SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
ADT LIMITED
(Name of Subject Company)
ADT LIMITED
(Name of Person(s) Filing Statement)
Common Shares, par value $0.10 per share
(including the associated preference stock purchase rights)
(Title of Class of Securities)
000915 10 8
(CUSIP Number of Class of Securities)
Stephen J. Ruzika
c/o ADT, Inc.
1750 Clint Moore Road
Boca Raton, FL 33431-0835
(561) 988-3600
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
With a copy to:
David W. Ferguson, Esq.
Davis Polk & Wardwell
450 Lexington Ave.
New York, New York 10017
Item 1.Security and Subject Company.
The name of the subject company is ADT Limited, a corporation organized
under the laws of Bermuda ("ADT" or the "Company"). The principal executive
offices of ADT are located at Cedar House, 41 Cedar Avenue, Hamilton HM12,
Bermuda. The title of the class of equity securities to which this Statement
relates is the common shares, par value $0.10 per share, of ADT (the "Common
Shares"), including the associated preference stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of November 6,
1996, as amended, (the "Rights Agreement") between ADT and Citibank, N.A., New
York branch, as Rights Agent.
Item 2. Tender Offer of the Bidder.
This Statement relates to the proposed exchange offer disclosed in a
Registration Statement on Form S-4 dated December 18, 1996, as amended by
Amendment No. 1 dated February 3, 1997 and Amendment No. 2 dated February
25, 1997 (the "Western S-4") by Western Resources, Inc., a Kansas
corporation ("Western"), to exchange a combination of Western common stock,
par value $5.00 per share, and cash for any and all of the outstanding
Common Shares (the "Western Offer"). On March 3, 1997, Western issued a
press release (the "March 3rd Press Release") in which it announced an
intention to change the mix of consideration payable pursuant to the
Western Offer, but without changing the maximum value of such
consideration. Prior to the March 3rd Press Release, Western, in its
preliminary prospectus included in the Western S-4, had stated that it
intended to commence the Western Offer, upon the terms and subject to the
conditions set forth in the Western S-4 and in a related Letter of
Transmittal, to exchange $7.50 net in cash and a number of shares of
Western common stock valued at a maximum of $15 (depending on a pricing
formula) for each of the Common Shares validly tendered on or prior to the
Expiration Date (as defined in the Western S-4) of the Western Offer and
not properly withdrawn. In the March 3rd Press Release, Western announced
that it intended to amend the Western Offer to increase the cash portion of
its offer to $10.00 per Common Share and to decrease the number of shares
of Western common stock so that the maximum value of the shares of Western
common stock exchangeable for each Common Share is $12.50. The March 3rd
Press Release states that based on the closing price of Western's common
stock on February 28, 1997, ADT shareholders would receive $10.00 in cash
plus 0.41322 of a share of Western common stock for each Common Share
pursuant to the Western Offer. The precise formula for determining the
number of shares of Western common stock to be exchanged for each Common
Share pursuant to the Western Offer is not set forth in the March 3rd Press
Release. However, the press release does state that ADT shareholders would
not receive more than 0.42017 of a share of Western common stock for each
Common Share. The consideration proposed to be paid by Western pursuant to
the Western Offer, as amended by the March 3, 1997 Press Release, is
referred to herein as the "Exchange Consideration".
According to the Western S-4, Western intends, following consummation of
the proposed Western Offer, to seek to merge a subsidiary of Western with and
into ADT pursuant to applicable law (the "Proposed Western Amalgamation").
According to the Western S-4, the principal executive offices of Western
are located at 818 Kansas Avenue, Topeka, Kansas 66612.
Item 3. Identity and Background.
(a)The name and business address of ADT, which is the person
filing this Statement, are set forth in Item 1 above.
(b)(1)Certain information with respect to certain contracts,
agreements, arrangements or understandings between ADT or its affiliates and
certain of its executive officers, directors and affiliates is set forth in
pages 11-30 of ADT's Notice of Annual General Meeting of Shareholders and
Proxy Statement dated March 12, 1996 for ADT's 1996 Annual General Meeting of
Shareholders (the "1996 Proxy Statement"), copies of which pages are attached
as Exhibit 99.4 to this Statement and are incorporated herein by reference.
The amendments to ADT's 1993 Long Term Incentive Plan described in the 1996
Proxy Statement became effective following their approval by the shareholders
at ADT's Annual Meeting held on April 11, 1996.
The Company has entered into a written employment agreement
with Mr. Ashcroft, dated as of May 8, 1993. An amendment to the agreement was
approved on November 4, 1996, which provides that Mr. Ashcroft shall serve as
Chairman of the Board and Chief Executive Officer until March 31, 2000,
subject to renewal for additional two-year terms thereafter. Mr. Ashcroft's
initial base salary was $1,000,000 per annum subject to annual review and
adjustment by ADT's Board of Directors (the "Board") but may only be reduced
by a maximum of 15 per cent during the term of the agreement without Mr.
Ashcroft's consent. During 1996, Mr. Ashcroft's base salary was increased to
$1,157,625 per annum. Mr. Ashcroft is also eligible for annual bonus payments
based upon an earnings-per-share target for the Common Shares set each year,
subject to a maximum bonus of $4,000,000. The maximum bonus is payable upon
attaining 117.5 per cent of the targeted earnings per share. As a term of the
contract, Mr. Ashcroft was granted options to purchase 1,000,000 Common Shares
under the ADT 1993 Long Term Incentive Plan, with 50 per cent of such options
exercisable at market value on the date of grant, as defined, 25 per cent
exercisable at 110 per cent of market value, and 25 per cent exercisable at
120 per cent of market value, vesting in equal annual installments over a
three-year period commencing one year from the date of grant and exercisable
over a ten-year period. The Company will make annual payments to Mr. Ashcroft
calculated to provide him with retirement and death benefits no less favorable
than if he were a member of the pension plan maintained by ADT Group PLC.
Such annual payments will not be less than $450,000. The Company may
terminate the agreement upon Mr. Ashcroft's death, when Mr. Ashcroft attains
the age of 60, if Mr. Ashcroft is unable to perform his duties for 180 days
due to ill heath, accident or otherwise, if Mr. Ashcroft fails to discharge
his duties or engages in conduct that is materially injurious to the Company,
or if Mr. Ashcroft willfully and continually commits a material breach of the
agreement. Mr. Ashcroft may terminate the agreement upon, among other
reasons, a breach by the Company which breach (except for a material breach)
is not cured within 30 days, if he is removed from his position as Chairman of
the Board or his position as Chief Executive Officer, or if the scope of his
duties and responsibilities becomes inconsistent with his position as an
officer of the Company.
Mr. Ashcroft may also terminate the agreement without cause at
any time upon 90 days notice. In the event the agreement is terminated
pursuant to its terms by the Company or without cause by Mr. Ashcroft upon 90
days notice, Mr. Ashcroft will be entitled to the pro rata portion of his base
salary, bonus payment, pension payment and other benefits but will not be
entitled to any additional payments. If the agreement is terminated due to a
disability, Mr. Ashcroft will be entitled to an additional payment equal to
two times his highest base salary. In the event the agreement is terminated
by the Company without cause or by Mr. Ashcroft with cause, Mr. Ashcroft will
be entitled to a severance payment equal to two times his highest base salary
and average bonus payment, annual pension payments for the year of termination
and the following two years, and one year of any other benefits previously
provided.
Mr. Ruzika entered into an employment agreement with ADT as of
February 26, 1997. The agreement provides that Mr. Ruzika will serve as Chief
Financial Officer of ADT and as President of ADT Security Services, Inc., ADT
Operations, Inc. and ADT, Inc., subsidiaries of ADT, from March 1, 1997 until
February 28, 1999, subject to renewal for additional two-year terms
thereafter. Mr. Ruzika's initial annual base salary will be $694,500 and will
be subject to annual review for possible adjustments. Mr. Ruzika will also be
eligible for annual bonus payments at the discretion of the Company as well as
other compensation and benefit plans of the Company including stock option
plans. The termination provisions of this agreement provide that in the event
that agreement is terminated by ADT without cause or by Mr. Ruzika with cause,
Mr. Ruzika will be entitled to receive a severance payment equal to twice his
base salary and certain fringe benefits.
Mr. Lakey entered into an employment agreement with ADT, Inc.
as of January 16, 1997. The agreement provides that Mr. Lakey will have
operational responsibility for ADT's electronic security operations in Canada
and Europe from January 16, 1997 until December 31, 1999, subject to renewal
for additional two-year terms thereafter. Mr. Lakey's initial annual base
salary will be $265,000. Mr. Lakey will also be eligible for annual bonus
payments at the discretion of the Company as well as certain other enumerated
benefits and relocation expenses. The termination provisions of this
agreement include a term to the effect that, in the event that agreement is
terminated by ADT without cause or by Mr. Lakey with cause, Mr. Lakey will be
entitled to receive his base salary and certain fringe benefits for two years.
Under ADT Inc.'s supplemental executive retirement plan (the
"ADT SERP") (and, in the case of Mr. Ruzika, the Supplemental Benefit
Agreement between Mr. Ruzika and ADT Management Services Limited (the
"Supplemental Benefit Agreement")), Mr. Ruzika and Mr. Lakey become fully
vested in the accrued benefits thereunder upon a Change in Control (as defined
below) of the Company or ADT, Inc. Mr. Ruzika also becomes fully vested upon a
Change in Control (as defined below) of ADT Management Services Limited. If
Mr. Ruzika or Mr. Lakey's employment is terminated within one year from the
date of a Change in Control, the terminated executive will receive, in lieu of
all other amounts due to him under the ADT SERP (and, in Mr. Ruzika's case,
the Supplemental Benefit Agreement), a lump-sum distribution equal to the
present value of his accrued benefit and an additional amount calculated under
a formula intended to put him in the same after-tax position that he would
have been in if he had received a lump-sum distribution of his accrued benefit
on his normal retirement date. Under this formula Mr. Ruzika would currently
receive an additional amount of approximately $653,295 and Mr. Lakey would
currently receive an additional amount of approximately $54,253.
A "Change in Control" is deemed to have occurred under the ADT
SERP if : (1) any person (other than Laidlaw, Inc. or its affiliates,
collectively the "Laidlaw Group") acquires more than 40 per cent of the
Company's voting stock (the triggering percentage has been reduced from 40 per
cent to 35 per cent because the Laidlaw Group's beneficial ownership of the
Company's voting stock is less than 20 per cent); (2) the Laidlaw Group
becomes the beneficial owner of more than 45 per cent of the Company's
outstanding voting stock; (3) there is a change of 50 per cent or more in the
composition of the Company's directors during any 3-year period (unless the
change in directors was approved by two thirds of the directors in office at
the beginning of such 3-year period or directors who had previously been
elected with the requisite two thirds approval); (4) a person acquires the
legal right to direct the management and policies of the Company (other than
by virtue of membership on the board of directors or a committee of the
board); (5) the Company ceases to own, directly or indirectly through
subsidiaries, at least 80 per cent of the voting stock of ADT, Inc. or (6) the
shareholders of either the Company or ADT, Inc. approve a merger,
consolidation or a sale or disposition of all, or substantially all, of the
assets of the Company or ADT, Inc. as the case may be, with the relevant
company not surviving. In the case of Mr. Ruzika, the provisions of (4), (5),
and (6) above include a change in the ownership of ADT Management Services
Limited (as well as the Company or ADT, Inc.).
Mr. Richardson entered into an employment agreement with ADT
Automotive Holdings, Inc. ("ADT Automotive Holdings"), the corporate parent of
ADT Automotive, Inc., as of November 30, 1993. The agreement provides that Mr.
Richardson will serve as Chief Executive Officer of ADT Automotive Holdings
and its subsidiaries from December 1, 1993 until July 31, 1996, subject to
renewal for additional one-year terms thereafter. The agreement was renewed
on a year-to-year basis as of July 31, 1996. The agreement provides that the
term will be extended for an additional one year period thereafter unless
either ADT Automotive Holdings or Mr. Richardson shall have given the other
notice of intention not to extend the term six months prior to July 31, 1997.
On January 29, 1997 ADT Automotive Holdings and Mr. Richardson entered into an
agreement which provides that Mr. Richardson's time to give such notice is
extended to and including April 30, 1997. Mr. Richardson's initial annual
base salary will be $300,000 and will be subject to annual review for possible
increases. Mr. Richardson will also be eligible for annual bonus payments at
the discretion of the Company. The termination provisions of this agreement
include a term to the effect that, in the event that agreement is terminated
by ADT Automotive Holdings without cause or by Mr. Richardson with cause, Mr.
Richardson will be entitled to receive his base salary and certain fringe
benefits for two years or the remaining term of the agreement, whichever is
longer.
Mr. Richardson has also entered into an incentive compensation
agreement for payment upon the successful sale of ADT Automotive Holdings by
the Company. To the extent that the gross consideration for such sale exceeds
$430 million, on completion of the sale, ADT has agreed to pay Mr. Richardson
one-half of one per cent of such excess. Gross consideration is deemed to be
the aggregate of proceeds received by ADT and debt remaining in the auctions
group which is assumed by the purchaser other than debt considered to be a
component of working capital, including bank overdrafts.
The Remuneration Committee of the Board has considered the
recommendations of the Company's outside independent human resources
consultants, and has reviewed industry practices concerning change in control
severance benefits. In view of the need to minimize employee distractions and
to retain employee loyalty and dedication to the Company and to assure
attention to the Company's performance pending resolution of the Western
Offer, on February 27, on the recommendation of the Remuneration Committee,
the Board unanimously approved a severance agreement between Mr. Gross and ADT
Security Services, Inc. in the event of a change of control, which severance
arrangement it has determined is fair and consistent with industry practices.
The agreement provides that in the event that there is a "Severance Change in
Control" (as defined below) of ADT prior to February 9, 2000, and either (x)
Mr. Gross's employment is terminated without cause or (y) Mr. Gross terminates
his employment for good reason, Mr. Gross shall be entitled to (a) an amount
of severance pay equal to twice the total of (i) the higher of his annual full
base salary as of the date of termination or as of the date of the Severance
Change in Control, calculated on an annualized basis, plus (ii) the amount of
the bonus awarded to Mr. Gross, if any, in the year prior to the date of
termination and (b) for the twelve-month period following such termination,
benefits substantially similar to the higher of those which Mr. Gross is
receiving immediately prior to the date of termination or as of the date of
the Severance Change in Control. A "Severance Change in Control" is deemed to
have occurred under the severance agreement if: (1) any person becomes the
beneficial owner of more than 50 per cent of ADT's then-outstanding voting
securities; (2) there is a change of 50 per cent or more in the composition
of the Company's directors during the term of the agreement (unless the change
in directors was approved by two thirds of the directors in office at the
beginning of such term or directors who had previously been elected with the
requisite two thirds approval); (3) a person acquires the legal right to
direct the management and policies of the Company (other than by virtue of
membership on the board of directors or a committee of the board); or (4) the
shareholders of ADT approve a merger, consolidation or a sale or disposition
of all, or substantially all, of the assets of ADT in which ADT is not the
surviving entity.
In 1996, the Remuneration Committee of the Board resolved to
increase the subscription price and size of certain share options held by Mr.
Ashcroft and Mr. Ruzika. In 1993, Mr. Ashcroft and Mr. Ruzika were granted
options to subscribe for 3,000,000 and 125,000 Common Shares respectively at
an exercise price of $8.625 per share for which each was required to pay $2.50
per option, representing a total payment of $7,500,000 and $312,500
respectively, as a condition of vesting. In 1996, the exercise price of these
options was increased to $15 and the number of related shares was increased to
8,000,000 and 333,333 respectively. All the other material terms and
conditions remained unchanged. These changes were approved by the shareholders
of the Company. At the time that the Remuneration Committee approved these
changes, the closing price of the Common Shares was $14.75. In November 1996,
the Remuneration Committee resolved that the options of Mr. Ashcroft be
transferable and, at the same time, in return, Mr. Ashcroft agreed to extend
the termination date of his employment agreement from March 31, 1998 to March
31, 2000.
In November 1996, the Remuneration Committee also approved a
bonus plan under which Mr. Ruzika is to receive a bonus of $200,000 when the
Common Share price exceeds $21.00 for a continuous period of 30 trading days
and $200,000 each time the Common Share price exceeds by $1.00 for a
continuous period of 30 trading days the share price level at which a bonus
payment was previously made. The plan is due to expire in 2001 or such
earlier date as the Common Share price exceeds $30.00 for a continuous period
of 30 trading days. Should the share price exceed $30.00 within two and one
half years, Mr. Ruzika will receive an additional payment of $1,000,000.
ADT, Inc., a wholly owned subsidiary of ADT, entered into a
consulting agreement with John E. Danneberg, one of ADT's directors, as of
August 28, 1996. The agreement provides that Mr. Danneberg, as an independent
consultant, will serve as Chief Executive Officer of Sonitrol Corporation
("Franchisor") and certain franchisees of Franchisor owned or acquired by
affiliates of ADT, Inc. The agreement provides that the initial term of such
engagement shall be for a period of six months commencing on September 1, 1996
and shall be automatically renewed on a month to month basis unless written
notice is given by ADT, Inc. or Mr. Danneberg not to renew the agreement at
least 30 days before the end of such initial term, which notice was not given.
Under the terms of the agreement, ADT, Inc. pays Mr. Danneberg a monthly fee
of $15,000 and Mr. Danneberg is reimbursed directly for all reasonable
out-of-pocket business expenses.
On January 6, 1997, ADT entered into indemnification agreements
with John E. Danneberg, Alan B. Henderson, James S. Pasman, Jr., W. Peter
Slusser, William W. Stinson and Raymond S. Troubh (each a "Director
Indemnitee"), the nonmanagement directors of ADT, pursuant to which ADT has
agreed, subject to certain limitations, to indemnify each Director Indemnitee
for all costs, losses, and expenses (including, without limitation, attorneys'
and other fees and expenses, judgments, and amounts paid in settlement) which
any Director Indemnitee may incur or become liable for in connection with any
threatened, pending or completed action, suit, proceeding or inquiry by reason
of the fact that the Director Indemnitee is or was a director of ADT, or is or
was or had agreed to serve at the request of ADT as a director, officer,
employee or agent of another entity including any subsidiary of ADT. ADT has
agreed to advance any such amounts to each Director Indemnitee prior to the
final disposition of any action, suit, proceeding or inquiry and each Director
Indemnitee has agreed to repay any advances made on his behalf if it is
ultimately determined that such Director Indemnitee is not entitled to
indemnification. ADT has also agreed to obtain and maintain insurance
policies providing for customary directors and officers liability insurance in
appropriate amounts, subject to certain limitations. On February 26, 1997,
ADT entered into indemnification agreements with Michael A. Ashcroft and
Stephen J. Ruzika (each a "Director-Officer Indemnitee"), pursuant to which
ADT has agreed, subject to certain limitations, to indemnify each
Director-Officer Indemnitee on substantially the same terms as the Director
Indemnitees.
As of February 28, 1997, the Company had granted stock options
to purchase an aggregate of 13,558,333 Common Shares to the directors and
executive officers of the Company. The number of such options granted since
January 1, 1996 was 5,448,333.
In order to implement the Board's original intentions in
adopting the Rights Agreement dated as of November 6, 1996 (the "Rights
Plan"), the Board resolved to effect certain changes to the Rights Plan as set
forth in the First Amendment to Rights Agreement, dated as of March 3, 1997
(the "Amendment"). The Amendment limits the ability to redeem or revoke the
Rights Agreement by, inter alia, (i) amending the definition of a continuing
director on the Board ("Continuing Director") to exclude persons elected to
the Board as a result of a proxy solicitation or similar shareholder
initiative if any participant in such initiative has stated (or a majority of
the Board has determined in good faith) that such participant (or its
affiliates or associates) intends to take, or may consider taking, any action
that would result in (a) that person becoming a person (other than the Company
or any employee benefit plan of the Company) that has acquired beneficial
ownership of 15% or more of the Common Shares issued and outstanding (or, in
the case of any person that beneficially owned more than 15% of the Common
Shares on November 4, 1996, that person acquires more than such person owned
as of such date) or (b) a merger, consolidation, or sale of a majority of the
assets or voting power of the Company which causes the rights to be triggered
and (ii) expanding the circumstances in which supplements, deletions or
amendments to the Rights Plan must be approved by a majority of Continuing
Directors. If the Western Proposals were adopted so that the only members of
the Board were the Western nominees, there would be no Continuing Directors on
the Board. As a result of the Amendment, the Western nominees would be unable
to amend the Rights Plan or redeem the rights issued thereunder, which would
negatively affect the ability of Western to complete the Western Offer.
To the extent that the foregoing describes contracts,
agreements, arrangements or understandings not previously disclosed, such
descriptions are qualified in their entirety by reference to Exhibits 99.5
through 99.14 hereto.
Other than as disclosed herein or incorporated by reference
there are no contracts, agreements, arrangements or understandings or any
actual or potential conflicts of interest between ADT or its affiliates and
ADT, its executive officers, directors or affiliates.
(b)(2) There are no contracts, agreements, arrangements or
understandings or any actual or potential conflict of interest between ADT and
its affiliates and Western or its executive officers, directors or affiliates.
Item 4.The Solicitation or Recommendation
(a) and (b) Recommendation and Reasons.
On February 27, 1997, the Board met to review and deliberate on
the terms of the Western Offer with its legal and financial advisors as well
as to consider certain other items of business and did not take any action
on the Western Offer. On March 2, 1997, the Board met with its legal and
financial advisors and concluded that the Western Offer as of that date was
inadequate.
On March 3, 1997, the Board met again with its legal and
financial advisors and unanimously concluded that the Western Offer, as
amended by the March 3rd Press Release, was inadequate and not in the best
interests of ADT's shareholders. In rendering its conclusion, the Board
received the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") that the Exchange Consideration to be paid pursuant to
the Western Offer is inadequate, from a financial point of view, to the
shareholders of ADT other than Western and its affiliates. A copy of such
opinion setting forth the assumptions made and matters considered by
Merrill Lynch is attached hereto as Exhibit 99.2 and should be read in its
entirety. The Board recommends a vote against the Western Proposals and
recommends that shareholders not tender their Common Shares if Western
commences the Western Offer.
In making this determination, the Board considered numerous
factors in addition to the Merrill Lynch opinion referred to above, including
among other things the following:
* the Board's familiarity with, and management's view of, the Company's
business, financial condition and results of operations and the
Board's belief that the Western Offer does not reflect the inherent
value of the Company;
* the Board's concerns about the long-term value and prospects for
appreciation of Western's common stock;
* the Board's concern as to the limited ability of ADT's shareholders
to sell the shares of Western common stock to be issued to them if
the Western Offer is consummated, and the potential downward pressure
of such sales on the market price for Western's common stock,
particularly in light of:
* the historically low average daily trading volume in Western's
common stock (including an average daily trading volume of 202,000
shares since the announcement of the Western Offer);
* the fact that many ADT shareholders who are oriented toward growth
investing may seek to sell the Western common stock received in
exchange for their Common Shares; and
* the exacerbating effect if the shareholders of Kansas City Power &
Light Company ("KCP&L") also seek to sell the shares of Western
common stock received by them in the proposed Western/KCP&L merger;
* the fact that the Western Offer is taxable to ADT shareholders,
thereby further reducing the value of the Western Offer;
* the Board's and management's commitment to protecting the best
interests of the shareholders of ADT and enhancing the value of ADT;
* the Board's belief that the Company's strong fundamentals and growth
prospects, including but not limited to partnering opportunities with
premier companies in a variety of industries, will produce greater
short-term and long-term value for the shareholders of the Company
than the Western Offer;
* the fact that the maximum value of the Western Offer represents a
premium of only 11.8% above the pre-announcement closing price per
Common Share and the Board's belief that the actual value of the
Western Offer is likely to be less than the maximum stated value of
$22.50 per Common Share;
* the uncertainties associated with the Western Offer, including:
* the uncertainties with respect to evaluating the numerous
transactions in which Western is currently involved, including the
dilutive effect of these transactions on Western's common stock
and the cost and availability of financing;
* the uncertainties resulting from deregulation of the electric
utility industry;
* the uncertainty with respect to availability, cost and terms of
financing for the Western Offer, and the likelihood that such
uncertainty may be heightened if Western increases its offer for
ADT; and
* the Board's belief that Western is not a strong strategic partner for
ADT.
The foregoing discussion of the information and factors
considered and given weight by the Board is not intended to be exhaustive. In
view of the variety of factors considered in its evaluation, the Board did not
find it practicable to and did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendation. In addition, individual members of the Board may have given
different weights to different factors.
A press release announcing the Board's determinations is filed
as Exhibit 99.1 hereto and is incorporated herein by reference.
Item 5.Persons Retained, Employed or to be Compensated.
The Company has retained D.F. King & Co., Inc. and its
affiliate D.F. King (Europe) Limited (collectively, "D.F. King") to
participate in the solicitation of proxies and revocations. D.F. King will
receive reasonable and customary compensation for its services and will be
reimbursed for its out-of-pocket expenses in connection therewith. The
Company also has agreed to indemnify D.F. King against certain liabilities
and expenses. The Company estimates that approximately 130 employees of D.F.
King will be involved in the solicitation of proxies on behalf of the Company.
The Company will also reimburse brokers, fiduciaries, custodians and other
nominees, as well as persons holding stock for others who have the right to
give voting instructions, for reasonable out-of-pocket expenses incurred in
forwarding this proxy statement and related materials to, and obtaining
instructions or authorizations relating to such materials from, beneficial
owners of the Company's capital stock.
ADT has retained Merrill Lynch to render financial advisory
services to ADT in connection with the evaluation and response to the
Western Offer and in connection with strategic, financial and shareholder
relations matters arising during the term of Merrill Lynch's engagement.
Pursuant to the terms of an engagement letter dated March 3, 1997, ADT has
agreed to pay Merrill Lynch for its financial advisory services an initial
retainer fee of $1,500,000 and an additional fee of $1,500,000 that is
payable on the earlier of (i) the day of the Special General Meeting and
(ii) July 8, 1997. If the Western Proposals are defeated at the Special
General Meeting and Western votes in favor of the Western Proposals, ADT
has agreed to pay Merrill Lynch an additional fee of $3,000,000;
alternatively, however, if (i) Western withdraws its Special General
Meeting requisition or (ii) the Special General Meeting is cancelled or
(iii) Western abstains or votes against the Western Proposals, ADT has
agreed to pay Merrill Lynch an additional fee of $1,500,000. In addition,
ADT has agreed to pay Merrill Lynch a fee of $2,000,000 on or before July
8, 1997; provided, however, that if during the period Merrill Lynch is
retained by ADT under the engagement letter or within one year thereafter,
the Company enters into certain specified transactions, and, in connection
therewith, the Company has retained Merrill Lynch pursuant to a separate
engagement letter, then the Company and Merrill Lynch have agreed that such
$2,000,000 fee shall be credited against any fee due and payable to Merrill
Lynch pursuant to the terms of such separate engagement letter. ADT has
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses
incurred in connection with Merrill Lynch's activities under the engagement
letter, including the reasonable fees and distributions of its legal
counsel. ADT has agreed to indemnify Merrill Lynch against certain
liabilities arising out of or in connection with its engagement. Merrill
Lynch does not admit that it or any of its directors, officers or employees
is a "participant," as defined in Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended, in the solicitation of
proxies. In connection with Merrill Lynch's engagement as financial
advisor, certain employees of Merrill Lynch may communicate in person, by
telephone or otherwise with a limited number of institutions, brokers or
other persons who are shareholders of the Company. Merrill Lynch will not
receive any fee for or in connection with such activities by their
respective employees apart from the fees they are otherwise entitled to
receive as described above.
ADT has retained Abernathy MacGregor Group Inc. ("AMG") as public
relations and investor relations advisors in connection with the proxy contest
and proposed Western Offer. AMG will receive reasonable and customary
compensation for its services and will be reimbursed for its out-of-pocket
expenses in connection therewith. ADT has agreed to indemnify AMG against
certain liabilities arising out of or in connection with its engagement.
Except as set forth above, neither ADT nor any person acting on
its behalf has employed, retained or compensated any person or class of
persons to make solicitations or recommendations to shareholders with respect
to the Western Offer.
Item 6.Recent Transactions and Intent with Respect to Securities.
(a) Except as described in Schedule I hereto, no transactions
in ADT Common Shares (or associated Rights) have been effected during the past
60 days by ADT, or, to the best of knowledge of ADT, any executive officer,
director, affiliate or subsidiary of ADT.
(b) To the best knowledge of ADT, none of its executive
officers, directors, affiliates or subsidiaries currently intends to tender
Common Shares to Western pursuant to the proposed Western Offer or to sell any
Common Shares that are owned beneficially or held of record by such persons,
in each case, subject to and consistent with any fiduciary obligations in the
case of Common Shares held by a fiduciary.
Item 7.Certain Negotiations and Transactions by the Subject Company.
(a) and (b) In a press release dated November 6, 1996, ADT
announced its intention to sell its United States vehicle auction business,
which operates under the name of ADT Automotive. ADT's European vehicle
auctions operations were sold in the fourth quarter of 1995 as part of ADT's
strategy to redeploy assets to concentrate on the expansion of its electronic
security services business. The proposed sale of ADT Automotive represents
the conclusion of this strategy.
Except as disclosed above, ADT is not now engaged in any
negotiations which relate to or would result in (i) an extraordinary
transaction, such as a merger or reorganization, involving ADT or any
subsidiary of ADT, (ii) a purchase, sale or transfer of a material amount of
assets by ADT or a subsidiary of ADT, (iii) a tender offer for or other
acquisition of securities by or of ADT or (iv) any material change in the
present capitalization or dividend policy of ADT. There are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the tender offer which relate to or would result in one or more of the matters
referred to in the preceding sentence.
Notwithstanding the foregoing, the Board may, in the future,
engage in negotiations in response to the Western Offer that could have one of
the effects specified in the preceding paragraph and it has determined that
disclosure with respect to the parties thereto, and the possible terms of, any
transaction or proposal of the type referred to in the preceding paragraph
might jeopardize any discussions or negotiations that ADT may conduct.
Accordingly, the Board has adopted a resolution instructing management not to
disclose the possible terms of any such transaction or proposals, or the
parties thereto, unless and until an agreement in principle relating thereto
has been reached or, upon advice of counsel, as may otherwise be required by
law.
Item 8.Additional Information to be Furnished.
Certain Litigation
On December 18, 1996, Westar Capital, Inc. ("WCI") filed a
complaint in the U.S. District Court for the Southern District of Florida (the
"Court") against the Company, the directors of the Company and Republic
Industries, Inc. ("Republic"). The complaint alleges that the Company and its
directors breached their fiduciary duties to WCI and the Company's other
shareholders (i) by issuing to Republic a share purchase warrant for
15,000,000 Common Shares (the "Republic Warrant") in connection with a
proposed amalgamation with Republic in July 1996 (the "Republic Merger"), (ii)
by adopting the Rights Plan, and (iii) by holding shares of the Company in one
of the Company's subsidiaries with the intention of voting those shares as
needed to entrench existing management. The complaint seeks a court order (i)
declaring the Republic Warrant null and void or preventing the Company and
Republic from exercising their rights under the Republic Warrant, (ii)
directing the Company to redeem the Rights Plan, and (iii) preventing the
Company from voting the shares held by its subsidiary. On December 23, 1996,
the Court entered an order dismissing the complaint without prejudice on the
grounds that the complaint contained inadequate and improper allegations
relating to the Court's jurisdiction over the case.
On December 27, 1996, WCI filed a second complaint with the
Court which contains modified allegations relating to the Court's jurisdiction
and identical substantive allegations as the prior complaint. On January 3,
1997, WCI filed an amended complaint which, in addition to the allegations
made in the prior complaints, alleges that the Company and its directors have
attempted to interfere with WCI's voting rights by seeking certain information
from WCI pursuant to procedures established in the Company's Bye-Laws. The
amended complaint seeks the same relief as the prior complaints and also
requests that the Court confirm WCI's voting rights.
On January 21, 1997, the Court granted WCI leave to file a
second amended complaint. The second amended complaint contains the same
allegations as the amended complaint and in addition alleges (i) that the
Company and its directors breached their fiduciary duties by setting a July 8,
1997 date for a meeting of the Company's shareholders, and (ii) that the
Company and its directors violated Section 14(d) of the Securities Exchange
Act of 1934 by making a recommendation to the Company's shareholders regarding
the tender offer without first making certain filings with the SEC. WCI asks
for a court order (i) enjoining the Company from holding the shareholders
meeting on July 8, 1997, (ii) compelling the Company to hold the shareholders
meeting on or before March 20, 1997, and (iii) declaring that the Company has
violated Section 14(d) and enjoining the Company from making any further
recommendations relating to the tender offer until the required SEC filings
are made.
