed to buy alarm-system
provider ADT. The all-stock deal initially valued ADT
at nearly $5 billion, or $26 a share. If Ashcroft,
whose new options would fully vest upon a change of
control at the company, could sell at that price, he
would net $80 million.
ADT and Ashcroft didn't return calls seeking comment
on whether he had any idea back in February that ADT
might be sold. Republic also wouldn't specify when
the deal was first discussed but says that it was put
together fast. ADT's Board has been generous to
Ashcroft in
<PAGE>
CASE NO. 96-8889-Civ-Zloch
other ways, paying him $5.2 million and granting him
1.5 million options in 1995 -- even though net income
fell 50%.
58. ADT has publicly maintained that its discussions with
Republic were concentrated over a few days and did not go back to the time when
the additional options to Mr. Ashcroft were approved. A July 7, 1996 report in
The Sunday Telegraph newspaper in London stated that the principal negotiations
between ADT and Republic took place over one frantic June 28-30 weekend:
Two weeks ago Ashcroft took a call from his old
friend. Huizenga had recently started out with his
third company Republic, and was already expanding it
through acquisition. Republic is focused on waste,
second-hand car dealerships and electronic security.
Huizenga asked if they could meet and made Ashcroft a
generous offer. The talks culminated in frantic
negotiations last weekend and by Monday the two sides
had the terms of the all-share takeover to announce
to the New York Stock Exchange.
59. The merger announcement triggered a precipitous drop in
the market price of Republic's stock -- the currency for the merger. Between
July 1 and July 16, Republic's stock price fell from $29 1/8 to $20 15/l6 (a
drop of over 30%). Consequently, on September 30, 1996, ADT and Republic issued
a joint press release (disseminated from Fort Lauderdale, Florida), announcing
that the agreement had been terminated because of "stock market conditions".
60. One newspaper report somewhat more critically suggested
that the "real surprise" was not that the proposed merger had been abandoned,
but why "it had taken the two companies so long" to realize that "the
transaction was based on financial engineering rather than industrial logic."
News reports explained the deal's problems:
<PAGE>
CASE NO. 96-8889-Civ-Zloch
The two sides couldn't agree on a final price for the
stock swap as Republic's shares lost almost a third
of their value after the July merger announcement.
The stock dropped amid a falling market and fear by
some investors that the acquisition-hungry Huizenga
was issuing too much stock to pay for companies.
(See, e.g., "Republic's $4 Billion Merger With ADT Dies," The Florida
Times-Union (Jacksonville), October 1, 1996).
61. Despite being stymied in their attempts to merge with
Republic, Mr. Ashcroft and his fellow board members had used the
occasion of the merger discussions to put in place an entrenchment
device that survived the termination of the Merger -- the Warrant.
The Warrant provides that, if the Merger Agreement is terminated --
as it has been -- Republic has the right for a 180-day period from
termination to purchase from ADT 15 million ADT shares at an
exercise price of $20 per share, $6 per share less than the
contemplated merger consideration. The Warrant further provides
that Mr. Ashcroft shall have Republic's proxy to vote any shares
purchased pursuant to the Warrant for a two-year period following
the date that the Warrant is exercised (as long as Republic does not
transfer or sell the shares to a third party). The Warrant also
restricts Republic's ability to tender shares purchased pursuant to
the Warrant to "tender offers which the Board of Directors of ADT
recommends . . . ." Finally, the Warrant provides that it can only
be transferred with the consent of ADT and shares purchased pursuant
to the Warrant cannot be sold to any single purchaser in an amount
greater than five million shares. Id.
62. A warrant to buy 15 million ADT shares at $20 per share at
a time when ADT was purportedly valuing itself at $26 per share for merger
purposes was an extraordinarily valuable asset to give to Republic. The only
apparent consideration received by
<PAGE>
CASE NO. 96-8889-Civ-Zloch
ADT for the Warrant was Republic's agreement to the Merger. However, unlike the
Warrant, that agreement was conditional and could evaporate if no opinion was
obtained that the Republic stock was fair consideration to ADT's shareholders.
The board of directors breached its duty of care to ADT and its shareholders in
unconditionally granting the Warrant before they were certain that Republic's
stock was sufficiently valuable merger consideration to be fair.
63. While providing no value to ADT or its shareholders, the
Warrant does provide Mr. Ashcroft and the ADT Board with another weapon against
unwanted suitors in three respects:
a. Until expiration, the Warrant acts as a deterrent to future
acquisition proposals by rendering more expensive any acquisition
proposal above $20 (which would likely trigger Republic's decision to
purchase ADT shares at a discount). For example, in response to
Westar's $22.50 per share acquisition proposal, Republic has the right
to purchase ADT shares at $20 per share. If this right is exercised,
Republic would realize a $37.5 million windfall and the consideration
for Western Resources' Offer would increase by over $337 million (for
this reason the offer is conditioned on the Warrant being invalidated
or not being exercised);
b. Once exercised, the Warrant places approximately 10% of the company's
outstanding shares under ADT's control for two years if Republic
retains the shares, because Republic agreed to give Mr. Ashcroft a
proxy over the shares for that time period. This permits Mr. Ashcroft
to undermine the voting rights of the ADT shareholders by voting the
Republic stock as he sees fit; and
c. In all events, Republic's exercise of the Warrant will result in an
immediate 2.6% dilution of Westar's 27% interest in ADT because ADT
will have to issue an additional 15 million ADT shares.
64. One financial analyst summarized the potential effect of
the Warrant on future acquisition proposals:
In the short term, however, buying interest [in ADT]
could be muted. Republic Industries, under its
(NY)
<PAGE>
CASE NO. 96-8889-Civ-Zloch
agreement, has a warrant to buy 15 million ADT shares
at $20 for the next six months, making any deal above
that price more expensive for a buyer.
(See "Market sinks Huizenga bid for ADT," Chicago Sun-Times, Financial Section,
October 1, 1996.)
65. ADT fortified the suspicion that the Warrant is an
entrenchment device when it strengthened its antitakeover features at the same
time that the Republic Merger Agreement was terminated. Simultaneous with ADT's
announcement of that termination, it also announced that the parties had amended
the Warrant to preclude Republic from selling, assigning, or otherwise
transferring shares purchased pursuant to the Warrant to any person whom
Republic had "reasonable cause to believe . . . has acquired interests in shares
of the Company which amount to 10% or more of the issued share capital of any
class of the Company." This provision -- which restricts Republic's ability to
transfer ADT shares to Westar -- surely did not promote the Merger since the
Merger had already been terminated. Instead, the only effect of the amendment is
to enhance the Warrant's entrenchment effect.
The Parking of ADT Shares in a Subsidiary
-----------------------------------------
66. Another entrenchment device utilized by the ADT Board is
the parking of ADT shares in a subsidiary that, upon information and belief, is
controlled by the ADT Board, in order to enable the board to affect the outcome
of a close shareholder vote.
67. In connection with ADT's 1996 annual stockholders meeting,
ADT disclosed that 3,182,787 shares, representing over 2% of ADT's outstanding
stock, were owned by an unidentified ADT "subsidiary" and that the subsidiary
was "entitled to vote" those shares. Under Bermuda corporate law, ADT's place of
incorporation, a company is a subsidiary of another company if it is directly or
indirectly controlled by that other company.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
68. The subsidiary's shares provide the board with a "safety
valve" in the event of a close vote. For example, the 1996 proposal regarding
Mr. Ashcroft's option package passed by a mere 1.44 million votes -- just 1% of
ADT's outstanding stock. If ADT used its control over its subsidiary to vote its
shares in favor of the options proposal, those shares would have swung the vote
in favor of a proposal that would otherwise have been rejected by shareholders.
It is a breach of the board's fiduciary duty to interfere with a shareholder
vote in such a manner.
The December 24 Letters
-----------------------
69. The ADT Board further indicated its willingness to
interfere with a shareholder vote in letters sent by ADT to Western Resources,
Westar and several of Western Resources' directors on December 24, 1996 -- six
days after Westar requested the Special Meeting. (Copies of the letters to
Westar and Western Resources (the "Westar Letter" and "Western Resources'
Letter") are annexed hereto as Exhibit A).
70. The Westar Letter seeks information regarding ADT shares
in which Westar is "interested", purportedly pursuant to a provision of ADT's
Bye-laws, and then threatens to "disqualify" Westar from "attend[ing] or
vot[ing] at any meeting of the Company" or from "exercis[ing] any privilege in
relation to meetings of the Company" for a period of 90 days upon notice by ADT
that it does not consider the information sought in the letter to have been
satisfactorily supplied in a timely manner. The letter purports to reserve ADT's
right to send this notice at any time in the future.
71. The Westar Letter is unnecessary for any legitimate
information- gathering objective because Western Resources and Westar have
provided all relevant information regarding ADT shares in which Westar holds an
interest in a "Preliminary Proxy
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Statement" and "Preliminary Prospectus" that they publicly filed with the SEC on
December 18, 1996; the Westar Letter is, instead, a device being utilized by ADT
to provide it with an excuse to deny Westar the right to vote at the Special
Meeting. This motivation is underscored by the fact that, although Westar
responded to the letter on January 3, 1997, ADT sent a further letter on January
28, 1997, alleging that no response had been received to its December 24
letters.
72. ADT's letter to Western Resources contains additional
veiled threats, principal among them a suggestion that Western Resources and
Westar did not comply with a provision in ADT's Bye-laws requiring notice to be
given to ADT upon acquisition of over 3% of ADT's outstanding common shares and
upon subsequent changes in interest amounting to over 1% of ADT's outstanding
shares. The letter ominously warns:
The directors of the Company attach significance to
disclosure of interest in shares in the Company in
accordance with the Bye-laws. Failure to make
notification entitles the directors to give notice
under Bye-law 46(2)(B), suspending the voting rights
in respect of the relevant shares, as described in
that Bye-law (which the directors reserve the right
to do).
73. All of Westar's purchases of ADT shares, however, were
reported to ADT (as well as publicly) in compliance with the Bye-laws. In fact,
in apparent recognition of this fact, ADT raised no objection to Westar voting
its ADT shares at ADT's April 11, 1996 annual shareholders meeting, which
occurred over one month after Westar had increased its ownership interest in
ADT's common shares to approximately 24%. Thus, ADT's letter to Western
Resources is simply another threat to arbitrarily find some excuse to prevent
Westar from voting at the Special Meeting.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
74. The cumulative effect of the December 24 letters is to
announce to Westar and ADT's other shareholders that ADT reserves the right
until some undetermined date in the future (perhaps, the date of the Special
Meeting) to disenfranchise ADT's largest shareholder from voting its 38,287,111
common shares, which would have the effect of radically altering ADT's
shareholder mix in connection with any shareholder vote. The confusion and
uncertainty created by such an announcement is damaging both to Westar's
acquisition proposal and to the interests of ADT's other shareholders.
75. The December 24 letters also threaten as an additional
penalty the possibility that common shares owned by Westar might not be
"reckoned in a quorum." Disabling Westar's 38,287,111 shares from being counted
towards a quorum in a special meeting would substantially increase the
percentage of ADT's outstanding stock under the control of Mr. Ashcroft if
Republic exercises the Warrant. Similarly, the 3,182,787 shares parked in the
ADT subsidiary would also constitute a larger percentage of ADT's outstanding
shares if Westar's 38,287,111 shares are not counted towards a quorum.
The ADT Special Meeting
-----------------------
76. On December 18, 1996, pursuant to ADT Bye-law 42 and
Section 74 of the Companies Act, Westar demanded that the ADT Board convene the
Special Meeting. Westar requested that the meeting be held on February 18, 1997.
77. On January 7, 1997, on the twenty-first day after being
served with Westar's demand, ADT announced that the Special Meeting requested by
Westar would be noticed for July 8, 1997 at 9:00 a.m. (A copy of ADT's Notice of
Special Meeting is annexed hereto as Exhibit B). The justification offered by
ADT to its shareholders for a potential seven-month delay was to "allow
sufficient time for all relevant information to become
<PAGE>
CASE NO. 96-8889-Civ-Zloch
available and be circulated to [shareholders] to enable [shareholders] to decide
whether or not [shareholders] wish to accept the Western Offer and how
[shareholders] wish to vote at the Special General Meeting." However, ADT hedged
on this issue by adding that, "[i]f it becomes apparent that all relevant
information is available so as to allow the proposals to be properly considered
at a significantly earlier date, your Board intends to convene a Separate
General Meeting for an earlier date."
