<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-50855-01
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 1, 1998)
$2,750,000,000
[LOGO]
TYCO INTERNATIONAL GROUP S.A.
FULLY AND UNCONDITIONALLY GUARANTEED BY TYCO INTERNATIONAL LTD.
$750,000,000 6 1/8% NOTES DUE 2001
$750,000,000 6 3/8% NOTES DUE 2005
$500,000,000 7% NOTES DUE 2028
$750,000,000 6 1/4% DEALER REMARKETABLE SECURITIES(SM) (DRS.(SM)) DUE 2013
The 6 1/8% Notes due 2001 (the "2001 Notes"), the 6 3/8% Notes due 2005 (the
"2005 Notes") and the 7% Notes due 2028 (the "2028 Notes") will bear interest
from June 9, 1998 at the rate of 6 1/8%, 6 3/8% and 7% per annum, respectively,
payable semiannually on June 15 and December 15, commencing December 15, 1998.
The 2001 Notes, the 2005 Notes and the 2028 Notes are hereinafter collectively
referred to as the "Notes."
The Dealer remarketable securities ("Drs.(SM)") due June 15, 2013 (the "Stated
Maturity Date") will bear interest at the rate of 6 1/4% per annum from June 9,
1998 until June 15, 2003 (the "Remarketing Date"). Interest on the Drs. is
payable semiannually on June 15 and December 15, commencing December 15, 1998.
The Notes and the Drs. will be unsecured and unsubordinated obligations of Tyco
International Group S.A. (the "Company") and will be fully and unconditionally
guaranteed on an unsubordinated basis (the "Guarantees" and, together with the
Notes and the Drs., the "Securities") by Tyco International Ltd., a Bermuda
company and the sole shareholder of the Company ("Tyco"). The Notes and the Drs.
(CONTINUED ON NEXT PAGE)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Notes will be offered by the Underwriters on a fixed price basis as set
forth in the table below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2001 Note 99.912% .350% 99.562%
- ---------------------------------------------------------------------------------------------------------------------
Per 2005 Note 99.591% .625% 98.966%
- ---------------------------------------------------------------------------------------------------------------------
Per 2028 Note 99.279% .875% 98.404%
- ---------------------------------------------------------------------------------------------------------------------
Total $1,992,667,500 $11,687,500 $1,980,980,000
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from June 9, 1998.
(2) The Company and Tyco have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be
approximately $125,000.
The Drs. will be offered by the Underwriters at varying prices based on
prevailing market prices at the time of resale. The net proceeds to the Company
for the Drs. will be 101.808% of the principal amount of the Drs., or
$763,560,000, plus accrued interest, if any, from June 9, 1998, before deducting
expenses payable by the Company estimated to be approximately $125,000. The net
proceeds to the Company of the offering of the Drs. will include a premium paid
by the Remarketing Dealer for the right to require the mandatory tender of all
outstanding Drs. See "Underwriting."
The Notes and the Drs. are offered subject to prior sale, when, as and if
delivered to and accepted by the Underwriters, and subject to the approval of
certain legal matters by counsel for the Underwriters. It is expected that
delivery of the Notes and the Drs. will be made through the facilities of The
Depository Trust Company on or about June 9, 1998, against payment therefor in
same-day funds.
<TABLE>
<S> <C>
JOINT BOOKRUNNERS
J.P. MORGAN & CO. MORGAN STANLEY DEAN WITTER
-----------------
LEHMAN BROTHERS MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
-------------------
ABN AMRO INCORPORATED BANCAMERICA ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC. BNY CAPITAL MARKETS, INC.
BT ALEXu BROWN CITICORP SECURITIES, INC.
COMMERZBANK CAPITAL MARKETS CORPORATION CREDIT LYONNAIS SECURITIES (USA) INC.
FIRST CHICAGO CAPITAL MARKETS, INC. FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC MONTGOMERY SECURITIES LLC PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS UBS SECURITIES
</TABLE>
June 4, 1998
- ------------
"Dealer remarketable securities(SM)" and "Drs.(SM)" are service marks of J.P.
Morgan Securities Inc.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
will rank pari passu with all unsecured and unsubordinated indebtedness of the
Company, and the Guarantees will rank pari passu with all unsecured and
unsubordinated indebtedness of Tyco. The Notes and the Drs. will be effectively
subordinated to all existing and future indebtedness and other liabilities of
the Company's subsidiaries.
Except as provided in "Description of the Debt Securities and the
Guarantees--Redemption Upon Changes in Withholding Taxes" in the accompanying
Prospectus, the 2001 Notes and the 2005 Notes are not redeemable prior to
maturity.
The 2028 Notes may be redeemed at any time at the option of the Company, in
whole or in part, at a redemption price equal to the greater of (i) 100% of the
principal amount of the 2028 Notes and (ii) as determined by the Quotation Agent
(as defined herein), the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Redemption Treasury Rate (as defined
herein) plus 15 basis points plus, in each case, accrued interest thereon to the
date of redemption. See "Description of the Notes--Optional Redemption" herein.
The 2028 Notes are also subject to redemption to the extent described in
"Description of the Debt Securities and the Guarantees-- Redemption Upon Changes
in Withholding Taxes" in the accompanying Prospectus.
The Drs. are subject to mandatory tender on the Remarketing Date. If J.P. Morgan
Securities Inc., as Remarketing Dealer (the "Remarketing Dealer"), elects to
remarket the Drs. as described herein, the Drs. will be subject to mandatory
tender to the Remarketing Dealer at 100% of the principal amount thereof for
remarketing on the Remarketing Date. See "Description of the Drs.--Mandatory
Tender of Drs.; Remarketing." If the Remarketing Dealer elects not to remarket
the Drs., or for any reason does not purchase all of the Drs. on the Remarketing
Date, all holders will be required to tender, and the Company will be required
to purchase, on the Remarketing Date, any Drs. that have not been purchased by
the Remarketing Dealer at 100% of the principal amount thereof plus accrued
interest, if any. See "Description of the Drs.--Repurchase."
The Drs. will be redeemable on the Remarketing Date on the terms described in
"Description of the Drs.--Redemption" and as provided in "Description of the
Debt Securities and the Guarantees-- Redemption Upon Changes in Withholding
Taxes" in the accompanying Prospectus.
The Notes and the Drs. will be respectively represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as Depositary. Beneficial interests in the Notes and the Drs. will be shown on,
and transfers thereof will be effected only through, records maintained by the
Depositary and its participants. Except as described herein, the Notes and the
Drs. will not be issued in definitive form. Neither the Notes nor the Drs. will
be listed on any securities exchange.
S-2
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE THE PRICES OF THE NOTES OR THAT MAINTAIN OR OTHERWISE AFFECT THE
PRICES OF THE NOTES AND THE DRS. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN
CONNECTION WITH THE OFFERINGS, AND MAY BID FOR, AND PURCHASE, THE NOTES OR THE
DRS. IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus in connection with the offer contained in this Prospectus Supplement
and the accompanying Prospectus, and if given or made, such other information or
representations must not be relied upon as having been authorized by the
Company, Tyco or any of the Underwriters. This Prospectus Supplement and the
accompanying Prospectus do not constitute an offer to sell or the solicitation
of an offer to buy by the Company, Tyco or any Underwriter any securities in any
jurisdiction to any person to whom it is unlawful for the Company, Tyco or such
Underwriter to make such an offer or solicitation in such jurisdiction. Neither
the delivery of this Prospectus Supplement and the accompanying Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has been no change in the affairs of the Company or Tyco since the
date hereof or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.
Certain statements contained or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risks and uncertainties. In particular, any
statements contained herein and therein regarding the consummation and benefits
of recent or 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 the Company and/or Tyco, 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 other things, overall economic and business conditions, the demand for the
goods and services of the Company and Tyco, competitive factors in the
industries in which the Company and Tyco compete, changes in government
regulations and the timing, impact and other uncertainties of future
acquisitions.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Incorporation of Certain Information by Reference.......................................................... S-4
Tyco International Ltd..................................................................................... S-5
The Company................................................................................................ S-5
Current Developments....................................................................................... S-6
Use of Proceeds............................................................................................ S-7
Ratio of Earnings to Fixed Charges of Tyco................................................................. S-7
Capitalization of Tyco..................................................................................... S-8
Selected Consolidated Financial Data of Tyco............................................................... S-9
Business of Tyco........................................................................................... S-12
Description of the Notes................................................................................... S-22
Description of the Drs..................................................................................... S-24
Certain United States Federal Income and Luxembourg Tax Consequences....................................... S-29
Underwriting............................................................................................... S-32
Legal Matters.............................................................................................. S-34
PROSPECTUS
Available Information...................................................................................... 2
Incorporation of Certain Information by Reference.......................................................... 2
Tyco International Ltd. ................................................................................... 3
The Company................................................................................................ 3
Enforcement of Civil Liabilities........................................................................... 4
Use of Proceeds............................................................................................ 4
Ratio of Earnings to Fixed Charges of Tyco................................................................. 4
Description of the Debt Securities and the Guarantees...................................................... 6
Plan of Distribution....................................................................................... 19
Legal Matters.............................................................................................. 20
Experts.................................................................................................... 20
</TABLE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
In addition to the documents identified in "Incorporation of Certain
Information by Reference" in the accompanying Prospectus, the following
documents, which have been filed by Tyco with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are hereby incorporated by reference in this
Prospectus Supplement:
1. Tyco's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998.
2. Tyco's Current Report on Form 8-K/A filed on May 13, 1998.
S-4
<PAGE>
TYCO INTERNATIONAL LTD.
Tyco International Ltd. ("Tyco") is a diversified manufacturing and service
company that, through its subsidiaries, operates in four segments: (i) the
design, manufacture and distribution of disposable medical supplies and other
specialty products, and the conduct of vehicle auctions and related services;
(ii) the design, manufacture, installation and service of fire detection and
suppression systems, and the installation, monitoring and maintenance of
electronic security systems; (iii) the design, manufacture and distribution of
flow control products; and (iv) the design, manufacture and distribution of
electrical and electronic components, and the design, manufacture, installation
and service of undersea cable communication systems (as described in greater
detail under "Business of Tyco").
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
On July 2, 1997, a wholly-owned subsidiary of what was formerly called ADT
Limited ("ADT") merged with Tyco International Ltd., a Massachusetts corporation
("Former Tyco"). Upon consummation of the merger, ADT (the continuing public
company) changed its name to Tyco International Ltd.
Tyco's registered and principal executive offices are located at The Gibbons
Building, 10 Queen Street, Suite 301, Hamilton HM 11, Bermuda, and its telephone
number is (441) 292-8674. The executive offices of Tyco's principal United
States subsidiary, Tyco International (US) Inc. ("Tyco US"), are located at One
Tyco Park, Exeter, New Hampshire 03833, and its telephone number is (603)
778-9700.
THE COMPANY
Tyco International Group S.A., a Luxembourg company (the "Company"), is a
direct wholly-owned subsidiary of Tyco. The registered and principal offices of
the Company are located at 6, Avenue Emile Reuter, 2nd Floor, L-2420 Luxembourg,
and its telephone number is (352) 464-340-1. Through its subsidiaries, the
Company owns substantially all of the assets, and engages in substantially all
of the businesses, owned or engaged in by Tyco.
S-5
<PAGE>
CURRENT DEVELOPMENTS
On May 29, 1998, a subsidiary of Tyco acquired the Wells Fargo Alarm
business of Borg-Warner Security Corporation ("Wells Fargo") for $425 million in
cash. Wells Fargo, with annual revenues of approximately $250 million, is a full
service provider of electronic security services, including intrusion, fire
detection and monitoring, as well as closed circuit television and access
control.
On May 25, 1998, Tyco entered into a definitive merger agreement for the
acquisition of United States Surgical Corporation ("USS") in a stock for stock
transaction valued at approximately $3.3 billion. USS, with annual revenues of
approximately $1.4 billion, develops, manufactures and markets a line of
surgical wound closure products and advanced surgical products to hospitals
throughout the world. The acquisition, which will be accounted for as a pooling
of interests, will be structured with USS stockholders receiving 0.7606 of a
Tyco common share for each share of USS common stock outstanding. According to
publicly filed documents, as of March 31, 1998, USS had 76,658,350 shares of
common stock outstanding. The consummation of the transaction is contingent upon
customary regulatory review, approval by the USS stockholders and certain other
conditions. USS is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information (the "USS Reports") with the Commission. USS is a defendant in
several legal actions for alleged patent infringement which are described in the
USS Reports. The Company believes that even if, following consummation of Tyco's
acquisition of USS, all of such actions were determined adversely to USS, such
determinations would not have a material adverse effect on Tyco or the Company,
although there can be no assurance in this regard.
Also on May 25, 1998, a subsidiary of Tyco purchased 6.7 million shares of
capital stock of CIPE S.A. ("CIPE"), representing approximately 63% of the
outstanding shares of CIPE, for approximately $265 million. This subsidiary
intends to conduct a simplified tender offer for the remaining outstanding
shares of CIPE. CIPE, with annual revenues of approximately $230 million, is a
full provider of electronic security services and equipment throughout Europe,
with operations in Belgium, the Netherlands, Spain, Germany and Switzerland.
On April 13, 1998, a subsidiary of Tyco acquired Confab, Inc. ("Confab") for
approximately $142 million in cash. Confab, with sales in excess of $200
million, is a major manufacturer of adult incontinence and other hygiene
products sold to retailers and, to a lesser extent, institutions in the United
States.
In March 1998, Tyco sold 25.3 million of its common shares in a public
offering at $50.75 per share. The net proceeds from the sale were used to repay
indebtedness incurred for previous acquisitions.
Tyco and its subsidiaries review acquisition opportunities in the ordinary
course of their business, some of which may be material and some of which are
currently under investigation, discussion or negotiation. There can be no
assurance that any of such acquisitions will be consummated.
S-6
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Securities offered hereby are
estimated to be $2,744.3 million. Such proceeds are expected to be used to repay
borrowings under the bank credit agreement and certain uncommitted lines of
credit of Tyco US. As of June 2, 1998, there was $2,100.0 million outstanding
under the bank credit agreement, bearing interest at a rate per annum of 5.97%
and having current maturities of less than 30 days, although such borrowings may
be renewed upon maturity for periods through April 1999. Also as of this date,
there was $667.0 million outstanding under such uncommitted lines of credit,
bearing interest at a weighted average rate per annum of 5.87% and having due
dates that generally range from overnight to 90 days. The borrowings under the
bank credit agreement and uncommitted lines of credit were primarily incurred in
connection with certain business acquisitions in fiscal 1998, including, among
others, the Sherwood-Davis & Geck division of American Home Products
Corporation, Wells Fargo, Confab and CIPE. Certain affiliates of the
Underwriters are lenders under the bank credit agreement and uncommitted lines
of credit and will receive a significant portion of the net proceeds. See
"Capitalization" and "Underwriting."
RATIO OF EARNINGS TO FIXED CHARGES OF TYCO
The following table sets forth the ratio of earnings to fixed charges for
Tyco for the six months ended March 31, 1998, the nine month transitional fiscal
year ended September 30, 1997, and the years ended December 31, 1996, 1995, 1994
and 1993.
<TABLE>
<CAPTION>
FISCAL YEAR YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED
ENDED SEPTEMBER 30, ------------------------
MARCH 31, 1998 1997(3) 1996 1995
----------------- ------------------- ----- -----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)(2)....................... 6.88 (4) (4) 3.00
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Ratio of earnings to fixed charges(1)(2)....................... 3.33 2.76
</TABLE>
- ------------------------
(1)(2)(3)(4) See corresponding footnotes on page 4 of the accompanying
Prospectus.
S-7
<PAGE>
CAPITALIZATION OF TYCO
The following table sets forth the consolidated capitalization of Tyco on an
actual basis as of March 31, 1998, on a pro forma basis to give effect to
increases in amounts outstanding under the bank credit agreement and uncommitted
lines of credit of Tyco US subsequent to March 31, 1998 in connection with the
acquisitions of Wells Fargo, Confab and CIPE and the repayment of the sterling
denominated bank facility, and as adjusted to give effect to the issuance of the
Notes and the Drs. and the application of the net proceeds thereof. See "Use of
Proceeds." This table should be read in conjunction with the audited
Consolidated Financial Statements of Tyco and the related notes, incorporated
herein by reference. See also "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------------- ----------- -----------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Loans payable and current portion of long-term debt
(1):................................................... $ 255.0 $ 255.0 $ 255.0
------------- ----------- -----------
------------- ----------- -----------
Long-term debt (1):
Bank and acceptance facilities......................... $ 1.6 $ 1.6 $ 1.6
Bank credit agreement (2).............................. 1,500.0 2,100.0 --
Private placement notes(2)............................. 625.0 625.0 625.0
Uncommitted lines of credit (2)........................ 235.0 617.1 --
8.125% public notes due 1999........................... 10.5 10.5 10.5
8.25% senior notes due 2000............................ 9.5 9.5 9.5
6.5% public notes due 2001............................. 298.9 298.9 298.9
Sterling denominated bank facility due 2002............ 142.1 -- --
9.25% senior subordinated notes due 2003............... 14.1 14.1 14.1
6.375% public notes due 2004........................... 104.5 104.5 104.5
Zero Coupon Liquid Yield Option Notes due 2010......... 190.0 190.0 190.0
9.5% public debentures due 2022........................ 49.0 49.0 49.0
8.0% public debentures due 2023........................ 50.0 50.0 50.0
6.125% Notes due 2001.................................. -- -- 746.7
6.375% Notes due 2005.................................. -- -- 742.2
7.0% Notes due 2028.................................... -- -- 492.0
6.25% Dealer remarketable securities due 2013.......... -- -- 763.6
Other.................................................. 169.2 169.2 141.8
------------- ----------- -----------
Total debt......................................... 3,399.4 4,239.4 4,239.4
Less current portion............................... 255.0 255.0 255.0
------------- ----------- -----------
Total long-term debt............................... 3,144.4 3,984.4 3,984.4
------------- ----------- -----------
Shareholders' equity:
Common shares, $0.20 par value, 1,503,750,000 shares
authorized; 580,613,217 shares outstanding, net of
4,638,401 shares owned by subsidiaries................. 116.1 116.1 116.1
Capital in excess:
Share premium.......................................... 3,475.0 3,475.0 3,475.0
Contributed surplus, net of deferred compensation of
$2.3................................................. 2,414.0 2,414.0 2,414.0
Currency translation adjustment.......................... (226.5) (226.5) (226.5)
Accumulated deficit...................................... (375.8) (375.8) (375.8)
------------- ----------- -----------
Total shareholders' equity......................... 5,402.8 5,402.8 5,402.8
------------- ----------- -----------
Total capitalization..................................... $ 8,547.2 $ 9,387.2 $ 9,387.2
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
- ------------------------
(1) All of such indebtedness (other than the Notes and the Drs.) are obligations
of subsidiaries of the Company.
