<PAGE>
As filed with the Securities and Exchange Commission on July 18, 1997
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
BERMUDA 7382 NOT APPLICABLE
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12 BERMUDA
(441) 292-2033
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MARK H. SWARTZ
C/O TYCO INTERNATIONAL (US) INC.
ONE TYCO PARK
EXETER, NEW HAMPSHIRE 03833
(603) 778-9700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
*Tyco International Ltd. maintains its registered and principal executive
offices at Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda. The executive
offices of the subsidiary that supervises the activities of the subsidiaries of
Tyco International Ltd. in North America are located at One Tyco Park, Exeter,
New Hampshire 03833. The telephone number there is (603) 778-9700.
------------------------
COPIES TO:
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<S> <C>
JOSHUA M. BERMAN, ESQ. GENE LEWIS, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL LIDDELL, SAPP, ZIVLEY, HILL & LABOON,
919 THIRD AVENUE L.L.P.
NEW YORK, NEW YORK 10022 600 TRAVIS, SUITE 3500
HOUSTON, TEXAS 77002
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective and
all other conditions to the merger contemplated by the Agreement and Plan of
Merger, dated as of May 20, 1997, described in the Proxy Statement/Prospectus
included in the Registration Statement have been satisfied or waived.
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Shares, par value
$0.20 per share.......................... 19,620,447 $77.3125 (1) $1,516,905,809 $459,670
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 ("Rule 457") promulgated under the Securities Act of 1933, as
amended, on the basis of the average of the high and low prices of the
Common Shares on the New York Stock Exchange on July 17, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
(SUBJECT TO COMPLETION DATED July 18, 1997)
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
To the Shareholders of Keystone International, Inc.:
The Board of Directors of Keystone International, Inc. has agreed upon a
merger with Tyco International Ltd. and is seeking your vote for this important
transaction.
If the merger is approved by shareholders, Keystone will become a subsidiary
of Tyco, and shareholders of Keystone will become Tyco shareholders. Tyco is a
diversified manufacturing and service company that operates in more than 50
countries around the world and has annual sales of approximately $10 billion.
The merger will give shareholders of Keystone an interest in a substantially
larger and more diversified company.
Shareholders of Keystone are being asked, at a Special Meeting of
shareholders, to approve the merger and the merger agreement relating to the
merger. You can find the full text of the merger agreement at the back of this
document in Annex A.
In the merger, shareholders of Keystone will receive Tyco shares in exchange
for their shares of Keystone stock. The exchange ratio, that is the fraction of
a Tyco share you will receive for each share of Keystone stock, will depend on
the average trading price for Tyco shares over a period of time prior to the
Keystone Special Meeting. Keystone shareholders may call toll free
1-800- - at any time after August , 1997 for current information on the
exchange ratio.
Whether or not you plan to attend the Special Meeting, please take the time
to vote on the proposal submitted to you by completing and mailing the enclosed
proxy card to us. YOUR VOTE IS VERY IMPORTANT.
The date, time and place of the Special Meeting is:
August , 1997 at 10:00 a.m.
Central time at Texas Commerce Tower,
600 Travis, 25th Floor Conference Room,
Houston, Texas 77002.
This document provides you with detailed information about the proposed
merger. In addition, you may obtain information about Tyco and Keystone from
documents that Tyco and Keystone have filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
If you have any questions about the merger, please contact Corporate
Investor Communications, Inc. 1-800- - (toll free in the United States).
Nishan Teshoian
Chairman and Chief Executive Officer
Keystone International, Inc.
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Neither the Securities and Exchange Commission nor any state securities
regulators have approved the securities to be issued under this Proxy
Statement/Prospectus or determined if this Proxy Statement/ Prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
The information in this prospectus is not complete and may be amended. The
securities to be issued in the merger may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any state where the offer or sale is not permitted.
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Proxy Statement/Prospectus dated , 1997 and first mailed to
shareholders , 1997.
<PAGE>
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK ROAD
HOUSTON, TX 77040
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------
To our Shareholders:
Notice is hereby given that the Special Meeting of Shareholders (the
"Special Meeting") of Keystone International, Inc. ("Keystone") will be held at
10:00 a.m., Central time, on August , 1997 at Texas Commerce Tower, 600
Travis, 25th Floor Conference Room, Houston, Texas 77002 for the following
purposes:
1. To approve the merger of Keystone with T8 Acquisition Corp., a
wholly-owned subsidiary of Tyco International Ltd., a Bermuda company, and to
approve the Agreement and Plan of Merger relating thereto.
2. To consider and act upon any other business as may properly come before
the Special Meeting or any adjournment or postponement thereof.
Only holders of Keystone Common Stock of record at the close of business on
July , 1997 are entitled to notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
By Order of the Board of Directors
Donna D. Moore,
SECRETARY
, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE RETURN ENVELOPE
PROVIDED TO BE RECEIVED NO LATER THAN , 1997. IN ORDER TO AVOID THE
ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE TYCO/KEYSTONE MERGER....................................................... 1
SUMMARY.................................................................................................... 3
The Companies............................................................................................ 3
The Meeting.............................................................................................. 3
Reasons for the Merger................................................................................... 3
Recommendations to Shareholders.......................................................................... 4
The Merger............................................................................................... 4
Certain Considerations................................................................................... 6
SELECTED FINANCIAL DATA FOR TYCO AND KEYSTONE.............................................................. 7
Selected Tyco Historical Financial Information........................................................... 7
Selected Keystone Historical Financial Information....................................................... 9
Selected Tyco and Keystone Unaudited Pro Forma Combined Financial Information............................ 10
Comparative Per Share Information........................................................................ 11
KEYSTONE SPECIAL MEETING................................................................................... 12
Purpose of the Keystone Special Meeting.................................................................. 12
Record Date; Voting Rights; Proxies...................................................................... 12
Solicitation of Proxies.................................................................................. 12
Quorum................................................................................................... 12
Required Vote............................................................................................ 13
THE MERGER................................................................................................. 13
General.................................................................................................. 13
Effective Time........................................................................................... 13
Conversion of Shares; Procedures for Exchange of Certificates............................................ 14
Background of the Merger................................................................................. 14
Reasons of Tyco for the Merger........................................................................... 15
Recommendation of the Board of Directors of Keystone; Reasons of Keystone for the Merger................. 16
Opinion of Keystone's Financial Advisor.................................................................. 16
Certain Considerations................................................................................... 22
Interests of Certain Persons in the Merger............................................................... 23
Certain United States Federal Income Tax and Bermuda Tax Consequences.................................... 24
Anticipated Accounting Treatment......................................................................... 26
Effect on Stock Option Plans............................................................................. 26
Certain Legal Matters.................................................................................... 27
Federal Securities Law Consequences...................................................................... 27
Stock Exchange Listing................................................................................... 28
Dividends................................................................................................ 28
Appraisal Rights......................................................................................... 28
Fees and Expenses........................................................................................ 28
THE MERGER AGREEMENT....................................................................................... 29
Terms of the Merger...................................................................................... 29
Exchange of Certificates................................................................................. 30
Representations and Warranties........................................................................... 31
Conduct of Business Pending the Merger................................................................... 32
Additional Agreements.................................................................................... 35
Conditions to the Merger................................................................................. 36
Termination.............................................................................................. 38
Amendment and Waiver..................................................................................... 40
</TABLE>
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PAGE
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COMPARATIVE PER SHARE PRICES AND DIVIDENDS................................................................. 41
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Tyco..................................................................................................... 41
Keystone................................................................................................. 42
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION............................................... 43
BUSINESSES OF TYCO......................................................................................... 51
Flow Control Products.................................................................................... 51
Fire and Safety Services................................................................................. 52
Disposable and Specialty Products........................................................................ 54
Electrical and Electronic Components..................................................................... 57
Proposed Acquisition..................................................................................... 58
BUSINESS OF KEYSTONE....................................................................................... 59
DESCRIPTION OF SHARE CAPITAL OF TYCO....................................................................... 60
COMPARISON OF SHAREHOLDER RIGHTS........................................................................... 62
OTHER MATTERS.............................................................................................. 71
LEGAL MATTERS.............................................................................................. 71
EXPERTS.................................................................................................... 71
SHAREHOLDER PROPOSALS......................................................................................
WHERE TO FIND MORE INFORMATION............................................................................. 71
LIST OF DEFINED TERMS...................................................................................... 73
</TABLE>
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<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE TYCO/KEYSTONE MERGER
Q: WHY HAS KEYSTONE INTERNATIONAL, INC. AGREED TO BE ACQUIRED IN A MERGER BY
TYCO INTERNATIONAL LTD.?
A: Keystone is a worldwide manufacturer of industrial valves. Tyco is a
diversified manufacturing and service company with annual sales of
approximately $10 billion. Through its Flow Control Group, Tyco manufactures
and distributes a broad range of flow control products including pipe,
fittings, valves and meters.
For the two companies, the merger is an attractive strategic combination
which will benefit from synergies and cost savings. For Keystone
shareholders, the merger offers a premium over the historic market value of
their shares. It will also provide them with an interest in a substantially
larger and more diverse enterprise, with an opportunity for greater
liquidity in their investment.
For a more detailed discussion of the reasons for the merger, see "The
Merger--Reasons of Tyco for the Merger"; and "--Recommendation of the Board
of Directors of Keystone; Reasons of Keystone for the Merger."
Q: WHAT WILL HAPPEN TO THE STOCK OF KEYSTONE IN THE MERGER?
A: In the merger, Keystone shareholders will receive shares of Tyco in exchange
for their shares of Keystone stock. The exchange ratio will depend on the
average trading price of Tyco stock over a period of time prior to the
Keystone special shareholders meeting, as described below. Cash will be paid
instead of the distribution of fractional shares.
Q: HOW IS THE EXCHANGE RATIO OF TYCO SHARES FOR KEYSTONE SHARES DETERMINED?
A: The exchange ratio has been designed to give Keystone shareholders between
$31 and $37 in value of Tyco shares for each of their Keystone shares. The
value of the Tyco shares for this purpose is deemed to be the average daily
trading price of the Tyco shares on the New York Stock Exchange over the ten
trading days ending five trading days before the date of the special meeting
of Keystone shareholders to vote on the merger.
- If the average daily trading price for Tyco shares is between $57.21 and
$68.29, the exchange ratio will be 0.54183 Tyco shares for each share of
Keystone stock, corresponding to a value of between $31 (0.54183 x $57.21)
and $37 (0.54183 x $68.29).
- If the average daily trading price for Tyco shares is greater than $68.29,
the exchange ratio will be correspondingly reduced, so that the product of
the exchange ratio and the average daily trading price is $37 (i.e.,
Keystone shareholders will receive $37 in value (based upon the average
daily trading price) of Tyco shares for each share of Keystone stock).
- If the average daily trading price for Tyco shares is less than $57.21 but
at least $54.08, the exchange ratio will be correspondingly increased, so
that the product of the exchange ratio and the average daily trading price
is $31 (i.e., Keystone shareholders will receive $31 in value (based upon
the average daily trading price) of Tyco shares for each share of Keystone
stock).
- If the average daily trading price for Tyco shares is less than $57.21,
Tyco can terminate the merger agreement unless Keystone agrees to an
exchange ratio of 0.54183, and Keystone can terminate the merger agreement
unless Tyco agrees to adjust the exchange ratio such that the product of
the exchange ratio and the average daily trading price is $31 (i.e.,
Keystone shareholders will receive $31 in value (based upon the average
daily trading price) of Tyco shares for each share of Keystone stock).
1
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The average daily trading price of Tyco shares on the New York Stock
Exchange for the ten trading days ending July 16, 1997 was $76.7054. Based
on this price, the exchange ratio would be 0.48236.
Q. HOW WILL I KNOW WHAT THE ACTUAL EXCHANGE RATIO IS?
A. Keystone shareholders can call toll free 1-800- - at any time after
August , 1997 for the average daily trading price of Tyco shares for the
preceding ten trading days and the exchange ratio that would be in effect
based on that average daily trading price. The actual average daily trading
price, exchange ratio and value of the fractional Tyco share to be received
in the merger per share of Keystone stock will be calculated after the close
of business on , 1997 and may be obtained by calling the toll free
number after that date.
Q: WHEN WILL THE MERGER TAKE EFFECT?
A: Tyco and Keystone expect that the merger will become effective promptly
after the shareholders of Keystone approve the merger and the merger
agreement. The special shareholders meeting of Keystone is scheduled for
August , 1997.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER FOR THE
SHAREHOLDERS OF KEYSTONE?
A: The receipt of Tyco shares in the merger will generally be tax free to the
shareholders of Keystone, however a shareholder may be required to pay taxes
on cash received in lieu of a fractional share of Tyco. For a detailed
discussion of the tax consequences of the merger, see "The Merger--Certain
United States Federal Income Tax and Bermuda Tax Consequences."
Q: WILL SHAREHOLDERS HAVE APPRAISAL RIGHTS?
A: Shareholders of Keystone will not have any appraisal rights as a result of
the merger.
Q: WHAT SHOULD SHAREHOLDERS DO NOW?
A: Shareholders should mail their signed proxy card in the enclosed envelope,
as soon as possible, so that their shares will be represented at the
Keystone special shareholders meeting. The Board of Directors of Keystone
recommends that Keystone shareholders vote in favor of the merger. After the
merger is completed, shareholders will receive written instructions for
exchanging their share certificates.
Q: CAN SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED IN A SIGNED PROXY
CARD?
A: Yes. Shareholders can change their vote in one of three ways at any time
before their proxies are used. First, shareholders can revoke their proxies
by written notice. Second, shareholders can complete new, later dated proxy
cards. Third, shareholders can attend the special shareholders meeting and
vote in person.
Q: WHOM SHOULD SHAREHOLDERS CALL WITH QUESTIONS?
A: Shareholders who have questions about the merger should call Corporate
Investor Communications, Inc. at 1-800 (toll-free in the United
States).
2
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH YOU HAVE BEEN REFERRED. SEE "WHERE TO
FIND MORE INFORMATION." FOR A TABLE OF THE DEFINED TERMS USED IN THIS SUMMARY
AND ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, SEE PAGE .
THE COMPANIES
KEYSTONE INTERNATIONAL, INC.
9600 West Gulf Bank Road
Houston, TX 77040
(713) 466-1176
Keystone International, Inc. ("Keystone") was incorporated in Texas in 1947.
Keystone designs, manufactures and markets on a worldwide basis industrial flow
control valves, actuators and accessories.
For further information on the business of Keystone, see "Business of
Keystone."
TYCO INTERNATIONAL LTD.
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
(441) 292-2033
Tyco International Ltd., a Bermuda company ("Tyco"), is the continuing
public company resulting from the business combination (the "ADT Merger") on
July 2, 1997 of Tyco International Ltd. (now Tyco International (US) Inc.), a
Massachusetts corporation ("Old Tyco"), and ADT Limited, a Bermuda company
("ADT").
Tyco manufactures and distributes flow control products, disposable medical
supplies and other specialty products, electrical and electronic components and
underwater telecommunication systems. In addition, Tyco is the largest
contractor in the world for design, installation and servicing of fire
protection systems and is a leading manufacturer and distributor of fire
detection and fire suppression products. Tyco is also the largest provider of
electronic security services in North America and the United Kingdom. These
services include the sale, installation, monitoring and maintenance of
electronic security devices and systems for intrusion detection, surveillance
and access control. Tyco also operates a network of vehicle auction centers in
the United States.
Tyco's strategy is to be a low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share.
The headquarters address for Tyco's North American operations is c/o Tyco
International (US) Inc., One Tyco Park, Exeter, New Hampshire 03833. The
telephone number at this address is (603) 778-9700.
For further information on the businesses of Tyco, see "Businesses of Tyco."
THE MEETING
The Special Meeting of the Keystone shareholders will be held on August ,
1997.
The record date for Keystone shareholders entitled to receive notice of and
to vote at the Special Meeting is July , 1997. On that date there were
shares of Common Stock of Keystone outstanding.
REASONS FOR THE MERGER
For Tyco, the Merger is consistent with its strategy of seeking growth
through internal expansion and through acquisitions that are likely to benefit
from synergies and cost savings with Tyco's existing operations and that are
expected to be non-dilutive. For Keystone shareholders, the Merger presents the
opportunity to receive a premium over the historic market price for their
shares. It also should enable Keystone shareholders to participate in a larger
and more diversified company. In addition, because Tyco has a substantially
larger public float and trading volume than Keystone, the Merger should give
Keystone shareholders greater liquidity in their investment.
3
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To review the reasons for the merger in greater detail, see "The
Merger--Reasons of Tyco for the Merger"; and "--Recommendation of the Board of
Directors of Keystone; Reasons of Keystone for the Merger."
RECOMMENDATIONS TO SHAREHOLDERS
The Keystone Board of Directors believes that the Merger is fair and in the
best interests of Keystone and the Keystone shareholders and unanimously
recommends that shareholders vote FOR the proposal to approve the Merger and the
Merger Agreement.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS. YOU SHOULD READ THE MERGER AGREEMENT, AS IT IS THE LEGAL
DOCUMENT WHICH GOVERNS THE MERGER.
CONSEQUENCES OF THE MERGER
In the Merger, Keystone will merge with a subsidiary of Tyco. As a result
Keystone will become a wholly-owned subsidiary of Tyco, and the former
shareholders of Keystone will become shareholders of Tyco.
WHAT KEYSTONE SHAREHOLDERS WILL RECEIVE IN THE MERGER
In the Merger, Keystone shareholders will receive Tyco Common Shares in
exchange for their shares of Keystone Common Stock. The Exchange Ratio will
depend on the average daily trading price of Tyco Common Shares over the ten
trading days ending five trading days prior to the Special Meeting (the "Average
Stock Price"). For an Average Stock Price of between $57.21 and $68.29, the
Exchange Ratio would be 0.54183 Tyco Common Shares for each share of Keystone
Common Stock. The Exchange Ratio will be higher or lower for an Average Stock
Price below or above this range. The average daily trading price of Tyco Common
Shares on the New York Stock Exchange for the ten trading days ending July 16,
1997 was $76.7054 (the "July 16th Average Stock Price"). Based on this price,
the Exchange Ratio would be 0.48236. Cash will be paid in lieu of the
distribution of fractional shares. For more detailed information, see "The
Merger Agreement--Terms of the Merger."
CERTAIN UNITED STATES FEDERAL INCOME TAX AND
BERMUDA TAX CONSEQUENCES
The transaction is a tax free reorganization under the United States
Internal Revenue Code. Shareholders of Keystone generally should not have any
taxable gain or loss for U.S. federal income tax purposes upon receipt of Tyco
Common Shares in the Merger, however a shareholder may be required to pay taxes
on cash received in lieu of a fractional Common Share. Keystone shareholders
will have a taxable gain or loss in connection with any cash received by such
shareholders in lieu of fractional Tyco Common Shares. There will be no Bermuda
tax of any kind payable in respect of the exchange of shares in the Merger.
For further details, see "The Merger--Certain United States Federal Income
Tax and Bermuda Tax Consequences."
SHAREHOLDER VOTE REQUIRED
The favorable vote of two-thirds of the outstanding Keystone Common Stock is
required to approve the Merger and the Merger Agreement. IF YOU FAIL TO RETURN
YOUR CARD, THE EFFECT WILL BE THE SAME AS A VOTE AGAINST THE MERGER (UNLESS YOU
APPEAR IN PERSON AT THE SPECIAL MEETING AND VOTE FOR THE MERGER).
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the Keystone Board of Directors in
favor of the Merger, Keystone shareholders should be aware that members of its
management will receive benefits as a result of the Merger that will be in
addition to benefits received by shareholders generally. For further details,
see "The Merger-- Interests of Certain Persons in the Merger."
CONDITIONS OF THE MERGER
The consummation of the Merger depends upon satisfaction of a number of
conditions, including the following:
(1) approval of the Merger and the Merger Agreement by the shareholders of
Keystone;
(2) listing on the New York Stock Exchange of Tyco Common Shares to be
issued in the Merger;
4
<PAGE>
(3) receipt of any required regulatory approvals;
(4) receipt by Tyco and Keystone of the written opinion of their respective
counsel that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code.
(5) absence of governmental action prohibiting the Merger or materially
adversely affecting Tyco;
(6) absence of any law that makes the Merger illegal; and
(7) receipt of the opinions of Coopers & Lybrand and Arthur Andersen LLP
regarding the qualification of the Merger as a pooling of interests for
accounting purposes.
These conditions may be waived by the party entitled to assert the
conditions. For further details, see "The Merger Agreement--Conditions to the
Merger."
TERMINATION OF THE MERGER AGREEMENT
Either Keystone or Tyco may terminate the Merger Agreement if:
(1) the Merger is not completed by December 31, 1997;
(2) a court or governmental agency permanently prohibits the Merger;
(3) the shareholders of Keystone do not approve the Merger and the Merger
Agreement by December 31, 1997, or if the Keystone shareholders do not
approve the Merger and the Merger Agreement at the Special Meeting.
(4) the other party breaches its representations, warranties or obligations
under the Merger Agreement and that breach cannot be remedied;
(5) the Board of Directors of Keystone adversely modifies its approval of
the Merger, but Keystone may only terminate under these circumstances if
the Board's modification is in keeping with its fiduciary obligations to
its shareholders; or
(6) subject to the right of the other party to prevent termination by
agreeing to a modification in the Exchange Ratio, if the Average Stock
Price for Tyco Common Shares is less than $54.08.
Tyco may also terminate the Merger Agreement if:
(7) the Keystone Board of Directors recommends a tender offer or merger
proposal made by a third party.
For further details, see "The Merger Agreement--Termination of the Merger
Agreement."
TERMINATION FEES AND EXPENSES
Keystone is required to pay a termination fee of $35 million, plus up to $2
million of reasonable out-of-pocket expenses, to Tyco if the Merger Agreement is
terminated under certain circumstances. Tyco is required to pay up to $2 million
of reasonable out-of-pocket expenses to Keystone if the Merger Agreement is
terminated under certain other circumstances.
REGULATORY APPROVALS
Tyco and Keystone have given each other a commitment to use their best
efforts to take whatever actions are required to obtain necessary regulatory
approvals.
The U.S. Hart-Scott-Rodino statute prohibits Tyco and Keystone from
completing the Merger until they have furnished certain information and
materials to the Antitrust Division of the U.S. Department of Justice and the
Federal Trade Commission and a required waiting period has expired. This waiting
period is scheduled to expire on July 20, 1997, unless extended. The U.S.
Department of Justice and the Federal Trade Commission have the authority to
challenge the Merger on antitrust grounds before or after the Merger is
completed. Each state and country where either Tyco or Keystone has operations
may also review the Merger under such jurisdiction's antitrust law.
ACCOUNTING TREATMENT
Tyco and Keystone expect the Merger to qualify as a pooling of interests for
accounting purposes, which means that the companies will be treated as if they
had always been combined for accounting and financial reporting purposes. Each
5
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company must receive a letter from its independent accounting firm regarding
qualification of the Merger as a pooling of interests for accounting purposes.
See "The Merger--Accounting Treatment."
OPINION OF FINANCIAL ADVISOR
Goldman Sachs delivered its written opinion to the Board of Directors of
Keystone to the effect that, as of the date hereof, the Exchange Ratio pursuant
to the Merger Agreement is fair to the holders of Keystone Common Stock.
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex B and is incorporated
herein by reference. HOLDERS OF SHARES OF KEYSTONE COMMON STOCK ARE URGED TO,
AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See "The Merger--Opinion of
Keystone's Financial Advisor."
APPRAISAL RIGHTS
Keystone shareholders do not have appraisal rights in connection with the
Merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION; LISTING
Tyco Common Shares are listed on the New York Stock Exchange, the London
Stock Exchange and the Bermuda Stock Exchange. Prior to the business combination
of Old Tyco and ADT, the common stock of Old Tyco was listed on the New York
Stock Exchange; this stock may be viewed as equivalent to the Tyco Common Shares
prior to July 2, 1997. Keystone Common Stock is also listed on the New York
Stock Exchange. The New York Stock Exchange closing price per share for the
common stock of Old Tyco was $62.75 on May 20, 1997, the last full trading day
prior to the public announcement of the proposed Merger. On , 1997,
the closing price per Tyco Common Share on the New York Stock Exchange was
$ . The closing price per share on the New York Stock Exchange of the
Keystone Common Stock was $20.50 on May 20, 1997, and on , 1997.
Application will be made to list the Tyco Common Shares issuable in the
Merger on the New York Stock Exchange, the London Stock Exchange and the Bermuda
Stock Exchange.
CERTAIN CONSIDERATIONS
ADJUSTABLE EXCHANGE RATIO
The Merger Agreement provides for adjustments to the Exchange Ratio based
upon the Average Stock Price for Tyco Common Shares. These adjustments are
designed so that Keystone shareholders will receive between $31 and $37 in value
of Tyco Common Shares (as measured by the Average Stock Price) for each share of
Keystone Common Stock exchanged in the Merger. In particular, for all values of
the Average Stock Price above $68.29, the Exchange Ratio is reduced, so that the
value of the Tyco shares receivable by Keystone shareholders in the Merger
(measured by the Average Stock Price) will not increase as a result of increases
in the price of Tyco Common Shares that raise the Average Stock Price above
$68.29. Keystone shareholders should also be aware that the price per Tyco
Common Share at the time of the Merger is likely to be different than the
Average Stock Price, which is determined on the basis of the average daily
trading prices of Tyco Common Shares over a ten day trading period ending five
trading days before the date of the Special Meeting. The price of Tyco Common
Shares is subject to change based upon changes in the business, operations and
prospects of Tyco, general market and economic conditions, regulatory
considerations and other factors. Keystone shareholders are urged to obtain
current market quotations for Tyco Common Shares and Keystone Common Stock and
to call 1-800-___-____ at any time after August , 1997 for current information
on the Average Stock Price and the Exchange Ratio.
SHAREHOLDINGS IN A BERMUDA COMPANY
If the Merger is consummated, shareholders of Keystone will become
shareholders of Tyco, a Bermuda company. There are significant differences
between the corporate laws of Bermuda and the corporate laws of Texas and
between the constitutional documents of Keystone and Tyco. See "Comparison of
Shareholder Rights." These differences may materially affect the rights of
Keystone shareholders.
6
<PAGE>
SELECTED FINANCIAL DATA FOR TYCO AND KEYSTONE
The following information is being provided to assist in analyzing the
financial aspects of the Merger. The information for Tyco has been derived from
Tyco's audited supplemental consolidated financial statements as of December 31,
1996 and 1995 and for the three years in the period ended December 31, 1996
incorporated herein. All other Tyco historical information presented below has
been derived by combining ADT's and Old Tyco's historical audited and unaudited
financial statements. The information for Keystone has been derived from
Keystone's audited financial statements for the fiscal years ended December 31,
1992 through 1996 and Keystone's unaudited financial statements for the three
months ended March 31, 1996 and the thirteen weeks ended March 28, 1997. The
information is only a summary. The information should be read in conjunction
with the historical financial statements and related notes contained in the
annual, quarterly and other reports filed by Tyco and Keystone with the
Securities and Exchange Commission (the "Commission"). See "Where to Find More
Information."
SELECTED TYCO HISTORICAL FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992(1)
--------- --------- --------- --------- --------- --------- ---------
Income Statement Data:
Net sales................................ $ 2,114.9 $ 1,668.9 $ 7,425.8 $ 6,318.5 $ 5,705.8 $ 5,447.9 $ 4,618.7
Operating (loss)income (2)............... 260.8 (534.6) (102.9) 649.1 596.6 451.9 360.1
(Loss) income before extraordinary items
and cumulative effect of accounting
changes(3)(4).......................... 141.7 (626.1) (338.6) 247.6 271.8 205.2 254.4
(Loss) income per share before
extraordinary items and cumulative
effect of accounting changes(3)(4)..... 0.60 (2.87) (1.53) 1.14 1.21 0.91 1.56
Cash dividends per common share(5)....... 0.03 0.03 0.13 0.11 0.08 0.07 0.07
Balance Sheet Data:
Total assets(6).......................... $ 8,700.7 $ 7,928.5 $ 6,801.2 $ 6,556.9 $ 6,642.4 $ 5,820.4
Long-term debt (including current
portion)............................... 1,896.0 1,962.4 1,686.7 1,799.9 1,766.0 1,602.8
Total shareholders' equity............... 3,932.6 2,987.8 3,060.0 2,743.5 2,403.6 2,095.0
</TABLE>
- ------------------------
(1) On October 19, 1994, Tyco merged with Kendall International, Inc.
("Kendall") in a transaction accounted for as a pooling of interests. The
summary historical financial data reflects the combined results of Tyco and
Kendall for all periods presented subsequent to June 30, 1992, the date on
which Kendall undertook a financial restructuring. The summary historical
data at and for the year ended December 31, 1992 reflect only the results of
operations and financial position of Tyco.
(2) Operating loss in 1996 included restructuring and other non-recurring
charges of $237.3 million relating principally to ADT Security's operations
in the United States and the United Kingdom, and a charge of $744.7 million,
which occurred in the three month period ended March 31, 1996, relating to
the impairment of long-lived assets of ADT Security and ADT Automotive
following the adoption of Statement of Financial Accounting Standards No.
121 ("SFAS 121"). Operating income in 1995 included restructuring and other
non-recurring charges of $34.2 million relating principally to ADT
Security's United States operations and to ADT Security's corporate
restructuring in Europe, and a
7
<PAGE>
charge of $37.2 million related to merger and transaction costs associated
with the Kendall merger. Operating income in 1993 included a non-recurring
inventory charge of $22.5 million principally relating to Kendall, and a
restructuring charge of $39.3 million relating principally to the European
and Australian fire protection contracting operations, as well as the
Grinnell flow control distribution operations. Operating income in 1992
included a restructuring charge of $25.6 million relating to European fire
products manufacturing, North American fire protection operations and
corporate headquarters and Grinnell flow control distribution operations.
(3) In 1996, Tyco recorded certain non-recurring items including (i) a non-cash
charge relating to the write-down of specific ADT Security and ADT
Automotive assets to their estimated fair values in accordance with SFAS
121, (ii) a charge principally relating to costs associated with integrating
the businesses of Automated Security (Holdings) plc in the United Kingdom
and the United States into ADT Security, together with the costs of
administrative, accounting, management information and technological
infrastructure enhancements currently being implemented in the United States
electronic security services operations, (iii) a gain arising on the sales
of Tyco's interest in Limelight Group plc, which was recorded on the balance
sheet at a nominal value and (iv) a gain represented by cash receivable as a
result of the settlement of Tyco's litigation against BDO Binder Hamlyn.
Tyco's historical net income before these non-recurring items amounted to
$488.4 million or $2.19 per share ($2.14 per share on a fully diluted
basis).
(4) In the three months ended March 31, 1997, Tyco recorded certain
non-recurring charges in connection the ADT Merger and the unsolicited
proposals of Western Resources, Inc.. Tyco's historical net income before
these non-recurring items amounted to $151.3 million or $0.65 per share
($0.64 per share on a fully diluted basis). In the three months ended March
31, 1996, Tyco recorded certain non-recurring charges which principally
represented non-cash charges relating to the write down of specific ADT
assets to their estimated fair value in accordance with SFAS 121. Tyco
historical net income before these non-recurring items amounted to $108.4
million, or $0.50 per share ($0.48 per share on a fully diluted basis).
(5) Prior to the ADT Merger, ADT had not declared any dividends on its common
shares since April 1991. Old Tyco declared dividends of $0.20 per share in
1996, 1995 and 1994, $0.19 per share in 1993 and $0.18 per share in 1992.
(6) During 1996, Tyco recorded a charge of $744.7 million relating to the
impairment of ADT Security and ADT Automotive's long-lived assets.
8
<PAGE>
SELECTED KEYSTONE HISTORICAL FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE
13 WEEK
PERIOD AT OR FOR THE
ENDED 3 MONTH PERIOD AT OR FOR THE YEAR ENDED DECEMBER 31,
MARCH 28, ENDED -----------------------------------------------------
1997 MARCH 31,1996 1996 1995 1994 1993 1992
------------- --------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales................................. $ 157.9 $ 164.2 $ 677.9 $ 597.1 $ 535.1 $ 516.1 $ 528.4
Operating (loss) income (1)(2)............ 16.5 16.6 79.5 38.3 57.0 70.6 80.4
(Loss) income before extraordinary items
and cumulative effect of accounting
change (1)(2)........................... 9.5 9.3 41.9 19.9 33.0 39.1 42.5
(Loss) income per share before
extraordinary items and cumulative
effect of accounting change............. 0.27 0.26 1.18 0.56 0.94 1.12 1.22
Cash dividends per common share........... 0.185 0.185 0.74 0.74 0.74 0.72 0.68
Balance Sheet Data:
Total assets.............................. $ 522.3 $ 542.8 $ 556.6 $ 496.3 $ 456.5 $ 438.1
Long-term debt (including current
portion)................................ 75.1 77.0 82.0 64.4 64.5 59.9
Total shareholders' equity................ 296.8 300.8 282.9 286.4 270.6 252.6
</TABLE>
- ------------------------
(1) Operating income in 1995 included charges of $22.8 million for restructuring
and severance costs, $8.2 million for impairment of assets held for sale and
$2.9 million for plant closure and related costs.
(2) Operating income in 1994 included charges of $4.4 million for plant closure
and related costs.
9
<PAGE>
SELECTED TYCO AND KEYSTONE UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------ -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, MARCH 31,
1997 1996 1996 1995 1994 1993 1992
----------- ----------- --------- --------- --------- --------- ---------
Income Statement Data:
Net sales............................... $ 2,272.8 $ 1,833.1 $ 8,103.7 $ 6,915.6 $ 6,240.9 $ 5,964.0 $ 5,147.1
Operating (loss) income................. 277.3 (518.0) (23.4) 687.4 653.6 522.5 440.5
(Loss) income before extraordinary items
and cumulative effect of accounting
charges (1)........................... 151.2 (616.8) (296.7) 267.5 304.8 244.3 296.9
(Loss) income per share before
extraordinary items and cumulative
effect of accounting changes(1)(2).... 0.59 (2.60) (1.24) 1.13 1.26 1.01 1.65
Cash dividends per common
share(3).............................. 0.06 0.05 0.22 0.21 0.17 0.17 0.16
Balance Sheet Data:
Total assets............................ $ 9,223.0 $ 8,471.3 $ 7,357.8 $ 7,053.2 $ 7,098.9 $ 6,258.5
Long-term debt (including current
portion).............................. 1,971.1 2,039.4 1,768.7 1,864.3 $ 1,830.5 1,662.7
Total shareholders' equity.............. 4,229.4 3,288.6 3,342.9 3,029.9 2,674.2 2,347.6
</TABLE>
- ------------------------
(1) See notes (3) and (4) to "Selected Tyco Historical Financial Information"
for information on Tyco's income per share before certain non-recurring
items. On a pro forma combined basis, net income per share for the three
months ended March 31, 1997 before these non-recurring items is $0.64 ($0.63
per share on a fully diluted basis). On a pro forma combined basis, net
income per share for 1996 before these non-recurring items is $2.19 ($2.15
per share on a fully diluted basis).
(2) The unaudited pro forma combined per share data are based on Keystone
shareholders receiving 0.54183 of a Tyco Common Share for each share of
Keystone Common Stock held. Based on the July 16th Average Stock Price of
Tyco Common Shares of $76.7054, the Exchange Ratio would be 0.48236.
Assuming that ratio, pro forma combined (loss) income per share would be
$0.61 per share (0.59 per share on a fully diluted basis) for March 31,
1997, ($2.62) for March 31, 1996, and ($1.25), $1.14, $1.27, $1.02 and $1.67
for the years ended December 31, 1996, 1995, 1994, 1993 and 1992,
respectively.
(3) Prior to the ADT Merger, ADT had not declared any dividends on its common
shares since April 1991. Old Tyco declared dividends of $0.05 per share in
the quarters ended March 31, 1997 and 1996, and $0.20 per share in 1996,
1995 and 1994. Keystone paid dividends of $0.185 per share in the quarters
ended March 31, 1997 and 1996, and $0.74 per share in 1996, 1995 and 1994.
Tyco expects to continue Old Tyco's dividend practice according to which it
would pay quarterly dividends of $0.05 per common share, although this may
be changed at any time by the Board of Directors of Tyco. The payment of
dividends by Tyco in the future will depend on business conditions, Tyco's
financial condition and earnings and other factors.
10
<PAGE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
TYCO AND
KEYSTONE KEYSTONE KEYSTONE
HISTORICAL UNAUDITED EQUIVALENT
TYCO PER PRO FORMA PRO FORMA
HISTORICAL SHARE COMBINED PER SHARE
PER SHARE DATA DATA PER SHARE DATA DATA
--------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
AT OR FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Loss) income from continuing operations per common
share............................................... $ 0.60 $ 0.27 $ 0.59(1) $ 0.32(1)
Cash dividends declared per common share.............. 0.03 0.19 0.06 0.03
Book value per common share........................... 16.23 8.34 16.17 8.76
AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
(Loss) income from continuing operations per common
share............................................... (1.53) 1.18 (1.24)(1) (0.67)(1)
Cash dividends declared per common share.............. 0.13 0.74 0.22 0.12
Book value per common share........................... 13.39 8.47 13.56 7.35
AT OR FOR THE YEAR ENDED DECEMBER 31, 1995
(Loss) income from continuing operations per common
share............................................... 1.14 0.56 1.13 0.61
Cash dividends declared per common share.............. 0.11 0.74 0.21 0.11
Book value per common share........................... 14.03 7.99 14.09 7.63
AT OR FOR THE YEAR ENDED DECEMBER 31, 1994
(Loss) income from continuing operations per common
share............................................... 1.21 0.94 1.26 0.68
Cash dividends declared per common share.............. 0.08 0.74 0.17 0.09
Book value per common share........................... 13.25 8.11 13.39 7.26
</TABLE>
- ------------------------
(1) See notes (3) and (4) to "Selected Tyco Historical Financial Information"
for information on Tyco's income per share before certain non-recurring
items. On a pro forma combined basis, net income per share for the three
months ended March 31, 1997 before these non-recurring items is $0.64 ($0.63
per share on a fully diluted basis). On an equivalent pro forma basis, net
income per share for the three months ended March 31, 1997 before these
non-recurring items is $0.35 ($0.34 per share on a fully diluted basis.) On
a pro forma combined basis, net income per share for 1996 before these non-
recurring items is $2.19 ($2.15 per share on a fully diluted basis). On an
equivalent pro forma basis, net income per share before non-recurring items
for 1996 is $1.18 ($1.16 per share on a fully diluted basis).
(a) Prior to the ADT Merger, ADT had not declared any dividends on its common
shares since April 1991. Old Tyco declared dividends of $0.05 per share in
the quarter ended March 31, 1997, and $0.20 per share in 1996, 1995 and
1994.
(b) The unaudited pro forma (loss) income and book value per share are based on
Keystone shareholders receiving 0.54183 of a Tyco Common Share for each
share of Keystone Common Stock held. The Keystone equivalent pro forma per
share data are calculated by the multiplying the unaudited pro forma
combined per share data by 0.54183.
Based on the July 16th Average Stock Price of Tyco Common Shares of $76.7054,
the Exchange Ratio would be 0.48236. Assuming that ratio, pro forma combined
(loss) income per share would be $0.61 per share ($0.59 per share on a fully
diluted basis), ($1.25), $1.14 and $1.27 for the quarter ended March 31,
1997 and each of the three years ended December 31, 1996, 1995, 1994
respectively; Pro forma equivalent (loss) income per share would be $0.29,
($0.60), $0.55 and $0.61 for the quarter ended March 31, 1997 and each of
the three years ended December 31, 1996, 1995, 1994 respectively. Based on
the ratio of 0.48236, pro forma combined book value per share would be
$16.30, $13.68, $14.21 and $13.52 at March 31, 1997 and at December 31,
1996, 1995 and 1994, respectively; Pro forma equivalent book value per share
would be $7.86, $6.60, $6.86 and $6.52, respectively.
11
<PAGE>
KEYSTONE SPECIAL MEETING
PURPOSE OF THE KEYSTONE SPECIAL MEETING
At the special meeting of Keystone shareholders (the "Special Meeting"),
holders of Keystone Common Stock will consider and vote upon a proposal to
approve the Merger (the "Merger") of Keystone and T8 Acquisition Corp., a Texas
subsidiary of Tyco ("Merger Sub"), and the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 20, 1997, among Old Tyco, Merger Sub,
successor by assignment to T6 Acquisition Corp., a subsidiary of Old Tyco
("T6"), and Keystone, providing for the Merger, and such other matters as may
properly be brought before the meeting.
THE BOARD OF DIRECTORS OF KEYSTONE HAS UNANIMOUSLY APPROVED THE MERGER AND
THE MERGER AGREEMENT AND RECOMMENDS THAT KEYSTONE SHAREHOLDERS VOTE FOR APPROVAL
OF THE MERGER AND THE MERGER AGREEMENT. SEE "THE MERGER--BACKGROUND OF THE
MERGER," "--RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF KEYSTONE; REASONS FOR
THE MERGER" AND "--INTERESTS OF CERTAIN PERSONS IN THE MERGER."
RECORD DATE; VOTING RIGHTS; PROXIES
The Keystone Board of Directors has fixed the close of business on July ,
1997 as the record date (the "Record Date") for determining holders entitled to
notice of and to vote at the Special Meeting.
As of the Record Date, there were shares of Keystone common stock,
par value $1.00 per share (the "Keystone Common Stock"), issued and outstanding,
each of which entitles its holder to one vote. All shares of Keystone Common
Stock represented by properly executed proxies will, unless such proxies have
been previously revoked, be voted in accordance with the instructions indicated
in such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF KEYSTONE
COMMON STOCK WILL BE VOTED IN FAVOR OF APPROVAL OF THE MERGER AND THE MERGER
AGREEMENT. Keystone does not know of any matters other than approval of the
Merger and the Merger Agreement that are to come before the Special Meeting. If
any other matter or matters are properly presented for action at the Special
Meeting, the persons named in the enclosed form of proxy will have the
discretion to vote on such matters in accordance with their best judgment,
unless such authorization is withheld. A shareholder who has given a proxy may
revoke it at any time prior to its exercise by giving written notice of
revocation to the Secretary of Keystone, by signing and returning a later dated
proxy, or by voting in person at the Special Meeting. However, mere attendance
at the Special Meeting will not in and of itself have the effect of revoking the
proxy.
Votes cast by proxy or in person at the Special Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
Keystone will bear its own cost of solicitation of proxies. Brokerage
houses, fiduciaries, nominees and others will be reimbursed for their
out-of-pocket expenses in forwarding proxy materials to beneficial owners of
stock held in their names.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Keystone Common Stock is
necessary to constitute a quorum at the Special Meeting.
