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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
0-16979
(COMMISSION FILE NUMBER)
TYCO INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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BERMUDA NOT APPLICABLE
(JURISDICTION OF INCORPORATION) (IRS EMPLOYER
IDENTIFICATION NUMBER)
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THE GIBBONS BUILDING, 10 QUEEN STREET, SUITE 301, HAMILTON, HM 11, BERMUDA
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
441-292-8674*
(REGISTRANT'S TELEPHONE NUMBER)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Name of each exchange
Title of each class on which registered
COMMON STOCK, PAR VALUE $0.20 NEW YORK STOCK EXCHANGE
SERIES A FIRST PREFERENCE SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. [X].
The aggregate market value of voting common stock held by nonaffiliates of
registrant was $39,636,878,846 as of November 6, 1998.
The number of shares of common stock outstanding as of November 6, 1998 was
647,323,419.
DOCUMENTS INCORPORATED BY REFERENCE
See pages 18 to 21 for the exhibit index.
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* The executive offices of registrant's principal United States subsidiary, Tyco
International (US) Inc., are located at One Tyco Park, Exeter, New Hampshire
03833. The telephone number there is (603) 778-9700.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Tyco International Ltd. ("Tyco" or the "Company") 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. See Notes 18 and 19 to the Consolidated Financial Statements for
certain segment and geographic financial data, respectively, relating to the
Company's business.
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.
I. DISPOSABLE AND SPECIALTY PRODUCTS
The principal divisions in the Disposable and Specialty Products group are
the Tyco Healthcare Group, ADT Automotive and Tyco Plastics and Adhesives.
The Tyco Healthcare Group manufactures and distributes medical supplies,
disposable medical products, personal absorbent products and other products. ADT
Automotive is the second largest provider of vehicle auction services in the
United States. Tyco Plastics and Adhesives manufactures polyethylene films and
packaging, industrial and consumer plastic products, molded plastic garment
hangers, laminated and coated products and adhesive products and tapes.
Tyco Healthcare Group
The principal operating company of this division is called The Kendall
Company ("Kendall"). Kendall conducts its operations through two business units:
Kendall Healthcare and Kendall International. In each of its business units,
Kendall has numerous competitors, including a number of large, well-established
companies. Kendall relies on its reputation for quality and dependable service,
together with its low-cost manufacturing and innovative products, to maintain a
leadership position in its markets.
The Kendall Healthcare business unit is made up of five segments: Medical
Surgical, Vascular Therapy, Alternate Site, Confab and Ludlow Technical
Products. These units manufacture and market a broad range of wound care,
needles and syringes, electrodes, specialized paper, vascular therapy,
urological care, incontinence care, and other nursing care products. These are
distributed to hospitals, rehabilitation centers, long-term care facilities and
homes throughout the United States and Canada.
Kendall Healthcare is one of the largest manufacturers of disposable
healthcare products in the world. Kendall Healthcare is the industry leader in
gauze products with its Kerlix(R) and Curity(R) brand dressings. Kendall
Healthcare's other core product category consists of its vascular therapy
products, principally anti-embolism stockings, marketed under the T.E.D.(R)
brand name, sequential pneumatic compression systems sold under the SCD(R) 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. The acquisition of Sherwood-Davis & Geck ("Sherwood") during 1998
significantly added to the range of disposable healthcare products manufactured
and sold by Kendall Healthcare. Sherwood's core brands of Monoject(R) syringes
and Kangaroo(R) feeding pumps are well known throughout the industry.
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Kendall Healthcare has also become an industry leader in the adult
incontinence market serving the acute care, long-term care and retail markets.
It offers a complete line of disposable adult briefs, underpads, baby diapers
and other related products. The Confab retail unit markets incontinence and
feminine care products through food and drug chains throughout the United States
and Canada.
Kendall Healthcare's Ludlow Technical Products segment manufactures and
sells a variety of disposable medical products, specialized paper and film
products. These products include medical electrodes and gels for monitoring and
diagnostic tests and hydrogel wound care products and are used primarily in
critical care, physical therapy and rehabilitative departments in hospitals.
Also, this segment produces adhesive tapes used for business forms and in
printing applications, high quality facsimile paper and recording chart papers
for medical and industrial instrumentation.
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 five groups: vascular, medical
surgical, alternate site, critical care (Ludlow) and retail (Confab). 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.
On October 1, 1998, a subsidiary of the Company merged with United States
Surgical Corporation ("USSC"). USSC develops, manufactures and markets a line of
surgical wound closure products and advanced surgical products to hospitals
throughout the world. These products include external surgical staplers,
laparoscopic stapling products and needles and sutures. USSC also manufactures
and distributes other specialized surgical products including spinal cages,
stents, cardiovascular radiation therapy, urology, and breastcare. During 1998,
USSC had previously acquired Valleylab, a division of Pfizer Inc. and a leading
manufacturer of electrosurgical and ultrasound surgical products. In addition,
on November 2, 1998, the Company announced the completion of its acquisition of
Graphic Controls Corporation. Graphic Controls, a leading designer,
manufacturer, marketer and distributor of disposable medical products, will be
integrated with Ludlow Technical Products. See Note 25 to Consolidated Financial
Statements for further discussion.
ADT Automotive
ADT Automotive operates a network of 28 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 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
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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. Relative to the size of
Tyco's other businesses, ADT Automotive does not qualify as a seperately
identifiable segment under external accounting and reporting rules. As such, it
is most appropriately grouped with the Company's other "specialty products"
businesses for purposes of segment reporting.
Tyco Plastics and Adhesives
Tyco Plastics and Adhesives consists of Armin Plastics, Carlisle Plastics,
A&E Products, Tyco Adhesives and Ludlow Coated Products.
Armin Plastics
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 Plastics
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 Ruffies(R), a national brand
consumer trash bag, for mass merchants and other retail stores. Carlisle also
provides heavy duty trash can liners for institutional customers, such as food
service distributors, janitorial supply houses, restaurants, hotels and
hospitals.
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 Ruffies(R) trash bags, while the
other major national brands are marketed primarily through food retailers.
Film-Gard(R), 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(R) 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 and 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.
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A&E Products operates in a competitive marketplace where success is
dependent upon price, service and quality.
Tyco Adhesives
The Tyco Adhesives division, formerly known as Kendall-Polyken,
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. Tyco Adhesives 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. Tyco Adhesives' Betham division develops and markets pressure sensitive
adhesives and coatings, principally for the automotive, medical and specialty
markets.
Tyco Adhesives 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. Tyco Adhesives sells its other industrial products either directly
to major end users or through diverse distribution channels, depending upon the
industry being supplied.
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. Ludlow 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.
II. FIRE AND SECURITY SERVICES
The Company, 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 the world.
Fire Protection Contracting and Services
Operating under several trade names including Grinnell, Wormald, Mather &
Platt, Total Walther, O'Donnell Griffin and Tyco, the Company designs,
fabricates, installs and services automatic fire sprinkler systems, fire alarm
and detection systems and special hazard suppression systems in buildings and
other installations.
The Company's fire protection contracting and services business operates
through a network of offices in the United States, Canada, Mexico, Central
America, Puerto Rico, the United Kingdom, continental Europe, Saudi Arabia,
United Arab Emirates, Australia, New Zealand, Asia and South America.
The Company 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 for structures with automatic sprinkler
systems.
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The majority of the fire suppression systems installed by the Company are
water-based. However, the Company 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.
The Company holds exclusive manufacturing and distribution rights in several
regions of the world for INERGEN(R) fire suppression products. INERGEN(R) 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, damaging costly equipment or harming people.
In Australia, New Zealand and Asia, the Company 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, primarily 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
the Company are manufactured by the Company. The Company also has fabrication
plants worldwide that cut, thread and weld pipe, which is then shipped with
other prefabricated components to job sites for installation. The Company 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.
The Company'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 the Company's
Grinnell Corporation ("Grinnell") subsidiary and a number of locals of the UA
were not renewed. Employees in those locations, representing 64 percent 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 the Company's business or results of operations.
Generally, competition in the fire protection business varies by geographic
location. In North America, the Company 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, the Company competes with many
regional or local contractors on a country by country basis. In Australia, New
Zealand and Asia, the Company competes with a few large fire protection
contractors as well as with many smaller regional or local companies. The
Company competes for fire protection contracts primarily on the basis of price,
service and quality.
Electronic Security Services
The Company provides electronic security services principally under the ADT
trade name and also under other trade names including Modern, Thorn Security,
Holmes Protection, CIPE, Zettler, Sonitrol, Securesys, Securiville and
Armourguard Security. Security services are provided in the United States,
Canada, the United Kingdom, 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
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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.
The Company 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 install 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.
The Company'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 the Company's monitoring centers. In either
case, the Company usually provides support and maintenance through service
contracts. It has been the Company'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 the Company
or by the customer. The Company usually retains ownership of standard
residential systems, but more sophisticated residential systems are usually
purchased by the customer.
The Company markets its electronic security services to commercial and
residential customers through a direct sales force and an authorized dealer
network. Commercial customers which have multiple locations in North America are
serviced by a separate national accounts sales force. The Company 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. The Company also competes with several national
companies and several thousand regional and local companies in the United
Kingdom, continental Europe, Asia, New Zealand and Australia. Competition is
based primarily on price in relation to quality of service. The Company believes
that the quality of its services is higher than that of many of its competitors
and, therefore, the Company's prices may be higher than those charged by its
competitors.
Manufacturing
The Company 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, the Company 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, the Company
manufactures and sells sprinkler heads, specialty valves, fire doors and
electronic panels for use in fire detection systems. In Mexico, the Company
manufactures fire extinguishers, fire hose and related equipment.
The Company'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.
Thorn Security manufactures certain alarm, detection and activation devices
and central monitoring station equipment which is both installed by the
Company's own units and sold to other installers of alarm and detection devices.
Otherwise, the Company 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.
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Fire protection products are sold through the Company's flow control
products distribution network, discussed under "Flow Control Products" below,
and through independent distributors.
III. FLOW CONTROL PRODUCTS
The Company, 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 Corporation ("Grinnell"), Allied Tube & Conduit ("Allied"), Mueller Co.
("Mueller") and Keystone International ("Keystone"), as well as a number of
other specialized manufacturers of valves, fittings and couplings. The group
also includes Earth Technology Corporation ("Earth Tech"), which provides a
broad range of environmental, consulting and engineering services.
Manufacturing
The Company 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, food and beverage products, water and gas
utilities, wastewater treatment, oil and gas exploration, pulp and paper,
petrochemical and numerous other industrial applications. The Company 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 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, the Company 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.
Keystone, one of the world's leading manufacturers of valves and flow
control products, 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, Mueller, Hersey, Keystone, Anderson-Greenwood, Yarway,
Crosby Valve, Gimpel, Henry Pratt Co., James Jones Company, Edward Barber & Co.,
Neotecha, Belgicast, Hindle Cockburns, Charles Winn (Valves) Ltd., Sempell,
Smith Valve, Anvil, Canvil, Unistrut, T.J. Cope, 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, Brazil and Argentina.
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Distribution
The Company's Grinnell subsidiary 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, that support local branches' product needs and ship
directly to customers. Each center stocks more than 8,500 products. The
Company's worldwide flow control operations stock and sell products through
distribution centers in Europe, Australia, New Zealand, the Middle East and
Asia. In Europe, the Company distributes fire protection products, industrial
valves and products for mechanical markets through warehouses located in The
Netherlands, the United Kingdom, Germany, France, Italy, Spain and Scandinavia.
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, the Company
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 directly to original equipment manufacturers
and other end users.
Allied competes for the sale of steel pipe, some of 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. Allied
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. Mueller
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. Mueller 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.
Keystone 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.
Environmental Services
Through its Earth Tech subsidiary, the Company 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 contract operations and management services for water
and wastewater treatment facilities operated by municipal and industrial
clients, infrastructure design and
8
<PAGE> 10
construction services and facilities engineering and construction management
services for institutional, civic, commercial and industrial clients.
Earth Tech has a network of 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.
IV. 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's Electrical Conduit division
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 Ltd.
TSSL, which includes the Company'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. Through its Rochester
Corporation subsidiary, the Company manufactures wire rope, wirelines,
electro-optical products and subsea products.
TSSL competes on a worldwide basis primarily against two other entities:
Alcatel-Alsthom, headquartered in France, and KDD, located in Japan.
Alcatel-Alsthom, 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.
9
<PAGE> 11
Tyco Printed Circuit Group
TPCG is one of the largest independent manufacturers of complex multi-layer
printed circuit boards and backplane assemblies 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
layers 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 that are required to accommodate powerful and sophisticated components.
Backplane assemblies are comprised of printed circuit boards, connectors and
other electronic components, and they serve as an electrical and mechanical
interconnect device.
TPCG manufactures double-sided and multi-layer boards, including highly
sophisticated, precision tooled, custom laminated boards with layer counts up to
68. TPCG also produces sophisticated flexible-rigid circuit boards for use in
commercial, aerospace and military applications. TPCG's backplane facilities
produce soldered, press-fit and surface mount backplane assemblies. In addition,
these facilities also provide turnkey manufacturing services including full "box
build" products. Printed circuit boards and backplane products are manufactured
on a job order basis to the customers' design specifications. The majority of
sales are derived from high-density multi-layer boards.
TPCG markets its products primarily through a direct sales force and, to a
lesser extent, through a network of independent manufacturers' representatives.
Customers are original equipment manufacturers and contract manufacturers in the
communications, computer, aircraft, military and other industrial and consumer
electronics industries. The Company competes with several other large
independent and captive companies that manufacture printed circuit board
products primarily in the United States. Competition is on the basis of quality,
reliability, price and timeliness of delivery. The Company believes that fewer
competitors manufacture the more complex, high-density multi-layer printed
circuit board products.
Subsequent Event
Subsequent to year end, an indirect subsidiary of the Company entered into
a definitive merger agreement for the acquisition of AMP Incorporated ("AMP"),
which is the world's leading manufacturer of electrical, electronic, fiber-optic
and wireless interconnective devices and systems. Its products have uses
wherever an electronic, electrical, computer or telecommunication system is
involved. AMP, with annual revenues of approximately $5.5 billion, sells to
customers in the consumer and industrial, communications, automotive, computer
and power industries. The merger is subject to the approval of AMP's
shareholders, approval by the Company's shareholders of the issuance of Tyco
common shares in connection with the merger and customary regulatory approvals.
See Note 25 to the Consolidated Financial Statements for further discussion.
BACKLOG
At September 30, 1998, the Company had a backlog of unfilled orders of
approximately $4.1 billion, compared to a backlog of approximately $2.4 billion
at September 30, 1997. The Company expects that approximately 73 percent of its
backlog at September 30, 1998 will be filled during the year ending September
30, 1999.
Backlog by industry segment is as follows (in millions of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Disposable and Specialty Products................. $ 65.5 $ 81.7
Fire and Security Services........................ 969.8 901.6
Flow Control Products............................. 1,119.3 585.6
Electrical and Electronic Components.............. 1,989.2 798.3
-------- --------
$4,143.8 $2,367.2
======== ========
</TABLE>
The increase in backlog within the Fire and Security Services group is
primarily due to an increase in backlog at the Company's worldwide security and
North American fire protection businesses. Within the Flow
10
<PAGE> 12
Control Products group, the increase is principally due to an increase in
backlog at Earth Tech, including backlog related to acquisitions, and in the
Company's European flow control operations. Within the Electrical and Electronic
Components group, the increase is principally due to contracts awarded to TSSL.
PROPERTIES
The Company's operations are conducted in facilities throughout the world
aggregating some 39.5 million square feet of floor space, of which approximately
22.0 million square feet are owned and approximately 17.5 million square feet
are leased. These facilities house manufacturing and warehousing operations as
well as sales, engineering and administrative offices.
Within the Fire and Security Services group, the fire protection
contracting and services business operates through a network of offices located
in North America, South America, Europe, Australia, New Zealand, the Middle East
and Asia. Fire protection components are manufactured at locations in North
America, the United Kingdom, Germany, Australia, New Zealand and Malaysia. The
electronic security services business operates through a network of monitoring
centers and sales and service offices and other properties in North America,
Europe, Australia, New Zealand, Argentina, Chile, Hong Kong, China and Malaysia.
The group occupies some 7.7 million square feet, of which 2.3 million square
feet are owned and 5.4 million square feet are leased.
The Disposable and Specialty Products group has manufacturing facilities in
North America, the United Kingdom, Germany, France, Spain, China, Thailand and
Malaysia. There are 28 vehicle auction facilities located in the United States.
The group occupies some 13.3 million square feet, of which 10.4 million square
feet are owned and 2.9 million square feet are leased.
The Flow Control Products group has manufacturing facilities in North
America, the United Kingdom, Germany, Switzerland, France, Spain, Scotland, The
Netherlands, Italy, China, Malaysia, Australia, Brazil, Argentina, and Mexico.
Products are distributed in North America through a branch distribution network
and through five regional distribution centers. The group also stocks and sells
products through warehouse and distribution centers in The Netherlands, the
United Kingdom, Germany, France, Spain, Italy, Scandinavia, Australia, New
Zealand, Singapore and the Middle East. The environmental services business
operates through a network of offices throughout North America. The group
occupies some 15.5 million square feet, of which 7.4 million square feet are
owned and 8.1 million square feet are leased.
All of the Electrical and Electronic Components group manufacturing
locations are in the United States. The group occupies some 2.9 million square
feet, of which 1.8 million square feet are owned and 1.1 million square feet are
leased.
In the opinion of management, the Company's properties and equipment
generally are in good operating condition and are adequate for its present
needs. The Company does not anticipate difficulty in renewing existing leases as
they expire or in finding alternative facilities. See Note 16 to Consolidated
Financial Statements for a description of the Company's rental obligations.
RESEARCH AND DEVELOPMENT
The amounts expended for Company-sponsored research and development during
Fiscal 1998, Fiscal 1997 and 1996 were $93.3 million, $45.0 million and $39.8
million, respectively. The increase in Fiscal 1998 is principally due to the
inclusion of TSSL, which was acquired in July 1997, as well as the inclusion of
Sherwood acquired in 1998. Customer-funded research and development expenditures
were $3.7 million, $0.5 million and $0.6 million, respectively.
Approximately 678 full-time scientists, engineers and other technical
personnel are engaged in product research and development activities.
Research activity at TSSL involves the continuing design and development of
processes for the next generation of undersea fiber optic cable, while Allied
and the printed circuit companies are principally involved with process
development. Kendall focuses on acquiring rights to new products and
technologies to complement existing product lines and applying expertise to
refine and successfully commercialize such
11
<PAGE> 13
products and technologies. Research activity in fire and security services and
flow control products is related to improvements in hydraulic design which
controls the motion of fluids, resulting in new sprinkler devices and flow
control products. Research and development activity at the specialty packaging
companies involves new product applications.
RAW MATERIALS
The Company is one of the largest buyers of steel and of plastic resin in
the United States. Other principal materials include scrap iron of various types
and grades, copper, brass, plastic, polyethylene resin and film, polypropylene,
electronic components, chemicals and additives, thin and flexible copper clad
materials, paper, ink, foil, adhesives, cloth, wax, pulp and cotton. Certain of
the materials used in the Fire and Security Services group and the Flow Control
Products group, principally certain valves and fittings and security systems,
are purchased for installation in fire protection systems or for distribution.
Materials are purchased both in and outside of the United States from a large
number of independent sources. There have been no shortages in materials which
have had a material adverse effect on the Company's businesses.
PATENTS AND TRADEMARKS
The Company owns a number of patents which principally relate to healthcare
and specialty products, fire protection devices, electronic security systems,
flow control products, pipe and tubing manufacture, and cable manufacture. The
Company also owns a number of trademarks and is a licensee under a number of
patents. Although these have been of value and are expected to continue to be of
value in the future, in the opinion of management, the loss of any single patent
or group of patents would not materially affect the conduct of the business in
any of the Company's segments. The patents and licenses have remaining lives of
from two to twenty years. Kendall sells certain products under trade names owned
by its suppliers and packages certain products under customer trademarks and
labels.