(2) The Company intends to refinance this indebtedness to become obligations of
the Company and not of its subsidiaries within 90 days after the sale of the
Securities.
S-8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF TYCO
The following table sets forth selected consolidated financial information
of Tyco for the six month periods ended March 31, 1998 and March 31, 1997, the
nine month transitional fiscal year ended September 30, 1997 and the two years
in the period ended December 31, 1996. The selected consolidated financial data
reflects the combined results of operations and financial position of Tyco,
Former Tyco and Keystone International, Inc. ("Keystone"), which was acquired in
1997, restated for all periods presented pursuant to the pooling of interests
method of accounting. The selected consolidated financial data prior to January
1, 1997, does not reflect the results of operations and financial position of
INBRAND Corporation ("INBRAND"), which was acquired in 1997 and accounted for
under the pooling of interests method of accounting, due to immateriality. The
information presented for the six months ended March 31, 1998 and 1997 are
unaudited and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments necessary for a fair presentation of such data.
The results for the six months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the fiscal year ending September
30, 1998. The selected financial information should be read in conjunction with
Tyco's Consolidated Financial Statements and related notes and the information
contained in "Management's Discussion and Analysis of Financial Condition and
Operating Results," incorporated herein by reference.
S-9
<PAGE>
<TABLE>
<CAPTION>
NINE
SIX MONTHS MONTHS
ENDED ENDED YEAR ENDED DECEMBER
MARCH 31, SEPTEMBER 31,
-------------------- 30, --------------------
1998 1997 1997(1) 1996(2) 1995(2)
--------- --------- ----------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales............................................................. $ 5,539.5 $ 4,564.9 $ 7,588.2 $ 8,103.7 $ 6,915.6
Cost of sales......................................................... 3,664.3 3,096.4 5,102.6 5,475.2 4,665.3
Selling, general and administrative expenses.......................... 1,027.6 927.2 1,534.9 1,656.5 1,495.4
Merger, restructuring and other non-recurring charges................. -- 246.9 917.8 246.1 97.1
Charge for the impairment of long-lived assets........................ -- -- 148.4 744.7 8.2
Write off of purchased in-process research and
development......................................................... -- -- 361.0 -- --
--------- --------- ----------- --------- ---------
Operating income (loss)(3)(4)(5)...................................... 847.6 294.4 (476.5) (18.8) 649.6
Interest income....................................................... 13.7 15.0 24.2 31.5 19.0
Interest expense...................................................... (95.4) (94.8) (137.5) (193.3) (187.5)
Other income less expenses............................................ -- 118.4 -- 119.4 (5.0)
--------- --------- ----------- --------- ---------
Income (loss) before income taxes and
extraordinary items................................................. 765.9 333.0 (589.8) (61.2) 476.1
Income taxes.......................................................... (248.9) (117.6) (187.0) (235.5) (208.6)
--------- --------- ----------- --------- ---------
Income (loss) before extraordinary items.............................. 517.0 215.4 (776.8) (296.7) 267.5
Extraordinary items, net of taxes..................................... (1.2) (2.6) (58.3) (8.4) (12.4)
--------- --------- ----------- --------- ---------
Net income (loss)..................................................... 515.8 212.8 (835.1) (305.1) 255.1
Dividends on preference shares........................................ -- (0.1) -- (0.3) (0.3)
--------- --------- ----------- --------- ---------
Net income (loss) available to common shareholders.................... $ 515.8 $ 212.7 $ (835.1) $ (305.4) $ 254.8
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
BASIC EARNINGS PER SHARE(6):
Income (loss) before extraordinary items.............................. $ .94 $ .44 $ (1.50) $ (.62) $ .58
Extraordinary items, net of taxes..................................... -- (.01) (.11) (.02) (.03)
Net Income (Loss)..................................................... .93 .43 (1.61) (.64) .55
DILUTED EARNINGS PER SHARE(6):
Income (loss) before extraordinary items.............................. $ .91 $ .43 $ (1.50) $ (.62) $ .57
Extraordinary items, net of taxes..................................... -- (.01) (.11) (.02) (.03)
Net Income (Loss)..................................................... .91 .42 (1.61) (.64) .54
CASH DIVIDENDS PER COMMON SHARE(6)(7)................................. $ 0.05 See (7) below.
CONSOLIDATED BALANCE SHEET DATA:
Working Capital....................................................... $ 659.6 $ 117.0 $ 292.7 $ 777.1
Total assets.......................................................... 13,338.5 10,447.0 8,471.3 7,357.8
Long-term debt........................................................ 3,144.4 2,480.6 1,878.4 1,760.7
Convertible redeemable preference shares.............................. -- -- -- 4.9
Shareholders' equity.................................................. 5,402.8 3,429.4 3,288.6 3,342.7
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. Accordingly, the nine-month transition period ended September
30, 1997 ("Fiscal 1997") is presented.
(2) On July 2, 1997, Tyco (formerly ADT) merged with Former Tyco. On August 27,
1997 and August 29, 1997, Tyco merged with INBRAND and Keystone,
respectively. These three combinations are collectively referred to as the
"Mergers" and are more fully described in Notes 1 and 2 to the Consolidated
Financial Statements contained in Tyco's Transition Report on Form 10-K for
the nine-month period ended September 30, 1997 (the "Form 10-K"),
incorporated herein by reference. Prior to the Mergers, ADT and Keystone had
a December 31 fiscal year end and Former Tyco had a June 30 fiscal year end.
The historical results have been combined using a December 31 fiscal year
end for ADT, Keystone and Former Tyco for the year ended December 31, 1996.
For 1995, the results of operations and financial position reflect the
combination of ADT and Keystone with a December 31 fiscal year end and
Former Tyco with a June 30 fiscal year end. Net sales and net income for
Former Tyco for the period July 1, 1995 through December 31, 1995 (which
results are not included in the historical combined results) were $2.46
billion and $136.4 million, respectively.
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(3) Operating loss in Fiscal 1997 results includes charges related to merger,
restructuring and other non-recurring costs of $917.8 million and impairment
of long-lived assets of $148.4 million primarily related to the Mergers and
integration of ADT, Former Tyco, Keystone, and INBRAND. See Notes 11 and 15
to the Consolidated Financial Statements contained in the Form 10-K. Fiscal
1997 also includes a charge of $361.0 million for the write-off of purchased
in-process research and development related to the acquisition of AT&T's
submarine systems business.
(4) Operating loss in 1996 includes non-recurring charges of $744.7 million
related to the adoption of Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets to be Disposed Of,"
$237.3 million related principally to the restructuring of ADT's electronic
security services business in the United States and United Kingdom and $8.8
million of fees and expenses related to ADT's acquisition of Automated
Security (Holdings) PLC, a United Kingdom quoted Company. See Notes 11 and
15 to the Consolidated Financial Statements contained in the Form 10-K.
(5) Operating income in 1995 includes a loss of $65.8 million on the disposal of
the European auto auction business and a gain of $31.4 million from the
disposal of the European electronic article surveillance business. See Note
3 to the Consolidated Financial Statements contained in the Form 10-K.
Operating income also includes non-recurring charges of $97.1 million for
restructuring charges at ADT and at Keystone and for the fees and expenses
related to the merger of Kendall International, Inc. and Former Tyco in
1994, as well as a charge of $8.2 million relating to the divestiture of
certain assets by Keystone. See Notes 11 and 15 to Consolidated Financial
Statements contained in the Form 10-K.
(6) Per share amounts for all periods presented have been restated to give
effect to the Mergers, including a 0.48133 reverse stock split effected on
July 2, 1997, and a two-for-one stock split distributed on October 22, 1997,
effected in the form of a stock dividend.
(7) Prior to the merger with Former Tyco, ADT had not declared any dividends on
its common shares since April 1991. Former Tyco declared quarterly dividends
of $0.025 per share in the first two quarters of Fiscal 1997 and aggregate
dividends of $0.10 per share in 1996 and 1995. Keystone declared quarterly
dividends of $0.19 per share in each of the three quarters in Fiscal 1997
and aggregate dividends of $0.76 per share in 1996 and 1995. Tyco declared a
dividend of $0.025 per share in the third quarter of Fiscal 1997 and each of
the first two quarters in fiscal 1998. The payment of dividends by Tyco in
the future will be determined by Tyco's Board of Directors and will depend
on business conditions, Tyco's financial condition and earnings and other
factors.
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BUSINESS OF TYCO
Tyco International Ltd. ("Tyco") is a diversified manufacturing and service
company that, through its subsidiaries, operates in four segments: (i) the
design, manufacture and distribution of disposable medical supplies and other
specialty products, and the conduct of vehicle auctions and related services;
(ii) the design, manufacture, installation and service of fire detection and
suppression systems, and the installation, monitoring and maintenance of
electronic security systems; (iii) the design, manufacture and distribution of
flow control products; and (iv) the design, manufacture and distribution of
electrical and electronic components, and the design, manufacture, installation
and service of undersea cable communication systems.
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
Tyco reviews acquisition opportunities in the ordinary course of its
business, some of which may be material and some of which are currently under
investigation, discussion or negotiation. There can be no assurance that any of
such acquisitions will be consummated.
DISPOSABLE AND SPECIALTY PRODUCTS
The principal divisions in the Disposable and Specialty Products group are
Kendall International ("Kendall"), ADT Automotive and the Tyco Plastics Group.
Kendall manufactures and distributes medical supplies, disposable medical
products, personal absorbent products, adhesive products, tapes and other
products. ADT Automotive is the second largest provider of vehicle auction
services in the United States. The Tyco Plastics Group manufactures polyethylene
films and packaging, industrial and consumer plastic products, molded plastic
garment hangers, and laminated and coated products.
KENDALL
Kendall conducts its operations through five business units: Kendall
Healthcare, Kendall International, Sherwood-Davis & Geck, Kendall-Polyken and
Ludlow Technical Products. In each of its business units, Kendall competes with
numerous companies, including a number of larger, well-established companies.
Kendall relies on its reputation for quality and dependable service, together
with its low-cost manufacturing and innovative products, to compete in its
markets.
The Kendall Healthcare business unit manufactures and markets a broad range
of wound care, vascular therapy, urological care, incontinence care, anesthetic
care and other products to hospitals in the United States and Canada and to
alternate site health care customers. Kendall Healthcare is the industry leader
in gauze production with its Kerlix-Registered Trademark- and
Curity-Registered Trademark- brands. Kendall Healthcare's other core product
category consists of its vascular therapy products, principally anti-embolism
stockings, marketed under the T.E.D.-Registered Trademark- brand name,
sequential pneumatic compression devices sold under the SCD-TM- brand name and a
venous plexus foot pump. Kendall Healthcare pioneered the pneumatic compression
form of treatment and continues to be the dominant participant in the pneumatic
compression and elastic stocking segments of the vascular therapy market.
Kendall Healthcare has become an industry leader in the adult incontinence
market serving both the acute care and long-term care markets. It offers a
complete line of disposable adult briefs, underpads and other related products.
INBRAND also manufactures a broad range of disposable personal absorbent
products, including adult incontinence products, feminine hygiene products and
baby diapers for the clinical and retail markets in North America and Europe.
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Kendall Healthcare distributes its products through its own sales force and
through a network of more than 250 independent distributors. Kendall
Healthcare's sales force is divided into three groups: one promoting its
vascular therapy products, one promoting its wound care and other health care
products and one selling all of its products into the alternate site markets.
Most of the distributors in the United States also sell similar products made by
Kendall's competitors, a practice common in the industry.
Kendall International is responsible for the manufacturing, marketing,
distribution and export of Kendall products worldwide. Kendall International
markets directly to hospitals and medical professionals, as well as through
independent distributors. Its operations are organized primarily into three
geographic regions: Europe, Latin America and the Far East. The range of
products marketed is similar to that of Kendall Healthcare, although the mix of
product lines varies from country to country.
The Sherwood-Davis & Geck division manufactures and distributes medical and
surgical devices, such as catheters, needles and syringes, sutures, thermometers
and other specialized disposable medical products. This division distributes its
products through its own sales force and independent distributors. The products
are distributed around the world with approximately 50% of the sales coming from
within the United States.
The Kendall-Polyken division manufactures and markets specialty adhesive
products and tapes for industrial applications, including external corrosion
protection tape products for oil, gas and water pipelines. Other industrial
applications include tapes used in the automotive industry for wire harness
wraps, sealing and other purposes, and tapes used in the aerospace and heating,
ventilation and air conditioning (HVAC) industries. Kendall-Polyken also
produces duct, foil, strapping, packaging and electrical tapes and spray
adhesives for industrial and consumer markets worldwide and manufactures cloth
and medical tapes for Kendall Healthcare and others. Kendall's Betham division
develops and markets pressure sensitive adhesives and coatings, principally for
the automotive, medical and specialty markets.
Kendall-Polyken generally markets its pipeline products directly, working
with local manufacturers' representatives, international engineering and
construction companies and the owners and operators of pipeline transportation
facilities. Kendall-Polyken sells its other industrial products either directly
to major end users or through diverse distribution channels, depending upon the
industry being supplied.
The Ludlow Technical Products division manufactures and sells a variety of
disposable medical products, specialized paper and film products. These products
include transcutaneous electrical nerve stimulation electrodes and related
products which are used primarily in physical therapy and other forms of
rehabilitative medicine, medical electrodes for EKGs and similar diagnostic
tests, gels which are used with medical electrodes for testing and other
monitoring purposes, hydrogel wound care products and neonatal electrodes,
diagnostic and monitoring electrodes, defibrillation electrodes, electrotherapy
electrodes and cable and lead wires. The division also produces adhesive tapes
used for business forms and in printing applications, high quality facsimile
paper and recording chart papers for medical and industrial instrumentation.
These products are marketed primarily by the division's own sales force.
Competitors vary from small regional firms to larger firms that compete on a
national basis. Competition is on the basis of price and quality.
ADT AUTOMOTIVE
ADT Automotive operates a network of 27 large modern auction centers in the
United States, providing an organized wholesale marketplace for the sale and
purchase of used vehicles. A substantial majority of the vehicles sold at ADT
Automotive auctions are passenger cars and light trucks. Other vehicles sold
consist of heavy trucks and industrial vehicles. Sales of vehicles from specific
market sources are held on a regularly scheduled basis and additional
specialized sales are scheduled as necessary. ADT
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Automotive operates almost exclusively in the wholesale marketplace and, in
general, the public is not permitted to attend its auctions. It acts solely as
an agent in auction transactions and does not purchase vehicles for its own
account.
The principal sources of vehicles for sale at auction are consignments by
new and used vehicle dealers, vehicle manufacturers, corporate owners of
vehicles such as fleet operators, rental companies, leasing companies, banks and
other financial institutions, manufacturers' credit subsidiaries and government
agencies. The vehicles consigned by dealers consist of vehicles of all types and
ages and include vehicles that have been traded in against new car sales.
Vehicles consigned by corporate and financial owners include both repossessed
and off-lease vehicles and, as a result, are normally in the range of one to
four years old. The principal purchasers of vehicles at auction are new and used
vehicle dealers and distributors.
In addition to the sale process, ADT Automotive provides a comprehensive
range of vehicle redistribution services including transportation,
reconditioning, title transfer assistance, vehicle repossession and fleet
management services. Vehicle reconditioning is carried out on-site and
principally consists of appearance reconditioning and paint and body work to
bring vehicles up to retail ready condition. More extensive body work services
including body panel painting and repair of minor collision damage are also
carried out. Reconditioning services are also provided for vehicles other than
those going through the auction process, principally for fleet owners and
insurance companies.
ADT Automotive competes with two other significant auction chains and a
large number of independently owned local auctions which are members of the
National Auto Auction Association. Competition is based primarily on price in
relation to the quality and range of services offered to sellers and buyers of
vehicles and ease of accessibility of auction locations.
TYCO PLASTICS GROUP
The Tyco Plastics Group consists of Armin Plastics, Carlisle Plastics, A&E
Products and Ludlow Coated Products.
ARMIN
Armin manufactures polyethylene film and packaging products in a wide range
of size, gauge, construction strength, stretch capacity, clarity and color.
Armin extrudes low density, high density and linear low density polyethylene
film from resin purchased in pellet form, incorporating such additives as
coloring, slip and anti-block chemicals. Armin's products include plastic
supermarket packaging, greenhouse sheeting, shipping covers and liners and a
variety of other packaging configurations for the aerospace, agricultural,
automotive, construction, cosmetics, electronics, food processing, healthcare,
pharmaceutical and shipping industries. Armin also manufactures a number of
other polyethylene products such as reusable plastic pallets, transformer pads
for electric utilities and a large variety of disposable gloves for the
cosmetic, medical, food handling and pharmaceutical industries. Armin generates
the majority of its sales through its own internal sales force and services more
than 6,000 customers in the United States.
Armin competes with a wide range of manufacturers, including some vertically
integrated companies and companies that manufacture polyethylene resins for
their own use. Armin competes in many market segments by emphasizing product
innovation, specialization and customer service.
CARLISLE
Carlisle is a leading producer of industrial and consumer plastic products,
including trash bags, flexible packaging and sheeting. Carlisle supplies plastic
trash bags to mass merchants, grocery chains, and institutional customers
primarily in North America. Carlisle manufactures Ruffles-Registered Trademark-,
a national brand consumer trash bag, for mass merchants and other retail stores.
Carlisle also provides heavy duty trash can
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liners for institutional customers, such as food service distributors,
janitorial supply houses, restaurants, hotels and hospitals.
In the consumer trash bag market, Carlisle competes primarily with two
nationally advertised brands. Carlisle has historically concentrated on mass
merchants as the primary market for its branded Ruffles-Registered Trademark-
trash bags, while the other major national brands are marketed primarily through
food retailers.
Film-Gard-Registered Trademark-, Carlisle's leading plastic sheeting
product, is sold to consumers and professional contractors through
do-it-yourself outlets, home improvement centers and hardware stores. A wide
range of Film-Gard-Registered Trademark- products are sold for various uses,
including painting, renovation, construction, landscaping and agriculture.
A&E PRODUCTS
A&E Products sells molded plastic garment hangers to garment manufacturers,
national, regional and local retailers and mass merchants. Garment manufacturers
put their products on A&E Products hangers before shipping to retail outlets.
National retailers purchase customized hanger designs created and manufactured
by A&E Products. Regional or local retailers buy standard A&E Products hanger
lines for retail clothing displays, and A&E Products also supplies mass
merchants with consumer plastic hangers for sale to the general public.
Carlisle and A&E Products operate in a competitive marketplace where success
is dependent upon price, service and quality.