12
<PAGE>
REQUIRED VOTE
The approval of the Merger and the Merger Agreement requires the affirmative
vote of the holders of two-thirds of the outstanding shares of Keystone Common
Stock. Abstentions and broker non-votes will have the effect of votes against
approval of the Merger and the Merger Agreement. In certain circumstances,
including if Keystone shareholders fail to approve the Merger and the Merger
Agreement, Keystone will be obligated to pay to Tyco a termination fee of $35
million, plus up to $2 million of reasonable out-of-pocket expenses. See "The
Merger Agreement--Termination--Fees and Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF KEYSTONE. ACCORDINGLY, KEYSTONE SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
THE MERGER
This section of the Proxy Statement/Prospectus as well as the next section
of the Proxy Statement/ Prospectus entitled "The Merger Agreement" describe
certain aspects of the proposed Merger. The following discussion is qualified in
its entirety by reference to the Merger Agreement, which is attached as Annex A
to this Proxy Statement/Prospectus, and to the other agreements and documents
that are discussed, which are filed as exhibits to the Registration Statement of
which this Proxy Statement/ Prospectus forms a part. All shareholders are urged
to read the Merger Agreement in its entirety.
GENERAL
The Merger Agreement provides that the Merger will be consummated if the
required approval of the Keystone shareholders is obtained and all other
conditions to the Merger are satisfied or waived. Upon consummation of the
Merger, Merger Sub will be merged with and into Keystone, and Keystone will
become a wholly-owned subsidiary of Tyco.
Pursuant to the Merger Agreement, each outstanding share of Keystone Common
Stock will be converted into common shares, par value $.20 per share, of Tyco
("Tyco Common Shares"). The exchange ratio ("the Exchange Ratio") of Tyco Common
Shares receivable in the Merger for each share of Keystone Common Stock will
depend on the Average Stock Price of Tyco Common Shares, as described under "The
Merger Agreement--Terms of the Merger." For an Average Stock Price of between
$57.21 and $68.29, the Exchange Ratio would be 0.54183 Tyco Common Shares for
each share of Keystone Common Stock. The Exchange Ratio will be higher or lower
for an Average Stock Price below or above this range. Based upon the July 16th
Average Stock Price of $76.7054, the Exchange Ratio would be 0.48236.
Based upon the number of shares of Keystone Common Stock outstanding on the
Record Date, and assuming the exercise of all outstanding Stock Options
currently exercisable and an Exchange Ratio of 0.54183, a maximum number of
19,620,447 Tyco Common Shares may be issued in the Merger. Based upon the
capitalization of Tyco and Keystone as of , 1997, the shareholders of
Keystone will own approximately 7% of the outstanding Tyco Common Shares
following consummation of the Merger.
EFFECTIVE TIME
As promptly as practicable after the satisfaction or waiver of the
conditions to the Merger set forth in the Merger Agreement, the parties will
file Articles of Merger with the Secretary of State of the State of Texas (the
"Articles of Merger"). The effective time of the Merger (the "Effective Time")
will occur upon the issuance of a Certificate of Merger by the Secretary of
State of the State of Texas (the "Certificate of Merger"). The Merger Agreement
may be terminated by either party if the Merger has not been
13
<PAGE>
consummated on or before December 31, 1997. The Merger Agreement may also be
terminated under certain other circumstances. See "The Merger
Agreement--Conditions to the Merger," and "-- Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of Keystone Common Stock into the right to receive Tyco
Common Shares will occur automatically at the Effective Time.
As soon as practicable after the Effective Time, a transmittal letter will
be mailed by the Exchange Agent to each Keystone shareholder informing
shareholders of the procedures to follow in forwarding stock certificates
representing Keystone Common Stock to the Exchange Agent. Upon receipt of a
shareholder's Keystone stock certificates, the Exchange Agent will deliver
certificates for full Tyco Common Shares to such shareholder and cash in lieu of
fractional shares pursuant to the terms of the Merger Agreement and in
accordance with the transmittal letter, together with any dividends or other
distributions to which such shareholder is entitled.
If any issuance of Tyco Common Shares in exchange for shares of Keystone
Common Stock is to be made to a person other than the Keystone shareholder in
whose name the certificate is registered at the Effective Time, it will be a
condition of such exchange that the certificate so surrendered be properly
endorsed or otherwise be in proper form for transfer and that the Keystone
shareholder requesting such issuance either pay any transfer or other tax
required or establish to the satisfaction of Tyco that such tax has been paid or
is not payable.
After the Effective Time, there will be no further transfers of Keystone
Common Stock on the stock transfer books of Keystone. If a certificate
representing Keystone Common Stock is presented for transfer, it will be
cancelled and a certificate representing the appropriate number of full Tyco
Common Shares and cash in lieu of fractional shares and any dividends and
distributions will be issued in exchange therefor.
After the Effective Time and until surrendered, shares of Keystone Common
Stock will be deemed for all corporate purposes, other than the payment of
dividends and distributions, to evidence ownership of the number of full Tyco
Common Shares into which such shares of Keystone Common Stock were converted at
the Effective Time. No dividends or other distributions, if any, payable to
holders of Tyco Common Shares will be paid to the holders of any certificates
for shares of Keystone Common Stock until such certificates are surrendered.
Upon surrender of such certificates, all such declared dividends and
distributions which shall have become payable with respect to such Tyco Common
Shares in respect of a record date after the Effective Time will be paid to the
holder of record of the full Tyco Common Shares represented by the certificate
issued in exchange therefor, without interest. See "The Merger Agreement--
Exchange of Certificates."
KEYSTONE SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. KEYSTONE SHAREHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
BACKGROUND OF THE MERGER
Except where otherwise specified, in this section and the following sections
captioned "Reasons for the Merger," "Recommendation of the Board of Directors of
Keystone; Reasons of Keystone for the Merger," "Opinion of Keystone's Financial
Advisor" and "Certain Considerations," references to Tyco for all times prior to
consummation of the ADT Merger on July 2, 1997 are to Old Tyco.
On April 4, 1997, Tyco sent Keystone an unsolicited letter expressing
interest in, and containing a proposal for, a potential acquisition of Keystone
by Tyco. Nishan Teshoian, the Chairman and Chief Executive Officer of Keystone,
promptly advised all of the members of the Keystone Board of Directors of
14
<PAGE>
this unsolicited proposal. With the board's concurrence, Mr. Teshoian appointed
a committee comprised of four outside directors with responsibility for making a
recommendation to the entire board regarding its response to the proposal (the
"Special Committee"). On April 7, 1997, Mr. Teshoian called L. Dennis Kozlowski,
the Chairman and Chief Executive Officer of Tyco, to clarify certain terms of
the proposal. Thereafter, Keystone engaged Goldman Sachs & Co. ("Goldman Sachs")
to advise Keystone in connection with Keystone's analysis and consideration of
the proposal and various available financial alternatives.
On April 20, 1997, the Special Committee held a meeting to consider the
appropriate course of action for Keystone to take in response to the proposal
from Tyco. At the conclusion of such meeting, the Special Committee unanimously
voted to recommend to the Board of Directors that Keystone actively pursue the
alternative of a sale or other combination of Keystone with Tyco or another
entity.
On April 22, 1997, the Keystone Board of Directors held a meeting to
discuss, among other things, the proposal from Tyco. After discussion, the Board
of Directors of Keystone unanimously approved and adopted the recommendation of
the Special Committee. Thereafter, Keystone engaged Goldman Sachs as Keystone's
financial advisor in connection with a possible sale of all or a portion of
Keystone.
After meetings between representatives of Tyco and Keystone, on May 1, 1997
the parties executed a mutual confidentiality and standstill agreement.
Following execution of this agreement, the parties began to conduct due
diligence investigations, and representatives of Tyco and Keystone began to
discuss and negotiate the terms of a possible business combination.
Between May 16 and May 20, 1997, representatives of Tyco and Keystone,
negotiated the terms of the Merger Agreement, including the exchange ratio,
while due diligence investigations continued. On May 20, 1997, the parties
agreed upon an exchange ratio of 0.54183 shares of Tyco stock (or, if the ADT
Merger was consummated, 0.54183 Tyco Common Shares) for each share of Keystone
Common Stock, subject to certain adjustments depending upon the trading price of
Tyco stock, and the parties agreed to the principal provisions of the Merger
Agreement subject to the approval of their respective boards of directors.
On May 20, 1997, the Keystone Board of Directors held a special meeting to
consider the terms of the proposed merger agreement. At this meeting, management
of Keystone discussed the results of the negotiations between the parties and
the terms of the proposed merger agreement, and Goldman Sachs provided to the
Keystone Board of Directors its oral opinion to the effect that, as of such
date, the Exchange Ratio pursuant to the Merger Agreement was fair to the
holders of Keystone Common Stock. The Keystone Board of Directors then
unanimously concluded that the Merger was in the best interests of Keystone and
Keystone's shareholders, unanimously approved the proposed terms and authorized
Keystone's officers to complete the negotiation of and execute the Merger
Agreement. The Keystone Board of Directors also approved an amendment to the
Keystone Rights Agreement to provide that rights granted thereunder would not be
triggered by the Merger. The Tyco Board of Directors met on May 20, 1997 to
consider the terms of the proposed merger agreement. The Tyco Board of Directors
concluded that the Merger was in the best interests of Tyco's shareholders,
unanimously approved the proposed terms and authorized Tyco's officers to
complete and execute the Merger Agreement.
After approval of the Merger by the Keystone Board of Directors and the Tyco
Board of Directors, on May 20, 1997 the Merger Agreement was executed by the
respective parties.
REASONS OF TYCO FOR THE MERGER
The Tyco Board of Directors believes that the Merger is in keeping with
Tyco's corporate strategy of seeking growth through internal expansion and
acquisition, where attractive acquisition opportunities present themselves that
are likely to benefit from cost reductions and synergies with Tyco's existing
operations and that are non-dilutive. In particular, the Tyco board believes
that there are several significant benefits from this transaction, including:
(i) combination of the product lines manufactured by Keystone with the
complementary products manufactured by Tyco, enabling Tyco to broaden
substantially the line of
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flow control products offered to its customers; (ii) realization of synergies
from the manufacturing and distribution expertise of both Keystone and Tyco in
the flow control markets; (iii) access to Keystone's worldwide distribution
network for flow control products to complement Tyco's existing distribution
channels for these products; (iv) utilization of the Keystone acquisition as a
platform for future growth in the segments of the flow control markets in which
Keystone is active; and (v) reduction of certain Keystone corporate costs,
possible elimination of excess facilities and potential cost reduction for
materials and services.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF KEYSTONE; REASONS OF KEYSTONE FOR
THE MERGER
The Board of Directors of Keystone has unanimously approved the Merger and
the Merger Agreement, has unanimously determined that the Merger is fair and in
the best interest of Keystone and its shareholders and unanimously recommends
that holders of shares of Keystone Common Stock vote FOR approval of the Merger
and the Merger Agreement.
In reaching its decision to approve the Merger and the Merger Agreement and
to recommend that Keystone's shareholders vote to approve the Merger and the
Merger Agreement, Keystone's Board of Directors considered the following factors
material: (i) the opportunity for Keystone shareholders to receive Tyco stock in
a tax-free exchange valued at a significant premium over the existing market
price for shares of Keystone Common Stock prevailing prior to the public
announcement of the Merger; (ii) the financial condition, results of operations
and business of Keystone and Tyco, on both a historical and prospective basis,
and current industry, economic and market conditions; (iii) the historical
market prices and recent trading patterns of Keystone Common Stock and Tyco
stock and market prices, recent trading patterns and financial data relating to
other companies engaged in the same business as Keystone; (iv) the opportunity
for Keystone shareholders to participate, as holders of Tyco stock, in a larger,
more strategically balanced company of which Keystone would be a part; (v) the
recommendation of the mananagement of Keystone that the Merger be approved; (vi)
the opinion of Goldman Sachs to the Keystone Board of Directors on May 20, 1997
to the effect that as of such date the Exchange Ratio pursuant to the Merger
Agreement is fair to the holders of Keystone Common Stock (see "Opinion of
Keystone's Financial Advisor"); (vii) the larger public float and trading volume
of shares of Tyco stock compared to the public float and trading volume of
shares of Keystone Common Stock which should provide Keystone's shareholders
with greater liquidity in their investment; (viii) the potential impact that the
Merger will have on Keystone's employees and customers; and (ix) alternatives to
the Merger that might be available to Keystone and its shareholders.
The foregoing discussion of the information and factors considered and given
weight by the Keystone Board of Directors is not intended to be exhaustive. In
view of the variety of factors considered in connection with its evaluation of
the Merger, the Keystone Board of Directors did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
Keystone Board of Directors may have given different weights to different
factors. For a discussion of the interest of certain members of Keystone's
management and Keystone's Board of Directors in the Merger, see "Interests of
Certain Persons in the Merger" below.
THE KEYSTONE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
KEYSTONE COMMON STOCK VOTE FOR APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
OPINION OF KEYSTONE'S FINANCIAL ADVISOR
On May 20, 1997, Goldman Sachs delivered its oral opinion to the Board of
Directors of Keystone to the effect that as of such date, the Exchange Ratio
pursuant to the Merger Agreement was fair to the holders of Keystone Common
Stock. Goldman Sachs subsequently confirmed its oral opinion by delivery of its
written opinion dated the date hereof.
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THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED THE DATE HEREOF,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH ITS OPINION, IS ATTACHED AS ANNEX B TO THIS
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS
OF KEYSTONE ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) this Proxy Statement/Prospectus; (iii) the Annual
Reports to Shareholders and Annual Reports on Form 10-K of Keystone and ADT for
the five years ended December 31, 1996 and of Tyco for the five fiscal years
ended June 30, 1996; (iv) certain interim reports to shareholders and Quarterly
Reports on Form 10-Q of Keystone, Tyco and ADT; (v) certain other communications
from Keystone, Tyco and ADT to their respective shareholders; and (vi) certain
internal financial analyses and forecasts for Keystone and Tyco prepared by
their respective managements including financial analyses and forecasts for Tyco
reflecting the impact of the ADT Merger. Goldman Sachs also held discussions
with members of the senior managements of Keystone and Tyco regarding the past
and current business operations, financial condition, and future prospects of
their respective companies. In addition, Goldman Sachs reviewed the reported
price and trading activity for the Keystone Common Stock and the Common Stock,
par value $0.50 per share, of Old Tyco ("Old Tyco Common Stock") and the Tyco
Common Shares, compared certain financial and stock market information for
Keystone and Tyco with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the flow control and fluid management industries
specifically and in other industries generally and performed such other studies
and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of its opinion. Goldman Sachs' review of Tyco and ADT
was limited to publicly available information, limited internal financial
forecasts prepared by Tyco's management and discussions with Tyco's management
including financial analyses and forecasts for Tyco regarding the impact of the
ADT Merger. In addition, Goldman Sachs has not made an independent evaluation or
appraisal of the assets and liabilities of Keystone or Tyco or any of their
respective subsidiaries and Goldman Sachs has not been furnished with any such
evaluation or appraisal. Goldman Sachs' advisory services and its opinion are
provided for the information and assistance of Keystone's Board of Directors in
connection with its consideration of the transaction contemplated by the Merger
Agreement and such opinion does not constitute a recommendation as to how any
holder of Keystone Common Stock should vote with respect to the Merger.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Board of
Directors of Keystone on May 20, 1997. In connection with such analyses Goldman
Sachs utilized an indicative Exchange Ratio of 0.5386, which is the Exchange
Ratio obtained assuming a transaction value of $34 based on the per share
closing price of $63.125 for the Old Tyco Common Stock on May 19, 1997. Goldman
Sachs utilized substantially the same type of financial analysis with such
analyses giving effect to the ADT Merger in connection with providing the
written opinion attached hereto as Annex B.
(i) SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed and compared
certain financial information, ratios and public market multiples relating to
Keystone to corresponding financial information, ratios and public market
multiples for nine publicly traded corporations in the flow control industry:
Amcast Industrial Corporation, BW/IP, Inc., Durco International Inc., The
Gorman-Rupp Company, Goulds Pumps, Incorporated, Graco Inc., IDEX Corporation,
Robbins & Myers Inc. and Watts Industries, Inc. (the "Selected Companies"). The
Selected Companies were chosen because they are publicly-traded companies with
operations that for the purposes of this analysis may be considered similar to
Keystone. Goldman Sachs calculated and compared various financial ratios for the
Selected Companies and compared them to those of Keystone. The ratios for
Keystone and the Selected Companies were based on publicly available
information, including estimates provided by the Institutional Brokers Estimate
System ("IBES"). Goldman Sachs' analyses of the Selected Companies indicated
latest twelve months ("LTM")
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gross margins which ranged from 19.9% to 51.6% with a mean of 36.4% and a median
of 37.6% compared to 37.9% for Keystone; LTM earnings before interest, taxes,
depreciation and amortization ("EBITDA") margins which ranged from 10.5% to
20.8% with a mean of 14.5% and a median of 14.4% compared to 15.5% for Keystone;
LTM earnings before interest and taxes ("EBIT") margins which ranged from 7.6%
to 17.4% with a mean of 10.9% and a median of 11.5% compared to 11.8% for
Keystone; LTM Net Income margins which ranged from 1.1% to 9.3% with a mean of
6.1% and a median of 6.3% compared to 6.3% for Keystone; Net debt to total
capitalization ratios, which ranged from 10.4% to 55.7% with a mean of 32.7% and
a median of 28.7% compared to 20.6% for Keystone; and a Long-Term earnings per
share ("EPS") Growth Rate (provided by IBES) which ranged from 12.0% to 15.0%
with a mean of 12.8% and a median of 13.0% compared to 13.0% for Keystone.
Goldman Sachs also calculated and compared various financial multiples for the
Selected Companies, excluding Goulds Pumps (which was the subject of a recently
announced merger), and for Keystone. The multiples of Keystone were calculated
using a price of $20.75 per share of Keystone Common Stock, the closing price of
the Keystone Common Stock on the NYSE on May 19, 1997. The multiples for
Keystone and the multiples for each of the Selected Companies were based on
publicly available information including estimates provided by IBES. With
respect to the Selected Companies, Goldman Sachs considered levered market
capitalization (i.e., market value of common equity plus book value of debt less
cash) as a multiple of LTM sales, as a multiple of LTM EBITDA and as a multiple
of LTM EBIT. Goldman Sachs' analyses of the Selected Companies indicated levered
multiples of LTM sales, which ranged from 0.8x to 1.8x with a mean of 1.2x and a
median of 1.1x, LTM EBITDA, which ranged from 6.5x to 10.8x with a mean of 8.1x
and a median of 7.9x, and LTM EBIT, which ranged from 8.8x to 15.0x with a mean
of 10.9x and a median of 10.3x, compared to levered LTM multiples of 1.2x, 7.9x
and 10.3x, respectively, for Keystone Common Stock at a price of $20.75 per
share of Keystone Common Stock, and multiples implied by a $34 transaction price
per share of Keystone Common Stock of 1.9x, 12.4x and 16.2x, respectively, for
Keystone. Goldman Sachs also considered for the Selected Companies estimated
calendar year 1997 and 1998 price/earnings ratios, which ranged from 11.0x to
14.3x with a mean and median of 13.7x for estimated calendar year 1997 and 9.7x
to 12.6x with a mean of 12.2x and a median of 12.1x for estimated calendar year
1998 compared to 15.4x and 13.0x, respectively, for Keystone and a transaction
value implied by a $34 price per share of Keystone Common Stock to estimated
calendar year 1997 and 1998 earnings ratios of 25.2x and 21.3x, respectively,
for Keystone. The review also indicated the multiple of calendar year 1997
Price/Earnings Ratio Estimates to IBES Long-term EPS growth rate ranged from
0.9x to 1.2x with a mean of 1.1x and a median of 1.0x compared to 1.2x for
Keystone on a standalone basis and 1.9x based on a transaction value implied by
a $34 price per share of Keystone Common Stock.
(ii) DISCOUNTED CASH FLOW ANALYSIS. Goldman Sachs performed a discounted
cash flow analysis using Keystone's management's projections (the "Management
Case"). Goldman Sachs also applied a sensitivity analysis to the revenue growth
and operating margin assumptions contained in the Management Case using a 13.0%
discount rate and a terminal year (2002) operating income multiple of 9.0x (the
"Sensitivity Analysis").
In the Management Case, Goldman Sachs calculated a net present value of free
cash flows for the years 1997 through 2002 using discount rates ranging from
10.0% to 14.0%. Goldman Sachs calculated Keystone's terminal values in the year
2002 based on multiples ranging from 7.0x operating income to 11.0x operating
income. These terminal values were then discounted to present value using
discount rates ranging from 10.0% to 14.0%. The implied per share values of
Keystone Common Stock ranged from $23.48 to $40.20 in the Management Case.
In the Sensitivity Analysis, Goldman Sachs calculated a net present value of
free cash flows for the years 1997 through 2002 using a discount rate of 13.0%
and a terminal year operating income multiple of 9.0x. To these values Goldman
Sachs applied different operating sensitivities for Operating Margin and Sales
Growth. The Operating Margin sensitivities ranged from 500 basis points less
than to 500 basis points greater than Keystone's management's projections and
the Sales Growth sensitivities ranged from 500
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basis points less than to 500 basis points greater than Keystone's management's
projections. The implied per share values of Keystone Common Stock ranged from
$16.20 to $49.56 in the Sensitivity Analysis.
(iii) SELECTED TRANSACTIONS ANALYSIS. Goldman Sachs analyzed certain
information relating to selected transactions in the Flow Control industry since
1985. Such analysis indicated that (i) levered aggregate consideration as a
multiple of LTM sales ranged from 0.50x to 1.89x as compared to 1.91x for the
levered aggregate consideration as a multiple of LTM sales to be received in the
Merger, based on a transaction value implied by a price per share of Keystone
Common Stock of $34, (ii) levered aggregate consideration as a multiple of LTM
EBITDA ranged from 6.2x to 13.2x as compared to 12.5x for the levered aggregate
consideration as a multiple of LTM EBITDA to be paid in the Merger, based on a
transaction value implied by a price per share of Keystone Common Stock of $34,
and (iii) levered aggregate consideration as a multiple of LTM EBIT ranged from
6.1x to 22.1x as compared to 16.3x for the levered aggregate consideration as a
multiple of LTM EBIT to be paid in the Merger, based on a transaction value
implied by a price per share of Keystone Common Stock of $34.
Goldman Sachs also analyzed certain information relating to selected
transactions in the Fluid Management Products industry since 1985. Such analysis
indicated that (i) levered aggregate consideration as a multiple of LTM sales
ranged from 0.43x to 2.10x, as compared to 1.91x for the levered aggregate
consideration as a multiple of LTM sales to be received in the Merger based on a
transaction value implied by a price per share of Keystone Common Stock of $34,
(ii) levered aggregate consideration as a multiple of LTM EBITDA ranged from
5.0x to 11.4x, as compared to 12.5x for the levered aggregate consideration as a
multiple of LTM EBITDA to be paid in the Merger based on a transaction value
implied by a price per share of Keystone Common Stock of $34, and (iii) levered
aggregate consideration as a multiple of LTM EBIT ranged from 6.5x to 15.1x, as
compared to 16.3x for the levered aggregate consideration as a multiple of LTM
EBIT to be paid in the Merger based on a transaction value implied by a price
per share of Keystone Common Stock of $34.
(iv) PRO FORMA MERGER ANALYSIS. Goldman Sachs prepared pro forma analyses
of the financial impact of the Merger. Using earnings estimates for Keystone
prepared by its management for the years 1998 and 1999 and for Tyco prepared by
Tyco's management for 1998 and 1999 and using an earnings estimate growth rate
for Tyco provided by IBES, Goldman Sachs compared the EPS of the Tyco Common
Shares, on a standalone basis, to the EPS of the Tyco Common Shares on a pro
forma basis. Goldman Sachs performed this analysis based on an indicative
Exchange Ratio of 0.5386 and an indicative maximum Exchange Ratio of 0.5699
under the following four scenarios: assuming attained synergies of $0 (the "No
Synergies Case"), $30 million, $60 million and $90 million. Based on such
analyses, the Merger would be dilutive to the combined company on an EPS basis
using both Exchange Ratios in the years 1998 and 1999 in the No Synergies Case
and accretive to the combined company on an EPS basis using both Exchange Ratios
in the years 1998 and 1999 in the other cases.
(v) HISTORICAL STOCK TRADING ANALYSIS. Goldman Sachs reviewed the
historical trading prices for the Keystone Common Stock for the ten years ended
April 30, 1997. Such analysis indicated that since 1992 the Shares had not
traded above $31 and that during such ten year period the Shares had never
traded at or above $34.
(vi) CONTRIBUTION ANALYSIS. Goldman Sachs reviewed certain historical and
estimated future operating and financial information (including, among other
things, operating income and net income) for Keystone, Tyco and the pro forma
combined entity resulting from the Merger based on Keystone's management's
estimates for Keystone and Tyco's management estimates for Tyco. Goldman Sachs
analyzed the relative contribution of Keystone and Tyco to the combined company
on a pro forma basis before taking into account any of the possible benefits
that may be realized following the Merger based on Tyco's and Keystone's
respective management's estimated financial results for 1997 (calendarized, in
the case of Keystone, to Old Tyco's June year end), based on financial data and
on the assumptions provided to Goldman Sachs by Keystone's and Tyco's
managements. This analysis indicated that Keystone would
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contribute 9.5% of combined sales, 9.3% of combined operating income, and 9.7%
of combined net income. The analysis also indicated that if the Merger is
completed in 1997 prior to the completion of the transactions with ADT, AT&T and
Inbrand, Keystone shareholders would receive 10.5% (assuming an Exchange Ratio
of 0.5386) or 11.1% (assuming an Exchange Ratio of 0.5699) of the outstanding
common stock of the combined company after the Merger.
Goldman Sachs also reviewed certain historical and estimated future
operating and financial information (including, among other things, operating
income and net income) for Keystone, Tyco and the pro forma combined entity
resulting from the Merger based on Keystone's management's estimates for
Keystone and Tyco's management's estimates for Tyco assuming that the Merger is
completed in 1998 (following the completion of the transactions with ADT, AT&T
and Inbrand). Goldman Sachs analyzed the relative contribution of Keystone and
Tyco to the combined company on a pro forma basis before taking into account any
of the possible benefits that may be realized following the Merger based on
Tyco's and Keystone's respective management's estimated financial results for
1998 (calendarized, in the case of Keystone, to Old Tyco's June year end), based
on financial data and on the assumptions provided to Goldman Sachs by Keystone's
and Tyco's managements. This analysis indicated that in 1998 (assuming the
completion of the transactions with ADT, AT&T and Inbrand) Keystone would
contribute 6.4% of combined sales, 6.0% of combined operating income and 5.9% of
combined net income. This analysis also indicated that Keystone shareholders
would receive 7.1% (assuming an Exchange Ratio of 0.5386) or 7.5% (assuming an
Exchange Ratio of 0.5699) of the outstanding common stock of the combined
company after the Merger.
(vii) IMPLIED FUTURE STOCK PRICE. Goldman Sachs performed a calculation of
the implied future stock price of the Keystone Common Stock, based upon the
achievement of Keystone's management's estimates of annual EPS through the year
2002 and assuming multiples of price/earnings ranging from 11.0x to 17.0x. This
calculation showed that depending upon the multiple selected, and assuming that
the Keystone Common Stock actually trades at such multiples (which assumption is
subject to numerous uncertainties) the implied stock price would exceed $34.00
per share of Keystone Common Stock in 1998 at price/earnings multiples of 17.0x
or greater, in 1999 at price/earnings multiples of 15.0x or greater, in 2000 at
price/earnings multiples of 13.0x or greater and in 2002 at price/earnings
multiples of 11.0x or greater.
Goldman Sachs also performed a calculation of the present value of the
implied future stock price of the Keystone Common Stock, discounting those
future prices by 13%. This calculation showed that the present value of the
implied future stock price of the Keystone Common Stock and all dividends paid
does not exceed $34.
(viii) TYCO SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed and
compared certain financial information relating to Tyco to corresponding
financial information, ratios and public market multiples for eight publicly
traded diversified manufacturing corporations: AlliedSignal Inc., Dover
Corporation, Emerson Electric Company, General Electric Company, Minnesota
Mining and Manufacturing Company, Textron Inc., Thermo Electron Corporation,
United Technologies Corporation (the "Tyco Selected Companies"). The Tyco
Selected Companies were chosen because they are publicly-traded companies with
characteristics that for the purposes of this analysis may be considered similar
to Tyco. Goldman Sachs calculated various financial ratios for the Tyco Selected
Companies and compared them to Tyco. Goldman Sachs' analyses of the Tyco
Selected Companies indicated LTM Gross margins which ranged from 16.9% to 59.3%
with a mean of 36.7% and a median of 36.0% compared to 27.8% for Tyco; LTM
EBITDA margins which ranged from 10.4% to 27.0% with a mean of 17.9% and a
median of 16.0% compared to 14.4% for Tyco; LTM EBIT margins which ranged from
6.1% to 23.1% with a mean of 13.8% and a median of 12.9% compared to 11.5% for
Tyco; LTM Net Income margins which ranged from 4.0% to 10.8% with a mean of 7.4%
and a median of 7.6% compared to 6.1% for Tyco; Net debt to total capitalization
ratios, which ranged from negative 7.9% to 75.5% with a mean of 33.8% and a
median of 25.0% compared to 23.8% for Tyco; and a Long-Term EPS Growth Rate
(provided by IBES) which ranged
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from 10.0% to 19.5% with a mean of 13.1% and a median of 13.0% compared to 18.0%
for Tyco. The multiples for Tyco were calculated using a price of $63.125 per
share, the closing price of the Old Tyco Common Stock on the NYSE on May 19,
1997. The multiples for Tyco and the multiples for each of the Tyco Selected
Companies were based on publicly available information and estimates provided by
IBES. Goldman Sachs' analyses of the Tyco Selected Companies indicated levered
multiples of LTM sales, which ranged from 0.8x to 3.2x with a mean and median of
2.0x, LTM EBITDA, which ranged from 6.8x to 17.1x with a mean of 11.5x and a
median of 11.4x, and LTM EBIT, which ranged from 10.0x to 24.6x with a mean of
15.7x and a median of 13.8x, compared to levered LTM multiples of 1.9x, 13.1x
and 16.3x, respectively, for Tyco. Goldman Sachs also considered for the Tyco
Selected Companies estimated calendar year 1997 and 1998 price/earnings ratios,
which ranged from 17.2x to 24.6x with a mean of 20.0x and a median of 19.9x for
estimated calendar year 1997 and 15.3x to 21.6x with a mean of 17.4x and a
median of 17.6x for estimated calendar year 1998 compared to 22.7x and 19.1x,
respectively, for Tyco. The review also indicated the multiple of calendar year
1997 Price/Earnings Ratio Estimates to IBES Long-term EPS growth rate ranged
from 1.1x to 2.2x with a mean of 1.6x and a median of 1.4x compared to 1.3x for
Tyco.
(ix) HISTORICAL OLD TYCO COMMON STOCK TRADING ANALYSIS. Goldman Sachs
reviewed the historical trading prices and volumes for the Old Tyco Common Stock
for the three year period ended May 16, 1997. Such analysis indicated that the
closing market prices of the Old Tyco Common Stock during such period ranged
from a low of $23 per share of Old Tyco Common Stock in 1994 to a high of $63
per share of Old Tyco Common Stock by May 16, 1997.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Keystone, Old Tyco, Tyco or the Merger. The analyses were prepared solely for
purposes of Goldman Sachs providing its opinion to the Keystone Board of
Directors as to the fairness of the Exchange Ratio and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, none of
Keystone, Tyco, Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Board of Directors of
Keystone was one of many factors taken into consideration by the Board of
Directors of Keystone in making its determination to approve the Merger
Agreement. The foregoing summary does not purport to be a complete description
of the analysis performed by Goldman Sachs and is qualified by reference to the
written opinion of Goldman Sachs set forth in Annex B hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Keystone selected
Goldman Sachs as its financial advisor because it is an internationally
recognized investment banking firm that has substantial experience in
transactions similar to the Merger. Goldman Sachs is familiar with Tyco having
provided certain investment banking services from time to time to Old Tyco,
including having acted as co-managing underwriter in the public offering of $394
million aggregate principal amount of Old Tyco Common Stock in February 1995.
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Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Keystone and/or Tyco for its own account and for the account of
customers.
Pursuant to a letter agreement dated April 25, 1997 (the "Engagement
Letter"), Keystone engaged Goldman Sachs to act as its financial advisor in
connection with the possible sale of all or a portion of Keystone. Pursuant to
the terms of the Engagement Letter, Keystone has agreed to pay Goldman Sachs,
upon consummation of the Merger, a transaction fee equal to 0.65% of the
Aggregate Consideration (as defined in the Engagement Letter) paid in the Merger
up to an Aggregate Consideration implied by a value of $30 per Share, and 1.75%
of the Aggregate Consideration paid in the Merger in excess of the Aggregate
Consideration implied by a value in excess of $30 per Share (the "Transaction
Fee"). Credited against the Transaction Fee will be the $500,000 payment
previously made to Goldman Sachs by Keystone pursuant to an engagement letter
dated April 11, 1997. Keystone has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws.
CERTAIN CONSIDERATIONS
In considering whether to approve the Merger and the Merger Agreement,
Keystone shareholders should carefully evaluate the information contained in
this Proxy Statement/Prospectus and, in particular the following factors:
- ADJUSTABLE EXCHANGE RATIO. The Merger Agreement provides for adjustments
to the Exchange Ratio based upon the Average Stock Price for Tyco Common
Shares. These adjustments are designed so that Keystone shareholders will
receive between $31 and $37 in value of Tyco Common Shares (as measured by
the Average Stock Price) for each share of Keystone Common Stock exchanged
in the Merger. In particular, for all values of the Average Stock Price
above $68.29, the Exchange Ratio is reduced, so that the value of the Tyco
shares receivable by Keystone shareholders in the Merger (measured by the
Average Stock Price) will not increase as a result of increases in the
price of Tyco stock that raise the Average Stock Price above $68.29.
Keystone shareholders should also be aware that the price per Tyco Common
Share at the time of the Merger is likely to be different than the Average
Stock Price, which is determined on the basis of the average daily trading
prices of Tyco Common Shares over the ten day trading period ending five
trading days before the date of the Special Meeting. The price of Tyco
Common Shares is subject to change based upon changes in the business,
operations and prospects of Tyco, general market and economic conditions,
regulatory considerations and other factors. Keystone shareholders are
urged to obtain current market quotations for Tyco shares and Keystone
shares and to call 1-800-___-____ at any time after August , 1997 for
current information on the Average Stock Price and the Exchange Ratio.
- FUTURE PRICES OF TYCO COMMON SHARES. Following the Merger, the trading
price of Tyco Common Shares could be subject to fluctuations as a result
of the factors recited above.
- HISTORICAL PERFORMANCE NO INDICATION. The historical share and earnings
performance of Tyco is not necessarily indicative of Tyco's future share
price or earnings results.
- BERMUDA COMPANY. If the Merger is consummated, shareholders of Keystone
will become shareholders of a Bermuda company. There are significant
differences between the corporate laws of Bermuda and the corporate laws
of Texas and between the constitutional documents of Keystone and Tyco.
See "Comparison of Shareholder Rights." These differences may materially
affect the rights of Keystone shareholders.
Keystone shareholders are urged to obtain current market quotations for Tyco
Common Shares and the Keystone Common Stock.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Keystone Board of Directors that
the Keystone shareholders approve the Merger and the Merger Agreement, Keystone
shareholders should be aware that certain directors and officers of Keystone
have interests in the Merger in addition to their interests solely as
shareholders of Keystone, as described below. The Keystone Board of Directors
was aware of these interests when it considered and approved the Merger and the
Merger Agreement.
EXECUTIVE SEVERANCE AGREEMENTS. Keystone entered into Executive Severance
Agreements with the following executive officers (collectively, the "Executive
Officers") effective as of the date indicated: Nishan Teshoian (December 12,
1995); Gregory E. Hyland (December 15, 1995); Francis S. Kalman (June 3, 1996);
Mark E. Baldwin (December 15, 1995); James M. Sweet (August 5, 1996); Bruce M.
Taten (December 15, 1995); and Donna D. Moore (December 15, 1995) (collectively,
the "Executive Severance Agreements"). Pursuant to the terms of the Executive
Severance Agreements, the respective Executive Officer will be entitled to
receive certain severance benefits described below if (i) such Executive Officer
is terminated by Tyco or the Surviving Corporation, or (ii) such Executive
Officer is assigned any duties inconsistent in any respect with such Executive
Officer's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities, or any action by Tyco or
the Surviving Corporation which results in a diminution in such position,
authority, duties or responsibilities; (iii) the reduction of compensation or
other benefits payable to the Executive Officer; or (iv) such Executive Officer
is required to be based outside the Houston area. If triggered, the severance
payments (as approved by the Keystone Compensation Committee) payable under the
Executive Severance Agreements would be as follows: Mr. Teshoian--$ ;
Mr. Hyland--$ ; Mr. Kalman--$ ; Mr. Baldwin--$ ; Mr.
Sweet--$ ; Mr. Taten $ ; and Ms. Moore $ . In addition
to these amounts, the Executive Officers would be entitled to certain ongoing
benefits, 1996 and 1997 long-term incentive payments, 1997 bonus amounts, and
other benefits described in such agreements. The Executive Severance Agreements
also provide for additional payments to make the respective Executive Officer
whole for certain excise taxes payable under the Code.
STOCK OPTIONS AND RESTRICTED STOCK. As a result of the Merger, at the
Effective Time each outstanding option (exercisable or unexercisable) to
purchase Keystone Common Stock (a "Stock Option") held by Executive Officers and
directors of Keystone shall be assumed by Tyco as of the Effective Time and
shall be deemed to constitute an immediately exercisable option to acquire the
number of Tyco Common Shares as each such Executive Officer or director would be
entitled to receive pursuant to the Merger if the Executive Officer or director
was to exercise the option in full immediately prior to the Effective Time (not
taking into account whether or not such option is in fact exercisable). In
addition, the forfeiture provisions set forth in the individual restricted stock
agreements entered into pursuant to the Keystone International, Inc. 1985
Incentive Plan will lapse, as provided in such agreements.
INDEMNIFICATION. The Merger Agreement provides that, after the Effective
Time, the Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Articles of Incorporation or
By-laws, indemnify and hold harmless, each present and former director, officer
or employee of Keystone or any of its subsidiaries against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation (i) arising out of the transactions
contemplated by the Merger Agreement, or (ii) otherwise with respect to any acts
or omissions occurring at or prior to the Effective Time, to the same extent as
provided in Keystone's Articles of Incorporation or By-Laws or any applicable
contract or agreement as in effect on the date of the Merger Agreement, in each
case for a period of six years after such date. The Merger Agreement further
provides that the provisions with respect to indemnification in Keystone's
Articles of Incorporation and By-Laws existing on the date of the Merger
Agreement shall continue in full force and effect in the Articles of
Incorporation and By-Laws of the Surviving Corporation, and shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
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of individuals who at the Effective Time were directors, officers, employees or
agents of Keystone. The Merger Agreement also provides that, for a period of
three years after the Effective Time, Tyco will cause
the Surviving Corporation to maintain in effect, if available, directors' and
officers' liability insurance covering those persons who are currently covered
by Keystone's directors' and officers' liability insurance policy on terms
comparable to those applicable to directors and officers of Keystone as of the
date of the Merger Agreement.
CERTAIN UNITED STATES FEDERAL INCOME TAX AND BERMUDA TAX CONSEQUENCES
UNITED STATES FEDERAL TAX CONSEQUENCES
It is a condition to the obligation of Keystone to consummate the Merger
that Keystone receive an opinion from Liddell, Sapp, Zivley, Hill & LaBoon, LLP,
counsel for Keystone, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"). It is a condition to the
obligation of Tyco to consummate the Merger that Tyco receive an opinion to the
same effect from Kramer, Levin, Naftalis & Frankel. Such opinions will be based
upon facts existing at the Effective Time, and, in rendering the opinions of
counsel referred to in this section, such counsel will rely upon certain
representations, made as of the Effective Time, including representations by
Keystone, Tyco and certain shareholders of Keystone, which counsel will assume
to be true, correct and complete, including representations as to the intent of
the historic shareholders of Keystone to retain ownership of the Tyco Common
Shares which they receive in the Merger. If such representations are untrue,
incorrect or incomplete, the opinions could be adversely affected. No ruling has
been or will be sought from the Internal Revenue Service (the "IRS") as to the
United States federal income tax consequences of the Merger, and the opinions of
counsel set forth herein are not binding upon the IRS or any court.
Subject to the limitations and qualifications referred to herein, and
assuming the Merger is treated as a reorganization under Section 368 of the
Code, Liddell, Sapp, Zivley, Hill & LaBoon, LLP, counsel to Keystone, is of the
opinion as to the matters set forth in 1-3 below, and Kramer, Levin, Naftalis &
Frankel, counsel to Tyco, is of the opinion as to the matters set forth in 4 and
5 below.
1. Except as provided below, no gain or loss will be recognized by a
Keystone shareholder upon the exchange of his or her Keystone Common Stock for
Tyco Common Shares. A Keystone shareholder who receives cash proceeds in lieu of
a fractional share interest in Tyco Common Shares will recognize gain or loss
equal to the difference between such proceeds and the tax basis allocated to the
fractional share interest. Such gain or loss will constitute capital gain or
loss if such shareholder's Keystone Common Stock is held as a capital asset at
the Effective Time and will be long-term capital gain or loss if shares of
Keystone Common Stock have been held for more than one year at the Effective
Time. A United States Holder (as defined below) of Keystone Common Stock owning
at least five percent (measured by vote or value) of the Common Shares of Tyco
immediately after the Merger (taking into account the constructive ownership
rules of Section 958(b) of the Code (a "5% Shareholder")) will recognize gain
(but not loss) with respect to the Keystone Common Stock exchanged in the Merger
at the Effective Time, unless, in general, such 5% Shareholder (i) complies with
certain reporting requirements and (ii) enters into an agreement with the IRS to
recognize retroactively all or a portion of such gain (with interest) if, during
the five year period following the taxable year of the Merger, Tyco disposes of
all or a portion of the Keystone Common Stock acquired in the Merger or
Keystone, not in the ordinary course of business, disposes of all or a
substantial portion of its assets. 5% SHAREHOLDERS ARE URGED TO CONSULT THEIR
TAX ADVISORS.