EMPLOYEES
The Company employed approximately 87,000 persons at September 30, 1998, of
which approximately 50,700 are employed in the United States and 36,300 outside
the United States. The Company has collective bargaining agreements with labor
unions covering approximately 18,100 employees at certain of its North American,
European and Asia-Pacific businesses. While the Company believes that its
relations with the labor unions and with its employees are generally
satisfactory, a number of local unions affiliated with the United Association of
Plumbers and Pipefitters, representing 64 percent of Grinnell Fire Protection's
North American union employees, are on strike. See discussion under "Fire and
Security Services" above.
ENVIRONMENTAL MATTERS
The Company makes a substantial effort to operate its facilities in
compliance with laws relating to the protection of the environment. Compliance
has not had and is not expected to have a material adverse effect upon the
capital expenditures, earnings or competitive position of the Company.
The Company believes that, consistent with applicable laws and regulations,
it exercises due care and takes appropriate precautions in the management of
wastes. The Company has received notification from the United States
Environmental Protection Agency, and from certain state environmental agencies,
that conditions at a number of sites where hazardous wastes were disposed of by
the Company and other persons require cleanup and other possible remedial
action.
The Company also has a number of projects underway at several of its
manufacturing facilities in order to comply with environmental laws. These
projects relate to a variety of activities, including solvent and metal
contamination clean up and oil spill equipment upgrades and replacement. Some of
the projects are voluntary while others are required under applicable law. The
projects involve both remediation expenses and capital improvements. In
addition, the Company remains responsible for certain environmental issues at
manufacturing locations sold by the Company.
12
<PAGE> 14
The ultimate cost of site cleanup is difficult to predict given the
uncertainties regarding the extent of the required cleanup, the interpretation
of applicable laws and regulations and alternative cleanup methods. Based upon
the Company's experience with the foregoing environmental matters, the Company
has concluded that there is at least a reasonable possibility that remedial
costs will be incurred with respect to these issues in an aggregate amount in
the range of $16.5 million to $44.6 million. As of September 30, 1998, the
Company has concluded that the most probable amount which will be incurred
within this range is $21.0 million and such amount is included in the caption
"accrued expenses and other current liabilities" in the accompanying
Consolidated Balance Sheet. Based upon information available to the Company, at
those sites where there has been an allocation of the liability for cleanup
costs among a number of parties, including the Company, and such liability could
be joint and several, management believes it is probable that other responsible
parties will fully pay the cost allocated to them, except with respect to one
site for which the Company has assumed that one of the identified responsible
parties will be unable to pay the cost apportioned to it and that such party's
cost will be reapportioned among the remaining responsible parties. In view of
the Company's financial position and reserves for environmental matters of $21.0
million, the Company has concluded that its payment of such estimated amounts
will not have a material adverse effect on its consolidated financial position,
results of operations or liquidity.
ITEM 2. PROPERTIES
See Item 1. "Business -- Properties" for information relating to the
Company's owned and leased property.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
See also the discussions under Item 1. "Business -- Environmental Matters".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
In July 1997, a wholly-owned subsidiary of what was formerly called ADT
Limited ("ADT") merged with Tyco International Ltd ("Former Tyco"). Upon
consummation of the merger, ADT (the surviving public company) changed its name
to Tyco International Ltd. Former Tyco became a wholly-owned subsidiary of the
Company and changed its name to Tyco International (US) Inc. ("Tyco US").
The executive officers of the Company and executive officers of certain
subsidiaries are as follows:
L. Dennis Kozlowski, age 52, Chairman of the Board and Chief Executive
Officer since July 1997. Chairman of the Board of Former Tyco from January 1993
to July 1997; Chief Executive Officer of Former Tyco since July 1992, President
of Former Tyco since December 1989, and Chief Operating Officer of Former Tyco
from 1989 to 1992; President of Grinnell since 1984; President of Ludlow
Corporation from 1981 to 1984; associated with Former Tyco since 1975.
Mark A. Belnick, age 52, Executive Vice President and Chief Corporate
Counsel since September 1998. Prior to joining Tyco, Mr. Belnick was a Senior
Partner at the international law firm of Paul, Weiss, Rifkind, Wharton &
Garrison since 1987.
Jerry R. Boggess, age 54, President of Tyco Fire and Security Services
since August 1993. Vice President of Former Tyco since February 1996; Executive
Vice President of Grinnell from 1989 to 1993; associated with Former Tyco since
1968.
Neil R. Garvey, age 43, President of Tyco Submarine Systems Ltd. since July
1997. President of Simplex Technologies from July 1995 to June 1997; Vice
President of Sales and Marketing of Simplex Technologies from June 1992 to July
1995; associated with Former Tyco since 1979.
13
<PAGE> 15
Richard A. Gilleland, age 54, President of Tyco Healthcare Group since
October 1998. Director of the Company since July 1997; Director of Former Tyco
from 1994 to November 1997. Chairman, President and Chief Executive Officer of
Physician's Resource Group, Inc. from December 1997 to September 1998; President
and Chief Executive Officer of AMSCO International, Inc. from July 1995 to July
1996; Senior Vice President of Former Tyco from October 1994 to July 1995;
Chairman, President and Chief Executive Officer of The Kendall Company from July
1990 to July 1995.
Robert P. Mead, age 47, President of the Flow Control Products group since
May 1993. Vice President of Former Tyco since August 1993; Executive Vice
President of Allied Tube and Conduit Corp. from July 1992 to May 1993; Managing
Director of Asia-Pacific region from April 1991 to July 1992; Executive Vice
President -- Manufacturing Division of Grinnell from January 1989 to April 1991;
Vice President -- Finance of Grinnell from February 1985 to January 1989;
associated with Former Tyco since 1973.
Mark H. Swartz, age 38, Executive Vice President and Chief Financial
Officer since July 1997. Vice President and Chief Financial Officer of Former
Tyco since February 1995; Director of Mergers and Acquisitions of Former Tyco
from 1993 to 1995; associated with Former Tyco since 1991.
14
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SECURITY HOLDER
MATTERS
The approximate number of registered holders of the Company's common shares
at November 18, 1998 was 40,400.
Tyco common shares are listed and traded on the New York Stock Exchange
("NYSE"), the London Stock Exchange and the Bermuda Stock Exchange. The
following table sets forth the high and low sales prices per share of Tyco
common shares as reported in the NYSE Composite Transaction Tape, and the
dividends paid on such Tyco common shares, for the quarterly periods presented
below. The price for Tyco common shares have been restated to reflect the
0.48133 reverse stock split related to the merger between ADT and Former Tyco in
July 1997. In addition, the price and dividends for Tyco common shares have been
restated to reflect a two-for-one stock split effected in the form of a stock
dividend which was distributed on October 22, 1997. The prices per Tyco common
shares listed in the table for periods prior to the merger of ADT and Former
Tyco on July 2, 1997 are for common shares of ADT.
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997(1)
--------------------------------------- ---------------------------------------
MARKET PRICE RANGE MARKET PRICE RANGE
-------------------- DIVIDEND PER -------------------- DIVIDEND PER
QUARTER HIGH LOW COMMON SHARE(2) HIGH LOW COMMON SHARE(2)
- ------- ---- --- --------------- ---- --- ---------------
<S> <C> <C> <C> <C> <C> <C>
First $45.5000 $34.0000 $.025 $28.6965 $22.0743 $--
Second 57.4375 42.3750 .025 35.4487 25.4503 --
Third 63.0625 51.4375 .025 43.0000 34.4099 .025
Fourth 69.0000 50.0000 .025
----- -----
$ .10 $.025
===== =====
</TABLE>
- ---------------
(1) Fiscal 1997 represents the transitional nine month fiscal year ended
September 30, 1997.
(2) Tyco declared aggregate dividends of $ 0.10 per common share in Fiscal 1998
and $0.025 per common share in the third quarter of Fiscal 1997. 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 common share in the first two quarters of Fiscal 1997. The
payment of dividends by Tyco in the future will depend on business
conditions, Tyco's financial condition and earnings and other factors.
15
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of the Company for the fiscal year ended September 30, 1998, the nine month
fiscal period ended September 30, 1997 and the three years in the period ended
December 31, 1996. This selected financial information should be read in
conjunction with the Company's Consolidated Financial Statements and related
notes. The selected financial data reflect the combined results of operations
and financial position of Tyco International Ltd., Former Tyco and Keystone
restated for all periods presented pursuant to the pooling of interests method
of accounting. The selected financial data prior to January 1, 1997 do not
reflect the results of operations and financial position of INBRAND, which was
acquired in 1997 and accounted for under the pooling of interests method of
accounting, due to immateriality. The combinations are collectively referred to
as the "Mergers". See Notes 1 and 2 to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
YEAR NINE MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------------------
1998 1997(1) 1996 1995(5) 1994(5)
------------- ------------- ---- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations
Data:
Net sales.......................... $12,311.3 $ 7,588.2 $8,103.7 $6,915.6 $6,240.9
Operating income (loss)(2)(3)(4)... 1,923.7 (476.5) (18.8) 649.6 653.6
Income (loss) before extraordinary
items........................... 1,177.1 (776.8) (296.7) 267.5 304.8
Income (loss) before extraordinary
items per common share:(6)
Basic........................... 2.07 (1.50) (.62) .58 .65
Diluted......................... 2.02 (1.50) (.62) .57 .63
Cash dividends per common share.... .10 See (7) below
Consolidated Balance Sheet Data:
Total assets....................... $16,526.6 $10,447.0 $8,471.3 $7,357.8 $7,053.2
Long-term debt..................... 4,652.6 2,480.6 1,878.4 1,760.7 1,755.3
Shareholders' equity............... 6,136.9 3,429.4 3,288.6 3,342.7 3,030.0
</TABLE>
- ---------------
(1) In September 1997, the Company changed its fiscal year end from December 31
to September 30. Accordingly, the nine month transition period ended
September 30, 1997 is presented.
(2) Operating loss in Fiscal 1997 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. 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 the submarine systems business of
AT&T Corp.
(3) 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 the ASH merger. See Notes 11 and 15
to Consolidated Financial Statements.
(4) 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. 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 Kendall merger, 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.
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<PAGE> 18
(5) Prior to the mergers in Fiscal 1997, ADT and Keystone had a calendar year
end and the Former Tyco had a June 30 fiscal year end. The historical
results have been combined using a calendar year end for ADT, Keystone and
the Former Tyco for the year ended December 31, 1996. For 1995 and 1994, the
results of operations and financial position reflect the combination of ADT
and Keystone with a calendar year end and the Former Tyco with a June 30
fiscal year end. Net sales and net income for the 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.
(6) Per share amounts for all periods presented have been restated to give
effect to the mergers between ADT, Former Tyco, Keystone and INBRAND in
Fiscal 1997 (See Notes 1 and 2 to the Consolidated Financial Statements),
including the 0.48133 reverse stock split, and a two-for-one stock split
distributed on October 22, 1997 effected in the form of a stock dividend.
(7) The Company has declared a quarterly cash dividend of $0.025 per common
share since July 1997. 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 in fiscal years 1996, 1995 and 1994. Keystone declared
quarterly dividends of $0.19 per share in each of the three quarters of
Fiscal 1997 and in fiscal years 1996, 1995 and 1994. The payment of
dividends by Tyco in the future will depend on business conditions, Tyco's
financial condition and earnings and other factors.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OPERATING RESULTS
See Management's Discussion and Analysis of Financial Condition and
Operating Results which appears on pages 62 to 67 of this Form 10-K.
ITEM 7A. FINANCIAL INSTRUMENT DISCLOSURE
See Management's Discussion and Analysis of Financial Condition and
Operating Results which appears on pages 62 to 67 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and schedules are filed as
part of this Annual Report:
Financial Statements:
Reports of Independent Accountants
Consolidated Balance Sheets -- September 30, 1998 and September 30, 1997
Consolidated Statements of Operations for the fiscal year ended
September 30, 1998, the nine month fiscal period ended September 30,
1997 and the year ended December 31, 1996
Consolidated Statements of Shareholders' Equity for the fiscal year
ended September 30, 1998, the nine month fiscal period ended September
30, 1997 and the year ended December 31, 1996
Consolidated Statements of Cash Flows for the fiscal year ended
September 30, 1998, the nine month fiscal period ended September 30,
1997 and the year ended December 31, 1996
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts
All other financial statements and schedules have been omitted since the
information required to be submitted has been included in the consolidated
financial statements and related notes or because they are either not applicable
or not required under the rules of Regulation S-X.
See Notes to Consolidated Financial Statements for Summarized Quarterly
Financial Data (unaudited).
17
<PAGE> 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Directors of the Registrant is hereby
incorporated by reference to the Registrant's definitive proxy statement or an
Amendment to this Form 10-K which will be filed with the Commission within 120
days after the close of the fiscal year.
ITEM 11. MANAGEMENT REMUNERATION
Information concerning management remuneration is hereby incorporated by
reference to the Registrant's definitive proxy statement or an Amendment to this
Form 10-K which will be filed with the Commission within 120 days after the
close of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference to the Registrant's definitive
proxy statement or an Amendment to this Form 10-K which will be filed with the
Commission within 120 days after the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
hereby incorporated by reference to the Registrant's definitive proxy statement
or an Amendment to this Form 10-K which will be filed with the Commission within
120 days after the close of the fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules -- see Item 8.
(b) Exhibits
<TABLE>
<S> <C>
3.1 Memorandum of Association (as altered) (Incorporating all
amendments to May 26, 1992).(1)
3.2 Certificate of Incorporation on change of name dated July 2,
1997.(6)
3.3 Bye-Laws (incorporating all amendments to March 27,
1998).(11)
3.4 Articles of Association.(11)
4.1 Indenture relating to the senior notes dated August 4, 1993
among ADT Operations, Inc., as issuer, and ADT Limited and
certain subsidiaries of ADT Operations, Inc., as guarantors,
and The Chase Manhattan Bank (National Association), as
trustee, and the form of senior note included therein.(2)
4.2 First Supplemental Indenture to the Indenture, dated as of
August 4, 1993, among ADT Operations, Inc., the Guarantors
Named Therein and The Chase Manhattan Bank, as Trustee,
dated as of July 1, 1997, in respect of the $250,000,000
8 1/4% Senior Notes due 2000.(7)
4.3 Amended and Restated Indenture dated as of July 2, 1997, in
respect of the $250,000,000 8 1/4% Senior Notes due 2000.(7)
4.4 Indenture dated as of July 1, 1995 among ADT Operations,
Inc., ADT Limited and Bank of Montreal Trust Company, as
trustee and the form of note included therein.(3)
4.5 Rights Agreement between ADT Limited and Citibank, N.A.
dated as of November 6, 1996.(5)
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C>
4.6 First Amendment between ADT Limited and Citibank, N.A. dated
as of March 3, 1997 to Rights Agreement between ADT Limited
and Citibank, N.A. dated as of November 6, 1996.(5)
4.7 Second Amendment between ADT Limited and Citibank, N.A.
dated as of July 2, 1997 to the Rights Agreement
(Incorporated by reference to Form 8-A/A dated July 2,
1997.)
4.8 Indenture dated April 30, 1992 between Former Tyco and
Security Pacific National Trust Company (New York).
(Incorporated by reference to Former Tyco's Form 10-Q for
the period ended March 31, 1992.)
4.9 First Supplemental Indenture dated April 30, 1992 between
Former Tyco and Security Pacific National Trust Company (New
York). (Incorporated by reference to Former Tyco Form 10-Q
for the period ended March 31, 1992.)
4.10 Second Supplemental Indenture, dated as of March 8, 1993,
between Former Tyco and BankAmerica National Trust Company,
as Trustee. (Incorporated by reference to Tyco International
Ltd.'s Form 8-K filed on March 8, 1993.)
4.11 Form of Indenture, dated as of June 9, 1998 among Tyco
International Group S.A. (TIG), Tyco and The Bank of New
York, as trustee.(12)
4.12 Form of Supplemental Indenture No. 1, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as Trustee,
relating to the 6 1/8% Notes due 2001 of the Company
(including the form of Notes).(12)
4.13 Form of supplemental Indenture No. 2, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as Trustee,
relating to the 6 3/8% Notes due 2005 of the Company
(including the form of Notes).(12)
4.14 Form of Supplemental Indenture No. 3, dated as of June, 9,
1998, among TIG, Tyco and The Bank of New York, as Trustee,
relating to the 7% Notes due 2028 of the Company (including
the form of Notes).(12)
4.15 Form of Supplemental Indenture No. 4, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as Trustee,
relating to the 6 1/4% Dealer remarketable securities(sm)
(Drs.(tm)) due 2013 of the Company (including the form of
Drs.).(12)
4.16 Form of Supplemental Indenture No. 5, dated as of November
2, 1998, among TIG, Tyco and the Bank of New York, as
Trustee, relating to the 5.875% Notes due 2004 of TIG.
(Filed Herewith).
4.17 Form of Supplemental Indenture No. 6, dated as of November
2, 1998, among TIG, Tyco and the Bank of New York, as
Trustee, relating to the 6.125% Notes due 2004 of TIG.
(Filed Herewith).
4.18 Form of Indenture among United States Surgical Corporation
("USSC") and the Bank of New York, as Trustee, relating to
the 7.25% Senior Debt Securities due 2008 of USSC
(incorporated by reference to Exhibit 4(a) to USSC's Form
S-3 (File No. 333-46239) filed March 6, 1998).
4.19 Officers Certificate, dated March 17, 1998, defining the
terms of the debenture among USSC and the Bank of New York,
as Trustee relating to the 7.25% Senior Debt Securities due
2008 of USSC. (Filed Herewith).
4.20 Indenture, dated as of September 15, 1995, between Graphic
Controls Corporation and United States Trust Company of New
York, as Trustee (incorporated by reference to Exhibit 4.2
to the Graphic Controls Corporation's Registration Statement
on Form S-4 (File No. 33-99094).
4.21 Form of 12% Senior Subordinated Notes due 2005 of Graphic
Controls Corporation (incorporated by reference to Exhibit
4.3 to the Graphic Controls Corporation's Registration
Statement on Form S-4 (Filed No. 33-99094).
4.22 364-Day Credit Agreement, Five-Year Credit Agreement and
Bridge Credit Agreement, each dated as of June 27, 1997
(Incorporated by reference to Tyco International (US) Inc.'s
Form 10-K for the fiscal year ended June 30, 1997.)
4.23 Parent Guarantee Agreement dated as of July 2, 1997
(Incorporated by reference into Tyco International (US)
Inc.'s Form 10-K for the fiscal year ended June 30, 1997.)
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C>
4.24 $1.75 billion 364-day Credit Agreement dated February 13, 1998 held by Tyco International Group S.A.
(TIG).(8)
4.25 $500 million Extendible Credit Agreement dated February 13, 1998 held by TIG.(8)
4.26 Parent Guarantee Agreement dated as of February 13, 1998.(8)
10.1 Agreement and Plan of Merger, dated as of March 17, 1997, by and among ADT Limited, Limited Apache, Inc.
and Former Tyco.(4)
10.2 Agreement and Plan of Merger, dated as of May 20, 1997, by and among Former Tyco, T6 Acquisition Corp. and
Keystone International, Inc. (Incorporated by reference as an Exhibit to Former Tyco's Registration
Statement No. 333-31631 on Form S-4 filed on July 18, 1997.)