78. Scheduling the Special Meeting for as late as July 8, 1997
is both a breach by the ADT Board of its duties to Westar and unlawful under
Bermuda law and the Bye-laws. Bermuda law only requires Bermuda corporations to
have one shareholder meeting per year; the special meeting provisions of the
Companies Act and Bye-laws give a shareholder owning over 10% of a Bermuda
corporation the ability to convene a meeting on a more expedited basis if the
shareholder wishes to make a proposal to fellow shareholders. The special
meeting provision of the Companies Act is one of the most important rights
afforded to large shareholders of Bermuda corporations. By scheduling the
Special Meeting almost seven months after it was demanded by Westar, ADT has
undermined this right and delayed Westar's right to present proposals to its
fellow shareholders.
79. Section 74(1) of the Companies Act states that, upon the
demand or "requisition" by a shareholder owning over 10% of the company's paid
up capital, the directors must "forthwith proceed duly to convene a special
general meeting of the company." While Section 74 does not set out an express
deadline by which the meeting must be held, the statute clearly contemplates
that the meeting be held reasonably promptly. In fact, Section 74(3) states that
the shareholder can convene the meeting itself if the corporation does not do so
within 21 days but that such a meeting must be held within three months. By
setting a date of
<PAGE>
CASE NO. 96-8889-Civ-Zloch
July 8, 1997 for the Special Meeting, the ADT Board has frustrated Westar's
right to hold the meeting itself no later than March 18, 1997 under Section
74(3) of the Companies Act.
80. ADT's convening the Special Meeting for July 8, 1997 also
violates ADT's Bye-laws, which require Special Meetings to be convened by notice
"in like manner as the Annual General Meeting." See ADT Bye-Law 42. For the last
four years ADT has scheduled its annual general meeting on approximately 30
days' notice, including the 1996 annual meeting when it presented proposals to
its shareholders regarding the options package to be offered its two executives
which were contested by Westar. Thus, scheduling the Special Meeting in "like
manner" as the annual general meeting would have required a 30-day rather than
six-month notice of the meeting.
81. Moreover, ADT's excuse for its delay in holding the
meeting -- to "allow sufficient time" for shareholders to become apprised of all
"relevant information" -- is a pretext. As ADT well knows, disclosure in advance
of the meeting is regulated by the SEC (because ADT is a United States issuer
under the United States securities laws) and a clear majority of ADT's share
trading activity occurs on the New York Stock Exchange and, consequently, there
is no reason to believe that shareholders will not receive "relevant
information" sufficiently in advance of the meeting. Perhaps this is why ADT, in
its notice of the meeting, felt the need to tell shareholders that a shareholder
meeting may be held at a "significantly earlier date."
82. If the Special Meeting is held on July 8, 1997, as
currently scheduled, Westar will be prevented from exercising a right that it
should have been permitted to exercise months earlier -- the right to ask
shareholders to replace the ADT Board. The board -- which has an obvious
self-interest in delaying such a decision by ADT's shareholders -- simply should
<PAGE>
CASE NO. 96-8889-Civ-Zloch
not be permitted to so frustrate Westar's rights.
ADT's Recommendations to Reject
the Western Resources Offer as Inadequate
-----------------------------------------
83. On January 7, 1997, the ADT Board sent a letter to ADT
shareholders that was signed by defendant Ashcroft in his capacity as Chairman
and Chief Executive Officer of ADT ("Ashcroft Letter") (Exhibit B). The Ashcroft
Letter states in pertinent part:
Due to the limited time since the announcement of the
Western Offer and the limited information presently
available, your Board has not reached definitive
decision with respect to the Western Offer. However,
you should be aware that the Board's preliminary view
based on this limited information, is that the
Western Offer is inadequate.....
84. Although the ADT Board stated that it "ha[d] not reached a
definitive decision with respect to the Western Offer," the ADT Board advanced
its "preliminary view" to ADT shareholders that "the Western Offer was
inadequate." This preliminary view is a "recommendation" within the meaning of
Section 14(d)(4) of the Securities Exchange Act of 1934 (the "1934 Act"), 15
U.S.C. ss. 78n(d).
85. ADT did not, however, couple this letter with the filing
of a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9
("Schedule 14D-9"), as required by Section 14(d). 17 C.F.R. ss. 240.14d-9.
86. On March 3, ADT announced that it was rejecting the
Western Resources Offer as "inadequate" and, the next day, filed a Schedule
14D-9. However, between January 7 and March 4, ADT had no Schedule 14D-9 filed.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
COUNT ONE: AGAINST ALL DEFENDANTS
EXCEPT REPUBLIC (FOR BREACH OF
FIDUCIARY DUTY) (POISON PILL)
---------------------------------
87. Westar repeats and realleges the allegations in paragraphs
1 through 86, as if set forth in full herein.
88. The ADT Board's deployment of the Poison Pill is a
violation of their fiduciary duties because until redeemed, the Pill (i)
prevents an acquisition of the company pursuant to the attractive proposal made
by Western Resources; (ii) shelters a poor-performing and highly-paid
management from a change in control; and (iii) deprives ADT's stockholders of
the opportunity to receive full value for their shares pursuant to the Western
Resources' Offer. The Poison Pill acts to entrench the board in office, which is
an unlawful, improper and collateral purpose. The Poison Pill also discriminates
against -- indeed, specifically penalizes -- Westar because it (i) prevents
Westar from selling its shares as a block to a third party, and (ii) prohibits
Westar from purchasing any more shares of ADT stock. Moreover, the Pill is by
nature discriminatory because the party who triggers the Poison Pill rights does
not receive its benefits.
89. This discrimination and punitive conduct is unlawful and
in breach of the ADT Board's fiduciary duties.
90. Westar has no adequate remedy at law.
COUNT TWO: AGAINST ALL DEFENDANTS
EXCEPT REPUBLIC (BREACH OF FIDUCIARY
DUTY BY AMENDING THE POISON PILL)
------------------------------------
91. Westar repeats and realleges the allegations in paragraphs
1 and 86 as if set forth in full herein.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
92. Shareholders who disagree with the ADT Board's decision to
use the pill to thwart the Western Resources' Offer can vote the Board out of
office. However, the Dead Hand provisions are designed to nullify such a vote by
reserving to the current ADT Board -- even if it is no longer in office -- the
exclusive power to redeem the Poison Pill.
93. The amendment to the Pill is also intended to interfere
with Westar's right as a 27% shareholder to wage an effective proxy contest to
replace the ADT Board by removing from shareholders their incentive to vote for
the Westar Proposal.
94. The ADT Board's adoption of the Dead Hand provisions has
no legitimate purpose, except the improper, collateral and unlawful purpose of
entrenching the current ADT Board in office, and is not in the best interests of
ADT or its shareholders. The ADT Board is breaching its fiduciary duties and its
conduct penalizes, and unfairly discriminates against, Westar.
95. The validity of the Dead Hand provisions must be resolved
prior to the Special Meeting so that Westar and ADT's other shareholders know
whether a vote in favor of the Westar Proposal will facilitate the Western
Resources Offer.
96. Westar has no adequate remedy at law.
COUNT THREE: AGAINST ALL DEFENDANTS
EXCEPT REPUBLIC (BREACH OF FIDUCIARY DUTY)
------------------------------------------
97. Westar repeats and realleges the allegations in paragraphs
1 through 86, as if set forth in full herein.
98. A shareholder's most fundamental right is the right to
vote. A board of directors breaches its fiduciary duty if it uses its control of
the corporate machinery in order to subvert shareholder voting rights.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
99. Upon information and belief, ADT has done just that by
placing ADT stock in the hands of a subsidiary it controls and permitting that
subsidiary to vote those shares. This device permits ADT to use the subsidiary's
stock to swing a vote in its favor.
100. ADT should not have voted its subsidiary's stock in the
past and should not be permitted to vote its subsidiary's stock at the Special
Meeting. This issue must be resolved in advance of that meeting.
101. Westar has no adequate remedy at law.
COUNT FOUR: BREACH OF FIDUCIARY
DUTY AGAINST ALL DEFENDANTS
EXCEPT REPUBLIC (WARRANT)
-------------------------------
102. Westar repeats and realleges the allegations in
paragraphs 1 through 86, as if set forth in full herein.
103. As directors of ADT, defendants are obliged to exercise
the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. They are also required to act in the best interests of
the company as a whole and not for any improper, unlawful, or collateral
purposes or to interfere with shareholder voting rights.
104. A rational and prudent board would not have granted the
Warrant to Republic. By granting the Warrant and thereby (i) giving away a
corporate asset for inadequate consideration, (ii) making more expensive any
proposal to acquire the company above the Warrant's exercise price of $20 per
share, (iii) allowing over 10% of ADT's shares to be held subject to Mr.
Ashcroft's control upon exercise of the Warrant, (iv) restricting Republic's
ability to tender shares purchased pursuant to the Warrant to "tender offers
which the Board of Directors of ADT recommends," (v) precluding Republic from
selling greater
<PAGE>
CASE NO. 96-8889-Civ-Zloch
than five million shares to any single purchaser, and (vi) precluding Republic
from transferring shares purchased pursuant to the Warrant to any person owning
more than 10% of ADT's stock, the ADT Board breached its fiduciary duties to ADT
and its shareholders and acted for an improper purpose.
105. The Warrant interferes with the proposal Westar plans to
present at the Special Meeting by diluting Westar's interest in the Company and,
under certain circumstances, giving Mr. Ashcroft voting control over
approximately 10% of the shares of the Company.
106. If the Warrant is exercised and the shares are voted
against Westar's proposals at the Special Meeting, Westar will have no adequate
remedy at law.
COUNT FIVE: BREACH OF
FIDUCIARY DUTY AGAINST ALL
DEFENDANTS EXCEPT REPUBLIC
(THREATS TO SUSPEND VOTING RIGHTS)
----------------------------------
107. Westar repeats and realleges the allegations in
paragraphs 1 through 86, as if set forth in full herein.
108. A board of directors breaches its fiduciary duty if it
uses its control of the corporate machinery in order to subvert or interfere
with shareholder voting rights. The ADT Board has threatened to do just that in
its December 24, 1996 and January 28, 1997 letters to Westar and Western
Resources in which it purports to have the right to suspend Westar's voting
rights regarding its ADT shares because of the alleged failure of Westar to
provide certain information regarding its ADT holdings. These threats are
without basis because Westar has provided ADT with all relevant information
regarding its ADT stockholdings in a timely manner.
<PAGE>
CASE NO. 96-8889-Civ-Zloch
109. The ADT Board's threat to disqualify Westar's 38,287,111
shares from being "reckoned in a quorum" would also unjustifiably interfere with
a shareholder vote by (i) increasing the percentage of ADT stock under Mr.
Ashcroft's control if the Warrant is exercised, and (ii) increasing the
percentage of stock under ADT's control by virtue of the 3,182,787 shares parked
in the ADT subsidiary.
110. The ADT Board's current threat to interfere with Westar's
voting rights coupled with its contention that it can reserve its right to
suspend Westar's voting rights until some unspecified date in the future creates
uncertainty as to whether Westar will be able to vote its substantial stock
interest in ADT in favor of its own proposal at the Special Meeting. This
uncertainty is harmful to (1) Westar's acquisition proposal for ADT, and (2)
ADT's shareholders.
111. Thus, a ripe case and controversy exists regarding
Westar's rights to vote its shares at the Special Meeting. Now that ADT has
threatened to suspend those rights, their validity must be resolved before the
Special Meeting.
112. Westar has no adequate remedy at law.
COUNT SIX: FOR BREACH OF
FIDUCIARY DUTY AGAINST ALL
DEFENDANTS EXCEPT REPUBLIC
(FOR DELAYING THE SPECIAL MEETING)
----------------------------------
113. Westar repeats and realleges the allegations in
paragraphs 1 through 86, as if set forth in full herein.
114. The ADT Board has an obligation not to interfere with and
frustrate the rights granted to shareholders in the Companies Act and ADT's
Bye-laws.
115. The ADT Board's determination that the Special Meeting
<PAGE>
CASE NO. 96-8889-Civ-Zloch
be scheduled for July 8, 1997 is a breach of fiduciary duty and an inequitable
manipulation of the corporate machinery for an improper purpose. Westar has the
right under ADT's Bye-laws and Section 74 of the Companies Act to call a special
meeting and to have its proposal heard within a reasonable time. It is
unreasonable for the ADT Board to delay the Special Meeting until July 8, 1997.