2. The tax basis of the Tyco Common Shares received by a Keystone
shareholder will be the same as such shareholder's tax basis in the Keystone
Common Stock surrendered in exchange therefor, decreased by the tax basis
allocated to any fractional share interest exchanged for cash, and increased,
with respect to a 5% Shareholder that does not enter into a gain recognition
agreement, by the amount of any gain recognized with respect to the Keystone
Common Stock exchanged in the Merger.
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3. The holding period of the Tyco Common Shares received by a Keystone
shareholder will include the period during which the Keystone Common Stock
surrendered in exchange therefor was held (provided that such Keystone Common
Stock was held by such Keystone shareholder as a capital asset at the Effective
Time).
4. No gain or loss will be recognized by Keystone, Tyco or Merger Sub as a
result of the Merger.
5. Distributions with respect to Tyco Common Shares will be treated as
dividends and taxable as ordinary income to a United States Holder of Tyco
Common Shares to the extent that such distributions are made out of Tyco's
current or accumulated earnings and profits as determined for United States
federal income tax purposes (regardless of whether such distributions are
treated as a return of capital for non-tax purposes), with any excess being
treated as a tax-free return of capital which reduces such United States
Holder's tax basis in the Tyco Common Shares to the extent thereof and
thereafter as gain from the sale or exchange of property. Such dividends
generally will be treated as foreign source "passive" income for foreign tax
credit purposes. The amount of any distribution of property other than cash will
be the fair market value of such property on the date of distribution by Tyco.
United States Holders that are corporations generally will not be entitled to
claim a dividends received deduction with respect to distributions by Tyco. Gain
or loss realized by a United States Holder on the sale or exchange of Tyco
Common Shares held as capital assets (including a distribution in liquidation)
will be subject to United States federal income taxation as capital gain or loss
in an amount equal to the difference between the amount realized on such sale or
exchange and such Holder's adjusted tax basis in the Tyco Common Shares sold or
exchanged. Such gain or loss will be long-term capital gain or loss if such
Holder's holding period for the Tyco Common Shares is more than one year. Any
gain so realized generally will be United States source income. Certain
non-corporate United States Holders may be subject to backup withholding at a
rate of 31% on distributions with respect to Tyco Common Shares or the proceeds
of a disposition of Tyco Common Shares. Backup withholding will apply only if
the Holder (i) fails to furnish its Taxpayer Identification Number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed to
properly report payments of interest and dividends or (iv) under certain
circumstances fails to certify, under penalty of perjury, that it has furnished
a correct TIN and that it has not been notified by the IRS that it is subject to
backup withholding for failure to report interest and dividend payments. The
amount of any backup withholding from a payment to a United States Holder will
be allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that certain
required information is furnished to the IRS.
As used in this section, a "United States Holder" means a holder that is,
for United States federal income tax purposes, a citizen or resident of the
United States, a corporation or partnership created or organized in or under the
laws of the United States, or any political subdivision thereof, or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. For its taxable years beginning after December 31,
1996, a trust generally will be a United States Holder only if a court within
the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all substantial decisions of the trust.
BERMUDA TAX CONSEQUENCES
In the opinion of Appleby, Spurling & Kempe, attorneys in Bermuda for Tyco,
there will be no Bermuda income, corporation or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty or inheritance tax payable
in respect of an exchange of Tyco Common Shares for Keystone Common Stock
pursuant to the Merger. In addition, as of the date hereof, there is no Bermuda
income, corporation or profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable in respect of capital gains
realized on a disposition of Tyco Common Shares or in respect of distributions
by Tyco with respect to Tyco Common Shares. Furthermore, Tyco has received from
the Minister of Finance of Bermuda under the Exempted Undertakings Tax
Protection Act of 1966, as amended, an undertaking that, in the event of there
being enacted in Bermuda any legislation imposing any tax computed on profits or
income, including any dividend or capital gains withholding tax, or computed on
any capital assets, gain
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or appreciation, or any tax in the nature of an estate or inheritance tax or
duty, the imposition of such tax shall not be applicable to Tyco or any of its
operations, nor to its Common Shares, nor to obligations of Tyco until the year
2016. This undertaking applies to Tyco Common Shares. It does not, however,
prevent the application of Bermuda taxes to persons ordinarily resident in
Bermuda.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN MATERIAL
UNITED STATES FEDERAL INCOME AND BERMUDA TAX CONSEQUENCES OF THE MERGER AND OF
HOLDING TYCO COMMON SHARES AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER TO VOTE IN
FAVOR OF APPROVAL OF THE MERGER AND THE MERGER AGREEMENT. THE DISCUSSION DOES
NOT ADDRESS THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE
RELEVANT TO A PARTICULAR KEYSTONE SHAREHOLDER SUBJECT TO SPECIAL TREATMENT UNDER
CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS AND SHAREHOLDERS
WHO ACQUIRED KEYSTONE COMMON STOCK PURSUANT TO THE EXERCISE OF STOCK OPTIONS OR
OTHERWISE AS COMPENSATION, NOR DOES IT ADDRESS ANY CONSEQUENCES ARISING UNDER
THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION, OTHER THAN BERMUDA. THE
DISCUSSION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS BASED UPON THE
CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT
DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND
ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION.
KEYSTONE SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of Tyco and Keystone will be carried forward to the
combined corporation at their recorded amounts, subject to any adjustments
required to conform the accounting policies of the companies; income of the
combined corporation will include income of Tyco and Keystone for the entire
fiscal year in which the Merger occurs; and the reported income of the separate
corporations for prior periods will be combined and restated as income of the
combined corporation.
The Merger Agreement provides that a condition to the consummation of the
Merger is the receipt of a letter from Coopers & Lybrand, independent certified
public accountants of Tyco, and a letter from Arthur Andersen LLP, independent
certified public accountants to Keystone, regarding the qualification of the
Merger as a "pooling of interests" for accounting purposes.
EFFECT ON STOCK OPTION PLANS
At the Effective Time, each then outstanding Stock Option granted under the
Keystone International, Inc. 1985 Incentive Plan, as amended, and the 1994
Director's Stock Option Plan (collectively, the "Keystone Stock Option Plans")
or any other stock option plan or agreement of Keystone, whether or not then
vested, will be assumed by Tyco and will be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Stock
Option prior to the Effective Time, the number of Tyco Common Shares as the
holder of such Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately prior to the
Effective Time (whether or not such option was in fact exercisable). The
exercise price per Tyco Common Share will be equal to (x) the aggregate exercise
price for Keystone Common Stock otherwise purchasable pursuant to such Stock
Option divided by (y) the aggregate number of Tyco Common Shares deemed
purchasable pursuant to the Stock Option. Upon exercise of a Stock Option,
fractional Tyco Common Shares will not
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be issued and holders of Stock Options will instead be paid a cash amount based
on the closing price per Tyco Common Share on the New York Stock Exchange, Inc.
(the "NYSE") on the trading day immediately preceding the date of exercise. As
of July , 1997, there were outstanding Stock Options to acquire
shares of Keystone Common Stock. See "The Merger Agreement--Terms of
the Merger-- Options."
In addition, the forfeiture provisions set forth in the individual
restricted stock agreements entered into pursuant to the 1985 Incentive Plan
will lapse, as provided in such agreements. As of July , 1997, there were
outstanding restricted shares of Keystone Common Stock.
CERTAIN LEGAL MATTERS
ANTITRUST. Pursuant to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Tyco and Keystone have
each filed a Notification and Report Form for review under the HSR Act with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the waiting period under
the HSR Act with respect to such filings is scheduled to expire on July 20,
1997, unless extended by the federal antitrust agencies.
Tyco and Keystone do not believe that any additional governmental filings in
the United States, other than the Articles of Merger, are required with respect
to the Merger. Even though the HSR Act waiting period has expired, the FTC or
the Antitrust Division could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking
divestiture of substantial assets of Tyco or Keystone. Consummation of the
Merger is conditioned upon, among other things, the absence of any preliminary
or permanent injunction or other order issued by any federal or state court in
the United States which prevents the consummation of the Merger or requires Tyco
to divest or hold separate any material portion of its business or assets.
Tyco does not believe that consummation of the Merger will result in a
violation of any applicable antitrust laws. However, there can be no assurance
that a challenge to the Merger on antitrust grounds will not be made or, if such
a challenge is made, of the result.
FOREIGN APPROVALS. Tyco and Keystone conduct operations in a number of
foreign countries where regulatory filings or approvals may be required in
connection with the consummation of the Merger. Tyco and Keystone believe that
all such material filings and approvals have been made or obtained, or will be
made or obtained, as the case may be.
FEDERAL SECURITIES LAW CONSEQUENCES
All Tyco Common Shares issued in connection with the Merger will be freely
transferable, except that any Tyco Common Shares received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act of
1933, as amended (the "Securities Act")) of Keystone prior to the Merger may be
sold by them only in transactions permitted by the resale provisions of Rule 145
under the Securities Act, or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of Keystone generally include
individuals or entities that control, are controlled by, or are under common
control with, Keystone and may include certain officers and directors of
Keystone as well as principal shareholders of Keystone.
In general, under Rule 145, for one year following the Effective Time, a
Keystone affiliate (together with certain related persons) would be entitled to
sell Tyco Common Shares acquired in connection with the Merger only through
unsolicited "broker transactions" or in transactions directly with a "market
maker," as such terms are defined in Rule 144. Additionally, the number of
shares to be sold by an affiliate (together with certain related persons and
certain persons acting in concert) within any three-month period for purposes of
Rule 145 may not exceed the greater of 1% of the outstanding Tyco Common Shares
or the average weekly trading volume of such stock during the four calendar
weeks preceding such sale. Rule 145 would only be available, however, if Tyco
remained current with its informational filings with
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the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). After the end of one year from the Effective Time, a Keystone
affiliate who does not become a Tyco affiliate would be able to sell Tyco Common
Shares received in the Merger without such manner of sale or volume limitations
provided that Tyco was current with its Exchange Act informational filings and
such affiliate was not then an affiliate of Tyco. Two years after the Effective
Time, an affiliate of Keystone would be able to sell such Tyco Common Shares
without any restrictions so long as such affiliate had not been an affiliate of
Tyco for at least three months prior thereto.
Keystone has agreed to use its best efforts to cause its affiliates to agree
in writing that they will comply with Rule 145 and that they will not sell
Keystone Common Stock or Tyco Common Shares at a time that would prevent the
Merger from qualifying as a pooling of interests for financial accounting
purposes.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the Tyco Common Shares to be issued in
connection with the Merger be authorized for listing on the NYSE, subject to
official notice of issuance. In addition, it is contemplated that such shares
will also be listed on the London Stock Exchange and the Bermuda Stock Exchange.
DIVIDENDS
Tyco expects to declare regularly scheduled dividends consistent with the
practices of Old Tyco prior to the ADT Merger. Keystone is not permitted under
the terms of the Merger Agreement to declare, set aside, make or pay any
dividend or other distribution in respect of its capital stock, other than its
regularly scheduled dividend consistent with past practices, during the period
from the date of the Merger Agreement until the earlier of the termination of
the Merger Agreement or the Effective Time.
APPRAISAL RIGHTS
Under the Texas Business Corporation Act (the "TBCA"), the holders of
Keystone Common Stock are not entitled to any appraisal rights with respect to
the Merger.
FEES AND EXPENSES
Keystone has agreed to pay Tyco a fee (a "Fee") of $35 million plus Tyco's
reasonable, documented out-of-pocket expenses up to $2 million, if the Merger
Agreement is terminated under certain circumstances. Tyco has agreed to pay to
Keystone its reasonable documented out-of-pocket expenses up to $2 million, if
the Merger is terminated under certain other circumstances. See "The Merger
Agreement-- Termination."
The Fee payable under certain circumstances by Keystone to Tyco is intended,
among other things, to compensate Tyco for its costs, including lost opportunity
costs, if the Merger is not consummated as a result of certain actions or
inactions by Keystone or its shareholders. The Fee may have the effect of
increasing the likelihood that the Merger will be consummated in accordance with
the terms of the Merger Agreement. The Fee may also have the effect of
discouraging persons who might now or prior to the consummation of the Merger be
interested in acquiring all of or a significant interest in Keystone from
considering or proposing such an acquisition by increasing the costs of any such
acquisition.
Except as aforesaid, and except for printing and filing fees in respect of
this Proxy Statement/ Prospectus and the Registration Statement which will be
shared equally, Tyco and Keystone will each pay their own expenses in connection
with the Merger.
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THE MERGER AGREEMENT
The description of the Merger Agreement set forth below does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement/Prospectus as
Annex A and incorporated herein by reference.
The Merger Agreement was executed on May 20, 1997, prior to consummation of
the ADT Merger, among Old Tyco, T6, a subsidiary of Old Tyco, and Keystone.
Subsequent to the consummation of the ADT Merger, T6 assigned its rights under
the Merger Agreement to Merger Sub, a subsidiary of Tyco. References to "Tyco"
in the description of the Merger Agreement below are to Old Tyco, which is a
wholly-owned subsidiary of Tyco.
TERMS OF THE MERGER
THE MERGER. At the Effective Time, and subject to and upon the terms and
conditions of the Merger Agreement and the TBCA, Merger Sub will be merged with
and into Keystone, the separate corporate existence of Merger Sub will cease,
and Keystone will continue as the surviving corporation ("Surviving
Corporation").
EFFECTIVE TIME. As promptly as practicable after the satisfaction or waiver
of the conditions to the Merger set forth in the Merger Agreement, the parties
will file Articles of Merger with the Secretary of State of the State of Texas.
The Merger will be consummated upon the issuance of a Certificate of Merger by
the Secretary of State of the State of Texas in accordance with the provisions
of the TBCA.
CERTIFICATE OF INCORPORATION AND BY-LAWS. The Merger Agreement provides
that the Restated Articles of Incorporation and By-Laws of Keystone, as in
effect immediately prior to the Effective Time, will be the Articles of
Incorporation and By-Laws of the Surviving Corporation, except that (i)
provisions related to Keystone's capital stock will be deleted and replaced such
that the capitalization of the Surviving Corporation shall consist of 100 shares
of Common Stock, par value $.01 per share, and (ii) provisions related to the
composition of Keystone's Board of Directors will be deleted and replaced such
that the Surviving Corporations's Board of Directors shall consist of not less
than three members, all of a single class, with the exact number to be fixed
from time to time by resolution of the Board of Directors.
DIRECTORS AND OFFICERS. The directors of Merger Sub immediately prior to
the Effective Time will be the initial directors of the Surviving Corporation,
and the officers of Keystone immediately prior to the Effective Time will be the
initial officers of the Surviving Corporation.
CONVERSION OF KEYSTONE COMMON STOCK AND THE STOCK OF MERGER SUB IN THE
MERGER. At the Effective Time, each share of Keystone Common Stock issued and
outstanding immediately prior to the Effective Time (excluding shares referred
to in the following paragraphs) will be converted into the right to receive
0.54183 fully paid and nonassessable Tyco Common Shares; PROVIDED, HOWEVER, that
(i) in the event the Average Stock Price (as hereinafter defined) is greater
than $68.29, the Exchange Ratio shall be equal to $37.00 divided by the Average
Stock Price; (ii) subject to clauses (iii) and (iv) below, in the event the
Average Stock Price is less than $57.21, the Exchange Ratio shall be equal to
$31.00 divided by the Average Stock Price, but in no event greater than 0.57327;
(iii) in the event Tyco delivers its notice specified in (1) of clause (ix)
under "--Termination --Conditions to Termination," the Exchange Ratio shall be
equal to $31.00 (or such higher number as specified in Tyco's notice) divided by
the Average Stock Price; and (iv) in the event Keystone delivers its notice
specified in (2) of clause (ix) under "-- Termination--Conditions to
Termination", the Exchange Ratio shall be equal to 0.54183.
As used in this section, "Average Stock Price" means the average of the
Daily Per Share Prices for the ten (10) consecutive trading days ending on the
fifth trading day prior to the Special Meeting. "Daily Per Share Price" for any
trading day means the weighted average of the per share selling prices on the
NYSE of Tyco Common Shares (as reported in the NYSE Composite Transactions) for
that day.
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Each share of Keystone Common Stock held in the treasury of Keystone or
owned by Tyco, Merger Sub or any subsidiary of Keystone or Tyco immediately
prior to the Effective Time will be canceled and retired without payment of any
consideration.
Each share of common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
OPTIONS. At the Effective Time, each outstanding Stock Option to purchase
Keystone Common Stock which by its terms is not extinguished in the Merger will
be deemed to constitute an option to acquire, on the same terms and conditions,
MUTATIS MUTANDIS, as were applicable to such Stock Option prior to the Effective
Time, the number of Tyco Common Shares as the holder of such Stock Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (whether or not such
Stock Option was in fact exercisable), at a price per share equal to the
aggregate exercise price for Keystone Common Stock purchasable pursuant to such
stock option divided by the number of Tyco Common Shares purchasable pursuant to
such stock option; PROVIDED, HOWEVER, that the number of Tyco Common Shares that
may be purchased upon exercise of any such Stock Option shall not include any
fractional share and, upon exercise of the Stock Option, a cash payment shall be
made for any fractional share based upon the Closing Price of a Tyco Common
Share on the trading day immediately preceding the date of exercise. "Closing
Price" means, on any day, the last reported sale price per Tyco Common Share on
the NYSE.
The Tyco Common Shares issuable upon exercise of the Stock Options are to be
registered under the Securities Act as soon as practicable after the Effective
Time and Tyco will use its best efforts to maintain the effectiveness of such
registration for so long as the Stock Options remain outstanding.
FRACTIONAL SHARES. No certificates representing fractional shares of Tyco
Common Shares will be issued in connection with the Merger. In lieu of any such
fractional share, each Keystone shareholder who would otherwise have been
entitled to a fractional share of Tyco Common Shares will be paid an amount
equal to such fraction multiplied by the Closing Price on the date of the
Effective Time.
EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. ChaseMellon Shareholder Services, L.L.C., or such other
bank or trust company as shall be mutually designated by Keystone and Tyco (the
"Exchange Agent"), will act as Exchange Agent for the Merger.
EXCHANGE PROCEDURES. As soon as reasonably practicable after the Effective
Time, Tyco will instruct the Exchange Agent to mail to each holder of record of
Keystone Common Stock a letter of transmittal and instructions to effect the
surrender of the certificates representing Keystone Common Stock in exchange for
certificates evidencing Tyco Common Shares. Upon surrender of a certificate
representing Keystone Common Stock for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such certificate will be entitled to receive in exchange (i) certificates
evidencing that number of whole Tyco Common Shares which such holder has the
right to receive in the Merger, (ii) any dividends or other distributions on the
Tyco Common Shares declared or made after the Effective Time to which such
holder is entitled, and (iii) cash in respect of fractional Tyco Common Shares
as provided above (the Tyco Common Shares, dividends, distributions and cash
being, collectively, the "Merger Consideration"), and the certificate so
surrendered will be canceled. In the event of a transfer of ownership of shares
of Keystone Common Stock which is not registered in the transfer records of
Keystone as of the Effective Time, Tyco Common Shares, dividends and
distributions may be issued and paid to a transferee if the certificate
evidencing such shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have
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been paid. Until so surrendered, each outstanding certificate that, prior to the
Effective Time, represented shares of Keystone Common Stock will be deemed from
and after the Effective Time, for all corporate purposes, to evidence the
ownership of the number of full Tyco Common Shares into which such shares of
Keystone Common Stock shall have been so converted.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED KEYSTONE COMMON STOCK. No
dividends or other distributions declared or made after the Effective Time with
respect to Tyco Common Shares will be paid to the holder of an unsurrendered
certificate representing shares of Keystone Common Stock. Subject to applicable
law, following surrender of any certificate formerly representing shares of
Keystone Common Stock, there will be paid to the record holder of the
certificates representing Tyco Common Shares issued in exchange, without
interest, at the time of surrender, the amount of dividends or other
distributions with a record date after the Effective Time previously paid with
respect to such Tyco Common Shares.
TRANSFERS OF OWNERSHIP. If any certificate for shares of Tyco Common Shares
is to be issued in a name other than that in which the certificate representing
shares of Keystone Common Stock surrendered in exchange is registered, it will
be a condition of the issuance that the certificate surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Tyco or any designated agent any
transfer or other taxes required by reason of the issuance of a certificate for
Tyco Common Shares in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Tyco or any
designated agent that such tax has been paid or is not payable.
ESCHEAT AND WITHHOLDING. Neither Tyco, Merger Sub nor Keystone will be
liable to any holder of Keystone Common Stock for any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. Tyco or the Exchange Agent will be entitled to deduct
and withhold from the Merger Consideration to any Keystone shareholder such
amounts as Tyco or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under any provision of federal, state,
local or foreign tax law.
LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any certificates
representing shares of Keystone Common Stock have been lost, stolen or
destroyed, the Exchange Agent will issue Tyco Common Shares in exchange for such
lost, stolen or destroyed certificates upon the making of an affidavit of that
fact by the owner of such certificates, provided, however, that Tyco may, in its
discretion, require the holder of such lost, stolen or destroyed certificates to
deliver a bond in a reasonable sum as indemnity against any claim that may be
made against Tyco or the Exchange Agent with respect to the certificates alleged
to have been lost, stolen or destroyed.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
KEYSTONE SHAREHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF KEYSTONE COMMON STOCK.
KEYSTONE SHAREHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO
THE EXCHANGE AGENT PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Keystone, in respect of itself and its subsidiaries, and of Tyco, in respect of
itself and its subsidiaries, relating, among other things, to the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions): (i) corporate organization, standing, qualification and
similar corporate matters; (ii) the absence of violation of provisions of
charter documents; (iii) capitalization; (iv) the authorization, execution,
delivery and enforceability of the Merger Agreement; (v) the absence of conflict
of the Merger Agreement with charter documents, laws or agreements and required
consents for the execution and
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delivery of the Merger Agreement; (vi) the absence of conflict with, default
under or violation of agreements and laws, and the holding of permits necessary
for the conduct of business, except as could not reasonably be expected to have
a material adverse effect on the business, assets or financial condition of
Keystone or Tyco, as the case may be (a "Material Adverse Effect"); (vii)
reports and other documents filed with the Commission, the absence of material
misstatements in the information contained therein, and the fair presentation of
the financial statements contained therein in accordance with generally accepted
accounting principles; (viii) conduct of business in the ordinary course and the
absence of certain changes or events since the close of the most recent fiscal
year, of Keystone or Tyco, respectively, including the occurrence of a Material
Adverse Effect; (ix) the absence of undisclosed liabilities that could
reasonably be expected to have a Material Adverse Effect; (x) the absence of
litigation that could reasonably be expected to have a Material Adverse Effect;
(xi) employee benefit matters; (xii) labor matters; (xiii) the absence of any
material untrue statements in the Registration Statement and this Proxy
Statement/Prospectus; (xiv) the absence of restrictions on business, except as
could not reasonably be expected to have a Material Adverse Effect; (xv) title
to property; (xvi) payment of taxes and certain other tax matters; (xvii)
compliance with environmental laws; (xviii) brokers, finders and investment
bankers; (xix) ownership, rights to use and absence of violations or claims in
respect of intellectual property; (xx) relationships or transactions with
affiliates; (xxi) maintenance of insurance; (xxii) the absence of any product
liability claims or product recalls that could reasonably be expected to have a
Material Adverse Effect; and (xxiii) the absence of actions that, to the
knowledge of certain officers of the parties, could reasonably be expected to
prevent the Merger from being accounted for as a pooling of interests.
In addition, Tyco represented that Tyco (the Bermuda company) will have
authorized the issuance of Tyco Common Shares pursuant to the Merger Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
CONDUCT OF BUSINESS BY KEYSTONE. The Merger Agreement provides that, prior
to the Effective Time, unless Tyco otherwise agrees in writing, Keystone will
conduct its business and cause the businesses of its subsidiaries to be
conducted only in the ordinary course of business and in a manner consistent
with past practice; and Keystone will use reasonable commercial efforts to
preserve substantially intact the business organization of Keystone and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of Keystone and its subsidiaries and to preserve the present
relationships of Keystone and its subsidiaries with customers, suppliers and
other persons with which Keystone or any of its subsidiaries has significant
business relations. Except as contemplated by the Merger Agreement, neither
Keystone nor any of its subsidiaries, without the prior written consent of Tyco,
will:
(i) amend or otherwise change Keystone's Articles of Incorporation or
By-Laws;
(ii) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) in Keystone, any of its subsidiaries or affiliates (with
exceptions for shares of Keystone Common Stock issuable pursuant to Stock
Options under any Keystone Stock Option Plan, which Stock Options were
outstanding as of the date of the Merger Agreement);
(iii) sell, pledge, dispose of or encumber any assets of Keystone or any
of its subsidiaries (except for (i) sales of assets in the ordinary course
of business and in a manner consistent with past practice, (ii) dispositions
of obsolete or worthless assets, and (iii) sales of immaterial assets not in
excess of $500,000);
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(iv) (1) declare, set aside, make or pay any dividend or other
distribution in respect of any of its capital stock, except that a wholly
owned subsidiary of Keystone may declare and pay a dividend to its parent
and except that Keystone may declare and pay quarterly cash dividends of
$0.185 per share consistent with past practices, (2) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (3) amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any subsidiary to purchase, repurchase, redeem
or otherwise acquire, any of its securities or any securities of its
subsidiaries;
(v) (1) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division (subject to certain exceptions); (2) incur any indebtedness for
borrowed money, except for borrowings and reborrowings under Keystone's
existing credit facilities, or issue any debt securities or assume,
guarantee (other than guarantees of bank debt of Keystone's subsidiaries
entered into in the ordinary course of business) or endorse or otherwise as
an accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business
consistent with past practice; (3) authorize any capital expenditures or
purchase of fixed assets which are, in the aggregate, in excess of an agreed
limit, for Keystone and its subsidiaries taken as a whole; or (4) enter into
or amend any contract, agreement, commitment or arrangement to effect any of
the foregoing;
(vi) increase the compensation payable or to become payable to its
officers or employees, except for increases in salary or wages of employees
of Keystone or its subsidiaries in accordance with past practices, or grant
severance or termination pay to or enter into any employment or severance
agreement in excess of $100,000 with any director, officer or other employee
of Keystone or any subsidiary, or establish, adopt, enter into or amend any
collective bargaining, employment, termination, severance or benefit plan,
agreement, trust, fund, policy or arrangement for any current or former
directors, officers or employees, except, in each case, as may be required
by law;
(vii) take any action to change accounting policies or procedures;
(viii) make any material tax election inconsistent with past practice or
settle or compromise anmaterial federal, state, local or foreign tax
liability or agree to an extension of a statute of limitations, except for
settlements the amount of which has been reserved for in Keystone's
financial statements contained in reports previously filed with the
Commission;
(ix) pay, discharge or satisfy any claims, liabilities or obligations in
excess of $100,000 per matter or $1 million in the aggregate, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against
in Keystone's financial statements contained in reports previously filed
with the Commission or incurred in the ordinary course of business and
consistent with past practice; or
(x) take, or agree to take, any of the foregoing actions, or any action
which would make any of the representations or warranties of Keystone
contained in the Merger Agreement untrue or incorrect or prevent Keystone
from performing its covenants under the Merger Agreement.
NO SOLICITATION. The Merger Agreement provides that Keystone will not,
directly or indirectly, through any officer, director, employee, representative
or agent of Keystone or any of its subsidiaries, solicit or encourage the
initiation of any inquiries or proposals regarding any merger, sale of
substantial assets, sale of shares of capital stock or similar transactions
involving Keystone or any subsidiaries of Keystone (the foregoing being referred
to as "Acquisition Proposals"). However, the Board of Directors of
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Keystone is not prevented from (i) considering, negotiating, approving and
recommending to the shareholders of Keystone a bona fide Acquisition Proposal
not solicited in violation of the Merger Agreement, (ii) taking and disclosing
to its shareholders a position contemplated by Exchange Act Rule 14e-2 or (iii)
making any disclosure to the Keystone shareholders, PROVIDED the Board of
Directors of Keystone determines in good faith (upon advice of independent
counsel) that it is required to do so in order to discharge properly its
fiduciary duties.
Under the Merger Agreement, Keystone is required immediately to notify Tyco
after receipt of any Acquisition Proposal, or any modification of or amendment
to any Acquisition Proposal, or any request for nonpublic information relating
to Keystone or any of its subsidiaries in connection with an Acquisition
Proposal or for access to the properties, books or records of Keystone or any
subsidiary by any person or entity that informs the Board of Directors of
Keystone or such subsidiary that it is considering making, or has made, an
Acquisition Proposal.
If the Board of Directors of Keystone receives a request for material
nonpublic information by a person who makes a bona fide Acquisition Proposal,
and the Board of Directors determines in good faith and upon the advice of
independent counsel that it is required to cause Keystone to provide such
information in order to discharge properly the directors' fiduciary duties,
then, provided the person making the Acquisition Proposal has executed a
confidentiality agreement substantially similar to the one then in effect
between Keystone and Tyco, Keystone may provide such person with access to
information regarding Keystone.
The Merger Agreement also provides that Keystone will not to release any
third party from the confidentiality provisions of any confidentiality agreement
to which Keystone is a party.
Keystone is required to ensure that the officers, directors and employees of
Keystone and its subsidiaries and any investment banker or other advisor or
representative retained by Keystone are aware of the foregoing restrictions.
CONDUCT OF BUSINESS BY TYCO. The Merger Agreement provides that, prior to
the Effective Time, unless Keystone otherwise agrees in writing, Tyco will
conduct its business, and cause the businesses of its subsidiaries to be
conducted, in the ordinary course of business and consistent with past practice,
other than actions taken by Tyco or its subsidiaries in contemplation of the ADT
Merger, and will not, without the prior written consent of Keystone:
(i) amend or otherwise change Tyco's Articles of Organization or
By-Laws;
(ii) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person, which, in any such case,
would materially delay or prevent the consummation of the transactions
contemplated by the Merger Agreement;
(iii) declare, set aside, make or pay any dividend or other distribution
in respect of any of its capital stock, except that a wholly owned
subsidiary of Tyco may declare and pay a dividend to its parent, and except
that Tyco may declare and pay quarterly cash dividends of $.05 consistent
with past practice; or
(iv) take or agree to take, any action which would make any of the
representations or warranties of Tyco contained in the Merger Agreement
untrue or incorrect or prevent Tyco from performing its covenants under the
Merger Agreement.
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ADDITIONAL AGREEMENTS
ACCESS TO INFORMATION; CONFIDENTIALITY. The Merger Agreement provides that,
upon reasonable notice and subject to any other agreement by which Keystone or
Tyco are bound, Keystone and Tyco will each afford to the officers, employees,
accountants, counsel and other representatives of the other, reasonable access,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, Keystone and Tyco
each will furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request, and each
will make available to the other the appropriate individuals for discussion of
the other's business, properties and personnel as either Tyco or Keystone may
reasonably request. Each party shall keep such information confidential in
accordance with the terms of the confidentiality letter between Keystone and
Tyco dated May 1, 1997.
CONSENTS; APPROVALS. Keystone and Tyco will each use their reasonable best
efforts to obtain all consents, waivers, approvals, authorizations or orders,
and Keystone and Tyco shall make all filings required in connection with the
authorization, execution and delivery of the Merger Agreement and the
consummation by them of the transactions contemplated hereby.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that the
Articles of Incorporation and By-Laws of the Surviving Corporation will contain
the provisions with respect to indemnification set forth in the Articles of
Incorporation and By-Laws of Keystone, which will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of Keystone,
unless such modification is required by law.
After the Effective Time, the Surviving Corporation will, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
Articles of Incorporation or By-Laws, indemnify and hold harmless, each present
and former director, officer or employee of Keystone or any of its subsidiaries
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to the transactions contemplated by the Merger Agreement, or otherwise with
respect to any acts or omissions occurring at or prior to the Effective Time, to
the same extent as provided in Keystone's Articles of Incorporation or By-Laws
or any applicable contract or agreement as in effect on the date of the Merger
Agreement, in each case for a period of six years after the date of the Merger
Agreement.
For a period of three years after the Effective Time, Tyco will cause the
Surviving Corporation to maintain in effect, if available, directors' and
officers' liability insurance covering those persons who are currently covered
by Keystone's directors' and officers' liability insurance policy on terms
comparable to those now applicable to directors and officers of Keystone.
Tyco has agreed to guarantee the obligations of the Surviving Corporation
under the foregoing provisions.
NOTIFICATION OF CERTAIN MATTERS. Keystone and Tyco will each give the other
prompt notice of the occurrence or nonoccurrence of any event which would be
likely to cause any representation or warranty of the notifying party contained
in the Merger Agreement to be materially untrue or inaccurate, or any failure of
the notifying party materially to comply with any covenant, condition or
agreement in the Merger Agreement.
FURTHER ACTION/TAX TREATMENT. Each of the parties to the Merger Agreement
agrees to use all reasonable efforts to take, or cause to be taken, all actions
and do other things necessary, proper or advisable to consummate as promptly as
practicable the transactions contemplated by the Merger Agreement to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
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necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under the Merger
Agreement, except that Tyco is under no obligation to agree to divest, abandon,
license or take similar action with respect to any assets. In addition, each of
the parties agrees to use its reasonable best efforts to cause the Merger to
qualify as a reorganization under the provisions of Section 368 of the Code, and
will not (both before and after consummation of the Merger) take any actions
which to its knowledge could reasonably be expected to prevent the Merger from
so qualifying.
PUBLIC ANNOUNCEMENTS. Tyco and Keystone agree to consult with each other
before issuing any press release with respect to the Merger or the Merger
Agreement and will not issue any such press release or make any such public
statement without the prior consent of the other party, which consent will not
be unreasonably withheld, except as required by law or the regulations of the
NYSE.
LISTING OF TYCO SHARES. The Merger Agreement provides that Tyco will use
its best efforts to cause the Tyco Common Shares to be issued in the Merger to
be listed, upon official notice of issuance, on the NYSE prior to the Effective
Time.
ACCOUNTANT'S LETTERS. Upon reasonable notice from the other, Keystone or
Tyco will use its respective best efforts to cause Coopers & Lybrand to deliver
to Keystone a letter covering such matters as are requested by Keystone and as
are customarily addressed in accountant's "comfort" letters and Keystone will
use its best efforts to cause Arthur Andersen LLP to deliver to Tyco a letter
covering such matters as are requested by Tyco and as are customarily addressed
in an accountant's "comfort" letter.
POOLING ACCOUNTING TREATMENT. Each of Tyco and Keystone agrees not to take
any action that would reasonably be expected to adversely affect the ability of
Tyco to treat the Merger as a pooling of interests, and each of Tyco and
Keystone agrees to use its best efforts to take such action as may be reasonably
required to negate the impact of any past actions which, to its knowledge, could
reasonably be expected to adversely impact the ability of Tyco to treat the
Merger as a pooling of interests.
KEYSTONE RIGHTS AGREEMENT. Keystone has agreed to take all necessary action
prior to the Effective Time to (i) render rights issued pursuant to the Rights
Agreement dated March 31, 1990 by and between Keystone and Continental Stock
Transfer & Trust Company, as Rights Agent (as amended, the "Keystone Rights
Agreement"), inapplicable to the Merger, and (ii) ensure that (x) neither Tyco
nor any of its Affiliates (as defined in the Keystone Rights Agreement) is an
Acquiring Person (as defined in the Keystone Rights Agreement) and (y) no
Distribution Date, Section 11(a)(ii) Event, Section 13 Event, Stock Acquisition
Date or Triggering Date (each as defined in the Keystone Rights Agreement) shall
occur by reason of the approval, execution or delivery of the Merger Agreement,
or the announcement or consummation of the Merger.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(i) SHAREHOLDER APPROVAL. The Merger Agreement and the Merger shall
have been approved by the requisite vote of the shareholders of Keystone;
(ii) LISTING. The Tyco Common Shares issuable in the Merger shall have
been authorized for listing on the NYSE, upon official notice of issuance;
(iii) HART-SCOTT-RODINO APPROVAL. All waiting periods applicable to the
consummation of the Merger under HSR Act shall have expired or terminated;
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(iv) GOVERNMENTAL ACTIONS. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation or
other inquiry that might result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction,
domestic or foreign, nor shall there be in effect any judgment, decree or
order of any governmental authority, administrative agency or court of
competent jurisdiction or other legal restraint, in either case, preventing
or seeking to prevent or limiting or seeking to limit Tyco from exercising
all material rights and privileges pertaining to its ownership of the
Surviving Corporation or the ownership or operation by Tyco or any of its
subsidiaries of all or a material portion of the business or assets of Tyco
or any of its subsidiaries, or compelling or seeking to compel Tyco or any
of its subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of Tyco or any of its subsidiaries, as a
result of the Merger or the transactions contemplated by the Merger
Agreement;
(v) ILLEGALITY. No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal; and
(vi) TAX OPINIONS. Keystone and Tyco shall have received written
opinions of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. and Kramer, Levin,
Naftalis & Frankel, respectively, in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF TYCO AND MERGER SUB. The
obligations of Tyco and Merger Sub to effect the Merger are also subject to the
following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Keystone contained in the Merger Agreement shall be true and correct in
all respects on and as of the Effective Time, except for (1) changes
contemplated by the Merger Agreement, (2) those representations and
warranties which address matters only as of a particular date (which shall
have been true and correct as of such date), and (3) where the failure to be
true and correct could not reasonably be expected to have a Material Adverse
Effect, with the same force and effect as if made on and as of the Effective
Time, and Tyco and Merger Sub shall have received a certificate to such
effect signed by the Chief Executive Officer or Chief Financial Officer of
Keystone;
(ii) AGREEMENTS AND COVENANTS. Keystone shall have performed or
complied in all material respects with all agreements and covenants required
by the Merger Agreement to be performed or complied with by it on or prior
to the Effective Time, and Tyco and Merger Sub shall have received a
certificate to such effect signed by the Chief Executive Officer or Chief
Financial Officer of Keystone;
(iii) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Keystone for the authorization, execution and delivery of the
Merger Agreement and the consummation by it of the transactions contemplated
thereby shall have been obtained and made by Keystone, except where the
failure to receive such consents, etc. could not reasonably be expected to
have a Material Adverse Effect on Keystone or Tyco;
(iv) OPINIONS OF ACCOUNTANTS. Tyco shall have received an opinion of
Coopers & Lybrand and Keystone shall have received an opinion of Arthur
Andersen LLP, each in form and substance reasonably satisfactory to Tyco,
regarding the qualification of the Merger as to pooling of interests for
accounting purposes; and
(v) AFFILIATE AGREEMENTS. Tyco shall have received from each person who
is identified as an "affiliate" of Keystone an agreement to comply with
restrictions on such affiliates pursuant to Rule 145 under the Securities
Act and under pooling of interests accounting treatment.
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ADDITIONAL CONDITIONS TO OBLIGATION OF KEYSTONE. The obligation of Keystone
to effect the Merger is also subject to the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Tyco and Merger Sub contained in the Merger Agreement shall be true and
correct in all respects on and as of the Effective Time, except for (1)
changes contemplated by the Merger Agreement, (2) changes resulting from the
consummation of the ADT Merger, (3) those representations and warranties
which address matters only as of a particular date (which shall have been
true and correct as of such date), and (4) where the failure to be true and
correct could not reasonably be expected to have a Material Adverse Effect,
with the same force and effect as if made on and as of the Effective Time,
and Keystone shall have received a certificate to such effect signed by the
President or Chief Financial Officer of Tyco;
(ii) AGREEMENTS AND COVENANTS. Tyco and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by the Merger Agreement to be performed or complied with by them on
or prior to the Effective Time, and Keystone shall have received a
certificate to such effect signed by the President or Chief Financial
Officer of Tyco; and
(iii) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Tyco and Merger Sub for the authorization, execution and
delivery of the Merger Agreement and the consummation by them of the
transactions contemplated hereby shall have been obtained and made by Tyco
and Merger Sub, except where the failure to receive such consents, etc.
could not reasonably be expected to have a Material Adverse Effect on
Keystone or Tyco.
(iv) ADDITIONAL DISCLOSURES. There shall have been no change to Tyco
and its subsidiaries from the disclosures regarding Tyco (the Bermuda
company) and its subsidiaries set forth in the Joint Proxy
Statement/Prospectus, as amended or supplemented, mailed to the shareholders
of Tyco in connection with the ADT Merger, which is reasonably likely to
have a Material Adverse Effect on Tyco.
TERMINATION
CONDITIONS TO TERMINATION. The Merger Agreement may be terminated at any
time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of Keystone or Tyco:
(i) by mutual written consent duly authorized by the Boards of Directors
of Tyco and Keystone; or
(ii) by either Tyco or Keystone if the Merger shall not have been
consummated by December 31, 1997 (PROVIDED that the right to terminate the
Merger Agreement under this clause will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date); or
(iii) by either Tyco or Keystone if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other
action having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (PROVIDED that the right to terminate the Merger
Agreement under this clause will not be available to any party who has not
complied with its obligations under "Additional Agreements--Further
Action/Tax Treatment" above, and such noncompliance materially contributed
to the issuance of any such order, decree or ruling or the taking of such
action); or
(iv) by Tyco or Keystone, if the requisite vote of the shareholders of
Keystone shall not have been obtained by December 31, 1997, or if the
shareholders of Keystone shall not have approved the Merger and the Merger
Agreement at the Special Meeting; or
38
<PAGE>
(v) by Tyco, if (1) the Board of Directors of Keystone shall withdraw,
modify or change its approval or recommendation of the Merger Agreement or
the Merger in a manner adverse to Tyco or shall have resolved to do so; (2)
the Board of Directors of Keystone shall have recommended to the
shareholders of Keystone an Alternative Transaction (as defined in the
Merger Agreement); or (3) a tender offer or exchange offer for 25% or more
of the outstanding shares of Keystone Common Stock is commenced (other than
by Tyco or an affiliate of Tyco) and the Board of Directors of Keystone
recommends that the shareholders of Keystone tender their shares in such
tender or exchange offer; or
(vi) by Keystone, if the Board of Directors of Keystone shall withdraw,
modify or change its approval of the Merger Agreement or the Merger in a
manner adverse to Tyco or shall have resolved to do so in compliance with
its fiduciary obligation (after consultation with independent counsel); or
(vii) by Tyco or Keystone, (1) if any representation or warranty of
Keystone or Tyco and Merger Sub, respectively, set forth in the Merger
Agreement shall be untrue when made (a "Terminating Misrepresentation"), or
(2) upon a breach of any covenant or agreement on the part of Keystone or
Tyco, respectively, set forth in the Merger Agreement (a "Terminating
Breach"), such that the conditions set forth in "Conditions to the
Merger--Additional Conditions to Obligation of Tyco and Merger
Sub--Representations and Warranties" or "--Agreements and Covenants" above,
or in "Conditions to the Merger--Additional Conditions to Obligation of
Keystone--Representations and Warranties" or "--Agreements and Covenants"
above, as the case may be, would not be satisfied, PROVIDED that, if such
Terminating Misrepresentation or Terminating Breach is curable prior to
December 31, 1997 by Keystone or Tyco, as the case may be, through the
exercise of its reasonable best efforts and for so long as Keystone or Tyco,
as the case may be, continues to exercise such reasonable best efforts,
neither Tyco nor Keystone, respectively, may terminate the Merger Agreement
under this clause; or
(viii) by Tyco, if any representation or warranty of Keystone shall have
become untrue such that the condition set forth in "Conditions to the
Merger--Additional Conditions to Obligations of Tyco and Merger
Sub--Representations and Warranties" above would not be satisfied (a
"Keystone Terminating Change"), or by Keystone, if any representation or
warranty of Tyco shall have become untrue such that the condition set forth
in "Conditions to the Merger--Additional Conditions to Obligations of
Keystone--Representations and Warranties" would not be satisfied (a "Tyco
Terminating Change," and together with a Keystone Terminating Change, a
"Terminating Change"), in either case other than by reason of a Terminating
Breach; PROVIDED that, if such Terminating Change is curable prior to
December 31, 1997 by Keystone or Tyco, as the case may be, through exercise
of its reasonable best efforts is and for so long as Keystone or Tyco, as
the case may be, continues to exercise such reasonable best efforts, Tyco or
Keystone, respectively, may not terminate the Merger Agreement under this
clause.