10.3 Purchase Agreement dated December 20, 1997 by and among American Cyanamid Company, American Home Products
Corporation, AHP Subsidiary Holding Corporation and Tyco International (US) Inc.(9)
10.4 Parent Guarantee of obligations dated December 20, 1997.(9)
10.5 First Amendment to Purchase Agreement dated February 27, 1998 by and among American Cyanamid Company,
American Home Products Corporation, AHP Subsidiary Holding Corporation and Tyco International (US) Inc.(9)
10.6 Agreement and Plan of Merger, dated as of May 25, 1998, by and among Tyco International Ltd., T11
Acquisition Corp. and United States Surgical Corporation.(10)
10.7 Rules of the ADT UK Executive Share Option Scheme (1984), amended to reflect the reverse split of Common
Shares effective June 17, 1991.(1)*
10.8 Rules of the ADT International Executive Share Option Plan, amended to reflect the reverse split of Common
Shares effective June 17, 1991.(1)*
10.9 Rules of the ADT UK and International Executive Share Option Schemes (1984) New Section, amended to
reflect the reverse split of Common Shares effective June 17, 1991.(1)*
10.10 Rules of the ADT Senior Executive Share Option Plan, amended to reflect the reverse split of Common Shares
effective June 17, 1991.(1)*
10.11 US (1990) Stock Option Plan of ADT Limited, amended to reflect the reverse split of Common Shares
effective June 17, 1991.(1)*
10.12 Agreement between ADT Automotive Holdings, Inc. and Michael J. Richardson dated as of January 29,
1997.(5)*
10.13 Incentive Compensation Agreement between ADT, Inc. and Michael J. Richardson dated as of February 10,
1997.(5)*
10.14 Severance Agreement between ADT Security Services, Inc. and Raymond Gross dated as of February 26,
1997.(5)*
10.15 Consulting Agreement between ADT, Inc. and John E. Danneberg dated as of August 28, 1996.(5)*
10.16 Form of Indemnification Agreement.(5)*
10.17 The Tyco International Ltd. Long Term Incentive Plan (formerly known as the ADT 1993 Long-Term Incentive
Plan) (as amended July 2, 1997). (Incorporated by reference as an Exhibit to the Proxy Statement dated
June 3, 1997 on Amendment No. 3 to Form S-4 dated June 3, 1997.)*
10.18 1978 Restricted Stock Ownership Plan for Key Employees. (Incorporated by reference to Former Tyco
Shareholders' Proxy Statement for Annual Meeting of Shareholders on November 21, 1978.)*
10.19 1981 Key Employee Loan Program. (Incorporated by reference to Former Tyco's Form 10-K for the year ended
May 31 1982.)*
10.20 1983 Key Employee Loan Program. (Incorporated by reference to Former Tyco's Form 10-K for the year ended
May 31, 1983.)*
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
10.21 1983 Restricted Stock Ownership Plan for Key Employees.
(Incorporated by reference to Former Tyco Shareholders'
Proxy Statement for Annual Meeting of Shareholders on
October 18, 1983.)*
10.22 1983 Key Employee Loan Program, as amended December 9, 1993
(Incorporated by reference to Former Tyco's Form 10-K for
the year ended June 30, 1994.)*
10.23 Tyco Incentive Compensation Plan. (Incorporated by reference
to Former Tyco's Form 10-K for the year ended June 30,
1994.)*
10.24 1994 Restricted Stock Ownership Plan for Key Employees.
(Incorporated by reference to Former Tyco Shareholders'
Proxy Statement for Annual Meeting of Shareholders on
October 19, 1994.)
10.25 Tyco International Ltd. Supplemental Executive Retirement
Plan (Incorporated by reference to Former Tyco's Form 10-K
for the year ended June 30, 1995).*
21.1 Subsidiaries of the registrant. (Filed herewith.)
23.1 Consent of PricewaterhouseCoopers (Filed herewith.)
23.2 Consent of Arthur Andersen LLP (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
</TABLE>
- ---------------
(1) Incorporated by reference to an Exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.
(2) Incorporated by reference to an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.
(3) Incorporated by reference to an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995.
(4) Incorporated by reference to an Exhibit to the Former Tyco's Current Report
dated March 17, 1997 on Form 8-K filed March 25, 1997.
(5) Incorporated by reference to an Exhibit to the Registrant's Schedule 14D-9
dated March 3, 1997.
(6) Incorporated by reference to an Exhibit to the Registrant's Current Report
dated July 2, 1997 on Form 8-K filed July 10, 1997.
(7) Incorporated by reference to an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
(8) Incorporated by reference to an Exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1997.
(9) Incorporated by reference to an Exhibit to the Registrant's Current Report
dated February 27, 1998 on Form 8-K filed March 11, 1998.
(10) Incorporated by reference to an Exhibit to the Registrant's Current Report
dated May 25, 1998 on Form 8-K filed June 24, 1998.
(11) Incorporated by reference to an Exhibit to the Registrant's Form S-3 filed
June 9, 1998.
(12) Incorporated by reference to an Exhibit to the Registrant's and TIG's
Co-Registration Statement on Form S-3 (File Nos. 333-50855 and
333-50855-01) filed June 9, 1998.
* Management contract or compensatory plan.
(c) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the last quarter of
Fiscal 1998.
21
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TYCO INTERNATIONAL LTD.
By /s/ MARK H. SWARTZ
------------------------------------
MARK H. SWARTZ
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: December 10, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ L. DENNIS KOZLOWSKI Chairman of the Board, Chief
- --------------------------------------------------- Executive Officer, President
L. DENNIS KOZLOWSKI and Director (Principal
Executive Officer)
/s/ MICHAEL A. ASHCROFT Director
- ---------------------------------------------------
MICHAEL A. ASHCROFT
/s/ JOSHUA M. BERMAN Director, Vice President
- ---------------------------------------------------
JOSHUA M. BERMAN
/s/ RICHARD S. BODMAN Director
- ---------------------------------------------------
RICHARD S. BODMAN
/s/ JOHN F. FORT Director December 10, 1998
- ---------------------------------------------------
JOHN F. FORT
/s/ STEPHEN W. FOSS Director
- ---------------------------------------------------
STEPHEN W. FOSS
/s/ RICHARD A. GILLELAND Director
- ---------------------------------------------------
RICHARD A. GILLELAND
/s/ PHILIP M. HAMPTON Director
- ---------------------------------------------------
PHILIP M. HAMPTON
/s/ JAMES S. PASMAN, JR. Director
- ---------------------------------------------------
JAMES S. PASMAN, JR.
/s/ W. PETER SLUSSER Director
- ---------------------------------------------------
W. PETER SLUSSER
/s/ MARK H. SWARTZ Executive Vice President and
- --------------------------------------------------- Chief Financial Officer
MARK H. SWARTZ
/s/ FRANK E. WALSH, JR. Director
- ---------------------------------------------------
FRANK E. WALSH, JR.
</TABLE>
22
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Tyco International Ltd.:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Tyco International Ltd. and its subsidiaries at September 30, 1998
and 1997, and the results of their operations and their cash flows for the year
ended September 30, 1998, the nine months ended September 30, 1997 and the year
ended December 31, 1996, in conformity with generally accepted accounting
principles in the United States. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We did not
audit the financial statements of Keystone International, Inc., a wholly owned
subsidiary, for the year ended December 31, 1996, which statements reflect net
sales constituting 8.4% of consolidated net sales for the year ended December
31, 1996. Those statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for Keystone International, Inc. is based solely
on the report of the other auditors. We conducted our audits of these statements
in accordance with generally accepted auditing standards in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS
Hamilton, Bermuda
October 23, 1998
23
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors,
Keystone International, Inc.:
We have audited the consolidated statements of income, changes in
shareholders' investment and cash flows of Keystone International, Inc. (a Texas
corporation) and subsidiaries for the year ended December 31, 1996, which are
not included herein. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Keystone International, Inc. and subsidiaries for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
January 31, 1997
Houston, Texas
24
<PAGE> 26
TYCO INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(IN MILLIONS, EXCEPT SHARE DATA) 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................... $ 820.1 $ 369.8
Receivables, less allowance for doubtful accounts of $256.9
in 1998 and $107.7 in 1997................................ 2,082.5 1,600.4
Contracts in process........................................ 565.3 450.2
Inventories................................................. 1,460.0 1,124.8
Deferred income taxes....................................... 562.9 389.4
Prepaid expenses and other current assets................... 252.5 174.2
--------- ---------
Total current assets........................................ 5,743.3 4,108.8
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 3,710.1 2,924.0
GOODWILL AND OTHER INTANGIBLE ASSETS, NET................... 6,396.5 2,933.2
LONG-TERM INVESTMENTS....................................... 124.4 108.5
DEFERRED INCOME TAXES....................................... 147.5 144.0
OTHER ASSETS................................................ 404.8 228.5
--------- ---------
TOTAL ASSETS................................................ $16,526.6 $10,447.0
========= =========
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt...... $ 350.0 $ 250.0
Accounts payable............................................ 1,279.5 1,012.0
Accrued expenses and other current liabilities.............. 2,295.4 1,853.4
Contracts in process -- billings in excess of costs......... 332.9 293.7
Deferred revenue............................................ 260.6 152.3
Income taxes................................................ 517.9 403.5
Deferred income taxes....................................... 11.9 26.9
--------- ---------
Total current liabilities................................... 5,048.2 3,991.8
LONG-TERM DEBT.............................................. 4,652.6 2,480.6
OTHER LONG-TERM LIABILITIES................................. 631.8 497.5
DEFERRED INCOME TAXES....................................... 57.1 47.7
--------- ---------
TOTAL LIABILITIES........................................... 10,389.7 7,017.6
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 16)
SHAREHOLDERS' EQUITY:
Common shares, $.20 par value, 1,503,750,000 shares
authorized; 586,645,251 shares outstanding in 1998 and
536,357,498 shares outstanding in 1997, net of 3,371,003
shares owned by subsidiaries in 1998...................... 117.3 107.3
Capital in excess:
Share premium............................................. 3,585.1 2,041.3
Contributed surplus, net of deferred compensation of $46.3
in 1998 and $2.2 in 1997............................... 2,376.9 2,305.7
Currency translation adjustment............................. (182.7) (161.6)
Accumulated earnings (deficit).............................. 240.3 (863.3)
--------- ---------
Total shareholders' equity.................................. 6,136.9 3,429.4
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $16,526.6 $10,447.0
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE> 27
TYCO INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................................ $12,311.3 $7,588.2 $8,103.7
Cost of sales........................................ 8,046.4 5,102.6 5,475.2
Selling, general and administrative expenses......... 2,341.2 1,534.9 1,656.5
Merger, restructuring and other non-recurring
charges............................................ -- 917.8 246.1
Charge for the impairment of long-lived assets....... -- 148.4 744.7
Write off of purchased in-process research and
development........................................ -- 361.0 --
--------- -------- --------
Operating income (loss).............................. 1,923.7 (476.5) (18.8)
Interest income...................................... 30.9 24.2 31.5
Interest expense..................................... (236.2) (137.5) (193.3)
Other income less expenses........................... -- -- 119.4
--------- -------- --------
Income (loss) before income taxes and extraordinary
items.............................................. 1,718.4 (589.8) (61.2)
Income taxes......................................... (541.3) (187.0) (235.5)
--------- -------- --------
Income (loss) before extraordinary items............. 1,177.1 (776.8) (296.7)
Extraordinary items, net of taxes.................... (2.4) (58.3) (8.4)
--------- -------- --------
Net income (loss).................................... 1,174.7 (835.1) (305.1)
Dividends on preference shares....................... -- -- (.3)
--------- -------- --------
Net income (loss) available to common shareholders... $ 1,174.7 $ (835.1) $ (305.4)
========= ======== ========
Basic earnings (loss) per common share:
Income (loss) before extraordinary items........... $ 2.07 $ (1.50) $ (.62)
Extraordinary items, net of taxes.................. -- (.11) (.02)
Net income (loss) per common share................. 2.07 (1.61) (.64)
Diluted earnings (loss) per common share:
Income (loss) before extraordinary items........... $ 2.02 $ (1.50) $ (.62)
Extraordinary items, net of taxes.................. -- (.11) (.02)
Net income (loss) per common share................. 2.01 (1.61) (.64)
Weighted-average number of common shares outstanding:
Basic.............................................. 568.6 519.5 475.6
Diluted............................................ 586.8 519.5 475.6
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE> 28
TYCO INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996,
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 COMMON CURRENCY ACCUMULATED
AND YEAR ENDED SEPTEMBER 30, 1998 SHARES $0.20 SHARE CONTRIBUTED TRANSLATION EARNINGS
(IN MILLIONS) PAR VALUE PREMIUM SURPLUS ADJUSTMENT (DEFICIT)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996, as previously restated... $ 94.2 $1,052.5 $2,004.9 $ (31.4) $ 222.5
Effect of the Former Tyco's excluded activity (as
described in Note 1).......................... 2.9 (19.6) 121.2
Exchange of Liquid Yield Option Notes........... .3
Net loss........................................ (305.1)
Dividends....................................... (57.6)
Restricted stock grants, cancellations, tax benefits
and other..................................... .2 25.8 .5
Warrants and options exercised.................. .4 28.5 (.2)
Purchase of treasury shares..................... (4.4)
Amortization of deferred compensation........... 15.7
Minimum pension liability adjustment............ 3.6
Issuance of stock for acquisition............... 1.4 129.0
Other treasury stock transactions............... (4.7)
Currency translation and other adjustments...... (.5) 8.5
------ -------- -------- ------- -------
Balance at December 31, 1996...................... 96.2 1,081.0 2,168.8 (42.5) (14.9)
Pooling of interests with INBRAND (as described in
Note 1)....................................... 2.0 15.9 (.2) 27.6
------ -------- -------- ------- -------
Balance at December 31, 1996, as restated......... 98.2 1,081.0 2,184.7 (42.7) 12.7
Effect of ASH's excluded activity (as described in
Note 2)....................................... (.8)
Liquidation of ASH's ESOP....................... 2.5
Sale of common shares........................... 4.7 639.2 10.6
Exchange of Liquid Yield Option Notes........... 1.0 82.0
Net loss........................................ (835.1)
Dividends....................................... (43.4)
Restricted stock grants, cancellations, tax benefits
and other..................................... (18.0)
Warrants and options exercised.................. 3.3 321.1 (1.5)
Amortization of deferred compensation........... 48.5
Minimum pension liability adjustment............ .6
Other treasury stock transactions............... (.1)
Currency translation and other adjustments...... .1 (.5) (118.9) .2
------ -------- -------- ------- -------
Balance at September 30, 1997..................... 107.3 2,041.3 2,305.7 (161.6) (863.3)
Sale of common shares........................... 5.1 1,239.9
Exchange of Liquid Yield Option Notes........... 1.8 153.5
Net income...................................... 1,174.7
Dividends....................................... (59.2)
Restricted stock grants, net of surrenders, and
other......................................... .1 .2
Warrants and options exercised.................. 3.7 303.9 35.9
Purchase of treasury shares..................... (.7) (221.9)
Stock compensation expense, including amortization
of deferred compensation...................... 42.4
Minimum pension liability adjustment............ (11.9)
Issuance of common shares for acquisition....... .1 14.6
Tax benefit on stock transactions............... 47.2
Currency translation and other adjustments...... (.1) (.7) (21.1)
------ -------- -------- ------- -------
Balance at September 30, 1998..................... $117.3 $3,585.1 $2,376.9 $(182.7) $ 240.3
====== ======== ======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE> 29
TYCO INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $1,174.7 $ (835.1) $ (305.1)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Merger, restructuring and other non-recurring charges..... -- 207.4 217.4
Charge for the impairment of long-lived assets............ -- 148.4 744.7
Write off of purchased in-process research and
development............................................. -- 361.0 --
Extraordinary items....................................... 2.4 58.3 8.4
Depreciation.............................................. 413.3 286.3 339.0
Goodwill and other intangibles amortization............... 153.0 92.3 88.3
Debt and refinancing cost amortization.................... 11.0 15.9 25.5
Interest on ITS vendor note............................... (11.5) (7.7) (8.9)
Deferred income taxes..................................... 121.0 (295.7) 32.7
Gain arising from the ownership of investments............ -- -- (53.2)
Settlement gain........................................... -- -- (69.7)
Provisions for losses on accounts receivable and
inventory............................................... 115.4 58.1 36.2
Changes in assets and liabilities:
Receivables............................................. (86.2) (110.1) (99.8)
Proceeds from accounts receivable sale.................. -- 75.0 --
Contracts in process.................................... (91.4) (159.7) 17.8
Inventories............................................. (53.6) (6.2) (33.3)
Accounts payable, accruals and other liabilities........ (317.7) 542.8 (135.8)
Income taxes payable.................................... 150.3 302.3 (13.0)
Deferred revenue........................................ (12.4) 6.2 4.3
Other, net.............................................. 68.2 37.9 25.6
-------- --------- ---------
Net cash provided by operating activities................. 1,636.5 777.4 821.1
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................... (781.3) (519.1) (532.9)
Acquisition of businesses................................... (3,816.6) (1,344.8) (822.6)
Disposal of other investments and other..................... (8.4) -- 62.7
-------- --------- ---------
Net cash utilized by investing activities................. (4,606.3) (1,863.9) (1,292.8)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net receipts of short-term debt............................. 202.3 918.5 232.6
Net proceeds from issuance of public debt................... 2,744.5 -- --
Repayment of long-term debt, including debt tender.......... (988.1) (961.6) (269.6)
Proceeds from long-term debt................................ 219.0 234.6 386.6
Proceeds from sale of common shares......................... 1,245.0 654.5 --
Proceeds from exercise of options........................... 307.4 322.9 32.3
Dividends paid.............................................. (56.5) (37.9) (56.7)
Purchase of treasury shares................................. (222.6) -- (9.7)
Other....................................................... (30.9) -- (28.9)
-------- --------- ---------
Net cash provided by financing activities................. 3,420.1 1,131.0 286.6
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 450.3 44.5 (185.1)
Cash and cash equivalents at beginning of year.............. 369.8 324.2 429.8
Adjustment for INBRAND's cash and cash equivalents at
January 1, 1997 (as described in Note 1).................. -- 1.9 --
Effect of the excluded results of ASH and Former Tyco (as
described in Notes 1 and 2)............................... -- (0.8) 79.5
-------- --------- ---------
Cash and cash equivalents at end of year.................... $ 820.1 $ 369.8 $ 324.2
======== ========= =========
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Interest paid............................................... $ 187.7 $ 161.0 $ 166.0
======== ========= =========
Income taxes paid (net of refunds).......................... $ 201.0 $ 139.6 $ 152.9
======== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE> 30
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements have been
prepared in United States dollars in accordance with generally accepted
accounting principles in the United States. As described more fully in Note 2,
on July 2, 1997 a wholly-owned subsidiary of what was formerly called ADT
Limited ("ADT") merged with Tyco International Ltd. (the "Former Tyco"). Upon
consummation of the merger, ADT (the continuing public company) changed its name
to Tyco International Ltd. (the "Company" or "Tyco"). Former Tyco became a
wholly-owned subsidiary of the Company and changed its name to Tyco
International (US) Inc. ("Tyco US"). In addition, as more fully described in
Note 2, Tyco merged with INBRAND Corporation ("INBRAND") and Keystone
International, Inc. ("Keystone") on August 27, 1997 and August 29, 1997,
respectively. These transactions are referred to herein as the "mergers". These
consolidated financial statements include the consolidated accounts of Tyco, a
company incorporated in Bermuda, and its subsidiaries. They have been prepared
following the pooling of interests method of accounting for the mergers and
therefore reflect the combined financial position, operating results and cash
flows of ADT, Former Tyco and Keystone as if they had been combined for all
periods presented and of INBRAND from January 1, 1997. The restated combined
financial statements do not include the financial position, operating results
and cash flows of INBRAND prior to January 1, 1997 due to immateriality. In
accordance with the pooling of interests method of accounting, the Fiscal 1997
beginning Accumulated Earnings (Deficit) balance in the Consolidated Statement
of Shareholders' Equity has been restated to record the merger with INBRAND.