On January 23, 1997, WCI filed a motion for a preliminary
injunction asking the Court to enjoin the Company from holding the
shareholders meeting on July 8, 1997, and compelling the Company to hold the
shareholders meeting on or before March 20, 1997. The Company and its
directors have filed papers in opposition to WCI's motion. As of this date,
the Court has not rendered any decision with respect to plaintiff's motion for
a preliminary injunction.
On January 27, 1997, the Company and its directors filed a
motion to dismiss the second amended complaint based on, among other things,
the Court's lack of personal jurisdiction over the Company and its directors
and for failure to state a claim upon which relief can be granted. WCI has
filed papers in opposition to the motion. On February 21, 1997, the Court
entered an order ruling that the second amended complaint did not adequately
plead personal jurisdiction over the ADT Defendants. On February 27, 1997, WCI
filed a third amended complaint. The third amended complaint contains the
same allegations as the second amended complaint and contains additional
allegations relating to personal jurisdiction.
On February 19, 1997, WCI filed a motion for an expedited trial
on its claims relating to the Republic Warrant and the shares of ADT held by
one of ADT's subsidiaries. WCI has also requested that the Court enter an
order providing that it be given five days' notice before the Republic Warrant
is exercised. The Company and its directors must respond to this motion on or
before March 3, 1997.
The Company and the Board believe that the allegations in WCI's
third amended complaint are without merit and intend to vigorously defend
against them.
On December 26, 1996, Charles Gachot filed a complaint in the
Circuit Court for the Fifteenth Judicial Circuit in Palm Beach County, Florida
against the Company, certain of its directors, Western and WCI. The complaint
was brought on behalf of a class of all shareholders of the Company and
alleges that Western and WCI have breached their fiduciary duties to the
Company's shareholders by offering an inadequate price for the outstanding
Common Shares. The complaint seeks to enjoin Western and WCI from acquiring
the outstanding Common Shares. The complaint also alleges that the Company
and its directors have refused to negotiate with Western and WCI and that the
Republic Warrant and the Rights Plan are improper. The complaint seeks
unspecified monetary relief from all defendants. The Company and the Board
believe that the allegations in Gachot's complaint against the Company and the
directors are without merit and intend to vigorously defend against them.
On February 7, 1997, ADT Operations, Inc. ("ADT Operations"), a
subsidiary of ADT, filed a complaint in the Supreme Court of the State of New
York, County of New York against The Chase Manhattan Bank, N.A. ("Chase").
The complaint states that Chase has been an important lender and financial
advisor to ADT Operations since 1993, and that in the course of this business
relationship, ADT Operations has disclosed confidential business information
to Chase. The complaint asserts that ADT Operations and Chase expressly
agreed that Chase would not aid any third party in a hostile takeover bid for
ADT. The complaint alleges that Chase is currently aiding Western in its
attempt to take control of ADT and that Chase's actions constitute: (i) a
breach of an express agreement between Chase and ADT Operations; (ii) a breach
of the implied covenant of good faith that is part of the express agreement
between Chase and ADT Operations; and (iii) a breach of the fiduciary duties
that Chase owes to ADT Operations. The complaint further alleges that Chase
breached a confidentiality agreement with ADT Operations by providing Western
with confidential and proprietary information about ADT Operations and ADT and
by using such information in assessing whether to aid Western in Western's
hostile takeover bid. The complaint also alleges that Chase negligently
and/or fraudulently failed to disclose to ADT Operations that Chase was
advising Western regarding a possible hostile takeover bid for ADT. The
complaint seeks $50 million in monetary damages. The complaint also seeks to
enjoin Chase from advising, funding, or participating in Western's attempts to
take control of ADT and from disclosing any confidential information regarding
ADT Operations and ADT.
On February 7, 1997, ADT Operations filed a motion for a
preliminary injunction, seeking to enjoin Chase from: (i) advising, funding,
or assisting Western in its efforts to take over ADT or participating in these
efforts; and (ii) using or disclosing any confidential information that ADT
Operations provided to Chase. In addition, ADT Operations has sought
expedited discovery on issues regarding the preliminary injunction. On
February 19, 1997, Chase filed papers in opposition to this motion. The
motion was argued before the court on February 24, 1997.
The foregoing description of litigation is qualified in its entirety by
reference to Exhibits 99.15 through 99.30 hereto.
Western Proxy Statement
In conjunction with the Western Offer, Western has filed a
preliminary proxy statement to solicit proxies for the Western Proposals.
Western has disclosed pursuant to the Western S-4 that, if elected, directors
nominated by Western would take action to (a) redeem the Rights (or amend the
Rights Agreement to make the Rights inapplicable to the Western Offer and the
Proposed Amalgamation), (b) approve the Western Offer and the Proposed Western
Amalgamation, (c) not invoke Bye-Laws 46 and 104 against Western in connection
with the Western Offer and (d) take such other action and seek or grant such
other consents or approvals as may be desirable or necessary to expedite the
consummation of the Western Offer and the Proposed Western Amalgamation.
Item 9.Material to be Filed as Exhibits.
Exhibit 99.1 Press release dated March 3, 1997.
Exhibit 99.2 Letter from Merrill Lynch, Pierce, Fenner & Smith
Incorporated to the Board of Directors of ADT Limited dated
March 3, 1997.
Exhibit 99.3 ADT Shareholder Presentation.
Exhibit 99.4 Pages 11-30 of ADT 1996 Proxy Statement.
Exhibit 99.5 Amendment to employment agreement between ADT and Michael A.
Ashcroft approved on November 4, 1996.
Exhibit 99.6 Employment agreement between ADT Limited and Stephen J.
Ruzika dated as of February 26, 1997.
Exhibit 99.7 Employment agreement between ADT, Inc. and Ron G. Lakey
dated as of January 16, 1997.
Exhibit 99.8 Agreement between ADT Automotive Holdings and Michael J.
Richardson dated as of January 29, 1997.
Exhibit 99.9 Incentive Compensation Agreement between ADT, Inc. and
Michael J. Richardson dated as of February 10, 1997.
Exhibit 99.10 Severance Agreement between ADT Security Services, Inc. and
Raymond Gross dated as of February 26, 1997.
Exhibit 99.11 Consulting Agreement between ADT, Inc. and John E.
Danneberg dated as of August 28, 1996.
Exhibit 99.12 Form of Indemnification Agreement.
Exhibit 99.13 Rights Agreement between ADT Limited and Citibank, N.A.
dated as of November 6, 1996.
Exhibit 99.14 First Amendment between ADT Limited and Citibank, N.A.
dated as of March 3, 1997 to Rights Agreement between ADT
Limited and Citibank, N.A. dated as of November 6, 1996.
Exhibit 99.15 Complaint filed in Westar Capital, Inc. v. ADT Ltd. (S.D.
Fla.) dated December 18, 1996.*
Exhibit 99.16 Final Order of Dismissal in Westar Capital, Inc. v. ADT
Ltd. (S.D. Fla.) dated December 23, 1996.*
Exhibit 99.17 Complaint filed in Westar Capital, Inc. v. ADT Ltd. (S.D.
Fla.) dated December 27, 1996.*
Exhibit 99.18 Amended Complaint filed in Westar Capital, Inc. v. ADT Ltd.
(S.D. Fla.) dated January 3, 1997.*
Exhibit 99.19 Order granting leave to file Second Amended Complaint in
Westar Capital, Inc. v. ADT Ltd. (S.D. Fla.) dated January
21, 1997.*
Exhibit 99.20 Second Amended Complaint filed in Westar Capital, Inc. v.
ADT Ltd. (S.D. Fla.).*
Exhibit 99.21 Plaintiff's Motion for a Preliminary Injunction in Westar
Capital, Inc. v. ADT Ltd. (S.D. Fla.) dated January
23, 1997.*
Exhibit 99.22 Memorandum of Law of the ADT Defendants in Opposition to
Plaintiff's Motion for a Preliminary Injunction in
Westar Capital, Inc. v. ADT Ltd. (S.D. Fla.) dated
February 6, 1997.*
Exhibit 99.23 Motion and Memorandum of Law of the ADT Defendants to
Dismiss the Second Amended Complaint in Westar Capital,
Inc. v. ADT Ltd. (S.D. Fla.) dated January 27, 1997.*
Exhibit 99.24 Memorandum of Westar in Opposition to the ADT Defendants'
Motion to Dismiss in Westar Capital, Inc. v. ADT Ltd. (S.D.
Fla.) dated February 6, 1997.*
Exhibit 99.25 Order granting plaintiff's motion for leave to amend
complaint and denying, without prejudice, defendants'
motion to dismiss the Second Amended Complaint in Westar
Capital, Inc. v. ADT Ltd. (S.D. Fla.) dated February
21, 1997.*
Exhibit 99.26 Third Amended Complaint filed in Westar Capital, Inc. v.
ADT Ltd. (S.D. Fla.) dated February 27, 1997.*
Exhibit 99.27 Complaint filed in Gachot v. ADT Ltd. (Fla. Cir. Ct.) dated
December 26, 1996.*
Exhibit 99.28 Complaint filed in ADT Operations, Inc. v. The Chase
Manhattan Bank, N.A. (N.Y. Sup. Ct.) dated February
7, 1997.*
Exhibit 99.29 Plaintiff's Memorandum of Law in Support of Its Motion for
a Preliminary Injunction filed in ADT Operations, Inc. v.
The Chase Manhattan Bank, N.A. (N.Y. Sup. Ct.) dated
February 7, 1997.*
Exhibit 99.30 Defendant The Chase Manhattan Bank's Memorandum of Law in
Opposition to Plaintiff's Motion for a Preliminary
Injunction filed in ADT Operations, Inc. v. The Chase
Manhattan Bank, N.A. (N.Y. Sup. Ct.) dated February
19, 1997.*
- ----------
* Filed in hard-copy form pursuant to an exemption from the Securities and
Exchange Commission.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
ADT LIMITED
By: /s/ Stephen J. Ruzika
_______________________________
Stephen J. Ruzika
Chief Financial Officer, Executive Vice
President and Director (Principal
Financial Officer and Principal Accounting
Officer)
Dated: March 3, 1997
SCHEDULE I
RECENT TRANSACTIONS IN ADT COMMON SHARES
Set forth below is a summary of transactions which were
effected during the past 60 days by ADT, or, to the best of the knowledge of
ADT, any executive officer, director, affiliate or subsidiary of ADT.
Individual Share Activity
R.G. Lakey Exercised options to purchase
15,000 Common Shares on
January 17, 1997, and sold
15,000 Common Shares on
January 17, 1997.
FOR IMMEDIATE RELEASE [ADT Logo]
March 3, 1997 Press Release
ADT Limited ("ADT")
- ---------------------------------------------------------------------------
ADT REJECTS WESTERN RESOURCES' REVISED PROPOSED HOSTILE OFFER
- ---------------------------------------------------------------------------
Hamilton, Bermuda, March 3, 1997 -- ADT Limited (NYSE - ADT)
announced today that its board of directors unanimously recommends ADT
shareholders reject Western Resources' unsolicited proposed hostile exchange
offer, which was revised by Western today.
The board has determined, based upon advice it has received from
the Company's financial advisors, Merrill Lynch, that the value of Western's
proposed revised offer is inadequate and does not reflect the inherent value
of ADT. Furthermore, the board believes that the actual value of Western's
proposed offer for ADT could be significantly lower than the value stated by
Western.
The board unanimously believes that the Company should continue to
pursue its strategic business plan and that now is not the right time for
shareholders to give up their investment in ADT. The board does not consider
Western to be a strong strategic partner for ADT and believes that a sale to
Western would not offer any significant strategic opportunities for ADT or its
shareholders. In fact, the board believes that a combination of ADT and
Western would produce unacceptable risks for the prospects of all ADT
stakeholders.
Michael A. Ashcroft, Chairman and Chief Executive Officer of ADT,
said:
"The revisions to the proposed offer do not change its maximum
protential value but the change in the mix of the consideration
indicates that, like ADT, Western is also concerned about the
value of the Western stock."
"ADT Security Services is the market leader in electronic
security services in the United States and the United Kingdom.
The Company can now be regarded as a pure play electronic
security services provider and is evolving from a company which
installs and monitors security systems into a company which
gathers and distributes data for premises control services."
"ADT Security Services' strategy is to build on its strengths
as a data information company to position itself for
significant new growth in a rapidly changing marketplace.
The Company's broad base of commercial and residential
customers, its unique national distribution network and its
skilled workforce give the Company significant capacity to
exploit new technological developments, but only if it is in a
position to select its own partners."
Mr. Ashcroft added,
"We believe that the competitive pressures being brought about by
deregulation in the utility industry, and the effects of Western's
recent acquisition spree, are likely to result in substantial
earnings dilution for Western together with further downward
pressure on Western's share price. We also have serious doubts
regarding Western's ability to maintain its dividend at current
levels without either resorting to borrowing or starving its
businesses of cash by curtailing capital expenditure with
consequential adverse effects on the future growth of its
non-utility operations."
"The board of ADT is however fully aware of its fiduciary
duties to shareholders and would not reject any proposed
transaction involving the Company if it had reason to believe
that such a transaction offered ADT shareholders a real
prospect for achieving faster growth in the value of their
investment than is available to them as shareholders in an
independent ADT. Equally, management clearly understands the
advantages of forming appropriate alliances in a rapidly
changing market environment. Indeed, management would not
oppose any form of alliance if it believed that such alliance
offered prospects of superior opportunities for the Company's
businesses."
"We understand why a slow growth Kansas utility thinks it would
benefit from buying a high growth international electronic
security services company but fail to see any compelling reason
why ADT shareholders would benefit from such an alliance. Indeed,
we believe that it is Western's security business that would
benefit from being integrated into ADT's structure and do not see
any benefit to ADT by becoming part of a utility company" added
Mr. Ashcroft.
A special general meeting has been called for July 8, 1997 to
vote on Western's proposals that the existing eight member board of
directors of ADT be removed and replaced by two employees of Western. The
board has determined that Western's objective in putting forward these
proposals is to obtain effective control of ADT so that its employee
nominees could then dismantle ADT's shareholder protections to enable
Western to complete its proposed offer for the shares of ADT. Accordingly,
ADT has today filed a preliminary proxy statement recommending that
shareholders vote against Western's proposals.
The board also resolved to effect certain changes to ADT's
Rights Plan dated November 5, 1996 consistent with the objectives of the
Plan as originally adopted. These changes limit the ability to redeem or
revoke the Rights Plan by narrowing the circumstances in which persons
elected to the board as a result of a proxy solicitation or similar
shareholder action which produced a change in a majority of the directors
in connection with a proposed takeover, have the power to approve further
amendments to, or a revocation of, the Plan.
Forward Looking Information
ADT may occasionally make statements regarding its business and the
markets for its services, including projections of future performance,
statements of management's plans and objectives, forecasts of market trends
and other matters which, to the extent that they are not historical fact, may
constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
Certain statements contained herein constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. In particular, statements contained herein regarding the
consummation and benefits of future acquisitions as well as expectations with
respect to future sales, operating efficiencies and product expansion, are
subject to known and unknown risks, uncertainties and contingencies, many of
which are beyond the control of ADT, which may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. Factors that might affect such forward looking
statements include, among others overall economic and business conditions,
the demand for ADT's services, competitive factors in the industry, regulatory
approvals and uncertainty about the consummation of future acquisitions.
CERTAIN ADDITIONAL INFORMATION: ADT Limited (the "Company") will be
soliciting proxies against the proposals of Western Resources, Inc. (together
with its subsidiaries, "Western") and revocations of proxies previously given
to Western for such proposals. The following individuals may be deemed to be
participants in the solicitation of proxies and revocations of proxies by the
Company: ADT Limited, Michael A. Ashcroft, John E. Danneberg, Alan B.
Henderson, James S. Pasman, Jr., Stephen J. Ruzika, W. Peter Slusser, William
W. Stinson, Raymond S. Troubh and Angela E. Entwistle. As of February 28,
1997, Mr. Ashcroft is the beneficial owner of 11,075,718 of the Company's
common shares, Mr. Danneberg is the beneficial owner of 102 of the Company's
common shares, Mr. Henderson is the beneficial owner of 621 of the Company's
common shares, Mr. Pasman is the beneficial owner of 2,000 of the Company's
common shares, Mr. Ruzika is the beneficial owner of 1,157,405 of the
Company's common shares, Mr. Slusser is the beneficial owner of 2,800 of the
Company's common shares, Mr. Stinson is the beneficial owner of 3,010 of the
Company's common shares, Mr. Troubh is the beneficial owner of 2,500 of the
Company's common shares and Ms. Entwistle is the beneficial owner of 29,500 of
the Company's common shares. The Company has retained Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") to act as its financial advisor
in connection with Western's proposals. Merrill Lynch is an investment
banking firm that provides a full range of financial services for
institutional and individual clients. Merrill Lynch does not admit that it or
any of its directors, officers or employees is a "participant" as defined in
Schedule 14A ("Schedule 14A") promulgated by the Commission under the
Securities Exchange Act of 1934, as amended in the proxy solicitation, or that
such Schedule 14A requires the disclosure of certain financial information
concerning Merrill Lynch. In connection with Merrill Lynch's role as
financial advisor to the Company, Merrill Lynch and the following investment
banking employees of Merrill Lynch may communicate in person, by telephone or
otherwise with a limited number of institutions, brokers or other persons who
are shareholders of the Company: Richard Johnson (Managing Director), Huston
McCollough (Managing Director), Hugh O'Hare (Vice President), Robert Simensky
(Vice President), Paul Bastone (Associate) and Eric Evans (Analyst). In the
normal course of its business, Merrill Lynch regularly buys and sells
securities issued by the Company and its affiliates ("ADT Securities") for its
own account and for the accounts of its customers, which transactions may
result from time to time in Merrill Lynch and its associates having a net
"long" or net "short" position in ADT Securities or option contracts or other
derivatives in or relating to ADT Securities. As of February 28, 1997,
Merrill Lynch held positions in ADT Securities as principal as follows: (i)
net "short" 769,995 of the Company's common shares; (ii) net "long" 51,000
par amount of 9.25% Guaranteed Senior Subordinated Notes of ADT Operations,
Inc. due August 1, 2003; and (iii) net "long" 31,509 Liquid Yield
Option[Trademark] Notes of ADT Operations, Inc. due 2010, exchangeable for
889,499 of the Company's common shares. As of February 28, 1997, Merrill Lynch
held positions in ADT Securities as agent as follows: (i) net "long" 2,195,181
of the Company's common shares; (ii) net "long" $4,717,000 par amount of 8.25%
Guaranteed Senior Notes of ADT Operations, Inc. due August 1, 2000; (iii) net
"long" $2,830,000 par amount of 9.25% Guaranteed Senior Subordinated Notes of
ADT Operations, Inc. due August 1, 2003; and (iv) net "long" 31,820 Liquid
Yield Option[Trademark] Notes of ADT Operations, Inc. due 2010, exchangeable
for 898,278 of the Company's common shares. None of the investment banking
employees of Merrill Lynch who are referred to above or their associates owned
of record or beneficially any ADT Securities as of February 28, 1997. None of
such Merrill Lynch investment banking employees or their associates purchased
or sold for their own account any ADT Security within the past two years.
Contact:
- -------
ADT Abernathy MacGregor Group
561-988-3600 212-371-5999
Note:
- ----
This and other press releases are available through Company News On-Call by
fax; call 800-758-5804, extension 112511, or at http://www.prnewswire.com/
- Ends -
EXHIBIT 99.2
[Merrill Lynch Letterhead]
March 3, 1997
Board of Directors
ADT Limited
Cedar House, 41 Cedar Avenue
Hamilton HM12, Bermuda:
Members of the Board:
We understand that Western Resources, Inc. ("Western") has
proposed an exchange offer (the "Offer") for any and all of the
outstanding common shares (the "Shares") of ADT Limited ("ADT"), other than
Shares owned by Western and its affiliates, pursuant to which the holders of
each outstanding Share will be entitled to receive $10.00 per Share net to the
seller in cash and $12.50 of Western common stock, par value $5.00 per share
(subject to downward adjustment as set forth in the Offer) (the "Exchange
Consideration"), for each of their Shares purchased pursuant to the Offer, all
as set forth more fully in the draft Offer to Exchange contained in Western's
Registration Statement on Form S-4 dated December 18, 1996 ("Western's S-4")
and related proxy materials (the "Proxy Materials") filed under Section
14(a) of the Securities Exchange Act of 1934, each as amended to the date
hereof.
You have asked us whether, in our opinion, the proposed
Exchange Consideration is adequate to the shareholders of ADT, other than
Western and its affiliates, from a financial point of view.
In arriving at the opinion set forth below, we have among other
things:
(1) reviewed Western's Annual Reports on Form 10-K and related
audited financial statements for the five fiscal years
ended December 31, 1995, Western's Quarterly Reports on
Form 10-Q and the related unaudited financial statements
for the quarterly periods ending March 31, 1996 and June
30, 1996 and September 30, 1996, Western's Current
Report on Form 8-K, dated December 12, 1996, in
connection with the pending sale of its natural gas
assets to ONEOK, Inc. ("ONEOK"), Western's Registration
Statement on Form S-4 and related proxy materials, as
amended to the date hereof, in connection with its
exchange offer for all of the outstanding share capital
of Kansas City Power & Light Company ("KCPL") and
Western's Current Report on Form 8-K including the
exhibits thereto, dated February 7, 1997;
(2) reviewed ADT's Annual Reports on Form 10-K and related
audited financial statements for the five fiscal years
ended December 31, 1995, ADT's Quarterly Reports on Form
10-Q and the related unaudited financial statements for
the quarterly periods ending March 31, 1996, June 30,
1996 and September 30, 1996, ADT's filings with the SEC
in connection with the proposed merger with Republic
Industries, Inc. that was terminated in September 1996
and ADT's Current Report on Form 8-K, as amended to
September 5, 1996, filed in connection with the
acquisition by ADT of Automated Security (Holdings)
PLC;
(3) reviewed Western's S-4 and the Proxy Materials,
each as amended to the date hereof;
(4) reviewed KCPL's Annual Report on Form 10-K and related
audited financial statements of KCPL for the fiscal year
ended December 31, 1995 and KCPL's Quarterly Reports on
Form 10-Q and related unaudited financial statements for
the quarterly periods ended March 31, 1996, June 30,
1996 and September 30, 1996;
(5) reviewed ONEOK's Annual Report on Form 10-K and related
audited financial statements for the fiscal year ended
August 31, 1996 and ONEOK's Quarterly Report on Form 10-Q
and related unaudited financial statements for the
quarterly period ended November 30, 1996;
(6) reviewed certain financial information, including financial
forecasts, relating to the financial condition, business,
earnings, cash flow, assets, liabilities, and prospects of
ADT, that were furnished to us by ADT;
(7) conducted discussions with members of senior management of
ADT concerning its financial condition, business, earnings,
cash flow, assets, liabilities, operations, contingencies
and prospects;
(8) reviewed the historical market prices and trading activity
for the Shares and Western's common stock and compared such
data with indices that we deemed relevant;
(9) compared the respective financial condition and results of
operations of ADT with that of certain publicly traded
companies that we deemed to be relevant;
(10) compared the proposed financial terms of the Offer with
the financial terms of certain other mergers and
acquisitions that we deemed to be relevant;
(11) considered, based upon information provided by ADT and
publicly available for Western, Westinghouse Security, Inc.
("Westinghouse Security"), ONEOK and KCPL, the pro forma
impact of Western's acquisition of Westinghouse Security,
the pending sale to ONEOK of Western's natural gas
business, Western's proposed merger with KCPL and the
Offer on the income statement, balance sheet and cash
flows of Western, including earnings and dividends per
share, consolidated capitalization and certain balance
sheet, income statement and cash flow data and ratios of
Western; and
(12) reviewed such other financial studies and analyses and
performed such other investigations and took into account
such other matters as we deemed necessary.
In preparing our opinion, with your consent we have relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, and we have not assumed responsibility for independently
verifying such information or undertaken an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, nor have we
been furnished any such evaluation or appraisal. In addition, with your
consent, we have relied upon the management of ADT as to the reasonableness
and achievability of the financial forecasts (and the assumptions and bases
therefor) provided to, and discussed with, us with respect to ADT. In that
regard, we have assumed and relied with your consent that such forecasts
reflect the best currently available estimates, allocations and judgments of
ADT as to the future financial performance of ADT. Our opinion is necessarily
based on economic market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have been retained by the Board of Directors of ADT as an
independent contractor to act as financial advisor to ADT with respect to the
Offer and will receive a fee for our services. We have, in the past, provided
financial advisory and financing services to ADT and received customary fees
for the rendering of such services. In addition, in the ordinary course of
our securities business, we may actively trade debt and/or equity securities
of Western and ADT and their respective affiliates for our own account and the
accounts of our customers, and we therefore may from time to time hold a long
or short position in such securities. In addition, ADT has been advised by us
that we are currently acting as financial adviser to KCPL in connection with
its merger with Western.
Our opinion is directed to the Board of Directors of ADT and
does not constitute a recommendation to any shareholder of ADT as to how such
shareholder should vote at any shareholder meeting of ADT held in connection
with the Offer.
On the basis of, and subject to the foregoing, we are of the
opinion that the proposed Exchange Consideration pursuant to the Offer is
inadequate to the shareholders of ADT, other than Western and its affiliates,
from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ________________________________
Managing Director
Investment Banking Group
EXHIBIT 99.3
ADT LOGO
Forward Looking Information
Certain statements in this presentation constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. In particular, statements contained herein regarding the
consummation and benefits of future acquisitions, as well as expectations with
respect to future sales, operating efficiencies and product expansion are
subject to known and unknown risks, uncertainties and contingencies, many of
which are beyond the control of ADT, which may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. Factors that might affect such forward looking
statements include, among others, overall economic and business conditions,
the demand for ADT's services, competitive factors in the industry, regulatory
approvals and uncertainty about the consummation of future acquisitions.
1. Overview
[Graphic - Check Marked Box]
ADT "Status Quo" is a Vote For More Value
bullet Superior Stock Price Performance:
#1 Electronic Security Services company is a solid growth vehicle
(Lehman research target: $28-$30 by year end 1997)
bullet Basic Growth Engine:
1.8 million customer installed base ($920 million in contractual
recurring revenues)
bullet ADT's Turbocharger:
next generation "data management" technology offerings being
delivered today
1. Overview
[Graphic - Empty Box]
Western Proposal is Not Worthy of Your Vote
bullet Stated Value:
$22.50 is inadequate
bullet Theoretical Value:
$10.00 + 0.42017 WR shares is likely to be less than $22.50
bullet Realizable Value:
with ADT, KCP&L and "dividend nervous" sellers, market indigestion
means realizable values may be much less than $22.50
bullet Taxable transaction
1. Executive Summary
ADT Present
bullet ADT is the Strong #1: electronic security services -- North America
and U.K.
bullet Earnings Quality: recurring revenues - $920 million (1.8 million
customers, 65% is contractual)
bullet ADT has become a "Pure Play" Electronic Security Services Provider:
Selling/Sold: U.S. and U.K. Vehicle Auction operations
Acquired: Alert Centre, ASH (synergies from these recent
deals still to come)
1. Executive Summary
ADT Future
bullet Well-Positioned for the Future of the Electronic Security Services
Industry:
bullet Leading market position
bullet Only player with national brand and service delivery
bullet Economics of scale
bullet Next generation "service provider" products (the turbocharger
for ADT's current growth engine)
bullet Consolidator in a fragmented industry
2. Forces Shaping The Electronic Security Services Industry
Industry Trends
bullet Fragmented Industry Where ADT is the leader
-Top 100 companies - 23% market share
-Total market $13 billion in 1996*
-ADT is about 3.5 times the #2 player
bullet Key Drivers for Future (Residential) Industry Growth
-Size of potential market (98 million homes)
-Low residential market penetration (currently 10%)
-Increased crime awareness
-Next generation security products (technology "upgrades")
bullet "Higher Technology" Further Benefits ADT
-More sophisticated equipment
-More sophisticated monitoring
-More sophisticated service needs
-ADT is the clear leader
* Source: STAT Resources
2. Forces Shaping The Electronic Security Services Industry
Fragmentation Persists Despite Recent Consolidation
[Graphic-Chart depicting the following ($ in millions)]
U.S. Electronic Security Industry: 1995 Revenue and Market Share Comparison
$880
ADT/Alert Pro Forma
$255
Borg-Warner (Wells Fargo)
$250
Ameritech*
$223
Honeywell
$150
Westinghouse Security (Westar)
$128
Brink's Home Security
$66
Rollins Protective Services
$62
Westec Security
$56
Protection One
$53
Republic Industries
Source: Security Distributing & Marketing, May 1996.
* Includes the acquired businesses of National Guardian and Security Link.
3. Overview of ADT's Electronic Security Services Business
Electronic Security Services - Net Sales (Worldwide)*
[Graphic - Chart depicting the following Net Sales ($MM)]
1992
$901.1
1993
$937.3
1994
$999.8
1995
$1,092.5
1996
$1,406.2
Total Number of
Customers ('000's): 744 1992
864 1993
1,019 1994
1,214 1995
1,800 1996
* Amounts for 1995 and prior years exclude the acquisitions of Alert
Centre and Automated Security.
3. Overview of ADT's Electronic Security Services Business
Contractually Recurring Revenues (Worldwide)
[Graphic - Forward/upward pointing arrow reads: 15.4% Compound Annual
Growth Rate]
[Graphic - Chart depicting the following (Recurring Revenues $mm)]
1992
$518
1993
$553
1994
$588
1995
$658
1996*
$920
* Reflects acquisitions of Alert Centre and Automated Security
3. Overview of ADT's Electronic Security Services Business
Residential Security System Unit Sales
[Graphic - forward/upward pointing arrow 36.5% Compound Annual Growth
Rate]
[Graphic - Chart depicting the following]
1989
29,000
1990
50,000
1991
80,000
1992
115,000
1993
145,000
1994
180,000
1995
215,000
1996
280,000
1997P
350,000
3. Overview of ADT's Electronic Security Services Business
Electronic Security Services - Operating Income (Worldwide)*
[Graphic - Chart depicting Operating Income ($MM)]
1991
$127.7
1992
$141.0
1993
$154.0
1994
$172.9
1995
$188.7
1996
$223.1
*Excludes goodwill amortization, restructuring charges and FAS 121 charge.
Amounts for 1995 and prior years exclude Alert Centre and Automated Security.