Such delay interferes with Westar's right to have the meeting held and
shareholder voting rights, and improperly extends the board's stay in office.
116. Westar has no adequate remedy at law.
COUNT SEVEN: FOR VIOLATION OF THE
BERMUDA STATUTORY SCHEME AGAINST
ALL DEFENDANTS EXCEPT REPUBLIC
FOR DELAYING THE SPECIAL MEETING).
----------------------------------
117. Westar repeats and realleges paragraphs 1 through 86, as
if set forth in full herein.
118. Under Section 74(1) of the Companies Act, upon the demand
to convene a special general meeting, a board of directors must "forthwith
proceed duly to convene a special general meeting of the Company."
119. If a board fails to duly convene a meeting under Section
74(1) within 21 days, a shareholder may convene a meeting as long as "any
meeting so convened shall not be held after the expiration of three months from
such date."
120. Westar filed its requisition with ADT on December 18,
1996. In response, ADT noticed the meeting for July 8, 1997, but indicated that
the date was somewhat tentative by stating that a shareholder meeting might be
held at a "significantly earlier date."
121. By failing to convene the Special Meeting within a
reasonable time and
<PAGE>
CASE NO. 96-8889-Civ-Zloch
noticing only a tentative meeting date, the ADT Board has violated its statutory
duties set forth in Section 74 of the Companies Act and has acted in a manner
that is prejudicial to the interests of Westar and other shareholders of ADT.
122. Westar has no adequate remedy at law.
COUNT EIGHT: FOR VIOLATION OF
SECTION 14(d) OF THE EXCHANGE
ACT AND RULE 14d-9 AGAINST ALL
DEFENDANTS EXCEPT REPUBLIC
------------------------------
123. Westar repeats and realleges the allegations in
paragraphs 1 through 86, as if set forth in full herein.
124. Section 14(d)(4) of the Exchange Act, 15 U.S.C.ss.78n(d),
provides that: Any solicitation or recommendation to the holders of such a
security to accept or reject a tender offer or request or invitation for tenders
shall be made in accordance with such rules and regulations as the Commission
may prescribe as necessary or appropriate in the public interest or for the
protection of investors.
125. Rule 14d-9 promulgated under Section 14(d) of the
Exchange Act strictly prohibits solicitations or recommendations regarding a
tender offer "unless as soon as practicable on the date such solicitation or
recommendation is first published or sent or given to security holders" a filing
on Schedule 14D-9 is made. 17 C.F.R. ss. 240.14d-9 This prohibition extends to
imminent exchange offers.
126. Because the Western Resources Offer was a public
announcement that an exchange offer was imminent that was followed by the filing
of a registration statement on Form S-4 containing a preliminary prospectus and
preliminary proxy materials with the SEC,
<PAGE>
CASE NO. 96-8889-Civ-Zloch
Rule 14d-9 applies to the Western Resources Offer.
127. The Ashcroft Letter includes recommendations within the
meaning of Rule 14d-9. However, no Schedule 14D-9 was filed by ADT regarding
those materials. On March 4, 1997, ADT filed a Schedule 14D-9 with respect to
its recommendation to ADT's shareholders that they reject the Western Resources
Offer as "inadequate." However, no Schedule 14D-9 as to the January 7 letter was
ever filed.
128. ADT has violated Rule 14d-9 by failing to timely file a
Schedule 14D-9 with the SEC.
COUNT NINE: FOR AIDING AND
ABETTING A BREACH OF FIDUCIARY
DUTY AGAINST REPUBLIC INDUSTRIES
--------------------------------
129. Westar repeats and realleges the allegations in
paragraphs 1 through 86, as if set forth in full herein.
130. Republic, through its Chairman H. Wayne Huizenga and its
board of directors, acted in concert with, and knowingly participated in
breaches of fiduciary duties by, the ADT Board by agreeing to the Warrant and
its amendments. The Warrant provides no value to ADT's shareholders and was
authorized for the improper purpose of entrenching the ADT Board.
131. Republic's conduct has caused, and is continuing to
cause, harm to ADT and its shareholders, including Westar.
WHEREFORE, Westar respectfully requests that this Court enter
judgment as follows:
(a) Declaring that ADT's Board of Directors is in breach of
its fiduciary
<PAGE>
CASE NO. 96-8889-Civ-Zloch
duties to ADT and to ADT's stockholders by continuing to deploy the poison pill
and amending the pill to add the Dead Hand provisions;
(b) Compelling ADT's Board of Directors to redeem the poison
pill or take such actions as are required to render the poison pill inapplicable
the Western Resources Offer;
(c) Declaring the Dead Hand provisions of the poison pill null
and void and of no further force and effect and compelling the ADT Board to take
such actions as required to remove the provisions from the poison pill and to
render the Dead Hand provisions inapplicable to the Westar Proposal and Western
Resources Offer;
(d) Declaring that ADT's subsidiary is prohibited from voting
any shares of ADT it owns on any matter put to a vote of ADT's shareholders,
including matters subject to a vote at any special meeting of ADT's shareholders
requested by Westar;
(e) Declaring void and rescinding any ADT action that was
taken only after receiving ADT shareholder approval if shares were voted in
favor of the action by any ADT subsidiary and such shares were greater in number
than the margin by which the action was approved by shareholders;
(f) Enjoining, preliminarily and permanently, ADT's subsidiary
from voting any ADT shares on any matter put to a vote of ADT's shareholders,
including matters subject to a vote at the special meeting of ADT's shareholders
requested by Westar;
(g) Enjoining, preliminarily and permanently, ADT and Republic
from enforcing their respective rights, duties and obligations under the
Warrant;
(h) Declaring that the Warrant and any shares issued pursuant
to it are null and void and of no further force and effect;
<PAGE>
CASE NO. 96-8889-Civ-Zloch
(i) In the event that the Warrant is exercised by Republic,
rescinding any purchase of shares pursuant to the Warrant;
(j) Enjoining, preliminarily and permanently, ADT, Republic
and Mr. Ashcroft from exercising any voting rights associated with any shares
received pursuant to exercise of the Warrant on any matter put to a vote of
ADT's shareholders, including matters subject to a vote at the upcoming special
meeting of ADT's shareholders;
(k) Declaring that Westar is entitled to exercise its voting
rights with respect to the shares it owns in ADT;
(l) Enjoining, preliminarily and permanently, ADT from taking
any action to suspend any rights attendant to Westar's ownership of ADT shares,
including voting rights;
(m) Enjoining, preliminarily and permanently, ADT from holding
a Special Meeting on July 8, 1997;
(n) Declaring that ADT's announcement that the Special Meeting
be held on July 8, 1997 constitutes a breach of the ADT Board's fiduciary and
statutory duties;
(o) Compelling ADT to hold the Special Meeting 30 days after
the date on which Western Resources begins disseminating definitive proxy
materials for the Special Meeting to ADT's shareholders;
(p) Enjoining, preliminarily and permanently, ADT, its agents
and employees from making further statements and soliciting proxies against the
Western Resources Offer in violation of Section 14(d) of the Exchange Act and
Rule 14d-9 promulgated thereunder;
(q) Declaring that ADT has violated Section 14(d) of the
Exchange Act and Rule 14d-9 promulgated thereunder;
<PAGE>
CASE NO. 96-8889-Civ-Zloch
(r) Awarding Westar and/or ADT damages for the losses and
costs it has sustained and will sustain as a result of the conduct of ADT's
Board of Directors;
(s) Awarding Westar and/or ADT the costs and disbursements of
this action together with reasonable attorneys' fees;
(t) Awarding Westar and/or ADT such other and proper relief as
the Court may deem just and proper; and
(u) Jury trial is demanded.
Dated: March 10, 1997 Respectfully submitted,
SULLIVAN & CROMWELL HOLLAND & KNIGHT LLP
John L. Hardiman Attorneys for Plaintiff
Tariq Mundiya 701 Brickell Avenue
John C. Stellabotte P.O. Box 015441
125 Broad Street Miami, FL 33101
New York, NY 10004 phone: (305) 374-8500
phone: (212) 558-4000 fax: (305) 789-7799
fax: (212) 558-3588
By: /s/ Illegible /for MLS
--------------------------
MARTY L. STEINBERG
Florida Bar No. 187293
JUDITH M. MERCIER
Florida Bar No. 0032727
CERTIFICATE OF SERVICE
----------------------
I HEREBY CERTIFY that a true and correct copy of the foregoing was
served via Federal Express to Michael P. Carroll, Davis, Polk & Wardwell, 450
Lexington Avenue, New York, N.Y. 10017 as attorneys for ADT Defendants, and
Thomas J. Allingham, II, Skadden, Arps, Meagher & Flom, One Rodney Square, P.O.
Box 636, Wilmington, Delaware 19899 as
<PAGE>
CASE NO. 96-8889-Civ-Zloch
attorneys for Republic Industries Inc., and via hand-delivery to Robert C.
Josefsberg, Katherine W. Ezell, Podhurst, Orseck, Josefsberg, et al., 25 West
Flagler Street, Suite 800, City National Bank Building, Miami, Florida 33130 as
attorneys for ADT Defendants and Henry Latimer, Eckert, Seamans, Cherin &
Mellot, 450 East Las Olas Blvd. Ft. Lauderdale, Florida 33301 as attorneys for
Republic Industries, Inc. on this 11th day of March, 1997.
/s/ Illegible
-------------
FTL1-234208
<PAGE>
Exhibit A
[ADT LOGO]
ADT Limited
Cedar House
Cedar Avenue
Western Resources, Inc. Hamilton HM 09
818 South Kansas Avenue Bermuda
P.O. Box 889 Telephone 809 295 2244
Topeka Telecopier 809 292 8666
Kansas 66612 Telex 3223 ASK BA
USA
December 24, 1996
Dear Sirs,
We note that you have recently stated that your subsidiary, Westar Capital, Inc.
("Westar") holds 38,287,111 common shares in ADT Limited (the "Company"),
including 14,115 common shares issuable upon exchange of Liquid Yield Option
Notes of the Company. In the circumstances, we draw your attention to the
following:
1. Under Bye-Law 46(3)(A) of the Company's Bye-Laws, any person who
acquires an interest in shares which amounts to 3% or more of the
issued share capital of any class of the Company is required, within
two days following the date on which he became aware (or ought
reasonably to have become aware) of the acquisition of such an
interest, to notify the Company of the existence of that interest and
to supply the particulars referred to in that Bye-Law. In view of your
announced intention to commence an offer to acquire further shares in
the Company, you should note that:
(a) any change in interests amounting to 1% or more of the issued
share capital of any class of the Company must also be
notified to the Company within the same period; and
(b) for these purposes, a person's interests are aggregated with
those of any other person acting in concert with the first
person.
The Company has no record of any notification made by you or by Westar
in accordance with the terms of this Bye-Law in respect of Westar's
purchases of shares in the Company, apparently made during the last two
years in privately negotiated and open market transactions. The
directors of the Company attach significance to disclosure of interests
in shares in the Company in accordance with the Bye-Laws. Failure to
make notification entitles the directors to give notice under Bye-Law
48(3)(B), suspending the voting rights in respect of the relevant
shares, as described in
<PAGE>
that Bye-Law (which the directors reserve the right to do).
2. Bye-Law 104(1)(B) of the Bye-Laws of the Company entitles the directors
to require compliance with the SARs (as defined in that Bye-Law) by a
person who appears to the directors likely to acquire an interest in
shares in the capital of the Company in the circumstances envisaged by
the SARs and that Bye-Law. In accordance with Bye-Law 104(1)(B), we
require you to comply with the SARs (as so defined) in relation to any
acquisition made or proposed to be made by you or Westar. You should
note that any failure to do so entitles the directors to require
disposal of the relevant shares, as more particularly described in
Bye-Law 104 (which they reserve the right to do).
3. Bye-Law 104(1)(A) entitles the directors to require an offer to be made
or extended in accordance with the requirements of the City Code (as
defined in that Bye-Law) in certain circumstances. Bye-Law 104(3) also
entitles the directors to require a similar offer to be made in certain
circumstances, as more particularly described in that Bye- Law.
The directors reserve the right to require compliance with these
provisions in appropriate circumstances.