Prior to the mergers, ADT and Keystone had calendar year ends and the Former
Tyco had a June 30 fiscal year end. The Consolidated Statements of Operations,
Shareholders' Equity and Cash Flows for the year ended December 31, 1996 reflect
the combination of the calendar year end consolidated results of operations and
cash flows for ADT, Keystone and the Former Tyco. The results of operations and
cash flows for the Former Tyco from July 1, 1995 to December 31, 1995, which
have been excluded from historical combined results, are reflected as
adjustments in the 1996 Consolidated Statements of Shareholders' Equity and Cash
Flows.
Principles of Consolidation -- Tyco is a holding company whose assets
consist of its investments in its subsidiaries, intercompany balances and
holdings of cash and cash equivalents. The businesses of the consolidated group
are conducted through the Company's subsidiaries. The Company consolidates
companies in which it owns or controls more than fifty percent of the voting
shares unless control is likely to be temporary. The results of companies
acquired or disposed of during the fiscal year are included in the consolidated
financial statements from the effective date of acquisition or up to the date of
disposal except in the case of pooling of interests (see Note 2). All
significant intercompany balances and transactions have been eliminated in
consolidation.
Change in Year End -- In September 1997 the Company changed its fiscal year
end from December 31 to September 30. The change in year end resulted in a short
fiscal year covering the nine month transition period from January 1 to
September 30, 1997. References to Fiscal 1998, Fiscal 1997 and 1996 throughout
these consolidated financial statements refer to the twelve months ended
September 30, 1998, the nine months ended September 30, 1997 and the calendar
year ended December 31, 1996, respectively.
Cash Equivalents -- All highly liquid investments purchased with a maturity
of three months or less are considered to be cash equivalents.
Inventories -- Inventories are recorded at the lower of cost (primarily
first-in, first-out) or market value.
29
<PAGE> 31
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment -- Property, plant and equipment are
principally recorded at cost less accumulated depreciation. Maintenance and
repair expenditures are charged to expense when incurred. The straight-line
method of depreciation is used over the estimated useful lives of the related
assets as follows:
<TABLE>
<S> <C>
Buildings and related improvements 2 to 50 years
Leasehold improvements Remaining term of the lease
Subscriber systems 10 to 14 years
Other plant, machinery, equipment and 2 to 20 years
furniture and fixtures
</TABLE>
Gains and losses arising on the disposal of property, plant and equipment
are included in the Consolidated Statements of Operations.
Associates -- For investments in which the Company owns or controls more
than twenty percent of the voting shares, or over which it exerts significant
influence over operating and financial policies, the equity method of accounting
is used. The Consolidated Statements of Operations include the Company's share
of net income of associates less applicable goodwill amortization.
Goodwill and Other Intangible Assets -- Goodwill, which is being amortized
on a straight-line basis over periods ranging from 10 to 40 years, was $5,635.0
million and $2,631.7 million at September 30, 1998 and 1997, respectively.
Accumulated amortization amounted to $453.8 million at September 30, 1998 and
$332.5 million at September 30, 1997. Impairment of goodwill, if any, is
measured periodically on the basis of whether anticipated undiscounted operating
cash flows generated by the acquired businesses will recover the recorded net
goodwill balances over the remaining amortization period.
Other intangible assets include patents, trademarks, customer contracts and
other items, which are being amortized on a straight-line basis over lives
ranging from 2 to 30 years. At September 30, 1998 and September 30, 1997,
accumulated amortization amounted to $108.6 million and $76.9 million,
respectively.
Revenue Recognition -- Revenue from the sale of services or products is
recognized as services are rendered or shipments are made. Subscriber billings
for services not yet rendered are deferred and taken into income as earned, and
the deferred element is included in current liabilities. Revenue from the
installation of electronic security systems is recognized when installations are
completed.
Contract sales for installation of fire protection systems, underwater
cable systems and other construction related projects are recorded on the
percentage-of-completion method. Profits recognized on contracts in process are
based upon estimated contract revenue and related cost to completion. Revisions
in cost estimates as contracts progress have the effect of increasing or
decreasing profits in the current period. Provisions for anticipated losses are
made in the period in which they first become determinable.
Accounts receivable include amounts billed under retainage provisions for
fire protection contracts. Retention balances of $38.7 million at September 30,
1998, which become due upon contract completion and acceptance, are expected to
be substantially collected during the fiscal year ending September 30, 1999
("Fiscal 1999").
Share Premium and Contributed Surplus -- In accordance with the Bermuda
Companies Act of 1981, when the Company issues shares for cash at a premium to
their par value, the resulting premium is credited to a share premium account, a
non-distributable reserve. When the Company issues shares in exchange for shares
of another company, the excess of the fair value of the shares acquired over the
par value of the shares issued by the Company is credited, where applicable, to
contributed surplus, which is, subject to certain conditions, a distributable
reserve.
Income Taxes -- Deferred tax liabilities and assets are recognized for the
expected future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred tax
30
<PAGE> 32
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities and assets are determined based on the differences between the
consolidated financial statements and the tax basis of assets and liabilities,
using tax rates in effect for the years in which the differences are expected to
reverse. A valuation allowance is provided to offset any net deferred tax assets
if, based upon the available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized.
Research and Development -- Research and development expenditures are
expensed when incurred.
Advertising -- Advertising costs are expensed when incurred.
Translation of Foreign Currency -- Assets and liabilities of the Company's
subsidiaries operating outside of the United States which account in a
functional currency other than U.S. dollars, other than those operating in
highly inflationary environments, are translated into U.S. dollars using
year-end exchange rates. Revenues and expenses are translated at the average
exchange rates effective during the year. Foreign currency translation gains and
losses are included as a separate component of shareholders' equity. For
subsidiaries operating in highly inflationary environments, inventories and
property, plant and equipment, including related expenses, are translated at the
rate of exchange in effect on the date the assets were acquired, while other
assets and liabilities are translated at year-end exchange rates. Translation
adjustments for these operations are included in net income (loss).
Gains and losses resulting from foreign currency transactions, the amounts
of which are not material, are included in net income (loss).
Interest Rate Swaps, Currency Options and Other Contracts -- From time to
time the Company enters into a variety of interest rate swaps, interest rate
locks of future fundings, currency options and cross-currency swaps in its
management of interest costs and foreign currency exposures.
Interest rate swaps and interest rate locks hedge interest rates on certain
indebtedness and involve the exchange of fixed and floating rate interest
payment obligations over the life of the related agreement without the exchange
of the notional amount. The interest differentials to be paid or received under
interest rate swaps or locks are recognized over the life of the underlying
agreement or indebtedness, respectively, as an adjustment to interest expense.
Currency options, acquired for the purpose of hedging foreign operating
income generally for periods not exceeding twelve months, are marked to market
with any realized and unrealized gains or losses reflected in selling, general
and administrative expenses. Under cross-currency swaps, which hedge certain net
foreign investments, changes in valuation are recorded in the currency
translation adjustment account. The interest differentials from swaps are
recorded in interest expense.
Use of Estimates -- The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make extensive use of certain estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reported periods.
Significant estimates in these consolidated financial statements include
allowances for doubtful accounts receivable, estimates of future cash flows
associated with assets, asset impairments, useful lives for depreciation and
amortization, loss contingencies, net realizable value of inventories, estimated
contract revenues and related costs, environmental liabilities, income taxes and
tax valuation reserves, and the determination of discount and other rate
assumptions for pension and post-retirement employee benefit expenses. Actual
results could differ from those estimates.
Accounting Pronouncements -- In June 1997, the Financial Accounting
Standards Board (the "FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information", which are
both effective for years beginning after December 15, 1997. Adoption of these
standards is not expected to impact the financial results of the Company.
31
<PAGE> 33
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", which is effective for fiscal
years beginning after December 15, 1997. This statement revises financial
statement disclosure requirements for pension and other postretirement benefit
plans but does not change the measurement or recognition of those plans.
Adoption of this standard is not expected to impact the financial results of the
Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for fiscal years
beginning after June 15, 1999. This statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. The Company is currently analyzing this new standard.
Reclassifications -- Certain prior year amounts have been reclassified to
conform with current year presentation.
Stock Split -- Per share amounts and share data have been retroactively
adjusted to reflect the two-for-one stock split described in Note 10.
2. MERGERS
Tyco's Merger with Keystone -- In August 1997, Tyco merged with Keystone
International, Inc. A total of approximately 34.8 million Tyco common shares
were issued to the former shareholders of Keystone.
Tyco's Merger with INBRAND -- In August 1997, Tyco merged with INBRAND
Corporation. A total of approximately 10.2 million Tyco common shares were
issued to the former shareholders of INBRAND.
ADT's Merger with the Former Tyco -- In July 1997, a wholly-owned
subsidiary of ADT merged with the Former Tyco. Shareholders of ADT, through a
reverse stock split, received 0.48133 shares of the Company's common stock for
each share of ADT common stock outstanding, and the Former Tyco shareholders
received one share of the Company's common stock for each share of the Former
Tyco common stock outstanding or a total of approximately 336.8 million Tyco
common shares. All historical common share and per share data of the Company
have been retroactively restated to reflect the reverse stock split.
Each of the three merger transactions discussed above was accounted for
under the pooling of interests accounting method, which presents as a single
interest, common shareholder interests which were previously independent. The
historical consolidated financial statements for periods prior to the
consummation of the combination are restated as though the companies had been
combined during such periods. As discussed in Note 1, the consolidated financial
statements for periods prior to January 1, 1997 do not include INBRAND due to
immateriality.
Aggregate fees and expenses related to the three mergers discussed above
and to the integration of the combined companies have been expensed in the
accompanying consolidated statement of operations for the nine months ended
September 30, 1997 as required under the pooling of interests accounting method.
This includes transaction costs of approximately $239.8 million relating to
legal, printing, accounting, financial advisory services, severance costs
payable at the effective time of the merger and other direct expenses. It also
includes charges of approximately $678.0 million to reflect the combination of
the four companies, including severance costs, integration costs, the costs
associated with the elimination of excess facilities and the satisfaction of
certain liabilities. In addition, the Company recorded a charge of $148.4
million for the impairment of long-lived assets. See Notes 11 and 15.
32
<PAGE> 34
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Combined and separate results of ADT, Former Tyco, Keystone and INBRAND for
the periods preceding the mergers were as follows:
<TABLE>
<CAPTION>
FORMER
ADT TYCO KEYSTONE INBRAND(I) COMBINED
--- ------ -------- ---------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Six Months ended June 30, 1997 (unaudited)
Net sales.................................. $ 923.9 $3,505.6 $331.2 $118.7 $4,879.4
Net income (loss).......................... 47.2 244.6 22.9 (28.9) 285.8
Year ended December 31, 1996
Net sales.................................. 1,704.0 5,721.8 677.9 -- 8,103.7
Extraordinary items, net of taxes.......... (8.4) -- -- -- (8.4)
Net (loss) income.......................... (695.1) 348.1 41.9 -- (305.1)
</TABLE>
- ---------------
(i) The restated combined financial statements for periods prior to January 1,
1997 do not include INBRAND due to immateriality (see Note 1).
ADT's Merger with Automated Security (Holdings) PLC ("ASH")
In September 1996, ADT merged with and acquired the whole of the issued
capital of ASH, a United Kingdom quoted company (the "ASH merger"). ASH is
engaged in the provision of electronic security services in North America and
Europe. The total consideration in respect of the whole of the issued capital of
ASH consisted of the issue of approximately 6.8 million common shares of the
Company.
The consolidated financial statements of ASH have previously been presented
in pounds sterling, ASH's functional currency. For the purposes of these
consolidated financial statements, ASH's consolidated financial statements have
been translated into United States dollars at the appropriate exchange rates. In
addition, ASH's fiscal year end was November 30. ASH has been accounted for as a
pooling of interests and its results have been combined with ADT's using the
November year end. The results of operations and cash flows for ASH for the
month of December 1996, which have been excluded from these consolidated
financial statements, are reflected as adjustments in the 1997 Consolidated
Statements of Shareholders' Equity and Cash Flows.
Combined and separate results of ADT and ASH for the periods preceding the
ADT and ASH merger were as follows:
<TABLE>
<CAPTION>
ADT ASH ADJUSTMENTS COMBINED
--- --- ----------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Six months ended June 30, 1996 (unaudited)
Net sales...................................... $ 715.6 $ 118.1 $-- $ 833.7
Extraordinary items, net of taxes.............. (1.2) -- -- (1.2)
Net loss....................................... (347.7) (328.9) 0.5(i) (676.1)
</TABLE>
- ---------------
(i) Income tax adjustment arising on preference share dividends accrued by the
ASH group but not payable following merger.
All fees and expenses related to the ASH merger have been expensed as
required under the pooling of interests accounting method. Such fees and
expenses amounted to $8.8 million in 1996.
3. ACQUISITIONS AND DIVESTITURES
During Fiscal 1998 the Company acquired companies in each of its business
segments for an aggregate of $4.20 billion, including $3.82 billion in cash, the
assumption of approximately $240 million in debt and the
33
<PAGE> 35
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issuance of 271,416 common shares valued at $14.7 million and 1,254 subsidiary
preference shares valued at $125.4 million. The cash portions of the
acquisitions were made utilizing cash on hand, borrowings under the bank credit
agreements, proceeds of approximately $1.25 billion from the sale of common
shares, as well as borrowings under the Company's uncommitted lines of credit.
Each of these acquisitions was accounted for as a purchase and the results of
operations of the acquired companies were included in the consolidated results
of the Company from their respective acquisition dates. As a result of the
acquisitions, approximately $3.62 billion in goodwill and other intangibles was
recorded by the Company, which reflects the adjustments necessary to allocate
the individual purchase prices to the fair value of assets acquired, liabilities
assumed and additional purchase liabilities recorded. Additional purchase
liabilities recorded during Fiscal 1998 include approximately $57.8 million for
transaction and other direct costs, $151.0 million for severance and related
costs and $278.9 million for costs associated with the shut down and
consolidation of certain acquired facilities. At September 30, 1998, accrued
liabilities for approximately $38.8 million in transaction and other costs,
$121.9 million in severance costs and $264.7 million for facility related costs
remained on the balance sheet.
The Fiscal 1998 acquisitions discussed above include the acquisition of the
Sherwood-Davis & Geck division ("Sherwood") of American Home Products
Corporation, which was purchased for cash of $1.77 billion. As a result of this
acquisition, approximately $1.44 billion in goodwill and other intangibles was
recorded by the Company. Sherwood is a manufacturer of medical and surgical
devices, such as catheters, needles and syringes, sutures, thermometers and
other specialized disposable medical products, with annual revenues of
approximately $1.0 billion. Sherwood is being integrated with Kendall within
Tyco's Disposable and Specialty Products segment.
In July 1998, the Company acquired the U.S. operations of Crosby Valve,
Inc. in exchange for 1,254 cumulative dividend preference shares of a newly
created subsidiary, valued at $125.4 million. The subsidiary has authorized
2,000 cumulative dividend preference shares. The holders of these preference
shares have the option to require the Company to repurchase the preference
shares at par value plus unpaid dividends at any time after July 2001. The
outstanding preference shares were issued at $100,000 par value each and have
been classified in Other Long-Term Liabilities on the accompanying 1998
Consolidated Balance Sheet. Cash dividends accumulate on a preferred basis,
whether or not earned or declared, at the rate of $3,750 per share per annum.
Upon liquidation, the holders of shares are entitled to receive an amount equal
to $100,000 per share, plus any unpaid dividends. These preference shares may be
redeemed by the subsidiary at any time on or after December 31, 2008 at a price
per share of $100,000, plus unpaid dividends, adjusted for certain increases in
the value of Tyco's stock, as defined.
34
<PAGE> 36
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma data summarize the results of operations
for the periods indicated as if these acquisitions had been completed on January
1, 1997. The pro forma data give effect to actual operating results prior to the
acquisitions and adjustments to interest expense, goodwill amortization and
income taxes. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisitions had occurred
on January 1, 1997 or that may be obtained in the future. The pro forma data do
not give effect to acquisitions completed subsequent to September 30, 1998.
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------ ------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net Sales.................................. $13,589.7 $9,285.6
Income (loss) before extraordinary items... 1,019.6 (863.2)
Net income (loss).......................... 1,011.8 (923.0)
Net income (loss) per common share:
Basic................................. 1.78 (1.78)
Diluted............................... 1.74 (1.78)
</TABLE>
In addition to the mergers discussed in Note 2, in Fiscal 1997 the Company
acquired companies in each of its business segments for an aggregate of $1.36
billion, including $1.34 billion in cash and the assumption of approximately
$15.7 million in debt. The cash portions of the acquisitions were made utilizing
cash on hand, funding from an equity offering of $645.2 million, as well as
borrowings under the Company's uncommitted lines of credit. Each of these
acquisitions was accounted for as a purchase and the results of operations of
the acquired companies were included in the consolidated results of the Company
from their respective acquisition dates. As a result of the acquisitions,
approximately $531.7 million in goodwill and other intangibles, net of the
write-off of purchased in-process research and development, was recorded by the
Company, which reflects the adjustments necessary to allocate the individual
purchase prices to the fair value of assets acquired, liabilities assumed and
additional purchase liabilities recorded. At September 30, 1998, purchase
liabilities for approximately $6.9 million in severance costs and $28.9 million
for facility and other related costs remained on the balance sheet. In
connection with the acquisition of AT&T's submarine systems business, the
Company allocated $361.0 million of the purchase price to in-process research
and development projects that had not reached technological feasibility and had
no probable alternative future uses. The Company expects that the payout for
employee severance and its consolidation of facilities related to these
acquisitions will be substantially completed in Fiscal 1999, excluding certain
leases for abandoned facilities.
During 1996, the Company acquired companies in each of its business
segments for an aggregate of $1.1 billion, including $822.6 million in cash, 3.5
million shares of the Company's common stock valued at $130.4 million and the
assumption of approximately $155.0 million in debt. The cash acquisitions were
made utilizing cash on hand, proceeds of approximately $300 million from the
issuance of 6 1/2% public notes, as well as borrowings under the Company's
uncommitted lines of credit. Each of the acquisitions was accounted for as a
purchase and the results of operations of the acquired companies were included
in the consolidated results of the Company from their respective acquisition
dates. As a result of the acquisitions, approximately $859.2 million in goodwill
was recorded by the Company, which reflects the adjustments necessary to
allocate the individual purchase prices to the fair value of assets acquired,
liabilities assumed and additional purchase liabilities recorded. At September
30, 1998, purchase liabilities for approximately $21.5 million in severance
costs and facility related costs remained on the balance sheet. The Company
expects to complete the payout for employee severance and its consolidation of
facilities in Fiscal 1999, excluding certain leases for abandoned facilities.
As a result of the sale of a business in 1995, the Company holds a
subordinated, non-collateralized zero coupon loan note maturing in 2004 ("Vendor
Note"), together with a 10% interest of the ordinary share
35
<PAGE> 37
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
capital of the issuer. The Vendor Note has a $205.4 million aggregate principal
amount at maturity with an issue price of $83.9 million, reflecting a yield to
maturity of 10.0% per annum, and was originally valued by the Company at $74.6
million. As of September 30, 1998, the Vendor Note is included in Long-Term
Investments on the accompanying Consolidated Balance Sheet and has been
accounted for at its amortized cost of $111.1 million (which approximates fair
value). The fair value of the Vendor Note was estimated based on the Company's
calculation of an appropriate fair value interest rate discount. This discount
rate was determined based on an evaluation of current UK market conditions
(private placement rates, discussions with financial sources, etc.) and the
continued risk margin associated with deep discount debentures.
During 1996, the Company entered into a settlement agreement related to a
1990 acquisition and a lawsuit originated by the Company in 1991. After
deducting legal and other settlement costs, the net gain arising on this
settlement amounted to $69.7 million, of which $65.0 million was included in
other income and $4.7 million was included in interest income in 1996.