(ix) (1) by Keystone, if the Average Stock Price is less than $54.08 and
on or before the third trading day prior to the date of the Special Meeting,
Tyco has not agreed by notice to Keystone in writing to an Exchange Ratio
equal to $31.00 (or higher) divided by the Average Stock Price; PROVIDED
that, the Exchange Ratio shall thereafter, for all purposes of the Merger
Agreement, be deemed to be such ratio; or (2) by Tyco, if the Average Stock
Price is less than $54.08 and on or before the second trading day prior to
the date of the Company Shareholders Meeting, Keystone has not agreed by
notice to Tyco in writing to an Exchange Ratio equal to 0.54183; PROVIDED
that, the Exchange Ratio shall thereafter, for all purposes of the Merger
Agreement, be deemed to be such ratio. In the event Tyco delivers its notice
specified under (1) of this clause or the Keystone delivers its notice
specified under (2) of this clause, then neither Keystone nor Tyco shall
have the right to terminate this Agreement pursuant this clause.
39
<PAGE>
FEES AND EXPENSES. Except as set forth below, all fees and expenses
incurred in connection with the Merger Agreement and the Merger will be paid by
the party incurring such expenses, whether or not the Merger is consummated,
PROVIDED that Tyco and Keystone shall share equally all filing fees and printing
expenses incurred in connection with the printing and filing of this Proxy
Statement/Prospectus and the Registration Statement.
The Merger Agreement provides that Keystone will pay Tyco the Fee of $35
million, plus actual, documented and reasonable out-of-pocket expenses of up to
$2 million of Tyco relating to the transactions contemplated by the Merger
Agreement (including, but not limited to, fees and expenses of Tyco's counsel,
accountants and financial advisors, but excluding any fees paid to such
financial advisors), as Tyco's sole and exclusive remedy, upon the first to
occur of any of the following events:
(i) the termination of the Merger Agreement by Tyco or Keystone as a
result of the failure to receive the requisite vote for approval of the
Merger and the Merger Agreement by the shareholders of Keystone by December
31, 1997 or of the failure of the shareholders of Keystone to approve the
Merger and the Merger Agreement at the Special Meeting; or
(ii) the termination of the Merger Agreement by Tyco pursuant to clause
(v) under "Conditions to Termination" above; or
(iii) the termination of the Merger Agreement by Keystone pursuant to
clause (vi) under "Conditions to Termination" above; or
(iv) the termination of the Merger Agreement by Tyco on account of a
Terminating Breach of Keystone.
Upon a termination of the Merger Agreement by Tyco or Keystone, as the case
may be, as a result of a Terminating Misrepresentation pursuant to clause (vii)
under "Conditions to Termination" above, the other party shall pay to the
terminating party documented and reasonable out-of-pocket expenses of up to $2
million, as its sole and exclusive remedy.
The aforesaid fees and related expenses are payable within one business day
after a demand for payment following the occurrence of the event requiring such
payment, PROVIDED that, in no event will a party be required to pay such fees or
expenses to the other if, immediately prior to the termination of the Merger
Agreement, the party to receive the fee and/or expenses was in material breach
of its obligations under the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended in writing by the parties by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Effective Time, PROVIDED, HOWEVER that after approval of the Merger by
the shareholders of Keystone, no amendment may be made which by law requires
further approval by such shareholders without such further approval.
At any time prior to the Effective Time, any party to the Merger Agreement
may, with respect to any other party, extend the time for the performance of any
of the obligations or other acts, waive any inaccuracies in the representations
and warranties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement, or waive compliance with any of the agreements
or conditions contained in the Merger Agreement. Any such extension or waiver
will be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
40
<PAGE>
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
TYCO
Tyco Common Shares are listed and traded on the NYSE, the London Stock
Exchange and the Bermuda Stock Exchange. The following table sets forth the high
and low sales prices per share of Tyco Stock as reported in the NYSE Composite
Transactions, and the dividends paid on such Tyco Stock, for the quarterly
periods presented below. The price and dividends for Tyco Stock have been
restated to reflect a two-for-one stock split effected in the form of a stock
dividend which was distributed on November 14, 1995. "Tyco Stock" refers to Old
Tyco stock for all times on or prior to July 2, 1997, the consummation date of
the ADT Merger, and to Tyco Common Shares for all times thereafter.
<TABLE>
<CAPTION>
TYCO STOCK
---------------------------
HIGH LOW DIVIDEND
------- ------- -------
<S> <C> <C> <C>
1995:
First quarter..... $26.8125 $23.25 $0.05
Second quarter.... 29.125 25.50 0.05
Third quarter..... 31.625 26.6875 0.05
Fourth quarter.... 31.625 29.50 0.05
1996:
First quarter..... 39.25 32.375 0.05
Second quarter.... 41.375 35.125 0.05
Third quarter..... 44.875 35.50 0.05
Fourth quarter.... 56.00 42.875 0.05
1997:
First quarter..... 62.00 51.75 0.05
Second quarter.... 71.875 54.00 0.05
Third quarter
(through July
17, 1997) 80.625 69.875
</TABLE>
On May 20, 1997, the last trading day prior to announcement of the execution
of the Merger Agreement, the closing price per share of Tyco Stock, as reported
in the NYSE Composite Transactions, was $62.75. On , 1997, the most recent
date for which prices were available prior to printing this Proxy
Statement/Prospectus, the closing price per Tyco Common Share as reported in the
NYSE Composite Transactions was $ . Shareholders are urged to obtain
current market quotations.
Prior to the ADT Merger, dividends were paid on the Tyco Stock in the amount
of $.05 per quarter or $.20 per year. Tyco currently expects to continue this
dividend practice, although this may be changed at any time by the Tyco Board of
Directors. The payment of dividends by Tyco in the future will depend on
business conditions, Tyco's financial condition and earnings and other factors.
41
<PAGE>
KEYSTONE
Keystone Common Stock is listed and traded on the NYSE. The following table
sets forth the high and low sales prices per share of Keystone Common Stock as
reported in the NYSE Composite Transactions, and the dividends paid on such
Keystone Common Stock, for the quarterly periods presented below.
<TABLE>
<CAPTION>
KEYSTONE COMMON STOCK
---------------------------------
HIGH LOW DIVIDEND
--------- --------- -----------
<S> <C> <C> <C>
1995:
First quarter.................................................................... $ 22.25 $ 16.75 $ 0.185
Second quarter................................................................... 22.75 19.375 0.185
Third quarter.................................................................... 22.50 19.375 0.185
Fourth quarter................................................................... 23.00 18.875 0.185
1996:
First quarter.................................................................... 22.75 19.375 0.185
Second quarter................................................................... 22.50 20.50 0.185
Third quarter.................................................................... 21.00 17.25 0.185
Fourth quarter................................................................... 20.50 17.25 0.185
1997:
First quarter.................................................................... 20.375 17.75 0.185
Second quarter................................................................... 35.50 17.375 0.185
Third quarter (through July 17, 1997)............................................ 36.375 34.688
</TABLE>
Under the terms of the Merger Agreement, other than in respect of its
regularly scheduled quarterly dividend of $0.185, Keystone is not permitted to
declare, set aside, make or pay any dividend on distribution in respect of its
capital stock from the date of the Merger Agreement until the earlier of the
termination of the Merger Agreement and the Effective Time.
On May 20, 1997, the last trading day prior to announcement of the execution
of the Merger Agreement, the closing price per share of Keystone Common Stock as
reported in the NYSE Composition Transactions was $20.50. On , 1997, the
most recent date for which prices were available prior to printing this Proxy
Statement/Prospectus, the closing price per share of Keystone Common Stock as
reported in the NYSE Composition Transactions was $ . Shareholders are
urged to obtain current market quotations.
42
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The Merger is to be accounted for in accordance with the pooling interests
method of accounting pursuant to APB Opinion No. 16. The pooling of interests
method of accounting assumes that Tyco and Keystone have been merged since their
inception, and the historical consolidated financial statements for periods
prior to consummation of the Merger are restated as though the companies have
been combined since their inception. Accordingly, the accompanying unaudited pro
forma combined financial information gives effect to the transaction in
accordance with pooling of interests. Pursuant to Rule 11-02 of Regulation S-X,
the unaudited pro forma combined financial information excludes the results of
discontinued operations and extraordinary items.
The unaudited pro forma combined financial information should be read in
conjunction with (i) Tyco's supplemental consolidated financial statements,
including the accounting policies and notes thereto, included in its current
report on Form 8-K dated July 10, 1997, (ii) ADT's and Old Tyco's consolidated
financial statements and notes thereto included in their quarterly reports on
Form 10-Q for the quarterly period ended March 31, 1997, (iii) Keystone's
consolidated financial statements, including the accounting policies and notes
thereto, included in its annual report on Form 10-K for the year ended December
31, 1996, and (iv) Keystone's consolidated financial statements and notes
thereto included in its quarterly report on Form 10-Q for the quarterly period
ended March 28, 1997. See "Where You Can Find More Information."
The unaudited pro forma combined financial information has been prepared in
United States dollars in accordance with generally accepted principles in the
United States ("U.S. GAAP"). These principles require management to make
extensive use of estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The unaudited pro forma combined results of operations are
not necessarily indicative of future operating results.
The unaudited pro forma combined condensed balance sheet gives effect to the
Merger as if it had occurred on March 31, 1997, combining the balance sheets of
Tyco and Keystone at March 31, 1997. The unaudited pro forma combined statements
of income give effect to the Merger as if it had occurred on January 1, 1994,
combining the results of Tyco and Keystone for each of the three years in the
period ended December 31, 1996 and for the three month period ended March 31,
1997.
43
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN MILLIONS, EXCEPT SHARE NUMBER AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO KEYSTONE ADJUSTMENTS COMBINED
---------- --------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 2,114.9 $ 157.9 $ 2,272.8
Cost of sales................................................... (1,433.8) (97.6) (1,531.4)
Selling, general and administrative expenses.................... (420.3) (43.8) (464.1)
---------- --------- ----- ----------
Operating (loss) income......................................... 260.8 16.5 -- 277.3
Interest income (2)............................................. 5.6 -- 0.3 5.9
Interest expense (2)............................................ (42.4) (1.2) (0.3) (43.9)
---------- --------- ----- ----------
(Loss) income from continuing operations before income taxes.... 224.0 15.3 -- 239.3
Income taxes.................................................... (82.3) (5.8) -- (88.1)
---------- --------- ----- ----------
(Loss) income from continuing operations........................ $ 141.7 $ 9.5 $ -- $ 151.2
---------- --------- ----- ----------
---------- --------- ----- ----------
Primary earnings per common share:
(Loss) income from continuing operations...................... $ 0.61 $ 0.27 -- $ 0.60
---------- --------- ----- ----------
---------- --------- ----- ----------
Fully diluted earnings per common share:
(Loss) income from continuing operations...................... $ 0.60 $ 0.27 -- $ 0.59
---------- --------- ----- ----------
---------- --------- ----- ----------
Weighted average number of common shares (in thousands):
Primary....................................................... 231,604 35,605 -- 250,896
---------- --------- ----- ----------
---------- --------- ----- ----------
Fully diluted................................................. 243,617 35,605 -- 262,909
---------- --------- ----- ----------
---------- --------- ----- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
44
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT SHARE NUMBER AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO KEYSTONE ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 7,425.8 $ 677.9 $ 8,103.7
Cost of sales................................................... (5,052.3) (422.9) (5,475.2)
Selling, general and administrative expenses.................... (1,485.8) (175.5) (1,661.1)
Merger and transaction related costs............................ (8.8) (8.8)
Restructuring and other non-recurring charges................... (237.3) (237.3)
Charge for the impairment of long-lived assets.................. (744.7) (744.7)
---------- --------- ----------- ----------
Operating (loss) income......................................... (102.9) 79.5 (23.4)
Interest income................................................. 30.5 1.0 31.5
Interest expense................................................ (185.3) (8.0) (193.3)
Gain (loss) on disposal of business............................. 1.7 1.7
Other income less expenses...................................... 128.8 (6.5) 122.3
---------- --------- ----------- ----------
(Loss) income from continuing operations
before income taxes........................................... (127.2) 66.0 -- (61.2)
Income taxes.................................................... (211.4) (24.1) (235.5)
---------- --------- ----------- ----------
(Loss) income from continuing operations........................ $ (338.6) $ 41.9 $ -- $ (296.7)
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Primary earnings per common share:
(Loss) income from continuing operations...................... $ (1.53) $ 1.18 $ (1.24)
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Weighted average number of common shares (in thousands):
Primary....................................................... 220,465 35,528 239,715
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
45
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT SHARE NUMBER AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO KEYSTONE ADJUSTMENTS COMBINED
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 6,318.5 $ 597.1 $ 6,915.6
Cost of sales................................................... (4,303.7) (361.6) (4,665.3)
Selling, general and administrative expenses.................... (1,294.3) (163.3) (1,457.6)
Merger and transaction related costs............................ (37.2) (37.2)
Restructuring and other non-recurring charges................... (34.2) (22.8) (57.0)
Impairment of assets held for sale.............................. (8.2) (8.2)
Plant closure and related costs................................. (2.9) (2.9)
---------- ----------- ----------- ----------
Operating (loss) income......................................... 649.1 38.3 (687.4)
Interest income................................................. 17.8 1.2 19.0
Interest expense................................................ (181.3) (6.2) (187.5)
Gain (loss) on disposal of business............................. (36.6) (36.6)
Other income less expenses...................................... (5.0) (1.2) (6.2)
---------- ----------- ----------- ----------
(Loss) income from continuing operations before income taxes.... 444.0 32.1 -- 476.1
Income taxes.................................................... (196.4) (12.2) (208.6)
---------- ----------- ----------- ----------
(Loss) income from continuing operations........................ $ 247.6 $ 19.9 $ -- $ 267.5
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Primary earnings per common share:
Loss) income from continuing operations......................... $ 1.14 $ 0.56 $ 1.13
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Weighted average number of common shares (in thousands):
Primary....................................................... 217,578 35,372 236,744
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
46
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS, EXCEPT SHARE NUMBER AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO KEYSTONE ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 5,705.8 $ 535.1 $ 6,240.9
Cost of sales................................................... (3,916.6) (314.9) (4,231.5)
Selling, general and administrative expenses.................... (1,188.1) (158.8) (1,346.9)
Restructuring and other non-recurring charges................... (4.5) (4.5)
Plant closure and related costs................................. (4.4) (4.4)
---------- --------- ----------- ----------
Operating (loss) income......................................... 596.6 57.0 -- (653.6)
Interest income................................................. 15.7 1.4 17.1
Interest expense................................................ (162.2) (5.5) (167.7)
Gain (loss) on disposal of business............................. (0.3) (0.3)
Other income less expenses...................................... (4.1) (0.5) (4.6)
---------- --------- ----------- ----------
(Loss) income from continuing operations before income taxes.... 445.7 52.4 -- 498.1
Income taxes.................................................... (173.9) (19.4) (193.3)
---------- --------- ----------- ----------
(Loss) income from continuing operations........................ $ 271.8 $ 33.0 $ -- $ (304.8)
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Primary earnings per common share:
(Loss) income from continuing operations........................ $ 1.21 $ 0.94 $ (1.26)
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Weighted average number of common shares (in thousands):
Primary....................................................... 213,072 35,250 232,172
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
47
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AT MARCH 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO KEYSTONE ADJUSTMENTS COMBINED
--------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 555.2 $ 16.5 $ 571.7
Accounts receivable, net........................................ 1,275.6 165.0 1,440.6
Contracts in process............................................ 125.1 125.1
Inventories..................................................... 881.2 137.7 1,018.9
Deferred income taxes........................................... 147.5 147.5
Prepaid expenses and other current assets....................... 159.6 6.4 166.0
--------- ----------- ----- -----------
Total current assets.......................................... 3,144.2 325.6 3,469.8
Property, plant and equipment, net................................ 2,525.2 144.9 2,670.1
Goodwill and other intangibles, net(2)............................ 2,548.1 43.3 2,591.4
Reorganization value in excess of identifiable assets............. 97.8 97.8
Long-term investments............................................. 61.9 61.9
Deferred income taxes............................................. 100.6 100.6
Other assets(2)................................................... 222.9 51.8 (43.3) 231.4
--------- ----------- ----- -----------
Total assets.................................................. $ 8,700.7 $ 522.3 $ -- $ 9,223.0
--------- ----------- ----- -----------
--------- ----------- ----- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable and current portion of long-term debt(9).......... $ 190.0 $ 14.2 $ 204.2
Accounts payable................................................ 741.2 28.6 769.8
Accrued expenses and other current liabilities(5)............... 992.6 83.8 33.3 1,109.7
Contracts in process--billings in excess of cost................ 148.0 148.0
Deferred revenue................................................ 163.2 163.2
Income taxes.................................................... 115.6 7.9 123.5
Deferred income taxes........................................... 12.1 12.1
--------- ----------- ----- -----------
Total current liabilities..................................... 2,362.7 134.5 33.3 2,530.5
Long-term debt(9)............................................... 1,895.3 72.6 1,967.9
Other long-term liabilities..................................... 127.9 18.4 146.3
Deferred income taxes........................................... 382.2 382.2
--------- ----------- ----- -----------
Total liabilities............................................. 4,768.1 225.5 33.3 5,026.9
--------- ----------- ----- -----------
Retained (deficit) earnings(5).................................. (39.1) 159.6 (33.3) 87.2
Other shareholders' equity...................................... 3,971.7 137.2 4,108.9
--------- ----------- ----- -----------
Total shareholders' equity.................................... 3,932.6 296.8 (33.3) 4,196.1
--------- ----------- ----- -----------
Total liabilities and shareholders' equity.................. $ 8,700.7 $ 522.3 $ -- $ 9,223.0
--------- ----------- ----- -----------
--------- ----------- ----- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
48
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
(1) The pro forma combined per share amounts are based on the combined weighted
average of Tyco Common Shares and Keystone Common Shares for all periods
presented based on Keystone shareholders receiving 0.54183 of a Combined
Company Common Share for each share of Keystone Common Stock held. Based on
the July 16th Average Stock Price of Tyco Common Shares of $76.7054, the
Exchange Ratio would be 0.48236. Assuming that ratio, pro forma combined
(loss) income per share would be $0.61 per share (0.59 per share on a fully
diluted basis) for March 31, 1997, and ($1.25), $1.14 and $1.27 for the
years ended December 31, 1996, 1995 and 1994, respectively.
(2) Certain reclassifications, none of which affects (loss) income from
continuing operations, have been made to the Keystone statements of income
in the pro forma combined statements of income to classify interest income
on a consistent basis. The pro forma adjustments to the balance sheet were
required to classify on a consistent basis goodwill and other intangibles.
(3) Primary (loss) earnings per common share from continuing operations for
Tyco, after deducting dividends on Tyco convertible preference shares, was
based on adjusted net (loss) income from continuing operations available to
common shareholders of ($338.9) million in 1996, $247.3 million in 1995 and
$258.5 million in 1994.
Fully diluted earnings per common share from continuing operations for Tyco,
after adding Liquid Yield Option Notes discount amortization, was based on
adjusted net income from continuing operations available to common
shareholders of $145.2 million in the three months ended March 31, 1997.
(4) There were no material transactions between Tyco and Keystone during any of
the periods presented.
(5) Total transaction costs to be incurred by Tyco and Keystone in connection
with the Merger are estimated to be approximately $33.3 million. These
costs, related to legal, printing, accounting, financial advisory services,
severance costs payable at the Effective Time and other expense, will be
charged against income upon consummation of the Merger.
(6) A restructuring charge to operations by the combined company is expected to
occur subsequent to the Merger to reflect the combination of the two
companies. Such charges, which have not yet been estimated, may include
amounts with respect to the elimination of excess facilities, the write-off
of certain goodwill and fixed assets, severance costs and the satisfaction
of certain liabilities. The effects of these costs have not been reflected
in this pro forma combined condensed financial information.
(7) In 1996 Tyco recorded certain non-recurring items including (i) a non-cash
charge relating to the write-down of specific ADT Security and ADT
Automotive assets to their estimated fair values in accordance with SFAS
121, which occurred in the three month period ended March 31, (ii) a charge
principally relating to costs associated with integrating the businesses of
Automated Security (Holdings) plc in the United Kingdom and the United
States into ADT Security, together with the costs of administrative
accounting, management information and technological infrastructure
enhancements currently being implemented in the United States electronic
security services division, (iii) a gain arising on the sale of Tyco's
entire interest in Limelight Group plc, which was recorded in the balance
sheet at a nominal value and (iv) a gain represented by cash receivable as a
result of the settlement of Tyco's litigation against BDO Binder Hamlyn.
Tyco's historical net income for 1996 before these non-recurring items
amounted to $488.1 million, or $2.19 per share ($2.14 per share on a fully
diluted basis). On a pro forma combined basis, net income for 1996 before
these non-recurring items is $530.0 million, or $2.19 per share ($2.15 per
share on a fully diluted basis).
(8) In the three months ended March 31, 1997, Tyco recorded certain
non-recurring charges in connection with the ADT Merger and the unsolicited
proposals of Western Resources, Inc. Tyco's historical net
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income before these non-recurring items amounted to $151.3 million, or $0.65
per share ($0.64 per share on a fully diluted basis). On a pro forma
combined basis, net income for the three months ended March 31, 1997 before
these non-recurring items is $160.8 million, or $0.64 per share ($0.63 per
share on a fully diluted basis).
(9) In June 1997, Tyco entered into a new $1.75 billion credit agreement,
consisting of a $500 million five-year revolving credit facility, a $750
million 364-day revolving credit facility and a $500 million bridge credit
facility (expiring in December 1997) with a group of commercial banks and
simultaneously canceled its existing $300 million credit agreement. Interest
rates and financial and operating covenants under the new facilities are
substantially the same as those under the canceled credit agreement. In July
1997, Tyco borrowed $600 million under the new credit agreement at a
weighted average interest rate of 5.92% to partially fund the SSI
acquisition. Also in July 1997 Tyco borrowed $800 million under the new
credit agreement to fund the debt tenders discussed below.
In July 1997 Tyco tendered for its $145,000,000 8.125% public notes due 1999,
$250,000,000 8.25% senior notes due 2000, $294,085,000 9.25% senior
subordinated notes due 2003 and $200,000,000 9.5% public debentures due
2022. 92.8% of the 8.125% notes, 96.2% of the 8.25% notes, 95.2% of the
9.25% notes and 75.5% of the 9.5% debentures were tendered. The Company paid
an aggregate amount, including accrued interest, of approximately $900.8
million to the note holders, of which $800.0 million was financed from the
new credit agreement discussed above.
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BUSINESSES OF TYCO
TYCO
Tyco, through its divisions and operating subsidiaries, engages in the
manufacture and distribution of flow control products, the design, manufacture,
installation and servicing of fire protection and suppression systems, the
installation, monitoring and maintenance of electronic security systems, the
manufacture and distribution of disposable medical supplies and other specialty
products and the manufacture and distribution of electrical and electronic
components, including underwater telecommunication systems. Tyco, which operates
in more than 50 countries around the world, has annual revenues of approximately
$10 billion.
FLOW CONTROL PRODUCTS
Tyco is a manufacturer and distributor of flow control products in North
America, Europe and Asia-Pacific. Flow control products include pipe, fittings,
valves, meters and related products which are used to transport, control and
measure the flow of liquids and gases. Tyco's Flow Control Group includes
Grinnell, Allied Tube & Conduit, Mueller Co. and a number of specialized
manufacturers of valves, fittings and couplings.
MANUFACTURING. Tyco manufactures and distributes a wide range of flow
control products, including pipe and pipe fittings, tubing, valves, meters,
couplings, pipe hangers, strut and related components. These products are used
in plumbing, heating, ventilation and air conditioning (HVAC) systems,
mechanical contracting, power generation, water and gas utilities, oil and gas
exploration, petrochemical and numerous other industrial applications. Tyco also
manufactures certain related products such as steel tubing, custom iron
castings, malleable iron pipe fittings and fencing materials.
Allied is the leading North American manufacturer of pipe and other tubular
products. Allied produces a full line of steel pipe for the fire protection and
construction industries and for commercial, residential and institutional
markets. Its mechanical tube division offers steel tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications.
Allied's fence division is a leader in the manufacture of products for the
residential and industrial/commercial fence markets. Allied also manufactures
metal framing systems used in the construction, industrial and OEM markets.
Mueller, a manufacturer of water and gas distribution products, produces
fire hydrants, iron butterfly and gate valves, service-line brass valves and
fittings, gas valves and meter bars, water meters, backflow preventers and
related products for sale to independent distributors and, to a lesser extent,
directly to waterworks contractors, municipalities and gas companies throughout
the United States and Canada.
Over the past five years, Tyco has expanded its worldwide manufacturing and
distribution presence through a series of acquisitions and internal growth. In
North America, Grinnell manufactures forged steel fittings and valves. In
Switzerland, Neotecha manufactures Teflon lined specialty valves for use in
highly corrosive environments. In the United Kingdom, Charles Winn (Valves) Ltd.
and Hindle Cockburns manufacture specialty high performance butterfly valves and
ball valves that are used principally in the oil and gas, chemical and
processing industries. In Spain, Belgicast manufactures valves used for
waterworks and other industrial applications. In Malaysia, Tyco manufactures
couplings, fittings, steel tubing and metal framing products.
In September 1996, Tyco acquired Henry Pratt Co., James Jones Company and
Edward Barber & Co from Watts Industries, Inc. These three operations, located
in the United States and the United Kingdom, are engaged in the manufacture and
sale of valves, hydrants and fittings used primarily in water utility,
wastewater treatment and power generation markets.
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FIRE AND SAFETY SERVICES
Tyco is the largest contractor in the world for the design and installation
of fire detection, suppression and sprinkler systems, and for the servicing for
such systems. Tyco is also a leading manufacturer and distributor of fire
detection and suppression products. Tyco's ADT Security business is the largest
provider of electronic security services in North America and the United
Kingdom.
Tyco's Grinnell subsidiary ("Grinnell"), which was founded in 1850, is the
largest installer, manufacturer and supplier of automatic fire sprinkler and
fire alarm and detection systems in North America. Wormald International Limited
("Wormald"), which was founded in 1889, operates as a major fire protection
company with contracting, manufacturing and distribution operations throughout
Western Europe and the Asia-Pacific region. Grinnell and Wormald, in
combination, is the largest fire protection company in the world, forming a
network of over 300 offices on five continents. The acquisition of Thorn
Security Group ("Thorn") in July 1996 further expands Tyco's worldwide position
in the fire detection and security systems market.
CONTRACTING AND SERVICE. Tyco designs, fabricates, installs and services
automatic fire sprinkler systems, fire alarm and detection systems, special
hazard suppression systems and security systems in buildings and other
installations. Grinnell's fire protection contracting and service business in
North America operates through a network of offices located in the United
States, Canada, Mexico and Puerto Rico. Internationally, Tyco engages in fire
protection contracting and service through a network of offices in the United
Kingdom, Continental Europe, Saudi Arabia, United Arab Emirates, Australia, New
Zealand, Southeast Asia and South America.
Tyco installs fire protection systems in both new and existing structures.
Typically, the contracting businesses bid on contracts for fire protection
installation which are let by owners, architects, construction engineers and
mechanical or general contractors. In recent years, the business of retrofitting
existing buildings in the United States and Canada has grown as a result of
local and state legislation requiring installation of fire protection systems
and reduced insurance premiums available on structures with automatic sprinkler
systems. The retrofitting and servicing of fire protection systems in existing
buildings represented approximately 65% of Grinnell's North American contracting
sales in 1996. Revenue from the servicing, maintenance, repair and inspection of
fire protection, detection and suppression systems installed by Tyco and other
contractors has increased in recent years.
A majority of the fire suppression systems installed by Tyco are
water-based, but Tyco is also the world's leader in providing custom designed
special hazard fire protection systems which incorporate various specialized
non-water agents such as foams, dry chemicals and gases. Systems using agents
other than water are suited for fire protection in certain manufacturing, power
generation, petrochemical, offshore oil exploration, transportation,
telecommunications, mining and marine applications. Tyco holds exclusive
manufacturing and distribution rights in several regions of the world for
INERGEN-Registered Trademark- fire suppression products.
INERGEN-Registered Trademark-, an alternative to the ozone depleting agent known
as halon, consists of a mixture of three inert gases designed to effectively
extinguish fires without polluting the environment or damaging costly equipment.
In Australia, New Zealand and Asia, Tyco's O'Donnell Griffin division
engages in the installation of electrical wire and related electrical equipment
in new and existing structures and offers specialized electrical contracting
services in these markets for different types of construction, including
applications for railroad and bridge construction.
Substantially all of the mechanical components (and, in North America, most
of the pipe) used in the fire protection systems installed by Tyco are
manufactured by Tyco. Tyco also has fabrication plants worldwide that cut,
thread and weld pipe, which is then shipped with other prefabricated components
to job sites for installation. Tyco has developed its own computer-aided-design
technology that reduces the time required to design systems for specific
applications and coordinates fabrication and delivery of system
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components. Tyco also installs alarms, detection and activation devices and
centralized monitors. With the acquisition of Thorn, Tyco is now a major
manufacturer of alarms, detection and activation devices and central monitoring
stations.
MANUFACTURING. Tyco manufactures most of the components used in its own
fire protection contracting business, as well as a variety of products for sale
to other fire protection contractors. In North America, Tyco manufactures pipe
and pipe fittings, fire hydrants, sprinkler heads and substantially all of the
mechanical sprinkler components used in an automatic fire suppression system. In
the United Kingdom, France, Germany and Asia-Pacific, Tyco manufactures and
sells sprinkler heads, specialty valves, fire doors and electronic panels for
use in fire detection systems. In Mexico, Tyco manufactures fire extinguishers,
fire hose and related equipment. With the recent addition of Thorn, Tyco now
manufactures a complete line of alarm and detection equipment that is installed
by Tyco's units and sold to other alarm and detection installers.
Tyco's Ansul subsidiary manufactures and sells various lines of dry
chemical, liquid and gaseous portable fire extinguishers and related agents for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry, confined industrial spaces and commercial spaces housing delicate and
electronic equipment. Ansul also manufactures spill control products designed to
absorb, neutralize and solidify spills of various hazardous materials.
ADT SECURITY. ADT Security sells, installs and maintains monitored security
systems, integrated electronic security systems and other electronic security
products in both the commercial and residential markets. ADT Security's
electronically monitored security systems involve the use on a customer's
premises of devices designed to detect or react to various occurrences or
conditions, such as intrusions, movement, fire, smoke, flooding, environmental
conditions (including temperature or humidity variations), industrial operations
(such as water, gas or steam pressure and process flow controls) and other
hazards. In most systems, these detection devices are connected to a
microprocessor based control panel which communicates through telephone lines to
an ADT Security monitoring center where alarm and supervisory signals are
received and recorded. Systems may also incorporate an emergency "panic button,"
which when pushed causes the control panel to transmit an alarm signal that
takes priority over other alarm signals. In most systems, control panels can
identify the nature of the alarm and the areas within a building where the
sensor was activated and transmit the information to an ADT Security customer
monitoring center. If a customer has subscribed for central station monitoring,
monitoring center personnel will respond to alarms by relaying appropriate
information to the local fire or police departments, notifying the customer or
taking other appropriate action, such as dispatching employees to the customer's
premises. ADT Security's other electronic security products include card or
keypad activated access central systems and closed circuit television systems.
ADT Security conducts its commercial operations in the United States,
Canada, the United Kingdom, Spain, France, Belgium, Greece, The Netherlands and
the Republic of Ireland. These operations provide electronic security services
and products to financial institutions, industrial and commercial businesses and
complexes, warehouses, facilities of federal, state and local government
departments, defense installations, and health care and educational facilities.
ADT Security's systems and products are typically tailored to its customers'
specific needs, but ADT Security also markets standard security packages for
specific types of commercial customers, such as retailers and banks. ADT
Security also sells integrated electronic security systems that combine a
variety of electronic security services and products into a single computer
controlled security system. Integrated security systems can range in price from
a few thousand to several million dollars.
Commercial security systems may be owned by ADT Security or, as in the case
of most integrated systems, by the customer. In addition to obtaining systems
equipment from ADT Security, most customers pay an annual service charge for
monitoring and maintenance. Service contracts are negotiated on an
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individual basis depending upon the number of systems monitored, the type of
alarm transmission and the level of response services required.
Residential electronic security services are primarily marketed to customers
in North America and consist of the sale, installation, monitoring and
maintenance of electronically monitored security systems to detect intrusion and
fire. Residential customer service and monitoring are performed from the same
facilities as those used for commercial accounts.
In North America, ADT Security usually retains ownership of standard
residential systems, although more sophisticated systems are usually purchased
by the customer. Substantially all residential customers agree to pay an annual
service charge for monitoring and may also subscribe for maintenance services.
Uniform package prices are offered to residential customers who purchase ADT
Security's standard residential security system, which includes a fixed number
of detection devices. Frequently, customers add detection devices to expand the
coverage of their system, for which ADT Security imposes additional charges.
Pricing for residential customers who require more sophisticated systems depends
upon the monitoring components installed, the type of alarm transmission and the
mix of services provided.
ADT Security entered the mobile security services market in 1996 with the
launch of CarCop-Registered Trademark-, a vehicle security system introduced in
the fourth quarter of 1996 in conjunction with Mobile Security Communications,
Inc. which is responsible for the sale and installation of the CarCop product.
CarCop combines ADT Security's 24 hour monitoring services with cellular
communications technology and the Global Positioning Satellite system to provide
constant security coverage for a vehicle and its occupants whether the vehicle
is parked, unattended or in use. The system can detect a range of emergency
situations and, through utilizing ADT Security's 24 hour monitoring services and
employing satellite tracking technology, the appropriate assistance can be
despatched to the vehicle's exact location at any time, day or night.
ADT Security maintains an installation, service and maintenance force in
North America and Europe. These employees are trained by ADT Security to install
and service the various types of commercial and residential security systems
which are marketed by ADT Security. ADT Security also uses sub-contracted
personnel where appropriate.
ADT Security does not manufacture any of the components used in its
electronic security services business, although it does provide its own
specifications to manufacturers for certain security system components and
undertakes some final assembly work in respect of more sophisticated systems.
ENVIRONMENTAL SERVICES. Tyco's The Earth Technology Corporation ("Earth
Tech") is a provider of a broad range of environmental, consulting and
engineering services. The principal services of Earth Tech consist of
full-spectrum environmental and hazardous waste management services. They also
include infrastructure design and construction services, facilities engineering
and construction management services for institutional, civic, commercial and
industrial clients, and contract operations and management services for water,
waste water and remediation treatment facilities operated by municipal and
industrial clients. Services are provided through a network of 40 offices
located throughout North America.
DISPOSABLE AND SPECIALTY PRODUCTS
Tyco's Disposable and Specialty Products Group consists of Kendall
International ("Kendall"), Ludlow Laminating and Coating, Armin Plastics,
Twitchell, Accurate Forming, Carlisle Plastics, Inc. ("Carlisle") and ADT
Automotive. Kendall manufactures and distributes medical supplies, disposable
medical products and adhesive products and tapes. Ludlow Laminating and Coating
manufactures laminated and coated products. Armin manufactures polyethylene film
and packaging products. Twitchell manufactures extrusion coated polyester yarns
and woven fabrics and Accurate Forming manufactures deep-drawn metal parts.
Carlisle, which was acquired in September 1996, is a leading manufacturer of
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specialty packaging materials and garment hangers. ADT Automotive operates a
network of large modern vehicle auction and reconditioning centers in the United
States.
KENDALL. Kendall conducts its operations through four business units:
Kendall Healthcare, Kendall International, Kendall-Polyken and Ludlow Technical
Products.
The Kendall Healthcare business unit markets a broad range of wound care,
vascular therapy, urological care, incontinence care, anesthetic care and other
products to U.S. and Canadian hospitals and alternate site health care
customers. Kendall Healthcare is the industry leader in gauze production with
its Kerlix-Registered Trademark- and Curity-Registered Trademark- brands.
Kendall Healthcare's other core domestic product category consists of its
vascular therapy products, principally anti-embolism stockings, marketed under
the T.E.D.-Registered Trademark- brand name, sequential pneumatic compression
devices sold under the SCD-TM-brand name and a venous plexus foot pump. Kendall
Healthcare pioneered the pneumatic compression form of treatment and continues
to be the dominant participant in the pneumatic compression and elastic stocking
segments of the vascular therapy market.
Kendall's Healthcare also offers a range of other patient care products,
including incontinent care products, marketing primarily to nursing homes and
other institutional providers of long term care, urological, wound care,
surgical care and respiratory care products, a broad line of disposable medical
supplies including respiratory, urology and nursing care products and airway
management, temperature monitoring and specialty products serving patients in
anesthesia, critical care and emergency medicine.
Kendall International is responsible for the manufacturing, marketing,
distribution and export of Kendall products in numerous countries worldwide.
Kendall International's operations are organized primarily into three geographic
regions: Europe, Latin America and the Far East. Kendall International generally
markets a range of products similar to those of Kendall Healthcare, although the
mix of product lines varies from country to country.
The Kendall-Polyken division manufactures and markets specialty adhesive
products and tapes for industrial applications, including external corrosion
protection tape products for oil, gas and water pipelines. Other industrial
applications include tapes used in the automotive industry for wire harness
wraps, sealing and other purposes, and tapes used in the aerospace and heating,
ventilation and air conditioning (HVAC) industries. Kendall-Polyken also
produces duct, foil, strapping, packaging and electrical tapes and spray
adhesives for industrial and consumer markets worldwide and manufactures
bandages and medical tapes for Kendall's healthcare product units and for
others. Kendall's Betham division develops and markets pressure sensitive
adhesives and coatings, principally for the automotive, medical and specialty
markets.
The Ludlow Technical Products division manufactures and sells a variety of
disposable medical products, specialized paper and film products. These products
include transcutaneous electrical nerve stimulation electrodes and related
products which are used primarily in physical therapy and other forms of
rehabilitation medicine, medical electrodes for EKGs and similar diagnostic
tests, gels which are used with medical electrodes for testing and other
monitoring purposes, hydrogel wound care products, and neonatal electrodes,
diagnostic and monitoring electrodes, electrotherapy electrodes and cable and
lead wires. Ludlow Technical Products also produces adhesive tapes, pressure
sensitive coated papers and films used for business forms and in printing
applications, high quality facsimile paper and recording chart papers for
medical and industrial instrumentation.
LUDLOW LAMINATING AND COATING. Ludlow Laminating and Coating produces
protective packaging and other materials made of coated or laminated
combinations of paper, polyethylene and foil. Coated packaging materials provide
barriers against grease, oil, light, heat, moisture, oxygen and other
contaminants that could damage the contained products. The division produces
structural coated and laminated products such as plastic coated kraft,
linerboard and bleached boards for rigid urethane insulation panels, automotive
components and wallboard panels. Other applications include packaging for
photographic film,
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frozen foods, health care products, electrical and metallic components,
agricultural chemicals, cement and specialty resins.
ARMIN. Armin manufactures polyethylene film and packaging products in a
wide range of size, gauge, construction strength, stretch capacity, clarity and
color. Armin extrudes low density, high density and linear low density
polyethylene film from resin purchased in pellet form, incorporating such
additives as coloring, slip and anti-block chemicals. Armin's products include
plastic supermarket packaging, greenhouse sheeting, shipping covers and liners
and a variety of other packaging configurations for the aerospace, agricultural,
automotive, construction, cosmetics, electronics, food processing, healthcare,
pharmaceutical and shipping industries. Armin also manufactures a number of
other polyethylene products, such as reusable plastic pallets, transformer pads
for electric utilities, and a large variety of disposable gloves for the
cosmetic, medical, foodhandling and pharmaceutical industries.
TWITCHELL. Twitchell manufactures extrusion coated polyester yarns and
woven PVC-coated yarn fabrics and woven and knit paper fabrics. These fabrics
are sold for use principally in outdoor furniture, wall coverings, window
screening, awnings, housewares and other specialty products. Non-woven fabric is
coated and sold for use as disposable medical clothing.
ACCURATE FORMING. Accurate Forming manufactures deep-drawn metal parts,
primarily barrels, caps and clips for pens and pencils and containers, caps and
closures for cosmetics, pharmaceutical packaging and automotive applications.
CARLISLE. Carlisle is a leading producer of industrial and consumer plastic
products. Carlisle's products include trash bags, flexible packaging, sheeting
and garment hangers. Carlisle supplies plastic trash bags to mass merchants,
grocery chains, and institutional customers. Carlisle manufactures
Ruffies-Registered Trademark-, a national brand consumer trash bag, for mass
merchants and other retail stores. Carlisle also provides heavy duty trash can
liners for institutional customers, such as food service distributors,
janitorial supply houses, restaurants, hotels and hospitals.
Film-Gard-Registered Trademark-, Carlisle's leading plastic sheeting
product, is sold to consumers and professional contractors through
do-it-yourself outlets, home improvement centers and hardware stores. A wide
range of Film-Gard products are sold for various uses, including painting,
renovation, construction, landscaping and agriculture. Carlisle's industrial
packaging film is sold for use as shrink wrap and for other packaging
requirements.