4. For the purposes of the Bye-Laws of the Company, the directors will
(without prejudice to their rights and powers under the Bye-Laws)
presume that the following persons, in addition to Westar, are acting
in consent with you, unless the contrary is established:
(a) all your subsidiaries and associated companies (within the
meaning of the City Code) of your company;
(b) all directors of your company, together with their close
relatives and related rusts;
(c) any of your company's pension funds; and
(d) your financial and other professional advisers or persons who
control any such adviser or are under the same control as any
such adviser (as defined for the purposes of the City Code).
<PAGE>
In order to enable the directors to monitor and give effect to some or all of
the provisions referred to above, we are today serving notices requiring
information concerning your interests in common shares in the Company, pursuant
to Bye-Law 46 of the Bye-Laws of the Company.
Yours faithfully,
/s/ Rosalind Johnson
for ADT Limited
<PAGE>
[ADT LOGO]
ADT Limited
Cedar House
Cedar Avenue
Hamilton HM 09
Westar Capital, Inc. Bermuda
818 South Kansas Ave. Telephone 809 295 2244
Topeka, KS 66601-0889 Telecopier 809 292 8886
USA Telex 3223 ASK BA
December 24, 1996
Dear Sirs,
We note that you are the registered holder of 30,800,000 shares of US$0.10 each
in the Company ("Common Shares"). Under Bye-Law 46 of the Bye-Laws of ADT
Limited (the "Company"), we require you to provide us in writing with the
following information concerning your interests in Common Shares.
1. Please indicate whether or not you are interested1 in any other Common
Shares, in addition to those registered in your name.
2. Please provide the following particulars about your interests in Common
Shares:
(a) the number of Common Shares in which you have an interest (the
"Shares") indicating the nature of your interest (e.g.
beneficial owner, trustee, contracted to purchase);
(b) the full name(s) and address(es) of the registered holder(s)
of the Shares (if they are not registered in your name alone),
together with the number of Shares held by each registered
holder;
(c) the full name and address of every other person2 (if any) who
has an interest in any of the Shares, together with the
particulars of the nature of such interest and the number of
Shares in which each such person has an interest; and
(d) whether you and/or any other registered holder(s) referred to
in paragraph (b) above and/or the person(s) having an interest
in Shares referred to in paragraph (c) above are parties to
any agreement or arrangement relating to the exercise of any
of the rights conferred by the holding of the Shares (if so,
please give full particulars).
- --------
1 See note 1 below for the meaning of "interested".
2 See note 2 below for the meaning of "person".
<PAGE>
The information requested above should be sent to John D. Campbell, Secretary,
at ADT Limited, Cedar House, Cedar Avenue, Hamilton, HM12, Bermuda so as to be
received not later than 5:00 p.m. (New York time) on January 3, 1997.
If you fail to supply the information required by this letter before the expiry
of the period specified above, you will not be entitled to attend or vote at any
meeting of the Company, either personally or by proxy, or to exercise any
privilege in relation to meetings of the Company conferred by membership or be
reckoned in a quorum in respect of the Shares. These disqualifications will take
effect on service on you of a further notice to the effect that you have thereby
become subject to these disqualifications and will remain in force for so long
as the information requested by this notice has not been supplied to the Company
and for a period of 90 days thereafter.
In addition, the right to receive payments of income or capital which become due
or payable in respect of any Share during a period of disqualification
applicable to that Share will be suspended during the period of disqualification
without any liability of the Company for late payment or non-payment and the
Company may retain such sums for its own use and benefit during the period of
suspension and the holders of the Shares may, in the discretion of the Directors
of the Company, may be excluded from participation in any further issue of
shares by reference to an existing holding of shares at a point in time during
such period of suspension. No trust shall be created in respect of any such
debt, no interest shall be payable in respect of the same and the Company shall
not be required to account for any money earned on such amount, which may be
employed in the business of the Company or invested in such investments as the
Directors of the Company may from time to time think fit.
Yours faithfully,
/s/ Rosalind Johnson
for ADT Limited
<PAGE>
NOTES
These notes form part of this letter:
1. For the purposes of this letter:
(a) a person who is interested in a right to subscribe for or
convert into shares in the Company is deemed to be interested
in shares in the Company; and
(b) references to an interest in shares include any interest
whatsoever in such shares including, without limitation, a
right to control directly or indirectly the exercise of any
right conferred by the holding of shares alone or in
conjunction with a person deemed to be acting in concert for
the purposes of Bye-Law 104 of the Bye-Laws of the Company and
the interest of any person deemed to be acting in concert.
For the purposes of Bye-Law 104, persons are deemed to be acting in
concert if, pursuant to an agreement or understanding (whether formal
or informal) they actively co-operate in acquiring or seeking to
acquire shares in, or convertible securities of, the Company.
2. The words "person" and "persons", when used in this letter, include any
company or association or bodies of persons, whether corporate or
un-incorporate.
<PAGE>
Exhibit B
January 7, 1997 ADT LOGO
To the Common Shareholders
Dear Shareholders
Special General Meeting and offer by Western Resources, Inc.
On December 18, 1996, Western Resources, Inc. ("Western") announced that it
proposed to make an unsolicited offer to attempt to acquire all the shares in
ADT Limited (the "Company") not already owned by Western and its affiliates. The
proposed offer (the "Western Offer") would be on terms that shareholders would
receive, in a taxable and highly conditioned transaction, US$7.50 in cash and
Western common stock valued at a maximum of US$15.00 (depending on the value of
Western common stock at the time of the Western Offer) in exchange for each
common share in the Company.
The text of a press release issued by the Company on December 18, 1996 is set
out below for your information.
Due to the limited time since the announcement of the Western Offer and the
limited information presently available, your Board has not reached a definitive
decision with respect to the Western Offer. However, you should be aware that
the Board's preliminary view, based on this limited information, is that the
Western Offer is inadequate.
Simultaneously with announcing the Western Offer, a subsidiary of Western
(holding more than 10 per cent of all the issued common shares of the Company)
requisitioned a Special General Meeting of the Company for the purpose of
considering resolutions to remove the entire board of directors, including all
of the independent directors, and replace them with two of their own nominees
(being employees or officers of Western). Western has left no doubt that its
objective in precipitating the Special General Meeting is to obtain control of
the Company and have its nominees dismantle the Company's shareholder
protections so that Western can complete its offer for the shares of the
Company. Under the Companies Act 1981 of Bermuda and the Bye-Laws of the
Company, your Board is obliged to convene a meeting to consider Western's
proposals and accordingly you will find set out at the back of this letter a
notice convening a Special General Meeting for July 8, 1997.
While it is apparent to your Board that sufficient information is not presently
available to the Board or shareholders generally for them to reach a definitive
decision as to the merits of the Western Offer, the Board recommends a vote
AGAINST the proposals to be considered at the Special General Meeting based upon
the information available at this time. Your Board expects that Western will in
due course publish definitive documents relating to the Western Offer and to
Western and I (on behalf of your Board) will then write to you explaining your
Board's views and the action which we recommend you to take on the Western
Offer. Your Board has convened the Special General Meeting for July 8, 1997 in
the
<PAGE>
expectation that this should allow sufficient time for all relevant information
to become available and be circulated to you to enable you to decide whether or
not you wish to accept the Western Offer and how you wish to vote at the Special
General Meeting. If it becomes apparent that all relevant information is
available so as to allow the proposals to be properly considered at a
significantly earlier date, your Board intends to convene a Separate General
Meeting for an earlier date.
Forms of proxy will be sent to shareholders well in advance of the Special
General Meeting.
Shareholders need not take any action in relation to the Western Offer until we
are able to write to you again, which we will do in good time. Your Board
recommends that you do not sign or return any proxy card sent to you by Western
Resources.
Yours sincerely,
/s/ Michael A. Ashcroft
------------------------------------
Chairman and Chief Executive Officer
CERTAIN ADDITIONAL INFORMATION: ADT Limited (the "Company") will be soliciting
proxies against the proposals of Western Resources, Inc. (together with its
subsidiaries, "Western") and revocations of proxies previously given to Western
for such proposals. The following individuals may be deemed to be participants
in the solicitation of proxies and revocations of proxies by the Company: ADT
Limited, Michael A. Ashcroft, John E. Danneberg, Alan B. Henderson, James S.
Pasman, Jr., Stephen J. Ruzika, W. Peter Slusser, William W. Stinson, Raymond S.
Troubh and Angela E. Entwistle. As of January 7, 1997, Mr. Ashcroft is the
beneficial owner of 11,075,718 of the Company's common shares, Mr. Danneberg is
the beneficial owner of 102 of the Company's common shares, Mr. Henderson is the
beneficial owner of 621 of the Company's common shares, Mr. Pasman is the
beneficial owner of 2,000 of the Company's common shares, Mr. Ruzika is the
beneficial owner of 1,157,405 of the Company's common shares, Mr. Slusser is the
beneficial owner of 2,800 of the Company's common shares, Mr. Stinson is the
beneficial owner of 3,010 of the Company's common shares, Mr. Troubh is the
beneficial owner of 2,500 of the Company's common shares and Ms. Entwistle is
the beneficial owner of none of the Company's common shares.
The following is the text of a press release issued by the Company on December
18, 1996:
ADT ADVISES SHAREHOLDERS TO AWAIT BOARD'S RECOMMENDATION
BEFORE TAKING ACTION ON WESTERN'S UNSOLICITED PROPOSAL
ADT Limited (NYSE: ADT) announced today, in response to Western Resources,
Inc.'s (NYSE: WR) unsolicited proposal, that the Company's Board of Directors
will review the proposal in due course.
<PAGE>
ADT stated that shareholders need not take any action at this time with respect
to Western's proposal, and requested that shareholders await the recommendation
of the ADT Board. ADT is the largest provider of electronic security services in
North America and the United Kingdom, providing continuous monitoring of
commercial and residential security systems to over 1.7 million customers.
ADT is also the second largest provider of vehicle auction services in the
United States, operating a network of 27 vehicle auction centers providing a
comprehensive range of vehicle remarketing services to vehicle dealers and
owners and operators of vehicle fleets.
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,
/s/ John D. Campbell, Secretary
41 Cedar Avenue
Hamilton HM12
Bermuda
January 7, 1997
Exhibit 99.36
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 96-8889-CIV-ZLOCH
WESTAR CAPITAL, INC.,
Plaintiff,
vs.
ADT LTD., MICHAEL A. ASHCROFT,
STEPHEN J. RUZIKA, JOHN E. ORDER
DANNEBERG, ALAN B. HENDERSON,
JAMES S. PASMAN, JR., W. PETER
SLUSSER, WILLIAM W. STINSON,
RAYMOND S. TROUBH, and
REPUBLIC INDUSTRIES, INC.,
Defendants.
THIS MATTER is before the Court upon Westar's Motion For An Expedited
Trial on Certain Counts Of The Complaint And Accompanying Notice Order, bearing
file stamp of the Clerk of this Court dated February 19, 1997; and upon the ADT
Defendants' Motion For Order Permitting appearance Pro Hac Vice, bearing file
stamp of the Clerk of this Court dated March 10, 1997. The Court has carefully
reviewed said Motions and after due consideration, it is
ORDERED AND ADJUDGED as follows:
1. Westar's Motion For An Expedited Trial on Certain Counts Of The
Complaint be and the same is hereby DENIED; and
<PAGE>
2. The ADT Defendants' Motion For Order Permitting appearance Pro Hac
Vice be and the same is hereby GRANTED. Michael P. Carrol, Esquire, James H.R.
Windels, Esquire, and Elizabeth A. Hone, Esquire, of the firm of Davis Polk &
Wardwell be and the same are hereby granted leave to appear in the above-styled
cause on behalf of the ADT Defendants.
DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County,
Florida, this 12th day of March, 1997.
/s/ William J. Zloch
--------------------
WILLIAM J. ZLOCH
United States District Judge
Copies furnished:
See attached Mailing List
Exhibit 99.37
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 96-8889-CIV-ZLOCH
Magistrate Judge Seltzer
WESTAR CAPITAL, INC.,
Plaintiff,
vs.
ADT LTD., MICHAEL A. ASHCROFT, MOTION AND MEMORANDUM
STEPHEN J. RUZIKA, JOHN E. OF THE ADT DEFENDANTS IN
DANNEBERG, ALAN B. HENDERSON, SUPPORT OF THEIR MOTION
JAMES S. PASMAN, JR., W. PETER TO DISMISS THE FOURTH
SLUSSER, WILLIAM W. STINSON, AMENDED COMPLAINT
RAYMOND S. TROUBH, and ------------------------
REPUBLIC INDUSTRIES, INC.,
Defendants.