4. INDEBTEDNESS
Long-term debt is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Bank and acceptance facilities.......................... $ 0.8 $ 56.4
Bank credit agreement(i)................................ 1,359.0 1,400.0
Uncommitted lines of credit(ii)......................... -- 38.5
Variable rate term loan due 1998(iii)................... -- 97.1
8.125% public notes due 1999(iv)........................ 10.5 10.5
8.25% senior notes due 2000(iv)......................... 9.5 9.5
6.34% senior notes due 2000............................. -- 45.0
6.5% public notes due 2001.............................. 299.0 298.7
6.125% public notes due 2001(v)......................... 747.0 --
Sterling denominated bank facility due 2002(vi)......... -- 137.5
9.25% senior subordinated notes due 2003(iv)............ 14.1 14.1
6.375% public notes due 2004............................ 104.6 104.5
6.375% public notes due 2005(v)......................... 742.6 --
Zero coupon Liquid Yield Option Notes due 2010(vii)..... 115.3 259.6
6.25% public Dealer Remarketable Securities ("Drs.") due
2013(v)............................................... 762.8 --
9.5% public debentures due 2022(iv)..................... 49.0 49.0
8.0% public debentures due 2023......................... 50.0 50.0
7.0% public notes due 2028(v)........................... 492.1 --
Other................................................... 246.3 160.2
-------- --------
Total debt.............................................. 5,002.6 2,730.6
Less current portion.................................... 350.0 250.0
-------- --------
Long-term debt.......................................... $4,652.6 $2,480.6
======== ========
</TABLE>
- ---------------
(i) In February 1998, Tyco US entered into a new $2.25 billion credit
agreement with a group of commercial banks, giving it the right to borrow
(a) up to $1.75 billion until February 12, 1999, with the option to extend
to February 12, 2000, and (b) up to $0.5 billion until February 12, 2003.
Interest payable on borrowings is variable based upon the borrower's
option of selecting a Eurodollar rate plus
36
<PAGE> 38
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
margins ranging from 0.17% to 0.19%, a certificate of deposit rate plus
margins ranging from 0.295% to 0.315%, or a base rate, as defined. If the
outstanding principal amount of loans equals or exceeds one-third of the
commitments, the Eurodollar and certificate of deposit margins are
increased by 0.10%. Repayments of amounts outstanding under this agreement
are guaranteed by the Company. In accordance with the terms of this
agreement, in June 1998 Tyco US and Tyco International Group S.A. ("TIG"),
a wholly-owned subsidiary of the Company, elected that TIG become the
borrower and that Tyco US cease to be the borrower under this agreement.
All other terms and conditions in effect remained unchanged. Substantially
all amounts outstanding under this credit agreement have been classified
as long-term based on the Company's ability and intent to refinance this
obligation on a long term basis.
Simultaneously with the closing of the new credit agreement, Tyco US
reduced aggregate commitments available under the previously existing
credit agreement from $1.75 billion to $950 million. In March 1998, Tyco
US terminated the $950 million credit agreement. Balances outstanding at
the time of termination were repaid with net proceeds from the sale of
common shares (Note 10).
(ii) Uncommitted lines of credit are borrowings by Tyco US from commercial
banks on an "as offered" basis. Borrowings and repayments occur daily and
contain no specific terms other than due dates and interest rates. The due
dates generally range from overnight to 90 days, and interest rates
approximate those available under the TIG credit agreement.
(iii) In May 1997, a Tyco subsidiary entered into a L60 million term loan with a
bank to refinance certain intercompany loans with external debt. Interest
payable on borrowings was variable based upon U.K. LIBOR plus 0.35%. In
March 1998, the term loan was repaid and the facility was terminated.
(iv) In July 1997, Tyco US tendered for its $145.0 million 8.125% public notes
due 1999 and $200.0 million 9.5% public debentures due 2022, and ADT
Operations, Inc. tendered for its $250.0 million 8.25% senior notes due
2000 and $294.1 million 9.25% senior subordinated notes due 2003. The
percentage of debt tendered was 92.8% of the 8.125% notes, 75.5% of the
9.5% debentures, 96.2% of the 8.25% notes and 95.2% of the 9.25% notes.
The two companies paid an aggregate amount, including accrued interest, of
approximately $900.8 million to the note holders, of which $800.0 million
was financed from the previously existing credit agreement discussed
above. In connection with the tender, the Company recorded an after-tax
charge of approximately $58.3 million, net of related income tax benefit
of $33.0 million, primarily representing unamortized debt issuance fees
and the premium paid, which was reported as an extraordinary loss
(Note 13).
The $250.0 million 8.25% senior notes due August 2000 were issued in
August 1993, through a public offering, by ADT Operations, Inc. and are
guaranteed on a senior basis by the Company and certain subsidiaries of
ADT Operations, Inc. The senior notes are not redeemable prior to
maturity.
The $294.1 million 9.25% senior subordinated notes due August 2003 were
issued in August 1993, through a public offering, by ADT Operations, Inc.,
and are guaranteed on a senior subordinated basis by the Company. The
notes are redeemable in whole or in part, at the option of ADT Operations,
Inc., at any time after August 1998 at the following redemption prices:
during the twelve month period beginning (a) August 1998 at 103.75%, (b)
August 1999 at 102.50%, (c) August 2000 at 101.25%, and thereafter at
100.00% of the principal amount. During 1996 the Company reacquired in the
market $23.1 million face value of the senior subordinated notes at a
purchase cost of $24.0 million, which was financed from cash on hand. The
loss arising on reacquisition of $0.9 million, and related costs of $0.5
million, were included in extraordinary items (Note 13). In December 1998,
ADT Operations, Inc. sent a notice of redemption to holders of these
notes, calling the notes for redemption on December 31, 1998.
In conjunction with the tenders described above, ADT Operations, Inc.,
through consent of the holders of the senior and senior subordinated
notes, eliminated in the indentures pursuant to which such notes were
issued (a) certain restrictive covenants and provisions and references to
such restrictive covenants,
37
<PAGE> 39
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) certain events of default to the extent relating to such restrictive
covenants and (c) certain definitions to the extent relating to such
restrictive covenants and events of default.
(v) In June 1998, TIG issued $750 million 6 1/8% notes due 2001, $750 million
6 3/8% notes due 2005, $750 million 6 1/4% Dealer Remarketable
Securities(SM) ("Drs.")(SM) due 2013 and $500 million 7.0% notes due 2028
under a $3.75 billion public shelf registration statement. Interest is
payable semi-annually in June and December. Under the terms of the Drs.,
the Remarketing Dealer has an option to remarket the Drs. in June 2003,
which if exercised would subject the Drs. to mandatory tender to the
Remarketing Dealer and reset the interest rate to an adjusted fixed rate
until June 2013. If the Remarketing Dealer does not exercise its option,
then all Drs. are required to be tendered to the Company in June 2003.
Repayment of amounts outstanding under these debt securities are fully and
unconditionally guaranteed by Tyco (Note 24). The net proceeds of
approximately $2.74 billion were ultimately used to repay borrowings under
the $2.25 billion bank credit facility and uncommitted lines of credit of
Tyco US. During Fiscal 1998, the effective interest rate on these
instruments approximated the coupon rate.
(vi) In March 1997, ADT Finance entered into a sterling denominated bank credit
facility of which $137.5 million (L85 million) is a term loan facility and
$8 million is a revolving credit facility. The term loan facility was
fully drawn down and was used to repay in part the $26 million drawn down
under another sterling denominated bank credit facility entered into in
January 1997. The new facility has a term of five years and is guaranteed
by the Company and certain of its subsidiaries. Interest is payable at
LIBOR plus a margin. Amounts outstanding under the term loan facility were
repaid as of September 30, 1998 and the facility was terminated.
(vii) In July 1995, ADT Operations, Inc. issued $776.3 million aggregate
principal amount at maturity of its zero coupon subordinated Liquid Yield
Option Notes ("LYONs") maturing July 2010. The net proceeds of the issue
amounted to $287.4 million which was used to repay in full all amounts
outstanding under ADT Operations Inc.'s previous bank credit agreement,
which was subsequently canceled. The issue price per LYON was $383.09,
being 38.309% of the principal amount of $1,000 per LYON at maturity,
reflecting a yield to maturity of 6.5% per annum (computed on a
semi-annual bond equivalent basis). The discount amortization on the LYONs
is being charged as interest expense through the consolidated statements
of operations on a basis linked to the yield to maturity. The LYONs
discount amortization for Fiscal 1998 amounted to $11.0 million (Fiscal
1997 -- $15.9 million; 1996 -- $20.3 million). Each LYON is exchangeable
for common shares of the Company at the option of the holder at any time
prior to maturity, unless previously redeemed or otherwise purchased by
ADT Operations, Inc., at an exchange rate of 27.176 common shares per
LYON. During Fiscal 1998 and Fiscal 1997, respectively, 342,752 and
188,290 Notes with carrying values of $155.3 million and $83.0 million
were exchanged for 9,314,599 and 5,116,923 common shares of the Company.
Any LYON will be purchased by ADT Operations, Inc., at the option of the
holder, as of July 2002 for a purchase price per LYON of $599.46. At this
time, if the holder exercises the option, the Company has the right to
deliver all or a portion of the purchase price in the form of common
shares of the Company. Beginning July 2002, the LYONs are redeemable for
cash at any time at the option of ADT Operations, Inc., in whole or in
part, at redemption prices equal to the issue price plus accrued original
issue discount to the date of redemption. The LYONs are guaranteed on a
subordinated basis by the Company.
The weighted-average rate of interest on all long-term debt during Fiscal
1998 was 6.5% (Fiscal 1997 -- 7.6%; 1996 -- 8.0%).
The aggregate amounts of total debt maturing during the next five years are
as follows (in millions): $350.0 in Fiscal 1999, $1,247.5 in Fiscal 2000,
$1,092.9 in Fiscal 2001, $65.0 in Fiscal 2002 and $19.8 in Fiscal 2003.
In June 1998, TIG entered into two interest rate swap agreements with a
financial institution to hedge a portion of the fixed rate terms of its public
notes. The agreements are for notional amounts of $650 million each and expire
in June 2003 and June 2005, respectively. The Company receives payments at fixed
rates of
38
<PAGE> 40
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6.25% and 6.375%, respectively, and makes floating rate payments based on LIBOR,
as defined, but not to exceed 7.0% and 7.125%, respectively. At September 30,
1998, the floating rates under these agreements were 5.58% and 5.55%,
respectively. The impact of the Company's interest rate swap activities on its
weighted-average borrowing rate was not material in any year. The impact on
reported interest expense was a reduction of $1.9 million, $0.8 million and $1.8
million for Fiscal 1998, Fiscal 1997 and 1996, respectively.
Subsequent to September 30, 1998, TIG issued $800 million of debt in a
private placement offering consisting of two series of Notes: $400 million of
5.875% Notes due November 2004 and $400 million of 6.125% Notes due November
2008. Interest on each series of Notes is payable on May 1 and November 1 of
each year, beginning May 1, 1999. The Notes are fully and unconditionally
guaranteed by Tyco. The net proceeds of approximately $791.7 million were used
to repay borrowings under TIG's $2.25 billion bank credit facility. In addition,
TIG entered into an interest rate swap agreement with a notional amount of $400
million to hedge the fixed rate terms of the 6.125% Notes due 2008. Under this
agreement, which expires in November 2008, TIG will receive payments at a fixed
rate of 6.125% and will make floating rate payments based on LIBOR, as defined.
5. SALE OF ACCOUNTS RECEIVABLE
The Company has an agreement under which one of its operating subsidiaries
sells a defined pool of trade accounts receivable to a limited purpose
subsidiary of the Company. The subsidiary, a separate corporate entity, owns all
of its assets and sells participating interests in such accounts receivable to
financiers who, in turn, purchase and receive ownership and security interests
in those assets. As collections reduce accounts receivable included in the pool,
the operating subsidiary sells new receivables. The limited purpose subsidiary
has the risk of credit loss on the receivables and, accordingly, the full amount
of the allowance for doubtful accounts has been retained on the Company's
Consolidated Balance Sheets. At September 30, 1998 and 1997, the $300 million
available under the program was fully utilized. The proceeds from the sales were
used to reduce borrowings under uncommitted lines of credit and are reported as
operating cash flows in the Company's Consolidated Statements of Cash Flows. The
proceeds of sale are less than the face amount of accounts receivable sold by an
amount that approximates the purchaser's financing costs of issuing its own
commercial paper backed by these accounts receivable. The discount from the face
amount is accounted for as a loss on the sale of receivables of $17.3 million,
$10.4 million, and $12.1 million during Fiscal 1998, Fiscal 1997 and 1996,
respectively, and has been included in selling, general and administrative
expenses in the Company's Consolidated Statements of Operations. The operating
subsidiary, as servicing agent for the purchaser, retains collection and
administrative responsibilities for the participating interests in the defined
pool.
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt. The Company also has
currency options (notional amount of $153.6 million), as well as interest rate
swaps. At September 30, 1998 and at September 30, 1997, the fair value of
interest rate swaps approximated book value, and the fair value of long-term
debt was approximately $5,044.7 million (book value of $4,652.6 million) and
$2,482.6 million (book value of $2,480.6 million), respectively, based on
current interest rates. The fair value of financial instruments included in
working capital approximated book value.
None of the Company's financial instruments represent a concentration of
credit risk as the Company deals with a variety of major banks worldwide and its
accounts receivable are spread among a number of major industries, customers and
geographic areas. None of the Company's off-balance sheet financial instruments
would result in a significant loss to the Company if a counterparty failed to
perform according to the terms of its agreement.
39
<PAGE> 41
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The provision (benefit) for income taxes and the reconciliation between the
notional United States federal income taxes at the statutory rate on
consolidated income (loss) before taxes and the Company's income tax provision
are as follows:
<TABLE>
<CAPTION>
NINE
MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
------------- ------------- ------------
1998 1997 1996
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Notional U.S. federal income taxes at the
statutory rate............................. $ 601.4 $(206.4) $(21.5)
Adjustments to reconcile to the Company's
income tax provision:
U.S. state income tax provision, net....... 23.9 16.2 22.4
SFAS 121 impairment........................ -- 49.6 150.2
Non U.S. net (earnings) losses............. (71.1) 121.4 75.5
Provision for unrepatriated earnings of
subsidiaries............................ -- 64.1 --
Nondeductible restructuring charges........ -- 112.9 --
Other...................................... (12.9) 29.2 8.9
------- ------- ------
Provision for income taxes................. 541.3 187.0 235.5
Deferred provision (benefit)............... 152.1 (257.4) 38.6
------- ------- ------
Current provision.......................... $ 389.2 $ 444.4 $196.9
======= ======= ======
</TABLE>
The provisions for Fiscal 1998, Fiscal 1997, and 1996 included $154.8
million, $101.1 million and $45.3 million, respectively, for non-U.S. income
taxes. The non-U.S. component of income (loss) before income taxes was $627.8
million, $(183.9) million and $(117.7) million for Fiscal 1998, Fiscal 1997, and
1996, respectively.
40
<PAGE> 42
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The deferred income tax balance sheet accounts result from temporary
differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. The components of the net deferred income
tax asset are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves........................ $ 773.6 $ 603.4
Accrued postretirement benefit obligation............... 65.5 59.5
Tax loss carryforwards.................................. 239.8 284.7
Interest................................................ 78.9 92.7
Other................................................... 16.5 5.1
-------- --------
1,174.3 1,045.4
-------- --------
Deferred tax liabilities:
Property, plant and equipment........................... (371.6) (433.4)
Contracts............................................... (6.4) (6.1)
Accrued liabilities and reserves........................ (7.1) (17.0)
Other................................................... (32.4) (14.7)
-------- --------
(417.5) (471.2)
-------- --------
Net deferred income tax asset before valuation
allowance............................................ 756.8 574.2
Valuation allowance..................................... (115.4) (115.4)
-------- --------
Net deferred income tax asset........................... $ 641.4 $ 458.8
======== ========
</TABLE>
As of September 30, 1998, the Company had approximately $185 million of net
operating loss carryforwards in certain non-U.S. jurisdictions. Of these, $166
million have no expiration, and the remaining $19 million will expire in future
years to 2004. U.S. operating loss carryforwards at September 30, 1998 were
approximately $600 million and will expire in future years to 2018. A valuation
allowance has been provided for operating loss carryforwards that are not
expected to be utilized.
8. KEY EMPLOYEE LOAN PROGRAM
Loans are made to employees of the Company under the Former Tyco 1983 Key
Employee Loan Program for the payment of taxes upon the vesting of shares
granted under Former Tyco's Restricted Stock Ownership Plans. The loans are
unsecured and bear interest, payable annually, at a rate which approximates the
Company's incremental short-term borrowing rate. Loans are generally repayable
in ten years, except that earlier payments are required under certain
circumstances. During Fiscal 1998, the maximum amount outstanding was $143.5
million. Loans receivable under this program were $22.2 million and $12.3
million at September 30, 1998 and September 30, 1997, respectively.
9. CONVERTIBLE REDEEMABLE PREFERENCE SHARES
The Company has authorized 125,000,000 convertible cumulative redeemable
preference shares of $1 each, of which none was outstanding at September 30,
1998 or September 30, 1997. Of the 125,000,000 convertible cumulative redeemable
preference shares authorized, 7,500,000 have been classified as Series A First
Preference Shares and are reserved for issuance pursuant to the Shareholder
Rights Plan described below. Rights as to dividends, return of capital,
redemption, conversion, voting and otherwise of the remaining 117,500,000
convertible cumulative redeemable preference shares of $1 each, none of which
are issued and outstanding, may be determined by the Company on or before the
time of allotment.
41
<PAGE> 43
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1996, the Board of Directors of ADT adopted a Shareholder
Rights Plan, which was amended in March 1997 and July 1997 (the "Plan"). Under
the Plan, each common shareholder has received a distribution of rights for each
common share held. After giving effect to the exchange ratio related to the
merger between ADT and Former Tyco and the two-for-one stock split distributed
on October 22, 1997, the number of Rights associated with each common share is
1.03879. Each right entitles the holder to purchase from the Company shares of a
new series of first preference shares at an initial purchase price of $90 per
one-hundredth of a first preference share. The rights will become exercisable
and will detach from the common shares a specified period of time after any
person becomes the beneficial owner of 15% or more of the Company's common
shares, or commences a tender or exchange offer which, if consummated, would
result in any person becoming the beneficial owner of 15% or more of the
Company's common shares. Once exerciseable each right will entitle the holder,
other than the acquiring person, to purchase, for the rights purchase price,
common shares having a market value of twice the rights purchase price.
If, following an acquisition of 15% or more of the Company's common shares,
the Company is involved in any mergers or other business combinations or sells
or transfers more than 50% of its assets or earnings power, each right will
entitle the holder to purchase, for the rights purchase price, common shares of
the other party to such transaction, having a market value of twice the rights
purchase price. The merger between ADT and Former Tyco (see Note 2) was
specifically excluded from these provisions by an amendment to the Plan in July
1997.
The Company may redeem the rights at a price of $0.01 per right at any time
prior to the specified period of time after a person has become the beneficial
owner of 15% or more of the Company's common shares. The rights will expire in
November 2005 unless exercised or redeemed earlier.
In the event of liquidation of the Company, the holders of all of the
Company's convertible redeemable preference shares are together entitled to
payment to them of the amount for which the preference shares were subscribed
and any unpaid dividend, prior to any payment to the common shareholders.
10. SHAREHOLDERS' EQUITY
During the second quarter of Fiscal 1998, the shareholders approved an
increase in the number of authorized common shares from 750,000,000 to
1,503,750,000.
In December 1997 the Company filed a shelf registration to enable it to
offer from time to time unsecured debt securities or shares of common stock, or
any combination of the foregoing, at an aggregate initial offering price not to
exceed $2.0 billion. In March 1998, the Company sold 25.3 million common shares
at $50.75 per share. The net proceeds from the sale of approximately $1.25
billion were used to repay indebtedness incurred for previous acquisitions.
During the last quarter of Fiscal 1997, the Board of Directors declared a
two-for-one stock split effected in the form of a 100% stock dividend on the
Company's common shares. Per share amounts and share data have been
retroactively adjusted to reflect the stock split.