Carlisle sells molded plastic garment hangers to garment manufacturers,
national retailers, regional or local retailers, and mass merchants. Garment
manufacturers place their clothes on Carlisle's hangers before shipping to
retail outlets. Carlisle creates, manufactures and sells customized hanger
designs to national retailers. Regional or local retailers buy standard Carlisle
hanger lines for retail clothing displays. Carlisle also supplies mass merchants
with consumer plastic hangers for sale to the general public.
ADT AUTOMOTIVE. ADT Automotive operates a network of large modern auction
centers and provides a comprehensive range of vehicle redistribution services.
Vehicle auctions constitute a principal channel of distribution and
redistribution for used vehicles. An auction brings together dealers seeking to
restock and diversify their inventory of used cars with a high volume of various
makes and models provided by sellers seeking to dispose of their vehicles. The
principal sources of vehicles for sale through auctions are consignments by new
and used vehicle dealers, vehicle manufacturers, corporate owners of vehicles
such as fleet operators, daily rental companies, leasing companies, banks and
other financial institutions, manufacturers' credit subsidiaries and government
agencies.
ADT vehicle auction services collects and transports a seller's vehicles to
an auction center, reconditions the vehicles to retail standards, matches the
vehicles with the auction market most likely to generate the highest amount of
sale proceeds and delivers the vehicles to the buyer. ADT Automotive acts solely
as an agent in auction transactions and does not purchase vehicles for its own
account. However, it does
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repurchase a small number of vehicles under its buyer protection programs, which
require it to repurchase vehicles that have suffered odometer tampering or that
have an undisclosed salvage history. ADT Automotive operates almost exclusively
in the wholesale marketplace, and the public is generally not permitted to
attend its auctions.
ELECTRICAL AND ELECTRONIC COMPONENTS
Tyco's Electrical and Electronic Components group consists of Tyco Submarine
Systems ("TSS"), Allied's electrical conduit division and Tyco's Printed Circuit
Group. TSS manufactures underwater communications cable and cable assemblies and
is a leading full-service provider of undersea communication systems and
services. Allied manufactures and distributes electrical conduit and related
components used in commercial electrical installations. The Printed Circuit
Group manufactures printed circuit boards and assembles backplanes for the
electronics industry.
TYCO SUBMARINE SYSTEMS. TSS is a fully-integrated source for the design,
engineering, manufacturing, installation and maintenance of undersea cable
telecommunication systems. TSS combines the manufacturing capabilities of Tyco's
Simplex Technologies business with the submarine services business acquired by
Tyco from AT&T Corp. in July 1997. TSS designs and builds both repeatered and
non-repeatered cable systems. Repeatered systems, which use optical amplifier
repeater and cable technology and advanced add-drop multiplexing, have capacity
to connect points over 10,000 kilometers apart. Non-repeatered systems, which
allow for greater circuit capacity and reduced transmission costs, are designed
for short-haul systems of several hundred kilometers. Over the past ten years,
TSS has manufactured more than 100,000 kilometers of undersea optical cable.
TSS also operates the world's largest fleet of ships for installing and
maintaining undersea fiber optic transmission systems. These ships lay cable,
perform upgrades and repairs, monitor transmission quality and perform system
tests. TSS also employs a variety of other undersea tools, including robotic
vehicles for undersea burial and retrieval operations.
For more than thirty years, Simplex Technologies has been the primary
supplier of cable and cable assemblies to the U.S. Navy for use in
data-gathering systems. Simplex Technologies also manufactures underwater
electric power cable and optical ground wire for use by power authorities and
utilities, and electro-mechanical cable for unique field operations.
ALLIED ELECTRICAL CONDUIT. Allied's electrical conduit division is one of
the leading producers of steel electrical conduit in the United States.
Electrical conduit is galvanized steel tubing designed to contain
current-carrying electrical wires both inside and outside building structures.
The conduit also serves as an electrical ground that ensures proper operation of
circuit interrupters and provides a channel into which additional wires can be
inserted or removed as electrical needs change. The division manufactures a full
line of electrical conduit as well as metal framing and other products.
PRINTED CIRCUIT GROUP. Tyco's Printed Circuit Group of companies is one of
the largest independent manufacturers of complex multi-layered printed circuit
boards and assemblers of backplanes in the United States. Printed circuit boards
are used in the electronics industry to mount and interconnect components to
create electronic systems. They are categorized by the number of sides or layers
that contain circuitry, which could be single-sided, double-sided or
multi-layer. In general, single and double-sided boards are less advanced.
Multi-layer boards provide greater interconnection density while decreasing the
number of separate printed circuit boards which are required to accommodate
powerful and sophisticated components. Backplanes include printed circuit boards
and are assemblies of connectors and other electronic components which
distribute power and interconnect printed circuit boards, power supplies and
other system elements.
The Group manufactures highly sophisticated double-sided, mass molded boards
of up to eight layers, precision tooled, custom laminated multi-layer boards of
up to 68 layers and sophisticated flex-rigid circuit
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boards for use in environmentally demanding conditions. The majority of the
Group's sales are derived from its high-density multi-layer boards. Tyco's
backplanes facility produces fully assembled units utilizing press-fit or
soldered connection technology, custom pin grid array sockets and surface
mounted assembly. The printed circuit boards and backplanes manufactured by Tyco
are designed by customers and are manufactured on a job order basis to the
customers' specifications. In January 1997, Tyco acquired ElectroStar, Inc., a
leading U.S. manufacturer of complex printed circuit boards used in
sophisticated electronic equipment.
PROPOSED ACQUISITION
On May 12, 1997, Old Tyco entered into a definitive merger agreement for the
acquisition of INBRAND Corporation ("INBRAND") in a stock for stock transaction
valued at approximately $450 million. INBRAND, with annual revenues of
approximately $150 million, is a producer of adult incontinence products,
feminine hygiene products and baby diapers. INBRAND products are sold to the
clinical and retail markets in North America and Europe. The transaction, which
will be accounted for as a pooling of interests, will be structured with INBRAND
shareholders receiving 0.43 of a Tyco Common Share, for each share of INBRAND
common stock outstanding. According to publicly filed documents, as of May 12,
1997, INBRAND had 11,760,123 shares of common stock outstanding. The transaction
is contingent upon customary regulatory review and approval by the INBRAND
shareholders.
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BUSINESS OF KEYSTONE
Keystone designs, manufactures and markets, on a worldwide basis, valves and
other specialized industrial products that control the flow of liquids, gases
and fibrous and slurry materials for use in various industries, including
chemical, power, food and beverage, marine and government, petroleum production
and refining, water, commercial construction, oil and gas pipeline, mining and
metals, and pulp and paper. Keystone, incorporated in Texas in 1947, is one of
the leading manufacturers of flow control products in the world. For additional
information regarding the business of Keystone, refer to Keystone's Anuual
Report on Form 10-K for the year ended December 31, 1996, which is incorporated
herein by reference.
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DESCRIPTION OF SHARE CAPITAL OF TYCO
The summary of the terms of the share capital of Tyco set forth below does
not purport to be complete and is qualified by reference to the Tyco Memorandum
of Association (the "Tyco Memorandum") and the Bye-laws of Tyco (the "Tyco
Bye-Laws"). Copies of the Tyco Memorandum and the Tyco Bye-Laws are incorporated
by reference in this Proxy Statement/Prospectus and will be sent to holders of
Keystone Common Stock upon request. See "Where To Find More Information."
AUTHORIZED SHARE CAPITAL
Tyco's authorized share capital consists of 750,000,000 Tyco Common Shares,
par value $0.20 per share, 125,725,000 convertible cumulative redeemable
preference shares, par value $1 per share, divided into three classes (the
"Convertible Preference Shares") (including a class of first preference shares
(the "First Preference Shares")), and 25,000 exchangeable cumulative redeemable
preference shares, par value $1 per share (the "Exchangeable Preference Shares")
(the Convertible Preference Shares and the Exchangeable Preference Shares,
collectively, the "Preference Shares").
TYCO COMMON SHARES
DIVIDENDS. The Board of Directors of Tyco may declare dividends out of
profits of Tyco available for that purpose as long as there are no reasonable
grounds for believing that Tyco is, or after such dividend would be, unable to
pay its liabilities as they became due or if the realizable value of Tyco's
assets would thereby be less than the aggregate of its liabilities and its
issued share capital and share premium accounts. Subject to such special rights
as may be attached to any other shares in Tyco, all dividends are payable
according to the amounts paid or credited as paid on Tyco Common Shares.
Dividends are normally payable in U.S. dollars, but holders with a registered
address in the United Kingdom and other countries outside the United States may
receive payment in another currency. Any dividend which is unclaimed may be
invested or otherwise made use of by the Board of Directors of Tyco and after a
period of 12 years is forfeited and reverts to Tyco.
VOTING RIGHTS. At any general meeting of Tyco, votes may be given in person
or by proxy and each holder of Tyco Common Shares is entitled, on a show of
hands, to one vote and, on a poll, to one vote for each Tyco Common Share held
by him. Any proxy must be a shareholder of Tyco.
LIQUIDATION. On a liquidation of Tyco, holders of Tyco Common Shares are
entitled to receive any assets remaining after the payment of the Tyco's debts
and the expenses of the liquidation, subject to such special rights as may be
attached to any other class of shares.
SUSPENSION OF RIGHTS. In certain circumstances, the rights of a shareholder
to vote and to receive any payment or income or capital in respect of a Tyco
Common Share may be suspended. Those circumstances include failure to provide
information about ownership of and other interests in Tyco Common Shares, if so
required in accordance with Tyco Bye-Laws. See "Comparison of Shareholder
Rights."
VARIATION OF RIGHTS. If at any time the share capital of Tyco is divided
into different classes of shares, the rights attached to any class (unless
otherwise provided by the terms of the issue of the shares of that class) may be
varied with the consent in writing of the holders of three-fourths of the issued
shares of that class or with the sanction of a resolution passed at a separate
general meeting of the holders of the shares of that class by a majority of
three-fourths of such holders voting in person or by proxy.
TRANSFERS. A Tyco Common Share may be transferred in any manner the Tyco
Board of Directors may approve. The Board of Directors may require the transfer
to be by an instrument signed by the transferor and, in the case of a partly
paid share, also by the transferee. The instrument must be in writing in the
usual common form or in any other form which the Board of Directors may approve
and must be lodged at the office of the registrar of Tyco for registration. The
Tyco Board of Directors may decline to
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register any transfer of shares on which Tyco has a lien, any transfer of shares
not fully paid up to a transferee of whom they do not approve and any transfer
of shares by a transferor or to a transferee on whom Tyco has duly served a
notice under the provisions of the Tyco Bye-Laws described under "-- Suspension
of Rights" above, during a period of suspension of voting rights.
GENERAL. The Tyco Common Shares to be issued pursuant to the Merger will be
duly authorized, validly issued, fully paid and non-assessable. All such shares
will be in registered form.
AS&K Services Limited is Tyco's Registrar. ChaseMellon Shareholder Services,
L.L.C. is the transfer agent for Tyco Common Shares.
TYCO PREFERENCE SHARES
As of the date hereof, no Preference Shares were issued and outstanding.
Under the Tyco Bye-Laws, the Tyco Board of Directors, in its sole discretion,
may designate, allot and issue one or more series of First Preference Shares
from the authorized and unissued First Preference Shares. Subject to limitations
imposed by law, the Tyco Memorandum or the Tyco Bye-Laws, the Board of Directors
is empowered to determine the designation of, and the number of shares
constituting, each series of First Preference Shares, the dividend rate for each
series, the terms and conditions of any voting and conversion rights for each
series, the amounts payable on each series on redemption or return of capital
and the preference and relative rights among each series of First Preference
Shares. At present, 7,500,000 First Preference Shares have been designated as
Series A First Preference Shares and are reserved for issue upon exercise of the
Rights under the Tyco Shareholder Rights Plan. For a description of the Tyco
Shareholder Rights Plan, see "Comparison of Shareholder Rights--Shareholder
Rights Plan."
STOCK EXCHANGE LISTING; DELISTING OF KEYSTONE COMMON STOCK
The Tyco Common Shares are listed on the NYSE, the London Stock Exchange and
the Bermuda Stock Exchange. It is a condition to the Merger that the Tyco Common
Shares issuable in the Merger be approved for listing on the NYSE at or prior to
the Effective Time, subject to official notice of issuance. Application will
also be made to list such shares on the London Stock Exchange and the Bermuda
Stock Exchange. If the Merger is consummated, Keystone Common Stock will cease
to be listed on NYSE.
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COMPARISON OF SHAREHOLDER RIGHTS
The rights of Tyco shareholders are governed by Bermuda law, the Tyco
Memorandum and the Tyco Bye-Laws. The rights of Keystone shareholders are
governed by Texas law, the Keystone Restated Articles of Incorporation (the
"Keystone Articles") and the Keystone Bylaws (the "Keystone Bylaws"). Upon
consummation of the Merger, the rights of Keystone shareholders who become
shareholders of Tyco in the Merger will be governed by Bermuda law, the Tyco
Memorandum and the Tyco Bye-Laws. The following is a summary of the principal
differences between the current rights of Keystone shareholders and those of
Tyco shareholders following the Merger.
The following discussions are not intended to be complete and are qualified
by reference to Bermuda law, Texas law, the Tyco Memorandum, the Tyco Bye-Laws,
the Keystone Articles and the Keystone Bylaws. Copies of the Tyco Memorandum,
the Tyco Bye-Laws, the Keystone Articles and the Keystone Bylaws will be sent to
holders of Keystone Common Stock upon request. See "Where You Can Find More
Information."
QUORUM. The Keystone Bylaws provide that holders of a majority of shares
entitled to vote generally in the election of directors constitutes a quorum.
Pursuant to the Tyco Bye-Laws, the presence, either in person or by proxy, of
two holders of Tyco Common Shares at any general meeting constitutes a quorum.
VOTING RIGHTS. Texas law provides that shareholders entitled to vote shall
have one vote for each share of stock owned by them. Pursuant to the Keystone
Bylaws, when a quorum is present, any matter brought before a shareholder
meeting shall be decided by the vote of a majority of the votes which are
entitled to be cast and are present, either in person or by proxy, at such
meeting, except where a larger vote is otherwise required by law or the Keystone
Articles. Neither Texas law, the Keystone Articles nor the Keystone Bylaws
contain a provision that allows shareholder voting by a show of hands.
Under Bermuda law, questions proposed for consideration at a general meeting
shall be decided on a simple majority of votes or by such majority as the
bye-laws of a company may prescribe except where a larger majority is required
by law. Any question proposed for consideration at a general meeting may be
decided on a show of hands in which each shareholder present in person or by
proxy is entitled to one vote and casts such vote by raising his or her hand
unless, before or on the declaration of the result of a show of hands, a poll is
demanded by (i) the Chairman of the meeting, (ii) at least three shareholders
present in person or represented by proxy, (iii) any shareholder or shareholders
present in person or represented by proxy holding between them 10% of the total
voting rights of all the shareholders entitled to vote at such meeting, or (iv)
a shareholder or shareholders present in person or represented by proxy holding
shares in such company entitled to vote at such meeting and on which an
aggregate sum has been paid up to at least 10% of the total sum paid up on all
such shares entitled to vote. Where a poll has been demanded, every shareholder
present in person or by proxy is entitled to one vote for each share held by
him.
The Tyco Bye-Laws provide that a Tyco shareholder is not entitled (except as
a proxy for another shareholder) to be present or vote at any meeting if such
shareholder has been served, and failed to comply, with a notice under the Tyco
Bye-Laws stating that such shareholder must make an offer in accordance with the
City Code (as defined below), as applied by the Tyco Bylaws (as described
below), or, as the case may be, in accordance with the Tyco Bye-Laws. A
shareholder of Tyco also loses the right to vote for a period of 180 days if
such shareholder acquires three percent or more of the issued share capital of
any class of Tyco shares, either alone or with others, and fails to notify Tyco
of such acquisition within two days or, already possessing three percent or
more, the shareholder fails to notify Tyco of a change in the shareholder's
interests amounting to one percent or more of the share capital of any class and
such shareholder is so notified by the Tyco Board of Directors of such loss of
right. In addition, the Tyco Bye-Laws provide that any person who is known or
believed by Tyco to be interested in Tyco Common Stock and has failed to comply
with a notice from Tyco requesting specified information regarding such person's
interests in shares in Tyco shall lose the right to vote for the period during
which such person fails to comply with the notice plus an additional ninety
days.
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Under cumulative voting, each shareholder casts as many votes for directors
as he has shares of stock multiplied by the number of directors to be elected.
Texas law provides for cumulative voting unless expressly prohibited by the
company's articles of incorporation. The Keystone Articles expressly prohibit
cumulative voting. Bermuda law allows, but does not require, cumulative voting
for the election of directors. Tyco shareholders do not have cumulative voting
rights for the election of directors, either under Bermuda law or under the Tyco
Bye-Laws.
SHAREHOLDER PROPOSALS. Neither Texas law, the Keystone Articles nor the
Keystone Bylaws contain provisions regulating shareholder proposals. Shareholder
proposals, however, are regulated by U.S. federal securities laws and
regulations.
Under Bermuda law, a shareholder wishing to move a resolution at an annual
general meeting of a company must give notice to the company of the resolution
at least six weeks before the meeting. If after notice has been given an annual
general meeting is called for a date less than six weeks after the giving of
that notice, the notice shall be deemed to have been given in time. Only
shareholders who represent not less than one-twentieth of the total voting
rights of members having a right to vote at the meeting or who are one hundred
or more in number may requisition a resolution at an annual general meeting. The
Tyco Bye-Laws provide that other than a director retiring at a general meeting
of shareholders or unless recommended by the Tyco Board of Directors, advance
written notice to the Secretary of Tyco of shareholder nominations of persons
for election to the Tyco Board of Directors is required. To be timely, such
notice must be received by the Secretary of Tyco not less than six and not more
than twenty-eight clear days before the day appointed for the meeting at which
such election is to be held. Such notice must be given by a shareholder (not
being the person to be proposed) entitled to attend and vote at the meeting for
which such notice is given and must also include notice in writing signed by the
person to be proposed of such person's willingness to be elected.
SPECIAL MEETING OF SHAREHOLDERS. Texas law provides that special meetings
of shareholders of a company may be called by a company's president, board of
directors, the person or persons authorized to do so by the articles of
incorporation or bylaws or by the holders of at least 10% (unless a greater or
lesser amount is specified in the company's articles of incorporation or bylaws)
of all the votes entitled to be cast on the proposed issue. The Keystone
Articles provide that a special meeting of shareholders may be called by the
Chairman of the Board, the President or the Board of Directors, or by the
holders of record of 50% of the Keystone shares entitled to vote at the proposed
special meeting.
The Tyco Bye-Laws provide that the directors of Tyco are authorized to call
a special general meeting at any time on not less than five day's notice.
Pursuant to Bermuda law and the Tyco Bye-Laws, the Tyco Board of Directors is
also required, on the written request of Tyco shareholders holding at least 10%
of the paid-up capital of Tyco entitled to vote at a general meeting, to convene
a special general meeting of Tyco. If the directors do not convene a meeting
within twenty-one days from the date of the request, the requesting
shareholders, or any of them representing more than one-half of the total voting
rights of all of them, may themselves convene a meeting, but any meeting so
convened may not be held later than three months from the date of the request.
INSPECTION RIGHTS. Under Texas law, any person who has been a shareholder
for at least six months or who holds at least 5% of the company's shares shall,
upon written demand stating the purpose thereof, have the right to examine, in
person or by agent, accountant or attorney, at any reasonable time or times, for
any proper purpose, the company's books and records of account, minutes and
share transfer records, and to make extracts therefrom.
Under Bermuda law, members of the general public have the right to inspect
the public documents (which include the Memorandum of Association (including its
object and powers) and any amendments thereto and documents relating to any
increase or reduction of authorized capital) of a Bermuda company at the office
of the Registrar of Companies of Bermuda. The shareholders of a Bermuda company
have the
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additional right to receive a copy of the company's bye-laws and its audited
financial statements and the right to inspect minutes of general meetings. The
register of shareholders of a Bermuda company is also open for inspection by
shareholders without charge, and to members of the general public for a minimal
fee. A Bermuda company must also keep at its registered office a register of
directors and officers which is open for inspection by members of the public
without charge. Bermuda law does not provide a general right for shareholders to
inspect or obtain copies of any other corporate records.
DIVIDENDS. Under Texas law, the payment of dividends is generally
permissible unless payment of such dividends would leave the company insolvent
or the distribution would exceed the surplus of the company. Under Bermuda law,
a dividend cannot be declared or paid if there are reasonable grounds for
believing that the company is, or after such payment would be, unable to pay its
liabilities as they become due or if the realizable value of the company's
assets would thereby be less than the aggregate of its liabilities and its
issued share capital and share premium accounts. Under the Tyco Bye-Laws,
dividends may only be paid out of profits available for the purpose, and a
shareholder's right to receive dividends is suspended during such time as he is
disqualified from voting, as described under "Voting Rights."
DERIVATIVE ACTIONS. Under Texas law, a shareholder may institute a
derivative suit in the right of the company if (i) the plaintiff was a record or
beneficial owner of shares at the time of the transaction of which he complains,
or the plaintiff receives such shares by operation of law from a person who was
such an owner at that time, and (ii) the initial pleading in the suit states the
requisite ownership and, with particularity, the efforts of the plaintiff to
have the suit brought for the company by the board of directors, or the reasons
for not making any such efforts. Under Bermuda law, subject to certain limited
exceptions, minority shareholders are not permitted to bring derivative actions
for wrongs done to their company.
BOARD OF DIRECTORS. Texas law provides that the number of directors shall
not be less than one. The Keystone Bylaws provided that the Keystone Board of
Directors shall be not less than nine, and the Keystone Board of Directors
currently consists of nine members. Under the Keystone Bylaws the number of
directors may be increased by vote of a majority of the directors then in
office. The Tyco Bye-Laws provide that the number of directors shall be such
number, not less than two, as the shareholders at a general meeting may from
time to time determine.
CLASSIFICATION OF THE BOARD OF DIRECTORS. Texas law provides that the
directors of a company may be classified into two or three classes, with the
effect that directors are elected and serve for staggered terms. The Keystone
Articles provide for a classified board which is to consist of three classes.
The three classes are to be as nearly equal in size as possible, and each
director is elected for a three year term. The Tyco Board is not classified, and
the Tyco Bye-Laws do not contemplate a classified board. Under Bermuda law, the
election of directors of a company may be regulated by its bye-laws or otherwise
determined by the company in general meeting. The Tyco Bye-Laws do not prescribe
any particular term of office for a director, except one appointed to fill a
casual vacancy.
REMOVAL OF DIRECTORS; VACANCIES ON THE BOARD OF DIRECTORS. Pursuant to the
Keystone Articles, a director, or the entire board of directors, may be removed
from office at any time, with or without cause, only by the affirmative vote of
the holders of at least 70% of all of the Keystone shares entitled to vote
generally in the election of directors, except that if the board of directors,
by an affirmative vote of at least 80% of the entire board of directors,
recommends removal of a director to the shareholders, such removal may be
effected by the affirmative vote of the holders of at least a majority of the
shares entitled to vote generally in the election of directors. Under Texas law,
the Keystone Articles and Keystone Bylaws, vacancies on the board of directors
(other than by an increase in the number of directors) may be filled at any time
by the vote of a majority of the remaining directors. Vacancies created by an
increase in the number of directors may be filled by the board of directors no
more than twice between any two annual shareholder meetings.
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Bermuda law provides that, subject to its bye-laws, the shareholders of a
company may, at a special general meeting called for the purpose, remove a
director, subject to statutory due process requirements. The Tyco Bye-Laws
provide that any director may at any time be removed from office as a director
either by resolution of the Tyco shareholders to that effect or upon a written
resolution signed by all the other directors of Tyco. The remaining Tyco
directors have the power to appoint any qualified person to fill a casual
vacancy in the Tyco Board who shall hold office until the next following annual
general meeting, and the existing directors may act notwithstanding any vacancy
in the board of directors.
LIMITATION OF LIABILITY OF DIRECTORS. Texas law permits a company to
eliminate or limit the personal liability of a director to the company or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except where such limitation is expressly prohibited.
Texas law does not authorize the elimination or limitation of the liability of a
director to the extent the director is found liable for (i) a breach of the
director's duty of loyalty to the company or its shareholders; (ii) an act or
omission not in good faith that constitutes a breach of duty of the director to
the corporation or an act or omission that involves intentional misconduct or a
knowing violation of law; (iii) a transaction from which the director received
an improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; or (iv) an act or omission for which
the liability of a director is expressly provided by an applicable statute. The
Keystone Articles provide for such limitation of liability of directors.
Bermuda law permits a company to exempt a director from liability with
respect to any negligence, default, breach of duty or breach of trust of which a
director may be guilty in relation to the company or any of its subsidiaries
except from any liability resulting from fraud or dishonesty. The Tyco Bye-Laws
provide for such exculpation for directors except in relation to the director's
own willful negligence, willful default, fraud or dishonesty.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS. Texas law permits
indemnification of directors and officers for expenses incurred by them by
reason of their position with the company, if the director or officer has acted
in good faith and, in the case of conduct with respect to his official capacity,
with the reasonable belief that his conduct was in the best interest of the
company, and in all other cases, that such conduct was at least not opposed to
the best interest of the company. The Keystone Bylaws provide for the
indemnification of each director and officer of Keystone against all liabilities
imposed on him and actual expenses reasonably incurred by him in connection with
any claim made against him by reason of his having been a director or officer of
Keystone. No indemnification is permitted for any action in which such director
or officer is found not to have acted in good faith and in the reasonable belief
(i) in the case of a director, that his conduct as a director was in the
corporation's best interests; and (ii) in the case of an officer, that his
conduct as an officer was at least not opposed to the corporation's best
interests. No indemnification is permitted in a criminal proceeding where a
director or officer is found to have had reasonable cause to believe that his
conduct was unlawful. Moreover, no director will be indemnified in any action
where it is found that the director derived improper profit or where such
director is found liable to the corporation.
Bermuda law permits a company to indemnify its officers and employees with
respect to any loss or liability attaching to such persons by virtue of any rule
of law concerning any negligence, default, breach of duty or breach of trust of
which the officer or employee may be guilty in relation to the company or any
subsidiary thereof; provided, however, that the company shall not indemnify an
officer or employee against any liability arising out of any fraud or dishonesty
of which such person may be guilty. The Tyco Bye-Laws provide that every
director, secretary and other officers of Tyco shall be indemnified by Tyco
against all costs, losses and expenses which any such person may be liable for
by reason of any contract entered into, or any act or thing done by such officer
in the discharge of such person's duties, provided that the indemnity contained
in the Tyco Bye-Laws shall not extend to any matter which would render such
indemnification void under applicable Bermuda law.
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INTERESTED DIRECTOR TRANSACTIONS. Texas law provides that a contract or
transaction between a corporation and one of its directors is not void or
voidable solely because the director is present and counted towards establishing
a quorum at the meeting at which the contract or transaction is authorized, so
long as (i) the material facts as to his relationship or interest regarding the
contract or transaction are disclosed or known to the board of directors and the
contract or transaction is authorized in good faith by a majority of the
disinterested directors, (ii) the material facts as to his relationship or
interest regarding the contract or transaction are disclosed or known to the
shareholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by the shareholders, or (iii) the contract
or transaction is fair as to the corporation as of the time it is authorized by
the board of directors or shareholders.
Under the Tyco Bye-Laws, no director is disqualified from contracting with
Tyco and no contract will be avoided by reason of such director holding that
office or of the fiduciary relationship thereby established if the requisite
disclosure by the interested director is made. A director who to his or her
knowledge is in any way, whether directly or indirectly, interested in a
contract or arrangement with Tyco shall declare the nature of that interest at
the meeting of the directors at which the question of entering into the contract
or arrangement is first taken into consideration, if he knows that he is or has
become so interested. Subject to certain exceptions, an interested director
shall not be counted towards a quorum, nor vote, with respect to the board of
directors authorization of such contract. Failure to make a declaration of
interest constitutes a breach of duty of a director under Bermuda law.
AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Under Texas law, the articles of
incorporation may be amended upon a resolution passed by a majority of the board
of directors and the subsequent approval by the holders of at least of
two-thirds of the shares entitled to vote thereon, unless any class of shares is
entitled to vote thereon as a class, in which case the amendment must be
approved by two-thirds of each class voting thereon. Texas law provides that
each class of shares is entitled to vote as a class on certain matters affecting
that class directly, regardless of whether separate class voting is specifically
authorized by the articles of incorporation. The Keystone Articles provide that
the Keystone Bylaws may be amended by the board of directors without action by
the shareholders, but that the shareholders retain the right to alter or repeal
any such Bylaws enacted by the directors.
Bermuda law provides that a company may, with the consent of the Minister of
Finance, by resolution passed at a general meeting of members of which due
notice has been given, alter the provisions of its memorandum of association.
Holders of at least 20% of any class of the company's share capital may apply to
the Bermuda Supreme Court to annul an alteration and, if such application is
made, the alteration shall not have effect except insofar as it is confirmed by
the Court. In addition, under Bermuda law a company may alter the conditions of
its memorandum of association, if so authorized by a general meeting and its
bye-laws, so as to increase its share capital, divide its shares into several
classes, consolidate and divide its share capital into shares of a larger par
value, sub-divide its shares into shares of a smaller par value, change the
currency denomination of its share capital and cancel any shares which have not
been taken or agreed to be taken by any person and diminish the amount of its
share capital by the amount so canceled. The Tyco Bye-Laws include such
authority (except as to changing the currency denomination of its share
capital).
The Tyco Bye-Laws provide that the rights attached to any class of shares
(unless otherwise provided by the terms of such class) may be varied either by
the consent in writing of the holders of three-fourths of the issued shares of
the class or by a resolution passed at a separate meeting of the holders of such
class of shares by the holder of three-fourths of the shares of such class
voting at such separate meeting. The rules of a Tyco general shareholder meeting
shall apply, MUTATIS MUTANDIS, to such separate meeting, except that (i) the
quorum required at such separate meeting shall be three or more persons holding
or representing by proxy not less than one-third of the issued shares of the
class, except that at any adjourned meeting, two holders of the shares of the
class present in person or by proxy (whatever the number of shares held by them)
shall constitute a quorum; (ii) every holder of shares of the class shall be
entitled on a poll to one vote for every share of such class held; and (iii) any
holders of shares of the class present in
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person or by proxy may demand a poll. Pursuant to Bermuda law, holders of at
least 10% of the class of shares may apply to the Bermuda Supreme Court to
cancel a variation otherwise approved by the requisite vote. Upon such
application, the variation shall not have effect unless and until it is
confirmed by the Court.
Pursuant to Bermuda law and the Tyco Bye-Laws, the Tyco Board may amend the
Tyco Bye-Laws, provided that no such amendment will be operative unless and
until it is confirmed by the Tyco shareholders at a general meeting of the Tyco
shareholders.
MERGERS AND OTHER EXTRAORDINARY CORPORATE TRANSACTIONS. Under Texas law, a
merger or share exchange requires the approval of two-thirds of the outstanding
shares otherwise entitled to vote, or two-thirds of the shares within each class
or series entitled to vote as a class and two-thirds of the outstanding shares
otherwise entitled to vote, of each constituent corporation, unless a different
amount (not less than a majority) is specified in the articles of incorporation,
except if the domestic corporation meets the following requirements: (i) the
corporation will be the sole surviving corporation in the merger; (ii) the
articles of incorporation will remain unchanged after the merger; (iii) each
shareholder will hold the same number of shares, with identical designations,
preferences, limitations and relative rights, immediately after the merger; (iv)
the voting power of outstanding voting shares immediately after the merger, plus
the number of participating shares issuable as a result of the merger, will not
exceed by more than 20% the voting power of the total number of voting shares
outstanding immediately before the merger; (v) the number of outstanding
participating shares immediately after the merger, plus the number of
participating shares issuable as a result of the merger, will not exceed by more
than 20% the total number of participating shares outstanding before the merger,
and (vi) the board of directors adopts a resolution approving the plan of
merger. Separate voting by class or series of shares shall be required: (i) for
a plan of merger if the plan contains a provision that if contained in a
proposed amendment to the articles of incorporation would require approval by
that class or series, or that class or series is entitled under the articles of
incorporation to vote as a class thereon, or (ii) for a plan of exchange if
shares of that class or series are to be exchanged pursuant to the terms of the
plan, or that class or series is entitled under the articles of incorporation to
vote as a class thereon. The Keystone Articles do not alter the vote required to
approve a merger or share exchange.
The sale, lease, exchange or other disposition (not including any pledge,
mortgage, deed of trust or trust indenture unless otherwise provided in the
articles of incorporation) of all, or substantially all, the property and
assets, with or without the goodwill, of a Texas corporation, if not made in the
usual and regular course of its business, requires the approval of the holders
of at least two-thirds of the outstanding shares of the corporation entitled to
vote thereon, and the holders of at least two-thirds of the outstanding shares
of each class or series entitled to vote thereon as a class, unless the articles
of incorporation require the vote of a different number (not less than a
majority) of the shares outstanding. Such a transaction is in the usual and
ordinary course of business if the corporation shall, directly or indirectly,
either continue to engage in one or more businesses or apply the consideration
received in connection with the transaction to the conduct of a business in
which it engages following the transaction. The Keystone Articles do not alter
the vote required to approve such a transaction.
Under Texas law, the dissolution of a corporation requires the approval of
the holders of at least two-thirds of the total outstanding shares of the
corporation, and the holders of two-thirds of the outstanding shares of each
class or series entitled to vote thereon as a class, unless a different amount
(not less than a majority) is specified in the articles of incorporation. Each
outstanding share of a Texas corporation is entitled to vote on dissolution. The
Keystone Articles do not alter the vote required to approve the dissolution of
the corporation.
Under Bermuda law, there is no requirement for a company's shareholders to
approve a sale, lease or exchange of any of its property and assets. Under
Bermuda law, a company may enter into a compromise or arrangement in connection
with a scheme for the reconstruction of the company on terms which
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include, among other things, the transfer of all or part of the undertaking or
assets of the company to another company. Any such compromise or arrangement
requires the approvals of a majority in number representing three-fourths in
value of each class of shareholders of the company and the sanction of the
Bermuda Supreme Court.
Pursuant to Bermuda law, unless the company's bye-laws provide otherwise, an
amalgamation requires the approval of the holders of at least three-fourths of
those voting at a meeting of shareholders at which a requisite quorum is
present. For purposes of approval of an amalgamation, all shares, whether or not
otherwise entitled to vote, carry the right to vote. A separate vote of a class
of shares is required if the rights of such class would be altered by virtue of
the amalgamation.
Under Bermuda law, unless its memorandum of association provides otherwise,
a company may be wound up voluntarily with the approval of its shareholders in
general meeting by a simple majority of votes. The Tyco Memorandum does not
contain any such provision.
PROVISIONS CONCERNING CERTAIN BUSINESS COMBINATIONS. The Keystone Articles
provide that any "business combination" (as defined therein) between the
corporation and a "control person" (as defined therein) must be approved by the
affirmative vote of two-thirds of the shares entitled to vote thereon, excluding
the shares held by such control person.
Pursuant to Tyco Bye-Law 104(1)(A), if any person, whether as a result of
one transaction or a series of transactions, would be obligated to make an offer
to the Tyco security holders pursuant to the Rules of City Code on Take-overs
and Mergers of the United Kingdom of Great Britain and Northern Ireland (the
"City Code"), the Tyco Board may require such person to make such an offer as if
the City Code applied to Tyco. The City Code provides that when any person (and
persons acting in concert with such person) acquires shares which carry 30% or
more of the voting rights of a company, such person must make an offer for all
shares of any class of equity share capital (whether voting or non-voting) and
also any voting non-equity share capital in which any such person or persons
hold shares. The offer must be in cash or offer a cash alternative, in each case
at not less than the highest price paid (in cash or otherwise) for shares of the
same class by the offeror, or anyone acting in concert with the offeror, during
the offer period and within the 12 months prior to commencement of the offer.
Bye-Law 104(3) further provides that where any person is interested, whether
as a result of a series of transactions over a period of time or not, in 30% or
more of the outstanding shares, the Tyco Board of Directors may serve a notice
requiring that person to make an offer for all of the outstanding securities of
Tyco if the Tyco Board of Directors determines that an offer pursuant to Bye-Law
104(1)(A) of the Tyco Bye-Laws is not expedient or if a person required to make
such an offer fails to do so. Such offer must be made within 30 days of the
demand on terms that payment in full therefor will be made within 21 days of
such offer becoming unconditional in all respects. If the Tyco Board of
Directors serves a notice under this provision, the Tyco Board of Directors may
also require that the offeror offer to purchase securities of Tyco convertible
into voting or non-voting shares of Tyco on terms considered "fair and
reasonable" by the Tyco Board of Directors in its sole discretion. Unless the
Tyco Board of Directors otherwise agrees, such an offer must be for cash or must
offer a cash alternative at not less than the highest price paid by the offeror
or any person acting in concert with it for shares of such class within the
preceding 12 months or, if unavailable or inappropriate, at a price fixed by the
directors. Any such offer must remain open for at least 14 days after the date
on which it becomes unconditional as to acceptances.
Bye-Law 104(1)(B) provides that when any person has acquired, is in the
process of acquiring, or appears to the Tyco Board of Directors likely to
acquire an interest in the capital stock of Tyco in circumstances in which such
person would be subject to the Rules Governing Substantial Acquisitions of
Shares ("SARs"), the Tyco Board of Directors may give notice requiring such
person to comply with the SARs, and if such person fails to comply, give further
notice requiring such person to dispose or to procure the disposal by any person
with whom such person has acted in concert of any interest in shares acquired
within 28 days of the date of such notice. The SARs provide that a person may
not, in any period of seven
68
<PAGE>
days, acquire shares representing 10% or more of the voting rights in a company
if such shares, aggregated with shares already held by the purchaser, would
carry 15% or more but less than 30% of the voting rights of such company. The
SARs do not apply to an acquisition from a single shareholder if such
acquisition is the only acquisition within a seven-day period. The SARs also do
not apply to a person who acquires 30% or more of the voting rights in a
company.
Under the Tyco Bye-Laws, any person who acquires an interest in three per
cent or more of the issued share capital of any class of Tyco is required to
notify the company of that interest and, on any change in that person's interest
amounting to one percent or more of the issued capital of any class, of such
change. Any such notification must be made within two days (Saturdays and
Sundays excluded) after the relevant event. In determining the percentage
interest of any person for these purposes, interests of persons acting in
concert for the purposes of Bylaw 104 may be aggregated. Neither Texas law nor
the Keystone Bylaws include any corresponding requirement.
REQUIRED PURCHASE AND SALE OF SHARES. Pursuant to Bermuda law, where the
transfer of shares or any class of shares in a company (the "transferor
company") to another company (the "transferee company") has, within four months
after the making of the offer, been approved by the holders of not less than 90%
in value of the shares or class of shares for which the offer was made, subject
to the satisfaction of certain conditions, the transferee company may, within
two months after the expiration of the four month period, give notice to any
dissenting shareholder that it desires to acquire his or her shares, and then
such transferee company shall be entitled and bound to acquire such shares on
the terms on which shareholders that approved such scheme or contract
transferred their shares, unless the Bermuda Supreme Court orders otherwise upon
application by the dissenting shareholder. "Dissenting shareholder" includes a
shareholder that has not assented to a scheme or contract and any shareholder
that has failed or refused to transfer shares to the transferee company.
Within one month of the transfer of 90% in value of the transferor company's
shares or class of shares to the transferee company, or to its nominee or
subsidiary, the transferee company shall notify the holders of the remaining
shares of such transfer. Within three months of the giving of notice, any such
remaining holder of shares may require the transferee company to acquire his
shares, and the transferee company shall be required to acquire such shares on
the same terms as provided for in the scheme or contract or upon such terms as
may be agreed or upon such terms as the Bermuda Supreme Court may determine upon
application of the transferee company or the shareholder. Neither Texas law nor
the Keystone Articles or the Keystone Bylaws contain similar provisions.
SHORT FORM MERGER. Under Texas law, where 90% of the outstanding shares of
each class of stock of a company is owned by another company, the parent company
may merge such other company into itself by vote of the parent company's
directors only. In certain circumstances, appraisal rights might be available to
shareholders of the merged company.
Bermuda law provides for short form mergers between companies and their
wholly-owned subsidiaries. Under Bermuda law, a holder or holders of not less
than 95% of the shares of any class of shares in a Bermuda company may give
notice to the remaining shareholders or class of shareholders of the intention
to acquire their shares on the terms set out in the notice. Bermuda law provides
that when such notice is given, the acquiring holder or holders shall be
entitled and bound to acquire the shares of the remaining shareholders on the
terms set out in the notice unless the remaining shareholders exercise statutory
appraisal rights. Bermuda law additionally provides a right of appraisal in
respect of the situation in which a holder of not less than 95% of the shares of
any class of shares in the company proposes to acquire the remaining shares.
APPRAISAL RIGHTS. Texas law grants shareholders the right to dissent and
receive payment of the fair value of their shares in the event of: (i) any
merger which requires shareholder approval under Texas law, (ii) any sale,
lease, exchange or other disposition of all or substantially all of the
company's assets requiring
69
<PAGE>
shareholder approval under Texas law; or (iii) any plan of exchange in which the
shareholder's shares are to be acquired.
Under Texas law, a shareholder shall not have appraisal rights with respect
to any plan of merger in which there is a single surviving or new corporation,
or with respect to any plan of exchange, if (i) the shares held by the
shareholder are part of a class of shares listed on a national securities
exchange or held of record by not less than 2,000 holders, on the record date,
and (ii) the shareholder is not required by the terms of the plan of merger or
plan of exchange to accept any consideration other than (A) shares of a
corporation that, immediately after the effective time of the merger or
exchange, will be part of a class of shares which are listed on a national
securities exchange, or held of record by not less than 2,000 holders, and (B)
cash in lieu of fractional shares otherwise entitled to be received.
Under Bermuda law, a properly dissenting shareholder who did not vote in
favor of an amalgamation and who is not satisfied that he has been offered the
fair value of his shares is entitled to receive the appraised value of his
shares.