_____________________________________/
Defendants ADT Ltd. ("ADT"), Michael A. Ashcroft, Stephen J. Ruzika,
John E. Danneberg, Alan B. Henderson, James S. Pasman, Jr., W. Peter Slusser,
William W. Stinson, and Raymond S. Troubh (collectively, the "ADT Defendants")
respectfully move this Court pursuant to Federal Rules of Civil Procedure
12(b)(2), 12(b)(6) and 12(b)(7) and the doctrine of forum non conveniens to
dismiss the Fourth Amended Complaint, dated March 11, 1997 (the "Complaint"),
against them.
Preliminary Statement
---------------------
In Nichols v. Paulucci, 652 So.2d 389 (Fla. 5th DCA 1995), the Florida
Appellate Court found personal jurisdiction over an out-of state parent
corporation based on eleven factors which the Court identified in its opinion.
As shown by the affidavits which accompany this motion, most of these factors
are not present in this case. This Court is therefore presented with the
issue of whether to extend the holding in Nichols to reach a foreign holding
company based on fewer contacts with Florida than were present in Nichols. We
respectfully submit that the holding in Nichols requires more contacts than
are present here and should not be extended.
The Complaint also names eight individuals as defendants, at least six
of whom are citizens of foreign countries or states other than Florida.
Accompanying this motion are affidavits from these six individuals which
establish that none of them have the contacts with Florida required for
personal jurisdiction.
Finally, for the reasons set forth in the ADT Defendants' prior motion
to dismiss, the current Complaint is also subject to dismissal under Bermuda
law and the doctrine of forum non conveniens. As the briefing of this issue
is unaffected by the recent amendment of the Complaint, the ADT Defendants
respectfully rely on the briefs previously filed with the Court on these
issues.
ARGUMENT
--------
I. THERE IS NO PERSONAL JURISDICTION OVER
ADT AND THE MAJORITY OF ITS BOARD
For a federal court in Florida to exercise personal jurisdiction in a
diversity case, the complaint must properly allege that the defendant's
activities fall within the Florida long-arm statute and that jurisdiction is
consistent with the due process requirements of the U.S. Constitution. See
Sun Bank, N.A. v. E.F. Hutton & Co., Inc., 926 F.2d 1030, 1033 (11th Cir.
1991). "The Florida long-arm statute is strictly construed, and the person
invoking jurisdiction under it has the burden of proving facts which clearly
justify the use of this method of service of process." Oriental Imports and
Exports, Inc. v. Maduro & Curiel's Bank, N.V., 701 F.2d 889, 891 (11th Cir.
1983); see also Limardo v. Corporacion Intercontinental, 590 F. Supp. 1109,
1111 (S.D. Fla. 1984). Because affidavits have been submitted with this
motion refuting plaintiff's allegations, the burden now shifts to plaintiff to
prove the existence of jurisdiction over the ADT Defendants. See Venetian
Salami Co. v. J.S. Parthenais, 554 So.2d 499, 502-503 (Fla. 1989).
A. There Is No Personal Jurisdiction Over
Defendants Danneberg, Henderson,
Pasman, Slusser, Stinson and Troubh
Plaintiff has not alleged any sufficient basis for this Court to
exercise jurisdiction over the six outside directors who sit on ADT's board --
John E. Danneberg, Alan B. Henderson, James S. Pasman, Jr., W. Peter Slusser,
William W. Stinson, and Raymond S. Troubh (the "Outside Directors").
Plaintiff concedes in the Complaint that each of the Outside Directors is a
citizen of a foreign country or a state other than Florida. See Complaint
Paragraph Paragraph 27-32. Despite this concession, plaintiff makes the
following allegations of personal jurisdiction over the Outside Directors:
(i) that they have attended board meetings in Florida and participated
in board conference calls that were arranged out of Florida
(Complaint Paragraph 16(e));
(ii) that they "agreed to the Merger Agreement and Warrant [with
Republic Industries, Inc.] in a board conference call that, upon
information and belief, was arranged out of Florida" (Complaint
Paragraph 21); and
(iii) that they approved the shareholders rights agreement and
transferred certain shares of ADT to one of its subsidiaries at a
board meeting held in Florida or at a board conference call that
was arranged out of Florida (Complaint Paragraph 22).
These allegations are either false, as shown by the accompanying affidavits,
or are legally insufficient.
1. There Is No Personal Jurisdiction
Over the Outside Directors Under
Florida's Long-Arm Statute
This Court has previously ruled that the allegation that some ADT board
meetings have been held in Florida is insufficient to create general
jurisdiction under Fla. Stat. Section 48.193(2). See Westar Capital, Inc. v.
ADT Ltd., et al., Case No. 96-8889-CIV-ZLOCH (S.D. Fla. Feb. 21, 1997) (the
"Feb. 21 Order"), slip op. at 4.(1) This Court's ruling is further supported
by affidavits from the Outside Directors and Michael A. Ashcroft, ADT's
chairman, which confirm that no more than three or four ADT board meetings
have been held in Florida over the past six years, and that none have been
held in Florida since 1995.(2) These affidavits also refute plaintiff's claim
that the board actions alleged in the Complaint to be unlawful occurred at
meetings held in Florida.(3)
Plaintiff's only remaining argument is that the Outside Directors have
at times participated in telephone conference calls that were arranged by a
secretary from Florida. There is no authority, however, for extending general
- ----------
(1) See also Donnelly v. The Kellog Co., 293 F. Supp. 53, 54-55 (S.D. Fla.
1968) (finding no jurisdiction over a company that held a board meeting in
Florida); Heil v. Morrison Knudsen Corp., 863 F.2d 546, 550 (7th Cir. 1988)
("It is common for large corporations to hold their board meetings in
different places rather than just at corporate headquarters. Heil's theory of
jurisdiction would invite every plaintiff in corporate litigation to sift
hopefully through the minutes of board meetings in search of a link between
the cause of action and whatever state the plaintiff thought most favorable to
its suit. It is not the purpose of long arm statutes to incite such forum-
shopping sprees. "); Joseph Walker & Sons v. The LeHigh Coal & Navigation Co.,
8 Misc. 2d 1005, 167 N.Y.S.2d 632 (Sup. Ct. N.Y. Cty. 1957) (finding three
board meetings in New York to be an insufficient basis for personal
jurisdiction under New York's long-arm statute).
(2) See Affidavit of Michael A. Ashcroft, dated March 16, 1997 ("Ashcroft
Aff.") (Ex. A), Paragraph 10; Affidavit of John E. Danneberg, dated March 15,
1997 ("Danneberg Aff."),Paragraph 1; Affidavit of Alan B. Henderson, dated
March 15, 1997 ("Henderson Aff."), Paragraph 1; Affidavit of James S. Pasman,
Jr., dated March 16, 1997 ("Pasman Aff."), Paragraph 1; Affidavit of W. Peter
Slusser, dated March 15, 1997 ("Slusser Aff."), Paragraph 1; Affidavit of
William W. Stinson, dated March 16, 1997 ("Stinson Aff."), Paragraph 1;
Affidavit of Raymond S. Troubh, dated March 15, 1997 ("Troubh Aff."),
Paragraph 1. The affidavits of the Outside Directors are attached as Exhibit
B.
(3) See Ashcroft Aff. Paragraph Paragraph 10-13; Danneberg Aff.,
Paragraph 1; Henderson Aff., Paragraph 1; Pasman Aff., Paragraph 1;
Slusser Aff., Paragraph 1; Stinson Aff., Paragraph 1; Troubh Aff.,
Paragraph 1. jurisdiction over individual board members on the sole basis
that they participate in board conference calls which happen to be
connected or routed through Florida. The Florida long-arm statute requires
either the commission of a tort in Florida or "substantial and not isolated
activity" in Florida by the person on the phone call, not by the telephone
operator or secretary who arranges the call. See Fla. Stat. Section
48.193(1)(b), (2); McLean v. Financial Corp. v. Winslow Loudermilk
Corp., 509 So.2d 1373, 1374 (Fla. 5th DCA 1987) (no specific jurisdiction
under Fla. Stat. Section 48.193(1)(b) over out-of-state defendant based
on misrepresentations allegedly made over the telephone). The record here
shows that the requirements of the long-arm statute have not been
satisfied.
2. There Is No Personal Jurisdiction Over
the Outside Directors Under the
"Corporate Shield" Doctrine
Jurisdiction over the Outside Directors is also precluded by the
"corporate shield" doctrine. The corporate shield doctrine holds that the
acts of a corporate employee performed in a corporate capacity cannot form the
basis for jurisdiction over the employee in his individual capacity. See
Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 628 (11th Cir. 1996);
Black v. Byrant, 905 F. Supp. 1046, 1052 (M.D. Fla. 1995); Doe v. Thompson,
620 So.2d 1004, 1006 (Fla. 1993); Snibbe v. Napoleonic Society of America,
Inc., 1996 WL 539021, at *1 (Fla. 2d DCA Sept. 25, 1996).
The corporate shield doctrine can only be pierced to expose a
non-resident corporate officer to personal jurisdiction in Florida by an
allegation that the officer acted individually, for his own benefit, and
committed an intentional tort expressly aimed at Florida which caused harm in
Florida. See Black v. Bryant, 905 F. Supp. at 1052-53; Doe v. Thompson, 620
So.2d at 1006 n.1; Allerton v. State Dep't of Insurance, 635 So.2d 36, 39-40
(Fla. 1st DCA App. 1994). As set forth above, the affidavits of the Outside
Directors show that they were not in Florida when any alleged tortious conduct
occurred, and there are no allegations in the Complaint that any alleged torts
were expressly aimed at Florida. Thus, the corporate shield doctrine
precludes an assertion of personal jurisdiction over the Outside Directors.
3. Personal Jurisdiction Over the Outside
Directors Would Violate Due Process
Finally, jurisdiction over the Outside Directors would violate the due
process clause of the U.S. Constitution. Under the due process clause,
jurisdiction is only constitutionally permissible when the defendant has
"minimum contacts" or "meaningful contacts, ties or relations" to the forum
state. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985).
Here, as demonstrated by the Outside Directors' affidavits, there are no such
contacts.(4)
- ----------
(4) See Danneberg Aff., Paragraph Paragraph 1-3; Henderson Aff., Paragraph
Paragraph 1-3; Pasman Aff., Paragraph Paragraph 1-3; Slusser Aff., Paragraph
Paragraph 1-3; Stinson Aff., Paragraph Paragraph 1-3; Troubh Aff., Paragraph
Paragraph 1-3.
In fact, the only ADT-related contacts between the Outside Directors and
Florida concern a few board meetings which have occurred there over the course
of six years. These few contacts are constitutionally insufficient. See
Mid-States Mortgage Corp. v. Louie, 841 F. Supp. 871, 876 (E.D. Wis. 1993)
(membership on board of in-state corporation did not satisfy minimum
contacts); Mozes v. Welch, 638 F. Supp. 215, 224 (D. Conn. 1986) (same);
Stanley Works v. Globemaster, Inc., 400 F. Supp. 1325, 1336 (D. Mass. 1975)
(visit of non-resident officers of parent once a year to forum state did not
satisfy minimum contacts).
B. There Is No Personal
Jurisdiction Over ADT
1. There Is No Personal Jurisdiction Over
ADT Under Fla. Stat. Section 48.193(2)
To establish jurisdiction under Fla. Stat. Section 48.193(2), the
plaintiff must allege that the defendant is "engaged in substantial and not
isolated activity within this state." Florida courts have held that the
substantial activity required under Section 48.193(2) must be continuous and
systematic, (see Rafal v. Mesick, 661 So.2d 79, 81 (Fla. 2d DCA 1995); Milberg
Factors, Inc. v. Greenbaum, 585 So.2d 1089, 1091 (Fla. 3d DCA 1991)), and that
"sporadic activities or visits will not constitute 'substantial and not
isolated activity' under section 48.193(2)." Hobbs v. Don Mealey Chevrolet,
Inc., 642 So.2d 1149, 1153 (Fla. 5th DCA 1994). Under this strict standard,
the facts required to assert general jurisdiction must be extensive and
pervasive. See American Overseas Marine Corp. v. Patterson, 632 So.2d 1124,
1128 (Fla. 1st DCA 1994) ("the requirement of continuous and systematic
general business contacts establishes a much higher threshold than the minimum
contacts required to assert specific jurisdiction, for the facts required to
assert this general jurisdiction must be extensive and pervasive.").