In March and April 1997, Former Tyco sold an aggregate of 23 million shares
of common stock at $28.88 per share. The net proceeds from the sale of $645.2
million were used to repay indebtedness incurred for previous acquisitions.
Prior to the merger of ADT with the Former Tyco, the shareholders of ADT
approved the consolidating of $0.10 par value common shares into new $0.20 par
value common shares and an increase in the number of authorized common shares to
750 million. Per share amounts and per share data have been retroactively
adjusted to reflect the consolidation into new par value shares. Information
with respect to ADT common shares and options has been retroactively restated in
connection with the merger on July 2, 1997 to reflect the reverse stock split in
the ratio of 0.48133 share of ADT for each share or option outstanding and the
issuance
42
<PAGE> 44
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of one share for each share of the Former Tyco outstanding (see Note 2).
Information with respect to Keystone and INBRAND common shares and options have
been retroactively restated in connection with their mergers with Tyco to
reflect their applicable merger exchange ratios of 0.48726 and 0.43,
respectively.
Restricted Stock -- The Former Tyco's 1978 Restricted Stock Ownership Plan
(the "1978 Plan") provided for the award of 9.6 million shares of common stock
to key employees through November 30, 1988. Under the 1978 Plan, approximately
9.5 million shares were granted, net of surrenders. The 1983 Restricted Stock
Ownership Plan (the "1983 Plan") provided for the award of 13.6 million shares
of common stock to key employees through October 18, 1993. Under the 1983 Plan,
approximately 13.5 million shares were awarded, net of surrenders. The Former
Tyco's 1994 Restricted Stock Ownership Plan (the "1994 Plan"), which was assumed
by the Company, provides for the award of an initial amount of shares of common
stock plus an amount equal to one-half of one percent of the total shares
outstanding at the beginning of each fiscal year. At September 30, 1998, there
were 8,540,055 shares available, of which 3,475,624 shares had been granted.
Common shares are awarded subject to certain restrictions with vesting varying
over periods of up to ten years.
For grants which vest based on certain specified performance criteria, the
fair market value of the shares at the date of vesting is expensed over the
period the performance criteria are measured. For grants that vest through
passage of time, the fair market value of the shares at the time of the grant is
amortized (net of tax benefit) to expense over the period of vesting. The
unamortized portion of deferred compensation expense is recorded as a reduction
of shareholders' equity. Recipients of all restricted shares have the right to
vote such shares and receive dividends. Income tax benefits resulting from the
vesting of restricted shares, including a deduction for the excess, if any, of
the fair market value of restricted shares at the time of vesting over their
fair market value at the time of the grants and from the payment of dividends on
unvested shares, are credited to contributed surplus.
The total compensation cost expensed for all stock-based compensation
awards was $45.1 million, $48.5 million and $15.8 million for Fiscal 1998,
Fiscal 1997 and 1996, respectively, including $29.6 million in Fiscal 1997
related to accelerated vesting in connection with changes in control provisions.
Employee Stock Purchase Plan -- Substantially all full-time employees of
the Company's U.S. subsidiaries and employees of certain qualified non-U.S.
subsidiaries are eligible to participate in an employee stock purchase plan.
Eligible employees authorize payroll deductions to be made for the purchase of
shares. The Company matches a part of the employee contribution by contributing
an additional 15% of the employee's payroll deduction. All shares purchased
under the plan are purchased on the open market by a designated broker.
Stock Options -- The Company has granted employee share options which were
issued under five fixed share option plans and schemes which reserve common
shares for issuance to the Company's directors, executives and managers. The
majority of options have been granted under the Tyco International Ltd. Long
Term Incentive Plan (formerly known as the ADT 1993 Long-Term Incentive
Plan -- the "Incentive Plan"). The Incentive Plan was originally approved by
shareholders of ADT in October 1993 and certain subsequent amendments to the
Incentive Plan were approved by shareholders of ADT in April 1996 and July 1997.
The Incentive Plan is administered by the Compensation Committee of the Board of
Directors of the Company, which consists exclusively of independent
non-executive directors of the Company. Options are generally granted to
purchase the Company common shares at prices which equate to the market price of
the common shares on the date the option is granted. Conditions of vesting are
determined at the time of grant. Certain options have been granted in prior
years in which participants were required to pay a subscription price as a
condition of vesting. Options which have been granted under the Incentive Plan
to date have generally vested and become exercisable in installments over a
three year period from the date of grant and have a maximum term of ten years.
The Company has reserved 44.0 million common shares for issuance under the
Incentive Plan. Awards which the Company becomes obligated to make through the
assumption of, or in substitution
43
<PAGE> 45
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for, outstanding awards previously granted by an acquired company do not count
against the shareholder approved shares available for award under the Incentive
Plan. At September 30, 1998 there were 4,557,648 shares available for future
grant under the Incentive Plan. Subsequent to year end, a broad-based option
plan for non-officer employees, the Tyco Long-Term Incentive Plan II ("LTIP
II"), was approved by the Board of Directors on October 21, 1998. The Company
has reserved 25.0 million common shares for issuance under the LTIP II. The
terms and conditions of this plan are similar to the Incentive Plan.
In connection with the acquisition of Holmes Protection in Fiscal 1998,
options outstanding under the Holmes' stock option plans were assumed by Tyco's
Incentive Plan. In connection with the mergers occurring in Fiscal 1997 (see
Note 2), all of the options outstanding under the Former Tyco, Keystone and
INBRAND stock option plans were assumed by Tyco's Incentive Plan. These options
are administered under the Incentive Plan but retain all of the rights, terms
and conditions of the respective plans under which they were originally granted.
During 1995, the Former Tyco established a stock option plan under which
certain employees, excluding officers and directors, have been granted options
to purchase common stock at a price equal to fair market value on the date of
grant. The options vest on a pro-rata basis over five years, with 50% becoming
exercisable at the end of the third year and the remaining exercisable at the
end of the fifth year. Grants are for periods generally not in excess of ten
years.
Keystone granted share options under its incentive stock option plans for
the benefit of its key employees and directors. Stock options were generally
issued at exercise prices which are not less than the fair market value at the
date of grant. The options vest after one to five years and expire after five to
ten years from the date of grant.
During 1993, INBRAND adopted The INBRAND Corporation Stock Incentive Plan
("the INBRAND Incentive Plan"). Awards under the INBRAND Incentive Plan were in
the form of qualified and non-qualified stock options and/or stock appreciation
rights (SAR's). Grants under the INBRAND Incentive Plan could be made to any
employee of INBRAND, any Director of the company, or any other person to whom
the Compensation Committee determines that making such a grant is in the best
interests of the company. The INBRAND Incentive Plan provides for a
performance-based stock option format which governs the vesting of option
awards. The INBRAND Incentive Plan provided that the exercise price shall not be
less than the fair market value of the common stock as of the determination or
grant date. Each option granted is exercisable only during the term fixed by the
Compensation Committee, with such term ending from five to ten years after the
grant date. If an option holder is still employed by the company thirty days
prior to the option's expiration date, the options will fully vest. The INBRAND
Incentive Plan contains provisions that restrict the transferability of grants
and limit their exercise in the event of termination of employment or the
disability or death of the grantee.
44
<PAGE> 46
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Share option activity for all plans since January 1, 1996 has been as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OUTSTANDING PRICE
----------- --------
<S> <C> <C>
At January 1, 1996.......................................... 20,173,777 $12.91
Effect of Former Tyco's excluded activity................. 39,500
Assumed from acquisitions................................. 1,090,212 16.27
Granted................................................... 7,896,075 17.14
Exercised................................................. (2,765,668) 10.57
Canceled.................................................. (832,694) 16.65
-----------
At December 31, 1996........................................ 25,601,202 14.49
Adjustment for INBRAND merger (Note 1).................... 1,270,954 17.25
Granted................................................... 8,524,470 36.31
Exercised................................................. (2,111,636) 11.01
Canceled.................................................. (725,492) 18.64
-----------
At September 30, 1997....................................... 32,559,498 20.22
Assumed from acquisitions................................. 43,616 20.45
Granted................................................... 8,787,293 53.34
Exercised................................................. (17,477,625) 17.53
Canceled.................................................. (854,620) 24.86
-----------
At September 30, 1998....................................... 23,058,162 35.20
===========
</TABLE>
The following table summarizes information about outstanding and
exercisable options at September 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ----------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
RANGE OF NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING PRICE LIFE -- YEARS EXERCISABLE PRICE
- --------------- ----------- -------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.00 to $ 4.95 57,775 $ 4.26 4.9 57,775 $ 4.26
4.96 to 9.97 477,900 9.01 4.7 477,900 9.01
9.98 to 14.88 5,094,823 12.90 6.1 3,093,751 12.73
14.89 to 19.69 1,209,611 17.66 5.5 386,224 17.80
19.70 to 24.82 646,908 21.76 6.1 202,401 21.62
24.83 to 29.75 1,879,302 27.87 5.7 841,212 27.09
29.76 to 39.38 6,863,489 38.38 5.9 671,057 37.78
39.39 to 46.96 2,086,447 41.42 7.3 203,756 40.90
46.97 to 56.24 1,177,374 54.48 4.6 21,574 52.92
56.25 to 68.22 3,564,533 67.24 9.9 2,554,533 68.18
---------- ---------
Total 23,058,162 8,510,183
========== =========
</TABLE>
Stock-Based Compensation -- During 1996, the Company was required to adopt
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123
allows companies to measure
45
<PAGE> 47
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compensation cost in connection with executive share option plans and schemes
using a fair value based method, or to continue to use an intrinsic value based
method which generally does not result in a compensation cost. The Company has
decided to continue to use the intrinsic value based method and no compensation
cost has been recorded. Had the fair value based method been adopted consistent
with the provisions of SFAS 123, the Company's proforma net income (loss) and
proforma net income (loss) per common share for Fiscal 1998, Fiscal 1997 and
1996 would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (loss) -- proforma (in millions)........... $1,133.4 $(854.0) $(335.0)
Net income (loss) per common share -- proforma
Basic............................................... 1.99 (1.64) (.70)
Diluted............................................. 1.94 (1.64) (.70)
</TABLE>
The estimated weighted average fair value of Tyco options granted during
Fiscal 1998 was $16.48 on the date of grant using the option-pricing model and
assumptions referred to below. The estimated weighted average fair value of
Tyco, Former Tyco and INBRAND options granted during Fiscal 1997 was $12.15,
$9.55 and $37.17, respectively, on the date of grant using the option-pricing
model and assumptions referred to below. There were no stock option grants for
Keystone in Fiscal 1997.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model. The following weighted average
assumptions were used for Fiscal 1998:
<TABLE>
<S> <C>
Expected stock price volatility............................. 22%
Risk free interest rate..................................... 5.62%
Expected annual dividends................................... $0.10
Expected life of options.................................... 5 years
</TABLE>
The following weighted average assumptions were used for Fiscal 1997:
<TABLE>
<CAPTION>
TYCO FORMER TYCO INBRAND
---- ----------- -------
<S> <C> <C> <C>
Expected stock price volatility.................... 22% 22% 55%
Risk free interest rate............................ 6.07% 6.34% 6.26%
Expected annual dividends.......................... $0.10 $0.10 --
Expected life of options........................... 5 years 5 years 6.4 years
</TABLE>
The following weighted average assumptions were used for 1996:
<TABLE>
<CAPTION>
ADT FORMER TYCO KEYSTONE
--- ----------- --------
<S> <C> <C> <C>
Expected stock price volatility................ 28% 22% 26%
Risk free interest rate........................ 5.9% 5.8% 6.4%
Expected annual dividends...................... -- $0.10 per share 3.8%
Expected life of options....................... 3.7 years 3.7 years 7 years
</TABLE>
The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995
and additional awards in future years are anticipated.
Stock Warrants -- The Company has outstanding warrants to purchase common
stock at per share exercise prices of $2.99 (the "A Warrants") and $3.98 (the "B
Warrants"), respectively (together, the "Warrants"). The Warrants expire on July
7, 1999. During Fiscal 1998, 31,397 A Warrants and 14,539 B Warrants were
exercised. During Fiscal 1997, 36,532 A Warrants and 25,000 B Warrants were
exercised. During 1996, 30,240 A Warrants and 25,120 B Warrants were exercised.
At September 30, 1998, 91,212 A Warrants and 66,566 B Warrants were outstanding.
46
<PAGE> 48
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1996, as part of an agreement to combine with Republic Industries,
Inc. ("Republic"), ADT granted to Republic a warrant (the "Warrant") to acquire
14,439,900 common shares of the Company at an exercise price of $20.78 per
common share. Following termination of the agreement to combine with Republic,
the Warrant vested and was exercisable by Republic in the six month period
commencing September 27, 1996. In March 1997, the Warrant was exercised by
Republic and the Company received $300 million in cash.
Treasury Shares -- From time to time the Company, through its subsidiaries,
purchases shares in the open market to satisfy certain stock-based compensation
arrangements. During Fiscal 1998, certain executives sold approximately 2.6
million common shares to the Company at the shares' then fair market value.
Dividends -- The Company has paid a quarterly cash dividend of $0.025 per
common share since July 1997. Prior to the merger with ADT, Former Tyco paid a
quarterly cash dividend of $0.025 in Fiscal 1997 and 1996. ADT paid no dividends
on its common shares in Fiscal 1997 or 1996. Keystone paid quarterly dividends
of $0.19 per share in Fiscal 1997 and 1996.
11. CHARGE FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
Charges for the impairment of long-lived assets are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Fire and Security Services......................... $-- $118.8 $731.7
Flow Control Products.............................. -- 29.6 --
Disposable and Specialty Products.................. -- -- 13.0
--- ------ ------
$-- $148.4 $744.7
=== ====== ======
</TABLE>
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 requires
the recoverability of the carrying value of long-lived assets, primarily
property, plant and equipment and related goodwill and other intangible assets,
to be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable.
Under SFAS 121 impairment losses are recognized when expected future cash flows
are less than the assets' carrying value. When indicators of impairment are
present, the carrying values of the assets are evaluated in relation to the
operating performance and future undiscounted cash flows of the underlying
business. The net book value of the underlying assets are adjusted if the sum of
expected future cash flows is less than book value.
1997 Charges
The Company recorded charges of $148.4 million for the impairment of
long-lived assets in Fiscal 1997.
The Fire and Security Services group recorded a charge of $118.8 million.
This includes $98.8 million related to subscriber security systems installed at
customers' premises in the United States and Canada, determined following a
review of the carrying value of the assets. It also includes an impairment in
the carrying value of goodwill of $20.0 million resulting from the combination
of ADT's electronic security business with that of Former Tyco.
The Flow Control Products group recorded a charge of $29.6 million
reflecting an impairment in the carrying value of goodwill resulting from the
combination of Keystone's valve manufacturing and distribution business with
that of Former Tyco.
47
<PAGE> 49
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 Charges
Following the adoption of SFAS 121, in particular the change in methodology
requiring the Company to evaluate assets at the lowest level of asset grouping,
rather than on an aggregate basis, the Company recorded a charge of $731.7
million in the Fire and Security Services segment relating to the electronic
security services business of ADT. The assets principally comprise subscriber
systems installed at customers' premises, which are included in property, plant
and equipment, and the related goodwill and other intangible assets.
Of this charge, $397.1 million related to an impairment in the carrying
value of subscriber systems, principally in the commercial sector, including the
related goodwill, which principally arose on the acquisition of ADT Security
Services in 1987. Since 1989, the Company's electronic security services
operations in the residential sector have developed at a very rapid rate based
principally on internally generated growth. As a consequence, the Company's
operations in the commercial sector, which were acquired principally in 1987,
have now been complemented by a significant residential electronic security
services operation and operations have been reorganized along separate
commercial and residential business lines, rather than on an aggregate
geographic basis. When the financial projections and estimated cash flows of the
commercial sector were analyzed separately, they indicated that the carrying
value of the related assets may not be fully recoverable. The impairment charge
amounted to $303.4 million in the United States, $56.7 million in Canada and
$37.0 million in Europe.
The remaining $334.6 million impairment charge relates to the electronic
security services of the ASH Group, which principally arose on the acquisition
of certain of the businesses of Modern Security Systems in 1989 and 1990, API
Security in 1989 and the Sonitrol Group in 1992. After a review of the carrying
value of subscriber systems and related goodwill and other intangibles in
connection with a reorganization of both the commercial and residential business
sectors to address, in part, changes in the electronic security services
business environment and performance similar to those being addressed by the ADT
group, an impairment charge in the carrying values of the assets was recorded.
In addition, the aggregate fair value of ADT common shares issued to ASH
shareholders was significantly less than ASH's consolidated net asset value. It
was for all of these reasons that the Company reviewed the assets for impairment
upon adoption of SFAS 121. The impairment charge amounted to $211.2 million in
the United Kingdom and $123.4 million in the United States.
An impairment charge of $13.0 million was recorded in the Company's vehicle
auction business, included in the Disposable and Specialty Products segment,
relating to an impairment in the carrying value of property and related
improvements, including related goodwill, which principally arose on the
acquisition of ADT Automotive in 1987.
12. OTHER INCOME LESS EXPENSES
Other income less expenses in 1996 consists of a litigation settlement gain
of $65.0 million (See Note 3) and gains on long-term investments of $54.4
million. During 1996 gains arising from the ownership of long-term investments
comprised a net gain of $53.4 million relating to the disposal in November 1996
of ADT's entire investment in Limelight Group plc, a United Kingdom quoted
company, which was previously valued and accounted for by ADT at a nominal
amount, a net gain of $1.2 million relating to the disposal of ADT's equity
investment in Integrated Transport Systems Limited (Note 3) and other net losses
of $0.2 million principally arising from the disposal of other non-core
investments.
13. EXTRAORDINARY ITEMS
The extraordinary item during Fiscal 1998 of $3.6 million was the write off
of unamortized deferred financing costs related to the LYONS (Note 4) and was
stated net of applicable income tax benefit of $1.2 million. During Fiscal 1997
and 1996 the Company reacquired in the market certain of its long-term debt
48
<PAGE> 50
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which was financed from cash on hand and new credit agreements. Extraordinary
items during Fiscal 1997 and 1996 included the loss arising on reacquisition of
these notes of $79.7 million and $5.1 million, respectively, and the write off
of unamortized deferred refinancing costs and other related fees of $11.6
million and $4.0 million, respectively, and were stated net of applicable income
tax benefit of $33.0 million and $0.7 million, respectively.
14. EARNINGS (LOSS) PER COMMON SHARE
During the first quarter of Fiscal 1998, the Company was required to adopt
SFAS No. 128, "Earnings Per Share." SFAS No. 128 specifies the computation,
presentation and disclosure requirements for earnings per share and is
substantially similar to the standards recently issued by the International
Accounting Standards Committee entitled "International Accounting Standards
Earnings Per Share". Prior period earnings per common share data have been
restated in accordance with the provisions of this statement.
The reconciliations between basic and diluted earnings (loss) per common
share are as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996
----------------------------- ---------------------------- ----------------------------
PER SHARE INCOME PER SHARE INCOME PER SHARE
INCOME SHARES AMOUNT (LOSS) SHARES AMOUNT (LOSS) SHARES AMOUNT
------ ------ --------- ------ ------ --------- ------ ------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic income (loss) per common
share:
Net income (loss) available to
common shareholders............. $1,174.7 568.6 $2.07 $(835.1) 519.5 $(1.61) $(305.4) 475.6 $(.64)
Stock options and warrants........ -- 8.0 -- -- -- --
Exchange of LYONs debt............ 7.2 10.2 -- -- -- --
-------- ----- ------- ----- ------- -----
Diluted income (loss) per common
share:
Net income (loss) available to
common shareholders plus assumed
conversions..................... $1,181.9 586.8 $2.01 $(835.1) 519.5 $(1.61) $(305.4) 475.6 $(.64)
======== ===== ======= ===== ======= =====
</TABLE>
The computation of diluted income per common share in Fiscal 1998 excludes
the effect of the assumed exercise of approximately 3.6 million stock options
that were outstanding as of September 30, 1998 because the effect would be
anti-dilutive. The effect on diluted loss per common share in Fiscal 1997 and
1996 resulting from the assumed exercise of all outstanding stock options and
warrants and the exchange of outstanding LYONS is anti-dilutive.