LUDLOW COATED PRODUCTS
Ludlow Coated Products produces protective packaging and other materials
made of coated or laminated combinations of paper, polyethylene and foil. Coated
packaging materials provide barriers against grease, oil, light, heat, moisture,
oxygen and other contaminants. The division produces structural coated and
laminated products such as plastic coated kraft, linerboard and bleached boards
for rigid urethane insulation panels, automotive components and wallboard
panels. Other product applications include packaging for photographic film,
frozen foods, health care products, electrical and metallic components,
agricultural chemicals, cement and specialty resins.
Ludlow markets its laminated and coated products through its own sales force
and through independent manufacturers' representatives. Tyco competes with many
large manufacturers of laminated and coated products on the basis of price,
service, marketing coverage and custom application engineering. There are
various specialized competitors in different markets.
FIRE AND SECURITY SERVICES
Tyco, through its subsidiaries, is the largest company in the world for the
design, manufacture, installation and service of fire detection, suppression and
sprinkler systems and is the largest provider of electronic security services in
North America and the United Kingdom.
FIRE PROTECTION CONTRACTING AND SERVICE
Operating under several trade names including Grinnell, Wormald, Mather &
Platt, Total Walther, O'Donnell Griffin and Tyco, Tyco designs, fabricates,
installs and services automatic fire sprinkler systems, fire alarm and detection
systems, special hazard suppression systems and security systems in buildings
and other installations.
Tyco's fire protection contracting and service business in North America
operates through a network of offices in the United States, Canada, Mexico,
Latin America and Puerto Rico. Tyco also operates
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worldwide through a network of offices in the United Kingdom, continental
Europe, Saudi Arabia, United Arab Emirates, Australia, New Zealand, Asia and
South America.
Tyco installs fire protection systems in both new and existing structures.
Typically, the contracting businesses bid on contracts for fire protection
installation which are let by owners, architects, construction engineers and
mechanical or general contractors. In recent years, the business of retrofitting
existing buildings has grown as a result of legislation mandating the
installation of fire protection systems and also as a result of lower insurance
premiums available in respect of structures with automatic sprinkler systems.
The majority of the fire suppression systems installed by Tyco are
water-based. However, Tyco is also the world's leading provider of custom
designed special hazard fire protection systems which incorporate various
specialized non-water agents such as foams, dry chemicals and gases. Systems
using agents other than water are especially suited to fire protection in
certain manufacturing, power generation, petrochemical, offshore oil
exploration, transportation, telecommunications, mining, and marine
applications. Tyco holds exclusive manufacturing and distribution rights in
several regions of the world for INERGEN-Registered Trademark- fire suppression
products. INERGEN-Registered Trademark- is an alternative to the ozone depleting
agent known as halon and consists of a mixture of three inert gases designed to
effectively extinguish fires without polluting the environment or damaging
costly equipment.
In Australia, New Zealand and Asia, Tyco also engages in the installation of
electrical wire and related electrical equipment in new and existing structures
and provides specialized electrical contracting services, including applications
for railroad and bridge construction through its O'Donnell Griffin division.
Substantially all of the mechanical components (and, in North America, a
high proportion of the pipe) used in the fire protection systems installed by
Tyco are manufactured by Tyco. Tyco also has fabrication plants worldwide that
cut, thread and weld pipe, which is then shipped with other prefabricated
components to job sites for installation. Tyco has developed its own
computer-aided design technology that reduces the time required to design
systems for specific applications and coordinates the fabrication and delivery
of system components.
Tyco's fire protection contracting business employs both non-union and union
employees in North America, Europe and Asia-Pacific. Many of the union employees
are employed on an hourly basis for particular jobs. In North America, the
largest number of union employees is represented by a number of local unions
affiliated with the United Association of Plumbers and Pipefitters ("UA"). In
April 1994, following lengthy negotiations, contracts between Tyco's Grinnell
Corporation ("Grinnell") subsidiary and a number of locals of the UA were not
renewed. Employees in those locations, representing 64 per cent of those
employees represented by the UA unions, went on strike. Grinnell has continued
to operate with former union members who have crossed over and with replacement
workers. The labor action has not had, and is not expected to have, any material
adverse effect on Tyco's business or results of operations.
Generally, competition in the fire protection business varies by geographic
location. In North America, Tyco competes with hundreds of smaller contractors
on a regional or local basis for the installation of fire suppression and fire
alarm and detection systems. Many of the regional and local competitors employ
non-union labor. In Europe, Tyco competes with many regional or local
contractors on a country by country basis. In Australia, New Zealand and Asia,
Tyco competes with a few large fire protection contractors as well as with many
smaller regional or local companies. Tyco competes for fire protection contracts
primarily on the basis of price, service and quality.
ELECTRONIC SECURITY SERVICES
Tyco provides electronic security services principally under the ADT trade
name and also under other trade names including Modern, Thorn Security, Holmes
Protection, Zettler, Sonitrol, Securesys, Securiville and Armourguard Security.
Services are provided in the United States, Canada, the United Kingdom,
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Spain, France, Belgium, Greece, The Netherlands, Germany, The Republic of
Ireland, Malaysia, Singapore, Hong Kong, New Zealand and Australia.
Electronically monitored security systems involve the installation and use
on a customer's premises of devices designed to detect or react to various
occurrences or conditions, such as intrusion, movement, fire, smoke, flooding,
environmental conditions (including temperature or humidity variations),
industrial operations (such as water, gas or steam pressure and process flow
controls) or other hazards. These detection devices are connected to a
microprocessor-based control panel which communicates through telephone lines to
a monitoring center, often located at remote distances from the customer's
premises, where alarm and supervisory signals are received and recorded. In most
systems, control panels can identify the nature of the alarm and the areas
within a building where the sensor was activated. Depending upon the type of
service for which the subscriber has contracted, monitoring center personnel
respond to alarms by relaying appropriate information to the local fire or
police departments, notifying the customer or taking other appropriate action,
such as dispatching employees to the customer's premises. In some instances, the
customer may monitor the system at its own premises or the system may be
connected to local fire or police departments.
Thorn Security manufactures certain alarm, detection and activation devices
and central monitoring station equipment which is both installed by Tyco's own
units and sold to other installers of alarm and detection devices. Otherwise,
Tyco does not manufacture the electronic security system components which it
installs, although it does provide its own specifications to manufacturers for
certain security system components and undertakes some final assembly work in
respect of more sophisticated systems.
Tyco provides electronic security services to both commercial and
residential customers. Commercial customers include financial institutions,
industrial and commercial businesses, facilities of federal, state and local
government departments, defense installations, and health care and educational
facilities. Residential electronic security services are provided primarily in
North America. Customers are often prompted to purchase security systems by
their insurance carriers, which may offer lower insurance premium rates if a
security system is installed or require that a system be installed as a
condition to coverage.
Tyco's systems and products are tailored to customers' specific needs and
include electronic monitoring services that provide intrusion and fire
detection, as well as card or keypad activated access control systems and closed
circuit television systems. Systems may be monitored by the customer at its
premises or connected to one of Tyco's monitoring centers. In either case, Tyco
usually provides support and maintenance through service contracts. It has been
Tyco's experience that commercial and residential contracts are generally
renewed after their initial terms. Contract discontinuances occur principally as
a result of customer relocation or closure. Systems installed at commercial
customers' premises may be owned by Tyco or by the customer. Tyco usually
retains ownership of standard residential systems, but more sophisticated
residential systems are usually purchased by the customer.
Tyco markets its electronic security services to commercial and residential
customers through a direct sales force. Commercial customers which have multiple
locations in North America are serviced by a separate national accounts sales
force. Tyco also utilizes advertising, telemarketing and direct mail to market
its services.
The electronic security services business in North America is highly
competitive, with a number of major firms and approximately 12,000 smaller
regional and local companies. Tyco also competes with several national companies
and several thousand regional and local companies in the United Kingdom,
continental Europe, Asia and New Zealand. Competition is based primarily on
price in relation to quality of service. Tyco believes that the quality of its
services is higher than that of many of its competitors and, therefore, Tyco's
prices may be higher than those charged by its competitors.
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MANUFACTURING
Tyco manufactures most of the components which are used in its own fire
protection contracting business, as well as a variety of products for sale to
other fire protection contractors. In North America, Tyco manufactures pipe and
pipe fittings, fire hydrants, sprinkler heads and substantially all of the
mechanical sprinkler components used in automatic fire suppression systems. In
the United Kingdom, France, Germany and the Asia-Pacific region, Tyco
manufactures and sells sprinkler heads, specialty valves, fire doors and
electronic panels for use in fire detection systems. In Mexico, Tyco
manufactures fire extinguishers, fire hose and related equipment.
Tyco's Ansul subsidiary manufactures and sells various lines of dry
chemical, liquid and gaseous portable fire extinguishers and related agents for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry, confined industrial spaces and commercial spaces housing electronic
and other delicate equipment. Ansul also manufactures spill control products
designed to absorb, neutralize and solidify spills of various hazardous
materials.
Fire protection products are sold through Tyco's flow control products
distribution network, discussed in "Flow Control Products" below, and through
independent distributors.
ENVIRONMENTAL SERVICES
Through its Earth Technology Corporation ("Earth Tech") subsidiary, Tyco
provides a broad range of environmental, consulting and engineering services.
Earth Tech's principal services consist of full-spectrum environmental and
hazardous waste management services. These include infrastructure design and
construction services, facilities engineering and construction management
services for institutional, civic, commercial and industrial clients, and
contract operations and management services for water and wastewater treatment
facilities operated by municipal and industrial clients.
Earth Tech has a network of 40 offices located throughout North America. It
competes with a number of national, regional and local companies on the basis of
price and breadth and quality of services.
FLOW CONTROL PRODUCTS
Tyco, through its subsidiaries, manufactures and distributes flow control
products in North America, Latin America, Europe, Asia and the Pacific region.
Flow control products include pipe, fittings, valves, meters and related
products which are used to transport, control and measure the flow of liquids
and gases. The principal subsidiaries in the Flow Control Products group are
Grinnell, Allied Tube & Conduit ("Allied"), Mueller Co. ("Mueller") and
Keystone. The group also includes a number of other specialized manufacturers of
valves, fittings and couplings.
MANUFACTURING
Tyco manufactures and distributes a wide range of flow control products,
including pipe and pipe fittings, tubing, valves, meters, couplings, pipe
hangers, strut and related components. These products are used in plumbing,
heating, ventilation and air conditioning (HVAC) systems, mechanical
contracting, power generation, manufacture of food and beverage products, water
and gas utilities, wastewater treatment, oil and gas exploration, pulp and
paper, petrochemical and numerous other industrial applications. Tyco also
manufactures certain related products such as steel tubing, custom iron
castings, malleable iron pipe fittings and fencing materials.
Allied is the leading North American manufacturer of pipe and other tubular
products. Allied manufactures a full line of steel pipe for the fire protection
and construction industries and for commercial, residential and institutional
markets. Its mechanical tube division offers steel tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications.
Allied's fence
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division is a leader in the manufacture of products for the residential,
industrial and commercial fence markets. Allied also manufactures metal framing
systems used in the construction, industrial and original equipment manufacturer
markets. In November 1996, Tyco acquired Unistrut Europe, a manufacturer and
distributor of metal framing, cable ladder and safety systems and, in January
1997, acquired American Tube and Pipe Co., Inc., a manufacturer and distributor
of steel pipe for the fire protection and fence markets and steel products for
the housing market.
Mueller, a manufacturer of water and gas distribution products, manufactures
fire hydrants, iron butterfly and gate valves, service-line brass valves and
fittings, gas valves and meter bars, water meters, backflow preventers and
related products for sale to independent distributors and, to a lesser extent,
directly to waterworks contractors, municipalities and gas companies throughout
the United States and Canada.
In August 1997, Tyco acquired Keystone, one of the world's leading
manufacturers of valves and flow control products. Keystone operates on a
worldwide basis through two groups, Industrial Valves and Controls and
Engineered Products, manufacturing valves and other industrial products that
control the flow of liquids, gases and fibrous and slurry materials.
The Flow Control Products group, operating under several trade names
including Grinnell Corporation, Mueller, Hersey, Keystone, Anderson-Greenwood,
Yarway, Henry Pratt Co., James Jones Company, Edward Barber & Co., Neotecha,
Belgicast, Hindle Cockburns, Charles Winn (Valves) Ltd., Sempell, Smith Valve,
Anvil, Canvil and others, supplies a wide range of valves and flow control
devices to the chemical, power, food and beverage, oil and gas, processing,
water utility, wastewater treatment, power generation and other industries.
Products are manufactured and assembled at facilities in the United States,
Canada, the United Kingdom, France, Italy, Spain, Germany, The Netherlands,
Switzerland, South Korea, China, India, Malaysia, Australia, New Zealand, Mexico
and Brazil.
DISTRIBUTION
Tyco sells flow control and fire protection products in North America
through a distribution network of five regional distribution centers,
strategically located in Georgia, Illinois, California, Pennsylvania and Texas,
which support local branches' product needs and ship directly to customers. Each
center stocks more than 8,500 products. Tyco's worldwide flow control operations
stock and sell products through distribution centers in Europe, Australia, New
Zealand, the Middle East and Asia. In Europe, Tyco distributes fire protection
products, industrial valves and products for mechanical markets through
warehouses located in The Netherlands, the United Kingdom, Germany and France.
Products are sold principally to fire protection contractors and in some
instances to mechanical and industrial contractors and original equipment
manufacturers. In Asia, the Pacific region and the Middle East, Tyco distributes
fire protection and flow control products through warehouses located in
Australia, New Zealand, Dubai and Singapore. Products are sold directly to fire
protection and other contractors as well as to mechanical and industrial
contractors and independent distributors. While distribution patterns vary, most
centers stock an extensive line of valves, fittings, pipe and other products for
fire protection systems, components for HVAC installations and water and gas
distribution and specialized valves and piping for the chemical, food, power and
beverage processing industries.
Grinnell's North American distribution network competes with independent
manufacturers' representatives and other manufacturers and, to a lesser extent,
with local and regional supply houses all of which carry lines from other United
States and non-United States manufacturers. Grinnell competes on the basis of
price, the breadth of its product line, service and quality. Grinnell competes
for the sale of gray iron pipe fittings, malleable and ductile iron fittings and
other flow control products and fire protection sprinklers and devices
principally with other United States producers as well as with non-United States
manufacturers of fittings. Grinnell uses an internal sales force for the sale of
certain other iron castings sold direct to original equipment manufacturers and
other end users.
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Allied competes for the sale of steel pipe, which is sold through Grinnell's
distribution network, with pipe from other United States and non-United States
producers. Competition for the sale of pipe is based on price, service and
breadth of product line. Fence and other specialized industrial tubing is sold
to wholesalers, original equipment manufacturers and other distributors.
Competition for the sale of fence products is principally from national and
regional United States producers and to a lesser extent from non-United States
companies on the basis of price, service and distribution. Tyco competes with
many small regional manufacturers for sales of specialized industrial tubing on
the basis of price and breadth of product line.
Mueller's water and natural gas distribution flow control products are sold
through independent distributors, and, to a lesser extent, directly to
utilities, municipalities and gas distribution companies. Certain of its gas
distribution products are also sold through the Grinnell distribution network.
Tyco competes for the sale of these products on the basis of product quality,
service, price, breadth of product line and conformity with municipal codes and
other engineering standards. Tyco competes with several other manufacturers in
the United States and Canada for the sale of iron and brass flow control devices
for water and natural gas distribution systems.
Keystone's products are sold both in the United States and internationally.
Tyco has numerous competitors in these markets, which, in some instances, are
divisions of larger corporations and, in some instances, are companies with
limited product lines. Advanced technology, global presence, experienced
personnel and price are the primary factors in competition.
ELECTRICAL AND ELECTRONIC COMPONENTS
The Electrical and Electronic Components group consists of Tyco Submarine
Systems Ltd. ("TSSL"), Allied's Electrical Conduit division and the Tyco Printed
Circuit Group ("TPCG"). TSSL designs, manufactures, installs and services
undersea communications cable systems. Allied manufactures and distributes
electrical conduit and related components used in commercial electrical
installations. TPCG manufactures printed circuit boards and assembles backplanes
for the electronics industry.
TYCO SUBMARINE SYSTEMS
TSSL, which includes Tyco's Simplex Technologies business and the submarine
systems business acquired from AT&T Corp. in July 1997, is the world's only
fully-integrated source for the design, engineering, manufacturing, installation
and servicing of undersea cable communication systems. TSSL designs and builds
both repeatered and non-repeatered cable systems. Repeatered cable systems,
which use Wave Division Multiplexing, can provide 20 gigabytes per second of
capacity over 10,000 kilometers. Non-repeatered systems, which allow for even
greater circuit capacity and reduced transmission costs, support short haul
systems of several hundred kilometers. TSSL has designed, manufactured and
installed approximately 265,000 kilometers of undersea optical cable.
TSSL also operates one of the world's largest fleet of ships designed to
install and service undersea fiber optic transmission systems. These ships lay
cable, perform upgrades and repairs, monitor transmission quality and perform
system tests. TSSL also uses a variety of other undersea tools, including
robotic vehicles for undersea cable burial and retrieval operations.
Simplex Technologies has been the primary supplier of cable and cable
assemblies to the United States Navy for use in data-gathering systems for more
than thirty years. It also manufactures underwater electric power cable and
optical ground wire for use by power authorities and utilities, and
electro-mechanical cable for unique field operations. In September 1996, Tyco
acquired Rochester Corporation which manufactures wire rope, wirelines,
electro-optical products and subsea products.
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TSSL competes on a worldwide basis primarily against two other entities:
Alcatel-Alsthom, headquartered in France, and KDD, located in Japan. Alcatel,
like TSSL, is vertically integrated and produces its own cable, whereas KDD
utilizes a Japanese cable manufacturer.
ALLIED ELECTRICAL CONDUIT
Allied's Electrical Conduit division is one of the leading producers of
steel electrical conduit in the United States. Electrical conduit is galvanized
steel tubing designed to contain current-carrying electrical wires both inside
and outside building structures. The conduit also serves as an electrical
ground, which ensures proper operation of circuit interrupters, and provides a
channel into which additional wires can be inserted as requirements change. The
division manufactures a full line of electrical conduit as well as metal framing
and other products.
The division's electrical conduit and related products are sold to wholesale
electrical distributors through Allied's distribution facilities by an internal
sales force and a network of commissioned sales agents. The division competes
for the sale of electrical products primarily with several other large United
States manufacturers. Competition in the electrical conduit industry is
primarily based upon price, quality, delivery and breadth of product line.
TYCO PRINTED CIRCUIT GROUP
TPCG is one of the largest independent manufacturers of complex
multi-layered printed circuit boards and assemblers of backplanes in the United
States. Printed circuit boards are used in the electronics industry to mount and
interconnect components to create electronic systems. They are categorized by
the number of sides or layers that contain circuitry and can be single-sided,
double-sided or multi-layer. In general, single and double-sided boards are less
advanced. Multi-layer boards provide greater interconnection density while
decreasing the number of separate printed circuit boards which are required to
accommodate powerful and sophisticated components. Backplanes include printed
circuit boards and are assemblies of connectors and other electronic components
which distribute power and interconnect printed circuit boards, power supplies
and other system elements. The group maintains manufacturing facilities in
Connecticut, California and Utah, which provide its customers with prompt
service and delivery capabilities.