3. Overview of ADT's Electronic Security Services Business
Nationwide Service and Distribution Network
North America [Graphic - Map of the forty-eight contiguous United
States and Canada illustrating service and
distribution network]
19 Customer monitoring centers
200 Sales and service offices
U.K. [Graphic - Map of the United Kingdom and Ireland
illustrating service and distribution network]
5 Customer monitoring centers
29 Sales and service offices
4. Initiatives For Future Growth
Overview of Internal Growth Opportunities
[Graphic - ADT logo in the middle with the following pointing to ADT]
Residential Business Initiatives
Commercial Business Initiatives
Customer Service Initiatives
New Technology Initiatives
4. Initiatives For Future Growth
Residential Business
bullet Leverage Strong Brand ("Security for Life")
bullet New Channels of Distribution
bullet Strategic Alliances (AT&T, Radio Shack, USAA, HFS
(ERA/Century 21)), More to Come!
bullet Dealers (January 1996 - 58 dealers)
(Year End 1996 - 120 dealers)
bullet Account Density Targeting
bullet New Security Services (not just the home)
bullet CarCop (GPS vehicle tracking)
bullet Video Security
bullet Medical Monitoring
bullet Personal Security
4. Initiatives For Future Growth
Commercial Business
bullet Integrated systems provider (national accounts)
bullet Retrofits for current large, sophisticated customers (390 of the
Fortune 500)
bullet "Security Sensitive" businesses need new products (banks, retail,
manufacturing, public sector)
bullet Work place data management
bullet Remote site monitoring
bullet Employee monitoring
bullet Customer traffic flow
bullet Increased penetration for small businesses (new CCTV products)
bullet ADT designs system solutions (client-specific marketing)
4. Initiatives For Future Growth
Customer Service Initiatives
bullet "Customer Care" Programs - putting more distance between ADT and its
competitors
bullet More customer interaction
bullet Team concept
bullet Employees get superior technical training
bullet R&D Spending
bullet New products shaped by vendor inputs
4. Initiatives For Future Growth
New Technology Initiatives
bullet Expanding our hardware and software capabilities
bullet Oracle
bullet MCI Systemhouse
bullet Digital
bullet Hewlett Packard
bullet Ensec
bullet Customer monitoring center station becomes a "data management center"
5. Why Shareholders Should Vote Against Western Resources' Proposals
This Kansas "Fairy Tale" Doesn't Have a Happy Ending
Toto Isn't The Only Dog in Kansas
[Graphic - Toto]
Realizable value of Western's bid may be nowhere near $22.50 (at 25%
of current WR volume, it takes ADT holders more than 5 years to
exit stock -- or 35 dog years)
Western Adds Nothing
[Graphic - Dorothy's ruby slippers]
ADT already safeguards Dorothy's ruby slippers (security for the
Smithsonian Institute)
This "Twister" Means Downside For ADT Shareholders
[Graphic - a twister (tornado)]
Western earnings and free cash flow spiral downward with each
subsequent dilutive deal (ADT would be the biggest drop yet)
There Are No Wizards Behind This Curtain
[Graphic - Picture of hanging curtains]
Western lacks the management depth to handle 4 large, simultaneous
deals
With Apologies to "The Wizard of Oz"
5. Why Shareholders Should Vote Against Western Resources' Proposals
Western's Pro Forma Stock Price
[CAPTION]
<TABLE>
Pre-ADT - Core Earnings Questions [GRAPHIC -- A TWISTER] Pre-ADT - Cash Flow "Crunch"
- --------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
bullet Hidden dilution from recent deals bullet Cash Crunch: ADT, Westinghouse, foreign
(e.g., Westinghouse) investments = $1.15 billion spent in 12
month period = 8.4 years of WR dividends
bullet Threat of deregulation (WR has high-cost
generating assets; neighbors are large, bullet Post KCP&L - free cash flow is nearly $190
well-capitalized and long power) million short of required dividends
bullet Energy services capabilities = LIMITED bullet "In the absence of significant additional
equity issuances, the company's financial
bullet KCP&L: even targeted net synergies can't condition will erode"<F1>
relieve dividend pressure
bullet Insufficient management talent to
successfully integrate:
bullet Westinghouse
bullet KCP&L
bullet Foreign Investments
Post-ADT - Cash Flow "Crisis" Post-ADT - Further Earnings Hit
- -------------------------------------------------- -----------------------------------------------------
bullet Dividend pressure bullet 26-32% dilutive to post KCP&L E.P.S. in
first few years
bullet WR risks a non-investment grade rating
New Shareholders (ADT, KCP&L) and existing bullet Net negative synergies
"dividend nervous" shareholders create WR
"selling stampede" bullet Not enough management talent to do four (4)
deals at once
Next WR Bid (?)
-----------------------------------------------------
bullet More cash and/or more shares mean more
downward pressure on WR stock
bullet Key Issue: Given this outlook, can Western
even afford a "fair price"?
<FN>
1. Standard & Poors Creditwire December 19, 1996
</TABLE>
5. Why Shareholders Should Vote Against Western Resources' Proposals
Western is Hardly the Ideal Partner
Issues in Western's Core Businesses
[CAPTION]
<TABLE>
bullet Small Size: bullet No Energy Service Franchise Volume (Mwh)
- -------------------------------------------------- ------------------------------------------------------ ---------------
<S> <C> <C>
Top 5 Power Marketers
---------------------
pro forma for KCP&L, a $4 billion utility (23rd Enron Power Marketing 60.5
largest in U.S.); top 6 utilities are $8 billion+ Duke/Louis Dreyfus/PanEnergy Power 32.5
LG&E Power Marketing 17.1
Electric Clearinghouse 14.9
Citizens Lehman 12.1
Western (?) N.M.
bullet Deregulation: bullet Westinghouse Security Net Income Dilution:
- ------------------------------------------------------- -----------------------------------------------------
High Cost Generating Assets: more than 60% of $12-15 million per annum
---------------------------------------------------- (9 Cents - 12 Cents per WR/KCP&L share)
WR/KCP&L assets are generation
Western/KCP&L (Blended Average Rates) bullet "Scatter Shot" Corporate Focus
----------------------------------------------------- ----------------------------------------------------------
Resid. Rate 7.87 Cents
Comm. Rate 6.71 Cents bullet Oneok
Ind. Rate 4.69 Cents bullet Westinghouse Security
bullet Foreign Investments
bullet KCP&L
bullet ADT(?)
Where is the seasoned, highly-skilled management team that
can integrate all these deals simultaneously?
----------------------------------------------------------
bullet 5 Biggest Threats to WR/KCP&L Grid
- -------------------------------------------------------------
Marginal Cost Reserve Margin
------------- --------------
bullet Central & Southwest 2.32 Cents 15%
bullet Entergy 3.24 8%
bullet SW Public Service 2.04 5%
bullet Texas Utilities 2.56 19%
bullet Union Electric 1.93 9%
---- ---
Average: 2.42 11%
</TABLE>
5. Why Shareholders Should Vote Against Western Resources' Proposals
Western is Hardly the Ideal Partner
Problems with the Inadequate Offer for ADT
bullet Massively Dilutive to Pro Forma E.P.S.
26%-32% in the first two years
bullet Credit Rating
Western is out of debt capacity, pro forma for ADT could be at least a
two notch downgrade
bullet Pro Forma Liquidity is but a Trickle
at 25% of current WR volume, it would take ADT shareholders more
than 5 years to fully exit their WR stock
bullet Dividend Pressure
1998 Pro Forma Payout Ratio 117%(*)
1998 Pro Forma Free Cash Flow Ratio 222%(0)
Note: The next price increase by Western would only exacerbate this
problem
bullet Net Negative Synergies
Sum of the after-tax savings that ADT could realize on
Westar/Westinghouse does not even pay for the loss of ADT's
international tax structure.
5. Why Shareholders Should Vote Against Western Resources' Proposals
Western Pro Forma for ADT is Massively Dilutive
1997 1998
---- ----
bullet Summary Dilution Analysis:
Western Resources E.P.S. - Pre KCP&L, Pre ADT $2.52 $2.74
Western E.P.S. - KPC&L Pro Forma $2.26 $2.47
Western Pro Forma for KPC&L, ADT (40 year) $1.79 $2.10
(% Dilution from WR - KCP&L) (20.8%) (15.3%)
bullet Incremental Dilution from:
Onshore Structure (10 Cents) (10 Cents)
24 Year Intangible Amortization (17 Cents) (17 Cents)
Adjusted Western Pro Forma E.P.S. $1.52 $1.83
(% Dilution from WR - KCP&L) (32.4%) (26.1%)
- ----------
(*) ADT Estimate
bullet Market Confusion Regarding Potential Dilution:
The Wall Street research community is having difficulty quantifying
the pro forma impact of Western Resources' proposed acquisition of
ADT. In an October 1996 report, a leading securities firm research
analyst calculated that an acquisition of ADT at $23.00 per share
would be $0.05 per share accretive to Western. Two months later,
the same analyst estimated Western's $22.50 per share proposal
would result in dilution of $0.35 - $0.40 per share to Western.
bullet Intangible Amortization:
The potential dilution may be significantly worse than Western has
indicated because separate identifiable intangibles are amortizable
over their estimated useful life, not 40 years (incremental
dilution could be 17 Cents per share, assuming a blended 24 year
amortization period) and moving ADT onshore costs another 10 Cents
per pro forma share.
5. Why Shareholders Should Vote Against Western Resources' Proposals
How Much Are 0.42017 Shares Really Worth?
[Graphic - This information is set out as boxed text]
The "Offer" $10.00 in Cash
0.42017 shares
BLENDED
ADT-WR-KCP&L PE
1997E Net
1997E Net Income as
AT 12/17/96 1997E PE Income (1) % of Total
- ----------- -------- ---------- ----------
ADT 17.1x $210 41%
(KCP&L)(2) 13.7x 127 25%
WR 11.7x 174 34%
Blended PE 14.4x $510 100%
[Graphic - Table]
1998 Pro Forma(3)
- -----------------
WR
(Pro Forma for ADT, KCP&L)
- ----------
(1) No adjustment made for anticipated premium to be paid to KCP&L.
(2) Based on Wall Street consensus estimates.
(3) Pro forma analysis based upon Wall Street estimates for ADT and for
WR/KCP&L pro forma for their transaction.
E.P.S
- -----
$1.83
Estimated Blended PE Multiple
- -----------------------------
14x - 16x
Theoretical WR Price Range at 1/1/98
- ------------------------------------
$25.62-$29.28
Theoretical Value of 0.42017 Shares
- -----------------------------------
$10.76-$12.30
Per Share Cash Component
- ------------------------
$10.00
Total Value for ADT Shares (at 1/1/98)
- --------------------------------------
$20.76-$22.30
Discounted to
- -------------------------------
2/28/97 at 15%: $18.48-$19.85
5. Why Shareholders Should Vote Against Western Resources' Proposals
The Reality Check
bullet Point of Departure
bullet Why give control of the ADT Board to a "Low - Ball Bidder"?
bullet Why pursue a merger of equals with a small, over-leveraged
Kansas utility with net negative synergies and severe
dilution to ADT's "pure play" growth rate?
bullet Who is more closely aligned with ADT shareholders in
creating shareholder value?
bullet Michael Ashcroft - 11,075,718 ADT shares
beneficially owned
(7.8% of outstanding)
bullet Steve Ruzika - 1,157,405 ADT shares
beneficially owned (0.8% of
outstanding)
bullet John Hayes - 20,849 Western shares
beneficially owned
(0.1% of outstanding)
bullet David Wittig - 16,634 Western shares
beneficially owned
(0.0% of outstanding)
bullet Bottom Line
bullet ADT's Future is Bright (stock should exceed stated value of
bid by mid-year 1997)
bullet Western's Future is Bleak (pre-tax realizable value of Western
offer unlikely to exceed $22.00 per ADT share by year end
1997)
Three Year Relative Stock Price performance
[Graphic - chart depicting the following: three year relative stock
price performance among ADT, the S&P 400, the S&P Utilities and Western
Resources, for the period February 28, 1994 through February 28, 1997.]
2/28/94 2/28/97
------- -------
ADT 100% 214.81%
S&P 400 100% 169.00%
S&P Utilities 100% 120.92%
WR 100% 99.18%
CERTAIN ADDITIONAL INFORMATION: ADT Limited (the "Company") will be
soliciting proxies against the proposals of Western Resources, Inc.
(together with its subsidiaries, "Western") and revocations of proxies
previously given to Western for such proposals. The following individuals
may be deemed to be participants in the solicitation of proxies and
revocations of proxies by the Company: ADT Limited, Michael A. Ashcroft,
John E. Danneberg, Alan B. Henderson, James S. Pasman, Jr., Stephen J.
Ruzika, W. Peter Slusser, William W. Stinson, Raymond S. Troubh and
Angela E. Entwistle. As of February 24, 1997, Mr. Ashcroft is the
beneficial owner of 11,075,718 of the Company's common shares, Mr.
Danneberg is the beneficial owner of 102 of the Company's common shares,
Mr. Henderson is the beneficial owner of 621 of the Company's common
shares, Mr. Pasman is the beneficial owner of 2,000 of the Company's
common shares, Mr. Ruzika is the beneficial owner of 1,157,405 of the
Company's common shares, Mr. Slusser is the beneficial owner of 2,800 of
the Company's common shares, Mr. Stinson is the beneficial owner of 3,010
of the Company's common shares, Mr. Troubh is the beneficial owner of
2,500 of the Company's common shares and Ms. Entwistle is the beneficial
owner of 29,500 of the Company's common shares. The Company has retained
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to act
as its financial advisor in connection with Western's proposals. Merrill
Lynch is an investment banking firm that provides a full range of financial
services for institutional and individual clients. Merrill Lynch does not
admit that it or any of its directors, officers or employees is a
"participant" as defined in Schedule 14A ("Schedule 14A") promulgated
under the Securities Exchange Act of 1934, as amended, in the proxy
solicitation, or that such Schedule 14A requires the disclosure of
certain financial information concerning Merrill Lynch. In connection with
Merrill Lynch's role as financial advisor to the Company, Merrill Lynch and
the following investment banking employees of Merrill Lynch may communicate
in person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are shareholders of the Company: Barry
Friedberg (Executive Vice President), Richard Johnson (Managing Director),
Huston McCollough (Managing Director), Hugh O'Hare (Vice President), Robert
Simensky (Vice President) and Paul Bastone (Associate). In the normal course
of its business, Merrill Lynch regularly buys and sells securities issued
by the company and its affiliates ("ADT Securities") for its own account
and for the accounts of its customers, which transactions may result from
time to time in Merrill Lynch and its associates having a net "long" or net
"short" position in ADT Securities or option contracts with other
derivatives in or relating to ADT Securities. As of February 28, 1997,
Merrill Lynch held positions in ADT Securities as principal as follows:
(i) net "short" 769,995 of the Company's common shares; (ii) net "long"
$51,000 par amount of 9.25% Guaranteed Senior Subordinated Notes of the
Company due August 1, 2003; and (iii) net "long" 31,509 Liquid Yield
Option[Trademark] Notes of the Company due 2010, exchangeable for 889,499
of the Company's common shares.
EXHIBIT 99.4
Proposal 4 - Approval of Amendments to the ADT 1993 Long Term Incentive Plan
Background
On August 12, 1993, the Board of Directors adopted the ADT 1993
Long-Term Incentive Plan (the "Plan") which was approved by the shareholders
of the Company on October 12, 1993. The Plan currently authorizes the
issuance of options to purchase common shares and other awards which are
measured by common shares for up to 8,500,000 common shares. To date,
3,400,000 options to purchase common shares in respect of which participants
are required to pay $2.50 per option ("Subscription Options") have been
granted under the Plan, of which 16,668 such options have been forfeited, and
have reverted to the Plan upon one participant ceasing to be in employment.
In addition, 4,715,000 options in respect of which participants are not
required to make payment ("Ordinary Options") have been granted under the
Plan. Accordingly, the Plan has only 401,668 common shares remaining available
for grant which, the Board of Directors believes, is inadequate for future
requirements. The Board of Directors believes that long-term incentives based
upon common shares are an integral part of the compensation packages to be
offered to the Company's executives and managers and that the grant of stock
options and other incentives available in the Plan, which align the interests
of the recipients with those of the Company's shareholders, is an effective
method to attract and retain employees.
Set out below is a summary of options outstanding under the
Plan together with the number of all other share options outstanding as of
February 29, 1996.
<TABLE>
<CAPTION>
Per cent of
Per cent of Fully diluted
Stock Options Common Shares Common
Outstanding Outstanding(1) Shares(2)
------------- -------------- -------------
<S> <C> <C> <C>
Ordinary Options outstanding under the Plan............ 4,545,000 3.4% 2.9%
Options outstanding under all other Company plans...... 5,469,185 4.1% 3.5%
----------
10,014,185 7.2% 6.2%
Subscription Options outstanding under the Plan........ 3,350,000 2.5% 2.2%
----------
Total Options outstanding.............................. 13,364,185 9.4% 8.1%
==========
</TABLE>
- ---------------
(1) Based upon common shares outstanding on February 29, 1996 but excluding
3,182,787 common shares owned by a subsidiary of the Company.
(2) Based upon common shares outstanding on February 29, 1996 and the number of
common shares to be issued on exchange of the Company's outstanding Liquid
Yield Option Notes, which are currently in the money.
At the Annual General Meeting, the shareholders will be asked
to approve amendments to the Plan by the affirmative vote of a majority of
votes cast by holders of the outstanding common shares represented at the
Annual General Meeting in person or by proxy. The amendments to the Plan were
proposed by the Remuneration Committee and approved by the board of directors
on February 29, 1996, subject to shareholder approval, to (i) increase the
number of common shares with respect to which options and other incentives
under the Plan may be granted by 8,500,000, thus increasing the common shares
subject to the Plan from 8,500,000 to 17,000,000 (ii) fix at 8,000,000 common
shares for 1996 and 3,000,000 common shares thereafter the maximum number of
common shares with respect to which options or other awards may be granted to
a single participant in any one calendar year, (iii) fix the value of a common
share at the date of any grant as the minimum exercise price of options and
the minimum grant price of stock appreciation rights, or not less than 85 per
cent of such value as such minimum if such option or right is to be paid for
or is expressly granted in lieu of a reasonable amount of salary or cash bonus
and (iv) delete from the Plan the provisions thereof relating to the grants of
awards in restricted common shares.
The increase in common shares available under the Plan is
designed to continue to promote the interests of the Company and its
shareholders by attracting and retaining officers and key employees of the
Company and its subsidiaries; motivating such employees by reason of
performance related incentives to achieve long-range performance goals; and
enabling such employees to participate in the long-term growth and financial
success of the Company. The establishment of a maximum number of shares with
respect to which options or other awards may be granted to any one participant
in any year is being made to preserve the ability of the Company to deduct
compensation realized by participants in connection with the award for United
States income tax purposes. The Omnibus Budget Reconciliation Act of 1993
generally prohibits the Company from deducting compensation paid to a "covered
employee" to the extent the compensation exceeds $1,000,000 per year.
"Performance based compensation", including compensation realized in
connection with certain stock options and stock appreciation rights, is
excluded in calculating the $1,000,000 deduction limit. In order for stock
options or stock appreciation rights to constitute performance based
compensation, the plan must, among other things, state the maximum number of
options or stock appreciation rights that may be granted during a specified
period to any participant. A special transitional rule was provided for plans,
like the 1993 Long Term Incentive Plan, that were approved by the shareholders
prior to December 20, 1993 without the requisite "per participant" limit. This
amendment is presented in order to set a "per participant" limit and to enable
the Company to deduct, for United States income tax purposes, the amount of
compensation realized by participants employed by the Company's subsidiaries
in the United States upon the exercise of a non-qualified option or a stock
appreciation right. The limit is set at a higher number for the current year
to accommodate the additional onions described below under "Initial Grants".
The fixing of a minimum exercise price was deemed desirable to prevent, except
in the limited circumstances provided, the grant of options exercisable at
less than the value of a common share at the date of the grant, even though no
such options have been granted. The existing provisions of the Plan relating
to the issuance of awards in the form of restricted common shares have never
been utilized, and the board of directors believes, will not be utilized in
the future.
If the proposed amendments to the Plan are not approved, the
Plan will continue to remain in effect in its present form.
Summary
The following is a summary of the material features of the Plan
as it is proposed to be amended and is qualified in its entirety by reference
to the Plan:
The Plan is administered by the Remuneration Committee of the
board of directors (the "Committee"), which is comprised exclusively of
independent directors. The Plan provides for the granting of stock
options, stock appreciation rights ("SARs"), performance awards, dividend
equivalents and other awards deemed by the Committee to be consistent with
the purposes of the Plan (collectively or individually, "Awards") to
officers and key employees of the Company and its subsidiaries (the
"Participants"). The Committee has exclusive discretion to select the
Participants to whom Awards will be granted and to determine the type, size
and terms of each Award, and to make all other determinations which it
deems necessary or desirable in the interpretation and administration of
the Plan except that the exercise price of Options and the grant price of
SARs must be at least the Fair Market Value of a Share at the date of the
grant, or not less than 85 per cent of such Fair Market Value at such date
if such Option or SAR is to be paid for or is expressly granted in lieu of
a reasonable amount of salary or cash bonus. The Committee has the
authority to administer, construe and interpret the Plan, and its decisions
are final, binding and conclusive.
The maximum number of common shares with respect to which
Awards may be granted under the Plan will be 17,000,000. It is expected that
approximately 100 persons may be eligible to receive Awards under the Plan. No
Participant will be able to be granted in any calendar year Awards related to
more than 8,000,000 common shares in 1996 and 3,000,000 common shares
thereafter.
Common shares issued under the Plan may be either newly issued
shares, shares acquired by any subsidiary of the Company or any combination
thereof. Unless prohibited by Rule 16b-3 under Section 16 of the Securities
Exchange Act of 1934, as amended, if any common shares subject to repurchase
or forfeiture rights are acquired by any subsidiary of the Company or if any
Award is cancelled, terminates or expires unexercised without compensation,
the common shares which were issued or would otherwise have been issuable
pursuant thereto will become available for new Awards.
Awards under the Plan
Stock Options
A stock option ("Option"), which may be a non-qualified or an
incentive stock option, is the right to purchase a specified number of common
shares at a price ("Option Price") determined by the Committee.
Options are not transferable during the Participant's lifetime
and will generally expire not later than ten years after the date on which
they are granted. Options become exercisable at such times and in such
installments as the Committee shall determine. Payment of the Option Price
must be made in full at the time of exercise in cash, by tendering common
shares having a fair market value equal to the Option Price, or by other means
that the Committee deems appropriate.
Stock Appreciation Rights
An SAR may be granted alone or in tandem with Options or other
Awards. Upon exercise of an SAR, the holder will receive, at the election of
the Committee, cash or common shares or other consideration equal in value to
the difference between the grant price and the fair market value of a common
share on the date of exercise, multiplied by the number of shares subject to
the SAR. A Participant to whom an Award of an Option or SAR is made has no
rights as a shareholder with respect to any common shares issuable pursuant to
any such Option or SAR until the date of issuance of the stock certificate for
such shares upon payment of the Option Price or settlement of the SAR.
Performance Awards
Performance awards are awards whose final value, if any, is
determined by the degree to which specified Company, business unit,
Participant and/or other performance objectives are achieved during a
specified performance period, subject to such adjustments as the Committee may
approve based on relevant factors. Performance objectives may be based on
share price, earnings per share, net income, return on equity, and/or on other
measures of performance. The Committee may make such adjustments in the
computation of any performance measure as it deems appropriate. The
maximum value of an Award may be a fixed dollar amount, an amount that
varies from time to time based on the value of a common share, or an amount
that is determinable from other criteria specified by the Committee. The
final value of an Award may vest over a period of time after the final
value is determined.
Dividend Equivalents
A dividend equivalent is a right to receive payments equivalent
to dividends with respect to a number of common shares determined by the
Committee. The Committee may provide that such amounts will be deemed to have
been reinvested in additional common shares or otherwise reinvested. Dividend
equivalents may have such other terms and conditions as the Committee may
determine.
Payment
Payment of an Award such as a performance award may be made in
cash, common shares or other consideration in accordance with such terms as
are determined by the Committee.
Additional Information
Under the Plan, if there is any change in the outstanding
common shares by reason of any stock split, stock dividend, combination,
subdivision or exchange of shares, recapitalization, merger, consolidation,
reorganization or other extraordinary or unusual event, the Committee may
direct that appropriate changes be made in the number or kind of securities
that may be issued under the Plan and in the terms of outstanding Awards. The
Committee has the discretion to make appropriate changes in some or all
Awards, consistent with the purposes of the Plan. Generally, a
Participant's rights under the Plan may not be assigned or transferred
(except in the event of death). The Committee may permit a Participant to
pay taxes required to be withheld with respect to an Award in any
appropriate manner. The expenses of the Plan are borne by the Company and
participating subsidiaries. No awards will be granted under the Plan after
June 30, 2003. The board of directors may amend the Plan for any purpose
consistent with the goals of the Plan, but no such amendment shall be
effective unless and until the same is approved by shareholders of the
Company where the absence of shareholder approval would adversely affect
the compliance of the Plan with Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or other applicable law or regulation.
Rule 16b-3 currently requires shareholder approval if the amendment would,
among other things, materially increase the benefits accruing to
Participants under the Plan.
Certain Income Tax Consequences of Options
The Company has been advised that under current law certain of
the income tax consequences under the laws of the United States to
Participants and their employers of Options granted under the Plan should
generally be as set forth in the following summary. The summary only addresses
income tax consequences for Participants and their employers who are subject
to taxation in the United States. (For purposes of this discussion, the term
"employer" shall be deemed to include the employer of an employee optionee and
the taxpayer for whom a non-employee optionee performs services.) An employee
to whom an incentive Option which qualifies under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), is granted will not recognize
income at the time of grant or exercise of such Option. No federal income tax
deduction will be allowable to the employee's employer upon the grant or
exercise of such Option. However, upon the exercise of an incentive Option,
special alternative minimum tax rules apply for the employee. When the
employee sells such shares more than one year after the date of transfer of
such shares and more than two years after the date of grant of such Option,
the employee will normally recognize a long term capital gain or loss equal to
the difference, if any, between the sales price of such shares and the Option
exercise price. If the employee does not hold such shares for this period,
when the employee sells such shares, the employee will recognize ordinary
compensation income and possibly capital gain or loss in such amounts as are
prescribed by the Code and regulations thereunder. Subject to applicable
provisions of the Code and regulations thereunder, the employee's employer
will generally be entitled to a federal income tax deduction in the amount of
such ordinary compensation income. An individual to whom a non-qualified
Option (which is treated as an option for federal income tax purposes) is
granted will not recognize income at the time of grant of such Option.
When such optionee exercises such non-qualified Option, the optionee will
recognize ordinary compensation income equal to the difference, if any,
between the Option Price paid and the fair market value, as of the date of
Option exercise, of the shares the optionee receives. The tax basis of
such shares to such optionee will be equal to the Option Price paid plus
the amount includable in the optionee's gross income, and the optionee's
holding period for such shares will commence on the day on which the
optionee recognized taxable income in respect of such shares. Subject to
applicable provisions of the Code and regulations thereunder, the employer
of such optionee will generally be entitled to a federal income tax
deduction in respect of non-qualified Options in an amount equal to the
ordinary compensation income recognized by the optionee. Any compensation
includable in the gross income of an employee in respect of a non-qualified
Option will be subject to appropriate federal income and employment taxes.
The discussion set forth above does not purport to be a
complete analysis of all potential tax consequences relevant to recipients of
Options or their employers or to describe tax consequences based on particular
circumstances and does not address Awards other than Options. It is based on
United States federal income tax law and interpretational authorities as of
the date of this proxy statement, which are subject to change at any time. The
discussion does not address state or local income tax consequences or income
tax consequences for taxpayers who are not subject to taxation in the United
States.
Initial Grants
On February 29, 1996, subject to the approval by shareholders
of the proposed amendments to the Plan, the Remuneration Committee resolved to
increase the subscription price and size of certain options outstanding under
the Plan. In 1993, Mr. Ashcroft and Mr. Ruzika were granted options to
subscribe for 3,000,000 and 125,000 common shares, respectively, at an
exercise price of $85/8 per common share, in respect of which they were
required to pay $2.50 per option. It is proposed to increase the exercise
price of these options to $15 per common share and to increase the number of
such options held by Mr. Ashcroft and Mr. Ruzika to 8,000,000 and 333,333
respectively. All the other terms and conditions of the option grants,
including the original aggregate amount to be paid therefor by the recipients
will remain unchanged and, accordingly, these options will expire ten years
from the original date of grant. In order to replace the estimated economic
value being given up by Mr. Ashcroft and Mr. Ruzika the Company's common share
price will have to reach $18.80, a 25 per cent increase over the new exercise
price of $15.00.
The Remuneration Committee believes that these options are held
by those individuals who are in the best position to influence the future
value of the Company and that their willingness to give up the increase in
value already accrued to these options, in return for greater participation in
the future success of the Company, should be beneficial to shareholders as a
whole.
The Remuneration Committee has taken independent advice with
regard to the proposal described above and believe it to be in the best
interests of the Company.
Set out below is a summary of the options to be outstanding on
implementation of the arrangements referred to above.
<TABLE>
<CAPTION>
Per cent of
Stock Options Per cent of Fully diluted
to be Common Shares Common
Outstanding Outstanding(1) Shares(2)
------------- -------------- -------------
<S> <C> <C> <C>
Ordinary Options outstanding under the Plan............ 4,545,000 3.4% 2.9%
Options outstanding under all other Company plans...... 5,469,185 4.1% 3.5%
----------
10,014,185 7.2% 6.2%
Subscription Options outstanding under the Plan........ 8,558,333 6.2% 5.4%
----------
Total Options outstanding.............................. 18,572,518 12.6% 11.0%
==========
</TABLE>
- ----------------
(1) Based upon common shares outstanding on February 29, 1996 but excluding
3,182,787 common shares owned by a subsidiary of the Company.
(2) Based upon common shares outstanding on February 29, 1996 and the number
of common shares to be issued on exchange of the Company's outstanding
Liquid Yield Option Notes, which are currently in the money.
The following is a summary of the options granted under the
Plan as amended, in accordance with the arrangements described above, which
will not be effective unless and until shareholder approval of the amendments
to the Plan is obtained.
<TABLE>
<CAPTION>
Market Value of
Increase in the Underlying Common
Number of Shares Shares as of
Name and Principal Position Subject to Options February 29, 1996
--------------------------- ------------------ ------------------
<S> <C> <C>
Michael A. Ashcroft(1).......................................... 5,000,000(2) $73,750,000(3)
Chairman of the Board; Chief Executive Officer
Ulysses J. Brualdi, Jr.......................................... -- --
Executive Vice President; Director
David B. Hammond................................................ -- --
Deputy Chairman of the Board
Michael J. Richardson........................................... -- --
President and Chief Executive Officer of ADT Automotive, Inc.
Stephen J. Ruzika(1)............................................ 208,333(2) $ 3,073,000(3)
Chief executive officers, as a group............................ 5,208,333 $76,823,000(3)
All directors who are not executive officers, as a group........ -- --
All employees, excluding executive officers, as a group......... -- --
</TABLE>
- ----------------
(1) Nominee for Director
(2) Represents the net increase in the number of options to be held by each
individual.
(3) On February 29, 1996 the closing price of the Company's common shares on
the New York Stock Exchange was $143/4.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENTS TO THE ADT 1993 LONG TERM INCENTIVE PLAN.
Executive Compensation
Remuneration Committee
The Remuneration Committee of the board of directors is
responsible for reviewing and approving the annual compensation and other
terms and conditions of employment of certain executive officers. It is
composed entirely of independent directors, who are not officers or employees
of the Company, and is comprised of W. Peter Slusser, Chairman, Alan B.
Henderson, James S. Pasman and Raymond S. Troubh.
Compensation Policy for Executive Officers
The Company's overall executive compensation strategy is based
on the objectives of attracting and retaining the best possible executive
talent; motivating these executives to achieve business goals that are in the
best interests of the Company and its shareholders; and providing overall
compensation packages to executives that recognize individual achievements and
the attainment of specifically identified goals relevant to that executive's
area of responsibility. In establishing compensation arrangements for senior
executives, the Company also aims to have regard to the competitive
marketplace for executive talent. Due to the broad nature of skills and
interchangeability of executive talent at the most senior corporate levels,
the Company regards this marketplace as being significantly greater than that
represented by other employers in its own market segment. Accordingly, the
Company's perceived competitive marketplace for executive talent is also
different from the peer group of companies used for comparative purposes in
the calculation of five year total shareholder return set out elsewhere in
this proxy statement. The Company does not set out to establish compensation
levels towards either the higher or lower end of a perceived range, however,
the Company employs no numerical formula in this regard. It believes that the
compensation of individuals is subjective in nature and that the more
important considerations are individual merit and the Company's financial
performance.
The principal components of the Company's executive
compensation are base salary, annual bonus and stock options. The Company
establishes salaries at a level which it considers to be commensurate with the
responsibility of the position and the experience of the individual. Bonuses
are intended to provide executives with an opportunity to receive additional
cash compensation related to individual and Company performance whether or not
the payment of a bonus or the method of its calculation is prescribed under
the terms of an employment agreement. Specific measures of performance, by
reference either to external or internal criteria, are employed to calculate
bonus payments for certain executives where it is appropriate to their
function or relevant to their achievements. Otherwise, judgement is used in
making bonus payments to reward individual performance or the attainment of
unique, non-recurring goals.
Equity based compensation such as grants of stock options is
intended to be a mechanism for aligning management's interests with
shareholders' interests, particularly for those senior executives who have the
most potential to influence the equity value of the Company. Accordingly, in
1993, the Company established the ADT 1993 Long Term Incentive Plan, which is
administered by the Remuneration Committee, under which the Remuneration
Committee has discretion to grant stock options, stock appreciation rights,
performance awards, dividend equivalent and other awards, deemed by the
Remuneration Committee to be consistent with the purposes of the Plan, to
officers and key employees of the Company and its subsidiaries. Certain
amendments to the Plan are being proposed for approval by shareholders at the
Annual General Meeting.