15. MERGER, RESTRUCTURING AND OTHER NON-RECURRING CHARGES
Merger, restructuring and other non-recurring charges are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Fire and Security Services............................... $ -- $530.3 $246.1
Flow Control Products.................................... -- 256.2 --
Disposable and Specialty Products........................ -- 131.3 --
------ ------ ------
$ -- $917.8 $246.1
====== ====== ======
</TABLE>
1997 Charges
In connection with the mergers consummated in Fiscal 1997 (Note 2), the
Company recorded merger, restructuring and other non-recurring charges of $917.8
million. Transaction costs of $239.8 million to effect
49
<PAGE> 51
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the mergers relate to legal, accounting, financial advisory services, severance
and other costs payable at the effective time of the mergers as well as other
direct expenses. These were expensed as is required under the pooling of
interests accounting method. Also incurred were costs required to combine ADT's
electronic security business, Keystone's valve manufacturing and distribution
business and INBRAND's disposable medical products business with the related
businesses of Former Tyco. These costs include the cost of workforce reductions
of $130.3 million including the elimination of approximately 4,000 positions,
the combination of certain facilities of $194.2 million involving the closure of
18 manufacturing facilities and the consolidation of sales and service offices,
electronic security system monitoring centers, warehouses and other locations,
disposing of excess equipment and other assets of $133.5 million and other costs
of $220.0 million relating to the consolidation of certain product lines, the
satisfaction of certain liabilities and other non-recurring charges.
Approximately $137.6 million of accrued merger and restructuring costs are
included in other current liabilities and $49.4 million in other noncurrent
liabilities at September 30, 1998. The Company currently anticipates that the
restructurings will be completed during Fiscal 1999, except for certain
long-term contractual obligations.
1996 Charges
During 1996, a charge was recorded which was principally attributable to
planned technological infrastructure enhancements to facilitate further
consolidation of ADT's entire United States and Canadian monitoring center
networks together with all related operations. The charge amounted to $139.5
million and included the write-off of certain property, plant and equipment of
$83.9 million, provision for idle property leases of $20.7 million, the
termination of certain contractual obligations and other settlement costs of
$9.4 million and other integration and restructuring costs of $25.5 million.
Also in 1996, ADT commenced a strategic and detailed review of the
electronic security services businesses acquired as part of the acquisition of
ASH in September 1996. This review was intended to integrate fully the ASH group
into ADT's existing electronic security service businesses in the United Kingdom
and the United States. A restructuring charge of $97.8 million was recorded
which included the write-off of certain property, plant and equipment of $13.2
million, provision for idle property leases of $22.5 million, the termination of
certain contractual obligations and other settlement costs of $35.2 million and
other integration and restructuring costs of $26.9 million.
Approximately $17.6 million of costs related to these charges are included
in other current and noncurrent liabilities at September 30, 1998. These
restructurings are substantially complete.
The fees and expenses related to the ASH merger were expensed as required
under the pooling of interests accounting method. Such fees and expenses
amounted to $8.8 million in 1996.
16. COMMITMENTS AND CONTINGENCIES
The Company occupies certain facilities under leases that expire at various
dates through the year 2021. Rental expense under these leases and leases for
equipment was $202.6 million, $153.5 million and $178.8 million for Fiscal 1998,
Fiscal 1997, and 1996, respectively. At September 30, 1998, the minimum lease
payment obligations under noncancelable operating leases were as follows: $147.6
million in Fiscal 1999, $121.6 million in Fiscal 2000, $78.7 million in Fiscal
2001, $62.8 million in Fiscal 2002, $46.7 million in Fiscal 2003 and an
aggregate of $222.3 million in Fiscal years 2004 through 2021.
In the normal course of business, the Company is liable for contract
completion and product performance. In the opinion of management, such
obligations will not significantly affect the Company's financial position or
results of operations.
The Company is involved in various stages of investigation and cleanup
related to environmental remediation matters at a number of sites. The ultimate
cost of site cleanup is difficult to predict given the
50
<PAGE> 52
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
uncertainties regarding the extent of the required cleanup, the interpretation
of applicable laws and regulations and alternative cleanup methods. Based upon
the Company's experience with the foregoing environmental matters, the Company
has concluded that there is at least a reasonable possibility that remedial
costs will be incurred with respect to these sites in an aggregate amount in the
range of $16.5 million to $44.6 million. At September 30, 1998, the Company has
concluded that the most probable amount that will be incurred within this range
is $21.0 million, and such amount is included in the caption "accrued expenses
and other current liabilities" in the accompanying Consolidated Balance Sheet.
Based upon information available to the Company, at those sites where there has
been an allocation of the liability for cleanup costs among a number of parties,
including the Company, and such liability could be joint and several, management
believes it is probable that other responsible parties will fully pay the cost
allocated to them, except with respect to one site for which the Company has
assumed that one of the identified responsible parties will be unable to pay the
cost apportioned to it and that such party's cost will be reapportioned among
the remaining responsible parties. In view of the Company's financial position
and reserves for environmental matters of $21.0 million, the Company has
concluded that its payment of such estimated amounts will not have a material
effect on its financial position, results of operations or liquidity.
The Company is a defendant in a number of other pending legal proceedings
incidental to present and former operations, acquisitions and dispositions. The
Company does not expect the outcome of these proceedings either individually or
in the aggregate to have a material adverse effect on its financial position,
results of operations or liquidity.
17. RETIREMENT PLANS
Defined Benefit Pension Plans -- The Company has a number of
noncontributory and contributory defined benefit retirement plans covering
certain of its U.S. and non-U.S. employees, designed in accordance with
conditions and practices in the countries concerned. Contributions are based on
periodic actuarial valuations which use the projected unit credit method of
calculation and are charged to the consolidated statements of operations on a
systematic basis over the expected average remaining service lives of current
employees. The net pension expense is assessed in accordance with the advice of
professionally qualified actuaries in the countries concerned or is based on
subsequent formal reviews for the purpose. The Company's funding policy is to
make annual contributions to the extent such contributions are tax deductible as
actuarially determined. The benefits under the defined benefit plans are based
on years of service and compensation.
The net periodic pension (benefit) cost for all defined benefit pension
plans includes the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost............................................ $ 31.3 $ 21.4 $ 23.4
Interest cost........................................... 64.7 46.1 53.6
Actual return........................................... (47.7) (141.8) (68.4)
Net amortization and deferral........................... (34.7) 83.9 4.4
Curtailment gain........................................ (28.4) -- --
------ ------- ------
Net periodic pension (income) expense................... $(14.8) $ 9.6 $ 13.0
====== ======= ======
</TABLE>
51
<PAGE> 53
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued (prepaid) pension cost at September 30, 1998 for all defined
benefit plans is as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS TOTAL
------------- ------------- -----
(IN MILLIONS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested....................................... $717.3 $229.0 $ 946.3
Non-vested................................... 11.5 15.9 27.4
------ ------ --------
Total.......................................... 728.8 244.9 973.7
Effect of future salary increases.............. 22.0 11.2 33.2
------ ------ --------
Projected benefit obligations.................. 750.8 256.1 1,006.9
Plan assets at fair value...................... 801.7 145.3 947.0
------ ------ --------
Plan assets (in excess of) less than projected
benefit obligations.......................... (50.9) 110.8 59.9
Unrecognized transition asset (liability)...... 11.4 (0.1) 11.3
Unrecognized prior service cost................ (1.6) (16.6) (18.2)
Additional minimum liability................... -- 35.8 35.8
Unrecognized net loss.......................... (36.2) (25.3) (61.5)
------ ------ --------
Accrued (prepaid) pension cost................. $(77.3) $104.6 $ 27.3
====== ====== ========
</TABLE>
Accrued (prepaid) pension cost at September 30, 1997 for defined benefit
plans is as follows:
<TABLE>
<CAPTION>
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS TOTAL
----------- ----------- -----
(IN MILLIONS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested........................................... $682.0 $127.6 $809.6
Non-vested....................................... 12.1 14.1 26.2
------ ------ ------
Total.............................................. 694.1 141.7 835.8
Effect of future salary increases and other........ 61.1 8.2 69.3
------ ------ ------
Projected benefit obligations...................... 755.2 149.9 905.1
Plan assets at fair value.......................... 863.2 62.7 925.9
------ ------ ------
Plan assets (in excess of) less than projected
benefit obligations.............................. (108.0) 87.2 (20.8)
Unrecognized transition asset (liability).......... 12.3 (0.8) 11.5
Unrecognized prior service cost.................... (4.4) (13.7) (18.1)
Additional minimum liability....................... -- 11.0 11.0
Unrecognized net gain.............................. 51.7 1.7 53.4
------ ------ ------
Accrued (prepaid) pension cost..................... $(48.4) $ 85.4 $ 37.0
====== ====== ======
</TABLE>
Pursuant to the provisions of SFAS 87, "Employers' Accounting for
Pensions," the Company recorded, in other liabilities, an additional minimum
pension liability adjustment of $35.8 million and $11.0 million as of September
30, 1998 and September 30, 1997, respectively, representing the amount by which
the accumulated benefit obligation exceeded the fair value of plan assets plus
accrued amounts previously recorded. The additional liability has been offset by
an intangible asset, included in goodwill and other intangible assets, to
52
<PAGE> 54
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the extent of previously unrecognized prior service cost. The amount in excess
of previously unrecognized prior service cost is recorded, net of the related
deferred tax benefit, as a reduction of shareholders' equity in the amount of
$13.8 million at September 30, 1998 and $1.9 million at September 30, 1997,
respectively.
During Fiscal 1998, the Company recorded a gain of $28.4 million related to
the curtailment of a subsidiary's defined benefit pension plan. In Fiscal 1998,
Fiscal 1997, and 1996, the Company terminated certain defined benefit pension
plans and distributed the plans' assets to the participants. Gains and losses in
Fiscal 1997 and 1996 resulting from terminations were not material. In addition,
the Company recognized liabilities for certain plans related to business
acquisitions in each of the years presented, the amounts of which were not
material.
Of the total plan obligations in Fiscal 1998, 54% relate to U.S. plans and
46% relate to non-U.S. plans (in Fiscal 1997, 53% and 47%, respectively). The
average discount rate used in determining the actuarial present value of the
projected benefit obligation, weighted in relation to plan obligations, was 6.5%
at September 30, 1998 (7.5 % at September 30, 1997). The average rate of
increase in future compensation levels was 4.0% at September 30, 1998 (4.8% at
September 30, 1997). The weighted average long-term rate of return on assets was
9.3% at September 30, 1998 (9.6% at September 30, 1997). Plan assets are
invested principally in equity and fixed income instruments.
The Former Tyco also participates in a number of multi-employer defined
benefit plans on behalf of certain employees. Pension expense related to
multi-employer plans was $1.7 million, $1.5 million, and $2.0 million for Fiscal
1998, Fiscal 1997, and 1996, respectively.
Defined Contribution Retirement Plans -- The Company maintains several
defined contribution retirement plans, which include 401(k) matching programs,
as well as qualified and nonqualified profit sharing and stock bonus retirement
plans. Pension expense for the defined contribution plans is computed as a
percentage of participants' compensation and was $36.2 million, $28.0 million
and $31.2 million for Fiscal 1998, Fiscal 1997, and 1996, respectively. The
Company also maintains an unfunded Supplemental Executive Retirement Plan
("SERP"). This plan is nonqualified and restores the employer match that certain
employees lose due to IRS limits on eligible compensation under the defined
contribution plans. Expense related to the SERP was $3.7 million, $2.2 million
and $1.7 million in Fiscal 1998, Fiscal 1997 and 1996, respectively.
Post-retirement Benefit Plans -- The Company generally does not provide
post-retirement benefits other than pensions for its employees. Certain of
Former Tyco's acquired operations provide these benefits to employees who were
eligible at the date of acquisition. In addition, ADT's electronic security
services operation in the United States sponsors an unfunded defined benefit
post-retirement plan which covers both salaried and non-salaried employees and
which provides medical and other benefits. This post-retirement health care plan
is contributory, with retiree contributions adjusted annually. The Company
recorded a gain of $8.8 million related to the curtailment of this plan in
Fiscal 1998.
Net periodic post-retirement benefit cost reflects the following
components:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................ $ 1.1 $ 0.6 $ 0.9
Interest cost............................................... 7.5 5.5 6.8
Net amortization and deferral............................... (4.7) (3.6) (4.2)
Curtailment gain............................................ (8.8) -- --
----- ----- -----
Net periodic post-retirement benefit (income) cost.......... $(4.9) $ 2.5 $ 3.5
===== ===== =====
</TABLE>
53
<PAGE> 55
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the accrued post-retirement benefit obligation, all of
which are unfunded, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.............................................. $ 77.8 $ 73.6
Fully eligible active plan participants............... 23.4 18.7
Other active plan participants........................ 8.0 8.3
------ ------
109.2 100.6
Unrecognized prior service benefit...................... 21.0 30.1
Unrecognized net gain................................... 14.2 17.6
------ ------
Accrued post-retirement benefit cost.................... $144.4 $148.3
====== ======
</TABLE>
For measurement purposes, in Fiscal 1998, a 9.1% composite annual rate of
increase in the per capita cost of covered health care benefits was assumed. The
rate was assumed to decrease gradually to 4.5% by the year 2008 and remain at
that level thereafter. The health care cost trend rate assumption may have a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rate by one percentage point would increase the
accumulated post-retirement benefit obligation as of September 30, 1998 by $4.2
million and the aggregate of the service and interest cost component of net
periodic post-retirement benefit cost for the year then ended by $0.3 million.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 6.75% at September 30, 1998 (7.5% at
September 30, 1997).
18. CONSOLIDATED SEGMENT DATA
Selected information by industry segment is presented below.
<TABLE>
<CAPTION>
AS AT AND
AS AT AND FOR THE NINE AS AT AND
FOR THE YEAR MONTHS FOR THE YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1996
------------- ------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales:
Disposable and Specialty Products.......... $ 3,446.5 $ 2,000.3 $2,001.0
Fire and Security Services................. 4,742.2 3,149.1 3,694.9
Flow Control Products...................... 2,341.8 1,684.1 1,928.8
Electrical and Electronic Components....... 1,780.8 754.7 479.0
--------- --------- --------
$12,311.3 $ 7,588.2 $8,103.7
========= ========= ========
Operating income (loss):
Disposable and Specialty Products.......... $ 643.7 $ 197.4(1) $ 358.9(5)
Fire and Security Services................. 654.9 (312.4)(2) (621.3)(6)
Flow Control Products...................... 325.9 (92.1)(3) 198.0
Electrical and Electronic Components....... 367.5 (224.6)(4) 89.0
Corporate and other expenses............... (68.3) (44.8) (43.4)
--------- --------- --------
$ 1,923.7 $ (476.5) $ (18.8)
========= ========= ========
</TABLE>
54
<PAGE> 56
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AS AT AND
AS AT AND FOR THE NINE AS AT AND
FOR THE YEAR MONTHS FOR THE YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1996
------------- ------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Total Assets:
Disposable and Specialty Products.......... $ 5,060.8 $ 2,270.8 $1,961.3
Fire and Security Services................. 6,822.1 4,338.2 4,343.1
Flow Control Products...................... 2,576.2 1,865.9 1,758.8
Electrical and Electronic Components....... 1,812.0 1,606.0 283.9
Corporate assets........................... 255.5 366.1 124.2
--------- --------- --------
$16,526.6 $10,447.0 $8,471.3
========= ========= ========
Depreciation and Amortization:
Disposable and Specialty Products.......... $ 112.9 $ 64.5 $ 67.8
Fire and Security Services................. 269.8 205.5 254.0
Flow Control Products...................... 120.0 63.8 78.3
Electrical and Electronic Components....... 44.7 25.2 11.7
Corporate.................................. 18.9 19.6 15.5
--------- --------- --------
$ 566.3 $ 378.6 $ 427.3
========= ========= ========
Capital Expenditures:
Disposable and Specialty Products.......... $ 138.0 $ 119.7 $ 90.5
Fire and Security Services................. 491.4 304.8 362.0
Flow Control Products...................... 92.6 58.3 69.4
Electrical and Electronic Components....... 48.9 32.8 9.7
Corporate.................................. 10.4 3.5 1.3
--------- --------- --------
$ 781.3 $ 519.1 $ 532.9
========= ========= ========
</TABLE>
- ---------------
(1) Includes charges of $131.3 million related to merger, restructuring and
other non-recurring charges in connection with the INBRAND merger.
(2) Includes charges of $530.3 million related to merger, restructuring and
other non-recurring charges and $118.8 million related to the impairment of
long-lived assets in connection with the merger of ADT and Former Tyco.
(3) Includes charges of $256.2 million related to merger, restructuring and
other non-recurring charges and $29.6 million related to the impairment of
long-lived assets in connection with the Keystone merger.
(4) Includes a charge of $361.0 million related to the write off of purchased
research and development costs in connection with an acquisition.
(5) Includes a charge of $13.0 million related to the impairment of long-lived
assets in ADT's vehicle auction services operations.
(6) Includes charges of $731.7 million related to the impairment of long-lived
assets and $237.3 million relating to restructuring and other non-recurring
items in ADT's electronic security services operations and $8.8 million
related to professional and other transaction costs in connection with the
ASH merger.
55
<PAGE> 57
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. CONSOLIDATED GEOGRAPHIC DATA
Selected information by geographic area is presented below.
<TABLE>
<CAPTION>
AS AT AND
AS AT AND FOR THE NINE AS AT AND
FOR THE YEAR MONTHS FOR THE YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1996
------------- ------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales:
Americas (primarily U.S.).................. $ 9,083.3 $ 5,447.5 $5,675.6
Europe..................................... 2,287.8 1,457.1 1,587.8
Asia-Pacific............................... 940.2 683.6 840.3
--------- --------- --------
$12,311.3 $ 7,588.2 $8,103.7
========= ========= ========
Operating income (loss):
Americas (primarily U.S.).................. $ 1,589.8 $ (371.6) $ 125.6
Europe..................................... 284.2 (104.0) (194.0)
Asia-Pacific............................... 49.7 (0.9) 49.6
--------- --------- --------
$ 1,923.7 $ (476.5) $ (18.8)
========= ========= ========
Total Assets:
Americas (primarily U.S.).................. $12,179.0 $ 7,498.6 $6,070.5
Europe..................................... 3,287.1 1,992.8 1,740.1
Asia-Pacific............................... 805.0 589.5 536.5
Corporate assets........................... 255.5 366.1 124.2
--------- --------- --------
$16,526.6 $10,447.0 $8,471.3
========= ========= ========
</TABLE>
56
<PAGE> 58
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SUPPLEMENTARY BALANCE SHEET INFORMATION:
Selected supplementary balance sheet information is presented below.
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Inventories:
Purchased materials and manufactured parts.............. $ 509.7 $ 262.7
Work in process......................................... 261.8 294.4
Finished goods.......................................... 688.5 567.7
--------- ---------
$ 1,460.0 $ 1,124.8
========= =========
Property, Plant and Equipment:
Land.................................................... $ 171.1 $ 160.3
Buildings............................................... 845.1 679.7
Subscriber systems...................................... 2,171.5 1,737.6
Machinery and equipment................................. 2,144.7 1,860.3
Leasehold improvements.................................. 103.6 74.8
Construction in progress................................ 269.9 211.6
Accumulated depreciation................................ (1,995.8) (1,800.3)
--------- ---------
$ 3,710.1 $ 2,924.0
========= =========
Accrued payroll and payroll related costs................. $ 203.0 $ 147.9
========= =========
</TABLE>
21. SUPPLEMENTARY INCOME STATEMENT INFORMATION:
Selected supplementary income statement information is presented below.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1996
------------- ------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Research and development..................... $97.0 $45.0 $39.8
Advertising.................................. 95.8 71.1 94.5
</TABLE>
57
<PAGE> 59
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
22. COMPARATIVE RESULTS (UNAUDITED)
The change in year end resulted in Fiscal 1997 covering the nine month
period ended September 30, 1997. The following unaudited financial information
for the twelve months ended September 30, 1997 is presented to provide
comparative results to those for Fiscal 1998 included in the accompanying
Consolidated Statement of Operations (in millions, except per share amounts).