SHAREHOLDER RIGHTS PLAN. In 1990, Keystone adopted the Keystone Rights
Agreement, and declared a dividend of one preferred stock purchase right
("Right" or "Rights") for each share of Keystone Common Stock outstanding as of
the close of business on July 2, 1990. The Keystone Rights Agreement provides
that unless certain actions are taken by the Keystone Board of Directors,
following the Distribution Date (as defined therein), the Rights will become
exercisable into Keystone depository preferred shares having a market value
equal to two times the exercise price. The Rights associated with the common
stock owned by the hostile third party are null and void. Additionally, the
Keystone Board of Directors has the option to exchange the Rights for preferred
shares on a one to one ratio, which terminates if a third person acquires 50% of
Keystone's stock. On May 20, 1997, the Keystone Board of Directors approved an
amendment to the Keystone Rights Agreement to provide that Rights granted
thereunder would not be triggered in connection with the Merger.
In 1996, Tyco adopted a Shareholders Rights Plan (the "Tyco Shareholder
Rights Plan"). The Tyco Shareholders Rights Plan provides that unless certain
actions are taken by the Tyco Board of Directors, upon the Distribution Date (as
defined therein) each right other than those rights owned by an Acquiring Person
(as defined therein) will become exercisable. Each right entitles its holder,
among other things, to purchase Tyco Common Shares from Tyco at a 50% discount
from the market price of Tyco Common Shares on the Distribution Date.
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OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement/Prospectus will be brought before the Special Meeting. If any other
matters are presented, however, it is the intention of the persons named in the
Keystone proxy to vote the proxy in accordance with the discretion of the
persons named in such proxy.
LEGAL MATTERS
The validity of the Tyco Common Shares to be issued to Keystone shareholders
pursuant to the Merger will be passed upon by Appleby, Spurling & Kempe,
Hamilton, Bermuda, special counsel to Tyco. Certain other legal matters in
connection with the Merger will be passed upon for Tyco by Kramer, Levin,
Naftalis & Frankel, New York, New York, and by Appleby, Spurling & Kempe. Joshua
M. Berman, a director and vice president of Tyco, is counsel to Kramer, Levin,
Naftalis & Frankel and owns 36,000 Tyco Common Shares. Certain legal matters in
connection with the Merger will be passed upon for Keystone by Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., Houston, Texas.
EXPERTS
The supplemental consolidated financial statements of Tyco as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996 included in Tyco's Current Report on Form 8-K and incorporated by
reference in this Proxy Statement/Prospectus give retroactive effect to the
merger between ADT Limited and Tyco International Ltd. (now Tyco International
(US) Inc.) and have been examined by Coopers & Lybrand. The consolidated
financial statements of ADT Limited as of December 31, 1996 and 1995 and for
each of the three years in the period ended December 31, 1996 (not separately
presented, but incorporated herein) have been audited by Coopers & Lybrand. The
consolidated financial statements of Tyco International Ltd (now Tyco
International (US) Inc.) as of December 31, 1996 and June 30, 1995 and for the
years ended December 31, 1996, June 30, 1995 and June 30, 1994 (not separately
presented or incorporated herein) have been audited by Coopers & Lybrand L.L.P.
Such reports are incorporated by reference herein in reliance on the authority
of said firms as experts in accounting and auditing.
The audited consolidated financial statements of Keystone incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in this registration
statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
WHERE TO FIND MORE INFORMATION
Tyco and Keystone file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or other information filed by Tyco and Keystone at the
Commission's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The Commission's filings of Tyco and
Keystone are also available to the public from commercial document retrieval
services and at the web site maintained by the Commission at "http://
www.sec.gov."
Tyco filed a Registration Statement on Form S-4 to register with the
Commission the Tyco Common Shares to be issued to Keystone shareholders in the
Merger. This Proxy Statement/Prospectus is a part of that Registration Statement
and constitutes a prospectus of Tyco in addition to being a proxy statement of
Keystone. As allowed by Commission rules, this Proxy Statement/Prospectus does
not contain all the information you can find in the Registration Statement or
the exhibits to the Registration Statement.
The Commission allows Tyco and Keystone to "incorporate by reference"
information into this Proxy Statement/Prospectus, which means that they can
disclose important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
71
<PAGE>
deemed to be part of this Proxy Statement/Prospectus, except for any information
superseded by information in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that Tyco and Keystone have previously filed with the Commission. These
documents contain important information about Tyco and Keystone and their
finances.
<TABLE>
<CAPTION>
TYCO COMMISSION FILINGS (FILE NO. 0-16979) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year Ended December 31, 1996
Quarterly Report on Form 10-Q Quarter ended March 31, 1997
Current Reports on Form 8-K Filed on March 25, 1997 and July 10, 1997
</TABLE>
<TABLE>
<CAPTION>
OLD TYCO COMMISSION FILINGS (FILE NO. 1-5482) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended June 30, 1996
Quarterly Reports on Form 10-Q Quarters ended September 30, 1996, December 31, 1996 and
March 31, 1997
Current Reports on Form 8-K Filed on October 29, 1996, March 4, 1997, March 25, 1997
and March 28, 1997
</TABLE>
<TABLE>
<CAPTION>
KEYSTONE COMMISSION FILINGS (FILE NO. 0-22144) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year Ended December 31, 1996
Quarterly Report on Form 10-Q Period Ended March 28, 1997
Current Report on Form 8-K Filed on May 27, 1997
</TABLE>
Tyco and Keystone are also incorporating by reference additional documents
that they file with the Commission between the date of this Proxy
Statement/Prospectus and the date of the Special Meeting.
Tyco has supplied all information contained or incorporated by reference in
this Proxy Statement/ Prospectus relating to Tyco, and Keystone has supplied all
such information relating to Keystone.
If you are a shareholder, Tyco and Keystone may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
Tyco, Keystone or the Commission. Documents incorporated by reference are
available from Tyco and Keystone without charge. Exhibits to the documents will
not be sent, however, unless those exhibits have specifically been incorporated
by reference as exhibits in this Proxy Statement/Prospectus. Shareholders may
obtain documents incorporated by reference in this Proxy Statement/Prospectus by
requesting them in writing or by telephone from the appropriate party at the
following address:
<TABLE>
<S> <C>
Tyco International Ltd. Keystone International, Inc.
Cedar House 9600 West Gulf Bank Road
41 Cedar Avenue Houston, Texas 77040
Hamilton HM12, Bermuda USA
(441) 292-2033 (713) 466-1176
</TABLE>
If you would like to request documents from Tyco or Keystone, please do so
by , 1997 to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. NEITHER TYCO
NOR KEYSTONE HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED , 1997. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF TYCO COMMON SHARES IN
THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE NO.
- -------------------------------------------- -----------
<S> <C>
5% Shareholder..............................
Acquisition Proposals.......................
ADT.........................................
ADT Automotive..............................
ADT Security................................
ADT Merger..................................
Antitrust Division..........................
Articles of Merger..........................
Average Stock Price.........................
Carlisle....................................
Certificate of Merger.......................
Closing Price...............................
Code........................................
Convertible Preference Shares...............
Daily Per Share Price.......................
Earth Tech..................................
EBIT........................................
EBITDA......................................
Effective Time..............................
Engagement Letter...........................
EPS.........................................
Exchange Act................................
Exchange Ratio..............................
Exchange Agent..............................
Exchangeable Preference Shares..............
Fee.........................................
First Preference Shares.....................
FTC.........................................
Goldman Sachs...............................
Grinnell....................................
HSR Act.....................................
IBES........................................
INBRAND.....................................
IRS.........................................
July Average Stock Price..................
Kendall.....................................
Keystone Terminating Change.................
Keystone....................................
Keystone Rights Agreement...................
Keystone Bylaws.............................
Keystone Common Stock.......................
<CAPTION>
DEFINED TERM PAGE NO.
- -------------------------------------------- -----------
<S> <C>
Keystone Stock Option Plans.................
LTM.........................................
Management Case.............................
Material Advance Effect.....................
Merger Consideration........................
Merger Sub..................................
Merger......................................
Merger Agreement............................
NYSE........................................
No Synergies Case...........................
Old Tyco....................................
Old Tyco Common Stock.......................
Preference Shares...........................
Record Date.................................
Securities Act..............................
Selected Companies..........................
Sensitivity Analyses........................
SFAS 21.....................................
Special Meeting.............................
Stock Option................................
Surviving Corporation.......................
T6..........................................
TBCA........................................
Terminating Change..........................
Terminating Breach..........................
Terminating Misrepresentation...............
Thorn.......................................
TIN.........................................
Transaction Fee.............................
TSS.........................................
Tyco........................................
Tyco Selected Companies.....................
Tyco Stock..................................
Tyco Shareholder Rights Plan................
Tyco Bye-Laws...............................
Tyco Terminating Change.....................
Tyco Memorandum.............................
Tyco Common Shares..........................
U.S. GAAP...................................
United States Holder........................
Wormald.....................................
</TABLE>
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TYCO INTERNATIONAL LTD.,
T6 ACQUISITION CORP.
AND
KEYSTONE INTERNATIONAL, INC.
DATED AS OF MAY 20, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<S> <C> <C>
SECTION 1.01. The Merger........................................................... A-2
SECTION 1.02. Effective Time....................................................... A-2
SECTION 1.03. Effect of the Merger................................................. A-2
SECTION 1.04. Articles of Incorporation; By-Laws................................... A-2
SECTION 1.05. Directors and Officers............................................... A-2
SECTION 1.06. Effect on Capital Stock.............................................. A-3
SECTION 1.07. Exchange of Certificates............................................. A-4
SECTION 1.08. Stock Transfer Books................................................. A-6
SECTION 1.09. No Further Ownership Rights in Company Common Stock.................. A-6
SECTION 1.10. Lost, Stolen or Destroyed Certificates............................... A-6
SECTION 1.11. Tax and Accounting Consequences...................................... A-6
SECTION 1.12. Taking of Necessary Action; Further Action........................... A-6
SECTION 1.13. Material Adverse Effect.............................................. A-6
SECTION 1.14 Termination of the ADT Merger........................................ A-6
</TABLE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<S> <C> <C>
SECTION 2.01. Organization and Qualification; Subsidiaries.......................... A-7
SECTION 2.02. Articles of Incorporation and By-Laws................................. A-7
SECTION 2.03. Capitalization........................................................ A-7
SECTION 2.04. Authority Relative to this Agreement.................................. A-8
SECTION 2.05. No Conflict; Required Filings and Consents............................ A-8
SECTION 2.06. Compliance; Permits................................................... A-9
SECTION 2.07. SEC Filings; Financial Statements..................................... A-9
SECTION 2.08. Absence of Certain Changes or Events.................................. A-10
SECTION 2.09. No Undisclosed Liabilities............................................ A-10
SECTION 2.10. Absence of Litigation................................................. A-10
SECTION 2.11. Employee Benefit Plans; Employment Agreements......................... A-10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 2.12. Labor Matters......................................................... A-13
SECTION 2.13. Registration Statement; Proxy Statement/Prospectus.................... A-13
SECTION 2.14. Restrictions on Business Activities................................... A-14
SECTION 2.15. Title to Property..................................................... A-14
SECTION 2.16. Taxes................................................................. A-14
SECTION 2.17. Environmental Matters................................................. A-15
SECTION 2.18. Brokers............................................................... A-16
SECTION 2.19. Intellectual Property................................................. A-16
SECTION 2.20. Interested Party Transactions......................................... A-17
SECTION 2.21. Insurance............................................................. A-17
SECTION 2.22. Product Liability and Recalls......................................... A-17
SECTION 2.23. Opinion of Financial Advisor.......................................... A-17
SECTION 2.24. Pooling Matters....................................................... A-17
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
<TABLE>
<S> <C> <C>
SECTION 3.01. Organization and Qualification; Subsidiaries.......................... A-17
SECTION 3.02. Articles of Organization and By-Laws.................................. A-18
SECTION 3.03. Capitalization........................................................ A-18
SECTION 3.04. Authority Relative to this Agreement.................................. A-19
SECTION 3.05. No Conflict; Required Filings and Consents............................ A-19
SECTION 3.06. Compliance; Permits................................................... A-20
SECTION 3.07. SEC Filings; Financial Statements..................................... A-20
SECTION 3.08. Absence of Certain Changes or Events.................................. A-21
SECTION 3.09. No Undisclosed Liabilities............................................ A-21
SECTION 3.10. Absence of Litigation................................................. A-21
SECTION 3.11. Employee Benefit Plans; Employment Agreements......................... A-21
SECTION 3.12. Labor Matters......................................................... A-24
SECTION 3.13. Registration Statement; Proxy Statement/Prospectus.................... A-24
SECTION 3.14. Restrictions on Business Activities................................... A-24
SECTION 3.15. Title to Property..................................................... A-24
SECTION 3.16. Taxes................................................................. A-25
SECTION 3.17. Environmental Matters................................................. A-26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.18. Brokers............................................................... A-26
SECTION 3.19. Intellectual Property................................................. A-26
SECTION 3.20. Interested Party Transactions......................................... A-27
SECTION 3.21. Insurance............................................................. A-27
SECTION 3.22. Product Liability and Recalls......................................... A-27
SECTION 3.23. Ownership of Merger Sub; No Prior Activities.......................... A-27
SECTION 3.24. Pooling Matters....................................................... A-27
</TABLE>
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
<TABLE>
<S> <C> <C>
SECTION 4.01. Conduct of Business by the Company Pending the Merger................. A-28
SECTION 4.02. No Solicitation....................................................... A-29
SECTION 4.03. Conduct of Business by Parent Pending the Merger...................... A-30
</TABLE>
ARTICLE V
ADDITIONAL AGREEMENTS
<TABLE>
<S> <C> <C>
SECTION 5.01. Proxy Statement/Prospectus; Registration Statement.................... A-31
SECTION 5.02. Company Shareholders Meeting.......................................... A-31
SECTION 5.03. Access to Information; Confidentiality................................ A-31
SECTION 5.04. Consents; Approvals................................................... A-31
SECTION 5.05. Agreements with Respect to Affiliates................................. A-32
SECTION 5.06. Indemnification and Insurance......................................... A-32
SECTION 5.07. Notification of Certain Matters....................................... A-33
SECTION 5.08. Further Action/Tax Treatment.......................................... A-33
SECTION 5.09. Public Announcements.................................................. A-33
SECTION 5.10. Listing of Parent Shares.............................................. A-34
SECTION 5.11. Conveyance Taxes...................................................... A-34
SECTION 5.12. Accountant's Letters.................................................. A-34
SECTION 5.13. Pooling Accounting Treatment.......................................... A-34
SECTION 5.14. Rights Agreement...................................................... A-34
</TABLE>
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<PAGE>
ARTICLE VI
CONDITIONS TO THE MERGER
<TABLE>
<S> <C> <C>
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger........... A-34
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger Sub......... A-35
SECTION 6.03. Additional Conditions to Obligation of the Company.................... A-36
</TABLE>
ARTICLE VII
TERMINATION
<TABLE>
<S> <C> <C>
SECTION 7.01. Termination........................................................... A-37
SECTION 7.02. Effect of Termination................................................. A-38
SECTION 7.03. Fees and Expenses..................................................... A-39
</TABLE>
ARTICLE VIII
GENERAL PROVISIONS
<TABLE>
<S> <C> <C>
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements........... A-39
SECTION 8.02. Notices............................................................... A-40
SECTION 8.03. Certain Definitions................................................... A-40
SECTION 8.04. Amendment............................................................. A-41
SECTION 8.05. Waiver................................................................ A-41
SECTION 8.06. Headings.............................................................. A-41
SECTION 8.07. Severability.......................................................... A-41
SECTION 8.08. Entire Agreement...................................................... A-42
SECTION 8.09. Assignment; Merger Sub................................................ A-42
SECTION 8.10. Parties in Interest................................................... A-42
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative................. A-42
SECTION 8.12. Governing Law; Jurisdiction........................................... A-42
SECTION 8.13. Counterparts.......................................................... A-42
SECTION 8.14. WAIVER OF JURY TRIAL.................................................. A-42
</TABLE>
iv
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 20, 1997 (this "Agreement"),
among TYCO INTERNATIONAL LTD., a Massachusetts corporation ("Parent"), T6
ACQUISITION CORP., a Texas corporation and a direct, wholly-owned subsidiary of
Parent ("Merger Sub"), and KEYSTONE INTERNATIONAL, INC., a Texas corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective shareholders for Parent to cause Merger Sub to merge with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "Merger")
of Merger Sub with and into the Company in accordance with the applicable
provisions of the Texas Business Corporation Act (the "TBCA"), and upon the
terms and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder;
WHEREAS, Parent, Merger Sub and the Company intend that the Merger be
accounted for as a pooling-of-interests for financial reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of the
Company's Common Stock, par value $1.00 per share (the "Company Common Stock"),
shall be converted into the right to receive the Merger Consideration (as
defined in Section 1.07(b)), upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. (a) EFFECTIVE TIME. At the Effective Time (as
defined in Section 1.02 hereof), and subject to and upon the terms and
conditions of this Agreement and the TBCA, Merger Sub shall be merged with and
into the Company, the separate corporate existence of Merger Sub shall cease,
and the Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
(b) CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the consummation of the Merger will take place as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VI, at the offices of Kramer,
Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York, unless another
date, time or place is agreed to in writing by the parties hereto.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing articles of merger as
contemplated by the TBCA (the "Articles of Merger"), together with any required
related certificates, with the Secretary of State of the State of Texas, in such
form as required by, and executed in accordance with the relevant provisions of,
the TBCA (the time of such filing being the "Effective Time").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the TBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION; BY-LAWS. (a) ARTICLES OF
INCORPORATION. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Articles of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the TBCA and such Articles of Incorporation; PROVIDED, HOWEVER, that (i)
Article Four shall be amended and restated in its entirety to provide that the
capital stock of the Surviving Corporation shall consist of 100 shares of Common
Stock, par value $.01 per share; and (ii) Article Seven shall be amended and
restated in its entirety to provided that the Surviving Corporation's Board
shall consist of not less than three members, all of a single class, with the
exact number to be fixed from time to time by resolution of the Board of
Directors.
(b) BY-LAWS. The By-Laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by the TBCA, the Articles of Incorporation of the
Surviving Corporation and such By-Laws; PROVIDED, HOWEVER, that Article II,
Section 1 shall be amended and restated in its entirety to provide that the
Surviving Corporation's Board shall consist of not less than three members, all
of a single class, with the exact number to be fixed from time to time by
resolution of the Board of Directors.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
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SECTION 1.06. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) CONVERSION OF SECURITIES. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.06(b)) shall be converted, subject to Section 1.06(f), into the right
to receive validly issued, fully paid and nonassessable shares of New Tyco
Common Stock in the ratio (the "Exchange Ratio") of 0.54183 a share of New Tyco
Common Stock for each such issued and outstanding Share; PROVIDED, HOWEVER, that
(i) in the event the Average Stock Price (as hereinafter defined) is greater
than $68.29, the Exchange Ratio shall be equal to $37.00 divided by the Average
Stock Price; (ii) subject to clauses (iii) and (iv) below, in the event the
Average Stock Price is less than $57.21, the Exchange Ratio shall be equal to
$31.00 divided by the Average Stock Price, but in no event greater than 0.57327;
(iii) in the event Parent delivers its notice specified in clause (y) of Section
7.01(k), the Exchange Ratio shall be equal to $31.00 (or such higher number as
specified in Parent's notice) divided by the Average Stock Price; and (iv) in
the event the Company delivers its notice specified in clause (y) of Section
7.01(l), the Exchange Ratio shall be equal to 0.54183.
Capitalized terms used in this section have the following meanings:
"Average Stock Price" means the average of the Daily Per Share Prices
for the ten (10) consecutive trading days ending on the fifth trading day
prior to the Company Shareholders Meeting (as defined in Section 2.13).
"Daily Per Share Price" for any trading day means the weighted average
of the per share selling prices on the New York Stock Exchange, Inc. (the
"NYSE") of New Tyco Common Stock (as reported in the NYSE Composite
Transactions) for that day.
"New Tyco Common Stock" means the common shares of ADT Limited, a
Bermuda corporation ("ADT"), par value $.20 per share, outstanding following
the merger (the "ADT Merger") of Limited Apache, Inc. ("Apache"), a
Massachusetts corporation and a wholly-owned subsidiary of ADT, with and
into Parent, pursuant to the terms of a Merger Agreement, dated March 17,
1997, among ADT, Apache and Parent (the "ADT Merger Agreement"). The ADT
Merger Agreement provides, among other things, that (i) Apache will be
merged with Parent, with Parent being the surviving company in such merger,
(ii) each share of common stock of Parent, par value $.50 per share ("Parent
Common Stock"), will be exchanged in the ADT Merger for one share of New
Tyco Common Stock; (iii) each common share of ADT, par value $.20 per share,
outstanding prior to the ADT Merger, as a result of a reverse stock split to
occur immediately prior to the ADT Merger, will be exchanged for 0.48133
shares of New Tyco Common Stock, and (iv) the name of ADT will changed to
Tyco International Ltd. (ADT, following consummation of the ADT Merger,
being referred to as "New Tyco").
(b) CANCELLATION. Each Share held in the treasury of the Company and each
Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) ASSUMPTION OF OUTSTANDING STOCK OPTIONS. Each option outstanding at the
Effective Time to purchase shares of Company Common Stock (a "Stock Option")
granted under (i) the Keystone International, Inc. 1985 Incentive Plan, as
amended, and the 1994 Directors' Stock Option Plan (the "Company Stock Option
Plans"), or (ii) any other stock plan or agreement of the Company, which by its
terms is not extinguished in the Merger, shall be deemed assumed by Parent and
deemed to constitute an option to acquire, on the same terms and conditions
MUTATIS MUTANDIS as were applicable under such Stock Option prior to the
Effective Time, the number of shares of New Tyco Common Stock as the holder of
such Stock Option would have been entitled to receive pursuant to the Merger had
such holder exercised such option
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in full immediately prior to the Effective Time (not taking into account whether
or not such option was in fact exercisable), at a price per share equal to (x)
the aggregate exercise price for Company Common Stock otherwise purchasable
pursuant to such Stock Option divided by (y) the number of shares of New Tyco
Common Stock deemed purchasable pursuant to such Stock Option; PROVIDED,
HOWEVER, that the number of shares of New Tyco Common Stock that may be
purchased upon exercise of any such Stock Option shall not include any
fractional share and, upon exercise of the Stock Option, a cash payment shall be
made for any fractional share based upon the Closing Price (as hereinafter
defined) of a share of New Tyco Common Stock on the trading day immediately
preceding the date of exercise. "Closing Price" shall mean, on any day, the last
reported sale price of one share of New Tyco Common Stock on the New York Stock
Exchange ("NYSE").
As soon as practicable after the Effective Time, Parent shall cause to be
delivered to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and such Stock Option shall
continue in effect on the same terms and conditions.
Parent shall cause to be taken all corporate action necessary to reserve for
issuance a sufficient number of shares of New Tyco Common Stock for delivery
upon exercise of Stock Options in accordance with this Section 1.06(c). As soon
as practicable after the Effective Time, Parent shall cause the New Tyco Common
Stock subject to the Stock Options to be registered under the Securities Act of
1933, as amended and the SEC's rules thereunder (the "Securities Act") pursuant
to a registration statement on Form S-8, as the case may be (or any successor or
other appropriate forms), and shall use its best efforts to cause the
effectiveness of such registration statement or registration statements (and the
current status of the prospectus or prospectuses contained therein) to be
maintained for so long as the Stock Options remain outstanding.
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, $.01 par value,
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the Surviving
Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be appropriately
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock occurring after the date hereof and prior to the
consummation of the ADT Merger and any such change with respect to the New Tyco
Common Stock occurring after the consummation of the ADT Merger and prior to the
Effective Time.
(f) FRACTIONAL SHARES. No certificates or scrip representing less than one
Parent Share shall be issued upon the surrender for exchange of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"). In lieu of any such fractional share,
each holder of Shares who would otherwise have been entitled to a fraction of a
share of New Tyco Common Stock upon surrender of Certificates for exchange shall
be paid upon such surrender cash (without interest) in an amount equal to such
fraction multiplied by the Closing Price of New Tyco Common Stock on the date of
the Effective Time.
SECTION 1.07. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. Parent shall
cause to be supplied, to or for such bank or trust company as shall be mutually
designated by the Company and Parent (the "Exchange Agent"), in trust for the
benefit of the holders of Company Common Stock, for exchange in accordance with
this Section 1.07, through the Exchange Agent, certificates evidencing the
shares of New Tyco Common Stock issuable pursuant to Section 1.06 in exchange
for outstanding Shares and the cash to be paid in lieu of fractional shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of Certificates (i) a letter of transmittal
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(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify), and (ii) instructions to effect the surrender of
the Certificates in exchange for the certificates evidencing shares of New Tyco
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor (A)
certificates evidencing that number of whole shares of New Tyco Common Stock
which such holder has the right to receive in accordance with the Exchange Ratio
in respect of the Shares formerly evidenced by such Certificate, (B) any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.07(c), and (C) cash in respect of fractional shares as provided in
Section 1.06(f) (the shares of New Tyco Common Stock and cash being,
collectively, the "Merger Consideration"), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Shares
which is not registered in the transfer records of the Company as of the
Effective Time, shares of New Tyco Common Stock, dividends, distributions, and
cash in respect of fractional shares, may be issued and paid in accordance with
this Article I to a transferee if the Certificate evidencing such Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer pursuant to this Section 1.07(b) and by
evidence that any applicable stock transfer taxes have been paid. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented Shares of the Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends
and subject to Section 1.06(f), to evidence the ownership of the number of full
shares of New Tyco Common Stock, and cash in respect of fractional shares, into
which such shares of the Company Common Stock shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the Effective Time with respect to shares
of New Tyco Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of New Tyco Common Stock they are entitled to receive until the holder of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of New Tyco Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of New Tyco
Common Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of New Tyco Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to New Tyco or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for shares of
New Tyco Common Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the satisfaction of New Tyco or
any agent designated by it that such tax has been paid or is not payable.
(e) NO LIABILITY. Neither Parent, Merger Sub, the Company nor New Tyco shall
be liable to any holder of Company Common Stock for any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) WITHHOLDING RIGHTS. New Tyco or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Company Common Stock such amounts as New Tyco or
the Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by New Tyco or the Exchange
Agent, such withheld amounts
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shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by New Tyco or the Exchange Agent.
SECTION 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 1.09. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of New
Tyco Common Stock as may be required pursuant to Section 1.06; PROVIDED,
HOWEVER, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
SECTION 1.11. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and (ii) subject to applicable accounting standards,
qualify for accounting treatment as a pooling of interests. The parties hereto
hereby adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
SECTION 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
SECTION 1.13. MATERIAL ADVERSE EFFECT. When used in connection with the
Company or any of its subsidiaries, Parent or any of its subsidiaries or New
Tyco or any of its subsidiaries, as the case may be, the term "Material Adverse
Effect" means any change, effect or circumstance that, individually or when
taken together with all other such changes, effects or circumstances that have
occurred prior to the date of determination of the occurrence of the Material
Adverse Effect, is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), financial condition or results
of operations of the Company and its subsidiaries, Parent and its subsidiaries,
or New Tyco and its subsidiaries as the case may be, in each case taken as a
whole.
SECTION 1.14 TERMINATION OF THE ADT MERGER. In the event that the ADT Merger
Agreement is terminated such that the consummation of the ADT Merger shall cease
to be a condition to the consummation of the Merger as provided in Section
6.01(h), all references in this Agreement to ADT or New Tyco (other than in the
definition of "New Tyco Common Stock" set forth in Section 1.06(a)) shall be
deemed references to Parent and all references to New Tyco Common Stock (other
than in the definition of "New Tyco Common Stock" set forth in Section 1.06(a))
shall be deemed references to Parent Common Stock.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule previously delivered (or,
to the extent set forth below, to be delivered) by the Company to Parent (the
"Company Disclosure Schedule"):
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
Approvals could not reasonably be expected to have a Material Adverse Effect.
Each of the Company and its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that could not reasonably be expected to have a Material Adverse
Effect. A true and complete list of all of the Company's subsidiaries, together
with the jurisdiction of incorporation of each subsidiary and the percentage of
each subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 2.01 of the Company Disclosure Schedule.
Except as set forth in Section 2.01 of the Company Disclosure Schedule or the
Company SEC Reports (as defined below), the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity,
with respect to which interest the Company has invested or is required to invest
$300,000 or more, excluding securities in any publicly traded company held for
investment by the Company and comprising less than five percent of the
outstanding stock of such company.
SECTION 2.02. ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws as most recently restated and subsequently amended to
date, and has made available to Parent the Articles of Incorporation and By-Laws
(or equivalent organizational documents) of each of its subsidiaries (the
"Subsidiary Documents"). Such Articles of Incorporation, By-Laws and Subsidiary
Documents are in full force and effect. Neither the Company nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or By-Laws or Subsidiary Documents, except for immaterial
violations of the Subsidiary Documents which may exist.
SECTION 2.03. CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 5,000,000 shares of
Preferred Stock, par value $10.00 per share (the "Company Preferred Stock"). As
of May 7, 1997, (i) 35,736,250 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, and
an additional 342,015 shares were held in treasury, (ii) no shares of Company
Preferred Stock were outstanding or held in treasury, (iii) no shares of Company
Common Stock or Company Preferred Stock were held by subsidiaries of the
Company, and (iv) 3,566,363 shares of Company Common Stock were reserved for
existing and future grants pursuant to the Company Stock Option Plans. No
material change in such capitalization has occurred between May 7, 1997 and the
date hereof. Except as set forth in Section 2.01, this Section 2.03 or Section
2.11 or in Section 2.03 or Section 2.11 of the Company Disclosure Schedule or
the Company SEC Reports (as hereinafter defined), there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue or
sell any shares of capital stock of, or other equity interests in, the Company
or any of its subsidiaries. All
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shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in Section 2.03 of the Company Disclosure
Schedule or the Company SEC Reports, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary or any other entity
other than guarantees of bank obligations of subsidiaries entered into in the
ordinary course of business. Except as set forth in Sections 2.01 and 2.03 of
the Company Disclosure Schedule, all of the outstanding shares of capital stock
(other than directors' qualifying shares) of each of the Company's subsidiaries
is duly authorized, validly issued, fully paid and nonassessable, and all such
shares (other than directors' qualifying shares and a de minimis number of
shares owned by employees of such subsidiaries) are owned by the Company or
another subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in the Company's voting rights, charges or
other encumbrances of any nature whatsoever.
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
approval of the Merger and this Agreement by the holders of at least a
two-thirds of the outstanding shares of Company Common Stock entitled to vote in
accordance with the TBCA and the Company's Articles of Incorporation and
By-Laws). The Board of Directors of the Company has determined that it is
advisable and in the best interest of the Company's shareholders for the Company
to enter into this Agreement and to consummate upon the terms and subject to the
conditions of this Agreement. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, as applicable, constitutes a legal, valid and
binding obligation of the Company.
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
2.05(a) of the Company Disclosure Schedule includes a list of (i) all loan
agreements, indentures, mortgages, pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, guaranties, standby
letters of credit, equipment leases or lease purchase agreements, each in an
amount equal to or exceeding $1,500,000, to which the Company or any of its
subsidiaries is a party or by which any of them is bound; (ii) all contracts,
agreements, commitments or other understandings or arrangements to which the
Company or any of its subsidiaries is a party or by which any of them or any of
their respective properties or assets are bound or affected, but excluding
contracts, agreements, commitments or other understandings or arrangements
entered into in the ordinary course of business and involving, in each case,
payments or receipts by the Company or any of its subsidiaries of less than
$750,000 in any single instance but not more than $3,000,000 in the aggregate;
and (iii) all agreements which, as of the date hereof, are required to be filed
as "material contracts" with the Securities and Exchange Commission ("SEC")
pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
and the SEC's rules thereunder (the "Exchange Act") but have not been so filed
with the SEC as of the date hereof.
(b) Except as set forth in Section 2.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Articles of Incorporation or By-Laws of the Company, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which its or any of
their respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default), or impair the Company's or any of its
subsidiaries' rights or alter the rights or
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obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except in any such case for any such
conflicts, violations, breaches, defaults or other occurrences that would not
reasonably be expected to have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act,
state securities laws ("Blue Sky Laws"), the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), filings and
consents under any applicable foreign laws intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade ("Foreign Monopoly Laws"), filings and consents as may be required under
any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and the filing and recordation of
appropriate merger or other documents as required by the TBCA, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent or delay the Company from performing its
obligations under this Agreement, or would not otherwise reasonably be expected
to have a Material Adverse Effect, or (iii) as to which any necessary consents,
approvals, authorizations, permits, filings or notifications have heretofore
been obtained or filed, as the case may be, by the Company.
SECTION 2.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
2.06(a) of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations which would not
reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.06(b) of the Company Disclosure
Schedule, the Company and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business of the Company and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Company Permits"). The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect.
SECTION 2.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed
all forms, reports and documents required to be filed with the SEC since
December 31, 1993 and has made available to Parent (i) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1994, 1995 and 1996, (ii) its
Quarterly Report on Form 10-Q for the quarterly period ended March 28, 1997,
and, (iii) all proxy statements relating to the Company's meetings of
shareholders (whether annual or special) held since December 31, 1993, (iv) all
other reports or registration statements (other than Reports on Form 10-Q not
referred to in clause (ii) above or on Form 8-K filed before January 1, 1997)
filed by the Company with the SEC since December 31, 1993, and (v) all
amendments and supplements to all such reports and registration statements filed
by the Company with the SEC (collectively, the "Company SEC Reports"). Except as
disclosed in Section 2.07 of the Company Disclosure Schedule, the Company SEC
Reports (i)
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were prepared in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto), and each fairly in all material respects presents the
consolidated financial position of the Company and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not
expected to be material in amount.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.08 of the Company Disclosure Schedule or the Company SEC Reports,
since December 31, 1996, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any Material Adverse Effect; (ii) any
amendments or changes in the Articles of Incorporation or By-laws of the
Company; (iii) any damage to, destruction or loss of any asset of the Company
(whether or not covered by insurance) that could reasonably be expected to have
a Material Adverse Effect; (iv) any material change by the Company in its
accounting methods, principles or practices; (v) any material revaluation by the
Company of any of its assets, including, without limitation, writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business; (vi) any sale of a material amount of property of
the Company, except in the ordinary course of business, or (vii) any other
action or event that would have required the consent of Parent pursuant to
Section 4.01 had such action or event occurred after the date of this Agreement.
SECTION 2.09. NO UNDISCLOSED LIABILITIES. Except as set forth in Section
2.09 of the Company Disclosure Schedule or the Company SEC Reports, neither the
Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) in the aggregate adequately
provided for in the Company's audited balance sheet (including any related notes
thereto) for the fiscal year ended December 31, 1996 included in the Company's
1996 Annual Report to Shareholders (the "1996 Balance Sheet"), (b) incurred in
the ordinary course of business and not required under GAAP to be reflected on
the 1996 Balance Sheet, (c) incurred since December 31, 1996 in the ordinary
course of business consistent with past practice, (d) incurred in connection
with this Agreement, or (e) which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 2.10. ABSENCE OF LITIGATION. Except as set forth in Section 2.10 of
the Company Disclosure Schedule or the Company SEC Reports, there are no claims,
actions, suits, proceedings or investigations pending or, to the knowledge of
the Company, overtly threatened against the Company or any of its subsidiaries,
or any properties or rights of the Company or any of its subsidiaries, before
any court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that would reasonably be expected to have a Material
Adverse Effect.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
2.11(a) of the Company Disclosure Schedule lists all employee pension benefit
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), all employee welfare benefit plans (as defined
in Section 3(1) of ERISA, and all other bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar fringe or employee benefit plans, programs or arrangements, and any
employment, executive compensation or severance agreements,
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written or otherwise, as amended, modified or supplemented, for the benefit of,
or relating to, any former or current employee, officer or consultant (or any of
their beneficiaries) of the Company or any other entity (whether or not
incorporated) which is a member of a controlled group including the Company or
which is under common control with the Company (an "ERISA Affiliate") within the
meaning of Sections 414(b), (c), (m) or (o) of the Code or Section 4001(a) (14)
or (b) of ERISA, or any subsidiary of the Company, as well as each plan with
respect to which the Company or an ERISA Affiliate could incur liability under
Title IV of ERISA or Section 412 of the Code (together for the purposes of this
Section 2.11, the "Employee Plans"). Within 30 days following the date of this
Agreement, the Company will provide to Parent copies of (i) each such written
Employee Plan (or a written description of any Employee Plan which is not
written) and all related trust agreements, insurance and other contracts
(including policies), summary plan descriptions, summaries of material
modifications and communications distributed to plan participants, (ii) the
three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Employee Plan required to
make such a filing, (iii) the most recent actuarial valuation for each Employee
Plan subject to Title IV of ERISA, (iv) the latest reports which have been filed
with the Department of Labor with respect to each Employee Plan required to make
such filing and (v) the most recent favorable determination letters issued for
each Employee Plan and related trust which is subject to Parts 1, 2 and 4 of the
Subtitle B of Title I of ERISA (and, if an application for such determination is
pending, a copy of the application for such determination). For purposes of this
Section 2.11, the term "material," when used with respect to (i) any Employee
Plan, shall mean that the Company or an ERISA Affiliate has incurred or may
incur obligations in an amount exceeding $300,000 with respect to such Employee
Plan, and (ii) any liability, obligation, breach or non-compliance, shall mean
that the Company or an ERISA Affiliate has incurred or may incur obligations in
an amount exceeding $300,000, with respect to any one such or series of related
liabilities, obligations, breaches, defaults, violations or instances of
non-compliance.
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule, (i) none of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person, and none of the Employee Plans is
a "multiemployer plan" as such term is defined in Section 3(37) of ERISA; (ii)
no party in interest or disqualified person (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Employee Plan which could subject the Company or any ERISA
Affiliate, directly or indirectly, to a tax, penalty or other material liability
for prohibited transactions under ERISA or Section 4975 of the Code; (iii) no
fiduciary of any Employee Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, which breach could
result in any material liability to the Company or any ERISA Affiliate; (iv) all
Employee Plans have been established and maintained substantially in accordance
with their terms and have operated in compliance in all material respects with
the requirements prescribed by any and all statutes (including ERISA and the
Code), orders, or governmental rules and regulations currently in effect with
respect thereto (including all applicable requirements for notification to
participants or the Department of Labor, Internal Revenue Service (the "IRS") or
Secretary of the Treasury), and may by their terms be amended and/or terminated
at any time subject to applicable law, and the Company and each of its
subsidiaries have performed all material obligations required to be performed by
them under, are not in any material respect in default under or violation of,
and have no knowledge of any default or violation by any other party to, any of
the Employee Plans; (v) each Employee Plan which is subject to Parts 1, 2 and 4
of Subtitle B of ERISA is the subject of a favorable determination letter from
the IRS, and nothing has occurred which may reasonably be expected to impair
such determination; (vi) all contributions required to be made with respect to
any Employee Plan pursuant to Section 412 of the Code, or the terms of the
Employee Plan or any collective bargaining agreement, have been made on or
before their due dates; (vii) with respect to each Employee Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event for
which the 30 day notice requirement has been waived under the regulations to
Section 4043 of ERISA) or any event described in Section 4062, 4063 or 4041 of
ERISA has occurred for which there is any material outstanding liability to the
Company or any ERISA Affiliate nor
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would the consummation of the transaction contemplated hereby (including the
execution of this agreement) constitute a reportable event for which the 30-day
requirement has not been waived; and (viii) neither the Company nor any ERISA
Affiliate has incurred or reasonably expects to incur any liability under Title
IV of ERISA (other than liability for premium payments to the Pension Benefit
Guaranty Corporation (the "PBGC") arising in the ordinary course).
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds (i) any option to purchase Company
Common Stock as of the date hereof, together with the number of shares of
Company Common Stock subject to such option, the option price of such option (to
the extent determined as of the date hereof), whether such option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code (an "ISO"), and the expiration date of such option; (ii) any shares of
Company Common Stock that are restricted; and (iii) any other right, directly or
indirectly, to receive Company Common Stock, together with the number of shares
of Company Common Stock subject to such right. Section 2.11(c) of the Company
Disclosure Schedule also sets forth the total number of any such ISOs and any
such nonqualified options and other such rights.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth a true and
complete list of (i) all employment agreements with officers of the Company or
any of its subsidiaries; (ii) all agreements with consultants who are
individuals obligating the Company or any of its subsidiaries to make annual
cash payments in an amount exceeding $150,000; (iii) all agreements with respect
to the services of independent contractors or leased employees whether or not
they participate in any of the Employee Plans; (iv) all officers of the Company
or any of its subsidiaries who have executed a non-competition agreement with
the Company or any of its subsidiaries; (v) all severance agreements, programs
and policies of the Company or any of its subsidiaries with or relating to its
employees, in each case with outstanding commitments exceeding $150,000,
excluding programs and policies required to be maintained by law; and (vi) all
plans, programs, agreements and other arrangements of Company which contain
change in control provisions. The disclosure of any documents under this Section
2.11(d) shall be provided within 30 days of this Agreement.
(e) Except as set forth in Section 2.11(e) of the Company Disclosure
Schedule, no employee of the Company or any of its ERISA Affiliates has
participated in any employee pension benefit plans (as defined in Section 3(2)
of ERISA) maintained by or on behalf of the Company with respect to which the
Company or an ERISA Affiliate could incur liability under Title IV of ERISA or
Section 412 of the Code. The PBGC has not instituted proceedings to terminate
any Employee Benefit Plan that is subject to Title IV of ERISA (each, a "Defined
Benefit Plan"). The Defined Benefit Plans have no accumulated or waived funding
deficiencies within the meaning of Section 412 of the Code nor have any
extensions of any amortization period within the meaning of Section 412 of the
Code or 302 of ERISA been applied for with respect thereto. The present value of
the benefit liabilities (within the meaning of Section 4041 of ERISA) of the
Defined Benefit Plans, determined on a termination basis using actuarial
assumptions that would be used by the PBGC does not exceed by more than
$1,000,000 the value of the Plans' assets. All applicable premiums required to
be paid to the PBGC with respect to the Defined Benefit Plans have been paid. No
facts or circumstances exist with respect to any Defined Benefit Plan which
would give rise to a lien on the assets of the Company under Section 4068 of
ERISA or otherwise. All the assets of the Defined Benefit Plans are readily
marketable securities or insurance contracts.
(f) Except as provided in Schedule 2.11(f) of the Company Disclosure
Schedule, (i) the Company has never maintained an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or any other Employee
Plan that invests in Company stock; (ii) the Company has not proposed nor agreed
to any increase in benefits under any Employee Plan (or the creation of new
benefits) or change in employee coverage which would increase the expense of
maintaining any Employee Plan; (iii) the consummation of the transactions
contemplated by this Agreement will not result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits or
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compensation payable in respect of any employee; (iv) no person will be entitled
to any severance benefits under the terms of any Employee Plan solely by reason
of the consummation of this transaction contemplated by this Agreement. With
respect to each Employee Plan that owns Company Common Stock, the terms of such
Employee Plan will allow the voting of Company Common Stock with respect to the
Merger.