TPCG manufactures highly sophisticated double-sided, mass molded boards of
up to eight layers, precision tooled, custom laminated multi-layer boards of up
to 68 layers and sophisticated flex-rigid circuit boards for use in
environmentally demanding conditions. The majority of sales are derived from
high-density multi-layer boards. The backplanes facility produces fully
assembled units utilizing press-fit or soldered connection technology, custom
pin grid array sockets and surface mounted assembly. Printed circuit boards and
backplanes are manufactured on a job order basis to the customers' designs and
specifications.
TPCG markets its products mainly through independent manufacturers'
representatives and, to a lesser extent, through its own internal sales
organization. Customers are generally original equipment manufacturers in the
telecommunications, aircraft, computer, military and other industrial and
consumer electronics industries. Tyco competes with several large companies
which manufacture less complex single-sided and double-sided printed circuit
boards in the United States, as well as with many companies that have their own
in-house manufacturing capabilities. Competition is on the basis of quality,
price, reliability and timeliness of delivery. Tyco believes that fewer
competitors manufacture the more complex, high-density double-sided and
multi-layer boards.
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<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
Each of the 2001 Notes, the 2005 Notes and the 2028 Notes will be issued as
a separate series of debt securities under the Indenture (as defined in the
accompanying Prospectus). The Trustee under the Indenture is The Bank of New
York. The following description of the particular terms of each series of Notes
offered hereby (referred to in the accompanying Prospectus as "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made.
The 2001 Notes will initially be issued in an aggregate principal amount of
$750,000,000 and will mature on June 15, 2001. The 2005 Notes will initially be
issued in an aggregate principal amount of $750,000,000 and will mature on June
15, 2005. The 2028 Notes will initially be issued in an aggregate principal
amount of $500,000,000 and will mature on June 15, 2028. The Company may issue
additional Notes of any series under the Indenture. The 2001 Notes, the 2005
Notes and the 2028 Notes will bear interest at the rate of 6 1/8%, 6 3/8% and 7%
per annum, respectively, from June 9, 1998 or from the most recent interest
payment date to which interest has been paid or provided for, payable
semiannually on June 15 and December 15 of each year, commencing December 15,
1998, to the persons in whose names such Notes are registered at the close of
business on June 1 or December 1 (whether or not a Business Day), as the case
may be, immediately preceding such interest payment date. "Business Day" means
any day other than a Saturday, a Sunday or a day on which banking institutions
in The City of New York are authorized or obligated by law, executive order or
governmental decree to be closed.
The Notes will be fully and unconditionally guaranteed by Tyco. See
"Description of the Debt Securities and the Guarantees--Guarantees" in the
accompanying Prospectus.
The Notes of each series will be issued in the form of one or more
registered global securities and will be deposited with, or on behalf of, The
Depository Trust Company, as depositary (the "Depositary"), and registered in
the name of the Depositary's nominee. A description of the Depositary's
procedures with respect to the global securities is set forth in the
accompanying Prospectus under "Description of the Debt Securities and the
Guarantees--Book-Entry System."
OPTIONAL REDEMPTION
Except as provided in "Description of the Debt Securities and the
Guarantees--Redemption Upon Changes in Withholding Taxes" in the accompanying
Prospectus, the 2001 Notes and the 2005 Notes are not redeemable prior to
maturity.
The 2028 Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such 2028 Notes, and (ii) as determined by the Quotation
Agent (as defined below), the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any portion
of such payments of interest accrued as of the date of redemption) discounted to
the date of redemption on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Redemption Treasury Rate (as defined
below) plus 15 basis points plus, in each case, accrued interest thereon to the
date of redemption. The 2028 Notes are also subject to redemption to the extent
described in "Description of the Debt Securities and the Guarantees--Redemption
Upon Changes in Withholding Taxes" in the accompanying Prospectus.
Notice of any redemption will be mailed at least 30 days and not more than
60 days before the redemption date to each holder of the 2028 Notes to be
redeemed. Unless the Company defaults in the payment of the redemption price, on
and after the redemption date, interest will cease to accrue on the 2028 Notes
or the portions thereof called for redemption. See "Description of the Debt
Securities and the Guarantees--Redemption" in the accompanying Prospectus.
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"ADJUSTED REDEMPTION TREASURY RATE" means, with respect to any redemption
date, the annual rate equal to the semiannual equivalent yield to maturity or
interpolated (on a 30/360 day count basis) yield to maturity of the Comparable
Redemption Treasury Issue, assuming a price for the Comparable Redemption
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Redemption Treasury Price for such redemption date.
"COMPARABLE REDEMPTION TREASURY ISSUE" means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
remaining term of the 2028 Notes to be redeemed that would be utilized at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such 2028 Notes.
"COMPARABLE REDEMPTION TREASURY PRICE" means, with respect to any redemption
date, (i) the average of the Redemption Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Redemption
Reference Treasury Dealer Quotations (unless there is more than one highest or
lowest quotation, in which case only one such highest and/or lowest quotation
shall be excluded), or (ii) if the Quotation Agent obtains fewer than four such
Redemption Reference Treasury Dealer Quotations, the average of all such
Redemption Reference Treasury Dealer Quotations.
"QUOTATION AGENT" means a Redemption Reference Treasury Dealer appointed as
such agent by the Company.
"REDEMPTION REFERENCE TREASURY DEALER" means each of J.P. Morgan Securities
Inc. and four other primary U.S. Government securities dealers in The City of
New York (a "Primary Treasury Dealer") selected by the Company.
"REDEMPTION REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to
each Redemption Reference Treasury Dealer and any redemption date, the offer
price for the Comparable Redemption Treasury Issue (expressed in each case as a
percentage of its principal amount) for settlement on the redemption date quoted
in writing to the Quotation Agent by such Redemption Reference Treasury Dealer
at 5:00 p.m., New York City time, on the third Business Day preceding such
redemption date.
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DESCRIPTION OF THE DRS.
GENERAL
The Drs. will be issued as a series of debt securities under the Indenture.
The Trustee under the Indenture is The Bank of New York. The following
description of the particular terms of the Drs. offered hereby (referred to in
the accompanying Prospectus as "Debt Securities") supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Debt Securities set forth in the accompanying Prospectus, to
which description reference is hereby made.
The Drs. will be limited to $750,000,000 in aggregate principal amount.
The Drs. will be fully and unconditionally guaranteed by Tyco. See
"Description of the Debt Securities and the Guarantees--Guarantees" in the
accompanying Prospectus.
The Drs. will bear interest at a rate per annum of 6 1/4% to June 15, 2003
(the "Remarketing Date"). If the Remarketing Dealer elects to remarket the Drs.,
then after the Remarketing Date, the interest rate on the Drs. will be reset at
a fixed rate until June 15, 2013 (the "Stated Maturity Date"), as determined by
the Remarketing Dealer based on bids requested from dealers in the Company's
publicly-traded debt securities. See "--Mandatory Tender of Drs.; Remarketing."
The Drs. will bear interest from June 9, 1998, or from the most recent interest
payment date to which interest has been paid or provided for, payable
semiannually on June 15 and December 15 of each year, commencing December 15,
1998, to the persons in whose names the Drs. are registered at the close of
business on June 1 or December 1 (whether or not a Business Day), as the case
may be, immediately preceding the related interest payment date. "Business Day"
means any day other than a Saturday, a Sunday or a day on which banking
institutions in The City of New York are authorized or obligated by law,
executive order or governmental decree to be closed.
The Drs. will mature on the Stated Maturity Date. However, if the
Remarketing Dealer elects to remarket the Drs., then the Drs. will be subject to
mandatory tender to the Remarketing Dealer, for purchase at 100% of the
principal amount thereof on the Remarketing Date on the terms and subject to the
conditions described herein. See "--Mandatory Tender of Drs.; Remarketing"
below. If the Remarketing Dealer does not elect to exercise its right to a
mandatory tender of the Drs., or for any reason does not purchase all of the
Drs. on the Remarketing Date, then all holders are required to tender, and the
Company is required to repurchase, on the Remarketing Date, any Drs. that have
not been purchased by the Remarketing Dealer from the holders thereof at 100% of
the principal amount thereof plus accrued interest, if any. See "--Repurchase"
below. The Drs. will not be redeemable prior to the Remarketing Date. However,
under the circumstances described under "--Redemption", the Company may redeem
the Drs. from the Remarketing Dealer on the Remarketing Date. The Drs. will also
be redeemable as provided in "Description of the Debt Securities and
Guarantees--Redemption Upon Changes in Withholding Taxes" in the accompanying
Prospectus.
The Drs. will be issued in the form of one or more registered global
securities and will be deposited with or on behalf of the Depositary and
registered in the name of the Depositary's nominee. A description of the
Depositary's procedures with respect to the global securities is set forth in
the accompanying Prospectus under "Description of the Debt Securities and the
Guarantees--Book-Entry System."
Although the United States federal income tax treatment of the Drs. is not
certain, the terms of the Drs. provide that the Company and all holders of the
Drs. agree to treat the Drs. for United States federal income tax purposes as
fixed rate debt instruments that mature on the Remarketing Date. See "Certain
United States Federal Income and Luxembourg Tax Consequences."
MANDATORY TENDER OF DRS.; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the Drs., if the Remarketing Dealer elects to purchase the Drs.
on the Remarketing Date for remarketing.
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MANDATORY TENDER
If the Remarketing Dealer gives notice to the Company and the Trustee on a
Business Day not later than ten Business Days prior to the Remarketing Date (the
"Notification Date") of its intention to purchase all of the Drs. for
remarketing, all outstanding Drs. will be automatically tendered to the
Remarketing Dealer for purchase on the Remarketing Date, except in the
circumstances described under "--Repurchase" or "--Redemption" below. The
purchase price of the Drs. will be equal to 100% of the principal amount
thereof. Interest on such Drs. to (but excluding) the Remarketing Date will be
paid to the tendering holders by the Company. When the Drs. are tendered for
remarketing, the Remarketing Dealer may remarket the Drs. for its own account at
varying prices to be determined by the Remarketing Dealer at the time of each
sale or may sell such Drs. to the Reference Corporate Dealer (as defined below)
submitting the lowest firm, committed bid on the Determination Date, as
described below.
If the Remarketing Dealer elects to remarket the Drs., then from and
including the Remarketing Date to but excluding the Stated Maturity Date, the
Drs. will bear interest at the Interest Rate to Maturity (defined below). The
obligation of the Remarketing Dealer to purchase the Drs. on the Remarketing
Date is subject to several conditions set forth in a Remarketing Agreement
between the Company, Tyco and the Remarketing Dealer (the "Remarketing
Agreement"). In addition, the Remarketing Dealer may terminate the Remarketing
Agreement upon the occurrence of certain events set forth therein. See "--The
Remarketing Dealer." If for any reason the Remarketing Dealer does not purchase
all outstanding Drs. on the Remarketing Date, the holders of any Drs. not so
purchased will be required to tender, and the Company will be required to
repurchase, on the Remarketing Date, any such Drs. from the holders thereof at a
price equal to the principal amount thereof plus all accrued interest, if any.
See "--Repurchase" below.
The Remarketing Dealer shall determine the interest rate the Drs. will bear
from the Remarketing Date to the Stated Maturity Date (the "Interest Rate to
Maturity") on the third Business Day immediately preceding the Remarketing Date
(the "Determination Date") by soliciting by 2:00 p.m., New York City time, the
Reference Corporate Dealers for firm, committed bids to purchase all outstanding
Drs. at the Dollar Price (defined below), and by selecting the lowest such firm,
committed bid (regardless of whether each of the Reference Corporate Dealers
actually submits a bid). Each bid shall be expressed in terms of the Interest
Rate to Maturity that the Drs. would bear (quoted as a spread over 5.55% per
annum (the "Base Rate")) based on the following assumptions:
(i) the Drs. would be sold on the Remarketing Date for settlement on
the same day;
(ii) the Drs. would mature on the Stated Maturity Date; and
(iii) the Drs. would bear interest from the Remarketing Date at the
Interest Rate to Maturity bid by such Reference Corporate Dealer, payable
semiannually on the interest payment dates for the Drs.
The Interest Rate to Maturity announced by the Remarketing Dealer as a
result of such process will be quoted to the nearest one hundred-thousandth
(0.00001) of one percent per annum and, absent manifest error, will be binding
and conclusive upon the holders of the Drs., the Company, Tyco and the Trustee.
The Remarketing Dealer shall have the discretion to select the time at which the
Interest Rate to Maturity is determined on the Determination Date.
"DOLLAR PRICE" means the discounted present value to the Remarketing Date of
the cash flows on a bond (x) with a principal amount equal to the aggregate
principal amount of the Drs., (y) maturing on the Stated Maturity Date and (z)
bearing interest from the Remarketing Date, payable semiannually (assuming a
360-day year consisting of twelve 30-day months) on the interest payment dates
of the Drs. at a rate equal to the Base Rate, using a discount rate equal to the
Treasury Rate (defined below).
"REFERENCE CORPORATE DEALER" means J.P. Morgan Securities Inc. and four
other leading dealers of publicly-traded debt securities of the Company that are
unconditionally guaranteed by Tyco. If any of such
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persons shall cease to be a leading dealer of publicly-traded debt securities of
the Company that are unconditionally guaranteed by Tyco, then the Remarketing
Dealer may replace such person with any other leading dealer of publicly-traded
debt securities for the Company that are unconditionally guaranteed by Tyco.
"TREASURY RATE" means the annual rate equal to the semiannual equivalent
yield to maturity or interpolated (on a 30/360 day count basis) yield to
maturity on the Determination Date of the Comparable Treasury Issue (defined
below) for value on the Remarketing Date, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price (defined below).
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by the Remarketing Dealer as having an actual maturity on the
Determination Date (or the United States Treasury securities selected by the
Remarketing Dealer to derive an interpolated yield to maturity on such
Determination Date) comparable to the remaining term of the Drs.
"COMPARABLE TREASURY PRICE" means (a) the offer price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) on the
Determination Date, as set forth on Telerate Page 500 (defined below), adjusted
to reflect settlement on the Remarketing Date if prices quoted on Telerate Page
500 are for settlement on any date other than the Remarketing Date, or (b) if
such page (or any successor page) is not displayed or does not contain such
offer prices on such Business Day, then (i) the average of the Reference
Treasury Dealer Quotations for the Remarketing Date, after excluding the highest
and lowest of such Reference Treasury Dealer Quotations (unless there is more
than one highest or lowest quotation, in which case only one such highest and/or
lowest quotation shall be excluded), or (ii) if the Remarketing Dealer obtains
fewer than four such Reference Treasury Dealer Quotations, the average of all
such Reference Treasury Dealer Quotations. The Remarketing Dealer shall have the
discretion to select the time at which the Comparable Treasury Price is
determined on the Determination Date and the number of Reference Treasury Dealer
Quotations to be obtained.
"TELERATE PAGE 500" means the display designated as "TELERATE PAGE 500" on
Dow Jones Markets Limited (or such other page as may replace Telerate Page 500
on such service) or such other service displaying the offer price specified in
clause (a) of the definition of Comparable Treasury Price as may replace Dow
Jones Markets Limited.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference
Treasury Dealer, the offer price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) for settlement on the Remarketing Date
quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by
2:00 p.m., New York City time, on the Determination Date.
"REFERENCE TREASURY DEALER" means a primary U.S. Government securities
dealer in The City of New York (which may include the Remarketing Dealer)
selected by the Remarketing Dealer.
NOTIFICATION OF RESULTS; SETTLEMENT
If the Remarketing Dealer has elected to remarket the Drs. as provided
herein, then the Remarketing Dealer will notify the Company, the Trustee and the
Depositary by telephone, confirmed in writing, by 3:30 p.m., New York City time,
on the Determination Date, of the Interest Rate to Maturity.
All of the Drs. will be automatically delivered to the account of the
Trustee by book-entry, through the Depositary, pending payment of the purchase
price therefor, on the Remarketing Date.
The Remarketing Dealer will make, or cause the Trustee to make, payment to
the Depositary by the close of business on the Remarketing Date against delivery
through the Depositary of the Drs., of the purchase price for all of the Drs.
tendered. The purchase price of the Drs. will be equal to 100% of the
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principal amount thereof. If the Remarketing Dealer does not purchase all of the
Drs. on the Remarketing Date, then the Company is obliged to make or cause to be
made such payment for all of the Drs. not purchased by the Remarketing Dealer,
as described below under "--Repurchase." In any case, the Company will make, or
cause the Trustee to make, payment of interest to (but excluding) the
Remarketing Date to holders of Drs. by book-entry through the Depositary by the
close of business on the Remarketing Date.
The tender and settlement procedures described above may be modified without
the consent of the holders of the Drs. to the extent required by the Depositary
or, if the book-entry system is no longer available for the Drs. at the time of
the remarketing, to the extent required to facilitate the tendering and
remarketing of the Drs. in certificated form. In addition, the Remarketing
Dealer may modify without the consent of the holders of the Drs. the settlement
procedures set forth above in order to facilitate the settlement process.
As long as the Depositary's nominee holds the certificates representing any
Drs. in the book-entry system of the Depositary, no certificates for such Drs.
will be delivered by any selling beneficial owner to reflect any transfer of
such Drs. effected in the remarketing. In addition, under the terms of the Drs.
and the Remarketing Agreement, the Company has agreed that (i) it will use its
best efforts to maintain the Drs. in book-entry form with the Depositary or any
successor thereto and to appoint a successor depositary to the extent necessary
to maintain the Drs. in book-entry form and (ii) it will waive any discretionary
right it otherwise has under the Indenture to cause the Drs. to be issued in
certificated form.
THE REMARKETING DEALER
On or prior to the date of issuance of the Drs., the Company, Tyco and the
Remarketing Dealer will enter into the Remarketing Agreement which will provide
for the Drs. to be remarketed substantially on the terms described below and in
"--Mandatory Tender of Drs.; Remarketing."
The Remarketing Dealer has the right under the Remarketing Agreement to
elect whether or not to remarket the Drs. If the Remarketing Dealer elects to
remarket the Drs. as described herein, the obligation of the Remarketing Dealer
to purchase the Drs. from holders thereof will be subject to several conditions
set forth in the Remarketing Agreement. In addition, the Remarketing Agreement
will provide for its termination by the Remarketing Dealer on or before the
Remarketing Date, upon the occurrence of certain events that would customarily
give underwriters the right to terminate an underwriting agreement or would give
rise to a failure to satisfy a closing condition to an underwriting agreement in
the Company's public debt offerings. The Remarketing Agreement will also provide
that the Remarketing Dealer may resign at any time as Remarketing Dealer, such
resignation to be effective ten Business Days after the delivery to the Company
and the Trustee of notice of such resignation. In such case, the Company shall
have the right, but not the obligation, to appoint a successor Remarketing
Dealer.