This case presents a unique and novel application of the principles of
general jurisdiction to a foreign holding company. Since its predecessor
corporation was founded in England 1917, ADT has always been incorporated
outside the U.S. See Affidavit of Keith G. Godfrey, dated March 17, 1997 (Ex.
C), Paragraph Paragraph 1-5. Since 1984, ADT has been incorporated as a
holding company in Bermuda. See id. Paragraph Paragraph 2, 5. Although ADT
owns subsidiaries operating in the U.S. and Florida, ADT itself has no offices
or operations in Florida. See Ashcroft Aff. Paragraph 2; Affidavit of Jan S.
Beck, dated March 17, 1997 ("Beck Aff.") (Ex. D), Paragraph Paragraph 5-6.
As a holding company, ADT's functions are limited to overseeing and monitoring
its investments in its various subsidiaries. See Ashcroft Aff. Paragraph
Paragraph 2-3, 5, 7. ADT does not engage in any business or sell any goods
or services or undertake any marketing or advertising activities in Florida or
the U.S. See Beck Aff. Paragraph 9; see also Hobbs, 642 So.2d at 1153
("section 48.193(2) requires continued and systematic activity on the part of
the defendant within the state of Florida, such as 'a continued solicitation
and procurement of business'"). ADT does not generate any revenues from its
oversight activities in Florida and does not have a significant impact on
commerce in Florida. See Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1331
(9th Cir. 1984) (the court must "focus upon the economic reality of the
defendant's activities rather than a mechanical checklist"); CompuServe, Inc.
v. Patterson, 89 F.3d 1257, 1265 (6th Cir. 1996) ("Business is transacted in a
state when obligations created by the defendant or business operations set in
motion by the defendant have a realistic impact on the commerce of that
state.").
There is no Florida case analyzing whether jurisdiction over a foreign
holding company which merely monitors and oversees its subsidiaries in Florida
is proper under Florida's long-arm statute. The most closely analogous
Florida case is Nichols v. Paulucci, 652 So.2d 389 (Fla. 5th DCA 1995).
Although Nichols involved different facts than here, the court's legal
analysis in that case does not support a finding of jurisdiction here.
The foreign company in Nichols was NTS Corporation ("NTS"), a Kentucky
corporation which owned several Florida corporations. In its opinion, the
court listed eleven factors which, taken together, it found to be sufficient
to confer general jurisdiction:
o NTS was a guarantor of one of its Florida subsidiaries' loans;
o NTS's consolidated accounting system performed accounting services
for its Florida subsidiaries;
o NTS issued checks to cover expenses of one of its Florida
subsidiaries, including travel expenses and legal fees;
o NTS performed management services for its Florida subsidiaries and
billed them for the services;
o NTS's architect traveled to Florida and performed services for its
Florida subsidiaries and billed them for the services;
o NTS issued invoices and purchases orders for one of its Florida
subsidiaries;
o NTS was listed as the customer on the Florida Power & Light
account for one of its Florida subsidiaries;
o correspondence on behalf of one of the Florida subsidiaries was
written on NTS letterhead;
o NTS issued checks on behalf of its Florida subsidiaries;
o certain NTS officers and directors also were officers and
directors of its Florida subsidiaries; and
o NTS's president and chief operating officer monitored the
development and projects of the Florida subsidiaries from his
office in Kentucky on almost a daily basis and he visited the
subsidiaries in Florida on a monthly basis; and
See id. at 394-395.
The holding of the Nichols court that these numerous contacts, taken
together, were sufficient to confer general jurisdiction over the out-of-state
parent corporation is entirely consistent with the requirement that the
contacts with Florida be "extensive and pervasive." See American Overseas
Marine, 632 So.2d at 1128 As the Nichols court stated, "we recognize that,
standing alone, any one of Nichol's contacts might not constitute substantial
activity within the meaning of section 48.193(2)." Nichols, 652 So.2d at 392
(emphasis added).
In the present case, the contacts between ADT and Florida are minimal
compared to those in Nichols. ADT does not perform any services for its
subsidiaries in Florida. See Beck Aff. Paragraph 8. Instead, one of ADT's
principal Florida subsidiaries, ADT, Inc., performs various services for ADT
comparable to those listed in the Nichols opinion. See id. Paragraph
Paragraph 2-3. ADT, Inc. is a separate corporation with no power to bind or
act on behalf of ADT. See id. Paragraph 7. In short, this case is the
opposite of Nichols -- here, an in-state subsidiary performs services pursuant
to a contract with the out-of-state parent; the out-of-state parent is not
performing any services for the in-state subsidiaries in Florida. See id.
Paragraph 8.
However, like NTS's chairman in Nichols, ADT's chairman monitors and
oversees ADT's Florida subsidiaries by means of visits to Florida and
maintains an office and a secretary in Florida. See Ashcroft Aff. Paragraph
Paragraph 6-8. But such in-state monitoring was only one of the
jurisdictional factors mentioned in Nichols, and we submit that this factor is
not enough. The Nichols court emphasized that any single factor might not be
enough and included a "c.f." citation to Qualley v. International Air Service
Co, Ltd. 595 So.2d 194, 196 (Fla. 3d DCA 1992), which refused to extend
jurisdiction to a foreign company that did not perform any in-state services
itself.
To hold otherwise -- i.e., that a foreign holding company is subject to
personal jurisdiction when it merely supervises and oversees the operations of
its subsidiaries in Florida -- would render meaningless the holding of
numerous Florida cases, like Qualley, that a parent company, without more, is
not subject to jurisdiction wherever its subsidiaries are found. See Feb. 21
Order, slip op. at 4 ("the mere presence of a parent corporation's wholly-owned
subsidiary in Florida is insufficient to bring the parent within Section
48.193(2)); Milligan Electric Co, Inc v. Hudson Construction Co., 886 F. Supp.
845, 850 (N.D. Fla. 1995) (wholly-owned subsidiary in Florida was an
insufficient basis for jurisdiction over parent); The Walt Disney Co. v.
Nelson, 677 So.2d 400, 403(Fla. 5th DCA 1996) (same); Mac Millan-Bloedel, Ltd.
v. Canada, 391 So.2d 749, 751 (Fla. 5th DCA 1980) (same).
In each case, it must be presumed that a parent corporation oversees the
activities of its subsidiaries; otherwise, it would run the risk of breaching
its fiduciary duties. See In re Hillsborough Holdings Corp., 166 B.R. 461,
472 (M.D. Fla. 1994) (it would be a breach of fiduciary duty if a parent did
not properly oversee its subsidiaries).(5) Under these circumstances, the
parent's oversight should not subject it to personal jurisdiction in the state
where the subsidiaries are located. See Volkswagenwerk Aktiengesellschaft v.
Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984) ("The officers of any
corporation that owns stock of another necessarily exercise a considerable
degree of control over the subsidiary corporation and the discharge of that
supervision alone is not enough to subject the parent to New York
jurisdiction."); Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1161 (5th Cir.
1983) ("the policymaking authority held and exercised by T & N was no more
than that appropriate for a sole shareholder of a corporation, and certainly
not enough to warrant the extra-territorial exercise of jurisdiction over that
shareholder under the Texas [specific jurisdiction] statute"); see also
Bensusan Restaurant Corp. v. King, 937 F. Supp. 295, 299 (S.D.N.Y. 1996) (mere
exchange of information via computers is not sufficient to confer
jurisdiction). Thus, a holding company cannot be subject to jurisdiction
under Section 48.193(2) on the basis of its supervision of its wholly owned
subsidiaries.
A ruling that in-state supervision by a foreign parent corporation is
enough for personal jurisdiction over the parent would have profound
ramifications in corporate law. Such a ruling would also be contrary to prior
holdings of this Court which have been very strict in recognizing corporate
separateness and identity. See Hermetic Seal Corp. v. Savoy Electronics,
Inc., 290 F. Supp. 240, 243-244 (S.D. Fla. 1967), aff'd, 401 F.2d 775 (5th
Cir. 1968). As one court has stated, "enterprises may incorporate in order to
limit shareholder liability, including the liability of exposure to the
jurisdiction of an out-of-state court." Jemez Agency, Inc. v. CIGNA Corp., 866
F. Supp. 1340, 1343 (D.N.M. 1994) (citing 13A William M. Fletcher, Fletcher
Cyclopedia of the Law of Private Corporations Section 6213, 6214 (1986)); see
also Frank v. U.S. West, 3 F.3d 1357, 1362 (10th Cir. 1993).
Supervision of subsidiaries is also insufficient to establish
jurisdiction under an alter-ego theory or piercing the corporate veil theory.
These legal doctrines would become meaningless and superfluous if a plaintiff
could by-pass them whenever a holding company supervised its subsidiaries.
These doctrines require, instead, either that the subsidiaries serve as agents
of the parent, or that the parent-subsidiary corporate structure be created
for an improper purpose such as working a fraud upon creditors. See Dania
Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114, 1120-21 (Fla. 1984); Wesco
Manuf.,Inc. v. Tropical Attractions of Palm Beach, Inc., 833 F.2d 1484, 1486
(11th Cir. 1987); Hobco, Inc. v. Tallahassee Assoc., 807 F.2d 1529, 1534 (11th
Cir. 1987). There is no allegation of improper purpose in this case, and
plaintiff's allegation of agency has been directly refuted by an affidavit
supporting this motion. See Beck Aff. Paragraph 7.(6)
The fact that a parent corporation's supervision of its subsidiaries is
insufficient for jurisdictional purposes is consistent with U.S. Treasury
Regulations dictating when a foreign holding company is subject to taxation in
the U.S. Example (2) under Treasury Regulations Section 1.864-3(b) provides
that a foreign holding company is not considered to be "engaged in a trade or
business in the United States" even when its chief executive officer maintains
an office in the U.S. and "spends a substantial portion of the taxable year
supervising [the holding company's] investments in its operating
- ----------
(5) See also United States v. Elgin, Joliet & Eastern Ry. Co., 298 U.S. 492,
503-504 (1936) ("a stockholder should show concern about the company's
affairs, ask for reports, sometimes consult with officers, give advice and
even object to proposed action"); In re School Asbestos Litig., 1993 WL 209719
at *6 (E.D. Pa. June 15, 1993) ("the parent corporation has the right to
protect its investment by supervising and actively participating in the
subsidiary's management").
(6) The fact that a parent and its subsidiary have common officers is also
insufficient to subject a holding company to general jurisdiction, even when
the common officer is present at the in-state subsidiaries' offices. See
Craig v. Lake Asbestos of Quebec Ltd., 843 F.2d 145, 152 (3d Cir. 1988);
Quarles v. Fuqua Ind., Inc., 504 F.2d 1358, 1364 (10th Cir. 1974); Steven v.
Roscoe Turner Aeronautical Corp., 324 F.2d 157, 161 (7th Cir. 1963). Thus,
plaintiff's allegation that defendant Steven J. Ruzika is both chief financial
officer of ADT and also president of certain of ADT's subsidiaries and
maintains an office in Florida is insufficient. See Complaint Paragraph
16(b), (f).
subsidiaries." See Ex. E. In this case, ADT's chairman in fact spends only a
small portion of his time at his office in Florida and conducts most of his
monitoring and oversight responsibilities from outside of Florida. See
Ashcroft Aff. Paragraph Paragraph 5-6.
Finally, plaintiff's allegations that ADT "directs" its subsidiaries in
Florida (Complaint Paragraph 16(a)) and that ADT's subsidiaries are "agents"
of ADT (Complaint Paragraph 16(f)) are wrong. See Ashcroft Aff. Paragraph
7; Beck Aff. Paragraph 7. While ADT acknowledges that its chairman
supervises and has input into the strategic issues affecting its subsidiaries,
the supporting affidavits refute any claim that ADT, or its chairman, directs
the operations of ADT's subsidiaries. See Ashcroft Aff. Paragraph 7. As the
court in Integrated Business Information Service (Proprietary) Ltd. v. Dun &
Bradstreet Corp., 714 F. Supp. 296 (N.D. Ill. 1989), stated, regarding Dun &
Bradstreet Corporation ("D & B"), a non-operating holding company,
"we have little doubt that D & B exercises some control over its
subsidiaries. . . . We note, for example, that D & B is able to force
its subsidiaries to divest from South Africa. . . . Yet from the
materials before us, it seems apparent that D & B does not exercise the
amount of control seen in Maunder or Schlunk. We conclude therefore
that Illinois courts would not exercise personal jurisdiction over D &B.