Bonus Arrangements
Bonus arrangements for Mr. Brualdi and Mr. Ruzika, under which
bonuses are payable related directly to the performance of the Company's
common share price, were approved by the Remuneration Committee in 1994. The
arrangement is structured so that Mr. Brualdi and Mr. Ruzika receive a bonus
each time the Company's common share price exceeds, by $1.00 for a continuous
period of 30 trading days, the share price at which a bonus payment was
previously made. In the event of a decrease in the share price, no payment is
due until the previous share price level at which a payment was made is
exceeded by $1.00. During 1994, Mr. Brualdi and Mr. Ruzika each received a
bonus of $200,000 comprised of $100,000 when the Company's common share price
exceeded $10.00 for 30 trading days and $100,000 when the Company's common
share price exceeded $11.00 for 30 trading days during 1994.
Mr. Brualdi and Mr. Ruzika each received a bonus of $250,000
during 1995, comprised of $125,000 when the Company's common share price
exceeded $12.00 for 30 trading days and $125,000 when the Company's common
share price exceeded $13.00 for 30 trading days during 1995. In addition, they
are to receive $125,000 when the common share price exceeds $14.00 for a
continuous period of 30 trading days, $150,000 when the common share price
exceeds $15.00, $16.00 and $17.00, respectively, for continuous periods of 30
trading days and $175,000 when the common share price exceeds $18.00, $19.00
and $20.00, respectively, for continuous periods of 30 trading days.
Accordingly, the total maximum bonus payable to each individual under this
arrangement is $1,550,000. The arrangement is due to expire in 1999 or such
earlier date as the common share price exceeds $20.00 for a continuous period
of 30 trading days.
Basis for CEO compensation
The Chief Executive Officer's cash compensation in respect of
1995, as set out in the Summary Compensation Table, was determined in
accordance with his employment agreement. During 1995, Mr. Ashcroft's base
salary was increased from $1,050,000 per annum to $1,102,500 per annum, with
effect from the second quarter of 1995, to take into account the effect of
inflation. The agreement provides for the majority of the Chief Executive
Officer's potential cash compensation to be performance related with a bonus
payable in accordance with a formula set out in his employment agreement.
After the end of each fiscal year Mr. Ashcroft's bonus is calculated by
reference to the Company's earnings per share compared, on a consistent basis,
subject to certain adjustments, with the internally targeted figure for
earnings per share for that fiscal year. Mr Ashcroft's bonus in respect of
1995, calculated in accordance with that formula, was $2,233,219.
Submitted by the Remuneration Committee
Alan B. Henderson
James S. Pasman
W. Peter Slusser
Raymond S. Troubh
Summary Compensation Table
Shown below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal
years ended December 31, 1995, 1994 and 1993, of those persons who were, at
December 31, 1995 (i) the Chief Executive Officer and (ii) the other four most
highly compensated executive officers of the Company, including one executive
officer of a subsidiary of the Company (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation(1) -------------
------------------------------------ Stock Option All Other
Name and principal position Year Salary Bonus Grants Compensation
- --------------------------- ---- ------ ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Michael A. Ashcroft(2) 1995 $1,089,375 $2,233,219 1,500,000 $1,921,939(3)
Chairman of the Board; 1994 $1,037,500 $1,945,313 750,000 $ 783,403
Chief Executive Officer 1993 $1,290,900 $1,175,000 4,750,000 $1,184,014
Ulysses J. Brualdi, Jr.(4) 1995 $ 653,625 $ 250,000(5) 500,000 $ 9,187(6)
Executive Vice President; 1994 $ 622,500 $ 200,000 250,000 $ 10,477
Director 1993 $ 600,000 -0- 625,000 $ 15,245
David B. Hammond(7) 1995 $ 360,000 -0- -0- -0-
Deputy Chairman of the 1994 $ 360,000 -0- 125,000 -0-
Board 1993 $ 480,000 -0- 250,000 -0-
Michael J. Richardson(8) 1995 $ 314,000 $ 145,245 50,000 $ 6,461(9)
Chief Executive Officer of 1994 $ 300,000 $ 115,000 45,000 $ 6,480
ADT Automotive, Inc. 1993 $ 257,080 $ 140,943 275,000 $ 9,034
Stephen J. Ruzika(10) 1995 $ 653,625 $ 250,000(5) 500,000 $ 1,655(11)
Chief Financial Officer; 1994 $ 622,500 $ 200,000 250,000 $ 35,639
Director
</TABLE>
- --------------------
(1) While officers enjoy certain perquisites, such perquisites did not exceed
the lesser of $50,000 or 10 per cent of each officer's salary and bonus. A
change in control of the Company does not of itself require the payment of
any moneys to any of the Named Officers. However, such an event does
accelerate the vesting of certain pension rights and the exercisability of
certain stock options.
(2) The salary, bonus and all other compensation shown in respect of each year
represent Mr. Ashcroft's entitlement to those amounts for that year. Mr.
Ashcroft utilized $2,500,000 of the compensation due to him in respect of
1995, being the whole of his bonus entitlement of $2,233,219 and $266,781
of his other compensation to subscribe for options, at the rate of $2.50
per option, to subscribe for common shares of the Company at an exercise
price of $85/8 per share. Mr. Ashcroft utilized $2,500,000 of the
compensation due to him in respect of 1994, being the whole of his bonus
entitlement of $1,945,313 and $554,687 of his other compensation
entitlement to subscribe for options on the same terms. These options are
all included in the stock option grants shown for 1993.
(3) The other compensation due to Mr. Ashcroft in respect of 1995, and
referred to in note (2) above, represents the US dollar equivalent of
#1,217,341 being an amount in lieu of providing Mr. Ashcroft with
retirement and death benefits under a defined pension plan,
attributable to service in 1995 (1994 - #511,126).
(4) The salary amount shown in respect of 1995 represents Mr. Brualdi's
entitlement to salary in the year. Prior to becoming entitled to
receive certain salary, however, Mr. Brualdi elected to receive
options at the rate of $2.50 per option, to subscribe for common shares
of the Company at an exercise price of $8 5/8 per share, in lieu of
receiving $104,167 in salary (1994 - $104,167). These options are
included in the stock option grants shown for 1993.
(5) Mr. Brualdi and Mr. Ruzika each received a bonus of $250,000 in 1995 (1994
- $200,000) under a bonus arrangement in respect of which payments are
related directly to the performance of the Company's common share price.
(6) Represents $1,800 contributed to a defined contribution 401(k) pension
benefit plan and $7,387 which is the cost to the Company of providing Mr.
Brualdi with life insurance.
(7) All amounts were paid to a company owned by Mr. Hammond and his family. In
addition to the amounts shown in the table, in 1993 such company received
$600,000 upon the termination of an agreement of indefinite term for the
provision of Mr. Hammond's services.
(8) The salary amount shown in respect of 1995 represents Mr. Richardson's
entitlement to salary in the year. Prior to becoming entitled to receive
certain salary, however, Mr. Richardson elected to receive options at
the rate of $2.50 per option, to subscribe for common shares of the
Company at exercise price of $8 5/8 per share, in lieu of receiving
$97,222 in salary (1994 - $97,222). These options are included in the
stock option grants shown for 1993.
(9) Represents $4,500 contributed to a defined contribution 401(k) pension
benefit plan and $1,961 which is the aggregate incremental cost to the
Company of providing Mr. Richardson with enhanced group term life
insurance benefits.
(10) The salary amount shown in respect of 1995 represents Mr. Ruzika's
entitlement to salary in the year. Prior to becoming entitled to
receive certain salary, however, Mr. Ruzika elected to receive
options at the rate of $2.50 per option, to subscribe for common
shares of the Company at an exercise price of $8 5/8 per share, in
lieu of receiving $104,167 in salary (1994 - $128,198). These options
are included in the stock option grants shown for 1993.
(11) Represents $1,655 which is the aggregate incremental cost to the Company
of providing Mr. Ruzika with supplemental term life insurance.
Option Grants in Last Fiscal Year
Shown below are all grants of share options to the Named
Officers during the fiscal year ended December 31, 1995. The following table
shows, along with certain additional information, hypothetical realizable
values of share options granted for the last fiscal year, at assumed rates of
cumulative share price appreciation over the ten year life of such options.
These assumed rates of appreciation are set by the rules of the Securities and
Exchange Commission and are not intended to forecast appreciation of the price
of the common shares. These hypothetical values have not been discounted to
reflect their present value.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Rates of Share Price
Appreciation for Option
Individual Grants Term(2)
--------------------------------------------------------------------- -----------------------------
% of Total
Options
Granted to Market Exercise or
Employees Price on Base
Options in Fiscal Date of Price
Name Granted(1) Year Grant ($/share) Expiration Date 5% 10%
---- ---------- --------- -------- ---------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft 1,200,000 40.0% $11.50 $11.69 May 11, 2005 $8,451,000 $21,766,000
150,000 5.0% $11.50 $12.86 May 11, 2005 $ 881,000 $ 2,545,000
150,000 5.0% $11.50 $14.02 May 11, 2005 $ 707,000 $ 2,371,000
Ulysses J. Brualdi, Jr. 400,000 13.3% $11.50 $11.69 May 11, 2005 $2,817,000 $ 7,255,000
50,000 1.7% $11.50 $12.86 May 11, 2005 $ 294,000 $ 848,000
50,000 1.7% $11.50 $14.02 May 11, 2005 $ 236,000 $ 790,000
Michael J. Richardson 50,000 1.7% $11.50 $11.63 May 11, 2005 $ 355,000 $ 910,000
Stephen J. Ruzika 400,000 13.3% $11.50 $11.69 May 11, 2005 $2,817,000 $ 7,255,000
50,000 1.7% $11.50 $12.86 May 11, 2005 $ 294,000 $ 848,000
50,000 1.7% $11.50 $14.02 May 11, 2005 $ 236,000 $ 790,000
</TABLE>
- ----------------
(1) Of the above options, 13.3 per cent are exercisable after one year from
the date of grant, 13.3 per cent are exercisable after two years from
the date of grant and the balance are exercisable after three years
from the date of grant, with the exception of Mr. Richardson's options
which are all exercisable after three years from the date of grant.
(2) Gains are reported net of the option exercise price but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on share option exercises are
dependent on the future price performance of the common shares as well as
the option holders' continued employment through the vesting period. The
potential realizable values reflected in this table may not necessarily be
achieved.
Aggregated Option Exercises in Last Fiscal Year and Year End Option Values
Shown below is information with respect to aggregated option
exercises by the Named Officers in the fiscal year ended December 31, 1995 and
with respect to unexercised options to purchase the Company's common shares
granted in fiscal 1995 and prior years to the Named Officers and held by them
at December 31, 1995.
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised in-the-Money
at Fiscal Year End Options at Fiscal Year End (1), (2)
Shares ------------------------------- -----------------------------------
Acquired
on Value Realized on
Exercise of Exercise of
Options in Options
Name Fiscal Year in Fiscal Year Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft... -0- -0- 2,991,665 4,083,335 $13,599,300 $16,282,400
Ulysses J. Brualdi.... -0- -0- 333,330 1,041,670 $ 1,833,300 $ 4,119,500
David B. Hammond...... 20,000 $ 11,500 131,665 83,335 $ 484,000 $ 221,900
Michael J. Richardson. 50,000 $181,000 189,998 220,002 $ 939,700 $ 1,134,600
Stephen J. Ruzika..... -0- -0- 420,330 1,041,679 $ 1,957,100 $ 4,119,500
</TABLE>
- ---------------
(1) Based on the closing price of $15 per common share on December 29, 1995.
(2) Messrs. Ashcroft, Brualdi, Richardson and Ruzika have been granted certain
options, having an exercise price of $85/8, for which they are required to
pay $2.50 each. These options are therefore valued as if their exercise
price was $111/8.
Options in respect of 250,000 common shares were purchased by
the Company from Mr. Hammond for their aggregate economic value of $1.1
million, based on the Company's common share price on December 19, 1995, in
connection with the purchase by a company, of which Mr. Hammond is a director,
of the Company's United Kingdom and continental European vehicle auction
business on December 29, 1995, further details of which are set out under
"Certain Relationships and Related Transactions" below.
Certain Defined Benefit Plans
The Company does not maintain any defined benefit or actuarial
retirement plans ("pension plans"). However, Mr. Brualdi, Mr. Richardson
and Mr. Ruzika participate in pension plans that are maintained by
indirect, wholly owned subsidiaries of the Company. Certain information is
set forth below regarding the pension plans in which Mr. Brualdi, Mr.
Richardson and Mr. Ruzika, as well as other employees of the Company's
subsidiaries, participate.
ADT Security Systems maintains a funded pension plan (the
"Security Systems Pension Plan"). ADT Security Systems also maintains an
unfunded supplemental executive retirement plan (the "Security Systems SERP").
Mr. Brualdi is the only Named Officer who participates in the Security Systems
Pension Plan and the Security Systems SERP.
The following table sets forth the estimated annual benefit
payable upon retirement at age 65 under the Security Systems Pension Plan
under the columns numbered (1) and under the Security Systems SERP under the
columns numbered (2).
Pension Plan Table: Security Systems Pension Plan Columns Number (1) and
Security Systems SERP Columns Numbered (2)
<TABLE>
<CAPTION>
Years of Service
- ---------------------------------------------------------------------------------------------------------------------
15 20 25 30 35
Remuneration (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- ------------ --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
125,000 18,750 4,350 25,000 10,600 31,250 16,850 37,500 10,600 43,750 4,350
150,000 22,500 8,100 30,000 15,600 37,500 23,100 45,000 15,600 52,500 8,100
175,000 22,500 15,600 30,000 25,600 37,500 35,600 45,000 28,100 52,500 20,600
200,000 22,500 23,100 30,000 35,600 37,500 48,100 45,000 40,600 52,500 33,100
225,000 22,500 30,600 30,000 45,600 37,500 60,600 45,000 53,100 52,500 45,600
250,000 22,550 38,100 30,000 55,600 37,500 73,100 45,000 65,600 52,500 58,100
300,000 22,500 53,100 30,000 75,600 37,500 98,100 45,000 90,600 52,500 83,100
350,000 22,500 68,100 30,000 956,000 37,500 123,100 45,000 115,600 52,500 108,100
400,000 22,500 831,000 30,000 115,600 37,500 148,100 45,000 140,600 52,500 133,100
450,000 22,500 98,100 30,000 135,600 37,500 173,100 45,000 165,600 52,500 158,100
500,000 22,500 113,100 30,000 155,600 375,000 198,100 45,000 190,600 52,500 183,100
600,000 22,500 142,100 30,000 195,600 37,500 248,100 45,000 240,600 52,500 233,100
700,000 22,500 173,100 30,000 235,600 37,500 298,100 45,000 290,600 52,500 283,100
</TABLE>
The amounts shown in the columns numbered (1) reflect the
estimated annual benefit payable under the Security Systems Pension Plan at
age 65, the normal retirement age under the Security Systems Pension Plan, in
the form of a straight life annuity (i.e., with no survivor option). The
normal retirement benefit under the Security Systems Pension Plan is an annual
benefit payable at age 65 equal to one per cent of a participant's average
base salary (including commissions) for the five consecutive years producing
the highest average, times his years of credited service. Compensation taken
into account under the Security Systems Pension Plan is limited to base salary
(including commissions), subject to a maximum limit, currently $150,000,
imposed by the Internal Revenue Code of 1986, as amended. Benefits payable
under the Security Systems Pension Plan are not offset by Social Security
benefits or any other amounts. Mr. Brualdi has approximately 20 years of
credited service under the Security Systems Pension Plan and the Security
Systems SERP.
The Security Systems SERP supplements the retirement benefits
payable to certain officers of ADT Security Systems. The amounts shown in the
columns numbered (2) reflect the estimated additional benefits payable under
the Security Systems SERP at age 65 in the form of a straight life annuity
(i.e., with no survivor option). Benefits under the Security Systems SERP are
based upon a participant's annual base salary immediately prior to retirement
or other termination of employment (disregarding any change in salary within
six months prior to retirement or termination). Compensation taken into
account under the Security Systems SERP is limited to base salary shown in the
salary column of the Summary Compensation Table. The Security Systems SERP
provides a normal retirement benefit of up to 50 per cent of annual base
salary (depending on a participant's years of service). Benefits under the
Security Systems SERP are reduced by pension benefits payable under the
Security Systems Pension Plan (or any other pension plan maintained by ADT
Security Systems or its affiliates) and Social Security benefits. Benefits are
payable under the Security Systems SERP to participants who retire at or after
age 65, retire at or after age 55 with the consent of ADT Security Systems or
are involuntarily terminated without cause. A participant who voluntarily
terminates employment with ADT Security Systems prior to retirement or who is
terminated for cause, as defined in the Security Systems SERP, forfeits all
benefits under the Security Systems SERP. ADT Group PLC ("ADT Group")
maintains an executive retirement plan (the "ADT Group Plan"). Mr. Richardson
is the only Named Officer who participates in the ADT Group Plan. The ADT
Group Plan will provide Mr. Richardson an annual benefit payable for life
beginning at age 60. The annual benefit is equal to 66.7 per cent of base
salary for the three years of the most recent ten years prior to retirement
that produce the highest average. Mr. Richardson's estimated annual benefit
payable at age 60 for life is $211,565. Benefits payable under the ADT Group
Plan are not offset by Social Security benefits or any other amounts.
ADT, Inc. maintains a supplemental executive retirement plan
(the "ADT SERP"). Mr. Ruzika is the only Named Officer who participates in the
ADT SERP. Benefits for Mr. Ruzika under the ADT SERP are also supplemented
under a Supplemental Benefit Agreement between Mr. Ruzika and ADT Management
Services Limited (the "Supplemental Benefit Agreement").
The ADT SERP and Supplemental Benefit Agreement together
provide benefits payable to Mr. Ruzika for a total of 20 years beginning at
age 55. This annual benefit is equal to 65 per cent of base salary and bonuses
for the three consecutive years that produce the highest average. Effective
for benefits accrued after December 31, 1994, the benefit is calculated using
base salary including, for this purpose, the purchase price of any options to
purchase the Company's shares received in lieu of base salary. This benefit is
reduced by the value of any benefits derived from employer contributions under
any other retirement plan maintained by ADT, Inc. or its affiliates. Mr.
Ruzika's estimated annual benefit payable at age 55 for a total of 20 years,
net of the estimated offset attributable to employer contributions under
certain defined contribution plans, is $372,598. Benefits are not offset by
Social Security benefits.
Compliance with Reporting Requirements
The Company believes that, during 1995, all filing requirements
under Section 16(a) of the Securities Exchange Act 1934 applicable to its
officers, directors and beneficial owners of more than ten per cent of equity
securities were complied with on a timely basis.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Company has entered into a written employment agreement
with Mr. Ashcroft, dated as of May 8, 1993 which provides that Mr. Ashcroft
shall serve as Chairman of the Board and Chief Executive Officer until March
31, 1998, subject to renewal for additional one-year terms thereafter. Mr.
Ashcroft's initial base salary was $1,000,000, per annum subject to annual
review and adjustment by the board of directors but may only be reduced by a
maximum of 15 per cent during the term of the agreement without Mr. Ashcroft's
consent. During 1995, Mr. Ashcroft's base salary was increased to $1,102,500
per annum. Mr. Ashcroft is also eligible for annual bonus payments based upon
an earnings per share target for the Company's common shares set each year,
subject to a maximum bonus of $4,000,000. The maximum bonus is payable upon
attaining 117.5 per cent of the targeted earnings per share. As a term of the
contract, Mr. Ashcroft was granted options to purchase 1,000,000 common shares
under the ADT 1993 Long Term Incentive Plan, with 50 per cent of such options
exercisable at market value on the date of grant, as defined, 25 per cent
exercisable at 110 per cent of market value, and 25 per cent exercisable at
120 per cent of market value, vesting in equal annual installments over a
three-year period commencing one year from the date of grant and exercisable
over a ten-year period. The Company will make annual payments to Mr. Ashcroft
calculated to provide him with retirement and death benefits no less
favourable than if he were a member of ADT Group Plan. Such annual payments
will not be less than $450,000. The Company may terminate the agreement upon
Mr. Ashcroft's death, when Mr. Ashcroft attains the age of 60, if Mr. Ashcroft
is unable to perform his duties for 180 days due to ill health, accident or
otherwise, if Mr. Ashcroft fails to discharge his duties or engages in conduct
that is materially injurious to the Company, or if Mr. Ashcroft willfully and
continually commits a material breach of the agreement. Mr. Ashcroft may
terminate the agreement upon a breach by the Company which breach (except for
a material breach) is not cured within 30 days, if he is removed from his
position as Chairman of the Board or his position as Chief Executive Officer,
or if the scope of his duties and responsibilities becomes inconsistent with
his position as an officer of the Company.
Mr. Ashcroft may also terminate the agreement without cause at
any time upon 90 days notice. In the event the agreement is terminated
pursuant to its terms by the Company or without cause by Mr. Ashcroft upon 90
days notice, Mr. Ashcroft will be entitled to the pro rata portion of his base
salary, bonus payment, pension payment and other benefits but will not be
entitled to any additional payments. If the agreement is terminated due to a
disability, Mr. Ashcroft will be entitled to an additional payment equal to
two times his highest base salary. In the event the agreement is terminated by
the Company without cause or by Mr. Ashcroft with cause, Mr. Ashcroft will be
entitled to a severance payment equal to two times his highest base salary and
average bonus payment, annual pension payments for the year of termination and
the following two years, and one year of any other benefits previously
provided.
Under the Security Systems SERP, if Mr. Brualdi's employment is
involuntarily terminated without cause he is entitled to receive his full
benefits under such plan, commencing immediately, whether or not he has
reached retirement age at the time of his dismissal.
Under the ADT SERP and the Supplemental Benefit Agreement Mr.
Ruzika becomes fully vested in the accrued benefits thereunder upon a Change
of Control (as defined in the ADT SERP) of the Company, ADT, Inc. or ADT
Management Services Limited. If Mr. Ruzika's employment is terminated within
one year from the date of a Change of Control he will receive, in lieu of all
other amounts due to him under the ADT SERP and the Supplemental Benefit
Agreement, a lump sum distribution equal to the present value of his accrued
benefit and an additional amount calculated under a formula intended to put
him in the same after tax position that he would have been in if he had
received a lump sum distribution of his accrued benefit on his normal
retirement date. Under this formula Mr. Ruzika would currently receive an
additional amount of approximately $647,725. A "Change of Control" is deemed
to have occurred if: (1) any person (other than Laidlaw or its affiliates,
collectively the "Laidlaw Group") acquires more than 40 per cent of the
Company's voting stock (the triggering percentage is reduced from 40 per cent
to 35 per cent if the Laidlaw Group's beneficial ownership of the Company's
voting stock is 20 per cent or less); (2) the Laidlaw Group becomes the
beneficial owner of more than 45 per cent of the Company's outstanding voting
stock; (3) there is a change of 50 per cent or more in the composition of the
Company's directors during any 3-year period (unless the change in directors
was approved by two thirds of the directors in office at the beginning of such
3-year period or directors who had previously been elected with the requisite
two thirds approval); (4) a person acquires the legal right to direct the
management and policies of the Company (other than by virtue of membership on
the board of directors or a committee of the board); (5) the Company ceases to
own, directly or indirectly through subsidiaries, at least 80 per cent of the
voting stock of ADT, Inc. or ADT Management Services Limited; or (6) the
stockholders of ether the Company, ADT, Inc., or ADT Management Services
Limited approve a merger, consolidation or a sale or disposition of all, or
substantially all, of the assets of the Company, ADT, Inc., or ADT Management
Services Limited, as the case may be, with the relevant company not surviving.
Mr. Richardson entered into an employment agreement with ADT
Automotive Holdings, Inc., the corporate parent of ADT Automotive, Inc., as of
November 30, 1993. The agreement provides that Mr. Richardson will serve as
Chief Executive Officer of ADT Automotive Holdings, Inc. and its subsidiaries
from December 1, 1993 until July 31, 1996, subject to renewal for additional
one-year terms thereafter. Mr. Richardson's initial annual base salary will
be $300,000 and will be subject to annual review for possible increase. Mr.
Richardson will also be eligible for annual bonus payments at the discretion
of the Company. The termination provisions of this agreement include a term
to the effect that, in the event the agreement is terminated by ADT Automotive
Holdings, Inc. without cause or by Mr. Richardson with cause, Mr. Richardson
will be entitled to receive his base salary and certain fringe benefits for
two years or the remaining term of the agreement, whichever is longer. In
addition, if the agreement is terminated before July 31, 1996 by ADT
Automotive Holdings, Inc. without good cause or by Mr. Richardson with cause,
Mr. Richardson will be entitled to receive monthly cash payments in the amount
necessary to increase any pension or retirement benefits paid to Mr.
Richardson to be equal to the amount of such benefits that Mr. Richardson
would have received if his employment had continued until July 31, 1996.
Certain Relationships and Related Transactions
On December 29, 1995, the Company and certain of its
subsidiaries (collectively referred to below, where appropriate, as "the
Company") entered into an agreement with Loanoption Limited ("Loanoption") and
its parent company, Integrated Transport Systems Limited ("ITS"), under which
the Company sold subsidiaries comprising its United Kingdom and Continental
European vehicle auction business ("European Auctions").
The consideration received by the Company was comprised of cash
of $250.5 million, a $187.6 million zero coupon Vendor Note maturing in 2004,
with an issue price of $83.9 million, valued by the Company at $74.6 million,
and 10 per cent of the ordinary share capital of ITS, valued by the Company at
a nominal amount.
Mr. D.B. Hammond and Mr. T.J. Gibson are both directors of
Loanoption and ITS. Mr. Hammond is presently Deputy Chairman of ADT Limited
and Mr. Gibson was the Chief Executive Officer of ADT Auction Group Limited
when that company was under the control of the Company. As a result of the
sale of European Auctions, Mr. Gibson is no longer employed by the Company.
Mr. Hammond and Mr. Gibson subscribed $10.4 million and $0.8
million, respectively to the capital of ITS and, as a result, are interested
in zero coupon Capital Bonds, of ITS maturing in 2004, ("Capital Bonds") with
issue prices of $9.4 million and $0.7 million respectively and 22.3 per cent
and 1.7 per cent, respectively, of the ordinary share capital of ITS. Other
senior management and employees of European Auctions subscribed approximately
$3.7 million to the capital of ITS and, as a group, are interested in Capital
Bonds with an issue price of $3.3 million and 8.0 per cent of the ordinary
share capital of ITS. In addition, Mr. M.A. Ashcroft the Chairman and Chief
Executive Officer of ADT Limited subscribed $7.0 million to the capital of ITS
and, as a result, is interested in Capital Bonds with an issue price of $6.3
million, and 15.0 per cent of the ordinary share capital of ITS. Mr. Ashcroft
is not an officer or director of ITS or any of its subsidiaries and has no
involvement in the day to day management of ITS or any of its subsidiaries.
At closing, the Company entered into an option agreement with
Mr. Ashcroft under which the Company could require Mr. Ashcroft to purchase
from it (and Mr. Ashcroft could require the Company to sell to him) additional
ordinary share capital of ITS and Capital Bonds held by the Company, for cash,
and ITS entered into an agreement with the Company and Mr. Ashcroft to use its
reasonable efforts to find additional third party investors for its ordinary
share capital and Capital Bonds held by the Company and Mr. Ashcroft. ITS was
successful in finding such additional investors and the mutual options were
released.
Upon the sale of European Auctions, ADT Limited share options
held by directors and employees of European Auctions became immediately
exercisable and the Company entered into arrangements with Mr. Gibson under
which share options held by him at the time of the sale were purchased by the
Company for their aggregate economic value totalling $1.2 million, based on
the Company's common share price on December 19, 1995, of which Mr. Gibson
invested $0.8 million in the capital of ITS. The Company also entered into
similar arrangements with other senior management and employees of European
Auctions under which the Company purchased options outstanding at the time of
the sale for their aggregate economic value of $0.6 million, based on the
Company's common share price on December 19, 1995, from those employees to
enable them to invest in the capital of ITS. In addition, in order to further
enable Mr. Hammond to invest in the capital of ITS, the Company purchased from
Mr. Hammond an option grant for its economic value of $1.1 million, based on
the Company's common share price on December 19, 1995, which would otherwise
have been exercisable on March 5, 1996.
Upon the sale of European Auctions by the Company, Mr. Gibson
received a severance payment of $0.3 million and other senior management and
employees of European Auctions, as a group, received severance payments
totalling $0.4 million.
A company controlled by Mr. Ashcroft agreed to make loans to
Mr. Hammond, or companies controlled by him, of an aggregate of $7.8 million
solely for the purpose of enabling Mr. Hammond or these companies to subscribe
to ordinary shares and Capital Bonds of ITS.
An opinion regarding the fair value of the transaction for the
sale of European Auctions was provided to the independent directors of the
Company by a leading European investment banking firm and the transaction was
approved unanimously by the independent directors on December 28, 1995.
EXHIBIT 99.5
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AGREEMENT is made on December 18th, 1996 BETWEEN:
(1) ADT LIMITED whose registered office is at Cedar House, 41 Cedar Avenue,
Hamilton HM12, Bermuda (the "Company"); and
(2) MICHAEL ANTHONY ASHCROFT of 60 Market Square, Belize City, Belize (the
"Executive")
WHEREAS on May 8, 1993 the parties hereto entered into an employment agreement
(the "Employment Agreement") pursuant to which the Company agreed to employ
the Executive as Chairman and Chief Executive Officer on the terms set out in
the Employment Agreement and the parties hereto have agreed to amend the
Employment Agreement on the terms set out below.
NOW IT IS AGREED, in consideration of the mutual promises and covenants
contained herein, as follows:-
1. The Employment Agreement shall be amended with effect from the date
hereof as follows:
(a) in line two of Clause 3(a), by the deletion of "1988" where it appears
in the date "March 31, 1998" and its replacement with "2000";
(b) in line one of Clause 3(b), by the deletion of "1988" where it appears
in the date "April 1, 1998" and its replacement with "2000" and by the
deletion of "each" where it appears in the phrase "each April 1
thereafter" and its replacement with "every second"; and
(c) in line three of Clause 3(b), by the deletion of "twelve" where it
appears in the phrase "period of twelve months" and its replacement with
"twenty four".
2. The Employment Agreement, as amended by this agreement, shall be read
and construed as one agreement, which agreement shall continue in full
force and effect. References in the Employment Agreement to "this
agreement", "hereof", "hereunder" and expressions of similar import
shall be deemed to be references to the Employment Agreement as amended
by this agreement. Nothing in the Employment Agreement, as amended by
this agreement, shall be deemed to amend or otherwise prejudice or
affect in any way any other agreement or arrangement between the parties
hereto.
AS WITNESS the hands of the parties (or their duly authorised representatives)
on the date which appears first above.
ADT LIMITED MICHAEL ANTHONY ASHCROFT
By: /s/ Peter Slusser /s/ M.A. Ashcroft
------------------- ---------------------
Peter Slusser M.A. Ashcroft
Director
Chairman, Remuneration Committee
EXHIBIT 99.6
February 26, 1997
-----------------
ADT LIMITED
-----------------
- and -
-----------------
STEPHEN J. RUZIKA
-----------------
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made on February 27, 1997 BETWEEN:
(1) ADT LIMITED whose registered office is at Cedar House, 41 Cedar Avenue,
Hamilton, Bermuda (the "Company"); and
(2) STEPHEN J. RUZIKA of 5753 St. Anne's Way, Boca Raton, FL 33496
IT IS AGREED as follows:
1. Interpretation
(1) In this agreement, unless otherwise expressly stated, in addition to
terms defined elsewhere herein:
"Associated Company" means:
(a) a company ("first company") whose equity share capital is owned as
to at least 20 per cent by a different company ("second company")
or one of the second company's Subsidiaries, and which first
company is not a Subsidiary of the second company; and
(b) A Subsidiary of a first company within (a) above;
"Board" means the Board of Directors of the Company;
"Group" means the Company and its Subsidiaries and Associated Companies for
the time being and "Group Company" means any one of them;
"Subsidiary" means a subsidiary company as defined by section 86 of the
Companies Act 1981 of Bermuda (as amended);
"Termination for Cause" means a termination of the employment of the Executive
by the Company as described in paragraphs (3) to (5) of clause 13 below;
"Termination upon Disability" means a termination of the employment by the
Executive by the Company as described in paragraph (1) of clause 13 below:
"Termination for Good Reason" means a termination of his employment by the
Executive as described in paragraph (1) of clause 14 below.
(2) References in this agreement to persons include bodies corporate and
unincorporated associations and references to companies include any
bodies corporate.
(3) Any reference in this agreement to a statutory provision includes any
statutory modification or re-enactment for the time being in force.