As a result of these conditions and termination rights and the Remarketing
Dealer's right of election and right to resign, holders of Drs. cannot be
assured that their Drs. will be purchased by the Remarketing Dealer in
connection with a mandatory tender. No holder of any Drs. shall have any rights
or claims under the Remarketing Agreement or against the Company, Tyco or the
Remarketing Dealer as a result of the Remarketing Dealer not purchasing such
Drs. If the Remarketing Dealer does not purchase all of the Drs. on the
Remarketing Date, the Company will be required to purchase on the Remarketing
Date any Drs. that have not been purchased by the Remarketing Dealer at a price
equal to 100% of the principal amount thereof plus accrued interest, if any. See
"--Repurchase."
The Remarketing Dealer will not receive any fees for its services under the
Remarketing Agreement, but will be entitled to reimbursement for out-of-pocket
expenses and other amounts under certain circumstances.
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The Company and Tyco will agree to indemnify the Remarketing Dealer against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, arising out of or in connection with its duties under the Remarketing
Agreement.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the Drs. The Remarketing Dealer may exercise any
vote or join in any action which any holder of Drs. may be entitled to exercise
or take with like effect as if it did not act in any capacity under the
Remarketing Agreement. The Remarketing Dealer, in its individual capacity,
either as principal or agent, may also engage in or have an interest in any
financial or other transactions with the Company as freely as if it did not act
in any capacity under the Remarketing Agreement.
REPURCHASE
If the Remarketing Dealer for any reason does not purchase all of the Drs.
on the Remarketing Date, the holders of any Drs. not so purchased are required
to tender, and the Company shall repurchase, on the Remarketing Date any such
Drs. at a price equal to 100% of the principal amount of the Drs. plus all
accrued and unpaid interest, if any, on such Drs. to (but excluding) the
Remarketing Date.
REDEMPTION
If the Remarketing Dealer has elected to remarket the Drs. on the
Remarketing Date, the Company shall have the right to redeem the Drs., in whole
but not in part, from the Remarketing Dealer on the Remarketing Date at a
redemption price equal to the greater of (i) 100% of the aggregate principal
amount of the Drs. and (ii) the Dollar Price, by giving notice of such
redemption to the Remarketing Dealer:
(x) no later than the Business Day immediately prior to the
Determination Date, or
(y) if fewer than three Reference Corporate Dealers timely submit firm,
committed bids for all outstanding Drs. to the Remarketing Dealer on the
Determination Date, within thirty minutes after the deadline set by the
Remarketing Dealer for receiving such bids has passed and the Remarketing
Dealer has notified the Company of the substance of such bids.
In either such case, the Company shall pay such redemption price for the
Drs. in same-day funds by wire transfer on the Remarketing Date to an account
designated by the Remarketing Dealer.
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CERTAIN UNITED STATES FEDERAL INCOME AND LUXEMBOURG TAX CONSEQUENCES
The following discussion is intended to be a general summary of Luxembourg
and United States federal income tax consequences to holders of Notes and Drs.
Due to the complexity of the tax laws of the aforementioned and other taxing
jurisdictions, the uncertainty, in some instances, as to the manner in which
such laws apply to holders and possible changes in law, it is particularly
important that each holder consult with its own tax adviser regarding the tax
treatment of the acquisition, ownership and disposition of Notes or Drs. under
the laws of any federal, state, local or other taxing jurisdiction.
LUXEMBOURG
Under current law, no withholding or deduction is imposed in Luxembourg in
respect of any payment to be made by the Company in respect of the Notes or the
Drs. Holders of Notes and/or Drs. who are neither resident in Luxembourg nor
engaged in a trade or business through a permanent establishment or permanent
representative in Luxembourg will not be subject to taxes or duties in
Luxembourg with respect to interest payments on, or gains realized on the
disposition of, the Notes and/or the Drs. No stamp, registration or similar
taxes, duties or charges are payable in Luxembourg in connection with the issue
of the Notes and the Drs.
UNITED STATES
The following is a general discussion of certain anticipated U.S. federal
income tax consequences of the ownership and disposition of the Notes and Drs.
to initial holders purchasing Notes or Drs. at their respective "issue prices."
The "issue price" of the Notes and the Drs. will equal the first price at which
a substantial amount of the Notes or Drs., respectively, is sold for cash to the
public (not including persons acting in the capacity of underwriters, placement
agents or wholesalers). This summary is based upon laws, regulations, rulings
and decisions currently in effect, all of which are subject to change at any
time, possibly with retroactive effect. Moreover, it deals only with purchasers
who hold Notes or Drs. as "capital assets" within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended, and does not purport to deal with
persons in special tax situations, such as financial institutions, insurance
companies, regulated investment companies, tax exempt investors, dealers in
securities or currencies, U.S. expatriates, persons holding Notes or Drs. as a
hedge against currency risk or as a position in a "straddle," "hedge,"
"conversion" or another integrated transaction for tax purposes, persons who own
(directly or indirectly) 10 percent or more of the voting power of the Company,
or U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar. Further, this discussion does not address the consequences under U.S.
federal estate or gift tax laws or the laws of any U.S. state or locality. In
addition, with respect to the Drs., this discussion only addresses the U.S.
federal income tax consequences until the Remarketing Date.
Prospective purchasers of the Notes or Drs. should consult their own tax
advisors concerning the consequences, in their particular circumstances, of
ownership of the Notes or Drs. under the U.S. federal tax laws and the laws of
any relevant state, local or non-U.S. taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of Notes or
Drs. that is, for U.S. federal income tax purposes, (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity (other than a
trust) created or organized in or under the laws of the United States or of any
political subdivision thereof (other than a partnership that is not treated as a
U.S. person under any applicable Treasury regulations), (iii) an estate whose
income is subject to U.S. federal income tax regardless of its source or (iv) a
trust if, in general, a court within the United States is able to exercise
primary jurisdiction over its administration and one or more U.S. persons have
authority to control all of its substantial decisions. As used herein, the term
"non-U.S. Holder" means a beneficial owner of Notes or Drs. that is not a U.S
Holder for U.S. federal income tax purposes.
S-29
<PAGE>
U.S. HOLDERS
THE NOTES
INTEREST. The gross amount of interest paid on the Notes (including any
Additional Amounts paid in respect of withholding taxes) will be taxable as
ordinary income for U.S. federal income tax purposes when received or accrued by
a U.S. Holder in accordance with such U.S. Holder's method of tax accounting.
Such interest will be income from sources outside the United States and, with
certain exceptions, will be treated as "passive" income for purposes of
computing the foreign tax credit allowable under U.S. federal income tax laws.
The rules relating to foreign tax credits and the timing thereof are extremely
complex, and U.S. Holders should consult their own tax advisers with regard to
the availability of foreign tax credits and the application of the foreign tax
credit limitations to their particular situations.
DISPOSITION. Upon the sale, redemption or other taxable disposition of a
Note, a U.S. Holder will recognize capital gain or loss equal to the difference
between the amount realized (excluding any amount attributable to accrued
interest, which will be taxable as ordinary interest income as described above)
and the U.S Holder's tax basis in the Notes (generally the U.S. Holder's cost).
Such gain or loss will be long term capital gain or loss if the Notes are held
for more than one year, and for individual U.S. Holders will be eligible for a
lower rate on capital gains if the Notes are held for more than eighteen months.
The deductibility of capital losses is subject to certain limitations. For
purposes of foreign tax credits under U.S. federal income tax laws, capital gain
recognized by a U.S. Holder generally will be treated as U.S. source income, but
any capital loss recognized by a U.S. Holder may be allocable to foreign source
income. U.S. Holders should consult their own tax advisors as to the foreign tax
credit implications of the disposition of Notes under U.S. federal income tax
laws.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Non-exempt U.S. Holders may be
subject to information reporting with respect to payments of interest on, and
the proceeds of the disposition of, Notes. Non-exempt U.S. Holders who are
subject to information reporting and who do not provide appropriate information
when requested may be subject to backup withholding at a 31% rate. U.S. Holders
should consult their tax advisors.
THE DRS.
The Company intends to treat the Drs., which are subject to mandatory tender
or repurchase by the Company on the Remarketing Date, as maturing on the
Remarketing Date for U.S. federal income tax purposes and as being reissued on
the Remarketing Date should the Remarketing Dealer remarket the Drs. By
purchasing the Drs., a holder agrees (in the absence of an administrative
determination or judicial ruling to the contrary) to follow such treatment for
U.S. federal income tax purposes. Assuming the above characterization of the
Drs. applies, the tax consequences to U.S. Holders of Drs. will be the same as
the tax consequences to U.S. Holders of Notes as described above.
However, no debt instrument closely comparable to the Drs. has been the
subject of any Treasury regulation, revenue ruling or judicial decision, and the
U.S. federal income tax treatment of the Drs. is not certain. No ruling on the
treatment of the Drs. will be sought from the Internal Revenue Service ("IRS").
Accordingly, significant aspects of the U.S. federal income tax consequences of
an investment in the Drs. are uncertain, and no assurance can be given that the
IRS or the courts will agree that the Drs. should be treated as maturing on the
Remarketing Date.
In particular, the IRS could seek to treat the Drs. as maturing on the
Stated Maturity Date. Because of the possible remarketing and reset, if the Drs.
were treated as maturing on the Stated Maturity Date, Treasury regulations
relating to contingent payment debt obligations would apply. In such case, the
timing and character of income on the Drs. would be significantly affected.
Among other things, U.S. Holders, regardless of their usual method of tax
accounting, would be required to accrue original issue discount income annually,
subject to the adjustments described below, that is determined in accordance
with a
S-30
<PAGE>
projected payment schedule based on a "comparable yield" on a non-contingent
debt instrument maturing on the Stated Maturity Date. Such original issue
discount could be higher than the actual cash payments received on the Drs. in a
taxable year. In addition, adjustments to income accruals would be required to
be made to account for differences between actual payments and projected
payments. Furthermore, any gain realized with respect to the Drs. would
generally be treated as ordinary interest income, and any loss realized would
generally be treated as ordinary loss to the extent of the U.S. Holder's
ordinary income inclusions with respect to the Drs. Any remaining loss generally
would be treated as capital loss. In addition, upon a sale or exchange (other
than as a result of exercise of the mandatory tender right) a holder may be
required to include as ordinary income, with a corresponding capital loss, an
amount equal to the positive difference, if any, between the fair market value
of the mandatory tender right at such time and its value upon issuance of the
Drs. The ability to use capital losses to offset ordinary income in determining
taxable income is generally limited.
PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ANY INVESTMENT IN THE DRS.
(INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE DRS.).
NON-U.S. HOLDERS
INTEREST AND DISPOSITION. In general (and subject to the discussion below
under "Information Reporting and Backup Withholding"), a non-U.S. Holder will
not be subject to U.S. federal income or withholding tax with respect to
payments of interest (including accrued original issue discount, if any) on, or
gain upon the disposition of, Notes or Drs., unless the income or gain is
effectively connected with the conduct by the non-U.S. Holder of a trade or
business in the United States. In that event, such income or gain will generally
be subject to regular U.S. income tax in the same manner as if it were realized
by a U.S. Holder. In addition, if such non-U.S. Holder is a non-U.S.
corporation, such income or gain may be subject to a branch profits tax at a
rate of 30% (or such lower rate provided by an applicable income tax treaty).
INFORMATION REPORTING AND BACKUP WITHHOLDING. If the Notes or Drs. are held
by a non-U.S. Holder through a non-U.S. (and non-U.S. related) broker or
financial institution, information reporting and backup withholding generally
would not be required. Information reporting, and possibly backup withholding,
may apply if the Notes or Drs. are held by a non-U.S. Holder through a U.S. (or
U.S. related) broker or financial institution and the non-U.S. Holder fails to
provide appropriate information. Holders should consult their tax advisors.
S-31
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreements
(the "Underwriting Agreements") relating to the Notes and the Drs. offered
hereby, the Company has agreed to sell to each of the underwriters named below
(the "Underwriters"), severally, the respective principal amounts of Notes and
Drs. set forth below opposite their respective names:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT
UNDERWRITERS OF 2001 NOTES OF 2005 NOTES OF 2028 NOTES OF DRS.
- ----------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
J.P. Morgan Securities Inc. ......................... $ 238,000,000 $ 233,500,000 $ 156,000,000 $ 238,000,000
Morgan Stanley & Co. Incorporated.................... 197,500,000 194,500,000 130,000,000 197,500,000
Lehman Brothers Inc.................................. 88,000,000 88,000,000 58,500,000 88,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................... 88,000,000 88,000,000 58,500,000 88,000,000
Credit Suisse First Boston Corporation............... 58,000,000 58,000,000 38,500,000 58,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation.......................... 58,000,000 58,000,000 38,500,000 58,000,000
BT Alex. Brown Incorporated.......................... 7,500,000
First Chicago Capital Markets, Inc................... 7,500,000
NationsBanc Montgomery Securities LLC................ 7,500,000
ABN AMRO Incorporated................................ 7,500,000
Credit Lyonnais Securities (USA) Inc................. 7,500,000
First Union Capital Markets Corp..................... 7,500,000
Scotia Capital Markets (USA) Inc..................... 7,500,000
Bear, Stearns & Co. Inc.............................. 5,000,000
Citicorp Securities, Inc............................. 5,000,000
PaineWebber Incorporated............................. 5,000,000
UBS Securities LLC................................... 5,000,000
BancAmerica Robertson Stephens....................... 7,500,000
BNY Capital Markets, Inc............................. 7,500,000
Commerzbank Capital Markets Corporation.............. 7,500,000
-------------- -------------- -------------- --------------
Total.......................................... $ 750,000,000 $ 750,000,000 $ 500,000,000 $ 750,000,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
Under the terms and conditions of the Underwriting Agreements, the
Underwriters are committed to take and pay for all of the Notes or the Drs., as
the case may be, if any are taken.
The Underwriters have advised the Company that they propose initially to
offer the Notes directly to the public at the public offering prices set forth
on the cover page hereof and to certain dealers at such prices less a concession
not in excess of .250% of the principal amount of the 2001 Notes, .375% of the
principal amount of the 2005 Notes and .500% of the principal amount of the 2028
Notes. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of .125% of the principal amount of the 2001 Notes, .250% of the
principal amount of the 2005 Notes and .250% of the principal amount of the 2028
Notes to certain other dealers. After the initial public offering of the Notes,
the offering prices and such concessions may be changed.
The Underwriters initially propose to offer the Drs. in part directly to the
public at varying prices based on prevailing market rates at the time of resale.
The Underwriters will purchase the Drs. at 98.903% of the principal amount
thereof. In addition, in consideration for the right to require the mandatory
tender of all outstanding Drs. as described above, the Remarketing Dealer will
pay to the Company, on the same date the Underwriters pay the purchase price for
the Drs., an amount equal to 2.905% of the principal amount of the Drs.
Consequently, the net proceeds to the Company will be $763,560,000 or 101.808%
of
S-32
<PAGE>
the principal amount of the Drs., before deducting expenses payable by the
Company, estimated to be approximately $125,000.
The Notes and the Drs. are new issues of securities with no established
trading market. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in the Notes and the Drs. but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Notes or the Drs.
In connection with the Offerings, the Underwriters may engage in
transactions that stabilize the prices of the Notes or that maintain or
otherwise affect the prices of the Notes and the Drs. Specifically, the
Underwriters may overallot in connection with the Offerings, creating a
syndicate short position. In addition, the Underwriters may bid for, and
purchase Notes or Drs., in the open market to cover syndicate shorts or to
stabilize the prices of the Notes. Finally, the underwriting syndicate may
reclaim selling concessions allowed for distributing the Notes and the Drs. in
the Offerings, if the syndicate repurchases previously distributed Notes and
Drs. in syndicate covering transactions, in stabilization transactions or
otherwise. Any of these activities may stabilize the prices of the Notes or
maintain the prices of the Notes or the Drs. above independent market levels.
The Underwriters are not required to engage in these activities, and may end any
of these activities at any time.
The Company and Tyco have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof. See also "Plan of Distribution" in the accompanying Prospectus.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have provided, and may in the future provide,
commercial banking and investment banking services to the Company and its
affiliates. Affiliates of each of J.P. Morgan Securities Inc., Credit Suisse
First Boston Corporation, ABN AMRO Incorporated, BancAmerica Robertson Stephens,
BNY Capital Markets, Inc., BT Alex. Brown Incorporated, Citicorp Securities,
Inc., Commerzbank Capital Markets Corporation, Credit Lyonnais Securities (USA)
Inc., First Chicago Capital Markets, Inc., First Union Capital Markets Corp.,
NationsBanc Montgomery Securities LLC, Scotia Capital Markets (USA) Inc. and UBS
Securities LLC (collectively the "Bank Affiliates") are lenders under certain
credit facilities (the "Credit Facilities") of Tyco US. Substantially all of the
net proceeds from the offering of the Notes and the Drs. will be used to repay
borrowings under the Credit Facilities. See "Use of Proceeds." Since the amount
to be repaid to the Bank Affiliates will exceed 10% of the net proceeds from the
sale of the Notes and the Drs., the offering of the Notes and the Drs. is being
made pursuant to the provisions of Rules 2710(c)(8) and 2720(c)(3)(c) of the
National Association of Securities Dealers, Inc. See "Use of Proceeds."
S-33
<PAGE>
LEGAL MATTERS
Certain U.S. legal matters regarding the Notes, the Guarantees and the Drs.
will be passed upon for Tyco and the Company by Kramer, Levin, Naftalis &
Frankel, New York, New York, counsel to Tyco and the Company. Joshua M. Berman,
a director and vice president of Tyco, is counsel to Kramer, Levin, Naftalis &
Frankel. Mr. Berman beneficially owns 64,000 common shares of Tyco. Certain
matters under the laws of Bermuda related to the Guarantees of Tyco will be
passed upon for Tyco by Appleby, Spurling & Kempe, Hamilton, Bermuda, Bermuda
counsel to Tyco. Certain matters under the laws of Luxembourg related to the
Notes and the Drs. will be passed upon by Zeyen Beghin Feider Loeff Claeys
Verbeke, Luxembourg counsel to the Company. Certain U.S. legal matters regarding
the Notes and the related Guarantees will be passed upon for the Underwriters by
Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), One New York Plaza, New York, New York 10004. The validity of the
Drs. and the related Guarantees being offered hereby will be passed upon for the
Underwriters by Davis Polk & Wardwell, New York, New York. Fried, Frank, Harris,
Shriver & Jacobson and Davis Polk & Wardwell will rely on Appleby, Spurling &
Kempe with respect to matters of Bermuda law and on Zeyen Beghin Feider Loeff
Claeys Verbeke with respect to matters of Luxembourg law.