(g) Each Employee Plan covering non-U.S. employees (an "International Plan")
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable Laws (including any special
provisions relating to registered or qualified plans where such International
Plan was intended to so qualify) and has been maintained in good standing with
applicable regulatory authorities. The fair market value of the assets of each
funded International Plan (or the liability of each funded International Plan
funded through insurance) is sufficient to procure or provide for the benefits
accrued thereunder through the Closing Date according to the actuarial
assumptions and valuations most recently used to determine employer
contributions to the International Plan.
(h) Schedule 2.11(h) of the Company Disclosure Schedule sets forth the
amount of the Company's fiduciary liability insurance covering the fiduciaries
of the Employee Plans (including the Company) with respect to whom the Company
may have liability.
(i) The Company Disclosure Schedules under this Section 2.11 shall be
provided to the Parent within 30 days following the date of this Agreement.
SECTION 2.12. LABOR MATTERS. Except as set forth in Section 2.12 of the
Company Disclosure Schedule or the Company SEC Reports, (i) there are no
controversies pending or, to the knowledge of the Company or any of its
subsidiaries, threatened, between the Company or any of its subsidiaries and any
of their respective employees, which controversies have had, or would reasonably
be expected to have, a Material Adverse Effect; (ii) neither the Company nor any
of its subsidiaries is a party to any material collective bargaining agreement
or other labor union contract applicable to persons employed by the Company or
its subsidiaries, nor does the Company or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees; and
(iii) neither the Company nor any of its subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its subsidiaries which would
reasonably be expected to have a Material Adverse Effect.
SECTION 2.13. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject to
the accuracy of the representations of Parent in Section 3.13, the information
supplied by the Company in writing specifically for inclusion in the
Registration Statement (as defined in Section 3.13) shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
information supplied by the Company for inclusion in the proxy
statement/prospectus to be sent to the shareholders of the Company in connection
with the meeting of the shareholders of the Company to consider the Merger (the
"Company Shareholders Meeting") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement/Prospectus") will
not, on the date the Proxy Statement/ Prospectus (or any amendment thereof or
supplement thereto) is first mailed to shareholders, at the time of the Company
Shareholders Meeting, or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or shall omit to state
any material fact necessary in order to make the statements made therein not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company or any of its respective affiliates, officers or directors should be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy
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Statement/Prospectus, the Company shall promptly inform Parent and Merger Sub.
The Proxy Statement/ Prospectus shall comply in all material respects with the
requirements of the Securities Act, the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
Merger Sub which is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Registration Statement or the Proxy
Statement/Prospectus.
SECTION 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this Agreement
or as set forth in Section 2.14 of the Company Disclosure Schedule or the
Company SEC Reports, to the best of the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or would reasonably be expected to have the effect
of prohibiting or impairing any business practice of the Company or any of its
subsidiaries, acquisition of property by the Company or any of its subsidiaries
or the conduct of business by the Company or any of its subsidiaries as
currently conducted or as proposed to be conducted by the Company, except for
any prohibition or impairment as would not reasonably be expected to have a
Material Adverse Effect.
SECTION 2.15. TITLE TO PROPERTY. Except as set forth in Section 2.15 of the
Company Disclosure Schedule, the Company and each of its subsidiaries have good
and indefeasible title to all of their properties and assets, free and clear of
all liens, charges and encumbrances, except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which could not reasonably be expected to have a
Material Adverse Effect, and except for liens which secure indebtedness
reflected in the 1996 Balance Sheet; and, to the knowledge of the Company, all
leases pursuant to which the Company or any of its subsidiaries lease from
others material amounts of real or personal property, are in good standing,
valid and effective in accordance with their respective terms, and there is not,
to the knowledge of the Company, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default), except where the lack of such good
standing, validity and effectiveness or the existence of such default or event
of default could not reasonably be expected to have a Material Adverse Effect.
SECTION 2.16. TAXES. (a) For purposes of this Agreement, "Tax" or "Taxes"
shall mean taxes, fees, levies, duties, tariffs, imposts, and governmental
impositions or charges of any kind in the nature of (or similar to) taxes,
payable to any federal, state, local or foreign taxing authority, including
(without limitation) (i) income, franchise, profits, gross receipts, AD VALOREM,
net worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; and "Tax Returns" shall mean returns, reports, and
information statements with respect to Taxes required to be filed with the IRS
or any other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns (including returns
required in connection with any Employee Plan).
(b) The Company on behalf of itself and all of its subsidiaries hereby
represents that, other than as disclosed in Section 2.16(b) of the Company
Disclosure Schedule or the Company SEC Reports: The Company and its subsidiaries
have timely filed all United States federal income Tax Returns and all other
material Tax Returns required to be filed by them. All such Tax Returns are
complete and correct in all material respects (except to the extent a reserve
has been established as reflected in the 1996 Balance Sheet). The Company and
its subsidiaries have timely paid and discharged all Taxes due in connection
with or with respect to the periods or transactions covered by such Tax Returns
and have paid all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings (to the extent that any such proceedings
are required), and there are no other Taxes that would be due if asserted by a
taxing authority, except with respect to which the Company is maintaining
reserves unless the failure to do so would not reasonably be expected to have a
Material Adverse Effect. Except as does not involve or would
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not result in liability to the Company or any of its subsidiaries that would
reasonably be expected to have a Material Adverse Effect, (i) there are no tax
liens on any assets of the Company or any subsidiary thereof; (ii) neither the
Company nor any of its subsidiaries has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax; (iii) no unpaid (or unreserved) deficiencies for Taxes have been
claimed, proposed or assessed by any taxing or other governmental authority with
respect to the Company or any of its subsidiaries; (iv) there are no pending or
threatened audits, investigations or claims for or relating to any liability in
respect of Taxes of the Company or any of its subsidiaries; and (v) neither the
Company nor any of its subsidiaries has requested any extension of time within
which to file any currently unfiled returns in respect of any Taxes. The
accruals and reserves for Taxes (including deferred taxes) reflected in the 1996
Balance Sheet are in all material respects adequate to cover all Taxes accruable
through the date thereof (including Taxes being contested) in accordance with
GAAP.
(c) The Company on behalf of itself and all its subsidiaries hereby
represents that, other than as disclosed in Section 2.16(c) of the Company
Disclosure Schedule or the Company SEC Reports, and other than with respect to
items the inaccuracy of which would not reasonably be expected to have a
Material Adverse Effect: (i) neither the Company nor any of its subsidiaries is
obligated under any agreement with respect to industrial development bonds or
other obligations with respect to which the excludability from gross income of
the holder for federal or state income tax purposes could be affected by the
transactions contemplated hereunder; (ii) neither the Company nor any of its
subsidiaries is, or has been, a United States real property holding corporation
(as defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; (iii) neither the Company nor
any of its subsidiaries has filed or been included in a combined, consolidated
or unitary return (or substantial equivalent thereof) of any Person other than
the Company and its subsidiaries; (iv) neither the Company nor any of its
subsidiaries is liable for Taxes of any Person other than the Company and its
subsidiaries, or currently under any contractual obligation to indemnify any
Person with respect to Taxes, or a party to any tax sharing agreement or any
other agreement providing for payments by the Company or any of its subsidiaries
with respect to Taxes; (v) except entities the beneficial ownership of which is
wholly owned by the Company and/or its subsidiaries, neither the Company nor any
of its subsidiaries is a party to any joint venture, partnership or other
arrangement or contract which could be treated as a partnership for United
States federal income tax purposes; (vi) neither the Company nor any of its
subsidiaries is a party to any agreement, contract, arrangement or plan that
would result (taking into account the transactions contemplated by this
Agreement), separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code; (vii) the
prices for any property or services (or for the use of property) provided by the
Company or any of its subsidiaries to any other subsidiary or to the Company
have been arm's length prices determined using a method permitted by the
Treasury Regulations under Section 482 of the Code; (viii) neither the Company
nor any of its subsidiaries is a "consenting corporation" under Section 341 (f)
of the Code or any corresponding provision of state, local or foreign law; and
(ix) neither the Company nor any of its subsidiaries has made an election or is
required to treat any of its assets as owned by another Person for federal
income tax purposes or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code (or any corresponding
provision of state, local or foreign law).
SECTION 2.17. ENVIRONMENTAL MATTERS. Except as set forth in Section 2.17 of
the Company Disclosure Schedule or the Company SEC Reports, and except in all
cases as, in the aggregate, have not had and would not reasonably be expected to
have a Material Adverse Effect, to the best of the Company's knowledge, the
Company and each of its subsidiaries (i) have obtained all applicable permits,
licenses and other authorizations which are required to be obtained under all
applicable federal, state or local laws or any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder ("Environmental Laws") relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
substances or wastes into ambient air, surface water, ground water, or land or
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otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic substances or wastes by the Company or its subsidiaries (or
their respective agents); (ii) are in compliance with all terms and conditions
of such required permits, licenses and authorizations, and also are in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
applicable Environmental Laws; (iii) as of the date hereof, are not aware of nor
have received written notice from any governmental authority or third party of
any past or present violations of Environmental Laws, or any event, condition,
circumstance, activity, practice, incident, action or plan which is reasonably
likely to interfere with or prevent continued compliance with or which would
give rise to any common law or statutory liability, or otherwise form the basis
of any claim, action, suit or proceeding, against the Company or any of its
subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant or hazardous or toxic substance or waste; and (iv) have taken all
actions necessary under applicable Environmental Laws to register any products
or materials required to be registered by the Company or its subsidiaries (or
any of their respective agents) thereunder.
SECTION 2.18. BROKERS. No broker, finder or investment banker (other than
Goldman, Sachs & Co. ("Goldman, Sachs") the fees and expenses of whom will be
paid by the Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 2.19. INTELLECTUAL PROPERTY. (a) The Company and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or material
that are used in the business of the Company and its subsidiaries as currently
conducted, except as would not reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Section 2.19(b) of the Company Disclosure
Schedule or the Company SEC Reports or as could not reasonably be expected to
have a Material Adverse Effect: (i) The Company is not, nor will it be as a
result of the execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which the Company
is authorized to use any third-party patents, trademarks, service marks and
copyrights ("Third-Party Intellectual Property Rights"); (ii) No claims with
respect to the patents, registered and material unregistered trademarks and
service marks, registered copyrights, trade names and any applications therefor
owned by the Company or any of its subsidiaries (the "Company Intellectual
Property Rights"), any trade secret material to the Company, or Third Party
Intellectual Property Rights to the extent arising out of any use, reproduction
or distribution of such Third Party Intellectual Property Rights by or through
the Company or any of its subsidiaries, are currently pending or, to the
knowledge of the Company, are overtly threatened by any person; or (iii) The
Company does not know of any valid grounds for any bona fide claims (1) to the
effect that the manufacture, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by Company or any of its
subsidiaries, infringes on any copyright, patent, trademark, service mark or
trade secret; (2) against the use by the Company or any of its subsidiaries, of
any trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the business of
the Company or any of its subsidiaries as currently conducted or as proposed to
be conducted; (3) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property Rights or other trade secret material to the
Company; or (4) challenging the license or legally enforceable right to use of
the Third Party Intellectual Rights by the Company or any of its subsidiaries.
(c) To the Company's knowledge, all material patents, registered trademarks,
service marks and copyrights held by the Company are valid and subsisting.
Except as set forth in Section 2.19(c) of the
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Company Disclosure Schedule or the Company SEC Reports, to the Company's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party,
including any employee or former employee of the Company or any of its
subsidiaries.
SECTION 2.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
2.20 of the Company Disclosure Schedule or the Company SEC Reports or for events
as to which the amounts involved do not, in the aggregate, exceed $300,000,
since the date of the Company's proxy statement dated March 31, 1997 (the "1997
Company Proxy Statement"), no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.
SECTION 2.21. INSURANCE. Except as disclosed in Section 2.21 of the Company
Disclosure Schedule, all material fire and casualty, general liability, business
interruption, product liability and sprinkler and water damage insurance
policies maintained by the Company or any of its subsidiaries are with reputable
insurance carriers, provide full and adequate coverage for all normal risks
incident to the business of the Company and its subsidiaries and their
respective properties and assets and are in character and amount appropriate for
the businesses conducted by the Company, except as could not reasonably be
expected to have a Material Adverse Effect.
SECTION 2.22. PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 2.22(a) of the Company Disclosure Schedule or the Company SEC Reports,
the Company is not aware of any claim, or the basis of any claim, against the
Company or any of its subsidiaries for injury to person or property of employees
or any third parties suffered as a result of the sale of any product or
performance of any service by the Company or any of its subsidiaries, including
claims arising out of the defective or unsafe nature of its products or
services, which would reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.22(b) of the Company Disclosure
Schedule or the Company SEC Reports, there is no pending or, to the knowledge of
the Company, overtly threatened recall or investigation of any product sold by
the Company, which recall or investigation would reasonably be expected to have
a Material Adverse Effect.
SECTION 2.23. OPINION OF FINANCIAL ADVISOR. The Company has been advised by
its financial advisor, Goldman, Sachs, to the effect that in its opinion, as of
the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of Shares. It is agreed and understood that such opinion is for the
benefit of the Board of Directors of the Company and may not be relied upon by
Parent, Merger Sub or their affiliates.
SECTION 2.24. POOLING MATTERS. To the Company's knowledge and based upon
consultation with its independent accountants, the Company has provided to
Parent and its independent accountants all information concerning actions taken
or agreed to be taken by the Company or any of its affiliates on or before the
date of this Agreement that could reasonably be expected to adversely affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests. For purposes of this Section 2.26, "to the
Company's knowledge" means to the actual knowledge of the Company's Chairman,
Chief Executive Officer or Chief Financial Officer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that, except as set forth in the written disclosure schedule
previously delivered or, to the extent set forth below, to be delivered, by
Parent to the Company (the "Parent Disclosure Schedule"):
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
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incorporation and has the requisite corporate power and authority and is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and Approvals could not
reasonably be expected to have a Material Adverse Effect. Each of Parent and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that could not reasonably be
expected to have a Material Adverse Effect. A true and complete list of all of
Parent's subsidiaries, together with the jurisdiction of incorporation of each
subsidiary and the percentage of each subsidiary's outstanding capital stock
owned by Parent or another subsidiary, is set forth in Section 3.01 of Parent
Disclosure Schedule. Except as set forth in Section 3.01 of the Parent
Disclosure Schedule or the Parent SEC Reports (as defined below), Parent does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity, with respect to which Parent has invested or is
required to invest $1,000,000 or more, excluding securities in any publicly
traded company held for investment by Parent and comprising less than five
percent of the outstanding capital stock of such company.
SECTION 3.02. ARTICLES OF ORGANIZATION AND BY-LAWS. Parent has heretofore
furnished to the Company a complete and correct copy of its Articles of
Organization and By-Laws, as amended to date. Such Articles of Organization and
By-Laws are in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Articles of Organization (or Articles
of Incorporation) or By-Laws.
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of Parent
consists of 500,000,000 shares of Parent Common Stock and 2,000,000 shares of
Preferred Stock, $1 par value per share ("Parent Preferred Stock"). As of May
13, 1997, (i) 168,358,092 shares of Parent Common Stock were issued and
outstanding, all of which are validly issued, fully paid and non-assessable, and
12,984,870 shares were held in treasury, (ii) no shares of Parent Preferred
Stock were outstanding or held in treasury, (iii) no shares of Parent Common
Stock or Parent Preferred Stock were held by subsidiaries of the Parent, (iv)
1,606,065 shares of Parent Common Stock were reserved for future issuance under
Parent's 1994 Restricted Stock Ownership Plan, (v) 210,178 shares of Parent
Common Stock were reserved for issuance upon exercise of Warrants issued by
Kendall International, Inc. and assumed by Parent, (vi) 7,974,990 shares of
Parent Common Stock were reserved for issuance upon exercise of stock options
issued under the Tyco International Ltd. 1995 Stock Option Plan, and (viii)
26,084 shares of Parent Common Stock were reserved for issuance upon exercise of
stock options issued under the stock incentive plans maintained by Kendall
International, Inc. No material change in such capitalization has occurred
between May 13, 1997 and the date hereof. Except as set forth in Section 3.03 of
the Parent Disclosure Schedule or the Parent SEC Reports (as hereinafter
defined), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of Parent or any of its subsidiaries or obligating Parent or any
of its subsidiaries to issue or sell any shares of capital stock of, or other
equity interests in, Parent or any of its subsidiaries. Except as set forth in
Section 3.03 of the Parent Disclosure Schedule or the Parent SEC Reports, there
are no obligations, contingent or otherwise, of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or the capital stock of any subsidiary or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any such subsidiary other than guarantees of bank obligations of subsidiaries
entered into in the ordinary course of business. Except as set forth in Section
3.01 or 3.03 of the Parent Disclosure Schedule, all of the outstanding shares of
capital stock (other than directors' qualifying shares) of each of Parent's
subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and all such shares (other than directors' qualifying shares) are owned by
Parent or another subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Parent's voting rights, charges or
other encumbrances of any nature whatsoever.
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(b) The shares of New Tyco Common Stock to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid and nonassessable and shall
be listed, upon official notice of issuance, for trading on the NYSE.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated thereby. The Board of Directors of Parent has determined that it is
advisable and in the best interest of Parent's shareholders for Parent to enter
into this Agreement and to consummate the Merger upon the terms and subject to
the conditions of this Agreement. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Parent and Merger Sub.
(b) At or prior to the filing of the Registration Statement of which the
Proxy Statement/Prospectus forms a part, ADT or New Tyco will have duly and
validly authorized the issuance of the New Tyco Common Stock in the Merger in
accordance with the terms of this Agreement.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
3.05(a) of the Parent Disclosure Schedule includes a list of (i) all loan
agreements, indentures, mortgages, pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, guaranties, standby
letters of credit, equipment leases or lease purchase agreements to which Parent
or any of its subsidiaries is a party or by which any of them is bound, each in
an amount exceeding $25,000,000, but excluding any such agreement between Parent
and its wholly-owned subsidiaries or between two or more wholly-owned
subsidiaries of Parent; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which Parent or any of its subsidiaries is a
party or by which any of them or any of their respective properties or assets
are bound or affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of business
and involving, in each case, payments or receipts by Parent or any of its
subsidiaries of less than $10,000,000 in any single instance; and (iii) all
agreements which, as of the date hereof, are required to be filed with the SEC
pursuant to the requirements of the Exchange Act as "material contracts" but
have not been so filed with the SEC as of the date hereof.
(b) Except as set forth in Section 3.05(b) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Articles of Organization (or Articles of
Incorporation) or By-Laws of Parent or Merger Sub, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Parent or any
of its subsidiaries or by which its or their respective properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
impair Parent's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
are bound or affected, except in any such case for any such conflicts,
violations, breaches, defaults or other occurrences that would not reasonably be
expected to have a Material Adverse Effect and except possibly with respect to
the ADT Merger Agreement, as to which any necessary consents have heretofore
been obtained by Parent.
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(c) Except as set forth in Section 3.05(c) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent will not, and
the performance of this Agreement by Parent will not, at the Effective Time (i)
conflict with or violate the Memorandum of Association or Bye-Laws of New Tyco,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to New Tyco or any of its subsidiaries or by which its or
their respective properties are bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or impair New Tyco's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of New Tyco or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which New Tyco or any of its
subsidiaries is a party or by which New Tyco or any of its subsidiaries or its
or any of their respective properties are bound or affected, except in any such
case for any such conflicts, violations, breaches, defaults or other occurrences
that would not reasonably be expected to have a Material Adverse Effect.
(d) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Securities Act,
the Exchange Act, the Blue Sky Laws, the pre-merger notification requirements of
the HSR Act, Foreign Monopoly Laws, and the filing and recordation of
appropriate merger or other documents as required by the TBCA, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent Parent or Merger Sub from performing their
respective obligations under this Agreement, and would not otherwise be
reasonably expected to have a Material Adverse Effect or (iii) as to which any
necessary consents, approvals, authorizations, permits, filings or notifications
have heretofore been obtained or filed, as the case may be, by Parent.
SECTION 3.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
3.06(a) of the Parent Disclosure Schedule, neither Parent nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for any such conflicts, defaults or violations which would not reasonably
be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 3.06(b) of the Parent Disclosure
Schedule, Parent and its subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
governmental authorities which are material to the operation of the business of
the Parent and its subsidiaries taken as a whole as it is now being conducted
(collectively, the "Parent Permits"). Parent and its subsidiaries are in
compliance with the terms of Parent Permits, except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC since June 30,
1994, and has heretofore delivered to the Company, in the form filed with the
SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended June 30,
1994, 1995 and 1996, (ii) its Quarterly Reports on Form 10-Q for the quarterly
periods ending September 30, 1996 , December 31, 1996 and March 31, 1997, (iii)
all proxy statements relating to Parent's meetings of shareholders (whether
annual or special) held since June 30, 1994, (iv) all other reports or
registration statements (other than Reports on Form 10-Q not referred to in
clause (ii) above) filed by Parent with the SEC since June 30, 1993, and (v) all
amendments and supplements to all such reports and registration statements filed
by Parent with the SEC (collectively, the "Parent SEC Reports"). The Parent
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SEC Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of Parent and its subsidiaries as
at the respective dates thereof and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.08 of the Parent Disclosure Schedule or the Parent SEC Reports, since
June 30, 1996, Parent has conducted its business in the ordinary course and
there has not occurred: (i) any Material Adverse Effect; (ii) any amendments or
changes in the Articles of Organization or By-Laws of Parent; (iii) any damage
to, destruction or loss of any assets of the Parent (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse Effect;
(iv) any material change by Parent in its accounting methods; (v) any material
revaluation by Parent of any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business; (vi) any sale of a material
amount of assets of Parent, except in the ordinary course of business, or (vii)
any other action or event that would have required the consent of the Company
pursuant to Section 4.03 had such action or event occurred after the date of
this Agreement.
SECTION 3.09. NO UNDISCLOSED LIABILITIES. Except as is disclosed in Section
3.09 of the Parent Disclosure Schedule and the Parent SEC Reports, neither the
Parent nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) adequately provided for in the
Parent's balance sheet (including any related notes thereto) as of June 30, 1996
included in Parent's Annual Report on Form 10-K for the fiscal year ended June
30, 1996 (the "June 1996 Balance Sheet"), (b) incurred in the ordinary course of
business and not required under GAAP to be reflected on the June 1996 Balance
Sheet, (c) incurred since June 30, 1996 in the ordinary course of business and
consistent with past practice, (d) incurred in connection with this Agreement,
or (e) which would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth in Section 3.10 of
the Parent Disclosure Schedule, there are no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of the Parent, threatened against
the Parent or any of its subsidiaries, or any properties or rights of the Parent
or any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that would
reasonably be expected to have a Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
3.11(a) of the Parent Disclosure Schedule lists all employee pension benefit
plans (as defined in Section 3(2) of ERISA), all employee welfare benefit plans
(as defined in Section 3(1) of ERISA) and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any employment, executive compensation or severance agreements, written or
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any former or current employee, officer or consultant (or any of their
beneficiaries) of Parent or any other entity (whether or not incorporated) which
is a member of a controlled group
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including Parent or which is under common control with Parent (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code or
Section 4001(a) (14) or (b) of ERISA, or any subsidiary of Parent, as well as
each plan with respect to which Parent or an ERISA Affiliate could incur
liability under Title IV of ERISA or Section 412 of the Code (together for the
purposes of this Section 5.11, the "Employee Plans"). Prior to the date of this
Agreement, the Parent has provided to the Company copies of (i) each such
written Employee Plan or a written description of any Employee Plan which is not
written and all related trust agreements, insurance and other contracts
(including policies), summary plan descriptions, summaries of material
modifications and communications distributed to plan participants, (ii) the
three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Employee Plan required to
make such a filing, and (iii) the most recent actuarial valuation for each
Employee Plan subject to Title IV of ERISA, (iv) the latest reports which have
been filed with the department of Labor with respect to each Employee Plan
required to make such a filing and (v) the most recent favorable determination
letters issued for each Employee Plan and related trust that is subject to Parts
1, 2, and 4 of Subtitle B of Title I of ERISA (and, if an application for such
determination is pending, a copy of the application). For purposes of this
Section 3.11(a) the term "material", when used with respect to (i) any Employee
Plan, shall mean that Parent or an ERISA Affiliate has incurred or may incur
obligations in an amount exceeding $5,000,000 with respect to such Employee
Plan, and (ii) any liability, obligation, breach or non-compliance, shall mean
that the Company or an ERISA Affiliate has incurred or may incur obligations in
an amount exceeding $1,000,000 with respect to any one such or series of related
liabilities, obligations, breaches, defaults, violations or instances of non-
compliance.
(b) (i) Except as set forth in Section 3.11(b) of the Parent Disclosure
Schedule, none of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person, and none of the Employee Plans is
a "multiemployer plan" as such term is defined in Section 3(37) of ERISA; (ii)
no party in interest or disqualified person (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Employee Plan which could subject Parent or any ERISA
Affiliate, directly or indirectly, to a tax, penalty or other material liability
for prohibited transactions under ERISA or Section 4975 of the Code; (iii) no
fiduciary of any Employee Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, which breach could
result in any material liability to Parent or any ERISA Affiliate; (iv) all
Employee Plans have been established and maintained substantially in accordance
with their terms and have operated in compliance in all material respects with
the requirements prescribed by any and all statutes (including ERISA and the
Code), orders, or governmental rules and regulations currently in effect with
respect thereto (including all applicable requirements for notification to
participants or the Department of Labor, IRS or Secretary of the Treasury), and
may by their terms be amended and/or terminated at any time subject to
applicable law and Parent and each of its subsidiaries have performed all
material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
default or violation by any other party to, any of the Employee Plans; (v) each
Employee Plan which is subject to Parts 1, 2 and 4 of Subtitle B of ERISA is the
subject of a favorable determination letter from the IRS, and nothing has
occurred which may reasonably be expected to impair such determination; (vi) all
contributions required to be made with respect to any Employee Plan pursuant to
Section 412 of the Code, or the terms of the Employee Plan or any collective
bargaining agreement, have been made on or before their due dates; (vii) with
respect to each Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the 30 day notice
requirement has been waived under the regulations to Section 4043 of ERISA) or
any event described in Section 4062, 4063 or 4041 of ERISA has occurred for
which there is any material outstanding liability to the Parent or any ERISA
Affiliates; nor would the consummation of the transaction contemplated hereby
(including the execution of this agreement) constitute a reportable event for
which the 30-day requirement has not been waived; and (viii) neither Parent nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
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under Title IV of ERISA (other than liability for premium payments to the PBGC
arising in the ordinary course).
(c) Section 3.11(c) of the Parent Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of Parent
or any of its subsidiaries who holds (i) any option to purchase Parent Common
Stock as of the date hereof, together with the number of shares of Parent Common
Stock subject to such option, the option price of such option (to the extent
determined as of the date hereof), whether such option is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and the expiration date of such option; and (ii) any shares of Parent
stock that are restricted (iii) any other right, directly or indirectly, to
receive Parent Common Stock, together with the number of shares of Parent Common
Stock subject to such right. Section 3.11(c) of the Parent Disclosure Schedule
also sets forth the total number of any such ISOs and any, such nonqualified
options and such other rights.
(d) Section 3.11(d) of the Parent Disclosure Schedule sets forth a true and
complete list of (i) all employment agreements with officers of Parent or any of
its subsidiaries; (ii) all agreements with consultants who are individuals
obligating Parent or any of its subsidiaries to make annual cash payments in an
amount exceeding $1,000,000; (iii) all agreements with respect to the services
of independent contractors or leased employees whether or not they participate
in any of the Employee Plans; (iv) all officers of Parent or any of its
subsidiaries who have executed a non-competition agreement with Parent or any of
its subsidiaries; (v) all severance agreements, programs and policies of Parent
or any of its subsidiaries with or relating to its employees in each case with
outstanding commitments exceeding $1,000,000, excluding programs and policies
required to be maintained by law; and (vi) all plans, programs, agreements and
other arrangements of Parent or any of its subsidiaries with or relating to its
employees which contain change in control provisions.
(e) Except as set forth in Section 3.11(e) of the Parent Disclosure
Schedule, no employee of Parent or any of its ERISA Affiliates has participated
in any employee pension benefit plans (as defined in Section 3(2) of ERISA)
maintained by or on behalf of Parent with respect to which the Parent or an
ERISA Affiliate could incur liability under Title IV of ERISA or Section 412 of
the Code. The PBGC has not instituted proceedings to terminate any Employee Plan
that is subject to Title IV of ERISA (each, a "Defined Benefit Plan"). The
Defined Benefit Plans have no accumulated or waived funding deficiencies within
the meaning of Section 412 of the Code nor have any extensions of any
amortization period within the meaning of Section 412 of the Code or 302 of
ERISA been applied for with respect thereto. As of June 30, 1996, the funded
ratio of the Defined Benefit Plans was approximately 100%. This funded ratio was
determined based on the Accumulated Benefit Obligation (utilizing disclosure
assumptions used by Parent in its consolidated financial statements) and the
fair market value of the Defined Benefit Plans' assets as of June 30, 1996. All
applicable premiums required to be paid to the PBGC with respect to the Defined
Benefit Plans have been paid. No facts or circumstances exist with respect to
any Defined Benefit Plan which would give rise to a lien on the assets of Parent
under Section 4068 of ERISA or otherwise. All the assets of the Defined Benefit
Plans are readily marketable securities or insurance contracts.
(f) Except as provided in Schedule 3.11(f) of the Parent Disclosure
Schedule, the Parent has never maintained an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or any other Employee
Plan that invests in Parent stock.
(g) Each Employee Plan covering non-U.S. employees (an "International Plan")
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable Laws (including any special
provisions relating to registered or qualified plans where such International
Plan was intended to so qualify) and has been maintained in good standing with
applicable regulatory authorities. The benefit liabilities of the International
Plans are adequately provided for on the consolidated financial statements of
Parent.
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(h) Parent has fiduciary liability insurance of at least $15,000,000 in
effect covering the fiduciaries of the Employee Plans (including Parent) with
respect to whom Parent may have liability.
SECTION 3.12. LABOR MATTERS. Except as set forth in Section 3.12 of the
Parent Disclosure Schedule or the Parent SEC Reports, (i) there are no
controversies pending or, to the knowledge of Parent or any of its subsidiaries,
threatened, between Parent or any of its subsidiaries and any of their
respective employees, which controversies have or would reasonably be expected
to have a Material Adverse Effect; (ii) neither Parent nor any of its
subsidiaries is a party to any material collective bargaining agreement or other
labor union contract applicable to persons employed by Parent or its
subsidiaries, nor does Parent or any of its subsidiaries know of any activities
or proceedings of any labor union to organize any such employees; and (iii)
neither Parent nor any of its subsidiaries has any knowledge of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of Parent or any of its subsidiaries which would reasonably be
expected to have a Material Adverse Effect.
SECTION 3.13. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject to
the accuracy of the representations of the Company in Section 2.13, the
registration statement (the "Registration Statement") pursuant to which the New
Tyco Common Stock to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein, in light of the circumstances
under which they were made, not misleading. The information supplied by Parent
in writing specifically for inclusion in the Proxy Statement/Prospectus will
not, on the date the Proxy Statement/Prospectus is first mailed to shareholders,
at the time of the Company Shareholders Meeting and at the Effective Time,
contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any
material fact, or will omit to state any material fact necessary in order to
make the statements therein not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Shareholders Meeting
which has become false or misleading. If at any time prior to the Effective Time
any event relating to Parent, Merger Sub or any of their respective affiliates,
officers or directors should be discovered by Parent or Merger Sub which should
be set forth in an amendment to the Registration Statement or a supplement to
the Proxy Statement/Prospectus, Parent or Merger Sub will promptly inform the
Company. The Registration Statement and Proxy Statement/Prospectus shall comply
in all material respects with the requirements of the Securities Act, the
Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, Parent and Merger Sub make no representation or warranty with respect
to any information supplied by the Company which is contained or incorporated by
reference in, or furnished in connection with the preparation of, the
Registration Statement or the Proxy Statement/ Prospectus.
SECTION 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, to the best of Parent's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon Parent or any of its subsidiaries which
has or would reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of Parent or any of its subsidiaries,
any acquisition of property by Parent or any of its subsidiaries or the conduct
of business by Parent or any of its subsidiaries as currently conducted or as
proposed to be conducted by Parent, except for any prohibition or impairment as
would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.15. TITLE TO PROPERTY. Parent and each of its subsidiaries have
good and indefeasible title to all of their properties and assets, free and
clear of all liens, charges and encumbrances, except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which could not reasonably be expected to have a
Material Adverse Effect, and except for liens which secure indebtedness
reflected in the June 1996 Balance Sheet; and, to Parent's knowledge, all leases
pursuant to which Parent or any of its subsidiaries lease from other material
amounts of real or personal property are
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in good standing, valid and effective in accordance with their respective terms,
and there is not, to the knowledge of Parent, under any of such leases, any
existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default) except where the
lack of such good standing, validity and effectiveness, or the existence of such
default or event of default would not reasonably be expected to have a Material
Adverse Effect.
SECTION 3.16. TAXES. (a) Parent on behalf of itself and all its subsidiaries
hereby represents that, other than as disclosed in Section 3.16(a) of the Parent
Disclosure Schedule or the Parent SEC Reports: Parent and its subsidiaries have
timely filed all United States federal income Tax Returns and all other material
Tax Returns required to be filed by them. All such Tax Returns are complete and
correct in all material respects (except to the extent a reserve has been
established as reflected in the June 1996 Balance Sheet). Parent and its
subsidiaries have timely paid and discharged all Taxes due in connection with or
with respect to the periods or transactions covered by such Tax Returns and have
paid all other Taxes as are due, except such as are being contested in good
faith by appropriate proceedings (to the extent that any such proceedings are
required) and there are no other Taxes that would be due if asserted by a taxing
authority, except with respect to which Parent is maintaining reserves unless
the failure to do so would not reasonably be expected to have a Material Adverse
Effect. Except as does not involve or would not result in liability to Parent
that would reasonably be expected to have a Material Adverse Effect, (i) there
are no tax liens on any assets of Parent or any subsidiary thereof; (ii) neither
Parent nor any of its subsidiaries has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax; (iii) no unpaid (or unreserved) deficiencies for Taxes have been
claimed, proposed or assessed by any taxing or other governmental authority with
respect to Parent or any of its subsidiaries; (iv) there are no pending or
threatened audits, investigations or claims for or relating to any liability in
respect of Taxes of Parent or any of its subsidiaries; and (v) neither Parent
nor any of its subsidiaries has requested any extension of time within which to
file any currently unfiled returns in respect of any Taxes. The accruals and
reserves for taxes (including deferred taxes) reflected in the June 1996 Balance
Sheet are in all material respects adequate to cover all Taxes accruable through
the date thereof (including Taxes being contested) in accordance with GAAP.
(b) Parent on behalf of itself and all its subsidiaries hereby represents
that, other than as disclosed on Section 3.16(b) of the Parent Disclosure
Schedule or the Parent SEC Reports, and other than with respect to items the
inaccuracy of which could not reasonably be expected to have a Material Adverse
Effect: (i) neither Parent nor any of its subsidiaries is obligated under any
agreement with respect to industrial development bonds or other obligations with
respect to which the excludability from gross income of the holder for federal
or state income tax purposes could be affected by the transactions contemplated
hereunder; (ii) neither Parent nor any of its subsidiaries has filed or been
included in a combined, consolidated or unitary return (or substantial
equivalent thereof) of any Person other than Parent and its subsidiaries; (iii)
neither Parent nor any of its subsidiaries is liable for Taxes of any Person nor
any of its subsidiaries; (iv) neither Parent nor any of its subsidiaries is
liable for Taxes of any Person other than Parent and its subsidiaries, or
currently under any contractual obligation to indemnify any Person with respect
to Taxes, or a party to any tax sharing agreement or any other agreement
providing for payments by Parent or any of its subsidiaries with respect to
Taxes; (v) except entities the beneficial ownership of which is wholly owned by
the Parent and/or its subsidiaries, neither Parent nor any of its subsidiaries
is a party to any joint venture, partnership or other arrangement or contract
which could be treated as a partnership for United States federal income tax
purposes; (vi) neither Parent nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that would result (taking into account
the transactions contemplated by this Agreement), separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code; (vii) the prices for any property or services (or
for the use of property) provided by Parent or any of its subsidiaries to any
other subsidiary or to Parent have been arm's length prices determined using a
method permitted by the Treasury Regulations under Section 482 of the Code;
(viii) neither Parent nor any of its subsidiaries is a "consenting corporation"
under Section 341(f) of the Code or any corresponding provision of state, local
or foreign law; and
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(ix) neither Parent nor any of its subsidiaries has made an election or is
required to treat any of its assets as owned by another Person for federal
income tax purposes or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code (or any corresponding
provision of state, local or foreign law).
SECTION 3.17. ENVIRONMENTAL MATTERS. Except as set forth in Section 3.17 of
the Parent Disclosure Schedule, and except in all cases as, in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect, to the best of Parent's knowledge, Parent and each of its subsidiaries
(i) have obtained all applicable permits, licenses and other authorizations
which are required to be obtained under all applicable Environmental Laws by
Parent or its subsidiaries (or their respective agents); (ii) are in compliance
with all terms and conditions of such required permits, licenses and
authorizations, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (iii) as of
the date hereof, are not aware of nor have received written notice from any
governmental authority or third party of any past or present violations of
Environmental Laws, or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with or which would give rise to any common law or
statutory liability, or otherwise form the basis of any claim, action, suit or
proceeding, against Parent or any of its subsidiaries based on or resulting from
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic substance or
waste; and (iv) have taken all actions necessary under applicable Environmental
Laws to register any products or materials required to be registered by Parent
or its subsidiaries (or any of their respective agents) thereunder.
SECTION 3.18. BROKERS. No broker, finder or investment banker (other than
Smith Barney Inc., the fees and expenses of whom will be paid by Parent) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Merger Sub.
SECTION 3.19. INTELLECTUAL PROPERTY. (a) Parent and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or material
that are used in the business of Parent and its subsidiaries as currently
conducted, except as would not reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Section 3.19(b) of the Parent Disclosure Schedule
or the Parent SEC Reports or as could not reasonably be expected to have a
Material Adverse Effect: Parent is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements as to
which Parent is a party and pursuant to which Parent is authorized to use any
third-party patents, trademarks, service marks and copyrights ("Third-Party
Intellectual Property Rights"). No claims with respect to the patents,
registered and material unregistered trademarks and service marks, registered
copyrights, trade names and any applications therefor owned by Parent or any of
its subsidiaries (the "Parent Intellectual Property Rights"), any trade secret
material to the Parent, or Third Party Intellectual Property Rights to the
extent arising out of any use, reproduction or distribution of such Third Party
Intellectual Property Rights by or through Parent or any of its subsidiaries,
are currently pending or, to the knowledge of Parent, are overtly threatened by
any person. Parent does not know of any valid grounds for any bona fide claims
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by Parent or any
of its subsidiaries infringes on any copyright, patent, trademark, service mark
or trade secret; (ii) against the use by Parent or any of its subsidiaries of
any trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the business of
Parent or any of its subsidiaries as currently conducted or as proposed
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to be conducted; (iii) challenging the ownership, validity or effectiveness of
any part of the Parent Intellectual Property Rights or other trade secret
material to Parent; or (iv) challenging the license or legally enforceable right
to use of the Third Party Intellectual Rights by Parent or any of its
subsidiaries.
(c) To Parent's knowledge, all patents, registered trademarks and copyrights
held by Parent are valid and subsisting. Except as set forth in Section 3.19(c)
of the Parent Disclosure Schedule or the Parent SEC Reports, to the Parent's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Parent Intellectual Property by any third party,
including any employee or former employee of Parent or any of its subsidiaries.
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
3.21 of the Parent Disclosure Schedule or the Parent SEC Reports, since the date
of Parent's proxy statement dated September 20, 1996, no event has occurred that
would be required to be reported as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.21. INSURANCE. Except as disclosed in Section 3.21 of the Parent
Disclosure Schedule, all material fire and casualty, general liability, business
interruption, product liability and sprinkler and water damage insurance
policies maintained by Parent or any of its subsidiaries are with reputable
insurance carriers, provide full and adequate coverage for all normal risks
incident to the business of Parent and its subsidiaries and their respective
properties and assets and are in character and amount appropriate for the
businesses conducted by Parent, except as could not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.22. PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 3.22(a) of the Parent Disclosure Schedule or the Parent SEC Reports,
Parent is not aware of any claim, or the basis of any claim, against Parent or
any of its subsidiaries for injury to person or property of employees or any
third parties suffered as a result of the sale of any product or performance of
any service by Parent or any of its subsidiaries, including claims arising out
of the defective or unsafe nature of its products or services, which would
reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 3.22(b) of the Parent Disclosure Schedule
or the Parent SEC Reports, there is no pending or, to the knowledge of Parent,
overtly threatened, recall or investigation of any product sold by Parent, which
recall or investigation would reasonably be expected to have a Material Adverse
Effect.