(4) Paragraphs (1) to (3) above apply unless the contrary intention appears
and the headings in this agreement do not affect its interpretation.
2. Conditional agreement
(1) This entire agreement and the respective rights and obligations of the
parties to this agreement are conditional upon ratification of this
agreement by resolutions of the Remuneration Committee of the Board and
of the Board itself, the terms of which ratification shall be
unconditional and without qualification. In the event that the
foregoing condition is not satisfied in full on or before midnight on
February 27, 1997, this entire agreement shall never become effective
and shall be null and void absolutely and neither the Executive nor
the Company nor any of the directors or officers of the Company shall
be under any liability arising out of or in connection with this
agreement.
(2) The existing oral employment arrangements between the Executive and the
Company shall not cease to have effect unless and until the condition
set out in paragraph (1) above has been satisfied in full.
3. Term of the agreement
Subject to clauses 13 and 14 below, the term of employment of the Executive
under this agreement (the "Term") shall be as follows:
(a) the Term shall commence on March 1, 1997 and, subject to (b)
below, shall terminate on February 28, 1999; and
(b) commencing on March 1, 1999 and on each March 1 thereafter (each a
"Renewal Date"), the Term shall be automatically extended for an
additional period of twenty-four months, unless not less than 90
days immediately preceding any such Renewal Date, either the
Company or the Executive shall have given notice that it or he
does not wish to extend the Term for such additional period in
which event the Term shall terminate without such extension.
4. Duties of the Executive
(1) The Executive shall be employed by a subsidiary of the Company in the
United States procured by it, as the Company's Chief Financial Officer
and as the President of the Company's subsidiaries ADT Security
Services, Inc., ADT Operations, Inc. and ADT, Inc. on the terms set out
in this agreement and shall perform his duties and exercise his powers
in a manner consistent with such offices. Unless prevented by
ill-health, accident or disability, the Executive shall devote such time
(both inside and outside of normal business hours) to the affairs of the
Group as is necessary for the proper fulfilment of his duties.
(2) The Executive shall report directly and exclusively to the Board and its
Chairman and shall comply with the proper instructions of the Board and
its Chairman.
5. Salary
(1) The Executive shall receive a base salary of US$694,500 per annum
subject to such adjustment as may be made pursuant to this clause 5.
(2) On April 1, 1997, and on each April 1 thereafter the Executive's base
salary shall be reviewed by the Board which may, in its discretion,
adjust his base salary based upon relevant circumstances. The Company
shall not, without the Executive's prior written consent, reduce the
Executive's base salary unless such reduction:
(a) occurs only once during the Term and does not exceed 15% of the
Executive's base salary current at that time; and
(b) comprises part of a general reduction in base salaries of
executive directors of the Company
(3) The Executive's base salary shall accrue from day to day by equal
installments in arrears on the last day of every month and shall be
inclusive of any fees receivable by the Executive as a director of any
Group Company.
6. Incentive bonus payments
(1) In respect of each fiscal year of the Company, the Executive shall be
entitled to receive such incentive bonus payment as may be determined by
the Remuneration Committee of the Board.
(2) In the event that there is any combination of the Company with another
company or any capital restructuring of the Company which occurrence is
not contemplated by the terms of a bonus incentive as so determined, or
any other occurrence similar to any of the foregoing, and as a result
thereof the amount or value of any incentive bonus payment referred to
above would be, or might reasonably be expected to be, significantly
affected thereby, appropriate adjustment(s) will, at the request of
either party hereto, be negotiated to establish amended or alternative
terms to such schedule to yield an equitable and comparable result.
(3) The foregoing is without prejudice to the existing rights of the
Executive under the bonus plan approved by the Remuneration Committee of
the Board in November 1996, under which Executive is to receive certain
payments related to the price of the Company's common shares, which
shall remain in effect in accordance with its terms.
7. Stock Options
(1) Save to the extent prohibited by applicable laws, the Executive shall be
eligible to participate in all compensation and benefit plans of the
Company, whether or not presently in existence, relating to the grant
of equity-related incentives to executives of the Company including,
without limitation, the ADT Senior Executive Share Option Plan, the
ADT Long Term Incentive Plan and any other stock option plan of the
Company (together the "ADT Option Plans"). The foregoing shall not
entitle the Executive to a grant of options or similar rights under
any such plan unless otherwise agreed by the Board and the Executive
(whether in this agreement, or otherwise).
(2) The foregoing is without prejudice to the existing rights of the
Executive under the ADT Option Plans.
8. Pension and related benefits payments
(1) The Executive shall be entitled to participate in any pension or similar
programs maintained for senior management personnel by the subsidiary of
the Company by which he is actually employed or as may be agreed by the
parties from time to time.
(2) The foregoing is without prejudice to the existing rights of the
Executive under any pension or similar programs.
9. Other Benefits
Save for pension and related benefits, the Executive shall be entitled to
receive all other benefits generally made available to executives of the
Company as agreed with the Chairman.
10. Reimbursement for expenses
The Company shall reimburse (or procure a Subsidiary to reimburse) the
Executive (on production of such evidence as may be required by any relevant
regulatory authority) the amount of all traveling and other expenses properly
and reasonably incurred by him in the discharge of his duties.
11. Holidays
The Executive shall be entitled a reasonable period of holiday with pay in
every year at times convenient to the Company, as agreed with the Chairman.
12. Gratuities and Codes of Conduct
(1) The Executive shall not directly or indirectly accept any commission,
rebate, discount or gratuity, in cash or in kind, from any person who
has or is likely to have a business relationship with any Group Company.
(2) The Executive shall comply with all codes of conduct and with all
applicable rules and regulations of any relevant regulatory authority,
in each case from time to time adopted by the Board.
13. Termination of the employment by the Company
(1) The Company may terminate the employment (but without prejudice to any
other rights of the Company) upon (i) the death of the Executive or (ii)
upon the Executive attaining the age of 60 or (iii) if he is unable
properly to perform his duties by reason of ill-health (mental or
physical), accident or other disability for a period or periods
aggregating at least 180 days in any period of 12 consecutive months
and, in the case of (iii) above, within 90 days after a written notice
has been served upon the Executive notifying him of his lack of proper
performance as aforesaid, he shall not have returned to the proper
performance of his duties.
(2) Any question as to the existence of any ill-health, accident or other
disability referred to in (iii) of paragraph (1) above upon which the
Company and the Executive cannot agree shall be determined by a
qualified independent physician selected by the Executive (or, if the
Executive is unable to make such selection, it shall be made in writing
to the Company and to the Executive shall be by any adult member of the
immediate family of Executive), and approved by the Company. The
determination of such physician made final and conclusive for all
purposes of this agreement. The Executive's full compensation
(including, but not limited to, base salary and payments under clauses 6
and 8 above) shall continue to be payable to him during any periods of
ill-health, accident or disability up to the date of termination of his
employment under paragraph (1) above.
(3) The Company may terminate the employment (but without prejudice to any
other rights of the Company) if the Executive:
(a) wilfully and continually fails substantially to perform his duties
with the Company or wilfully and continually commits a material
breach of this agreement (other than any such failure or such
material breach resulting from his incapacity due to ill-health,
accident or other disability or any such actual or anticipated
failure or material breach resulting from circumstances
constituting grounds for Termination for Good Reason by the
Executive) for a period of 30 days after a written demand for
substantial performance or substantial remedy of the material
breach, as the case may be, has been delivered to the Executive by
the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially
performed his duties or specifically identifies the material
breach which the Board believes that the Executive has committed,
as the case may be; or
(b) wilfully engages in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise.
(4) For purposes of paragraph (3) above, no act or failure to act on the
Executive's part shall be deemed to have been done or omitted to be done
"wilfully" unless done or omitted to be done by the Executive not in
good faith and without reasonable belief that his action or omission
was, in the case of (a) of paragraph (3) above, in the best interests of
the Company and, in the case of (b) of paragraph (3) above, in or not
opposed to the best interests of the Company.
(5) Notwithstanding the provisions of paragraph (3) above, the employment of
the Executive shall not be deemed to have been Terminated for Cause
unless and until there shall have been delivered to him a notice of
termination pursuant to subclause 15(2)(c) below which shall be
delivered together with a copy of a resolution duly adopted by the
affirmative vote (which cannot be delegated) of a majority of the entire
membership of the Board (not counting the Executive) at a meeting of the
Board called and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in subparagraphs (a) or
(b) of paragraph (3) above and specifying the particulars thereof in
detail.
(6) With effect from the date upon which the Company serves a notice upon
the Executive convening a meeting of the Board for the purpose described
in paragraph (5) above, the Board may (by service of the same or a
separate notice upon the Executive) suspend all or any of the
Executive's duties and powers on such terms as it considers expedient.
The foregoing suspension shall not exceed 14 days and the decision of
the Board to impose the same shall require a resolution duly adopted by
the affirmative vote ( which cannot be delegated) of a majority of the
entire membership of the Board (not counting the Executive). The
foregoing suspension shall not constitute a circumstance entitling the
Executive to terminate his employment pursuant to subclause 14(1)
(Termination for Good Reason) but shall be without prejudice to the
right of the Executive to terminate his employment pursuant to subclause
14(2).
14. Termination of the employment by the Executive
(1) The Executive may terminate his employment (but without prejudice to any
other rights of the Executive) with immediate effect if, without the
Executive's prior written consent:
(a) the Executive is removed from either or both of his positions as
Chief Financial Officer of the Company and President of ADT
Security Services, Inc. for any reason; or
(b) the Executive is assigned duties and responsibilities that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with his positions as aforesaid; or
(c) the Company fails to pay or procure the payment to or on behalf of
the Executive any amounts otherwise vested and due hereunder
including any incentive bonus payment or pension and related
benefits payment; or
(d) a reduction is made in the Executive's base salary (as the same
may have been adjusted from time to time) which reduction is not
permitted under the provisions of subclause 5(2) above; or
(e) the Company fails to continue in effect any compensation or
benefits plan in which the Executive participates, including but
not limited to the ADT Option Plans or any additional or
substitute plans, unless a fair and equitable arrangement
(embodied in an ongoing substitute or alternative plan providing
the Executive with substantially similar compensation or benefits)
is made with respect to such plan(s) or the Company fails to
continue the Executive's participation in any such plan(s) on a
substantially similar basis, both in terms of the amount of
benefits or compensation provided and the level of the Executive's
participation relative to other participants; or
(f) the Company fails to continue to provide the Executive with
benefits substantially as favorable as those enjoyed by the
Executive under any of the Group's life insurance, medical, health
and accident, disability, deferred compensation or savings plans
in which the Executive is participating or the Company takes any
action which would directly or indirectly materially reduce any of
such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at that time; or
(g) the Company fails to obtain a satisfactory agreement from any
successor to assume and agree to perform this agreement, as
contemplated by clause 19 below; or
(h) the Company purports to terminate the Executive's employment or
otherwise dismiss him in a manner which is not effected in
accordance with the requirements of clause 15 below (and, if
applicable, the requirements of paragraphs (3) to (5) of clause 13
above); or
(i) the Company commits any other breach of its obligations under this
agreement;
which act, omission, failure or breach, in the cases of paragraphs (c), (e),
(f), (h) and (i) only, has not been remedied by the Company to the reasonable
satisfaction of the Executive within a period of 30 days following written
notice of such breach by or on behalf of the Executive to the Company.
(2) Notwithstanding any other provision of this agreement, the Executive may
terminate his employment (but without prejudice to any other rights of
the Executive) at any time by giving to the Company a minimum of 90
days' written notice of termination which notice shall refer to this
subclause 14(2). In the event of a service of a notice of termination
of the employment of the Executive pursuant to this subclause 14(2), the
Executive shall not be entitled to payment of the amounts described in
subclause 16(3) below (irrespective of whether or not the employment of
the Executive is terminated by him in circumstances constituting
Termination for Good Reason) provided that if during the 90 day notice
period there occurs one or more of the circumstances described in
subclause 14(1)(a) or (b) above (other than circumstances agreed to in
writing between the Company and the Executive) the Executive shall be
entitled to terminate his employment for Good Reason. Such notice of
termination may not be withdrawn except with the agreement of the Board.
15. Miscellaneous provisions applicable to termination of employment
(1) Any purported termination of the employment of the Executive by either
party (including any termination by expiry of the original Term or any
extended Term) shall be communicated by written notice of termination to
the other party. Save in the case of a notice under clause 3 above or
in accordance with subclause 14(2) above, such notice of termination
shall indicate the specific termination provision in this agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of such
employment.
(2) For the purposes of this agreement, "Date of Termination" shall mean:
(a) in the case of expiry of the Term under clause 3 above, the date
of such expiry of the Term in accordance with such clause (whether
original or as extended);
(b) in the case of Termination upon Disability, the date of death or
the date upon which the Executive attains the retirement age of 60
or 90 days after the relevant notice of Termination is given, as
the case may be;
(c) in the case of Termination for Cause, the date specified in the
relevant notice of termination which shall not be less than 30 not
more than 60 days from the date such notice of termination is
given;
(d) in the case of Termination for Good Reason, the date specified in
the relevant notice of termination which may be the date upon
which such notice is given; and
(e) in the case of a termination of the agreement in accordance with
subclause 14(2) above, the date of expiry of the notice period set
out in the relevant notice of termination;
provided that (except in the case of a termination of the agreement in
accordance with subclause 14(2) above) if, within 30 days after any notice of
termination is given the party receiving such notice of termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined
either by mutual written agreement of the parties or by a final judgment,
order or decree of an arbitration tribunal or a court of competent
jurisdiction (which is not appealable or the time for appeal therefrom has
expired and no appeal has been perfected).
(3) Notwithstanding any dispute concerning the Date of Termination, the
Company shall continue to pay the Executive his full compensation
(including, but not limited to, base salary and payments under clauses 6
and 8 above) in effect when the notice giving rise to the dispute was
given, and continue the Executive as a participant in all equity
incentive, compensation, benefit and insurance plans in which the
Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with
paragraph (2) above.
16. Amounts to be paid upon termination of employment
(1) If the employment of the Executive terminates upon expiry of the Term in
accordance with clause 3 above (whether the original Term or as
extended) or if such employment is terminated by the Company in
circumstances constituting Termination for Cause or if such employment
is terminated by the Executive in accordance with subclause 14(2) above,
then, not later than 15 days following the Date of Termination, the
Company shall pay to the Executive:
(a) his full base salary up to and including the Date of Termination
plus all other amounts to which the Executive is entitled under
any compensation or benefit plan of the Company; and
(b) the payments described in clauses 6 and 8 above, as the case may
be, apportioned on a time basis between the number of days elapsed
prior to and including the Date of Termination and the number of
days remaining in the relevant fiscal year of the Company during
which the Date of Termination falls.
(2) If the employment of the Executive is terminated by the Company in
circumstances constituting Termination upon Disability, then, not later
than 15 days following the Date of Termination, the Company shall pay to
the Executive (or his estate) or on his behalf:
(a) his full base salary up to and including the Date of Termination
plus all other amounts to which the Executive is entitled under
any compensation or benefit plan of the Company;
(b) in lieu of any further base salary payments to the Executive (or
his estate) for periods subsequent to the Date of Termination, a
lump sum payment (the "Disability Payment") equal to two times the
Executive's entire base salary for a period of twelve months at
the highest rate in effect during the term of his employment
hereunder; and
(c) the payments described in clauses 6 and 8 above, as the case may
be, apportioned on a time basis between the number of days elapsed
prior to and including the Date of Termination and the number of
days remaining in the relevant fiscal year of the Company during
which the Date of Termination falls.
(3) If the employment of the Executive is terminated by the Company other
than in circumstances referred to in paragraph (1) and (2) above or by
the Company in any manner inconsistent with clause 15 above or if such
employment is terminated by the Executive in circumstances constituting
Termination for Good Reason (other than a Termination for Good Reason
subsequent to service of a notice of termination by the Executive
pursuant to subclause 14(2) above), then (but not otherwise):
(a) not later than 15 days following the Date of Termination, the
Company shall pay to the Executive his full base salary up to and
including the Date of Termination plus all other amounts to which
the Executive is entitled under any compensation or benefit plan
of the Company;
(b) In addition, not later than 15 days following the Date of
Termination, the Company shall make to the Executive the payment
described in clause 6 above apportioned on a time basis between
the number of days elapsed prior to and including the Date of
Termination and the number of days remaining in the relevant
fiscal year of the Company during which the Date of Termination
falls;
(c) in addition, in lieu of any further base salary payments to the
Executive and any further payments pursuant to clause 6 above, in
each case for periods subsequent to the Date of Termination, the
Company shall pay as severance pay to the Executive, not later
than 15 days following the Date of Termination, a lump sum equal
to twice (x plus y) where:
x is equal to the Executive's entire salary for a period of 12 months at the
highest rate in effect during the term of his employment hereunder; and
y is equal to the average amount (by reference to each fiscal year of the
Company) paid or due and payable to the Executive pursuant to clause 6
above, where the "average amount" is equal to the average of the two
previous complete fiscal years of the Company immediately preceding the
fiscal year in which the Date of Termination falls, provided that in no
circumstances shall y be less than the Executive's entire base salary for a
period of 12 months at the highest rate in effect during the term of his
employment hereunder;
(d) for a 12 month period after such termination, the Company shall
arrange to provide the Executive with life, disability, accident
and health insurance benefits substantially similar to those which
the Executive was receiving immediately prior to the Date of
Termination provided that benefits otherwise receivable by the
Executive pursuant to this subparagraph (a) shall be reduced to
the extent comparable benefits are actually received by the
Executive during the 12 month period following termination and any
such benefits actually received by the Executive shall be reported
to the Company.
(4) Except as may be specifically provided in this agreement or agreed in
writing between the parties, the Executive shall not be required to
mitigate the amount of any payment provided for in this clause 16 by
seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this clause be reduced by any
compensation earned by the Executive as the result of employment by
another employer or by death, pension or related retirement benefits
payable otherwise than pursuant to the provisions of this agreement
whether after the Date of Termination or otherwise.
(5) In the event that any compensation is payable to the Executive hereunder
during a time when he is partially or totally disabled in circumstances
where such disability (except for the provisions hereof) would entitle
him to disability income or to salary continuation payments from the
Company according to the term of any plan or policy of the Company, the
compensation payable hereunder shall be inclusive of any such income or
salary continuation. If any such payments are payable directly to the
Executive by an insurance company under an insurance policy paid for by
the Company, the amounts paid by such insurance company to him shall be
inclusive of the payments made by the Company pursuant to this clause.
17. Protection of the Group's interests
(1) Except for actions taken in the course of his employment hereunder or
with the prior written consent of the Company, the Executive shall not
either during the Term or at any time afterwards divulge or furnish to
any person any information of a private, confidential or secret nature
obtained by him while in the employ of the Company and, upon termination
of his employment hereunder, the Executive shall return to the Company
all such information which exists in written or other physical form and
all copies thereof and shall surrender to the Company all other property
of the Company in his possession or under his control.
(2) For the purposes of this clause 17, "person" and "group" shall be
interpreted in the manner as such terms are used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended and "beneficial
owner" shall mean the same as such term is defined in Rule 13d-3 under
such Act, as amended, except that a person shall be deemed to be the
beneficial owner of all securities that any such person has the right to
acquire pursuant to any agreement or arrangement or upon exercise of
conversion rights, warrants, options or otherwise, without regard to the
60 day period referred to in such Rule.
(3) Further, for the purposes of this clause 17 only, the term "Group" shall
mean the Company and its Subsidiaries for the time being and the term
"Group Company" means any one of the Company and its Subsidiaries for
the time being.
(4) During the term of his employment hereunder, the Executive shall not
directly or indirectly be engaged in competition with, or be interested
in any business which competes, directly or indirectly, with any
business of the Company or any Group Company.
(5) The Executive covenants with the Company (for itself and as trustee for
each Group Company) that he will not, for a period of nine months from
the Date of Termination (or such earlier date as the Company and the
Executive may agree to be the effective date of termination of the
employment of the Executive hereunder), except with the prior written
consent of the Company:
(a) be interested in any vehicle auction or electronic security
services business which is carried on in the United States and
which is directly competitive with any such business carried on at
the Date of Termination by a Group Company; or
(b) except on behalf of a Group Company, canvass or solicit business,
orders or custom for services similar to those being provided by
any Group Company carrying on a vehicle auction or electronic
security services business in the United States at the Date of
Termination from any person who is at that date or has been at any
time within twelve months ending on that date a supplier or
customer of such a Group Company; or
(c) induce or attempt to induce any supplier of a Group Company
carrying on a vehicle auction or electronic security services
business in the United States to cease to supply, or restrict or
vary the terms of supply to, that company; or
(d) approach an employee of a Group Company with a view to inducing
such employee to leave the employment of that company.
(6) For the purposes of paragraphs (2) to (5) above, the Executive is
interested in a person, company, entity or business if he carries it on
as principal or agent or if (i) he is a partner, director, employee,
secondee, consultant or agent in, of or to any person who carries on the
business, or (ii) he has any direct or indirect financial interest (as
shareholder or otherwise) in any person who carries on the business, or
(iii) he is a partner, director, employee, secondee, consultant or agent
in, of or to any person who has a direct or indirect financial interest
(as shareholder or otherwise) in any person who carries on the business
provided always that, however, the provisions of paragraphs (4) and (5)
above shall not prohibit ownership by any person of not more than 5% of
voting stock of any publicly held company which is so competitive.
(7) The restrictions in each paragraph or subparagraph above shall be
enforceable independently of each of the others and its validity shall
not be affected if any of the others is invalid; if any of those
restrictions is void but would be valid if some part of the restrictions
were deleted the restriction in question shall apply with such
modifications as may be necessary to make it valid.
(8) The Executive acknowledges that the provisions of this clause 17 are no
more extensive than are reasonable to protect the Company and the Group.
18. Payments fair and reasonable
The Company acknowledges and agrees that, due to the Executive's special
talents and stature and because of the nature and compensation practices of
services industries and in order to induce the Executive to continue in the
employment of the Company, the provisions of this agreement regarding further
payments in the event of termination of the employment of the Executive as set
out in clause 16 above constitute fair and reasonable provisions for the
consequences of such termination, do not constitute a penalty, and such
payments and benefits shall not be limited or reduced by amounts the Executive
might otherwise earn or be able to earn from any other employment or ventures
during the term of his employment hereunder.
19. Assumption of agreement
The Company will require any successor (whether direct or indirect, and
whether by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume and
agree to perform this agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. Such assumption and agreement shall be in express terms and shall be
obtained prior to the effectiveness of any such succession. As used in this
agreement, "Company" shall mean the Company as first defined above and any
successor to its business and/or assets as aforesaid.
20. Binding agreement
(1) This agreement shall be binding upon and inure to the benefit of the
Executive, his successors and assigns and to the benefit of the Company,
its successors and assigns. Where appropriate, references to the
Executive include his personal representatives. If the Executive dies
while any amount is payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this agreement to his devisee, legatee
or other designee or, if there is no such devisee, legatee or other
designee to the personal representatives of his estate.
(2) Neither party may, without the express written consent of the other
party, assign or pledge any rights or obligations under this agreement
to any person, firm or company, save that the Executive may transfer by
will or by operation of law (or by designation of beneficiary where a
plan or other agreement so provides) any rights to compensation or
benefits hereunder.
21. Indemnification and insurance
(1) The Company agrees to indemnify to the fullest extent permitted by
Bermuda law the Executive against all costs, losses and expenses which
the Executive may incur or become liable to by reason of any contract
entered into, or act or thing done by him as a director or officer of
the Company or any of its Subsidiaries, or in any way in the
discharge of his duties provided always that the indemnity contained
in this clause 21 shall not extend to any matter which would render
this clause 21 void pursuant to the laws of Bermuda.
(2) Subject to applicable laws and regulations, the Executive shall be
covered by directors' and officers' liability insurance to the same
extent as other senior executives of the Company.
22. Miscellaneous
(1) All payments under this agreement shall be made in United States
dollars. Except where expressly stated otherwise in this agreement,
payments under clauses 6 and 8 above shall be made (i) on or before
March 31 in the year following the end of the relevant fiscal year of
the Company; or (ii) five days following the date upon which the
Company's consolidated financial statements for the applicable fiscal
year are adopted by the Board, whichever is later.
(2) All amounts paid to the Executive under this agreement are without
prejudice to any other rights of the Executive against the Company and,
except where expressly stated otherwise, are in addition to all other
amounts due under this agreement. The Company's obligation to make the
payments provided for in this agreement and to provide the benefits
required hereby in accordance with this agreement shall not be affected
by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive.
(3) In addition to any other payments under this agreement, the Company
shall pay to the Executive (or, where applicable, his estate) all legal
fees and expenses reasonably incurred in connection with any dispute
arising under this agreement (including, without limitation, all such
fees and expenses, if any, incurred in contesting or disputing any
termination of the employment of the Executive or in seeking to obtain
or enforce any right or benefit provided by this agreement) unless the
Executive's (or his estate's) claim is found by an arbitration tribunal
or a court of competent jurisdiction to have been frivolous.
(4) This agreement represents the entire agreement of the parties with
respect to the employment of the Executive by the Company and all or
other agreements between the Executive and the Company shall cease to
have effect. Notwithstanding the foregoing, nothing in this agreement
shall affect or in any way prejudice any stock options or similar rights
granted to the Executive by the Company prior to the date hereof.
Subject to the rights of the parties under any applicable law, the
provisions of this agreement shall survive termination of the employment
hereunder.
(5) This agreement shall not be amended or modified nor shall any provision
hereof be capable of being waived or discharged by any party except, in
each case, by a written instrument executed by both of the parties
hereto.
(6) No waiver by either party of any breach by the other party of a
provision of this agreement shall be deemed to be a waiver of any
similar or dissimilar provision or condition at the same or any prior or
subsequent time.
(7) The invalidity or unenforceability of any provision of this agreement
shall not affect the validity or enforceability of any other provision
of this agreement, which shall remain in full force and effect.
(8) This agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
23. Notices
Any notice or other document to be served under or in connection with this
agreement may be delivered or sent by facsimile process to the Company at its
registered office for the time being or to the Executive at the address set
out above. In addition, any such notice or document may be served at such
other place or by sending it to such other facsimile number as may be
designated in writing by like notice. Any notice shall be deemed to have been
given 12 hours after being so delivered or communicated as required herein.
24. Governing Law
This agreement shall be governed by and construed in accordance with the laws
of Bermuda and the parties hereto hereby submit to the non-exclusive
jurisdiction of the Courts of Bermuda for the purpose of resolving any dispute
hereunder.
AS WITNESS the hands of the Executive and of a duly authorized representative
of the Company on the date first mentioned on page one.
ADT LIMITED
By: __________________________
Name:
Title:
______________________________
Stephen J. Ruzika
EXHIBIT 99.7
EMPLOYMENT AGREEMENT
AGREEMENT made this 16th day of January, 1997 by and between
ADT, Inc., a Florida corporation ("ADT") and Ron G. Lakey ("Executive").
WITNESSETH:
WHEREAS, Executive has heretofore been an executive officer of
ADT; and
WHEREAS, senior management of ADT desire to employ Executive
hereunder in contemplation of Executive's secondment to an affiliate of ADT
located in the United Kingdom, and desire that Executive provide full time
services to ADT upon all of the terms and conditions set forth herein; and
WHEREAS, Executive desires to accept such employment;
NOW, THEREFORE, in consideration of the mutual premises and
covenants contained therein, it is agreed as follows:
1. Services
During the term of this Agreement (the "Employment Period"),
Executive shall have operational responsibility for ADT Limited's electronic
security operations in Canada and Europe. Executive shall perform such duties
and render such services as may be determined and assigned to Executive by,
and subject to the direction of, senior management and the Board of Directors
of ADT. At all times hereunder, Executive shall devote his best efforts and
all of his working time to the provision of such services and duties and to
ADT's business. During the Employment Period the Executive shall be granted
exclusive use of the premises known as Touchwood, 4 Parkfield, Oxshort,
Surrey, England and such duties assigned to the Executive shall not require
the Executive to reside in premises other than Touchwood.
2. Term
2.1 The Employment Period under this Agreement shall commence
on January 16, 1997 and shall end on December 31, 1999,
unless earlier terminated in accordance herewith.
2.2 The Employment Period under this Agreement shall
automatically be extended for successive two (2) year
periods thereafter, unless and until either party shall
have given the other written notice of intention not to
extend the Employment Period at least two (2) years prior
to the termination of the Employment Period prior to such
written notice.
3. Compensation
3.1 In consideration for Executive's services hereunder, ADT
shall pay him during the term hereof, and Executive
agrees to accept a salary of $265,000 per year due and
payable in accordance with ADT's standard payroll
practices (the "Salary"). Executive's Salary shall be
reduced by the amount of all federal, state and local
income taxes which would have been payable by Executive
if his total income were $265,000 and Executive had
continued to reside in Boca Raton, Florida and had taken
the standard deduction, which amount shall be estimated
by Executive in each year based upon the previous year's
tax rates and, if necessary, adjusted when the tax rates
for each year become certain.
3.2 As additional consideration for Executive's services
hereunder, Executive may earn a potential annual year end
bonus to be awarded in ADT's reasonable discretion
subsequent to the end of each fiscal year within the term
hereof.
3.3 ADT shall provide Executive and his family exclusive use
of the premises known as Touchwood at 4 Parkfield,
Oxshort, Surrey, England and provide for all maintenance
and operating expenses thereof during the Employment
Period, but in any event, for a minimum period of three
years from the date of this Agreement. Executive agrees
to pay ADT, via payroll deduction, One thousand four
hundred eighty-nine dollars ($1,489) per month in
exchange for ADT providing exclusive use of Touchwood and
the maintenance and operating expenses thereof.
4. Expenses
ADT shall provide for or reimburse Executive for those
reasonable business expenses he incurs in connection with the
performance of services hereunder upon presentation of adequate
documentation of such expenses.
5. Benefits
5.1 Executive and his family shall be eligible to receive
medical, dental, life and hospitalization insurance
benefits, 401-K, pension, SERP and any other benefits
substantially equivalent to those extended to executives
of ADT in positions substantially equivalent to
Executive's position with ADT prior to his employment
hereunder in accordance with ADT's standard practice in
effect from time to time. In addition, Executive and his
family shall be covered under BUPA by an affiliate of ADT
in the United Kingdom.
5.2 ADT shall pay on Executive's behalf as and when due, or
shall advance to Executive in time for Executive to pay
as and when due, all personal income taxes levied in the
United States or United Kingdom against Executive upon
income arising or accruing after the effective date
hereof under Sections 3.1, 3.3, 4, 5.1, 5.2, 5.3, 5.4,
5.5, 5.6, 6.1 and 6.2 of this Agreement as well as taxes
levied against Executive with respect to the two vehicles
provided to Executive hereunder or pursuant to any
secondment agreement between ADT and ADT's United Kingdom
affiliate. ADT shall have no tax liability for bonuses
provided to Executive pursuant to Section 3.2 above or
for capital gains taxes levied against Executive as a
result of the sale of Executive's residence in Boca
Raton, Florida as contemplated by Section 6.1 below.
5.3 ADT shall provide for or reimburse Executive for the cost
(in excess of $7,090 per year) of educating Executive's
two daughters during the Employment Period, but, in any
event, for a period of at least three years from the date
of this Agreement. Such costs to include tuition,
transportation, and all attendant fees.
5.4 Executive shall be entitled to two vehicles for use by
Executive and his spouse, which vehicles shall be
selected by Executive in his reasonable discretion
consistent with the vehicle policy of ADT's affiliate in
the United Kingdom and which shall be provided at ADT's
expense.
5.5 ADT shall provide for or reimburse for the cost of
fifteen (15) round-trip economy class airfares in each
year of this Agreement from Great Britain to the
continental United States.
5.6 During the term hereof, Executive shall be entitled to
four (4) weeks of paid vacation in each year of
employment hereunder.
6. Relocation Expenses
6.1 ADT shall provide for or reimburse all reasonable
expenses of relocating Executive and his family from Boca
Raton, Florida to the residence in the United Kingdom
identified above. Said expenses shall include, but need
not be limited to, all reasonable moving expenses
including appropriate insurance costs, and all reasonable
transportation costs for Executive and his family. ADT
shall also reimburse Executive for any addition
out-of-pocket expenses incurred in said relocation up to
an amount not to exceed Pound Sterling10,000. If
Executive is able to sell his residence in Boca Raton,
Florida by April 4, 1997 without utilizing a real estate
agent or relocation service, ADT shall pay Executive
$14,000. At Executive's option, ADT shall cause
Prudential Relocation Service to make a directed offer in
the amount of $453,000 for Executive's residence in Boca
Raton, florida and ADT shall pay all closing cost related
to the closing of the directed offer. Executive shall
continue to pay maintenance, insurance and utility
expenses on said residence until the closing of the
private sale or directed offer. If the insurance on the
premises is canceled or becomes invalid by reasons of
being vacant, ADT agrees to insure the premises for
$450,000 (with a $1,000 deductible). Executive agrees to
pay ADT $138 per month for providing insurance if
Executive's homeowners insurance is canceled or becomes
invalid.