S-34
<PAGE>
PROSPECTUS
$3,750,000,000
----------------
TYCO INTERNATIONAL GROUP S.A.
-------------
DEBT SECURITIES
----------------
FULLY AND UNCONDITIONALLY GUARANTEED BY
TYCO INTERNATIONAL LTD.
------------------
Tyco International Group S.A., a Luxembourg company (the "Company"), may
offer from time to time unsecured debt securities ("Debt Securities") consisting
of debentures, notes and/or other evidences of unsecured indebtedness in one or
more series, at an aggregate initial offering price not to exceed
U.S.$3,750,000,000, or its equivalent if some or all of the Debt Securities are
denominated in one or more foreign currencies, at prices and on terms to be
determined at or prior to the time of sale in light of market conditions at the
time of sale. Debt Securities may be issued in registered form without coupons
("Registered Securities"), bearer form with or without coupons attached ("Bearer
Securities") or in the form of one or more global securities (each a "Global
Security"). Unless otherwise specified in the Prospectus Supplement, all Debt
Securities will be fully and unconditionally guaranteed as to payment of
principal, premium, if any, and interest by Tyco International Ltd. ("Tyco"),
the sole shareholder of the Company. Guarantees of the Debt Securities (the
"Guarantees") by Tyco will constitute unsecured and unsubordinated obligations
of Tyco.
Specific terms of the particular Debt Securities in respect of which this
Prospectus is being delivered will be set forth in one or more accompanying
Prospectus Supplements (each a "Prospectus Supplement"), together with the terms
of the offering of the Debt Securities and the initial price and the net
proceeds to the Company from the sale thereof. The Prospectus Supplement will
set forth with regard to the particular Debt Securities, without limitation, the
following: the specific designation, aggregate principal amount, ranking as
senior debt or subordinated debt, authorized denomination, maturity, rate or
method of calculation of interest and dates for payment thereof, any
exchangeability, conversion, redemption, prepayment or sinking fund provisions,
the currency or currencies or currency unit or currency units in which
principal, premium, if any, or interest is payable, any modification of the
covenants and any other specific terms thereof. The amounts payable by the
Company in respect of Debt Securities may be calculated by reference to the
value, rate or price of one or more specified commodities, currencies or indices
as set forth in the Prospectus Supplement. The Prospectus Supplement will also
contain, where applicable, relevant tax considerations relating to the holders
of Debt Securities covered by the Prospectus Supplement.
The Company may sell Debt Securities offered hereby to or through
underwriters or dealers, and also may sell Debt Securities directly to other
purchasers or through agents. The Prospectus Supplement will also set forth the
names of the underwriters, dealers and agents involved in the sale of the Debt
Securities offered hereby, the principal amounts, if any, to be purchased by the
underwriters or agents and the compensation, if any, of such underwriters or
agents and any applicable commissions or discounts. The net proceeds to the
Company from the sale of the Debt Securities offered hereby will also be set
forth in the Prospectus Supplement.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is May 1, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus or
the accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company, Tyco or any underwriter, dealer or agent. Neither the delivery of this
Prospectus or the accompanying Prospectus Supplement nor any sale made hereunder
or thereunder shall, under any circumstances, create an implication that the
information contained herein or in the accompanying Prospectus Supplement is
correct as of any date subsequent to the date hereof or thereof or that there
has been no change in the affairs of the Company or Tyco since the date hereof
or thereof. Neither this Prospectus nor the accompanying Prospectus Supplement
constitutes an offer to sell or a solicitation of an offer to buy Debt
Securities in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer or
solicitation.
AVAILABLE INFORMATION
Tyco is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"), all of which may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661;
and New York Regional Office, Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Commission maintains a site on the
World Wide Web, and the reports, proxy statements and other information filed by
Tyco with the Commission may be accessed electronically on the Web at
http://www.sec.gov. Such material may also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, where
Tyco's common shares, par value U.S.$0.20 per share ("Common Shares"), are
listed.
This Prospectus constitutes part of a Registration Statement on Form S-3
filed by the Company and Tyco (together with all amendments, schedules and
exhibits thereto, the "Registration Statement") with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, where a copy of such document has
been filed as an exhibit to the Registration Statement or otherwise has been
filed with the Commission, reference is made to the copy of the applicable
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed by Tyco with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference in this
Prospectus:
1. Tyco's Transition Report on Form 10-K for the fiscal year ended
September 30, 1997.
2. Tyco's Transition Report on Form 10-K/A for the fiscal year ended
September 30, 1997.
3. Tyco's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1997.
4. Tyco's Current Report on Form 8-K filed on March 6, 1998.
5. Tyco's Current Report on Form 8-K filed on March 11, 1998.
6. Tyco's Current Report on Form 8-K filed on April 23, 1998.
2
<PAGE>
All documents filed by Tyco with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of Debt Securities made hereby
shall be deemed to be incorporated by reference into this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Tyco and the Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, including any beneficial owner of Debt
Securities, upon the written or oral request of any such person, a copy of any
and all of the documents that have been or may be incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to J. Brad McGee, Senior Vice President, Tyco International
(US) Inc., One Tyco Park, Exeter, New Hampshire 03833 (telephone: (603)
778-9700).
TYCO INTERNATIONAL LTD.
Tyco International Ltd., a Bermuda company ("Tyco"), through its
subsidiaries, is a diversified manufacturing and service company that operates
in four segments: (i) the design, manufacture and distribution of disposable
medical supplies and other specialty products, and the conduct of vehicle
auctions and related services; (ii) the design, manufacture, installation and
service of fire detection and suppression systems, and the installation,
monitoring and maintenance of electronic security systems; (iii) the design,
manufacture and distribution of flow control products; and (iv) the design,
manufacture and distribution of electrical and electronic components, and the
design, manufacture, installation and service of undersea cable communication
systems.
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
On July 2, 1997, Tyco International Ltd., a Massachusetts corporation
("Former Tyco"), merged with a subsidiary of Tyco, with Tyco being the
continuing public company. In connection with the merger, Tyco changed its name
from ADT Limited ("ADT") to Tyco International Ltd.
Tyco's registered and principal executive offices are located at The Gibbons
Building, 10 Queen Street, Hamilton HM11, Bermuda, and its telephone number is
(441) 292-8674. The executive offices of Tyco's principal United States
subsidiary, Tyco International (US) Inc., are located at One Tyco Park, Exeter,
New Hampshire 03833, and its telephone number is (603) 778-9700.
THE COMPANY
Tyco International Group S.A., a Luxembourg company (the "Company"), is a
direct wholly-owned subsidiary of Tyco. The registered and principal executive
offices of the Company are located at Boulevard Royal, 26, Sixth Floor, L-2449
Luxembourg, and its telephone number is (352) 22-9999-5204. Through its
subsidiaries, the Company owns substantially all of the assets, and engages in
substantially all of the businesses, owned or engaged in by Tyco.
3
<PAGE>
ENFORCEMENT OF CIVIL LIABILITIES
The Company and Tyco have consented in the Indenture (as herein defined) to
jurisdiction in the United States federal and state courts in The City of New
York and to service of process in The City of New York in any legal suit, action
or proceeding brought to enforce any rights under or with respect to the
Indenture, the Debt Securities and the Guarantees. However, substantially all of
the Company's directly held assets consists of shares in its wholly-owned
subsidiary Tyco Group S.a.r.l., a Luxembourg company which, through its
subsidiaries, owns substantially all of the assets of the Company. Substantially
all of Tyco's directly held assets consists of shares in the Company.
Accordingly, any judgment against the Company or Tyco in respect of the
Indenture, the Debt Securities or the Guarantees, including for civil
liabilities under the United States federal securities laws, obtained in any
United States federal or state court may have to be enforced in the courts of
Luxembourg. Investors should not assume that the courts of Luxembourg would
enforce judgments of United States courts obtained against the Company or Tyco
predicated upon the civil liability provisions of the United States federal
securities laws or that such courts would enforce, in original actions,
liabilities against the Company or Tyco predicated solely upon such laws.
USE OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities to
refinance, in part, existing indebtedness, to finance recently announced
acquisitions and for general corporate purposes. Funds not required immediately
for such purposes may be invested temporarily in short-term marketable
securities.
RATIO OF EARNINGS TO FIXED CHARGES OF TYCO
The following table sets forth the ratio of earnings to fixed charges for
Tyco for the three months ended December 31, 1997, the nine month transitional
fiscal year ended September 30, 1997, and the years ended December 31, 1996,
1995, 1994 and 1993.
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR YEAR ENDED DECEMBER
ENDED ENDED 31,
DECEMBER SEPTEMBER 30, ----------------------
31, 1997 1997(3) 1996 1995
----------------- ------------------- ----- ---------
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)(2)........................ 6.37 (4) (4) 3.00
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Ratio of earnings to fixed charges(1)(2)........................ 3.33 2.76
</TABLE>
- ------------------------
(1) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, cumulative effect of change in
accounting methods and extraordinary items, and fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt expenses and
one-third of rent expense which is deemed representative of an interest
factor.
(2) On July 2, 1997, a wholly-owned subsidiary of Tyco merged with Former Tyco.
On August 27, 1997, Tyco consummated a merger with INBRAND, and, on August
29, 1997, Tyco consummated a merger with Keystone. Each of the three merger
transactions qualifies for pooling of interests basis of accounting. As
such, the ratio of earnings to fixed charges for the nine months ended
September 30, 1997 and the years ended December 31, 1996, 1995, 1994 and
1993 include the effect of the mergers, except that the calculation
presented above for periods prior to January 1, 1997 does not include
INBRAND due to immateriality.
Prior to the respective mergers, ADT and Keystone had calendar year ends and
Former Tyco had a June 30 fiscal year end. The historical results upon which
the ratios are based have been combined using a calendar year end for ADT,
Keystone and Former Tyco for the year ended December 31, 1996. For 1995,
1994, and 1993, the ratio of earnings to fixed charges reflects the
combination of ADT and Keystone with a calendar year end and Former Tyco
with a June 30 fiscal year end.
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<PAGE>
(3) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. The fiscal year ended September 30, 1997 represents the nine
month period ended September 30, 1997.
(4) Earnings were insufficient to cover fixed charges by $589.7 million and
$61.2 million in 1997 and 1996, respectively.
Earnings for the nine months ended September 30, 1997 and the year ended
December 31, 1996 included merger, restructuring and other nonrecurring
charges of $917.8 million and $246.1 million, respectively. Earnings also
include a charge for the impairment of long-lived assets of $148.4 million
and $744.7 million, respectively, in the 1997 and 1996 periods. The 1997
period also includes a write off of purchased in-process research and
development of $361.0 million.
On a pro forma basis the ratio of earnings to fixed charges excluding merger,
restructuring and other nonrecurring charges, charge for the impairment of
long-lived assets and write-off of purchased in-process research and
development would have been 5.44x and 4.68x for the nine months ended
September 30, 1997 and year ended December 31, 1996, respectively.
5
<PAGE>
DESCRIPTION OF THE DEBT SECURITIES AND THE GUARANTEES
The Debt Securities and the Guarantees offered hereby will be issued under
an indenture (hereinafter the "Indenture"), among the Company, Tyco and the
trustee thereunder (hereinafter referred to as the "Trustee"). The following
statements are subject to the detailed provisions of the Indenture, a copy of
which is filed as an exhibit to this Registration Statement. The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indenture and the Debt Securities and
the Guarantees to be issued thereunder are summaries of certain provisions
thereof, do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture and such Debt
Securities and Guarantees. Capitalized terms used but not defined herein shall
have the respective meanings set forth in the Indenture.
The particular terms of the Debt Securities and the Guarantees offered by a
Prospectus Supplement will be described in such Prospectus Supplement, along
with any applicable modifications of or additions to the general terms of the
Debt Securities and the Guarantees as described herein and in the Indenture or
in any supplemental indenture thereto and any applicable material income tax
considerations. Accordingly, for a description of the terms of any series of
Debt Securities and Guarantees, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities and the
Guarantees set forth in this Prospectus.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that the Debt Securities
may be issued from time to time in one or more series unless otherwise provided
in any supplemental indenture and the applicable Prospectus Supplement.
Unless otherwise provided in any supplemental indenture and specified in the
applicable Prospectus Supplement, Debt Securities offered pursuant to this
Prospectus will be direct, unsecured and unsubordinated obligations of the
Company and will rank equally with other unsecured and unsubordinated
obligations of the Company for money borrowed. The Debt Securities will be
effectively subordinated to all existing and future indebtedness and other
liabilities of the Company's subsidiaries. The Debt Securities will be fully and
unconditionally guaranteed by Tyco. Except as described under "Certain
Covenants" and as may be provided in any supplemental indenture and set forth in
the applicable Prospectus Supplement, the Indenture does not limit other
indebtedness or securities which may be incurred or issued by the Company or any
of its subsidiaries or contain financial or similar restrictions on the Company
or any of its subsidiaries. Except as may be provided in any supplemental
indenture and set forth in the applicable Prospectus Supplement, the Company's
rights and the rights of its creditors, including holders of Debt Securities, to
participate in any distribution of assets of any subsidiary upon the latter's
liquidation or reorganization or otherwise will be effectively subordinated to
the claims of the subsidiary's creditors, except to the extent that the Company
or any of its creditors may itself be a creditor of that subsidiary.
A Prospectus Supplement will set forth where applicable the following terms
of and information relating to the Debt Securities offered pursuant to this
Prospectus: (i) the designation of the Debt Securities; (ii) the aggregate
principal amount of the Debt Securities; (iii) the date or dates on which
principal of, and premium, if any, on the Debt Securities is payable; (iv) the
rate or rates at which the Debt Securities shall bear interest, if any, or the
method by which such rate shall be determined, the date or dates from which
interest will accrue and on which such interest will be payable and the related
record dates; (v) if other than the offices of the Trustee, the place where the
principal of and any premium or interest on the Debt Securities will be payable;
(vi) any redemption, repayment or sinking fund provisions; (vii) if other than
denominations of $1,000 or multiples thereof, the denominations in which the
Debt Securities will be issuable; (viii) if other than the principal amount
thereof, the portion of the principal amount due upon acceleration; (ix) whether
the Debt Securities shall be issued in the form of a global security or
securities; (x) any other specific terms of the Debt Securities (which may, for
example, include
6
<PAGE>
the currency, and any index used to determine the amount, of payment of
principal of and any premium and interest on the Debt Securities); and (xi) if
other than the Trustee, the identity of any trustees, paying agents, transfer
agents or registrars with respect to the Debt Securities.
Unless otherwise provided in any supplemental indenture and specified in the
applicable Prospectus Supplement, Debt Securities offered pursuant to this
Prospectus will be issued either in certificated, fully registered form, without
coupons, or as global notes under a book-entry system.
Upon receipt of an authentication order from the Company together with any
other documentation required by the Indenture or any supplemental indenture
thereto, the Trustee will authenticate Debt Securities in the appropriate form
and for the amount specified in the applicable Prospectus Supplement and the
supplemental indenture relating thereto.
Unless otherwise provided in any supplemental indenture and specified in the
applicable Prospectus Supplement, principal and premium, if any, will be
payable, and the Debt Securities offered pursuant to this Prospectus will be
transferable and exchangeable without any service charge, at the office of the
Trustee. However, the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection with any such
transfer or exchange.
Interest, if any, on any series of Debt Securities offered pursuant to this
Prospectus will be payable on the interest payment dates set forth in the
accompanying Prospectus Supplement to the persons described in the accompanying
Prospectus Supplement.
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, there are no covenants or provisions contained
in the Indenture which afford the holders of Debt Securities offered pursuant to
this Prospectus protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company. The consummation of any highly leveraged transaction, reorganization,
restructuring, merger or similar transaction could cause a material decline in
the credit quality of the outstanding Debt Securities.
GUARANTEES
Tyco will unconditionally guarantee the due and punctual payment of the
principal of, premium, if any, and interest and any Additional Amounts (as
defined below under "Payment of Additional Amounts"), if any, on the Debt
Securities when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise. The Guarantees are unsecured and
unsubordinated obligations of Tyco and will rank equally with all other
unsecured and unsubordinated obligations of Tyco. The Guarantees provide that in
the event of a default in payment of principal of, premium, if any, or interest
on a Debt Security, the holder of the Debt Security may institute legal
proceedings directly against Tyco to enforce the Guarantees without first
proceeding against the Company. In addition, under certain circumstances
described under "Certain Covenants--Limitation on Indebtedness of Subsidiaries,"
subsidiaries of the Company (collectively with Tyco, the "Guarantors") may
execute and deliver additional Guarantees.
The obligations of Tyco and any other Guarantor, if any, under their
respective Guarantees are limited to the maximum amount which, after giving
effect to any collections from or payments made by or on behalf of any other
Guarantors in respect of the obligations of such other Guarantors under their
respective Guarantees or pursuant to their contribution obligations under the
Indenture, will result in the obligations of such Guarantors under their
Guarantees not constituting a fraudulent conveyance or fraudulent transfer under
applicable law. Each Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Guarantor to the
extent permitted by applicable law.
REDEMPTION UPON CHANGES IN WITHHOLDING TAXES
The Debt Securities of any series may be redeemed, as a whole but not in
part, at the election of the Company, upon not less than 30 nor more than 60
days notice (which notice shall be irrevocable), at a redemption price equal to
100% of the principal amount thereof, together with accrued interest, if any, to
7
<PAGE>
the redemption date and Additional Amounts, if any, if as a result of any
amendment to, or change in, the laws or regulations of Luxembourg or any
political subdivision or taxing authority thereof or therein having power to tax
(a "Taxing Authority"), or any change in the application or official
interpretation of such laws or regulations which amendment or change becomes
effective after the date the applicable Debt Securities are issued, the Company
has become or will become obligated to pay Additional Amounts, on the next date
on which any amount would be payable with respect to the Debt Securities of such
series, and such obligation cannot be avoided by the use of reasonable measures
available to the Company; PROVIDED, HOWEVER, that (a) no such notice of
redemption may be given earlier than 60 days prior to the earliest date on which
the Company would be obligated to pay such Additional Amounts, and (b) at the
time such notice of redemption is given, such obligation to pay such Additional
Amounts remains in effect. Prior to the giving of any notice of redemption
described in this paragraph, the Company shall deliver to the Trustee (i) a
certificate signed by two directors of the Company stating that the obligation
to pay Additional Amounts cannot be avoided by the Company taking reasonable
measures available to it and (ii) a written opinion of independent legal counsel
to the Company of recognized standing to the effect that the Company has or will
become obligated to pay Additional Amounts as a result of a change, amendment,
official interpretation or application described above and that the Company
cannot avoid the payment of such Additional Amounts by taking reasonable
measures available to it.