Since they would not, we cannot."
Id. at 301 (citing Maunder v. DeHavilland Aircraft of Canada, Ltd., 466 N.E.2d
217 (Ill. 1984), and Schlunk v. Volkswagenwerk Aktiengesellschaft, 503 N.E.2d
1045 (1st Dist. 1986), aff'd on other grounds, 486 U.S. 694 (1988)).
With respect to plaintiff's conclusory allegation that ADT's Florida
subsidiaries act as "agents" for ADT, this is wrong as well. ADT's
subsidiaries have no general authority whatsoever to act on behalf of ADT, and
the consulting agreement between ADT and ADT, Inc. expressly provides that ADT
Inc. is not an agent of ADT. See Beck Aff. Paragraph 7.
2. There Is No Jurisdiction Over ADT
Under Fla. Stat. Section 48.193(1)(b)
Personal jurisdiction may be found under Fla. Stat. Section
48.193(1)(b) when the alleged tort is committed in Florida. Unlike the
general jurisdiction conferred by Section 48.193(2), to find specific
jurisdiction under Section 48.193(1)(b), there must be a "connexity" between
the tort and Florida. See Polskie Linie Oceaniczne v. Seasafe Transport A/S,
795 F.2d 968, 971-72 (11th Cir. 1986).
Plaintiff makes five principal claims of breach of fiduciary duty
against the ADT Defendants which relate to (1) the placing of ADT stock with
one of ADT's subsidiaries (Count 3); (2) the shareholders rights plan (Counts
1-2); (3) the scheduling of the shareholders meeting (Counts 6-7); (4) the
threatened disenfranchisement of plaintiff (Count 5); and (5) the issuance of
the warrant to Republic (Count 4). For this Court to have jurisdiction over
ADT under Section 48.193(1)(b) with respect to any of these claims, there
must be an independent basis for jurisdiction as to each claim. See Cronin v.
Washington National Insurance Co., 980 F.2d 663, 671 (11th Cir. 1993); Mark
Trucks, Inc. v. Arrow Aluminum Castings Co., 510 F.2d 1029, 1033-
34 (5th Cir. 1975).
Here, plaintiff's allegations that the placing of ADT stock with one of
ADT's subsidiaries and the implementation of the shareholders rights plan took
place at board meetings either in Florida or by telephone conference call
arranged from Florida are wrong and have been refuted by affidavit. See
Ashcroft Aff. Paragraph Paragraph 10-11. Similarly, the meeting at which the
board scheduled July 8, 1997 as the date for the shareholders meeting did not
occur in Florida. See id. Paragraph 12. Finally, there are no allegations
that ADT has done anything in Florida to disenfranchise plaintiff; in fact,
the letters attached to the Complaint which allegedly evidence these threats
were sent from Bermuda. With absolutely no basis to allege that any of these
claims arose out of acts committed in Florida, there can be no specific
jurisdiction over the ADT Defendants under Section 48.193(1)(b) with respect
to Counts 1-3 and 5-7.
With respect to plaintiff's final breach of fiduciary duty claim (Count
4), plaintiff's claim against ADT -- to the extent it has any -- arose from
the action of the ADT board in approving the warrant. That action took place
during a conference call where a majority of the board was not present in
Florida (see Ashcroft Aff. Paragraph 13), and thus, the board's actions did
not take place in Florida.
3. There Is No Personal Jurisdiction Over
ADT Under Fla. Stat. Section 48.193(1)(a)
In order to invoke long-arm jurisdiction under Fla. Stat. Section
48.193(1)(a), the plaintiff must show that the defendant is "[o]perating,
conducting, engaged in, or carrying on a business venture in this state." In
applying Section 48.193(1)(a), the activity of the corporation "must be
considered collectively and show a general course of business activity in the
State for pecuniary benefit." Sculptchair, 94 F.3d at 627; Milberg Factors,
585 So.2d at 1091.
First, there are no allegations in the Complaint that ADT derives
pecuniary benefits or revenues in Florida. While the operational activities
of ADT's subsidiaries generate revenues in Florida, ADT's monitoring and
oversight activities do not.
Second, the only claim which plaintiff alleges is subject to
jurisdiction under Section 48.193(1)(a) is plaintiff's warrant claim (Count
4). See Complaint Paragraph 24. Thus, even if this Court finds jurisdiction
over ADT with respect to Count Four, there can be no jurisdiction over ADT
with respect to plaintiff's other claims. See Cronin, 980 F.2d at 671; Mark
Trucks, 510 F.2d at 1033-34. However, as argued above, there is no
jurisdiction over ADT with respect to Count Four either, because that claim
arose from the action of the ADT board which did not occur in Florida. See
Ashcroft Aff. Paragraph 13.
4. Jurisdiction Over ADT Would
Violate Constitutional Due Process
The Supreme Court has held that "great care and reserve should be
exercised when extending our notions of personal jurisdiction into the
international field." Asahi Metal Ind. Co., Ltd. v. Superior Court of
California, 480 U.S. 102, 115 (1987). In determining whether due process has
been complied with, the court must examine the quality and nature of the
contacts, rather than the quantity of the contacts. For example, in
Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408 (1984), the Supreme
Court held that a Colombian corporation's contacts with Texas -- which
consisted of a trip to Texas by the corporation's chief executive officer for
the purpose of negotiating a transportation services contract, the acceptance
of checks drawn on Texas bank, and the purchases of helicopters and equipment
from a Texas manufacturer and related training trips -- were insufficient to
satisfy the requirements of the due process clause. The Court stated that the
purchases and related trips, even if occurring at regular intervals, were not a
sufficient basis for a state's assertion of jurisdiction. See id., 466 U.S.
at 417; see also Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516, 518
(1923) (business trips to a jurisdiction to purchase goods were insufficient
to satisfy due process "even if [the trips] occurr[ed] at regular intervals").
Generally, the Supreme Court has found foreign companies subject to
personal jurisdiction only where the subsidiaries were acting as distributors
for the parent company. In such cases, the foreign company was formed not
just to hold the stock of the subsidiaries but was engaged in the same
business as its subsidiaries as well. Such is not the case here. ADT is not
a fictional corporate entity; it is a viable holding company formed for the
purpose of holding the stock of its subsidiaries. In Cannon Manufacturing Co.
v. Cudahy Packing Co., 267 U.S. 333 (1925), the Supreme Court held that a
holding company should not be subject to jurisdiction where its subsidiaries
operate so long as the parent and the subsidiary maintain separate and distinct
corporate entities. See Cannon, 267 U.S. at 336; see also Volkswagenwerk
Aktiengesellschaft v. Schlunk, 486 U.S. 694, 705 n.* (1988) (citing Cannon);
Hargrave, 710 F.2d at 1159-1160 (citing Cannon).
Business visits to a jurisdiction by a parent corporation's
representatives have been found to be insufficient for purposes of due
process.(7) Similarly, exchanges of information by letter, telephone or telex
with the forum state do not satisfy due process either. See Cauff Lippman &
Co. v. Apogee Finance Group Inc., 745 F. Supp. 678 (S.D. Fla 1990).
- ----------
(7) See Gates v. Learjet, 743 F.2d 1325 (9th Cir. 1984) (no general
jurisdiction over the defendants despite several visits and purchases in forum
state, solicitation of contract in forum, and extensive communications with
forum state), cert. denied, 471 U.S. 1066 (1985); FDIC v. Milken, 781 F. Supp.
226, 230 (S.D.N.Y. 1991) (foreign parent's representation on board of
subsidiaries and regular attendance at board meetings insufficient for
personal jurisdiction); Wade v. Olympus Industries, Inc., 695 F. Supp. 730,
733 (S.D.N.Y. 1988) (doubtful that parent company's occasional attendance at
business meetings in New York in addition to ownership interest in New York
subsidiary would "even constitute sufficient minimum contacts to satisfy the
due process requirements").
Based on these principles, a Florida court cannot exercise jurisdiction
over ADT consistent with due process. The proper focus under these
circumstances is the quality of ADT's activities. Rather than actively
engaging in a business itself under the laws of Florida, ADT's minimal
activities in Florida constitute nothing more than a parent corporation's
normal oversight of the operations of its subsidiaries. See Beck Aff.
Paragraph Paragraph 8-9; Ashcroft Aff. Paragraph Paragraph 5, 7.
II. THE COMPLAINT FAILS TO STATE A
CLAIM AGAINST THE ADT DEFENDANTS
UNDER BERMUDA LAW
As set forth in the ADT Defendants' motion to dismiss plaintiff's second
amended complaint, dated January 27, 1997, and the affidavits of Peter
Bubenzer, dated January 24 and February 10, 1997, plaintiff's allegations of
breach of fiduciary fail to state a claim under Bermuda law. Accordingly,
they must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6).
III. PLAINTIFF'S CLAIM UNDER SECTION 14(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SHOULD BE DISMISSED AS MOOT
On March 3, 1997, ADT filed a Schedule 14D-9 with the Securities and
Exchange Commission (the "SEC") recommending that ADT's shareholders reject
plaintiff's offer of $22.50 for the outstanding shares of ADT. See Ex. F.
The only relief that plaintiff seeks on its Section 14(d) claim is a
declaration that ADT has violated Section 14(d) and an injunction preventing
ADT from soliciting proxies "unless and until [ADT] files a proper Schedule
14D-9 with the SEC." See Complaint at 48. Now that ADT has filed a Schedule
14D-9 with the SEC, plaintiff's claim is moot and should be dismissed. See
Electronic Specialty Co. v. International Controls Corp., 295 F. Supp. 1063,
1073 (S.D.N.Y. 1968) (dismissing securities law claim as moot based on
changing circumstances during a tender offer); see also Deakins v. Monaghan,
484 U.S. 193, 200 (1988) (claim rendered moot while awaiting review should be
dismissed).
IV. THE COMPLAINT SHOULD BE DISMISSED UNDER
THE DOCTRINE OF FORUM NON CONVENIENS
As previously argued in the ADT Defendants' motion to dismiss
plaintiff's second amended complaint, the Complaint should also be dismissed
under the doctrine of forum non conveniens. See Borden, Inc. v. Meiji Milk
Products Co., Ltd., 919 F.2d 822 (2d Cir. 1990), cert. denied, 500 U.S. 953
(1991) (dismissing case based on forum non conveniens due to uncertainty about
court's power to enforce injunction over foreign corporation).
Conclusion
----------
For the reasons set forth above, the ADT Defendants respectfully request
that this Court dismiss the Fourth Amended Complaint with prejudice pursuant
to Federal Rules of Civil Procedure 12(b)(2), 12(b)(6), and 12(b)(7) and the
doctrine of forum non conveniens.
Certificate of Service
----------------------
I HEREBY CERTIFY that on this 17th day of March 1997 a true and correct
copy of the foregoing was sent or delivered (i) by mail to John L. Hardiman,
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, counsel for
plaintiff, (ii) by hand to Martin L. Steinberg, Holland & Knight, LLP, 701
Brickell Avenue, Miami, Florida 33101, counsel for plaintiff, (iii) by hand to
Henry Latimer, Eckert Seamans Cherin & Mellot, 450 Las Olas Boulevard, Ft.
Lauderdale, Florida 33301, counsel for Republic Industries, Inc. ("Republic"),
and (iv) by mail to Thomas Allingham, Jr., Skadden, Arps, Slate, Meagher &
Flom, One Rodney Square, P.O. Box 636, Wilmington, Delaware 19899-0636,
counsel for Republic.
Dated: Miami, Florida
March 17, 1997
PODHURST, ORSECK, JOSEFSBERG
EATON, MEADOW, OLIN & PERWIN, P.A.
By:__________________________________
Robert C. Josefsberg
Florida Bar No. 040856
By:__________________________________
Katherine W. Ezell
Florida Bar No. 114771
Suite 800, City National Bank Building
25 West Flagler Street
Miami, Florida 33130-1780
Tel: (305) 358-2800
Fax: (305) 358-2382
- and -
Of Counsel: DAVIS POLK & WARDWELL
Michael P. Carroll 450 Lexington Avenue
James H.R. Windels New York, New York 10017
Tel: (212) 450-4000
Fax: (212) 450-4800
Attorneys for the ADT Defendants
Exhibit 99.38
[ADT logo]
FOR IMMEDIATE RELEASE
March 17, 1997 Press Release
ADT Limited ("ADT")
TYCO INTERNATIONAL TO ACQUIRE ADT LIMITED.