6.2 Upon termination of this Agreement, for any reason other
than Executive's conviction of a felony, ADT shall assume
all reasonable expenses, similar to those set forth above
in Section 6.1, associated with the relocation of
Executive and his family from the United Kingdom to the
continental United States except that Executive shall be
entitled to reimbursement of out-of-pocket expenses up to
an amount not to exceed Pound Sterling10,000.
6.3 In the event that the Employment period hereunder is
extended in accordance with Section 2 above, ADT shall
assume all reasonable relocation expenses of Executive
in addition to relocation expenses of Executive's family
should their respective relocations not be
contemporaneous.
7. Termination
7.1 This Agreement shall terminate automatically in the event
of Executive's death, permanent disability or Executive's
conviction of a felony. As used in this Agreement
"permanent disability" shall mean Executive's inability
to perform services hereunder for a period of four (4)
consecutive months or for six (6) months in any twelve
consecutive twelve (12) month period. This Agreement
shall terminate upon written notice from ADT to Executive
in the event of: (a) Executive's failure or refusal to
perform reasonable directives of ADT when such directives
consistent with the scope and nature of Executive's
duties and responsibilities hereunder; (b) Executive's
conviction of a felony; (c) any gross or willful
misconduct of Executive resulting in substantial loss to
ADT.
7.2 In addition, in the event that Executive's employment
hereunder is terminated by ADT without cause, or in the
event that ADT does not continue Executive's employment
on terms no less favorable than included herein, ADT
shall pay to Executive the Salary (reduced as provided in
Section 3.1) for the two (2) year period commencing with
the date of Executive's termination or expiration hereof.
7.3 In the event of any termination of this Agreement,
Executive shall immediately relinquish any and all
entitlement to the Salary and any and all other benefits
hereunder except as identified in Sections 3.3, 5.2,6,
7.2 (if applicable) above.
8. Competition
8.1 During the Employment Period and for the two (2) year
period subsequent to the termination or expiration hereof (if full payments
are being made pursuant to Section 7.2), Executive shall not directly or
indirectly engage in, or assist or have any interest in any person, firm,
corporation or other enterprise other than ADT or its affiliates which is
directly or indirectly engaged in the business of providing electronic
security services similar to any provided by ADT or its affiliates for which
the Executive shall have had direct or indirect involvement or responsibility
during the Employment Period anywhere in the United States, Europe, or Canada.
9. General Provisions
9.1 This Agreement constitutes the entire agreement between
the parties dealing with the subject matter hereof and
shall not be modified or amended except in a writing
signed by the parties.
9.2 All notices hereunder shall be in writing and shall be
considered given when delivered by hand or three (3) days
after mailing by a recognized international overnight
courier to ADT at PO Box 5035, Boca Raton, Florida 33431,
Attention: Steve Ruzika with a copy to Jan Beck at the
same address and if to Executive, at his last known
address.
9.3. This Agreement shall be binding upon the successors and
permitted assigns of ADT and shall inure to the benefit
of Executive's heirs, administrators and executors. This
Agreement may not be assigned by ADT without Executive's
consent, which consent, shall not be unreasonably
withheld or delayed. Performance of Executive's duties
and responsibilities hereunder may not be delegated to
any party without the prior written consent of ADT or its
permitted assigns.
9.4 This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida
applicable to contracts made and fully to be performed
therein.
9.5 This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original
and such counterparts shall together constitute one and
the same instrument.
9.6 If any court of competent jurisdiction holds any term of
this Agreement to be unenforceable, the parties hereto
consent to the modification of such term to permit
enforcement thereof to the maximum extent permitted by
applicable law. The invalidation of any such term shall
not in any respect affect any other term hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
ADT, Inc.
By: /s/ S.J. Ruzika
-----------------------------
Stephen J. Ruzika
Title: President
/s/ Ron G. Lakey
-----------------------------
Ron G. Lakey
EXHIBIT 99.8
ADT AUTOMOTIVE HOLDINGS, INC.
Delaware Trust Building
902 Market Street, 13th Floor
Wilmington, Delaware 19801
January 29, 1997
Mr. Michael J. Richardson
103 Rolling Mill Road
Old Hickory, Tennessee 37138
Dear Mike:
I refer to the Employment Agreement dated as of November 30,
1993 between you and ADT Automotive Holdings, Inc., the Term of which is
presently in a one year extension which will end July 31, 1997. The
Employment Agreement provides that the Term will be extended for an additional
one year period thereafter unless either party shall have given the other
notice of intention not to extend the term six months before July 31, 1997.
This letter is to evidence your and our agreement that your
time to give the Company notice of your intention not to further extend the
Term is hereby extended to and including April 30, 1997.
Except as modified herein, the Employment Agreement is in all
respects ratified and affirmed.
Very truly yours,
ADT AUTOMOTIVE HOLDINGS, INC.
By: /s/ S.J. Ruzika
------------------------------
Stephen J. Ruzika, Director
ACCEPTED:
/s/ Michael J. Richardson
- ------------------------------
Michael J. Richardson
EXHIBIT 99.9
[ADT Interoffice Memohead]
date: FEBRUARY 10, 1997
to: M.J. RICHARDSON PRIVATE & CONFIDENTIAL
from: S.J. RUZIKA
Michael,
This is to set out an agreement for payments to be made by ADT to you and
certain other key ADT Automotive Executives on the completion of a
successful sale of ADT Automotive Holdings, Inc ("the Transaction"). The
Executives which will participate in an incentive are: Larry Reese, Tony
Moorby and Bob McDevitt ("the Participants"). In addition, Jim Buzzell
upon completion of the Transaction will receive a payment of $110,000.
On completion of a sale, ADT will pay you $400,000 plus one-half of one per
cent of the gross consideration in excess of $430 million. For example, if
the gross consideration was $450 million, you would receive $500,000 and at
$500 million you would receive $750,000. There is no cap on the payments
regarding payments to you.
The Participants would receive $150,000 each plus three-eighths of one per
cent of the gross consideration in excess of $425 million. The excess payment
for the Participants will be capped at a gross consideration of $475 million,
therefore, the maximum amount which may be earned by a Participant would be
$337,500 each.
Gross consideration of the Transaction will be the aggregate of proceeds
received by ADT and debt remaining in the auctions group which is assumed by
the purchaser other than debt considered to be a component of working capital,
including bank overdrafts. The gross consideration should be readily apparent
from terms which will be set out in a definitive sale and purchase agreement.
Should there be any complications in determining the gross consideration, I am
confident that we will be able to come to an acceptable agreement between us.
ADT will, of course, endeavor to make these payments in as tax effective a
manner as possible.
In addition, senior executives who retire before the age of 65 will be
entitled to receive ADT Automotive sponsored medical benefits up to the age of
65 provided the respective executive pays the appropriate monthly cost of said
benefit from his retirement date until age 65. The monthly cost will be the
same cost charge to a Cobra participant.
This agreement, as it relates to the Transaction payments set above, will be
effective through September 30, 1997 at which time the agreement will
terminate unless extended by ADT at its sole discretion.
EXHIBIT 99.10
SEVERANCE AGREEMENT
AGREEMENT made this 26th day of February, 1997 by and between
ADT Security Services, Inc., a Delaware corporation (the "Company") and
Raymond Gross ("Executive").
WITNESSETH
WHEREAS, Executive is presently employed by the Company; and
WHEREAS, the parties wish to provide Executive with severance
arrangements upon a change of control of Parent (as hereinafter defined);
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, it is agreed as follows:
1. DEFINITIONS
The following terms used in this Agreement shall have the following
meanings (all terms defined in the singular have the correlative meanings when
used in the plural and vice versa).
"Board" shall mean the Board of Directors of Parent.
"Change in Control" shall mean the occurrence of any of the following
events:
(i) any "person" or "group" (as defined under Sections 13(d) and
14(d) of the Exchange Act) is or becomes the direct or indirect
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), of securities representing 50% or more of the combined
voting power of Parent's then outstanding voting securities;
(ii) beginning on or after the date of this Agreement, individuals
who either (a) were members of the Board at the beginning of such
period or (b) whose election by the Board of whose nomination for
election by the shareholders of Parent was approved by a vote of 66
2/3% of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously approved as provided for in this clause (b)
cease for any reason (including as a result of any proxy contest
involving the solicitation of revocable proxies under Section 14(a)
of the Exchange Act) to constitute a majority of the Board;
(iii) any "person" or "group" possesses, directly or indirectly, the
legal right to direct the management and policies of Parent, whether
through the ownership of securities, by contract or otherwise (other
than solely by virtue of membership on the Board or any committee
thereof); or
(iv) the shareholders of Parent shall approve a merger or
consolidation in which Parent is not the surviving entity, or a sale
or disposition of all, or substantially all, of the assets of Parent.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations thereunder.
"Parent" shall mean ADT Limited, a Bermuda corporation.
2. TERM
2.1 Term. Unless sooner terminated pursuant to the provisions of
this Agreement, the term of this Agreement shall be for a period commencing
February 10, 1997 and ending February 9, 2000.
3. TERMINATION
3.1 Termination following Change of Control. If a Change of Control
has occurred and Executive's employment is terminated within two years
following such Change of Control, other than on account of Executive's death,
disability or retirement, (i) by the Company other than for Cause (as
hereinafter defined) or (ii) by the Executive for Good Reason (as hereinafter
defined), Executive shall be entitled to the benefits provided in Section 4
hereof.
3.2 Termination for Cause.
3.2.1 The Company may by written notice terminate Executive's
employment for Cause. For purposes of this Agreement, "Cause" shall consist
of (i) a conviction of any of the following: (a) a felony, (b) embezzlement
or (c) misappropriation of funds or property of the Company or any of its
affiliates, (ii) habitual drunkenness or drug addiction, or (iii) the
Executive's consistent refusal or inability to perform his employment duties
in a material manner or willful misconduct in the performance of his
employment duties and obligations.
3.2.2 In order to terminate the Executive's employment for Cause,
the Company's Board of Directors shall be required to give written notice to
Executive specifying the claimed cause and Executive shall have failed to
correct the claimed breach, if such breach is curable, or alter the
objectionable pattern of conduct specified in the applicable written notice,
no later than thirty (30) days after receipt of the applicable notice.
3.3 Termination for Good Reason. Executive may by written notice
terminate his employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without the express written consent of Executive,
any of the following (i) Executive is removed from his position for any reason
(other than for Cause); (ii) the assignment to Executive of any duties or
responsibilities that are inconsistent, in a material respect, with the scope
of duties and responsibilities associated with his position, including,
without limitation, any such difference in scope resulting from Parent no
longer being a public company or from the Company's becoming a subsidiary of
another entity; (iii) the Company's failure or refusal to provide Executive
his fixed annual compensation or incentive compensation; (iv) a substantial
diminution of Executive's benefits (including, without limitation, benefits
under the Company's or Parent's life insurance, health and accident,
disability, deferred compensation or savings plans in which Executive is
participating) or (v) the Company's required relocation of Executive without
his prior written consent, to a place of employment (except for travel
reasonably required in the performance of Executive's responsibilities).
3.4 Date of Termination. In the case of termination for Cause,
Executive's date of termination shall be thirty (30) days following the date
specified in the relevant notice of termination and, in the case of
termination for Good Reason, the date of termination of Executive's employment
shall be the date specified in the relevant notice of termination; provided
that if, within thirty (30) days after any notice of termination is given, the
party receiving such notice of termination notifies the other party that a
dispute exists concerning the termination, Executive's date of termination
shall be the date on which the dispute is finally determined (either by mutual
written agreement or by a final judgment, order or decree of an arbitration
tribunal or a court of competent jurisdiction). Notwithstanding any dispute
regarding the date of termination of Executive's employment, the Company shall
continue (i) to pay Executive his full compensation, including, without
limitation, his base salary in effect when the notice giving rise to the
dispute was given (or, if higher, the base salary in effect as of the
Change in Control) and (ii) Executive's participation in all equity
incentive, compensation, benefit and insurance plans in which Executive was
participating when the notice giving rise to the dispute was given, until
the dispute is finally resolved in accordance with this subsection.
Amounts paid under this subsection are in addition to all other amounts due
under this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
4. COMPENSATION UPON TERMINATION.
4.1 Compensation. Following a Change of Control, upon termination
of Executive's employment, Executive shall be entitled to the following
benefits:
4.1.1. If the Executive's employment is terminated by the
Company for Cause or by Executive other than for Good Reason, disability,
death or retirement, the Company shall pay Executive his full base salary
through the date of termination at the rate in effect at the time notice of
termination is given plus any amounts to be paid to Executive pursuant to the
Company's retirement and other benefit plans of the Company then in effect,
and the Company shall have no further obligations to Executive under this
Agreement.
4.1.2. If Executive's employment shall be terminated by the
Company or by Executive for retirement or disability, or by reason of
Executive's death, Executive's benefits shall be determined in accordance with
the Company's retirement, benefit and insurance programs then in effect.
4.1.3. If Executive's employment by the Company shall be
terminated (i) by the Company other than for Cause and other than because of
Executive's death, disability or retirement or (ii) by Executive for Good
Reason, then the Company shall provide Executive:
(a) an amount equal to two times (2x) the total of (x) the higher of
his annual full base salary as of the date of termination or as of
the Change of Control, calculated on an annualized basis, plus (y)
the amount of the bonus awarded to Executive, if any, in the year
prior to the date of termination (collectively, the "Salary"); and
(b) for the twelve month period following such termination, life,
disability, accident and health insurance benefits and Executive's
automobile or automobile allowance substantially similar to those
which Executive is receiving immediately prior to the date of
termination or, if higher, the Change of Control.
Executive shall receive the Salary, at Executive's option, either in the form
of a one-time lump sum severance payment or on a monthly basis. Executive
shall have ten (10) days from the date of termination to provide the Company
with notice as to the method that Executive chooses to receive the Salary (the
"Salary Notice"). If Executive elects to receive the Salary in the form of a
lump sum severance payment, Company shall pay Executive the Salary ten (10)
days following the receipt of the Salary Notice.
4.2. Pension Plans. Nothing in this Agreement shall alter the terms
of any pension plans in which Executive participates which would otherwise
terminate on the termination of Executive's employment.
5. GENERAL PROVISIONS
5.1 Successors; Binding Agreement.
5.1.1. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the Business and/or assets of the Company to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. Such assumption and agreement shall be in express terms and shall be
obtained prior to the effectiveness of any such succession. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
direct or indirect successor to its business and/or assets as aforesaid.
5.1.2. This Agreement shall be binding and inure to the
benefit of Executive, his successors and assigns and the Company, its
successors and assigns. If Executive dies while any amount is payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to his devisee, legatee or other designee or, if there is no such devisee,
legatee or other designee to the personal representatives of his estate.
Neither the Company nor Executive may, without the express written consent of
the other party, assign or pledge any rights or obligations under this
Agreement to any person, firm or company, save that Executive may transfer by
will or by operation of law (or by designation of beneficiary where a plan or
other agreement so provides) any rights to compensation or benefits hereunder.
5.2 Entire Agreement. This writing constitutes the entire agreement
between the parties dealing with subject matter, supersedes all other and
prior agreements and shall not be modified or amended except in writing and
signed by the parties.
5.3 Notices. All notices hereunder shall be in writing and sent by
hand, telecopier or by certified mail if to the Company at 1750 Clint Moore
Road, P.O. Box 5035, Boca Raton, FL 33431, Attention: President; facsimile
(561) 241-1923, and if to Executive at his last known residence. Either may
by such notice change its or his address for notices.
5.4 Choice of Law. This Agreement shall be interpreted in
accordance with the laws of Florida.
IN WITNESS WHEREOF, the parties have caused these presents to be signed the
day and year first above written.
ADT SECURITY SERVICES, INC.
By:_________________________
Name:
Title:
RAYMOND GROSS
____________________________
UNCONDITIONAL GUARANTEE
ADT LIMITED, a Bermuda corporation, hereby irrevocably and unconditionally
guarantees the due and punctual performance and observance of each and every
agreement, covenant and obligation of ADT SECURITY SERVICES, INC. under this
Agreement, irrespective of any circumstance, including any statute of
limitations, that might otherwise constitute a defense available to, or a
discharge of, any such agreement, covenant or obligation.
ADT LIMITED
By:_________________________
Name:
Title:
EXHIBIT 99.11
[ADT Letterhead]
VIA OVERNIGHT DELIVERY
and FACSIMILE (201) 635-2023
August 28, 1996
Mr. John E. Danneberg
10 Dellwood Avenue
Chatham, NJ 07928
Dear John:
As you know, an affiliate of ADT, Inc. ("ADT") currently owns
three Sonitrol franchises and certain of ADT's affiliates will be acquiring
ownership of additional Sonitrol franchises (collectively, the "Franchisees")
and ownership of Sonitrol Corporation (the "Franchisor"). In anticipation of
the ownership of such additional interests in the Franchisor and the
Franchises (individually and collectively, the "Operations"), ADT offers you
the opportunity to serve as Chief Executive Officer of the Operations, as an
independent consultant ("Consultant").
The initial term of Consultant's engagement shall be for a
period of six (6) months, commencing on September 1, 1996 (the "Initial Term")
and shall be automatically renewed on a month-to-month basis, unless written
notice is given by ADT or Consultant not to renew, at least thirty (30) days
before the end of the Initial Term.
The responsibilities, requirements and compensation of the
Consultant are as follows:
Responsibilities
o Day-to-day direct management and control of the Operations
o Identification of the short-term and medium-term technical and profit
potential of the Operations
o Maximization of the Operation's Profits and Cash Flow
Requirements
o Traditional full-time hours and attention
o Customary travel to and from business prospects, vendors, etc.
Compensation
ADT, or its designee, will pay Consultant a monthly fee in the amount of
Fifteen Thousand Dollars ($15,000.000). Consultant will be reimbursed
directly for all properly substantiated reasonable out-of-pocket business
expenses incurred.
If you agree and accept the terms of this consulting
arrangement, please so acknowledge by executing in the space provided below
and returning one original of this letter to my attention.
Sincerely,
/s/ Jan S. Beck
--------------------------
Jan S. Beck
Vice President
Acknowledged and Agreed
/s/ John E. Danneberg
- --------------------------
John E. Danneberg
EXHIBIT 99.12
FORM OF
INDEMNIFICATION AGREEMENT
Indemnification Agreement entered into by way of deed on [date] between
ADT Limited, a Bermuda company limited by shares (the "Company"), and
__________, a __________ of the Company (the "Indemnitee").
WITNESSETH:
WHEREAS, the Indemnitee is currently serving as a ___________ of the
Company;
WHEREAS, Section 98(1) of the Companies Act 1981 of Bermuda (as amended
from time to time, the "Act") permits the Company, in its Bye-Laws or in any
contract or arrangement with any officer of the Company, subject to certain
exemptions, to indemnify such officer in respect of certain losses and
liabilities incurred by such officer in his capacity as an officer of the
Company and Section 98A of the Act permits the Company to purchase and
maintain insurance for the benefit of such officer in respect of such losses
and liabilities;
WHEREAS, Bye-Law 102 of the Company's Bye-Laws contains an indemnity by
the Company in favor of every director, secretary and other officer of the
Company, and the Indemnitee has been serving and continues to serve as a
director of the Company in part in reliance on his being indemnified by the
Company; and
WHEREAS, in recognition of the Indemnitee's need for substantial
protection against personal liability in connection with the Indemnitee's
continued service to the Company in an effective manner and the Indemnitee's
reliance on his being indemnified by the Company, the Company desires to
provide the Indemnitee with specific contractual assurance that the Indemnitee
is indemnified by the Company to the full extent permitted by applicable law.
NOW, THEREFORE, the parties hereto agree as follows:
1. Indemnification. (a) The Company hereby agrees to pay all costs,
losses and expenses (including without limitation, attorneys' and others fees
and expenses, judgments, fines, penalties and amounts paid in settlement)
(collectively, "Expenses") which the Indemnitee may incur or become liable for
in connection with any threatened, pending or completed action, suit,
proceeding or inquiry (whether civil, criminal, administrative or
investigative) (collectively, "Actions") by reason of the fact that the
Indemnitee is or was a ___________ of the Company, or is or was serving or had
agreed to serve at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including without limitation any subsidiary of the Company.
(b) The Company hereby agrees to pay all Expenses incurred by the
Indemnitee in participating in or preparing to participate in any Action in
advance of the final disposition of such Action upon request by the Indemnitee
that the Company pay such Expenses. The Indemnitee hereby agrees to repay to
the Company any such Expenses paid by the Company if and to the extent that it
is ultimately determined that the Indemnitee is not entitled under applicable
law to be indemnified as provided hereby.
(c) If the Indemnitee is entitled under this Agreement to
indemnification by the Company for some, but not the total amount, of any
Expenses, the Company shall nevertheless indemnify the Indemnitee for the
portion of such Expenses to which the Indemnitee is entitled to
indemnification.
(d) In the event that any Action is instituted by the Indemnitee to
enforce or interpret the Indemnitee's right to indemnification hereunder, the
Indemnitee shall be entitled to be paid all Expenses incurred by the
Indemnitee with respect to such Action, unless as a part of such Action, the
court of competent jurisdiction determines that the material assertions made
by the Indemnitee as a basis for such Action were not made in good faith or
were frivolous.
2. Procedures. (a) The Indemnitee shall promptly notify the Company
in writing of any Action brought, threatened, commenced or asserted against
the Indemnitee in respect of which indemnification may or could be sought
under this Agreement.
(b) The Company shall have the right to assume the defense of any such
Action, including the employment of counsel reasonably satisfactory to the
Indemnitee and the payment of all Expenses. The Indemnitee shall have the
right to employ separate counsel in any such Action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnitee unless (i) the Company agrees to pay such fees and
expenses, (ii) the Company shall have failed promptly to assume the defense of
such Action or (iii) the Indemnitee shall have reasonably concluded, upon the
advice of counsel, that there is a conflict of interest between the Indemnitee
and the Company. If the Indemnitee has made the conclusion referred to in
clause (iii), the Company shall not have the right to assume the defense of
such Action on behalf of the Indemnitee.
(c) Neither the Company nor the Indemnitee may settle or compromise
any Action covered by the indemnification set forth herein without the prior
written consent of the other, which such consent shall not to be unreasonably
withheld or delayed.
(d) The Company shall make payment of any amount due by it under this
Agreement against delivery to the Company of appropriate invoices or receipts
or such other evidence of Expenses as the Company reasonably requires.
3. Insurance. The Company hereby agrees to obtain and maintain in
effect a policy or policies of insurance with reputable insurance companies
providing for customary directors and officers liability insurance in
appropriate amounts; provided that the Company shall not be required obtain
and maintain such insurance if the Company determines in good faith that (i)
such insurance is not reasonably available, (ii) the premium costs for such
insurance are disproportionate to the amount of coverage provided or (iii) the
coverage provided is so limited by exclusions as to provide an insufficient
benefit.
4. Non-Exclusivity; No Duplication. The rights of the Indemnitee
under this Agreement shall not be exclusive of any other rights the Indemnitee
may have under the Company's Bye-Laws, the Act, any insurance or otherwise;
provided that the Company shall not be liable under this Agreement to make any
payment in connection with any claim to the extent the Indemnitee has
otherwise received payment (under the Bye-Laws, the Act, any insurance policy
or otherwise) of Expenses otherwise indemnifiable hereunder; and provided
further that the Indemnitee shall reimburse the Company for amounts paid to
the Indemnitee pursuant to such other rights to the extent such payments
duplicate any payments received pursuant to this Agreement.
5. Subrogation. In the event of payment of any Expenses, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
6. Notices. All notices or other communications that are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by certified or registered mail, overnight delivery or by facsimile
transmission. Notice to the Company shall be given at ADT Limited, Cedar
House, 41 Cedar Avenue, Hamilton HM 12, Bermuda and shall be directed to the
General Counsel (or such other address or person as the Company subsequently
shall designate in writing to the Indemnitee). Notice to the Indemnitee shall
be given at the address set forth on the signature page hereof (or such other
address as the Indemnitee subsequently shall designate in writing to the
Company).
7. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), permitted
assigns, heirs and legal representatives; provided that this Agreement and the
rights and obligations hereunder may not be assigned (in whole or in part) by
any party hereto without the prior written consent of the other party hereto.
8. Severability. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to other persons or circumstances shall
not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal shall be modified to the extent (but only to the extent)
necessary to make it enforceable, valid and legal.
9. Amendment. No supplement, modification or amendment of this
Agreement shall be valid or binding unless executed in writing by both of the
parties hereto.
10. Applicable Law. (a) The provisions of this Agreement shall apply
subject to, but to the full extent permitted by, the Act and any other
applicable law.
(b) This Agreement shall be governed by the laws of Bermuda, without
regard to the principles of conflicts of laws thereof.
IN WITNESS WHEREOF, this Agreement has been executed as a deed and has
been delivered on the date first above written.
The Common Seal of ADT Limited was )
affixed to this deed in the presence of: )
____________________________
Director
____________________________
Director/Secretary
Signed, sealed and delivered as a deed by )
[Indemnitee] in the presence of: )
L.S.
____________________________
Name:
Address:
Address of [Indemnitee] for Notices:
EXHIBIT 99.13
CONFORMED COPY
RIGHTS AGREEMENT
dated as of
November 6, 1996
between
ADT LIMITED
and
CITIBANK, N.A.
as Rights Agent
TABLE OF CONTENTS(1)
Page
----
Section 1. Definitions 1
Section 2. Appointment of Rights Agent 6
Section 3. Issue of Right Certificates 6
Section 4. Form of Right Certificates 7
Section 5. Countersignature and Registration 8
Section 6. Transfer and Exchange of Right Certificates;
Mutilated, Destroyed,
Lost or Stolen Right Certificates 8
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights 9
Section 8. Cancellation and Destruction of Right
Certificates 10
Section 9. Reservation and Availability of Shares 11
Section 10. Series A First Preference Shares Record Date 13
Section 11. Adjustment of Purchase Price,
Number and Kind of Shares or Number
of Rights 13
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares 21
Section 13. Consolidation, Amalgamation or Sale or
Transfer of Assets or Earning Power 22
Section 14. Prohibition on issue of Fractional Rights
and Fractional Shares 24
Section 15. Rights of Action 25
Section 16. Agreement of Right Holders 26
Section 17. Right Certificate Holder Not Deemed
a Shareholder 27
Section 18. Concerning the Rights Agent 27
Section 19. Merger or Consolidation or Change of
Name of Rights Agent 27
Section 20. Duties of Rights Agent 28
Section 21. Change of Rights Agent 30
Section 22. Issuance of New Right Certificates 31
Section 23. Redemption 31
Section 24. Notice of Proposed Actions 32
Section 25. Notices 33
Section 26. Supplements, Deletions and Amendments 34
Section 27. Successors 34
Section 28. Determinations and Actions
by the Board of Directors, etc. 34
Section 29. Benefits of this Agreement 35
Section 30. Severability 35
Section 31. Governing Law 35
Section 32. Counterparts 36
Section 33. Descriptive Headings 36
Exhibit A - Extract from Minutes of Meeting of Board of Directors of ADT
Limited creating the Series A First Preference Shares
Exhibit B - Form of Right Certificate
- -------------
(1) The Table of Contents is not a part of this Agreement.
RIGHTS AGREEMENT
AGREEMENT dated as of November 6, 1996, between ADT Limited, a
Bermuda company limited by shares (the "Company"), and Citibank, N.A., New
York branch, a national banking association organized under the laws of the
United States of America acting solely through its branch located at 111
Wall Street, New York, NY 10043 (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on November 4, 1996 the Board of Directors of the
Company authorized and declared a distribution of one Right (as hereinafter
defined) for each Common Share (as hereinafter defined) in issue at the close
of business on November 15, 1996 (the "Record Date") and has authorized and
declared the issuance, upon the terms and subject to the conditions
hereinafter set forth, of one Right in respect of each Common Share issued
after the Record Date, each Right representing the right to subscribe for,
upon the terms and subject to the conditions hereinafter set forth,
one-hundredth of a Series A First Preference Share (as hereinafter defined).
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. The following terms, as used herein,
have the following meanings:
"Acquiring Person" means any Person who, together with all
Affiliates and Associates of such Person, shall be the Beneficial
Owner of 15% or more of the Common Shares then issued and
outstanding, provided that Acquiring Person shall not include the
Company, any of its Subsidiaries, any employee benefit plan of the
Company or any of its Subsidiaries or any Person organized, appointed
or established by the Company or any of its Subsidiaries for or
pursuant to the terms of any such plan; provided further that the
term "Acquiring Person" shall not include any Grandfathered
Person, unless such Grandfathered Person after the Grandfathered
Time becomes the Beneficial Owner of more than the Grandfathered
Percentage of the Common Shares then issued and outstanding. Any
Grandfathered Person who after the Grandfathered Time becomes the
Beneficial Owner of less than 15% of the Common Shares then issued
and outstanding shall cease to be a Grandfathered Person.
In addition, notwithstanding the foregoing, a Person shall not
be an "Acquiring Person" if a majority of the Continuing Directors
determine that a person who would otherwise be an "Acquiring Person",
as defined pursuant to the foregoing provisions of this Section 1,
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person
shall no longer be an "Acquiring Person".
"Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on the date hereof.
A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own", any securities:
(a) which such Person or any of its Affiliates or
Associates, directly or indirectly, beneficially owns (as
determined pursuant to Rule 13d-3 under the Exchange Act as in
effect on the date hereof);
(b) which such Person or any of its Affiliates or
Associates, directly or indirectly, has
(i) the right to acquire (whether such right is
exercisable immediately or only upon the occurrence of
certain events or the passage of time or both) pursuant
to any agreement, arrangement or understanding (whether
or not in writing) or otherwise (other than pursuant to
the Rights); provided that a Person shall not be deemed
the "Beneficial Owner" of or to "beneficially own"
securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of its
Affiliates or Associates until such tendered securities
are accepted for payment or exchange; or
(ii) the right to vote (whether such right is
exercisable immediately or only upon the occurrence of
certain events or the passage of time or both) pursuant
to any agreement, arrangement or understanding (whether
or not in writing) or otherwise; provided that a Person
shall not be deemed the "Beneficial Owner" of or to
"beneficially own" any security under this clause (ii) as
a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or
understanding (A) arises solely from a revocable proxy or
consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with,
the applicable rules and regulations under the
Exchange Act and (B) is not also then reportable by
such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(c) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding
(whether or not in writing) for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as
described in subparagraph (b)(ii) immediately above) or
disposing of any such securities.
"Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York or the
Islands of Bermuda are authorized or obligated by law or executive
order to close.
"Close of business" on any given date means 5:00 P.M., New York
City time, on such date; provided that if such date is not a Business
Day "close of business" means 5:00 P.M., New York City time, on the
next succeeding Business Day.
"Common Shares" means the Common Shares of nominal value $0.10
each of the Company, except that, when used with reference to any
Person other than the Company, "Common Shares" means the capital
stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct
the management, of such Person.
"Continuing Director" means any member of the Board of
Directors of the Company, while such Person is a member of the Board,
who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative or nominee of an Acquiring
Person or of any such Affiliate or Associate and either (a) was a
member of the Board immediately prior to the time any Person becomes
an Acquiring Person or (b) subsequently becomes a member of the
Board, if such Person's nomination for election or election to the
Board is recommended or approved by a majority of the Continuing
Directors.
"Distribution Date" means the earlier of (a) the close of
business on the tenth day (or such later day as may be designated by
action of a majority of the Continuing Directors) after the Share
Acquisition Date and (b) the close of business on the tenth Business
Day (or such later day as may be designated by action of a majority
of the Continuing Directors) after the date of the commencement of a
tender or exchange offer by any Person if, upon consummation thereof,
such Person would be an Acquiring Person.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
"Expiration Date" means the earlier of (a) the Final Expiration
Date and (b) the time at which all Rights are redeemed as provided in
Section 23.
"Final Expiration Date" means the close of business on November
14, 2005.