SECTION 3.23. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. (a) Merger Sub
is a direct, wholly-owned subsidiary of Parent and was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by this Agreement, Merger
Sub has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 3.24. POOLING MATTERS. To the Parent's knowledge and based upon
consultation with its independent accountants, the Parent has provided to the
Company and its independent accountants all information concerning actions taken
or agreed to be taken by Parent or any of its affiliates on or before the date
of this Agreement that could reasonably be expected to adversely affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests. For purposes of this Section 3.26, "to the
Parent's knowledge" means to the actual knowledge of Parent's Chief Executive
Officer or Chief Financial Officer.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, the Company covenants
and agrees that, unless Parent shall otherwise agree in writing, and except as
set forth in Section 4.01 of the Company Disclosure Schedule, the Company shall
conduct its business and shall cause the businesses of its subsidiaries to be
conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use reasonable commercial efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, neither the Company nor any of its subsidiaries
shall, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, and
except as set forth in Section 4.01 of the Company Disclosure Schedule, directly
or indirectly do, or propose to do, any of the following without the prior
written consent of Parent:
(a) amend or otherwise change the Company's Articles of Incorporation or
By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) in the Company, any of its subsidiaries or affiliates (except for
the issuance of shares of Company Common Stock issuable pursuant to Stock
Options under the Company Stock Option Plans, which options are outstanding
on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $500,000);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly owned
subsidiary of the Company may declare and pay a dividend to its parent, and
except that the Company may declare and pay quarterly cash dividends of
$0.185 per share consistent with past practice, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any subsidiary to purchase, repurchase, redeem
or otherwise acquire, any of its securities or any securities of its
subsidiaries, including, without limitation, shares of Company Common Stock
or any option, warrant or right, directly or indirectly, to acquire shares
of Company Common Stock, or propose to do any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof other than those listed on Section 4.01(e) of the Company
Disclosure Schedule; (ii) incur any indebtedness for borrowed money, except
for borrowings and reborrowing under the Company's existing credit
facilities or issue any debt securities or assume, guarantee (other than
guarantees of bank debt of the Company's subsidiaries entered into in the
ordinary course of business) or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary
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course of business consistent with past practice; (iii) authorize any
capital expenditures or purchases of fixed assets which are, in the
aggregate, in excess of the amount set forth in Section 4.01 of the Company
Disclosure Schedule for the Company and its subsidiaries taken as a whole;
or (iv) enter into or amend any contract, agreement, commitment or
arrangement to effect any of the matters prohibited by this Section 4.01(e);
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in salary or wages of employees
of the Company or its subsidiaries in accordance with past practices, or
grant any severance or termination pay to, or enter into any employment or
severance agreement, in excess of $100,000 with any director, officer or
other employee of the Company or any of its subsidiaries, or establish,
adopt, enter into or amend any collective bargaining, agreement, Employee
Plan (within the meaning of Section 2.11 of this Agreement), trust, fund,
policy or arrangement for the benefit of any current or former directors,
officers or employees or any of their beneficiaries, except, in each case,
as may be required by law;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitations, except to
the extent the amount of any such settlement has been reserved for in the
financial statements contained in the Company SEC Reports filed prior to the
date of this Agreement;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $100,000 per matter or $1,000,000 in the aggregate, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against
in the financial statements contained in the Company SEC Reports filed prior
to the date of this Agreement or incurred in the ordinary course of business
and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (i) above, or any action which would
make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or prevent the Company from performing or
cause the Company not to perform its covenants hereunder.
SECTION 4.02. NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of its subsidiaries, solicit or encourage the initiation of
any inquiries or proposals regarding any merger, sale of substantial assets,
sale of shares of capital stock (including without limitation by way of a tender
offer) or similar transactions involving the Company or any subsidiaries of the
Company (any of the foregoing inquiries or proposals being referred to herein as
an "Acquisition Proposal"). Nothing contained in this Agreement shall prevent
the Board of Directors of the Company from (i) considering, negotiating,
approving and recommending to the shareholders of the Company a bona fide
Acquisition Proposal not solicited in violation of this Agreement, (ii) taking
and disclosing to its shareholders a position contemplated by Exchange Act Rule
14e-2 or (iii) making any disclosure to its shareholders; provided that, as to
each of clauses (i), (ii) and (iii), the Board of Directors of the Company
determines in good faith (upon advice of independent counsel, which may be
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.) that it is required to do so in
order to discharge properly its fiduciary duties.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any subsidiary by any
person or entity that informs
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the Board of Directors of the Company or such subsidiary that it is considering
making, or has made, an Acquisition Proposal. Such notice to Parent shall be
made orally and in writing, and shall indicate the identity of the person making
the Acquisition Proposal or intending to make an Acquisition Proposal or
requesting non-public information or access to the books and records of Parent,
the terms of any such Acquisition Proposal or modification or amendment to an
Acquisition Proposal, and whether the Company is providing or intends to provide
the person making the Acquisition roposal with access to information concerning
the Company as provided in Section 4.02(c).
(c) If the Board of Directors of the Company receives a request for material
nonpublic information by a person who makes a bona fide Acquisition Proposal,
and the Board of Directors determines in good faith and upon the advice of
independent counsel that it is required to cause the Company to act as provided
in this Section 4.02(c) in order to discharge properly the directors' fiduciary
duties, then, provided the person making the Acquisition Proposal has executed
an agreement with confidentiality provisions substantially similar to those then
in effect between the Company and Parent, the Company may provide such person
with access to information regarding the Company.
(d) Anything to the contrary in this Section or elsewhere in this Agreement
notwithstanding, the Board of Directors of the Company shall not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors of the matters set forth
in Section 5.02, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal or (iii) cause the Company to enter into any agreement
with respect to any Acquisition Proposal, except (x) upon the advice of
independent counsel that it is required to cause the Company to act as provided
in this Section 4.02(d) in order for the Board of Directors to act in a manner
consistent with its fiduciary duties and (y) with respect to the approval or
recommendation of any Acquisition Proposal or entering into any agreement with
respect to any Acquisition Proposal, after the third business day following
Parent's receipt of written notice of the information with respect to such
Acquisition Proposal, and, if applicable, the second business day after Parent's
receipt of written notice of the information with respect to all material
amendments or modifications thereto, in each case as contemplated by Section
4.02(b) above.
(e) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a party.
(f) The Company shall ensure that the officers, directors and employees of
the Company and its subsidiaries and any investment banker or other advisor or
representative retained by the Company are aware of the restrictions described
in this Section 4.02.
SECTION 4.03. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent covenants and agrees
that, except as set forth in Section 4.03 of Parent Disclosure Schedule or as
contemplated by the ADT Merger Agreement or unless the Company shall otherwise
agree in writing, Parent shall conduct its business, and cause the businesses of
its subsidiaries to be conducted, in the ordinary course of business and
consistent with past practice, other than actions taken by Parent or its
subsidiaries in contemplation of the Merger, and shall not directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise change Parent's Articles of Organization or
By-Laws;
(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
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agree to acquire any assets of any other person, which, in any such case,
would materially delay or prevent the consummation of the transactions
contemplated by this Agreement;
(c) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of any of its capital stock, except that a wholly owned subsidiary of Parent
may declare and pay a dividend to its parent, and except that Parent may
declare and pay quarterly cash dividends of $0.05 per share consistent with
past practice; or
(d) take or agree in writing or otherwise to take any action which would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect or prevent Parent from performing or cause
Parent not to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company shall
prepare and file with the SEC preliminary proxy materials which shall constitute
the Proxy Statement/Prospectus. As promptly as practicable after comments are
received from the SEC thereon and after the furnishing by the Company and Parent
of all information required to be contained therein, the Company shall file and
Parent shall cause ADT or New Tyco to file with the SEC a combined proxy and
Registration Statement on Form S-4 (or on such other form as shall be
appropriate) relating to the adoption of this Agreement and approval of the
transactions contemplated hereby by the shareholders of the Company pursuant to
this Agreement, and shall use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as practicable. The Proxy
Statement/Prospectus shall include the recommendation of the Board of Directors
of the Company in favor of the Merger, subject to the last sentence of Section
5.02.
SECTION 5.02. COMPANY SHAREHOLDERS MEETING. The Company shall call the
Company Shareholders Meeting as promptly as practicable for the purpose of
voting upon the approval of the Merger, and the Company shall use its reasonable
best efforts to hold the Company Shareholders Meeting as soon as practicable
after the date on which the Registration Statement becomes effective. Unless
otherwise required under the applicable fiduciary duties of the directors of the
Company, as determined by such directors in good faith after consultation with
and based upon the advice of independent legal counsel, the Company shall
solicit from its shareholders proxies in favor of approval of the Merger and
this Agreement, and shall take all other reasonable action necessary or
advisable to secure the vote or consent of shareholders in favor of such
approval.
SECTION 5.03. ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use reasonable efforts to be
released), the Company and Parent shall each (and shall cause each of their
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, reasonable access, during the period prior
to the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, the Company and Parent each shall (and shall
cause each of their subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and each shall make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either Parent or the Company may reasonably request. Each party shall keep
such information confidential in accordance with the terms of the
confidentiality letter, dated May 1, 1997 (the "Confidentiality Letter"),
between Parent and the Company.
SECTION 5.04. CONSENTS; APPROVALS. The Company and Parent shall each use
their reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all
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United States and foreign governmental and regulatory rulings and approvals),
and the Company and Parent shall make all filings (including, without
limitation, all filings with United States and foreign governmental or
regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company and Parent and the consummation by
them of the transactions contemplated hereby. The Company and Parent shall
furnish all information required to be included in the Proxy
Statement/Prospectus and the Registration Statement, or for any application or
other filing to be made pursuant to the rules and regulations of any United
States or foreign governmental body in connection with the transactions
contemplated by this Agreement.
SECTION 5.05. AGREEMENTS WITH RESPECT TO AFFILIATES. The Company shall
deliver to Parent, prior to the date the Registration Statement becomes
effective under the Securities Act, a letter (the "Affiliate Letter")
identifying all persons who are, at the time of the Company Shareholders
Meeting, anticipated to be "affiliates" of the Company for purposes of Rule 145
under the Securities Act ("Rule 145"), or the rules and regulations of the SEC
relating to pooling of interests accounting treatment for merger transactions
(the "Pooling Rules"). The Company shall use its reasonable best efforts to
cause each person who is identified as an "affiliate" in the Affiliate Letter to
deliver to Parent, no less than 35 days prior to the date of the Company
Shareholders Meeting a written agreement (an "Affiliate Agreement") in
connection with restrictions on affiliates under Rule 145 and pooling of
interests accounting treatment, in form mutually agreeable to the Company and
Parent.
SECTION 5.06. INDEMNIFICATION AND INSURANCE. (a) The By-Laws and Articles of
Incorporation of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the By-Laws and Articles of
Incorporation of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder as of the Effective
Time of individuals who at the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required after
the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Articles of Incorporation or
By-Laws, indemnify and hold harmless, each present and former director, officer
or employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the Company's Articles of
Incorporation or By-Laws or any applicable contract or agreement as in effect on
the date hereof, in each case for a period of six years after the date hereof.
In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) any counsel retained
by the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to the Surviving Corporation, (ii) after the Effective
Time, the Surviving Corporation shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received, and (iii) the
Surviving Corporation will cooperate in the defense of any such matter;
PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); and PROVIDED, FURTHER, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm to represent them in each
applicable jurisdiction with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties, in which
case each Indemnified Person with respect to whom such a conflict exists (or
group of such
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Indemnified Persons who among them have no such conflict) may retain one
separate law firm in each applicable jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements and employment
agreements (the employee parties under such agreements being referred to as the
"Officer Employees") with the Company's directors and officers existing at or
before the Effective Time.
(d) For a period of three years after the Effective Time, Parent shall cause
the Surviving Corporation to maintain in effect, if available, directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy of
which has been made available to Parent) on terms comparable to those now
applicable to directors and officers of the Company.
(e) From and after the Effective Time, Parent shall unconditionally
guarantee the timely payment of all funds owing by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section.
(f) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns of
the Surviving Corporation and shall be enforceable by the Indemnified Parties.
SECTION 5.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Merger Sub, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice; and PROVIDED FURTHER that failure
to give such notice shall not be treated as a breach of covenant for the
purposes of Sections 6.02(b) or 6.03(b) unless the failure to give such notice
results in material prejudice to the other party.
SECTION 5.08. FURTHER ACTION/TAX TREATMENT. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. The foregoing covenant shall not include any obligation by
Parent to agree to divest, abandon, license or take similar action with respect
to any assets (tangible or intangible) of Parent or the Company. Each of Parent,
Merger Sub and the Company shall use its reasonable best efforts to cause the
Merger to qualify, and will not (both before and after consummation of the
Merger) take any actions which to its knowledge could reasonably be expected to
prevent the Merger from qualifying, as a reorganization under the provisions of
Section 368 of the Code.
SECTION 5.09. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld; PROVIDED, HOWEVER, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law or the rules and
regulations of the NYSE, if it has used all reasonable efforts to consult with
the other party.
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SECTION 5.10. LISTING OF PARENT SHARES. Parent shall use its best efforts to
cause the shares of New Tyco Common Stock to be issued in the Merger to be
listed, upon official notice of issuance, on the NYSE prior to the Effective
Time.
SECTION 5.11. CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time and the
Surviving Corporation shall be responsible for the payment of all such taxes and
fees.
SECTION 5.12. ACCOUNTANT'S LETTERS. Upon reasonable notice from the other,
the Company shall use its best efforts to cause Arthur Andersen LLP to deliver
to Parent, and Parent shall use its best efforts to cause Coopers & Lybrand to
deliver to the Company, a letter covering such matters as are requested by
Parent or the Company, as the case may be, and as are customarily addressed in
accountant's "comfort" letters.
SECTION 5.13. POOLING ACCOUNTING TREATMENT. Parent and the Company each
agrees not to take any action that would reasonably be expected to adversely
affect the ability of Parent or New Tyco to account for the business combination
to be effected by the Merger as a pooling of interests, and Parent and the
Company each agrees to use its best efforts to take such action as may be
reasonably required to negate the impact of any past actions by Parent, the
Company or their respective affiliates which would reasonably be expected to
adversely impact the ability of Parent or New Tyco to treat the Merger as a
pooling of interests. The taking by Parent or the Company of any action
prohibited by the previous sentence, or the failure of Parent or the Company to
use its best efforts to take any action required by the previous sentence, if
the Merger is not able to be accounted for as a pooling of interests because of
such action or failure to take action, shall constitute a breach of this
Agreement by such party for the purposes of Section 7.01(i).
SECTION 5.14. RIGHTS AGREEMENT. Prior to the Effective Time, the Company
shall take all necessary action to (i) render rights (the "Company Rights")
issued pursuant to the Rights Agreement by and between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent (as amended, the
"Company Rights Agreement"), inapplicable to the Merger, and (ii) ensure that
(x) neither Parent nor any of its Affiliates (as defined in the Company Rights
Agreement) is an Acquiring Person (as defined in the Company Rights Agreement)
and (y) no Distribution Date, Section 11(a)(ii) Event, Section 13 Event, Stock
Acquisition Date or Triggering Date (each as defined in the Company Rights
Agreement) shall occur by reason of the approval, execution or delivery of this
Agreement, or the announcement or consummation of the Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose and no similar proceeding in respect of the Proxy
Statement/Prospectus shall have been initiated or threatened by the SEC;
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(b) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the requisite vote of the shareholders of the Company;
(c) LISTING. The shares of New Tyco Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance;
(d) HSR ACT. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
(e) GOVERNMENTAL ACTIONS. There shall not have been instituted, pending
or threatened any action or proceeding (or any investigation or other
inquiry that might result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction,
domestic or foreign, nor shall there be in effect any judgment, decree or
order of any governmental authority, administrative agency or court of
competent jurisdiction, or any other legal restraint (i) preventing or
seeking to prevent consummation of the Merger, (ii) prohibiting or seeking
to prohibit or limiting or seeking to limit, Parent (which for the purposes
of this Section 6.01(e) shall also be deemed to refer to New Tyco) from
exercising all material rights and privileges pertaining to its ownership of
the Surviving Corporation or the ownership or operation by Parent or any of
its subsidiaries of all or a material portion of the business or assets of
Parent or any of its subsidiaries, or (iii) compelling or seeking to compel
Parent or any of its subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of Parent or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as
a result of the Merger or the transactions contemplated by this Agreement;
(f) ILLEGALITY. No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(g) TAX OPINIONS. The Company shall have received a written opinion of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., and Parent shall have received
a written opinion of Kramer, Levin, Naftalis & Frankel, in form and
substance reasonably satisfactory to each of them to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of
the Code. Each party agrees to make all reasonable representations and
covenants in connection with the rendering of such opinions; and
(h) ADT MERGER. The ADT Merger shall have been consummated or the ADT
Merger Agreement shall have been terminated in accordance with its terms.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to effect the Merger are also subject
to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects on and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations and warranties
which address matters only as of a particular date (which shall have been
true and correct as of such date, subject to clause (iii)), or (iii) where
the failure to be true and correct could not reasonably be expected to have
a Material Adverse Effect, with the same force and effect as if made on and
as of the Effective Time, and Parent and Merger Sub shall have received a
certificate to such effect signed by the Chief Executive Officer or Chief
Financial Officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate
to such effect signed by the Chief Executive Officer or Chief Financial
Officer of the Company;
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(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Company for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company, except where the
failure to receive such consents, etc. could not reasonably be expected to
have a Material Adverse Effect on the Company or Parent;
(d) OPINION OF ACCOUNTANT. Parent shall have received an opinion of
Coopers & Lybrand, independent certified public accountants, to the effect
that the Merger, to the best of their knowledge after due inquiry, qualifies
for pooling of interests accounting treatment if consummated in accordance
with this Agreement and Company shall have received an opinion of Arthur
Andersen LLP, independent certified public accountants, to the effect that
the Merger, to the best of their knowledge after due inquiry, qualifies for
pooling of interests accounting treatment if consummated in accordance with
this Agreement. Such opinions shall be in form and substance reasonably
satisfactory to Parent; and
(e) AFFILIATE AGREEMENTS. Parent shall have received from each person
who is identified in the Affiliate Letter as an "affiliate" of the Company,
an Affiliate Agreement, and such Affiliate Agreement shall be in full force
and effect.
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct in all respects on and as of the Effective Time, except for (i)
changes contemplated by this Agreement, (ii) those changes resulting from
consummation of the ADT Merger in accordance with the terms of the ADT
Merger Agreement, (iii) those representations and warranties which address
matters only as of a particular date (which shall have been true and correct
as of such date, subject to clause (iv)), or (iv) where the failure to be
true and correct could not reasonably be expected to have a Material Adverse
Effect, with the same force and effect as if made on and as of the Effective
Time, and the Company shall have received a certificate to such effect
signed by the President or Chief Financial Officer of Parent;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by the President or Chief Financial
Officer of Parent;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Parent, Merger Sub or New Tyco for the authorization,
execution and delivery of this Agreement and the consummation by them of the
transactions contemplated hereby shall have been obtained and made by
Parent, Merger Sub or New Tyco, except where the failure to receive such
consents, etc. could not reasonably be expected to have a Material Adverse
Effect on the Company or Parent;
(d) NEW TYCO DISCLOSURES. In the event that the ADT Merger is
consummated before the Effective Time, there shall have been no change to
New Tyco and its subsidiaries from the disclosures regarding New Tyco and
its subsidiaries set forth in the Joint Proxy Statement/Prospectus, as
amended or supplemented, mailed to the shareholders of Parent in connection
with the ADT Merger, which is reasonably likely to have a Material Adverse
Effect on New Tyco.
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ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company or Parent:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by December 31, 1997 (provided that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date); or
(c) by either Parent or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued a nonappealable final order, decree or ruling or taken any other
action having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (provided that the right to terminate this Agreement
under this Section 7.01(c) shall not be available to any party who has not
complied with its obligations under Section 5.08 and such noncompliance
materially contributed to the issuance of any such order, decree or ruling
or the taking of such action); or
(d) by either Parent or the Company, if the requisite vote of the
shareholders of the Company shall not have been obtained by December 31,
1997, or if the shareholders of the Company shall not have approved the
Merger and this Agreement at the Company Shareholders Meeting; or
(e) by Parent, if (i) the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement
or the Merger in a manner adverse to Parent or shall have resolved to do so;
(ii) the Board of Directors of the Company shall have recommended to the
shareholders of the Company an Alternative Transaction (as hereinafter
defined); or (iii) a tender offer or exchange offer for 25% or more of the
outstanding shares of Company Common Stock is commenced (other than by
Parent or an affiliate of Parent) and the Board of Directors of the Company
recommends that the shareholders of the Company tender their shares in such
tender or exchange offer; or
(f) by the Company, if the Board of Directors of the Company shall
withdraw, modify or change its approval of this Agreement or the Merger in a
manner adverse to Parent or Merger Sub or shall have resolved to do so, in
each case in compliance with the provisions of Section 4.02; or
(g) by Parent or the Company, if any representation or warranty of the
Company, or Parent and Merger Sub, respectively, set forth in this Agreement
shall be untrue when made, such that the conditions set forth in Sections
6.02(a) or 6.03(a), as the case may be, would not be satisfied (a
"Terminating Misrepresentation"); PROVIDED, that, if such Terminating
Misrepresentation is curable prior to December 31, 1997 by the Company or
Parent, as the case may be, through the exercise of its reasonable best
efforts and for so long as the Company or Parent, as the case may be,
continues to exercise such reasonable best efforts, neither Parent nor the
Company, respectively, may terminate this Agreement under this Section
7.01(g); or
(h) by Parent, if any representation or warranty of the Company shall
have become untrue such that the condition set forth in Section 6.02(a)
would not be satisfied (a "Company Terminating Change"), or by the Company,
if any representation or warranty of Parent and Merger Sub shall have become
untrue such that the condition set forth in Section 6.03(a) would not be
satisfied (a "Parent Terminating Change" and together with a Company
Terminating Change, a "Terminating Change"), in either case other than by
reason of a Terminating Breach (as hereinafter defined); PROVIDED that if
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any such Terminating Change is curable prior to December 31, 1997 by the
Company or Parent, as the case may be, through the exercise of its
reasonable best efforts, and for so long as the Company or Parent, as the
case may be, continues to exercise such reasonable best efforts, neither
Parent nor the Company, respectively, may terminate this Agreement under
this Section 7.01(h); or
(i) by Parent or the Company, upon a breach of any covenant or agreement
on the part of the Company or Parent, respectively, set forth in this
Agreement, such that the conditions set forth in Sections 6.02(b) or
6.03(b), as the case may be, would not be satisfied (a "Terminating
Breach"); PROVIDED, THAT, if such Terminating Breach is curable prior to
December 31, 1997 by the Company or Parent, as the case may be, through the
exercise of its reasonable best efforts and for so long as the Company or
Parent, as the case may be, continues to exercise such reasonable best
efforts, neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(i).
(j) Notwithstanding any other provision of this Agreement, if the ADT
Merger is not either consummated or terminated in accordance with its terms,
the Company shall have the one-time right to terminate this Agreement
effective September 16, 1997; PROVIDED THAT, the Company has given Parent
written notice of such election prior to the close of business on September
15, 1997.
(k) by the Company, if (x) the Average Stock Price is less than $54.08
and (y) on or before the third trading day prior to the date of the Company
Shareholders Meeting, Parent has not agreed by notice to the Company in
writing to an Exchange Ratio equal to $31.00 (or higher) divided by the
Average Stock Price; PROVIDED that, the Exchange Ratio shall thereafter, for
all purposes of this Agreement, be deemed to be such ratio.
(l) by Parent, if (x) the Average Stock Price is less than $54.08 and
(y) on or before the second trading day prior to the date of the Company
Shareholders Meeting, the Company has not agreed by notice to Parent in
writing to an Exchange Ratio equal to 0.54183; PROVIDED that, the Exchange
Ratio shall thereafter, for all purposes of this Agreement, be deemed to be
such ratio.
In the event Parent delivers its notice specified in clause (y) of Section
7.01(k) or the Company delivers its notice specified in clause (y) of Section
7.01(l), then neither the Company nor the Parent shall have the right to
terminate this Agreement pursuant to Section 7.01(k) or 7.01(l), respectively.
As used herein, "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Parent, New Tyco
or its affiliates (a "Third Party") acquires or would acquire more than 25% of
the outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 25% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, or (iii) any other transaction pursuant to which any Third Party
acquires or would acquire control of assets (including for this purpose the
outstanding equity securities of subsidiaries of the Company, and the entity
surviving any merger or business combination including any of them) of the
Company, or any of its subsidiaries having a fair market value (as determined by
the Board of Directors of the Company in good faith) equal to more than 25% of
the fair market value of all the assets of the Company and its subsidiaries,
taken as a whole, immediately prior to such transaction; PROVIDED, HOWEVER, that
the term Alternative Transaction shall not include any acquisition of securities
by a broker dealer in connection with a bona fide public offering of such
securities.
SECTION 7.02. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.01, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or shareholders except (i) as set forth in
Section 7.03 and Section 8.01 hereof, and (ii) except as provided in Section
7.03, nothing herein shall relieve any party from liability for any breach
hereof.
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<PAGE>
SECTION 7.03. FEES AND EXPENSES. (a) Except as set forth in this Section
7.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that
Parent and the Company shall share equally all SEC filing fees and printing
expenses incurred in connection with the printing and filing of the Proxy
Statement/Prospectus (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) The Company shall pay Parent a fee of $35,000,000 (the "Fee"), plus
Parent's actual, documented and reasonable out-of-pocket expenses relating to
the transactions contemplated by this Agreement (including but not limited to,
fees and expenses of counsel and accountants and out-of-pocket expenses (but not
fees) of financial advisors) ("Expenses", as applicable to Parent or Company),
but in no event more than $2,000,000, as Parent's sole and exclusive remedy,
upon the first to occur of any of the following events:
(i) the termination of this Agreement by Parent or the Company pursuant
to Section 7.01(d) as a result of the failure to receive the requisite vote
for approval of the Merger and this Agreement by the shareholders of the
Company by December 31, 1997 or of the failure of the shareholders of the
Company to approve the Merger and this Agreement at the Company Shareholders
Meeting; or
(ii) the termination of this Agreement by Parent pursuant to Section
7.01(e); or
(iii) the termination of this Agreement by the Company pursuant to
Section 7.01(f); or
(iv) the termination of this Agreement by Parent pursuant to Section
7.01(i).
(c) Upon a termination of this Agreement by Parent pursuant to Section
7.01(g), the Company shall pay to Parent the Expenses of Parent relating to the
transactions contemplated by this Agreement, but in no event more than
$2,000,000, as its sole and exclusive remedy. Upon termination of this Agreement
by Company pursuant to Section 7.01(g), Parent shall pay to the Company the
Expenses of the Company relating to the transactions contemplated by this
Agreement, but in no event more than $2,000,000, as its sole and exclusive
remedy. Upon termination of this Agreement by either Parent or the Company
pursuant to Section 7.01(j) Parent shall pay to the Company the Expenses of the
Company relating to the transactions contemplated by this Agreement, but in no
event more than $2,000,000, as its sole and exclusive remedy.
(d) The Fee and/or Expenses payable pursuant to Section 7.03(b) or Section
7.03(c) shall be paid within one business day after a demand for payment
following the first to occur of any of the events described in Section 7.03(b)
or Section 7.03(c); PROVIDED THAT, in no event shall the Company or Parent, as
the case may be, be required to pay such Fee and/or Expenses to the other party,
if, immediately prior to the termination of this Agreement, the party entitled
to receive such Fee and/or Expenses was in material breach of its obligations
under this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as otherwise provided in this Section 8.01, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and Section 5.06 shall
A-39
<PAGE>
survive the Effective Time indefinitely and those set forth in Section 7.03
shall survive termination indefinitely. The Confidentiality Letter shall survive
termination of this Agreement as provided therein.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Parent Disclosure Schedule
shall not be deemed an admission that such matter is material.
SECTION 8.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
Tyco International Ltd.
One Tyco Park
Exeter, NH 03833
Telecopier No.: (603) 778-7330
Telephone No.: (603) 778-9700
Attention: Chairman
With a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 715-8000
Telephone No.: (212) 715-9100
Attention: Joshua M. Berman, Esq.
(b) If to the Company:
Keystone International, Inc.
9600 West Gulf Bank Road
Houston, Texas 77040
Telecopier No.: (713) 895-4044
Telephone No.: (713) 937-5313
Attention: General Counsel
With a copy to:
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Texas Commerce Tower
600 Travis
Houston, TX 77002
Telecopier No.: (713) 223-3717
Telephone No.: (713 ) 226-1397
Attention: Gene G. Lewis
SECTION 8.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) 'affiliates" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) 'beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its
A-40
<PAGE>
affiliates or associates (as such term is defined in Rule 12b-2 of the
Exchange Act) has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding, or (ii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares;
(c) 'business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(d) 'control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) 'person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(f) 'subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval of the
Merger and this Agreement by the shareholders of the Company, no amendment may
be made which by law requires further approval by such shareholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.06. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. SEVERABILITY. (a) If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
(b) The Company and Parent agree that the Fee provided in Section 7.03(b) is
fair and reasonable in the circumstances, considering not only the Merger
Consideration but also the outstanding funded
A-41
<PAGE>
indebtedness (including capital leases) of the Company and its subsidiaries. If
a court of competent jurisdiction shall nonetheless, by a final, non-appealable
judgment, determine that the amount of the Fee exceeds the maximum amount
permitted by law, then the amount of the Fee shall be reduced to the maximum
amount permitted by law in the circumstances, as determined by such court of
competent jurisdiction.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein.
SECTION 8.09. ASSIGNMENT; MERGER SUB. This Agreement shall not be assigned
by operation of law or otherwise, except that all or any of the rights of Merger
Sub hereunder may be assigned to any direct, wholly-owned subsidiary of Parent
or New Tyco provided that no such assignment shall relieve the assigning party
of its obligations hereunder. Merger Sub's rights under this Agreement shall be
assigned to a direct, wholly-owned subsidiary of New Tyco, if such assignment is
required in order that the Merger will constitute a tax-free reorganization
within the meaning of Section 368 of the Code. Parent guarantees the full and
punctual performance by Merger Sub of all the obligations hereunder of Merger
Sub or any such assignees.
SECTION 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.06 (which is intended to be for the benefit of the Indemnified Parties
and Officer Employees and may be enforced by such Indemnified Parties and
Officer Employees).
SECTION 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12. GOVERNING LAW; JURISDICTION. (a) This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York applicable to contracts executed and fully performed within the State
of New York.
(b) Each of the parties hereto submits to the non-exclusive jurisdiction of
the federal courts of the United States located in the City of New York, Borough
of Manhattan or in the City of Houston, Texas with respect to any claim or cause
of action arising out of this Agreement or the transactions contemplated hereby.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
A-42
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
TYCO INTERNATIONAL LTD.
By: /s/ L. DENNIS KOZLOWSKI
--------------------------------
Name: L. Dennis Kozlowski
Title: Chief Executive Officer and
Chairman of the Board
By: /s/ MARK H. SWARTZ
--------------------------------
Name: Mark H. Swartz
Title: Chief Financial Officer and
Vice President
T6 ACQUISITION CORP.
By: /s/ L. DENNIS, KOZLOWSKI
--------------------------------
Name: L. Dennis Kozlowski
Title: Chief Executive Officer
By: /s/ MARK H. SWARTZ
--------------------------------
Name: Mark H. Swartz
Title: Chief Financial Officer
KEYSTONE INTERNATIONAL, INC.
By: /s/ NISHAN TESHOIAN
--------------------------------
Name: Nishan Teshoian
Title: Chairman of the Board &
Chief Executive Officer
By: /s/ FRANCIS S. KALMAN
--------------------------------
Name: Francis S. Kalman
Title: Chief Financial Officer
A-43
<PAGE>
ANNEX B
OPINION OF GOLDMAN, SACHS & CO.
B-1
<PAGE>
KEYSTONE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Keystone International, Inc. hereby appoints
Nishan Teshoian and Francis S. Kalman, or either of them, proxies, with full
power of substitution, to vote at the Special Meeting of Shareholders to be held
at Texas Commerce Tower, 600 Travis, 25th Floor Conference Room, Houston, Texas
77002, at 10:00 a.m. Central Time, , 1997, and any adjournment or
adjournments thereof, the shares of Common Stock of Keystone International, Inc.
which the undersigned is entitled to vote, on all matters that may properly come
before the Special Meeting.
(1) To approve the merger of Keystone with T8 Acquisition Corp., a wholly-owned
subsidiary of Tyco International Ltd., a Bermuda company limited by shares (the
"Merger"), and to approve the Agreement and Plan of Merger related thereto (the
"Merger Agreement").
____ FOR the approval of the Merger and the Merger Agreement.
____ AGAINST the approval of the Merger and the Merger Agreement.
____ ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
You are urged to cast your vote by marking the appropriate box. PLEASE NOTE THAT
UNLESS A CONTRARY INTENTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ITEM 1.
Proxies marked as abstentions will not be counted as votes cast. Proxies marked
as abstentions, however, will be treated as shares present for purposes of
determining whether a quorum is present. In addition, shares held in street
names which have been designated by brokers on proxy cards as not voted will not
be counted as present or as votes cast.
______________________________________
(Signature)
______________________________________
(Signature)
Dated: _________________________, 1997
IMPORTANT: Please sign your name or names exactly as shown hereon and date your
proxy in the blank space provided above. For joint accounts, each joint owner
must sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give your full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Bye-Law 102 of the Tyco Bye-Laws provides, in part, that Tyco shall
indemnify its directors and other officers for all costs, losses and expenses
which they may incur in the performance of their duties as director or officer,
provided that such indemnification is not otherwise prohibited under the
Companies Act 1981 (as amended) of Bermuda. Section 98 of the Companies Act 1981
(as amended) prohibits such indemnification against any liability arising out of
the fraud or dishonesty of the director or officer. However, such section
permits Tyco to indemnify a director or officer against any liability incurred
by him in defending any proceedings, whether civil or criminal, in which
judgment is given in his favor or in which he is acquitted or when other similar
relief is granted to him.
The Registrant maintains $75,000,000 of insurance to reimburse its directors
and officers for charges and expenses incurred by them for wrongful acts claimed
against them by reason of their being or having been directors or officers of
the Registrant or any subsidiary thereof. Such insurance specifically excludes
reimbursement of any director or officer for any charge or expense incurred in
connection with various designated matters, including libel or slander,
illegally obtained personal profits, profits recovered by the Registrant
pursuant to Section 16(b) of the Exchange Act and deliberate dishonesty.
ITEM 21. EXHIBITS
<TABLE>
<C> <S>
2.1 --Agreement and Plan of Merger, dated as of May 20, 1997, by and among Old Tyco, T6
Acquisition Corp. and Keystone International, Inc. (included as Annex A to the Proxy
Statement/Prospectus which forms a part of this Registration Statement)
2.2 --Form of Assignment Agreement between T6 Acquisition Corp. and T8 Acquisition Corp.
3.1 --Memorandum of Association of Registrant (previously filed as an Exhibit to
Registrant's Annual Report on Form 10-K for the Year Ended December 31, 1996)
3.2 --Certificate of Incorporation on Change of Name (previously filed as an Exhibit to
the Registrant's Current Report on Form 8-K filed July 10, 1997 (the "July 10, 1997
8-K"))
3.3 --Bye-Laws of the Registrant (previously filed as an Exhibit to the July 10, 1997 Form
8-K)
4.1 --Rights Agreement between Registrant and Citibank, N.A. dated as of November 6, 1996
(previously filed as an Exhibit to Registrant's Form 8-A dated November 12, 1996)
4.2 --First Amendment between Registrant and Citibank, N.A. dated as of March 3, 1997 to
Rights Agreement between Registrant and Citibank, N.A. dated as of November 6, 1996
(previously filed as an Exhibit to Registrant's Form 8-A/A dated March 3, 1997)
4.3 --Second Amendment between Registrant and Citibank, N.A. dated as of July 2, 1997 to
Rights Agreement between Registrant and Citibank N.A. dated as of November 6, 1996
(previously filed as an Exhibit to Registrant's Form 8-A/A dated July 2, 1997)
5 --Form of Opinion of Appleby, Spurling & Kempe regarding the validity of the Tyco
Common Shares to be issued to the Keystone shareholders
8.1 --Tax Opinion of Kramer, Levin, Naftalis & Frankel*
8.2 --Tax Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.*
8.3 --Tax Opinion of Appleby, Spurling & Kempe*
23.1 --Consent of Coopers & Lybrand
23.2 --Consent of Coopers & Lybrand L.L.P.
23.3 --Consent of Arthur Andersen LLP
23.4 --Consent of Appleby, Spurling & Kempe (to be contained in Exhibit 5 and Exhibit 8.3)
23.5 --Consent of Kramer, Levin, Naftalis & Frankel (to be contained in Exhibit 8.1)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
23.6 --Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. (to be contained in Exhibit
8.2)
24 --Power of Attorney (contained on signature page)
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrant undertakes that prior to any public reoffering of the
securities registered hereunder through use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Exeter, State of New Hampshire, on the 18th day of
July 1997.
TYCO INTERNATIONAL LTD.
By: /s/ MARK H. SWARTZ
------------------------------------------
Mark H. Swartz
Executive Vice President-Chief Financial
Officer
(Principal Financial and Accounting
Officer)
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints L. DENNIS KOZLOWSKI AND MARK H. SWARTZ, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement (including all pre-effective and
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on July 18, 1997
in the capacities indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ L. DENNIS KOZLOWSKI Chairman of the Board, President, Chief Executive
------------------------------------------------ Officer and Director (Principal Executive Officer)
L. Dennis Kozlowski
/s/ MICHAEL A. ASHCROFT Director
------------------------------------------------
Michael A. Ashcroft
/s/ JOSHUA M. BERMAN Director and Vice President
------------------------------------------------
Joshua M. Berman
Director
------------------------------------------------
Richard S. Bodman
/s/ JOHN F. FORT Director
------------------------------------------------
John F. Fort
/s/ STEPHEN W. FOSS Director
------------------------------------------------
Stephen W. Foss
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
Director
------------------------------------------------
Richard A. Gilleland
Director
------------------------------------------------
Philip M. Hampton
Director
------------------------------------------------
James S. Pasman, Jr.
/s/ W. PETER SLUSSER Director
------------------------------------------------
W. Peter Slusser
/s/ MARK H. SWARTZ Executive Vice President-Chief Financial Officer
------------------------------------------------ (Principal Financial and Accounting Officer)
Mark H. Swartz
/s/ FRANK E. WALSH, JR. Director
------------------------------------------------
Frank E. Walsh, Jr.
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
2.1 --Agreement and Plan of Merger, dated as of May 20, 1997, by and among Old Tyco, T6
Acquisition Corp. and Keystone International, Inc. (included as Annex A to the Proxy
Statement/Prospectus which forms a part of this Registration Statement)
2.2 --Form of Assignment Agreement between T6 Acquisition Corp. and T8 Acquisition Corp.
3.1 --Memorandum of Association of Registrant (previously filed as an Exhibit to Registrant's
Annual Report on Form 10-K for the Year Ended December 31, 1996)
3.2 --Certificate of Incorporation on Change of Name (previously filed as an Exhibit to the
Registrant's Current Report on Form 8-K filed July 10, 1997 (the "July 10, 1997 8-K"))
3.3 --Bye-Laws of the Registrant (previously filed as an Exhibit to the July 10, 1997 Form 8-K)
4.1 --Rights Agreement between Registrant and Citibank, N.A. dated as of November 6, 1996
(previously filed as an Exhibit to Registrant's Form 8-A dated November 12, 1996)
4.2 --First Amendment between Registrant and Citibank, N.A. dated as of March 3, 1997 to Rights
Agreement between Registrant and Citibank, N.A. dated as of November 6, 1996 (previously
filed as an Exhibit to Registrant's Form 8-A/A dated March 3, 1997)
4.3 --Second Amendment between Registrant and Citibank, N.A. dated as of July 2, 1997 to Rights
Agreement between Registrant and Citibank N.A. dated as of November 6, 1996 (previously
filed as an Exhibit to Registrant's Form 8-A/A dated July 2, 1997)
5 --Form of Opinion of Appleby, Spurling & Kempe regarding the validity of the Tyco Common
Shares to be issued to the Keystone shareholders
8.1 --Tax Opinion of Kramer, Levin, Naftalis & Frankel*
8.2 --Tax Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.*
8.3 --Tax Opinion of Appleby, Spurling & Kempe*
23.1 --Consent of Coopers & Lybrand
23.2 --Consent of Coopers & Lybrand L.L.P.
23.3 --Consent of Arthur Andersen LLP
23.4 --Consent of Appleby, Spurling & Kempe (to be contained in Exhibit 5 and Exhibit 8.3)
23.5 --Consent of Kramer, Levin, Naftalis & Frankel (to be contained in Exhibit 8.1)
23.6 --Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. (to be contained in Exhibit 8.2)
24 --Power of Attorney (contained on signature page)
</TABLE>
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* To be filed by amendment.
II-6
<PAGE>
EXHIBIT 2.2
ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of July 1997 (this "Agreement"),
between T6 ACQUISITION CORP. ("T6"), a Texas corporation and a direct,
wholly-owned subsidiary of Tyco International (US) Inc. (formerly Tyco
International Ltd.), a Massachusetts corporation ("Old Tyco"), and T8
ACQUISITION CORP. ("T8"), a Texas corporation and a direct, wholly-owned
subsidiary of Tyco International Ltd., a Bermuda company limited by shares
("Tyco").
1. Old Tyco, T6 and Keystone International, Inc. are parties to that
certain Agreement and Plan of Merger dated as of May 20, 1997 (the "Merger
Agreement");
2. Pursuant to Section 8.09 of the Merger Agreement, all or any of
the rights of T6 may be assigned to any direct, wholly-owned subsidiary of
Old Tyco or Tyco provided that no such assignment shall relieve T6 of its
obligations under the Merger Agreement. T6's rights under the Merger
Agreement shall be assigned to a direct, wholly-owned subsidiary of Tyco if
such assignment is required in order that the merger contemplated by the
Merger Agreement constitute a tax-free reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended; and
3. T6 desires to assign, and T8 desires to assume, all of the rights
and obligations of T6 under the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and for such other
good and valuable consideration, the receipt of which is hereby acknowledged,
T6 and T8 agree that all of the rights and obligations of T6 under the Merger
Agreement are hereby assigned to, and assumed by, T8.
IN WITNESS WHEREOF, T6 and T8 have caused this Agreement to be
executed by their respective, duly authorized officers as of the date first
written above.
T6 ACQUISITION CORP.
By: ________________
Name:
Title:
T8 ACQUISITION CORP.
By: ________________
Name:
Title:
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-4 of Tyco International Ltd. (formerly named ADT Limited)
of our report dated July 10, 1997, on our examination of the combination of the
historical consolidated financial statements and consolidated financial
statement schedule of ADT Limited and Tyco International Ltd. (prior to the
merger) after restatement for the pooling of interests as described in Note 1
to the supplemental consolidated financial statements, which report is included
in the Company's Current Report on Form 8-K dated July 10, 1997. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND
Hamilton, Bermuda
July 18, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-4 of our report dated July 10, 1997 which is included in the Company's
current report on Form 8-K on our audits of the consolidated financial
statements and the consolidated financial statement schedule of Tyco
International Ltd. as of December 31, 1996 and June 30, 1995 and for the years
ended December 31, 1996, June 30, 1995 and June 30, 1994 (not presented
separately therein). We also consent to the reference to our firm under the
caption "Experts."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 18, 1997
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report on the financial
statements of Keystone International, Inc. dated January 31, 1997 incorporated
by reference in Tyco International, Ltd.'s Form S-4 covering the proposed
merger of Keystone International, Inc. and Tyco International, Ltd. and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
July 18, 1997