- ------------------------------------------------------------------------------
Hamilton, Bermuda, March 17, 1997 -- ADT Limited (NYSE - ADT).
THE FOLLOWING IS THE TEXT OF AN ANNOUNCEMENT ISSUED TODAY BY TYCO
INTERNATIONAL LTD.:
TYCO INTERNATIONAL TO ACQUIRE ADT LIMITED IN A STOCK TRANSACTION VALUED AT
$5.6 BILLION
$29 PER SHARE VALUE TO ADT SHAREHOLDERS
Exeter, New Hampshire, March 17, 1997 - Tyco International Ltd. (NYSE - TYC),
a diversified manufacturer of industrial and commercial products, announced
today that the Company has entered into a definitive merger agreement pursuant
to which Tyco will effectively acquire ADT Limited (NYSE - ADT), a leading
installer and servicer of electronic security systems, in a stock for stock
transaction valued at $5.6 billion.
The form of the acquisition will be as follows: Tyco will merge with a
subsidiary of ADT and the ADT parent company will be renamed Tyco
International Ltd. Tyco shareholders will receive one share in the combined
company for each Tyco share, and ADT shareholders, through a reverse split,
will receive 0.48133 shares in the combined company for each ADT share. Based
on Tyco's March 14, 1997 closing price of $60.25, the terms of the agreement
would result in a value of $29 per share to ADT shareholders.
At the closing of the transaction, Tyco shareholders will own approximately 64
percent of the outstanding shares of the combined company and ADT shareholders
will own approximately 36 percent of the outstanding shares of the combined
company. L. Dennis Kozlowski will remain the Chairman and Chief Executive
Officer of Tyco International Ltd. After the completion of the transaction,
Tyco is expected to have annual revenues in excess of $8.5 billion.
Mr. Kozlowski stated, "Tyco's acquisition of ADT is a continuation of our
strategy to expand our position in service businesses through internal growth
and complementary acquisitions. We believe that the combined operations of
ADT and Tyco's Fire and Safety Services group will greatly enhance our ability
to serve our industrial and commercial customers, worldwide, with fire
protection and electronic security products and services. Additionally, ADT's
continued penetration of new markets with electronic security products and
services provides Tyco with opportunities for growth in those markets. The
combined company will provide excellent cost, marketing and service synergies,
allowing for immediate positive benefits for the shareholders of both
companies."
Additionally, Mr. Kozlowski noted that this transaction meets all of Tyco's
previously stated acquisition requirements: ADT is a leader in the markets it
serves and complements Tyco's existing Fire and Safety Services operations; and
during the first year, the transaction is expected to be accretive to Tyco's
earnings per share and generate positive operating cash flows before
transaction related charges.
Michael A. Ashcroft, ADT's Chairman and Chief Executive Officer, commented,
"ADT's commercial and industrial businesses are an excellent fit with Tyco's
Fire and Safety Services group. This merger will enhance ADT's ability to
continue its growth, not only in North America and the United Kingdom, but in
all parts of the world utilizing Tyco's established infrastructure. This
transaction represents the best opportunity for current ADT shareholders,
particularly as they will receive an ongoing stake in an outstanding company
with superior performance."
ADT has total revenues of $1.7 billion. Through its subsidiaries, ADT provides
electronic security services to over 1.8 million industrial, commercial and
residential customers and is the largest provider of electronic security
services in North America and the United Kingdom. ADT's electronic security
services businesses generate recurring revenues of $920 million, representing
65 percent of total electronic security revenues. In the industrial and
commercial market, which represents over 60 percent of ADT's electronic
security revenues, ADT provides a complete range of sophisticated electronic
security solutions for every type of business and its customers include 390 of
the Fortune 500 companies. ADT also provides residential electronic security
services to over 1.1 million customers, approximately 85 percent of which are
located in the United States. In addition, ADT, through its subsidiary ADT
Automotive is also the second largest provider of vehicle auction and
redistribution services in the United States.
The combination of ADT with Tyco's Fire and Safety Services group will provide
the opportunity for expanded market coverage and combined marketing programs.
Tyco presently operates in over 300 offices located in over 50 countries. ADT
operates with 230 offices in 10 countries. This combination will improve the
Company's position in the electronic security market and the enhanced
efficiency of these offices will provide Tyco with numerous strategic and
financial synergies.
The transaction, which will be taxable to Tyco shareholders and accounted for
as a pooling of interests, is contingent upon customary regulatory review and
approval by the shareholders of both companies. The Board of Directors of
both companies have approved the transaction, which is expected to close by
July 1, 1997.
Upon completion of the transaction, the combined company's Board of Directors
will include Mr. Kozlowski, as Chairman, and Tyco's seven independent outside
directors, as well as, Mr. Ashcroft and two independent outside directors from
the present ADT Board.
Credit Suisse First Boston is acting as financial advisor to Tyco; Merrill
Lynch is financial advisor to ADT.
Tyco International is a worldwide manufacturer with strong leadership
positions in disposable medical products, packaging materials, flow control
products, electrical and electronic components and is the world's largest
manufacturer and provider of fire and safety systems and services. The
Company operates in more that 50 countries around the world and has revenues
in excess of $6 billion.
(SEE ACCOMPANYING TRANSACTION SUMMARY)
Tyco International Ltd. (NYSE-TYC) Announces the Acquisition of ADT Limited
(NYSE-ADT)
Transaction Value
(based on March 14 closing price): Approximately $5.6 billion
Exchange ratio: 0.48133 (subject to adjustments and
walk-aways under certain conditions)
Anticipated Closing: July 1, 1997
Termination Fee: $150 million
Conditions Include: Customary regulatory reviews and
approval by shareholders of both
companies.
Management: L. Dennis Kozlowski - Chairman and
CEO
Mark H. Swartz - CFO
Board: Current Tyco Board (8) plus Michael
A. Ashcroft and two additional
independent outside directors from the
present ADT board.
CERTAIN ADDITIONAL INFORMATION: ADT Limited (the "Company) will be soliciting
proxies against the proposals of Western Resources, Inc. (together with it
subsidiaries, "Western") and revocations of proxies previously given to
Western for such proposals. The following individuals may be deemed to be
participants in the solicitation of proxies and revocations of proxies by the
Company: ADT Limited, Michael A. Ashcroft, John E. Danneberg, Alan B.
Henderson, James S. Pasman, Jr., Stephen J. Ruzika, W. Peter Slusser, William
W. Stinson, Raymond S. Troubh and Angela E. Entwistle. As of March 17, 1997,
Mr. Ashcroft is the beneficial owner of 11,075,718 of the Company's common
shares, Mr. Danneberg is the beneficial owner of 102 of the Company's common
shares, Mr. Henderson is the beneficial owner of 621 of the Company's common
shares, Mr. Pasman is the beneficial owner of 2,000 of the Company's common
shares, Mr. Ruzika is the beneficial owner of 1,157,405 of the Company's
common shares, Mr. Slusser is the beneficial owner of 2,800 of the Company's
common shares, Mr. Stinson is the beneficial owner of 3,010 of the Company's
common shares, Mr. Troubh is the beneficial owner of 2,500 of the Company's
common shares and Ms. Entwistle is the beneficial owner of 29,500 of the
Company's common shares. The Company has retained Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") to act as its financial advisor
in connection with Western's proposals. 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 of employees is a "participant" as defined in
Schedule 14A ("Schedule 14A") promulgated by the Commission under the
Securities Exchange Act of 1934, as amended, in the proxy solicitation, or
that such Schedule 14A requires the disclosure of certain financial
information concerning Merrill Lynch. In connection with Merrill Lynch's role
as financial advisor to the Company, Merrill Lynch and the following investment
banking 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: Barry Friedberg (Executive Vice President),
Richard Johnson (Managing Director), Huston McCollough (Managing Director),
Hugh O'Hare (Vice President), Robert Simensky (Vice President) and Paul Bastone
(Associate). In the normal course of its business, Merrill Lynch regularly
buys and sells securities issued by the company and its affiliates ("ADT
Securities) for its own account and for the accounts of its 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 with other derivatives in or relating to ADT Securities. As of
February 28, 1997, Merrill Lynch held positions in ADT Securities as principal
as follows: (i) net "short" 769,995 of the Company's common shares; (ii) net
"long" 46,000 par amount of 9.25% Guaranteed Senior Subordinated Notes of ADT
Operations, Inc. due August 1, 2003; and (iii) net "long" 31,509 Liquid Yield
Option [Trademark] Notes of ADT Operations, Inc. due 2010, exchangeable for
889,499 of the Company's common shares.
Contact:
ADT
561-988-3600
Note:
This and other press releases are available through Company News On-Call by
fax; call 800-758-5804, extension 112511 or at http://www.prnewswire.com/
- Ends -
Exhibit 99.39
[ADT logo]
FOR IMMEDIATE RELEASE
March 17, 1997 Press Release
ADT Limited ("ADT")
ADT ACCOUNCES CANCELLATION OF PLANS TO SELL ITS US VEHICLE AUCTION BUSINESS.
- ----------------------------------------------------------------------------
Hamilton, Bermuda, March 17, 1997 -- ADT Limited (NYSE - ADT), announced today
that it has canceled its plans, which were previously announced in November
1996, to sell its United States vehicle auction business, and has terminated
its market purchase program in respect of ADT Operations, Inc. Liquid Yield
Option Notes due 2010.
CERTAIN ADDITIONAL INFORMATION: ADT Limited (the "Company) will be soliciting
proxies against the proposals of Western Resources, Inc. (together with it
subsidiaries, "Western") and revocations of proxies previously given to
Western for such proposals. The following individuals may be deemed to be
participants in the solicitation of proxies and revocations of proxies by the
Company: ADT Limited, Michael A. Ashcroft, John E. Danneberg, Alan B.
Henderson, James S. Pasman, Jr., Stephen J. Ruzika, W. Peter Slusser, William
W. Stinson, Raymond S. Troubh and Angela E. Entwistle. As of March 17, 1997,
Mr. Ashcroft is the beneficial owner of 11,075,718 of the Company's common
shares, Mr. Danneberg is the beneficial owner of 102 of the Company's common
shares, Mr. Henderson is the beneficial owner of 621 of the Company's common
shares, Mr. Pasman is the beneficial owner of 2,000 of the Company's common
shares, Mr. Ruzika is the beneficial owner of 1,157,405 of the Company's
common shares, Mr. Slusser is the beneficial owner of 2,800 of the Company's
common shares, Mr. Stinson is the beneficial owner of 3,010 of the Company's
common shares, Mr. Troubh is the beneficial owner of 2,500 of the Company's
common shares and Ms. Entwistle is the beneficial owner of 29,500 of the
Company's common shares. The Company has retained Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") to act as its financial advisor
in connection with Western's proposals. 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 defined in
Schedule 14A ("Schedule 14A") promulgated by the Commission under the
Securities Exchange Act of 1934, as amended, in the proxy solicitation, or
that such Schedule 14A requires the disclosure of certain financial
information concerning Merrill Lynch. In connection with Merrill Lynch's role
as financial advisor to the Company, Merrill Lynch and the following investment
banking 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: Barry Friedberg (Executive Vice President),
Richard Johnson (Managing Director), Huston McCollough (Managing Director),
Hugh O'Hare (Vice President), Robert Simensky (Vice President) and Paul Bastone
(Associate). In the normal course of its business, Merrill Lynch regularly
buys and sells securities issued by the company and its affiliates ("ADT
Securities) for its own account and for the accounts of its 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 with other derivatives in or relating to ADT Securities. As of
February 28, 1997, Merrill Lynch held positions in ADT Securities as principal
as follows: (i) net "short" 769,995 of the Company's common shares; (ii) net
"long" 46,000 par amount of 9.25% Guaranteed Senior Subordinated Notes of ADT
Operations, Inc. due August 1, 2003; and (iii) net "long" 31,509 Liquid Yield
Option [Trademark] Notes of ADT Operations, Inc. due 2010, exchangeable for
889,499 of the Company's common shares.
Contact:
ADT
561-988-3600
Note:
This and other press releases are available through Company News On-Call by
fax; call 800-758-5804, extension 112511 or at http://www.prnewswire.com/
- Ends -