PAYMENT OF ADDITIONAL AMOUNTS
All payments made by the Company and Tyco under or with respect to the Debt
Securities and the Guarantees will be made free and clear of and without
withholding or deduction for or on account of any present or future taxes,
duties, levies, imposts, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of any Taxing Authority ("Taxes"), unless the
Company or Tyco, as the case may be, is required to withhold or deduct Taxes by
law or by the interpretation or administration thereof. In the event that the
Company or Tyco is required to so withhold or deduct any amount for or on
account of any Taxes from any payment made under or with respect to the Debt
Securities or the Guarantees, as the case may be, the Company or Tyco, as the
case may be, will pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each holder of Debt Securities
(including Additional Amounts) after such withholding or deduction will equal
the amount that such holder would have received if such Taxes had not been
required to be withheld or deducted; provided that no Additional Amounts will be
payable with respect to a payment made to a holder of Debt Securities to the
extent:
(a) that any such Taxes would not have been so imposed but for the
existence of any present or former connection between such holder and the
Taxing Authority imposing such Taxes (other than the mere receipt of such
payment, acquisition, ownership or disposition of such Debt Securities or
the exercise or enforcement of rights under such Debt Securities, the
Guarantees or the Indenture);
(b) of any estate, inheritance, gift, sales, transfer, or personal
property Taxes imposed with respect to such Debt Securities, except as
otherwise provided herein;
(c) that any such Taxes would not have been so imposed but for the
presentation of such Debt Securities (where presentation is required) for
payment on a date more than 30 days after the date on which such payment
became due and payable or the date on which payment thereof is duly provided
for, whichever is later, except to the extent that the beneficiary or holder
thereof would have been entitled to Additional Amounts had the Debt
Securities been presented for payment on any date during such 30-day period;
or
(d) that such holder would not be liable or subject to such withholding
or deduction of Taxes but for the failure to make a valid declaration of
non-residence or other similar claim for exemption, if (x) the making of
such declaration or claim is required or imposed by statute, treaty,
regulation, ruling or administrative practice of the relevant Taxing
Authority as a precondition to an exemption from, or reduction in, the
relevant Taxes, and (y) at least 60 days prior to the first payment date
with respect to
8
<PAGE>
which the Company or Tyco shall apply this clause (d), the Company or Tyco
shall have notified all holders of Debt Securities in writing that they
shall be required to provide such declaration or claim.
The Company and Tyco, as applicable, will also (i) make such withholding or
deduction of Taxes and (ii) remit the full amount of Taxes so deducted or
withheld to the relevant Taxing Authority in accordance with all applicable
laws. The Company and Tyco, as applicable, will use their reasonable best
efforts to obtain certified copies of tax receipts evidencing the payment of any
Taxes so deducted or withheld from each Taxing Authority imposing such Taxes.
The Company or Tyco, as the case may be, will, upon request, make available to
the holders of the Debt Securities, within 60 days after the date the payment of
any Taxes so deducted or withheld is due pursuant to applicable law, certified
copies of tax receipts evidencing such payment by the Company or Tyco or if,
notwithstanding the Company's or Tyco's efforts to obtain such receipts, the
same are not obtainable, other evidence of such payments by the Company or Tyco.
At least 30 days prior to each date on which any payment under or with
respect to the Debt Securities is due and payable, if the Company or Tyco will
be obligated to pay Additional Amounts with respect to such payment, the Company
or Tyco will deliver to the Trustee an officer's certificate stating the fact
that such Additional Amounts will be payable, the amounts so payable and such
other information as is necessary to enable such Trustee to pay such Additional
Amounts to holders of Debt Securities on the payment date.
The foregoing provisions shall survive any termination of the discharge of
the Indenture and shall apply mutatis mutandis to any jurisdiction in which any
successor Person to the Company or Tyco, as the case may be, is organized or is
engaged in business for tax purposes or any political subdivisions or taxing
authority or agency thereof or therein.
In addition, the Company will pay any stamp, issue, registration,
documentary or other similar taxes and duties, including interest, penalties and
Additional Amounts with respect thereto, payable in Luxembourg or the United
States or any political subdivision or taxing authority of or in the foregoing
in respect of the creation, issue, offering, enforcement, redemption or
retirement of the Debt Securities.
Whenever in the Indenture, the Debt Securities, in the "Description of the
Notes and the Guarantees" in any Prospectus Supplement or in this "Description
of the Debt Securities and the Guarantees" there is mentioned, in any context,
the payment of principal (and premium, if any), redemption price, interest or
any other amount payable under or with respect to any Debt Security, such
mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
BOOK-ENTRY SYSTEM
If so specified in the applicable Prospectus Supplement, Debt Securities of
any series offered pursuant to this Prospectus may be issued under a book-entry
system in the form of one or more global securities ("Global Securities"). Each
Global Security will be deposited with, or on behalf of, a depositary, which,
unless otherwise specified in the accompanying Prospectus Supplement, will be
The Depository Trust Company, New York, New York (the "Depositary"). The Global
Securities will be registered in the name of the Depositary or its nominee. The
specific terms of the depositary arrangement with respect to any series of Debt
Securities, or portion thereof, to be represented by a Global Security will be
provided in the supplemental indenture relating thereto and described in the
applicable Prospectus Supplement.
The Depositary has advised the Company as follows: the Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of Persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates.
9
<PAGE>
The Depositary's participants include securities brokers and dealers, banks,
trust companies and clearing corporations, and may include certain other
organizations. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Global Security to
the accounts of participants. The accounts to be credited will be designated by
the underwriters or agents, if any, or by the Company, if such Debt Securities
are offered and sold directly by the Company. Ownership of beneficial interests
in the Global Security will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in the Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in the Global Security by persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary or its nominee is the registered owner of a Global
Security, it will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture. Except
as set forth below, owners of beneficial interests in such Global Security will
not be entitled to have the Debt Securities represented thereby registered in
their names, will not receive or be entitled to receive physical delivery of
certificates representing the Debt Securities and will not be considered the
owners or holders thereof under the Indenture.
Payment of principal of, premium, if any, and any interest on Debt
Securities represented by a Global Security will be made to the Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security. None of the Company, the Guarantor, the Trustee, any paying
agent or registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interest in the Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been advised by the Depositary that the Depositary will
credit participants' accounts with payments of principal, premium, if any, or
interest on the payment date thereof in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depositary. The Company expects that payments by
participants to owners of beneficial interests in the Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the account of
customers registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole to a nominee or
successor of the Depositary. If the Depositary is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within ninety days, the Company will issue certificates in
registered form in exchange for the Global Security or securities representing
the Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have Debt Securities of a series represented by a
Global Security and, in such event, will issue certificates in definitive form
in exchange for the Global Security representing such Debt Securities.
CERTAIN COVENANTS
Other than the covenants described below, any covenants, including any
restrictive covenants, of the Company with respect to any series of Debt
Securities will be provided in a supplemental indenture and described in the
applicable Prospectus Supplement.
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<PAGE>
LIMITATIONS ON LIENS. The Company covenants that, so long as any Debt
Securities remain outstanding (but subject to defeasance, as provided in the
Indenture), it will not, and will not permit any Restricted Subsidiary (as
defined below) to, issue, assume or guarantee any Indebtedness (as defined
below) which is secured by a mortgage, pledge, security interest, lien or
encumbrance (each a "lien") upon any Principal Property (as defined below), or
any shares of stock of or Indebtedness issued by any Restricted Subsidiary,
whether now owned or hereafter acquired, without effectively providing that, for
so long as such lien shall continue in existence with respect to such secured
Indebtedness, the Debt Securities (together with, if the Company shall so
determine, any other Indebtedness of the Company ranking equally with the Debt
Securities) shall be equally and ratably secured with (or at the Company's
option prior to) such secured Indebtedness, except that the foregoing covenant
shall not apply to (a) liens existing on the date the applicable Debt Securities
are issued; (b) liens on the stock, assets or Indebtedness of a Person existing
at the same time such Person becomes a Restricted Subsidiary unless created in
contemplation of such Restricted Subsidiary becoming such; (c) liens on any
assets or Indebtedness of a Person existing at the time such entity is merged
into the Company or a Subsidiary or at the time of a purchase, lease or other
acquisition of the assets of a Person or firm as an entirety or substantially as
an entirety by the Company or a Restricted Subsidiary; (d) liens on any
Principal Property existing at the time of acquisition thereof by the Company or
any Restricted Subsidiary, or liens to secure the payment of the purchase price
of such Principal Property, or to secure Indebtedness incurred, assumed or
guaranteed by the Company or a Restricted Subsidiary for the purpose of
financing all or any part of the purchase price of such Principal Property or
improvements or construction thereon, which Indebtedness is incurred, assumed or
guaranteed prior to, at the time of, or within one year after such acquisition
(or in the case of real property, completion of such improvement or construction
or commencement of full operation of such property, whichever is later); (e)
liens securing Indebtedness owing by any Restricted Subsidiary to the Company,
Tyco or a Subsidiary or by the Company to Tyco; (f) liens in favor of the United
States of America or any State thereof or any other country, or political
subdivision thereof, to secure partial, progress, advance or other payments
pursuant to any contract, statute, rule or regulation or to secure any
Indebtedness incurred or guaranteed for the purpose of financing all or any part
of the purchase price (or, in the case of real property, the cost of
construction or improvement) of the Principal Property subject to such liens
(including but not limited to, liens incurred in connection with pollution
control, industrial revenue or similar financings); (g) pledges, liens or
deposits under worker's compensation or similar legislation, or in connection
with bids, tenders, contracts (other than for the payment of money) or leases to
which the Company or any Restricted Subsidiary is a party, or to secure the
public or statutory obligations of the Company or any Restricted Subsidiary, or
in connection with obtaining or maintaining self-insurance, or to obtain the
benefits of any law, regulation or arrangement pertaining to unemployment
insurance, old age pensions, social security or similar matters, or to secure
surety, performance, appeal or customs bonds to which the Company or any
Restricted Subsidiary is a party, or in litigation or other proceedings in
connection with the matters heretofore referred to in this clause, such as, but
not limited to, interpleader proceedings, and other similar pledges, liens or
deposits made or incurred in the ordinary course of business; (h) certain liens
in connection with legal proceedings, including certain liens arising out of
judgments or awards, to the extent such proceedings are being contested or
appealed in good faith; final unappealable judgment liens which are satisfied
within 15 days of the date of judgment; or liens incurred for the purpose of
obtaining a stay or discharge in the course of any litigation or other
proceeding; (i) liens for certain taxes or assessments, landlord's liens and
liens and charges incidental to the conduct of the business of the Company or
any Restricted Subsidiary, or the ownership of their respective assets, which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not, in the opinion of the Board of Directors of
the Company, materially impair the use of such assets in the operation of the
business of the Company or such Restricted Subsidiary or the value of such
Principal Property for the purposes thereof; (j) liens to secure the Company's
or any Restricted Subsidiary's obligations under agreements with respect to
spot, forward, future and option transactions, entered into in the ordinary
course of business; (k) liens not permitted by the foregoing clauses (a) to (j),
inclusive, if at the time of, and after giving effect to, the creation or
assumption of such lien, the aggregate amount of
11
<PAGE>
all outstanding Indebtedness of the Company and its Restricted Subsidiaries
(without duplication) secured by all liens not so permitted by the foregoing
clauses (a) through (j), inclusive, together with the Attributable Debt (as
defined below) in respect of Sale and Lease-Back Transactions (as defined below)
permitted by paragraph (a) under "Limitation on Sale and Lease-Back
Transactions" below does not exceed the greater of $100,000,000 and 10% of
Consolidated Net Worth (as defined below); and (l) any extension, renewal or
replacement (or successive extensions, renewals or replacements) in whole or in
part, of any lien referred to in the foregoing clauses (a) to (k), inclusive,
except that the principal amount of Indebtedness secured thereby unless
otherwise excepted under clauses (a) through (k) shall not exceed the principal
amount of Indebtedness so secured at the time of such extension, renewal or
replacement and that such extension, renewal or replacement shall be limited to
all or part of the assets (or any replacement therefor) which secured the lien
so extended, renewed or replaced (plus improvements and construction on real
property).
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Company will not, and
will not permit any Restricted Subsidiary to, enter into any Sale and Lease-Back
Transaction with respect to a Principal Property unless (a) the Company or such
Restricted Subsidiary would, at the time of entering into a Sale and Lease-Back
Transaction, be entitled to incur Indebtedness secured by a lien on the
Principal Property to be leased in an amount at least equal to the Attributable
Debt in respect of such transaction, without equally and ratably securing the
Debt Securities pursuant to the provisions described under "Limitations on
Liens" above, or (b) the direct or indirect proceeds of the sale of the
Principal Property to be leased are at least equal to their fair value (as
determined by the Company's Board of Directors) and an amount equal to the net
proceeds is applied, within 180 days of the effective date of such transaction,
to the purchase or acquisition (or, in the case of real property, commencement
of the construction) of property or assets or to the retirement (other than at
maturity or pursuant to a mandatory sinking fund or mandatory redemption
provision) of Debt Securities, or of Funded Indebtedness (as defined below) of
the Company or a consolidated Subsidiary of the Company that ranks on a parity
with or senior to the Debt Securities (subject to credits for certain voluntary
retirement of Funded Indebtedness and certain delivery of Debt Securities to the
Trustee for retirement and cancellation).
LIMITATION ON INDEBTEDNESS OF SUBSIDIARIES. (a) The Company will not cause
or permit any Subsidiary (which is not a Guarantor), directly or indirectly, to
create, incur, assume, guarantee or otherwise in any manner become liable for
the payment of or otherwise incur (collectively, "incur"), any Indebtedness
(including any Acquired Indebtedness but excluding any Permitted Subsidiary
Indebtedness) unless such Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a Guarantee of the Debt Securities.
(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary of the Debt
Securities shall provide by its terms that it (and all liens securing the same)
shall be automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's equity interests in, or all or substantially all the assets
of, such Subsidiary, which transaction is in compliance with the terms of the
Indenture and such Subsidiary is released from all guarantees, if any, by it of
other Indebtedness of the Company or any Subsidiaries, (ii) the payment in full
of all obligations under the Indebtedness giving rise to such Guarantee or (iii)
with respect to Indebtedness described in clause (a) above constituting
guarantees, the release by the holders of such Indebtedness of the guarantee by
such Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness), at such time as (A) no other Indebtedness
(other than Permitted Subsidiary Indebtedness) has been guaranteed by such
Subsidiary, as the case may be, or (B) the holders of all such other
Indebtedness which is guaranteed by such Subsidiary also release the guarantee
by such Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness).
(c) For purposes of this covenant, any Acquired Indebtedness shall not be
deemed to have been incurred until 180 days from the date (A) the Person
obligated on such Acquired Indebtedness becomes a
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Subsidiary or (B) the acquisition of assets in connection with which such
Acquired Indebtedness was assumed is consummated.
DEFINITIONS. "Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Restricted Subsidiary or (ii) assumed
in connection with the acquisition of assets by such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person;
or (iii) any other Person 10% or more of the Voting Stock of which is
beneficially owned or held directly or indirectly by such specified Person. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Attributable Debt" means in connection with a Sale and Lease-Back
Transaction, as of any particular time, the aggregate of present values
(discounted at a rate per annum equal to the average interest borne by all
outstanding Debt Securities determined on a weighted average basis and
compounded semi-annually) of the obligations of the Company or any Restricted
Subsidiary for net rental payments during the remaining term of the applicable
lease (including any period for which such lease has been extended or may, at
the option of the lessor, be extended). The term "net rental payments" under any
lease of any period shall mean the sum of the rental and other payments required
to be paid in such period by the lessee thereunder, not including, however, any
amounts required to be paid by such lessee (whether or not designated as rental
or additional rental) on account of maintenance and repairs, reconstruction,
insurance, taxes, assessments, water rates or similar charges required to be
paid by such lessee thereunder or any amounts required to be paid by such lessee
thereunder contingent upon the amount of sales, maintenance and repairs,
reconstruction, insurance, taxes, assessments, water rates or similar charges.
"Capital Stock" of any Person means any and all shares, interests,
participations, rights in or other equivalents (however designated) of such
Person's capital stock, other equity interests whether now outstanding or issued
after the date of the Indenture, partnership interests (whether general or
limited), any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person and any rights (other than debt securities convertible into
Capital Stock), warrants or options exchangeable for or convertible into such
Capital Stock.
"Consolidated Net Worth" means, at any date, the total assets less the total
liabilities, in each case appearing on the most recently prepared consolidated
balance sheet of the Company and its subsidiaries as of the end of a fiscal
quarter of the Company, prepared in accordance with United States generally
accepted accounting principles as in effect on the date of calculation.
"Consolidated Tangible Assets" means, at any date, the total assets less all
intangible assets appearing on the most recently prepared consolidated balance
sheet of the Company and its subsidiaries as of the end of a fiscal quarter of
the Company, prepared in accordance with United States generally accepted
accounting principles as in effect on the date of calculation. "Intangible
Assets" means the amount (if any) which would be stated under the heading "Costs
in Excess of Net Assets of Acquired Companies" or under any other heading
relating to intangible assets separately listed, in each case on the face of the
aforesaid consolidated balance sheet.
"Funded Indebtedness" means any Indebtedness maturing by its terms more than
one year from the date of the determination thereof, including any Indebtedness
renewable or extendible at the option of the obligor to a date later than one
year from the date of the determination thereof.
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"Guarantee" means the unconditional and unsubordinated guarantee by Tyco or
any Guarantor of the due and punctual payment of the principal of and interest
on the Debt Securities (including premium and Additional Amounts, if any) when
and as the same shall become due and payable, whether at the stated maturity, by
acceleration, call for redemption or otherwise, in accordance with the terms of
such Debt Securities and the Indenture.
"Guarantor" means Tyco or any Subsidiary that after the date of the
Indenture executes a guarantee of the Debt Securities contemplated by the
"Limitation on Indebtedness of Subsidiaries" covenant, until a successor
replaces such party pursuant to the applicable provisions of the Indenture and,
thereafter, shall mean such successor.
"Indebtedness" means, without duplication, the principal or face amount of
(i) all obligations for borrowed money, (ii) all obligations evidenced by
debentures, notes or other similar instruments, (iii) all obligations in respect
of letters of credit or bankers acceptances or similar instruments (or
reimbursement obligations with respect thereto), (iv) all obligations to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (v) all obligations as lessee which
are capitalized in accordance with United States generally accepted accounting
principles, and (vi) all Indebtedness of others guaranteed by the Company or any
of its Subsidiaries or for which the Company or any of its Subsidiaries is
legally responsible or liable (whether by agreement to purchase indebtedness of,
or to supply funds or to invest in, others).