"Grandfathered Percentage" means, with respect to any
Grandfathered Person, the percentage of the Common Shares then in
issue that such Grandfathered Person, together with all Affiliates
and Associates of such Grandfathered Person, beneficially owns as of
the Grandfathered Time; provided that, in the event that the
percentage of Common Shares then in issue that a Grandfathered Person
beneficially owns shall decrease (whether due to the sale, transfer
or other disposition of Common Shares by the Grandfathered Person or
due to the dilution of the Grandfathered Person's interest in Common
Shares as a result of the issuance of additional Common Shares) after
the Grandfathered Time, the Grandfathered Percentage, with respect to
such Grandfathered Person, shall mean, subsequent to such sale,
transfer, disposition or dilution, the percentage of Common Shares
then in issue that such Grandfathered Person, together with all
Affiliates and Associates of such Grandfathered Person, beneficially
owns immediately following such sale, transfer, disposition or
dilution.
"Grandfathered Person" means any Person who, together with all
Affiliates and Associates of such Person is, as of the Grandfathered
Time, the Beneficial Owner of 15% or more of the Common Shares then
in issue.
"Grandfathered Time" means 5:00 p.m., New York City time, on
November 4, 1996.
"Person" means an individual, firm, corporation, partnership,
association, trust or any other entity or organization.
"Purchase Price" means the price (subject to adjustment as
provided herein) at which a holder of a Right may subscribe for
one-hundredth of a Series A First Preference Share (subject to
adjustment as provided herein) upon exercise of a Right, which price
shall initially be $90.
"Right" means a right to subscribe, upon the terms and subject
to the conditions hereinafter set forth, for one-hundredth of a
Series A First Preference Share (subject to adjustment as provided
herein) and "Rights" shall be construed accordingly.
"Series A First Preference Shares" means the Series A First
Preference Shares of nominal value $1.00 each of the Company,
comprising a series of the Convertible Cumulative Redeemable
Preference Shares of nominal value $1.00 each of the Company, having
the terms set forth in the extract from the minutes of a meeting of
the Board of Directors of the Company held on November 4, 1996
attached as an appendix to the Bye-laws of the Company and also
attached hereto as Exhibit A.
"Section 11(a)(ii) Event" means any event described in the
first clause of Section 11(a)(ii).
"Section 13 Event" means any event described in clauses (x),
(y) or (z) of Section 13(a).
"Securities Act" means the United States Securities Act of
1933, as amended.
"Share Acquisition Date" means the date of the first public
announcement (including the filing of a report on Schedule 13D under
the Exchange Act (or any comparable or successor report)) by the
Company or an Acquiring Person indicating that an Acquiring Person
has become such.
"Subsidiary" shall have the same meaning as defined for the
purposes of the Bye-laws of the Company.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Shares are listed or admitted
to trading is open for the transaction of business or, if the Common
Shares are not listed or admitted to trading on any national
securities exchange, a Business Day.
"Triggering Event" means any Section 11(a)(ii) Event or any
Section 13 Event.
"$" means United States dollars.
"United States" means the United States of America.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as rights agent in respect of the Rights in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable. If the Company
appoints one or more Co-Rights Agents, the respective duties of the Rights
Agent and any Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates. (a) Prior to the
Distribution Date, (i) the Rights will be evidenced by the certificates for
the Common Shares and not by separate Right Certificates (as hereinafter
defined) and the registered holders of the Common Shares shall be deemed to be
the registered holders of the associated Rights, and (ii) the Rights will be
transferable only in connection with the transfer of the underlying Common
Shares.
(b) As soon as practicable after the Company has notified the
Rights Agent in writing of the occurrence of the Distribution Date, the
Company will prepare, sign and deliver to the Rights Agent, and the Rights
Agent will send, by first-class, postage prepaid mail, to each record holder
of the Common Shares as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or more
Right Certificates evidencing one Right (subject to adjustment as provided
herein) for each Common Share so held. If an adjustment in the number of
Rights per Common Share has been made pursuant to Section 11(p), the Company
shall, at the time of distribution of the Right Certificates, make the
necessary and appropriate rounding adjustments (in accordance with Section
14(a)) so that Right Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights. From and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(c) Rights shall be issued in respect of all Common Shares in
issue as of the Record Date or issued after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. In addition, in
connection with the issuance of Common Shares following the Distribution Date
and prior to the Expiration Date, the Company (i) shall, with respect to
Common Shares so issued (x) pursuant to the exercise of any share options or
under any employee plan or arrangement or (y) upon the exercise, conversion or
exchange of other securities issued by the Company prior to the Distribution
Date and (ii) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Right Certificates representing
the appropriate number of Rights in connection with such issue; provided that
no such Right Certificate shall be issued if, and to the extent that, (i) the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificate would be issued or (ii) appropriate
adjustment shall otherwise have been made in lieu of the issue thereof.
(d) Certificates for the Common Shares issued after the Record
Date but prior to the earlier of the Distribution Date and the Expiration Date
shall have impressed on, printed on, written on or otherwise affixed to them
the following legend:
This certificate also evidences certain Rights as set forth in a
Rights Agreement between ADT Limited and Citibank, N.A. dated as of
November 6, 1996 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the registered office of the Company. The Company will mail
to the holder of this certificate a copy of the Rights Agreement
without charge promptly after receipt of a written request
therefor. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be evidenced by separate certificates
and no longer be evidenced by this certificate, may be redeemed or
may expire. As set forth in the Rights Agreement, Rights issued
to, or held by, any Person who is, was or becomes an Acquiring
Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may be null and
void. Rights shall not be exerciseable for securities in any
jurisdiction if the requisite qualification in such jurisdiction
shall not have been obtained, such exercise therefor shall not be
permitted under applicable law or a registration statement in
respect of such securities shall not have been declared effective.
Section 4. Form of Right Certificates. (a) The certificates
evidencing the Rights (and the forms of assignment, forms of election and
certificates to be printed on the reverse thereof) (the "Right Certificates")
shall be substantially in the form of Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to usage. The Right Certificates, whenever distributed,
shall be dated as of the Record Date.
(b) Any Right Certificate representing Rights beneficially
owned by any Person referred to in clauses (i), (ii) or (iii) of the first
sentence of Section 7(d) shall (to the extent feasible) contain the following
legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). This Right Certificate and the
Rights represented hereby may be or may become null and void in the
circumstances specified in Section 7(d) of such Agreement.
Section 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company in any manner
permitted by the Bye-laws of the Company. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company whose
manual or facsimile signature is affixed to the Right Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Right Certificates may,
nevertheless, be countersigned by the Rights Agent and issued and delivered
with the same force and effect as though the Person who signed such Right
Certificates had not ceased to be such officer of the Company. Any Right
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date
of the execution of this Rights Agreement any such Person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
place for surrender of Right Certificates upon exercise, transfer or exchange,
books for registration and transfer of the Right Certificates. Such books
shall show with respect to each Right Certificate the name and address of the
registered holder thereof, the number of Rights indicated on the certificate
and the certificate number.
Section 6. Transfer and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) At any time
after the Distribution Date and prior to the Expiration Date, any Right
Certificate or Certificates may, upon the terms and subject to the conditions
set forth below in this Section 6(a), be transferred or exchanged for another
Right Certificate or Certificates evidencing a like number of Rights as the
Right Certificate or Certificates surrendered. Any registered holder desiring
to transfer, split up, combine or exchange any Right Certificate or
Certificates shall make such request in writing delivered to the Rights Agent
and shall surrender such Right Certificate or Certificates (with, in the case
of a transfer, the form of assignment and certificate on the reverse side
thereof duly executed) to the Rights Agent at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate or Certificates until
the registered holder of the Rights has complied with the requirements of
Section 7(e). Upon satisfaction of the foregoing requirements, the Rights
Agent shall, subject to Sections 4(b), 7(d), 14 and 24, countersign and
deliver to the Person entitled thereto a Right Certificate or Certificates
as so requested. The Company may require payment of a sum sufficient to
cover any transfer tax or other governmental charge that may be imposed in
connection with any transfer or exchange of any Right Certificate or
Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the
Company's request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Right Certificate if mutilated, the Company will issue
and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein, including
Sections 7(d) and (e), 9(c), 11(a)) in whole or in part at any time after the
Distribution Date and prior to the Expiration Date upon surrender of the Right
Certificate, with the form of election and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the principal office or offices
of the Rights Agent designated for such purpose, together with payment (in
lawful money of the United States by certified check or bank draft payable to
the order of the Company) of the aggregate Purchase Price with respect to the
Rights then to be exercised and an amount equal to any applicable transfer tax
or other governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and
subject to Section 20(k), the Rights Agent shall thereupon promptly (i)(A)
requisition from the registrar of the Company or any transfer agent of the
Series A First Preference Shares (or make available, if the Rights Agent is
the registrar of the Company or the transfer agent therefor) certificates for
the total number of Series A First Preference Shares to be subscribed (and the
Company hereby irrevocably authorizes the Rights Agent to instruct the
Company's registrar or its transfer agent to comply with all such requests)
or (B) if the Company shall have elected to deposit the Series A First
Preference Shares issuable upon exercise of the Rights with a depositary
agent, requisition from the depositary agent depositary receipts representing
such number of Series A First Preference Shares as are to be subscribed (in
which case certificates for the Series A First Preference Shares represented
by such receipts shall be deposited by the registrar of the Company or
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of issuance of
fractional shares in accordance with Section 14 and (iii) after receipt of
such certificates or depositary receipts and cash, if any, cause the same to
be delivered to or upon the order of the registered holder of such Right
Certificate (with such certificates or receipts registered in such name or
names as may be designated by such holder). If the Company is obligated to
deliver Common Shares, other securities or assets pursuant to this Agreement,
the Company will make all arrangements necessary so that such other securities
and assets are available for delivery by the Rights Agent, if and when
appropriate.
(c) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing the number of Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Right Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event,
any Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or in any such Associate or Affiliate) or
to any Person with whom the Acquiring Person (or any such Associate or
Affiliate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which a majority of the
Continuing Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(d) shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to insure that the provisions of this
Section 7(d) and Section 4(b) are complied with, but shall have no liability
to any holder of Right Certificates or other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or its
Affiliates and Associates or any transferee of any of them hereunder.
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of Rights upon the
occurrence of any purported transfer pursuant to Section 6 or exercise
pursuant to this Section 7 unless such registered holder (i) shall have
completed and signed the certificate contained in the form of assignment or
form or election, as the case may be, set forth on the reverse side of the
Right Certificate surrendered for such transfer or exercise, as the case may
be, (ii) shall not have indicated an affirmative response to clause 1 or 2
thereof and (iii) shall have provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for exercise or transfer shall, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in cancelled form, or, if surrendered to the Rights
Agent, shall be cancelled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by this Agreement. The Company
shall deliver to the Rights Agent for cancellation, and the Rights Agent shall
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Company.
Section 9. Reservation and Availability of Shares. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available a number of Series A First Preference Shares which are authorized
but not issued or otherwise reserved for issuance sufficient to permit the
exercise in full of all outstanding Rights as provided in this Agreement.
(b) So long as any Series A First Preference Shares issuable
upon the exercise of Rights may be listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after such time as
the Rights become exercisable, all securities reserved for such issue to be
listed on any such exchange upon official notice of issuance upon such
exercise.
(c) The Company shall use its best efforts (i) to file, as
soon as practicable following the earliest date after the occurrence of a
Section 11(a)(ii) Event as of which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii), or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act with respect to the securities issuable upon exercise of the
Rights, (ii) to cause such registration statement to become effective as soon
as practicable after such filing and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the laws of Bermuda, the federal
securities laws of the United States and blue sky laws of the various
states of the United States in connection with the exercisability of the
Rights. The Company may temporarily suspend, for a period of time not to
exceed 90 days after the date set forth in clause (i) of the first sentence
of this Section 9(c), the exercisability of the Rights in order to prepare
and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension
is no longer in effect.
(d) Notwithstanding any such provision of this Agreement to
the contrary, the Rights shall not be exercisable for securities in any
jurisdiction if the requisite qualification in such jurisdiction shall not
have been obtained, such exercise therefor shall not be permitted under
applicable law or a registration statement in respect of such securities
shall not have been declared effective. In particular, the Rights do not
constitute an offer to, and may not be exercised by, any Person in the
United Kingdom (a "UK Person") unless and until, or to the extent that, a
majority of the Continuing Directors determine that any securities which
would be acquired on the exercise of any Rights by a UK Person (or by UK
Persons generally) may lawfully be offered to that UK Person (or to UK
Persons generally). The Company shall use its reasonable endeavours to
prepare and publish, as soon as practicable after the Distribution Date (if
and to the extent that such steps have not previously been taken), a
prospectus or other appropriate documents and/or take such other steps as a
majority of the Continuing Directors deem expedient under applicable laws
in the United Kingdom in order to extend the offer of such securities to UK
Persons generally.
If and to the extent that a majority of the Continuing Directors
determine that compliance with the laws of the United Kingdom or any other
territory would be impracticable or unduly onerous in order for the securities
which would be acquired on the exercise of any Rights lawfully to be offered
within that territory, a majority of the Continuing Directors may arrange for
the securities which would otherwise be issued on the exercise of Rights by
Persons in the relevant territory or territories ("Excluded Persons") to be
allotted or issued to some other person nominated by a majority of the
Continuing Directors for the purpose on terms that:
(x) such securities shall be sold in the market or otherwise for
the benefit of the Excluded Persons, if they can be sold at a price
in excess of the total Purchase Price referable to such securities
and the expenses of sale; and
(y) the proceeds of sale, after deducting a sum equal to the total
Purchase Price and expenses of sale, will be distributed to the
Excluded Persons in the proportions to which, but for the provisions
of this paragraph, they would otherwise have been entitled to
exercise Rights, provided that no distribution need be made to any
Excluded Person of a sum of less than $5 (any such sums being payable
to the Company for its own benefit).
(e) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Series A First Preference
Shares issuable upon exercise of Rights shall, at the time of allotment of
such securities (subject to payment of the Purchase Price), be duly and
validly authorized and issued fully paid or credited as fully paid and shall
rank pari passu in all respects with all other Series A First Preference
Shares in issue at that time provided that the Company shall not be obligated
to issue a Series A First Preference Share pursuant to any obligation
contained or referred to in this Agreement if such issue would require the
Company to issue that Series A First Preference Share for a Purchase Price
less than the nominal value of such Series A First Preference Share on the
date of issue thereof.
(f) The Company further covenants and agrees that it will pay
when due and payable any and all Bermuda, United States federal and state
transfer taxes and other governmental charges which may be payable in respect
of the issuance or delivery of the Right Certificates and of any certificates
for Series A First Preference Shares upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax or other governmental
charge which may be payable in respect of any transfer involved in the
issuance or delivery of any Right Certificates or of any certificates for
Series A First Preference Shares to a Person other than the registered holder
of the applicable Right Certificate, and prior to any such transfer, issuance
or delivery any such tax or other governmental charge shall have been paid by
the holder of such Right Certificate or it shall have been established to the
Company's satisfaction that no such tax or other governmental charge is due.
Section 10. Series A First Preference Shares Record Date.
Each Person (other than the Company) in whose name any certificate for Series
A First Preference Shares is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of such Series A First
Preference Shares represented thereby on the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any transfer taxes or other governmental charges) was
made; provided that if the date of such surrender and payment is a date upon
which the transfer books of the Company relating to the Series A First
Preference Shares are closed, such Person shall be deemed to have become the
record holder of such shares on the next succeeding Business Day on which the
applicable transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a shareholder of the Company with respect to shares
for which the Rights shall be exercisable, including the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. (a)(i) If the Company shall at any time after
the date of this Agreement (A) pay a dividend on the Series A First Preference
Shares payable in Series A First Preference Shares, (B) subdivide the Series A
First Preference Shares into a greater number of shares, (C) consolidate the
outstanding Series A First Preference Shares into a smaller number of shares
or (D) issue any shares of its capital stock in a reclassification of the
Series A First Preference Shares (including any such reclassification in
connection with a consolidation or amalgamation involving the Company), the
Purchase Price in effect immediately prior to the record date for such
dividend or of the effective date of such subdivision, consolidation or
reclassification, and the number and kind of Series A First Preference Shares
or other capital stock issuable on such date shall be proportionately adjusted
so that each holder of a Right shall (except as otherwise provided herein,
including Section 7(d)) thereafter be entitled to receive, upon exercise
thereof at the Purchase Price in effect immediately prior to such date, the
aggregate number and kind of Series A First Preference Shares or other capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the applicable transfer books of the
Company were open, such holder would have been entitled to receive upon such
exercise and by virtue of such dividend, subdivision, consolidation or
reclassification. If an event occurs which requires an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) If any Person, alone or together with its Affiliates and
Associates, shall, at any time after the date of this Agreement, become an
Acquiring Person, then proper provision shall promptly be made so that each
holder of a Right shall (except as otherwise provided herein, including
Section 7(d)) thereafter be entitled to receive, upon exercise thereof at the
Purchase Price in effect immediately prior to the first occurrence of a
Section 11(a)(ii) Event, in lieu of Series A First Preference Shares, such
number of duly authorized, validly issued and fully paid Common Shares of the
Company (such shares being referred to herein as the "Adjustment Shares") as
shall be equal to the result obtained by dividing
(x) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of a Section
11(a)(ii) Event by the number of one-hundredths of a Series A First
Preference Share for which a Right was exercisable immediately prior
to such first occurrence (such product being thereafter referred to
as the "Purchase Price" for each Right and for all purposes of this
Agreement) by
(y) 50% of the current market price (determined pursuant to
Section 11(d)(i)) per Common Share on the date of such first
occurrence;
provided that if the transaction that would otherwise give rise to the
foregoing adjustment is also subject to the provisions of Section 13, then
only the provisions of Section 13 shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii); and
provided further that the Company shall not be obligated to issue a Common
Share pursuant to this Section 11(a)(ii) if such issue would require the
Company to issue that Common Share for a Purchase Price less than the nominal
value of such Common Share on the date of issue thereof and in such event a
Person electing to receive such Common Share pursuant to this Section
11(a)(ii) shall be deemed to have elected to receive Series A First Preference
Shares.
(iii) If the number of Common Shares which are authorized by the
Company's Memorandum of Association but not outstanding or reserved for
issuance other than upon exercise of the Rights is not sufficient to permit
the exercise in full of the Rights in accordance with Section 11(a)(ii), the
Company shall, with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the Purchase Price then
in effect, (A) (to the extent available) Common Shares and then, (B) (to the
extent available) other equity securities of the Company which a majority of
the Continuing Directors has determined to be essentially equivalent to Common
Shares in respect to dividend, capital and voting rights (such securities
being referred to herein as "common share equivalents") and then, if
necessary, (C) other equity or debt securities of the Company, cash or other
assets, a reduction in the Purchase Price or any combination of the foregoing,
having an aggregate value (as determined by a majority of the Continuing
Directors based upon the advice of an internationally recognized investment
banking firm selected by a majority of the Continuing Directors) equal to the
value of the Adjustment Shares; provided that (x) the Company may, and (y) if
the Company shall not have made adequate provision as required above to
deliver value within 30 days following the later of the first occurrence of a
Section 11(a)(ii) Event and the first date that the right to redeem the Rights
pursuant to Section 23 shall expire, then the Company shall be obligated to,
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, (1) (to the extent available) Common Shares and
then (2) (to the extent available) common share equivalents and then, if
necessary, (3) other equity or debt securities of the Company, cash or other
assets or any combination of the foregoing, having an aggregate value (as
determined by a majority of the Continuing Directors based upon the advice of
an internationally recognized investment banking firm selected by a majority
of the Continuing Directors) equal to the excess of the value of the
Adjustment Shares over the Purchase Price. If a majority of the Continuing
Directors of the Company shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights, the 30 day period set forth above (such
period, as it may be extended, being referred to herein as the "Substitution
Period") may be extended to the extent necessary, but not more than 90 days
following the first occurrence of a Section 11(a)(ii) Event, in order that the
Company may seek shareholder approval for the authorization of such additional
shares. To the extent that the Company determines that some action is to be
taken pursuant to the first and/or second sentence of this Section 11(a)(iii),
the Company (X) shall provide, subject to Section 7(d), that such action shall
apply uniformly to all outstanding Rights and (Y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period
in order to seek any authorization of additional shares and/or to decide the
appropriate form and value of any consideration to be delivered as referred to
in such first and/or second sentence. If any such suspension occurs, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Shares shall be the current market
price per Common Share (as determined pursuant to Section 11(d)) on the later
of the date of the first occurrence of a Section 11(a)(ii) Event and the first
date that the right to redeem the Rights pursuant to Section 23 shall expire;
any common share equivalent shall be deemed to have the same value as the
Common Shares on such date; and the value of other securities or assets shall
be determined pursuant to Section 11(d)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Series A First
Preference Shares entitling them to subscribe for (for a period expiring
within 45 calendar days after such record date) Series A First Preference
Shares (or securities having the same rights, privileges and preferences as
the Series A First Preference Shares ("equivalent preference shares")) or
securities convertible into or exercisable for Series A First Preference
Shares (or equivalent preference shares) at a price per share of Series A
First Preference Shares (or equivalent preference shares) (in each case,
taking account of any conversion or exercise price) less than the current
market price (as determined pursuant to Section 11(d)) per Series A First
Preference Share on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such date by a fraction, the numerator
of which shall be the number of Series A First Preference Shares
outstanding on such record date, plus the number of Series A First
Preference Shares which the aggregate price (taking account of any
conversion or exercise price) of the total number of Series A First
Preference Shares (and/or equivalent preference shares) so to be offered
would purchase at such current market price and the denominator of which
shall be the number of Series A First Preference Shares outstanding on such
record date plus the number of additional Series A First Preference Shares
(and/or equivalent preference shares) so to be offered. In case such
subscription price may be paid by delivery of consideration part or all of
which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes. Such adjustment
shall be made successively whenever such a record date is fixed, and if
such rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of Series A First Preference Shares
(including any such distribution made in connection with a consolidation or
amalgamation involving the Company) of evidences of indebtedness, equity
securities other than Series A First Preference Shares, assets (other than a
regular periodic cash dividend out of the earnings or retained earnings of the
Company) or rights, options or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current market price (as determined pursuant to Section 11(d)) per Series A
First Preference Share on such record date, less the value (as determined
pursuant to Section 11(d)(iii)) of such evidences of indebtedness, equity
securities, assets, rights, options or warrants so to be distributed with
respect to one Series A First Preference Share and the denominator of which
shall be such current market price per Series A First Preference Share. Such
adjustment shall be made successively whenever such a record date is fixed,
and if such distribution is not so made, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(d)(i) For the purpose of any computation hereunder other than
computations made pursuant to Section 11(a)(iii) or 14, the "current market
price" per Common Share on any date shall be deemed to be the average of the
daily closing prices per share of such Common Shares for the 30 consecutive
Trading Days immediately prior to such date; for purposes of computations made
pursuant to Section 11(a)(iii), the "current market price" per Common Share on
any date shall be deemed to be the average of the daily closing prices per
share of such Common Shares for the 10 consecutive Trading Days immediately
following such date; and for purposes of computations made pursuant to Section
14, the "current market price" per Common Share for any Trading Day shall be
deemed to be the closing price per Common Share for such Trading Day; provided
that if the current market price per share of the Common Shares is determined
during a period following the announcement by the issuer of such Common Shares
of (A) a dividend or distribution on such Common Shares payable in shares of
such Common Shares or securities exercisable for or convertible into shares of
such Common Shares (other than the Rights), or (B) any subdivision,
consolidation or reclassification of such Common Shares, and prior to the
expiration of the requisite 30 Trading Day or 10 Trading Day period, as set
forth above, after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, consolidation or reclassification, then,
and in each such case, the "current market price" shall be properly adjusted
to take into account ex-dividend trading. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Common Shares are not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which the Common Shares are listed or admitted to
trading or, if the Common Shares are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use or, if on any
such date the Common Shares are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares selected by the Board of
Directors of the Company, or, if at the time of such selection there is an
Acquiring Person, by a majority of the Continuing Directors. If on any such
date no market maker is making a market in the Common Shares, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company (or, if at the time of such determination there is an
Acquiring Person, by a majority of the Continuing Directors) shall be used.
If the Common Shares is not publicly held or not so listed or traded, the
"current market price" per share means the fair value per share as determined
in good faith by the Board of Directors of the Company, or, if at the time of
such determination there is an Acquiring Person, by a majority of the
Continuing Directors, or if there are no Continuing Directors, by an
internationally recognized investment banking firm selected by the Board of
Directors, which determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current
market price" per Series A First Preference Share shall be determined in the
same manner as set forth above for the Common Shares in Section 11(d)(i)
(other than the last sentence thereof). If the current market price per
Series A First Preference Share cannot be determined in such manner, the
"current market price" per Series A First Preference Share shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as share subdivisions and
consolidations, scrip dividends and recapitalizations with respect to the
Common Shares occurring after the date of this Agreement) multiplied by the
current market price per Common Share (as determined pursuant to Section
11(d)(i) (other than the last sentence thereof)). If neither the Common
Shares nor the Series A First Preference Shares are publicly held or so listed
or traded, the "current market price" per share of the Series A First
Preference Shares shall be determined in the same manner as set forth in the
last sentence of Section 11(d)(i). For all purposes of this Agreement, the
"current market price" of one-hundredth of a Series A First Preference Share
shall be equal to the "current market price" of one Series A First Preference
Share divided by 100.
(iii) For the purpose of any computation hereunder, the value of
any securities or assets other than Common Shares or Series A First Preference
Shares shall be the fair value as determined in good faith by the Board of
Directors of the Company, or, if at the time of such determination there is an
Acquiring Person, by a majority of the Continuing Directors then in office,
or, if there are no Continuing Directors, by a nationally recognized
investment banking firm selected by the Board of Directors, which
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the Purchase Price;
provided that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a Common Share or
other share or one-millionth of a Series A First Preference Share, as the case
may be.
(f) If at any time, as a result of an adjustment made pursuant
to Section 11(a)(ii) or Section 13(a), the holder of any Right shall be
entitled to receive upon exercise of such Right any shares of capital stock
other than Series A First Preference Shares, thereafter the number of such
other shares so receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
the Series A First Preference Shares contained in Section 11(a), (b), (c),
(e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 with respect to the Series A First Preference Shares shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made hereunder shall evidence the right to purchase, at the
Purchase Price then in effect, the then applicable number of one-hundredths of
a Series A First Preference Share and other capital stock of the Company
issuable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to subscribe, at the adjusted Purchase Price,
that number of one-hundredths of a Series A First Preference Share (calculated
to the nearest one-millionth) obtained by (i) multiplying (x) the number of
one-hundredths of a share for which a Right was exercisable immediately prior
to this adjustment by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of
any adjustment in the number of one-hundredths of a Series A First Preference
Share issuable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the
number of one-hundredths of a Series A First Preference Share for which such
Right was exercisable immediately prior to such adjustment. Each Right held
of record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have been
issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one-hundredths of a Series A First Preference Share
issuable upon the exercise of the Rights, the Right Certificates theretofor
and thereafter issued may continue to express the Purchase Price per
one-hundredth of a share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price multiplied by 100 below the nominal value of a
Series A First Preference Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid such number of Series A First Preference Shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Series A First Preference Share or other capital stock of the
Company, if any, issuable upon such exercise over and above the number of
Series A First Preference Shares or other capital stock of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it, in its sole discretion, shall
determine to be advisable in order that any consolidation or subdivision of
the Series A First Preference Shares, issuance wholly for cash of any Series A
First Preference Shares at less than the current market price, issuance wholly
for cash of Series A First Preference Shares or securities which by their
terms are convertible into or exercisable for Series A First Preference
Shares, scrip dividends or issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to the holders of its Series
A First Preference Shares, shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it will not at any
time after the Distribution Date (i) consolidate, amalgamate or otherwise
combine under any applicable law with or (ii) sell or otherwise transfer
(and/or permit any of its Subsidiaries to sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries, taken as a whole, to any other Person or Persons if (x) at
the time of or immediately after such consolidation, amalgamation, combination
or sale there are any rights, warrants or other instruments or securities
outstanding or any agreements or arrangements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, amalgamation, combination or sale, the shareholders
of a Person who constitutes, or would constitute, the "Principal Party" for
the purposes of Section 13 shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after the
Distribution Date, it will not, except as permitted by Sections 23 and 26,
take (or permit any Subsidiary to take) any action if at the time such action
is taken it is reasonably foreseeable that such action will substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Notwithstanding anything in this Agreement to the
contrary, if at any time after the date hereof and prior to the Distribution
Date the Company shall (i) pay a dividend on the outstanding Common Shares
payable in Common Shares, (ii) subdivide the Common Shares into a larger
number of shares or (iii) consolidate the Common Shares into a smaller number
of shares, the number of Rights associated with each Common Share then
outstanding, or issued or delivered thereafter as contemplated by Section
3(c), shall be proportionately adjusted so that the number of Rights
thereafter associated with each Common Share following any such event shall
equal the result obtained by multiplying the number of Rights associated with
each Common Share immediately prior to such event by a fraction the numerator
of which shall be the total number of Common Shares outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of Common Shares outstanding immediately following the occurrence
of such event.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in Sections
11 and 13, the Company shall (a) promptly prepare a certificate setting
forth such adjustment and a brief statement of the facts accounting for
such adjustment, (b) promptly deliver to the Rights Agent, the registrar of
the Company and each transfer agent for the Series A First Preference
Shares and the Common Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or, if prior
to the Distribution Date, to each holder of a certificate representing
Common Shares) in the manner set forth in Section 25. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of
such adjustment unless and until it shall have actually received such
certificate.
Section 13. Consolidation, Amalgamation or Sale or Transfer of
Assets or Earning Power. (a) If, following the Share Acquisition Date,
directly or indirectly,
(x) the Company shall under any applicable law consolidate
with, amalgamate, or otherwise combine with, any other Person, and
the Company shall not be the continuing or surviving corporation of
such consolidation, amalgamation or combination,
(y) any Person shall under any applicable law amalgamate or
otherwise combine with the Company, and the Company shall be a
continuing or surviving corporation of such amalgamation or
combination and, in connection with such amalgamation or combination,
all or part of the outstanding Common Shares shall be changed into or
exchanged for other stock or securities of the Company or any other
Person, cash or any other property, or
(z) the Company and/or one or more of its Subsidiaries shall
sell or otherwise transfer, in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries,
taken as a whole, to any other Person or Persons,
then, and in each such case, proper provision shall promptly be made so that
(1) each holder of a Right shall thereafter be entitled to
receive, upon exercise thereof at the Purchase Price in effect immediately
prior to the first occurrence of any Triggering Event, such number of duly
authorized, validly issued and fully paid shares of freely tradeable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
rights of call or first refusal, liens, encumbrances or other claims, as shall
be equal to the result obtained by dividing
(A) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of any Triggering
Event by the number of one one-hundredths of a Series A First
Preference Share for which a Right was exercisable immediately prior
to such first occurrence (such product being thereafter referred to
as the "Purchase Price" for each Right and for all purposes of this
Agreement) by
(B) 50% of the current market price (determined pursuant to
Section 11(d)(i)) per share of the Common Shares of such Principal
Party on the date of consummation of such consolidation,
amalgamation, combination, sale or transfer;
(2) the Principal Party shall thereafter be liable for, and
shall assume, by virtue of such consolidation, amalgamation, combination, sale
or transfer, all the obligations and duties of the Company pursuant to this
Agreement;
(3) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and
(4) such Principal Party shall take such steps (including the
authorization and reservation of a sufficient number of shares of its Common
Shares to permit exercise of all outstanding Rights in accordance with this
Section 13(a)) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of its
Common Shares thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in Section
13(a)(x) or (y), the Person that is the issuer of any securities into
which Common Shares of the Company are converted in such
amalgamation, consolidation or combination, and if no securities are
so issued, the Person that survives or results from such
amalgamation, consolidation or combination; and
(ii) in the case of any transaction described in Section
13(a)(z), the Person that is the party receiving the greatest portion
of the assets or earning power transferred pursuant to such
transaction or transactions;
provided that in any such case, (A) if the Common Shares of such Person is
not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Shares of
which is and has been so registered, "Principal Party" shall refer to such
other Person; and (B) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
amalgamation, combination, sale or transfer unless the Principal Party shall
have a sufficient number of authorized shares of its Common Shares which are
not outstanding or otherwise reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section 13(a) and (b) and providing that, as soon as practicable after the
date of any consolidation, amalgamation, combination, sale or transfer
mentioned in Section 13(a), the Principal Party, at its own expense, will
(i) prepare and file a registration statement under the
Securities Act with respect to the securities issuable upon exercise
of the Rights, and will use its best efforts to cause such
registration statement (A) to become effective as soon as practicable
after such filing and (B) to remain effective (with a prospectus at
all times meeting the requirements of the Securities Act) until the
Expiration Date,
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act, and
(iii) take all such other steps as are required under
applicable laws in the United States and in other relevant
jurisdictions to enable the exercise in full of the Rights in
accordance with this Section 13.
The provisions of this Section 13 shall similarly apply to successive
amalgamations, consolidations, combinations, sales or other transfers. If any
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
Section 14. Prohibition on issue of Fractional Rights and
Fractional Shares. (a) The Company shall not be required to issue fractions
of Rights, except prior to the Distribution Date as provided in Section 11(p),
or to distribute Right Certificates which evidence fractional Rights. In lieu
of any such fractional Rights, the Company shall pay to the registered holders
of the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market price of a whole Right. For purposes of this Section 14(a),
the current market price of a whole Right shall be the closing price of a
Right for the Trading Day immediately prior to the date on which such
fractional Rights would otherwise have been issuable. The closing price of a
Right for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company, or, if at the time
of such selection there is an Acquiring Person, by a majority of the
Continuing Directors. If on any such date no such market maker is making a
market in the Rights, the current market price of the Rights on such date
shall be as determined in good faith by the Board of Directors of the Company,
or, if at the time of such determination there is an Acquiring Person, by a
majority of the Continuing Directors.
(b) The Company shall not be required to issue fractions of
Series A First Preference Shares upon exercise of the Rights or to distribute
certificates which evidence fractional Series A First Preference Shares. In
lieu of any such fractional Series A First Preference Shares, the Company
shall pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market price of a Series A First Preference Share, as
applicable. For purposes of this Section 14(b), the current market price of a
Series A First Preference Share shall be the closing price of a Series A First
Preference Share (as determined pursuant to Section 11(d)) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of any Triggering Event, the
Company shall not be required to issue fractions of Common Shares upon
exercise of the Rights or to distribute certificates which evidence fractional
Common Shares. In lieu of fractional Common Shares, the Company shall pay to
the registered holders of Right Certificates at the time such Rights are
exercised or exchanged as herein provided an amount in cash equal to the same
fraction of the current market price of a share of Common Shares. For
purposes of this Section 14(c), the current market price of a share of Common
Shares shall be the closing price of a share of Common Shares (as determined
pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the
date of such exercise or exchange.
(d) The holder of a Right by the acceptance or exercise of a
Right shall be deemed to have waived his right to receive any fractional
Rights or any fractional shares upon exercise of a Right except as permitted
by this Section 14.
Section 15. Rights of Action. All rights of action in respect
of the benefit of the Rights evidenced by this Agreement, except the rights of
action given to the Rights Agent under Section 18 hereof, are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of certificates representing Common
Shares); and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of any certificate representing Common Shares), without the
consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of any certificate representing Common
Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of the obligations of, any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the record books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights
Agent may deem and treat the Person in whose name a Right Certificate (or,
prior to the Distribution Date, a certificate representing Common Shares) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right
Certificate or the certificate representing Common Shares made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section
7(d), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or of a beneficial interest in a Right or other Person
as a result of its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority prohibiting or otherwise restraining performance of
such obligation; provided that the Company must use its best efforts to
have any such order, decree or ruling lifted or otherwise overturned as
soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder.
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares of
capital stock which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate,
as such, any of the rights of a shareholder of the Company or any right to
vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, unless and until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights
Agent, its reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the execution and/or administration of this
Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without negligence, bad
faith or willful misconduct on the part of the Rights Agent, for anything done
or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement or the exercise or performance of its duties
hereunder, including the costs and expenses of defending against any claim of
liability. The indemnity provided for herein shall survive the expiration of
the Rights and the termination of the Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with the administration of this Agreement or the exercise or
performance of its duties hereunder in reliance upon any Right Certificate or
certificate for Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, instruction, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. (a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust or stock transfer business of
the Rights Agent or any successor Rights Agent, shall be the successor to
the Rights Agent under this Agreement without the execution or filing of
any paper or any further act on the part of any of the parties hereto;
provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the
time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Right Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes only those duties and obligations imposed by this Agreement upon
the following terms and conditions, by all of which the Company and the
holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent
as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any "Acquiring
Person" and the determination of "current market price") be proved or
established by the Company prior to taking, suffering or omitting to take any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any Director or the
Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken, suffered or omitted in good faith by it
under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(d)) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13 or 23, or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after actual receipt
of the certificate described in Section 12 hereof with respect to such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Common Shares or Series A First Preference Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Common Shares or
Series A First Preference Shares will, when issued, be duly authorized,
validly issued and fully paid.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of its obligations under the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any Director or the Secretary or any Assistant Secretary of the Company,
and to apply to such officers for advice or instructions in connection with
its duties, and it shall not be liable for any action taken, suffered or
omitted to be taken by it in good faith in accordance with instructions of any
such officer or for any delay in acting while waiting for those instructions.
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Agreement and
the date on or after which such action shall be taken or such omission shall
be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included
in any such application on or after the date specified in such application
(which date shall not be less than five Business Days after the date any
officer of the Company actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall receive written instructions in response
to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not the Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall
not be answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company or to any
holders of Rights resulting from any such act, default, neglect or misconduct,
provided that reasonable care was exercised in the selection and continued
employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election, as the cases may be, has either not
been completed or indicates an affirmative response to clause 1 or 2 thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company, the registrar
of the Company and to each transfer agent of the Common Shares and Series A
First Preference Shares by registered or certified mail, and, subsequent to
the Distribution Date, to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, to the registrar of the Company and to each
transfer agent of the Common Shares and Series A First Preference Shares by
registered or certified mail, and, subsequent to the Distribution Date, to the
holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit
his Right Certificate for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. After appointment,
the successor Rights Agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent, with the registrar of
the Company and each transfer agent of the Common Shares and the Series A
First Preference Shares, and, subsequent to the Distribution Date, mail a
notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares of stock issuable upon exercise of the Rights made in
accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the
Company may, at its option, at any time prior to the earlier of (x) the close
of business on the tenth day following the Share Acquisition Date (or such
later date as a majority of the Continuing Directors may designate prior to
such time as the Rights are no longer redeemable) and (y) the Final Expiration
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.01 per Right as appropriately adjusted to reflect any
share subdivision or consolidation, dividend of shares or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"); provided that, if the Board of
Directors of the Company authorizes redemption of the Rights in either of the
circumstances set forth in clauses (x) or (y) below then there must be
Continuing Directors in office and such authorization shall require the
concurrence of a majority of the Continuing Directors: (x) such authorization
occurs on or after the Share Acquisition Date or (y) such authorization occurs
on or after the date of a change (resulting from a proxy or consent
solicitation) in a majority of the directors of the Company in office at the
commencement of such solicitation if any Person who is a participant in such
solicitation has stated (or if upon the commencement of such solicitation a
majority of the directors of the Company has determined in good faith) that
such Person (or any of its Affiliates or Associates) intends to take, or may
consider taking, any action which would result in such Person becoming an
Acquiring Person or which would cause the occurrence of a Triggering Event.
Notwithstanding anything contained in this Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder
has expired, as the same may be extended pursuant to the terms of this
Agreement.
(b) In deciding whether or not to exercise the Company's
right of redemption hereunder, the directors of the Company shall act in good
faith, in a manner they reasonably believe to be in the best interests of the
Company and with such care, including reasonable inquiry, skill and diligence,
as a person of ordinary prudence would use under similar circumstances, and
they may consider the long-term and short-term effects of any action upon
employees, customers and creditors of the Company and upon communities in
which offices or other establishments of the Company are located, and all
other pertinent factors.
(c) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right held. Immediately following such action of
the Board of Directors, evidence of such action shall be delivered to the
Rights Agent. Within 10 days after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the holders of the then outstanding Rights by mailing such
notice to the Rights Agent and to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the share register of the Company for the Common Shares.
Any notice which is mailed in the manner herein provided shall be deemed duly
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner
other than that specifically set forth in this Section 23 or other than in
connection with the redemption, acquisition or purchase of Common Shares prior
to the Distribution Date.
Section 24. Notice of Proposed Actions. (a) In case the
Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Series A First
Preference Shares or to make any other distribution to the holders of Series A
First Preference Shares (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of its Series A First Preference Shares rights or warrants to subscribe for
any additional Series A First Preference Shares or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Series A First Preference Shares (other than a
reclassification involving only the subdivision or consolidation of Series A
First Preference Shares) or (iv) to effect under any applicable law any
consolidation or amalgamation with any other Person, or to effect and/or to
permit one or more of its Subsidiaries to effect any sale or other transfer,
in one transaction or a series of related transactions, of assets or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries, taken as a whole, to any other Person or Persons, or (v)
to effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Right, to the
extent feasible and in accordance with Section 25, a notice of such proposed
action, which shall specify the record date for the purposes of any such
dividend, distribution or offering of rights or warrants, or the date on which
any such reclassification, consolidation, amalgamation, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Series A First Preference Shares, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the Series A First Preference Shares
entitled to participate in such dividend, distribution or offering, and in the
case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Series A First Preference Shares, whichever shall be the earlier.
The Company shall deliver a certificate to the Rights Agent to this effect as
well. The failure to give notice required by this Section or any defect
therein shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
(b) Notwithstanding anything in this Agreement to the
contrary, prior to the Distribution Date a public filing by the Company with
the United States Securities and Exchange Commission and, provided that any
class of the Company's securities is listed thereon, the London Stock Exchange
shall constitute sufficient notice to the holders of securities of the
Company, including the Rights, for purposes of this Agreement and no other
notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in any such case,
(1) the Company shall as soon as practicable thereafter give to the Rights
Agent and each holder of a Right, in accordance with Section 25, a notice of
the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or 13,
as the case may be, and (2) all references in Section 24(a) to Series A First
Preference Shares shall be deemed thereafter to refer to Common Shares or
other capital stock, as the case may be.
Section 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Right to or on the Company shall be sufficiently given or made if sent by
first-class mail (postage prepaid) to the registered office of the Company or
such other address as the Company shall specify in writing to the Rights
Agent. Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Right to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail (postage prepaid) to the address of the
Rights Agent indicated on the signature page hereof or such other address
as the Rights Agent shall specify in writing to the Company. Notices or
demands authorized by this Agreement to be given or made by the Company or
the Rights Agent to the holder of any Right Certificate (or, prior to the
Distribution Date, to the holder of any certificate representing Common
Shares) shall be sufficiently given or made if sent by first-class mail
(postage prepaid) to the address of such holder shown on the share register
of the Company.
Section 26. Supplements, Deletions and Amendments. Prior to
the Distribution Date, the Company and the Rights Agent shall, if the Company
so directs, supplement, remove or amend any provision of this Agreement
without the approval of any holders of Rights. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement, remove or amend this Agreement without the approval of
any holders of Rights in order (a) to cure any ambiguity, (b) to correct,
remove or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein or (c) to change, remove or
supplement the provisions hereof in any manner which the Company may deem
necessary or desirable and which, in the opinion of the Company, shall not
adversely affect the interests of the holders of Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person).
Notwithstanding the foregoing, after any Person has become an Acquiring
Person, any supplement, deletion or amendment shall be effective only if there
are Continuing Directors then in office, and such supplement, deletion or
amendment shall have been approved by a majority of such Continuing Directors.
Upon the delivery of a certificate from an appropriate officer of the Company
which states that the proposed supplement, deletion or amendment is in
compliance with the terms of this Section, the Rights Agent shall execute such
supplement, deletion or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Shares.
Section 27. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) under the Exchange
Act as in effect on the date of this Agreement. The Board of Directors of the
Company (or, after any Person has become an Acquiring Person, a majority of
the Continuing Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including the right and power to (i)
interpret the provisions of this Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not to redeem the Rights or to amend
the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board (or, after
any Person has become an Acquiring Person, by the Continuing Directors) in
good faith shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board of Directors of the Company or the Continuing Directors to
any liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the certificates representing the Common Shares) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the certificates representing the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated; provided that, notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company (or, after any Person has become an Acquiring Person,
a majority of the Continuing Directors) determines in its good faith judgment
that severing the invalid language from this Agreement would adversely affect
the purpose or effect of this Agreement, and if the right of redemption set
forth in Section 23 hereof shall at that time not be capable of exercise
pursuant to the terms thereof, such right of redemption shall be reinstated
and shall not expire until the close of business on the tenth day following
the date of such determination by the Board of Directors or a majority of the
Continuing Directors, as the case may be.
Section 31. Governing Law. This Agreement ,each Right and
each Right Certificate issued hereunder shall be governed by and construed
in accordance with the laws of Bermuda.
Section 32. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument.
Section 33. Descriptive Headings. The captions herein are
included for convenience of reference only, do not constitute a part of this
Agreement and shall be ignored in the construction and interpretation hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as a
deed by the parties hereto as of the day and year first above written.
ADT LIMITED
THE COMMON SEAL ) By: /s/ S.J. Ruzika
OF ADT LIMITED ) ------------------------
was affixed to this deed ) Name: S.J. Ruzika
in the presence of: ) Title: Director
By: /s/ M.A. Ashcroft
------------------------
Name: M.A. Ashcroft
Title: Director
CITIBANK, N.A.
By: /s/ Nancy Ward
------------------------
Name: Nancy Ward
Title:
111 Wall Street
New York, NY 10043
Attention: Nancy Ward
Exhibit A
APPENDIX A TO BYE-LAWS OF ADT LIMITED
EXTRACT FROM MINUTES OF A
MEETING OF THE BOARD OF DIRECTORS OF ADT LIMITED
HELD ON NOVEMBER 4, 1996
relating to creation of a series of
FIRST PREFERENCE SHARES
(as defined in the Bye-Laws of the Company)
IT IS HEREBY CERTIFIED that the following constitutes an extract from the
minutes of a meeting of the Board of Directors of ADT Limited, held on
November 4, 1996, and annexed as an appendix to the Bye-laws of ADT Limited.
"IT WAS RESOLVED THAT, subject to the powers of the directors of the Company
or any duly authorised committee of the board of directors of the Company to
revoke this resolution or in any way amend the rights and restrictions
attached to the Series A First Preference Shares by this resolution at any
time before the allotment of any such shares:
(1) 2,500,000 of the First Preference Shares be and are hereby designated
as Series A First Preference Shares of US$1 each and shall have
attached to them the rights and shall be subject to the restrictions
set out in Exhibit A and Exhibit A shall be attached to these minutes
for the purpose of recording the same in these minutes; and
(2) in accordance with paragraph 9(2)(iii) of the schedule to the
bye-laws of the Company, a copy of Exhibit A be annexed as an
appendix to the bye-laws of the Company.
The rights attaching to the Series A First Preference Shares shall be as
follows:-
Section 1. As regards income.
(A) A holder of a Series A First Preference Share shall be
entitled to receive, when, as and if declared by the Directors out of funds
legally available for the purpose, quarterly dividends payable on March 31,
June 30, September 30 and December 31 of each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issue of any Series A
First Preference Share, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) US$1.00 and (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate amount or value of
all cash dividends or other distributions and 100 times the aggregate
amount or value of all non-cash dividends or other distributions (other
than (i) a dividend payable in Common Shares or (ii) a subdivision of the
Common Shares (by reclassification or otherwise)), declared on each Common
Share since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issue of any Series A First Preference Share. If the Company shall at any
time after November 4, 1996 (the "Rights Date") pay any dividend on Common
Shares payable in Common Shares or effect a subdivision or consolidation of
the Common Shares (by reclassification or otherwise) into a greater or
lesser number of Common Shares, then in each such case the amount to which
a holder of a Series A First Preference Share was entitled immediately
prior to such event under (b) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the
number of Common Shares in issue immediately after such event and the
denominator of which is the number of Common Shares that were in issue
immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series A First Preference Shares as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Shares
(other than as described in (i) and (ii) of the first sentence of paragraph
(A) above); provided that if no dividend or distribution shall have been
declared on the Common Shares during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date (or, with
respect to the first Quarterly Dividend Payment Date, the period between the
first issue of any Series A First Preference Share and such first Quarterly
Dividend Payment Date), a dividend of US$1.00 per share on each Series A First
Preference Share shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on a
Series A First Preference Share from the Quarterly Dividend Payment Date next
preceding the date of issue of such Series A First Preference Share, unless
the date of issue of such share is on or before the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such share shall
begin to accrue and be cumulative from the date of issue of such share, or
unless the date of issue is a date after the record date for the determination
of holders of Series A First Preference Shares entitled to receive a quarterly
dividend and on or before such Quarterly Dividend Payment Date, in which case
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on a Series A First Preference Share in an amount less than the
total amount of such dividends at the time accrued and payable on such share
shall be allocated pro rata among all such shares at the time in issue. The
Directors may fix a record date for the determination of holders of Series A
First Preference Shares entitled to receive payment of a dividend or
distribution declared thereon, which record date shall not be more than 60
days prior to the date fixed for the payment thereof.
Section 2. As regards capital. Upon any liquidation, dissolution or winding
up of the Company, no distribution shall be made (1) to the holders of shares
ranking in order of priority after (either as regards income or capital) the
Series A First Preference Shares unless, prior thereto, the holders of Series
A First Preference Shares shall have received US$1.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment; provided that the
holders of shares of Series A First Preference Shares shall be entitled to
receive an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Shares, or (2) to the holders of
shares ranking in order of priority pari passu with the Series A First
Preference Shares (either as regards income or capital), except distributions
made rateably on the Series A First Preference Shares and all such other
shares ranking in order of priority pari passu with the Series A First
Preference Shares in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or winding up.
If the Company shall at any time after the Rights Date pay any dividend on
Common Shares payable in Common Shares or effect a subdivision or
consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a greater or lesser number of Common Shares, then in each such
case the aggregate amount to which holders of shares of Series A First
Preference Shares were entitled immediately prior to such event under the
proviso in (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
Section 3. As regards voting. Subject to and in accordance with the
provisions of the Companies Acts and the Bye-laws of the Company (in
particular, without limitation, paragraph (7) of the Schedule to the Bye-laws
of the Company) at any meeting of the Company each holder of a Series A First
Preference Share present in person shall be entitled to one vote on any
question to be decided on a show of hands and each such holder present in
person or by proxy shall be entitled on a poll to one vote for each Series A
Preference Share held by him.
Section 4. As to conversion. The Series A First Preference Shares shall not
be convertible into all or any other shares or securities of the Company.
Section 5. As to redemption. The Series A First Preference Shares shall not
be redeemable.
Section 6. Certain restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A First Preference Shares as provided in
Section 1 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on issued Series A First
Preference Shares shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares ranking in order of priority after the
Series A First Preference Shares (either as regards income or
capital);
(ii) declare or pay dividends on, or make any other
distributions on, any shares ranking in order of priority pari passu
with the Series A First Preference Shares (either as regards income
or capital), except dividends paid rateably on the Series A First
Preference Shares and all such other shares ranking pari passu with
them on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem, purchase or otherwise acquire for value any
shares ranking in order of priority after the Series A First
Preference Shares (either as regards income or capital) to the Series
A First Preference Shares; provided that the Company may at any time
redeem, purchase or otherwise acquire shares ranking in order of
priority after the Series A First Preference Shares in exchange for
shares of the Company ranking in order of priority after the Series A
First Preference Shares (either as regards income or capital); or
(iv) purchase or otherwise acquire for value any Series A
First Preference Shares, or any shares ranking pari passu with the
Series A First Preference Shares (either as regards income or
capital), except in accordance with a purchase offer made in
writing or by publication (as determined by the Directors) to all
holders of Series A First Preference Shares and all such other
shares ranking pari passu upon such terms as the Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective classes and
series, shall determine in good faith will result in fair and
equitable treatment among the respective classes or series.
(B) The Company shall not enter into any consolidation,
amalgamation, combination or other transaction under any applicable law in
which the Common Shares are exchanged for or changed into other shares or
securities, cash or any other property, unless in any such case the Series A
First Preference Shares shall at the same time be similarly exchanged for or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of shares,
securities, cash or any other property, as the case may be, into which or for
which each Common Share is changed or exchanged. If the Company shall at any
time after the Rights Date pay any dividend on Common Shares payable in Common
Shares or effect a subdivision or consolidation of the Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common
Shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A First Preference
Shares shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of Common Shares in issue immediately after
such event and the denominator of which is the number of Common Shares that
were in issue immediately prior to such event.
Section 7. Other rights
(A) Any Series A First Preference Share purchased or otherwise
acquired by the Company in any manner whatsoever shall be cancelled on
acquisition thereof.
(B) The Series A First Preference Shares shall rank in order of
priority (as regards income and capital) after all other classes and series of
the Company's preference shares from time to time except any class or series
that expressly provides that such class or series shall rank in order of
priority after the Series A First Preference Shares. The rights conferred
upon the holders of Series A First Preference Shares shall not be deemed to be
varied by the creation or issue of further shares ranking in order of priority
before, pari passu with or after the Series A First Preference Shares.
Terms defined in the Bye-Laws (including the Schedule) of the Company shall
have the same meanings in this resolution of the Directors attached as an
Appendix to the Bye-Laws."
IN WITNESS WHEREOF, I have executed and subscribed this
extract this _____________ day of _________________ 1996
- -----------------------
John D. Campbell
Secretary
Exhibit B
[Form of Right Certificate]
No. R- ____________Rights
NOT EXERCISABLE AFTER THE EARLIER OF NOVEMBER 14, 2005 AND THE DATE ON WHICH
THE RIGHTS EVIDENCED HEREBY ARE REDEEMED BY THE COMPANY AS SET FORTH IN THE
RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR
HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE
OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT),
WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT
HOLDER, MAY BE NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHT
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BE OR MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(d) OF THE RIGHTS AGREEMENT.](2) THE
RIGHTS SHALL NOT BE EXERCISABLE FOR SECURITIES IN ANY JURISDICTION IF THE
REQUISITE QUALIFICATION IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED,
SUCH EXERCISE THEREFOR SHALL NOT BE PERMITTED UNDER APPLICABLE LAW OR A
REGISTRATION STATEMENT IN RESPECT OF SUCH SECURITIES SHALL NOT HAVE BEEN
DECLARED EFFECTIVE.
- ------------------
2 If applicable, insert this portion of the legend and delete the
preceding sentence.
RIGHT CERTIFICATE
ADT LIMITED
This Right Certificate certifies that ______________________,
or registered assigns, is the registered holder of the number of Rights set
forth above, each of which entitles the holder (upon the terms and subject
to the conditions set forth in the Rights Agreement dated as of November 6,
1996 (the "Rights Agreement") between ADT Limited, a Bermuda company
limited by shares (the "Company"), and Citibank, N.A. (the "Rights
Agent")) to subscribe, at any time after the Distribution Date and prior to
the Expiration Date, for fully paid Series A First Preference Shares (the
"Series A First Preference Shares") of the Company at a price calculated at
the rate of $90 per one-hundredth of a share (the "Purchase Price"),
payable in lawful money of the United States of America, upon surrender of
this Right Certificate, with the form of election and related certificate
duly executed, and payment of the Purchase Price at an office of the Rights
Agent designated for such purpose.
Terms used herein and not otherwise defined herein have the
meanings assigned to them in the Rights Agreement.
The number of Rights evidenced by this Right Certificate (and
the number and kind of shares issuable upon exercise of each Right) and the
Purchase Price set forth above are as of November 15, 1996, and may have been
or in the future be adjusted as a result of the occurrence of certain events,
as more fully provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Right Certificate are beneficially owned by (a) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (b) a transferee
of an Acquiring Person (or any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (c) under certain
circumstances specified in the Rights Agreement, a transferee of an Acquiring
Person (or any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void, and no holder hereof shall have any right with respect
to such Rights from and after the occurrence of such Section 11(a)(ii) Event.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth
in the Rights Agreement.
Upon surrender at the principal office or offices of the Rights
Agent designated for such purpose and subject to the terms and conditions set
forth in the Rights Agreement, any Rights Certificate or Certificates may be
transferred or exchanged for another Rights Certificate or Certificates
evidencing a like number of Rights as the Rights Certificate or Certificates
surrendered.
Subject to the provisions of the Rights Agreement, the Board of
Directors of the Company may, at its option, at any time prior to the earlier
of (i) the close of business on the tenth day after the Share Acquisition Date
(or such later date as a majority of the Continuing Directors may designate
prior to such time as the Rights are no longer redeemable) and (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights
at a redemption price of US$.01 per Right.
No fractions of a Series A First Preference Shares will be
issued upon the exercise of any Right or Rights evidenced hereby, but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement. If
this Right Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised.
No holder of this Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose to be the holder of the shares
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent in
accordance with the Rights Agreement.
IN WITNESS WHEREOF, this instrument has been duly executed as a
deed by the parties hereto as of the day and year set out below.
Dated as of ________________, _____
ADT LIMITED
THE COMMON SEAL ) By: __________________________
OF ADT LIMITED ) Name:
was affixed to this deed ) Title: Director
in the presence of: )
By: __________________________
Name:
Title: Director
Countersigned:
CITIBANK, N.A.
By: _________________________
Name:
Title:
111 Wall Street
New York, NY 10043
Attention: Nancy Ward
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed if the registered holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________________________________________
hereby sells, assigns and transfers unto _____________________________________
______________________________________________________________________________
(Please print name and address of transferee)
______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _____________________, 19__
___________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate ___are
___are not being assigned by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it ___did ___did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: __________, 19 __ ________________________
Signature
__________
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
__________
FORM OF ELECTION
(To be executed if the registered holder desires to exercise
Rights represented by the Right Certificate.)
To: ADT Limited
The undersigned hereby irrevocably elects to exercise
____________ Rights represented by this Right Certificate to subscribe for
Series A First Preference Shares issuable upon the exercise of the Rights (or
such other securities of the Company or of any other person which may be
issuable upon the exercise of the Rights) and requests that such securities be
issued in the name of and certificates for such securities be delivered to:
Please insert social security
or other identifying number (if any)
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced
by this Right Certificate, the undersigned requests that a new Right
Certificate for the balance of such Rights be issued in the name of and
delivered to:
Please insert social security
or other identifying number (if any)
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: ________________, 19__
___________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate ___are
___are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it ___did ___did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: __________, 19 __ ___________________________
Signature
__________
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
__________
EXHIBIT 99.14
FIRST AMENDMENT
to
RIGHTS AGREEMENT
FIRST AMENDMENT dated as of March 3, 1997 ("this Amendment")
between ADT Limited, a Bermuda company limited by shares (the "Company")
and Citibank, N.A., New York branch, a national banking association
organized under the laws of the United States of America acting solely
through its branch located at 111 Wall Street, New York, NY 10043 (the
"Rights Agent").
WHEREAS, the above-mentioned parties have previously entered
into that certain Rights Agreement dated as of November 6, 1996 (the
"Agreement");
WHEREAS, the Board of Directors deems it desirable and in the
best interests of its shareholders that certain modifications to the terms and
conditions of the Agreement be effected to protect the Company's long-term
value for its shareholders.
WHEREAS, the provisions of this Amendment are in futherance of
the Agreement's original intent to enhance the Board of Directors' ability to
protect the shareholders of the Company against, amongst other things,
unsolicited attempts to acquire control of the Company which do not offer an
adequate price to all shareholders or otherwise are not in the best interests
of the Company and its shareholders.
WHEREAS, such parties wish to amend the Agreement in the manner
set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used herein, unless otherwise defined
herein, shall have the meanings given them in the Agreement, and each
reference in the Agreement to "this Agreement", "hereof", "herein",
"hereunder" or "hereby" and each other similar reference shall be deemed to
refer to the Agreement as amended hereby. All references to the Agreement in
any other agreement between or among any of the parties hereto relating to the
transactions contemplated by the Agreement shall be deemed to refer to the
Agreement as amended hereby.
2. The definition of "Continuing Director" in Section 1 is
hereby replaced in its entirety with the following:
"Continuing Director" means any member of the Board of
Directors of the Company, while such Person is a member of
the Board, who is not (i) an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or (ii) a
representative or nominee of an Acquiring Person or of any
such Affiliate or Associate or (iii) any Person elected to
the Board as a result of a proxy solicitation or initiative
referred to in Section 23(a)(y) and either (a) was a member
of the Board immediately prior to the time any Person
becomes an Acquiring Person or (b) subsequently becomes a
member of the Board, if such Person's nomination for
election or election to the Board is recommended or approved
by a majority of the Continuing Directors."
3. Section 23(a) is hereby replaced in its entirety with the
following:
"Section 23. Redemption. (a) The Board of Directors
of the Company may, at its option, at any time prior to the
earlier of (i) the close of business on the tenth day
following the Share Acquisition Date (or such later date as
a majority of the Continuing Directors may designate prior
to such time as the Rights are no longer redeemable) and
(ii) the Final Expiration Date, redeem all but not less than
all of the then outstanding Rights at a redemption price of
$.01 per Right as appropriately adjusted to reflect any
share subdivision or consolidation, dividend of shares or
similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the
"Redemption Price"); provided that, if the Board of
Directors of the Company authorizes redemption of the Rights
in either of the circumstances set forth in clauses (x) or
(y) below then there must be Continuing Directors in office
and such authorization shall require the concurrence of a
majority of the Continuing Directors: (x) such authorization
occurs on or after the Share Acquisition Date or (y) such
authorization occurs on or after the date of a change
(resulting from a proxy or consent solicitation or similar
shareholder initiative) in a majority of the directors of
the Company in office at the commencement of such
solicitation or initiative if any Person who is a
participant in such solicitation or initiative has stated
(or if upon the commencement of such solicitation or
initiative a majority of the directors of the Company has
determined in good faith) that such Person (or any of its
Affiliates or Associates) intends to take, or may consider
taking, any action which would result in such Person
becoming an Acquiring Person or which would cause the
occurrence of a Triggering Event. Notwithstanding anything
contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired, as the same may
be extended pursuant to the terms of this Agreement."
4. Section 26 is hereby replaced in its entirety with the
following:
"Section 26. Supplements, Deletions and Amendments.
Prior to the Distribution Date, the Company and the Rights
Agent shall, if the Company so directs, supplement, remove
or amend any provision of this Agreement without the
approval of any holders of Rights. From and after the
Distribution Date, the Company and the Rights Agent shall,
if the Company so directs, supplement, remove or amend this
Agreement without the approval of any holders of Rights in
order (a) to cure any ambiguity, (b) to correct, remove or
supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein
or (c) to change, remove or supplement the provisions hereof
in any manner which the Company may deem necessary or
desirable and which, in the opinion of the Company, shall
not adversely affect the interests of the holders or Rights
(other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person). Notwithstanding the foregoing, (x)
after any Person has become an Acquiring Person; or (y) on
or after the date of a change (resulting from a proxy or
consent solicitation or similar shareholder initiative) in a
majority of the directors of the Company in office at the
commencement of such solicitation or initiative if any
Person who is a participant in such solicitation or
initiative has stated (or upon the commencement of such
solicitation or initiative a majority of the directors of
the Company has determined in good faith) that such Person
(or any of its Affiliates or Associates) intends to take, or
may consider taking, any action which would result in such
Person becoming an Acquiring Person or which would cause the
occurrence of a Triggering Event, any supplement, deletion
or amendment shall be effective only if there are Continuing
Directors then in office, and such supplement, deletion or
amendment shall have been approved by a majority of such
Continuing Directors. Upon the delivery of a certificate
from an appropriate officer of the Company which states that
the proposed supplement, deletion or amendment is in
compliance with the terms of this Section, the Rights Agent
shall execute such supplement, deletion or amendment. Prior
to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the
holders of Common Shares."
5. This Amendment shall be shall be governed by and construed
in accordance with the laws of Bermuda.
6. This Amendment may be signed in any number of counterparts,
each of which shall be deemed an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
7. Except as expressly amended hereby, the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed as a
deed by the respective authorized officers of the parties hereto, in each case
as of the day and year first above written.
ADT LIMITED
By: /s/ S.J. Ruzika
THE COMMON SEAL ) -----------------------
OF ADT LIMITED ) Name: S.J. Ruzika
was affixed to this deed ) Title: Director
in the presence of: )
By: /s/ M.A. Ashcroft
-----------------------
Name: M.A. Ashcroft
Title: Director
CITIBANK, N.A.
By: /s/ Nancy Ward
-----------------------
Name: Nancy Ward
Title: Vice President
111 Wall Street
New York, NY 10043
Attention: Mark Woodward