"Permitted Subsidiary Indebtedness" means any of the following: (i)
Indebtedness in an aggregate amount, without duplication, not to exceed, as of
the date of determination, 5% of the Consolidated Tangible Assets of the Company
(excluding any Indebtedness described in clauses (ii) through (viii) herein);
(ii) Indebtedness owed to the Company, Tyco or any Subsidiary; (iii) obligations
under standby letters of credit or similar arrangements supporting the
performance of a Person under a contract or agreement in the ordinary course of
business; (iv) obligations as lessee in the ordinary course of business which
are capitalized in accordance with United States generally accepted accounting
principles; (v) Indebtedness that was Permitted Subsidiary Indebtedness at the
time that it was first incurred; (vi) Acquired Indebtedness that by its terms is
not callable or redeemable prior to its stated maturity and that remains
outstanding following such time as the Subsidiary obligated under such Acquired
Indebtedness in good faith has made or caused to be made an offer to acquire all
such Indebtedness, including, without limitation, an offer to exchange such
Indebtedness for securities of the Company, on terms which, in the opinion of an
independent investment banking firm of national reputation and standing, are
consistent with market practices in existence at the time for offers of a
similar nature, provided that the initial expiration date of any such offer
shall be not later than the expiration of the time period set forth in paragraph
(c) of the "Limitation of Indebtedness of Subsidiaries" covenant; (vii)
Indebtedness outstanding on the date of the Indenture and (viii) any renewals,
extensions, substitutions, refundings, refinancings or replacements
(collectively, a "refinancing") of any Indebtedness referred to in clause (vii)
of this definition of "Permitted Subsidiary Indebtedness" of a Subsidiary
organized under a jurisdiction other than the United States or any State thereof
or the District of Columbia, including any successive refinancings so long as
the borrower under such refinancing is such Subsidiary and the aggregate
principal amount of Indebtedness represented thereby (or if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, the original
issue price of such Indebtedness plus any accreted value attributable thereto
since the original issuance of such Indebtedness) is not increased by such
refinancing plus the lesser of (A) the stated amount of any premium or other
payment required to be paid in connection with such a refinancing pursuant to
the terms of the Indebtedness being refinanced or (B) the amount of premium or
other payment actually paid at such time to refinance the Indebtedness, plus, in
either case, the amount of expenses of such Restricted Subsidiary incurred in
connection with such refinancing.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
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"Principal Property" means any manufacturing, processing or assembly plant
or facility or any warehouse or distribution facility which is used by any U.S.
Subsidiary after the date hereof, other than any such plants, facilities,
warehouses or portions thereof, which in the opinion of the Board of Directors
of the Company, are not collectively of material importance to the total
business conducted by the Company and its Restricted Subsidiaries as an
entirety, or which, in each case, has a book value, on the date of the
acquisition or completion of the initial construction thereof by the Company, of
less than 1.5% of Consolidated Tangible Assets.
"Restricted Subsidiary" means any Subsidiary which owns or leases a
Principal Property.
"Sale and Lease-Back Transaction" means an arrangement with any Person
providing for the leasing by the Company or a Restricted Subsidiary of any
Principal Property whereby such Principal Property has been or is to be sold or
transferred by the Company or a Restricted Subsidiary to such Person; provided,
however, that the foregoing shall not apply to any such arrangement involving a
lease for a term, including renewal rights, for not more than three years.
"Subsidiary" means any corporation of which at least a majority of the
outstanding Voting Stock shall at the time directly or indirectly be owned or
controlled by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries.
"Voting Stock" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time Capital Stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
MERGER, CONSOLIDATION, SALE OR CONVEYANCE
The Indenture provides that unless otherwise provided in any supplemental
indenture and described in the applicable Prospectus Supplement, neither the
Company, Tyco nor any other Guarantor will merge or consolidate with any other
corporation and will not sell or convey all or substantially all of its assets
to any Person, unless the Company, Tyco or such other Guarantor, as the case may
be, shall be the continuing corporation, or the successor corporation or Person
that acquires all or substantially all of the assets of the Company, Tyco or
such other Guarantor, as the case may be, shall expressly assume the payment of
principal of, premium, if any, and interest on the Debt Securities and the
observance of all the covenants and agreements under the Indenture to be
performed or observed by the Company, Tyco or such other Guarantor, as the case
may be, and immediately after such merger, consolidation, sale or conveyance,
the Company, Tyco or such other Guarantor, as the case may be, such Person or
such successor corporation shall not be in default in the performance of the
covenants and agreements of the Indenture to be performed or observed by the
Company, Tyco or such other Guarantor, as the case may be; provided that the
foregoing shall not apply to a Guarantor other than Tyco if in connection with
any such merger, consolidation, sale or conveyance the Guarantee of such
Guarantor is released and discharged pursuant to paragraph (b) of the
"Limitation on Indebtedness of Subsidiaries" covenant.
EVENTS OF DEFAULT
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, an Event of Default with respect to Debt
Securities of any series issued under the Indenture is defined in the Indenture
as being: default for 30 days in payment of any interest on any Debt Securities
of such series; default in any payment of principal of or premium, if any, on
any Debt Securities of such series (including any sinking fund payment); default
by the Company, Tyco or any other Guarantor in performance of any other of the
covenants or agreements in respect of the Debt Securities of such series and
related Guarantees or the Indenture which shall not have been remedied for a
period of 90 days after written notice to the Company by the Trustee or the
holders of at least 25% of the principal amount of all Debt Securities of all
affected series, as provided in the supplemental indenture relating thereto and
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described in the applicable Prospectus Supplement, specifying that such notice
is a "Notice of Default" under the Indenture; default by the Company, Tyco or
any other Guarantor in the payment at the final maturity thereof, after the
expiration of any applicable grace period, of principal of, premium, if any, or
interest on Indebtedness for money borrowed (other than Non-Recourse
Indebtedness, as defined) in the principal amount then outstanding of
$50,000,000 or more, or acceleration of any Indebtedness in such principal
amount so that it becomes due and payable prior to the date on which it would
otherwise have become due and payable and such acceleration is not rescinded
within ten business days after notice to the Company by the Trustee or the
holders of at least 25% of the principal amount of all of the Debt Securities at
the time outstanding (treated as one class); any Guarantee ceases to be, or the
Company or any Guarantor asserts in writing that such Guarantee is not in full
force and effect and enforceable in accordance with its terms; certain events
involving bankruptcy, insolvency or reorganization of the Company, Tyco or any
Significant Subsidiary Guarantor; or any other Event of Default established for
the Debt Securities of such series set forth in the accompanying Prospectus
Supplement. Unless otherwise provided in any supplemental indenture and
described in the applicable Prospectus Supplement, the Indenture provides that
the Trustee shall transmit notice of any uncured default under the Indenture
with respect to any series, within 90 days after the occurrence of such default,
to the holders of Debt Securities of each affected series, except that the
Trustee may withhold notice to the holders of any series of the Debt Securities
of any default (except in payment of principal of, premium, if any, or interest
on such series of Debt Securities) if the Trustee considers it in the interest
of the holders of such series of Debt Securities to do so.
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, (a) if an Event of Default due to the default
in payment of principal of, premium, if any, or interest on any series of Debt
Securities issued under the Indenture or due to the default in the performance
or breach of any other covenant or agreement of the Company, Tyco or any
Guarantor applicable to the Debt Securities of such series but not applicable to
all outstanding Debt Securities issued under the Indenture shall have occurred
and be continuing, either the Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of each affected series issued under the
Indenture and then outstanding (each such series voting as a separate class) may
declare the principal of all Debt Securities of such affected series and
interest accrued thereon to be due and payable immediately; and (b) if an Event
of Default due to a default in the performance of any other of the covenants or
agreements in the Indenture applicable to all outstanding Debt Securities issued
thereunder and then outstanding, or due to a default in payment at final
maturity or upon acceleration of indebtedness for money borrowed in the
principal amount then outstanding of $50,000,000 or more, or to certain events
of bankruptcy, insolvency and reorganization of the Company, Tyco or any
Significant Subsidiary Guarantor shall have occurred and be continuing, either
the Trustee or the holders of not less than 25% in principal amount of all Debt
Securities issued under the Indenture and then outstanding (treated as one
class) may declare the principal of all such Debt Securities and interest
accrued thereon to be due and payable immediately, but upon certain conditions
such declarations may be annulled and past defaults may be waived (except a non-
payment of such Debt Securities which shall have become due by acceleration) by
the holders of a majority in principal amount of the Debt Securities of all such
affected series then outstanding (each such series voting as a separate class or
all such Debt Securities voting as a single class, as the case may be).
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, the holders of a majority in principal amount
of the Debt Securities of each series then outstanding and affected (with each
series voting as a separate class) shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee with respect to the Debt Securities of such series under the Indenture,
subject to certain limitations specified in the Indenture.
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, the Indenture provides that no holder of Debt
Securities of any series may institute any action against the Company under the
Indenture (except actions for payment of overdue principal, premium, if any, or
interest) unless such holder previously shall have given to the Trustee written
notice of default and
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continuance thereof and unless the holders of not less than 25% in principal
amount of the Debt Securities of each affected series (with each series voting
as a separate class) issued under the Indenture and then outstanding shall have
requested the Trustee to institute such action and shall have offered the
Trustee reasonable indemnity, and the Trustee shall not have instituted such
action within 60 days of such request, and the Trustee shall not have received
direction inconsistent with such written request by the holders of a majority in
principal amount of the Debt Securities of each affected series (with each
series voting as a separate class) issued under such Indenture and then
outstanding.
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, the Indenture requires the annual filing by
the Company with the Trustee of a written statement as to compliance with the
covenants and agreements contained in the Indenture.
"Significant Subsidiary Guarantor" means any one or more Guarantors (other
than Tyco) which, at the date of determination, together with its or their
respective subsidiaries in the aggregate, (i) for the most recently completed
fiscal year of the Company accounted for more than 10% of the consolidated
revenues of the Company or (ii) at the end of such fiscal year, was the owner
(beneficial or otherwise) of more than 10% of the consolidated assets of the
Company, as determined in accordance with United States generally accepted
accounting principles and reflected on the Company's consolidated financial
statements.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in any supplemental indenture and described in the
applicable Prospectus Supplement, the Company may discharge or defease its
obligations under the Indenture as set forth below.
Under terms satisfactory to the Trustee, the Company may discharge this
Indenture with respect to any series of Debt Securities issued under the
Indenture which have not already been delivered to the Trustee for cancellation
and which have either become due and payable or are by their terms due and
payable within one year (or which may be called for redemption within one year)
by irrevocably depositing with the Trustee cash or direct obligations of the
United States as trust funds in an amount certified to be sufficient to pay at
maturity (or upon redemption) the principal of, premium, if any, and interest
and Additional Amounts, if any, on such Debt Securities. However, the Company
may not thereby avoid its duty to register the transfer or exchange of such
series of Debt Securities, to replace any mutilated, destroyed, lost or stolen
Debt Securities of such series or to maintain an office or agency in respect of
such series of Debt Securities.
In the case of any series of Debt Securities in respect of which the exact
amounts of principal of and interest due on such series can be determined at the
time of making the deposit referred to below, the Company at its option at any
time may also (i) discharge any and all of its obligations to holders of such
series of Debt Securities issued under the Indenture ("defeasance"), but may not
thereby avoid its duty to register the transfer or exchange of such series of
Debt Securities, to replace any mutilated, destroyed, lost, or stolen Debt
Securities of such series or to maintain an office or agency in respect of such
series of Debt Securities or (ii) be released with respect to any outstanding
series of Debt Securities issued under the Indenture from the obligations
imposed by the covenants described under the captions "Covenants" and "Merger,
Consolidation, Sale or Conveyance" above and omit to comply with such covenants
without creating an Event of Default ("covenant defeasance"). Defeasance or
covenant defeasance may be effected only if, among other things: (i) the Company
or Tyco irrevocably deposits with the Trustee cash and/or direct obligations of
the United States, as trust funds in an amount certified by a nationally
recognized firm of independent public accountants or a nationally recognized
investment banking firm to be sufficient to pay each installment of principal
of, premium, if any, and interest and Additional Amounts, if any, on all
outstanding Debt Securities of such series issued under the Indenture on the
dates such installments of principal, premium, if any, and interest are due;
(ii) no default or Event of Default shall have occurred and be continuing on the
date of the deposit referred to in clause (i) or, in respect of certain events
of bankruptcy, insolvency or reorganization, during the period ending on the
91st day after the date
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of such deposit (or any longer applicable preference period); and (iii) the
Company delivers to the Trustee (A) an opinion of counsel to the effect that the
holders of such series of Debt Securities will not recognize any income, gain or
loss for United States federal income tax purpose as a result of such deposit
and defeasance or covenant defeasance, as applicable, and will be subject to
United States federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance or
covenant defeasance, as applicable, had not occurred (in the case of defeasance,
such opinion must be based on a ruling of the Internal Revenue Service or a
change in United States federal income tax law occurring after the date of the
Indenture) and (B) an opinion of counsel to the effect that (x) payments from
the defeasance trust will be free and exempt from any and all withholding and
other taxes imposed or levied by or on behalf of Luxembourg or any political
subdivision thereof having the power to tax, and (y) holders of such series of
Debt Securities will not recognize any income, gain or loss for Luxembourg
income tax and other Luxembourg tax purposes as a result of such deposit and
defeasance or covenant defeasance, as applicable, and will be subject to
Luxembourg income tax and other Luxembourg tax on the same amounts, in the same
manner and at the same times as would have been the case if such deposit and
defeasance or covenant defeasance, as applicable, had not occurred.
REDEMPTION
Unless otherwise provided in any supplemental indenture and specified in the
applicable Prospectus Supplement, the following provisions shall be applicable
to any redemption described under "Redemption Upon Changes in Withholding Taxes"
above and to the Debt Securities of any series which are redeemable before their
maturity or to any sinking fund for the retirement of Debt Securities of a
series.
Notice of redemption to the holders of Debt Securities of any series to be
redeemed as a whole or in part shall be given by mailing notice of such
redemption by first class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption. The notice of redemption to
each such holder shall specify the principal amount or portion thereof of each
Debt Security of such series held by such holder to be redeemed, the date fixed
for redemption, the redemption price, the place or places of payment, that
payment will be made upon presentation and surrender of such Debt Securities,
that such redemption is pursuant to the mandatory or optional sinking fund, or
both, if such be the case, that interest accrued to the date fixed for
redemption will be paid as specified in such notice and that on and after said
date interest thereon or on the portions thereof to be redeemed will cease to
accrue. At least one business day prior to the redemption date specified in the
notice of redemption given, the Company will deposit with the Trustee or with
one or more paying agents an amount of money sufficient to redeem on the
redemption date all the Debt Securities of such series so called for redemption.
If less than all the Debt Securities of a series are to be redeemed, the Trustee
shall select, in such manner as it shall deem appropriate and fair, Debt
Securities of such series to be redeemed. If notice of redemption has been given
as above provided, on and after the redemption date specified in such notice
(unless the Company shall default in the payment of such Debt Securities at the
redemption price, together with interest accrued to said date) interest on the
Debt Securities or portions of Debt Securities so called for redemption shall
cease to accrue, and the holders thereof shall have no right in respect of such
Debt Securities except the right to receive the redemption price thereof and
unpaid interest to the date fixed for redemption.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company, Tyco and the
Trustee, with the consent of the holders of not less than a majority of
principal amount of the Debt Securities at the time outstanding of all series
affected (voting as one class), to modify the Indenture or any supplemental
indenture or the rights of the holders of the Debt Securities, except that no
such modification shall (i) extend the final maturity of any of the Debt
Securities or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof, or reduce the amount of any original issue discount security
payable upon acceleration or provable in bankruptcy or impair or affect the
right of any holder of the Debt Securities to institute suit for the payment
thereof
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without the consent of the holder of each of the Debt Securities so affected or
(ii) reduce the aforesaid percentage in principal amount of Debt Securities, the
consent of the holders of which is required for any such modification, without
the consent of the holders of all Debt Securities then outstanding.
The Indenture contains provisions permitting the Company, Tyco and the
Trustee, without the consent of any holders of Debt Securities, to enter into a
supplemental indenture, among other things, for purposes of curing any ambiguity
or correcting or supplementing any provision contained in the Indenture or in
any supplemental indenture or making other provisions in regard to the matters
or questions arising under the Indenture or any supplemental indenture as the
Board of Directors of the Company deems necessary or desirable and which does
not adversely affect the interests of the holders of Debt Securities in any
material respect. The Company, Tyco and the Trustee, without the consent of any
holders of Debt Securities, may also enter into a supplemental indenture to
establish the form or terms of any series of Debt Securities as are not
otherwise inconsistent with any of the provisions of the Indenture.
CONCERNING THE TRUSTEE
The Trustee may hold Debt Securities, act as a depository for funds of, make
loans to, or perform other services for, Tyco, the Company and their
subsidiaries as if it were not the Trustee.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or dealers,
and also may sell Debt Securities directly to other purchasers or through
agents. Each Prospectus Supplement will describe the method of distribution of
the offered Securities.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions, or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions, or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers, and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on the
resale of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the Prospectus Supplement.
Underwriters and agents who participate in the distribution of Debt
Securities may be entitled under agreements which may be entered into by the
Company to indemnification by the Company and Tyco against certain liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase offered Debt Securities from
the Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the offered Debt Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
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LEGAL MATTERS
Certain U.S. legal matters regarding the Debt Securities and the Guarantees
will be passed upon for Tyco and the Company by Kramer, Levin, Naftalis &
Frankel, New York, New York, counsel to Tyco and the Company. Joshua M. Berman,
a director and vice president of Tyco, is counsel to Kramer, Levin, Naftalis &
Frankel. Mr. Berman owns beneficially 64,000 common shares of Tyco. Certain
matters under the laws of Bermuda related to the Guarantees of Tyco will be
passed upon for Tyco by Appleby, Spurling & Kempe, Hamilton, Bermuda, Bermuda
counsel to Tyco. Certain matters under the laws of Luxembourg related to the
Debt Securities will be passed upon by Zeyen Beghin Feider Loeff Claeys Verbeke,
Luxembourg counsel to the Company.
EXPERTS
The consolidated financial statements and financial statement schedule
included in Tyco's Transition Report on Form 10-K for fiscal year ended
September 30, 1997 and included in Tyco's Current Report on Form 8-K dated April
23, 1998 and incorporated by reference in this Prospectus have been audited by
Coopers & Lybrand, independent public accountants, as set forth in their reports
included therein. In those reports, that firm states that with respect to
certain subsidiaries its opinion is based on the reports of other independent
public accountants, namely Coopers & Lybrand L.L.P. and Arthur Andersen LLP. The
consolidated financial statements and financial statement schedule referred to
above have been incorporated herein in reliance upon said reports given upon the
authority of those firms as experts in accounting and auditing.
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