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
SEPTEMBER 30, 1997
-------------------
<S> <C>
Net sales................................................... $9,820.3
Gross profit................................................ 3,188.9
Operating loss.............................................. (455.3)
Income taxes................................................ (217.5)
Loss before extraordinary items............................. (708.7)
Extraordinary items, net of taxes........................... (60.9)
Net loss.................................................... (769.6)
Basic loss per common share:
Loss before extraordinary items........................... $ (1.39)
Extraordinary items, net of taxes......................... (0.12)
Net loss per common share................................. (1.51)
Diluted loss per common share:
Loss before extraordinary items........................... $ (1.39)
Extraordinary items, net of taxes......................... (0.12)
Net loss per common share................................. (1.51)
</TABLE>
23. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is presented below.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
--------------------------------------------
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................. $2,687.5 $2,852.0 $3,235.0 $3,536.8
Gross profit.............................. 895.8 979.4 1,116.7 1,273.0
Income before extraordinary items......... 240.8 276.2 320.2 339.9
Net income................................ 239.9 275.9 319.2 339.7
Basic income per common share:
Income before extraordinary items....... $ .44 $ .49 $ .55 $ .58
Net income per common share............. .44 .49 .55 .58
Diluted income per common share:
Income before extraordinary items....... $ .43 $ .48 $ .54 $ .57
Net income per common share............. .43 .48 .54 .57
</TABLE>
58
<PAGE> 60
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------
1ST QTR.(1) 2ND QTR.(1) 3RD QTR.(1)(2)(3)
----------- ----------- -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales...................................... $2,332.8 $2,546.6 $ 2,708.8
Gross profit................................... 765.2 864.8 855.6
Income (loss) before extraordinary items....... 147.3 138.5 (1,062.6)
Net income (loss).............................. 147.3 138.5 (1,120.9)
Basic income (loss) per common share:
Income (loss) before extraordinary items..... $ .29 $ .26 $ (2.00)
Net income (loss) per common share........... .29 .26 (2.11)
Diluted income (loss) per common share:
Income (loss) before extraordinary items..... $ .29 $ .25 $ (2.00)
Net income (loss) per common share........... .29 .25 (2.11)
</TABLE>
- ---------------
(1) Includes charges of $9.6 million in the first quarter, $47.0 million in the
second quarter and $861.2 million in the third quarter related to merger,
restructuring and other non-recurring charges primarily in connection with
the merger of ADT and Former Tyco and the Keystone and INBRAND mergers.
(2) Includes a charge for the impairment of long-lived assets of $148.4 million
and $361.0 million for the write-off of purchased in-process research and
development costs.
(3) Extraordinary items were comprised principally of losses on repayment and
the write off of net unamoritized deferred refinancing costs relating to the
early extinguishment of debt.
24. TYCO INTERNATIONAL GROUP S.A.
As discussed in Note 4, TIG issued $2.75 billion of debt securities, which
are fully and unconditionally guaranteed by Tyco. TIG, a Luxembourg holding
company, is the parent company of substantially all the operating subsidiaries
of the Company. The Company has not included separate financial statements and
footnotes for TIG, because of the full and unconditional guarantee by Tyco and
the Company's belief that such information is not material to the holders of the
debt securities. The following presents consolidated summary financial
information for TIG and its subsidiaries, as if TIG and its organizational
structure as of September 30, 1998 were in place for all periods presented.
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Total current assets...................................... $ 5,892.9 $4,018.3
Total non-current assets.................................. 10,640.6 6,236.2
Total current liabilities................................. 5,013.2 3,905.2
Total non-current liabilities............................. 5,774.5 3,998.1
</TABLE>
59
<PAGE> 61
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1996
------------- ----------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales................................ $12,309.4 $7,588.2 $8,103.7
Gross profit............................. 4,250.0 2,485.6 2,628.5
Income (loss) before extraordinary
items(1)(2)............................ 905.9 (721.3) (400.5)
Net income (loss)(3)..................... 903.5 (779.6) (408.9)
</TABLE>
- ---------------
(1) Loss before extraordinary items in Fiscal 1997 includes charges related to
merger, restructuring and other non-recurring costs of $816.8 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). Fiscal 1997 also includes a charge of $361.0 million for
the write-off of purchased in-process research and development costs.
(2) Loss before extraordinary items in 1996 includes non-recurring charges of
$744.7 million related to the adoption of SFAS No. 121, $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 the ASH merger. (See Notes 11 and 15).
(3) Extraordinary items were comprised principally of losses on repayment and
the write off of net unamortized deferred refinancing costs relating to the
early extinguishment of debt.
25. SUBSEQUENT EVENTS
On October 1, 1998, Tyco consummated a merger with United States Surgical
Corporation ("USSC"), which develops, manufactures and markets a line of
surgical wound closure products and advanced surgical products to hospitals
throughout the world. Shareholders of USSC received 0.7606 shares of Tyco common
stock in exchange for each outstanding share of USSC. A total of approximately
59.2 million shares were issued in this transaction, which will be accounted for
under the pooling of interests method of accounting.
The following pro forma data summarize the consolidated results of
operations for the periods indicated assuming the merger with USSC had been
consummated as of September 30, 1998 and all periods presented are restated for
this transaction (unaudited).
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ ------------------ ------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales........................ $13,537.2 $8,457.8 $9,216.4
Income (loss) before
extraordinary items............ 965.1 (697.7) (187.6)
Net income (loss)................ 962.7 (756.0) (196.0)
Net income (loss) per common
share:
Basic.......................... 1.54 (1.33) (0.41)
Diluted........................ 1.50 (1.33) (0.41)
</TABLE>
In November 1998, the Company announced the completion of its acquisition
of Graphic Controls Corporation for approximately $460 million, including the
assumption of certain outstanding debt. Graphic Controls, a leading designer,
manufacturer, marketer and distributor of disposable medical products, will be
integrated with Ludlow Technical Products within the Tyco Healthcare Group. The
Company intends to account for the acquisition as a purchase.
60
<PAGE> 62
TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1998, the boards of directors of Tyco and AMP Incorporated
("AMP") approved a definitive merger agreement pursuant to which AMP will merge
with an indirect subsidiary of Tyco. It is estimated that Tyco will issue up to
approximately 186.0 million common shares for delivery by its subsidiary to the
former shareholders of AMP in the merger. The actual number of shares will be
based on Tyco's weighted average stock price for a fifteen day trading period
prior to AMP's shareholder vote on the merger.
AMP, with annual revenues of approximately $5.5 billion, designs,
manufactures and markets a broad range of electronic, electrical, fiber-optic
and wireless interconnective devices and systems. AMP serves customers in the
consumer and industrial, communications, automotive, computer and power
industries. The merger is subject to the approval of both companies'
shareholders and customary regulatory approvals. The transaction is expected to
be accounted for as a pooling of interests.
61
<PAGE> 63
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Information for all periods presented below reflects the grouping of the
Company's businesses into four business segments consisting of Disposable and
Specialty Products, Fire and Security Services, Flow Control Products, and
Electrical and Electronic Components.
In September 1997, the Company changed its fiscal year end from December 31
to September 30. References to Fiscal 1998, Fiscal 1997 and 1996 refer to the
twelve month fiscal year ended September 30, 1998, the transitional nine month
fiscal year ended September 30, 1997 and the calendar year ended December 31,
1996, respectively. In the discussions below, the results of operations for
Fiscal 1998 compare the fiscal year ended September 30, 1998 with the twelve
months ended September 30, 1997 (unaudited), and the results of operations for
Fiscal 1997 compare the nine months ended September 30, 1997 with the nine
months ended September 30, 1996 (unaudited).
Overview
Income (loss) before extraordinary items was $1.18 billion, or $2.02 per
share on a diluted basis for Fiscal 1998, as compared to ($708.7) million, or
($1.39) per share, for the twelve months ended September 30, 1997. Excluding the
$1.40 billion ($2.59 per share) after-tax charge in the twelve months ended
September 30, 1997 for merger and transaction costs, writeoffs and integration
costs associated with acquisitions (see Notes 2 and 3 to the Consolidated
Financial Statements), income (loss) before extraordinary items rose 70.2% from
$691.4 million, or $1.30 per diluted share. The increase was attributable to
margin improvements, increased sales and results of acquired companies in each
of the Company's business segments.
After each acquisition, acquired companies are immediately integrated and
Tyco does not separately track post-acquisition financial results. Accordingly,
amounts in the following analysis related to the impact of acquired companies
are estimates based on pre-acquisition results.
Sales
Sales increased 25% during Fiscal 1998 to $12.31 billion from $9.82 billion
in the twelve months ended September 30, 1997. Sales of the Disposable and
Specialty Products group increased $865.2 million to $3.45 billion, or 34%,
principally due to increased sales at Kendall, and to a lesser extent ADT
Automotive and Tyco Plastics and Adhesives. The increase at Kendall was
primarily due to the inclusion of Sherwood-Davis & Geck ("Sherwood") and CONFAB,
which were acquired in February 1998 and April 1998, respectively. Excluding the
impact of these acquisitions, sales increased an estimated $213.0 million, or
6%. Sales of the Fire and Security Services group increased $574.1 million, or
14%, to $4.74 billion primarily due to increased sales in the Company's
electronic security services business in the United States. This increase
relates to increased volume of recurring service revenues and to a lesser
extent, the inclusion of the results of companies acquired during Fiscal 1998.
Additionally, sales increased in the European security and fire protection
businesses due to an increase in service and recurring revenues and the
inclusion of the results of acquired companies. Sales of the Flow Control
Products group increased $146.2 million to $2.34 billion, or 7%, reflecting
increased demand for the Company's valve products in North America and Europe,
higher volume at existing businesses at Allied Tube & Conduit and Mueller and
the inclusion of companies acquired in Fiscal 1998. Sales of the Electrical and
Electronic Components group increased $905.5 million to $1.78 billion, or 103%,
principally due to increased sales at Tyco Submarine Systems Ltd. ("TSSL"), as
well as increased sales at Tyco Printed Circuit Group, offset slightly by
decreased sales at Allied Electrical Conduit. The increased sales at TSSL
resulted principally from the acquisition of AT&T's submarine systems business
in July 1997. Excluding the impact of this acquisition, sales increased an
estimated $273.9 million, or 18%.
Sales increased 29% during the nine month fiscal period ended September 30,
1997 to $7.59 billion from $5.87 billion in the nine months ended September 30,
1996. Sales of the Disposable and Specialty Products group increased $580.3
million to $2.0 billion, or 41%, due to increased sales at Kendall, Tyco
Plastics and ADT Automotive. At Kendall and Tyco Plastics, the increase in sales
resulted principally from the INBRAND and Carlisle acquisitions, respectively,
as well as internal growth at Kendall's Healthcare and
62
<PAGE> 64
Polyken businesses. Sales of the Fire and Security Services group increased
$473.2 million, or 18%, to $3.15 billion due to increased sales in each
geographic region of the Company's fire protection operations, primarily as a
result of an increase in the volume of service business, as well as increases in
the Company's electronic security services businesses. Additionally, the results
include Thorn Security ("Thorn") which was acquired in July 1996. Sales of the
Flow Control Products group increased $266.8 million to $1.68 billion, or 19%,
reflecting higher volume at European Flow Control, including businesses acquired
in the last quarter of 1996 and first quarter of Fiscal 1997, from Mueller,
including businesses acquired in the third quarter of 1996, as well as increased
volume in existing businesses at Allied, including businesses acquired in the
first quarter of Fiscal 1997, and Grinnell's distribution operations, where
sales increased due to price increases. Sales were relatively unchanged at
Keystone, where growth in international operations was offset by reduced U.S.
dollar equivalents due to currency fluctuations. Sales of the Electrical and
Electronic Components group increased $396.4 million to $754.7 million, or 111%,
resulting principally from the acquisition of AT&T's submarine systems business
in July 1997 and increased sales at Simplex. Increased sales at the Printed
Circuit Group businesses were largely due to the acquisition of ElectroStar in
January 1997, and increased unit volume. Allied's electrical conduit operations
also increased sales.
Income (Loss) Before Income Taxes and Extraordinary Items
Pre-tax income (loss) before extraordinary items was $1.72 billion in
Fiscal 1998, as compared to ($491.2) million in the twelve months ended
September 30, 1997. Pre-tax income for the twelve months ended September 30,
1997 included charges of $1.54 billion for merger, restructuring and other
non-recurring charges. See Notes 11 and 15 to the Consolidated Financial
Statements. Excluding these non-recurring charges, pre-tax income (loss)
increased $667.3 million, or 63%, from $1.05 billion in the twelve months ended
September 30, 1997. Amortization expense for goodwill and other intangible
assets was $153.0 million for Fiscal 1998 and $115.8 million for the twelve
months ended September 30, 1997. The following analysis is presented exclusive
of these non-recurring charges to better portray the comparability of recurring
operations.
Operating profits of the Disposable and Specialty Products group increased
$218.6 million to $643.7 million in Fiscal 1998, or 51%. Operating profits were
18.7% of sales in Fiscal 1998 and 16.5% in the twelve months ended September 30,
1997. The increase was principally due to the increased sales at Kendall,
including the effect of the acquisition of Sherwood, fixed cost reductions due
to the integration of Sherwood and increased volume and better margins at Tyco
Plastics and Adhesives. Operating profits of the Fire and Security Services
group increased $217.5 million to $654.9 million, or 50%. Operating profits as a
percentage of sales were 13.8% in Fiscal 1998, as compared to 10.5% in the
twelve months ended September 30, 1997. The overall increase was principally due
to increases in service volume, including recurring monitoring revenue, in the
security and fire protection businesses and higher margins in each geographic
region of the Company's security services business. The operating profits of the
Flow Control Products group increased $80.3 million to $325.9 million, or 33%.
Operating profits were 13.9% of sales in Fiscal 1998, as compared to 11.2% in
the twelve months ended September 30, 1997. The increase was due to increased
volume and margins in the Company's North American and European Flow Control
Products operations, including Keystone's valve products, which have been
integrated into the Company's operations. In addition, there were higher sales
and margins at Allied Tube & Conduit. Operating profits of the Electrical and
Electronic Components group increased $208.6 million to $367.5 million, or 131%,
principally due to the acquisition of AT&T's submarine systems business in July
1997. Operating profits as a percentage of sales were 20.6% in Fiscal 1998, as
compared to 18.2% in the twelve months ended September 30, 1997. Operating
margins increased due to sales increasing at a higher rate than expenses at Tyco
Printed Circuit Group and improved operating efficiencies at Allied Electrical
Conduit, offset by slightly decreased margins at Tyco Submarine Systems Ltd.
The effect of changes in foreign exchange rates during Fiscal 1998, as
compared to the twelve months ended September 30, 1997, was not material to the
Company's sales and operating profits.
Operating profits of the Disposable and Specialty Products group increased
$52.4 million to $328.7 million in Fiscal 1997, or 19%, reflecting higher
earnings at Kendall, including improved manufacturing efficiencies and the
earnings of INBRAND, Tyco Plastics, which, in addition to internal growth in
volume and
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prices, includes the results of Carlisle from September 1996, and ADT
Automotive. Operating profits of the Fire and Security Services group increased
$77.9 million to $336.7 million, or 30%, due to higher margins in each
geographic region of the Company's fire protection operations and electronic
security businesses as well as the inclusion of Thorn. The higher margins in
fire protection were the result of a higher mix of service work within the
contracting business. The operating profits of the Flow Control Products group
increased $47.2 million to $193.7 million, or 32%, resulting principally from
increases in each of Company's operations, and the results of businesses
acquired in Fiscal 1997. Increases in the Company's European Flow Control
businesses were primarily due to increased margins as well as the inclusion of
acquisitions. Increases at Allied and Mueller were a combination of stronger
operating profits resulting from improved operating efficiencies as well as the
inclusion of acquisitions. Operating profits of the Electrical and Electronic
Components group increased $69.9 million to $136.4 million, or 105%, due to
increased earnings at TSSL, principally due to the acquisition of AT&T's
submarine systems business and increased operating levels. Earnings were also up
at the Printed Circuit Group businesses, including ElectroStar, and at Allied's
Electrical Conduit operations.
The effect of changes in foreign exchange rates during Fiscal 1997, as
compared to the nine months ended September 30, 1996 was not material to the
Company's sales and operating profits.
Corporate and other expenses were $68.3 million in Fiscal 1998 compared to
$56.8 million in the twelve months ended September 30, 1997. Corporate and other
expenses were $44.8 million in Fiscal 1997 and $31.4 million in the nine months
ended September 30, 1996. These increases were due principally to higher
compensation expense under the Company's performance-related, incentive
compensation plans.
Selling, General and Administrative Expenses
Total selling, general and administrative expenses were 19.0% of sales in
Fiscal 1998, 20.2% in the twelve months and nine months ended September 30, 1997
and 20.6% during the nine months ended September 30, 1996. The reductions in
selling, general and administrative costs as a percentage of sales is
principally due to the effect of higher sales and the termination of employees
and consolidation of facilities associated with the Fiscal 1997 acquisitions.
Interest Expense
Interest expense increased $47.4 million to $236.2 million in Fiscal 1998,
as compared to the twelve months ended September 30, 1997, due to higher average
debt balances, as a result of monies borrowed to pay for acquisitions, partially
offset by lower average interest rates. The weighted average rate of interest on
all long-term debt during Fiscal 1998, Fiscal 1997 and 1996 was 6.5%, 7.6% and
8.0%, respectively. Interest expense decreased $4.5 million to $137.5 million
during Fiscal 1997, as compared to the nine months ended September 30, 1996, due
to lower average interest rates partially offset by higher average debt
balances, as a result of monies borrowed to make acquisitions.
Extraordinary Items
Extraordinary items in Fiscal 1998, Fiscal 1997 and 1996 included net
losses amounting to $2.4 million, $58.3 million and $8.4 million, respectively,
arising on the reacquisition of certain of the Company's senior, senior
subordinated and public notes and the write off of net unamortized deferred
financing costs related to the LYONS. Further details are provided in Notes 4
and 13 to the Consolidated Financial Statements.
Income Tax Expense
The effective income tax rate was 31.5% during Fiscal 1998, 34.2% in the
twelve months ended September 30, 1997, 35.2% in the nine months ended September
30, 1997 and 36.4% in the nine months ended September 30, 1996. The decreases in
the effective income tax rates were due to higher earnings in domiciles with
lower income tax rates. The effective income tax rates for 1997 and 1996 exclude
the impact of non-recurring charges. Management believes that the Company will
generate sufficient future income to realize the tax benefits related to its
deferred tax asset. A valuation allowance has been maintained due to continued
uncertainties of realization of certain tax attributes, primarily tax loss
carryforwards. See Note 7 to the Consolidated Financial Statements.
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<PAGE> 66
LIQUIDITY AND CAPITAL RESOURCES
As presented in the Consolidated Statement of Cash Flows, net cash provided
by operating activities was $1.64 billion in Fiscal 1998. The significant
changes in working capital were a $317.7 million decrease in accounts payable,
accruals and other liabilities resulting principally from spending for merger,
restructuring and other non-recurring costs, a $150.3 million increase in income
taxes payable, a $91.4 million increase in contracts in process and a $86.2
million increase in accounts receivable. The impact of changes in foreign
exchange rates during Fiscal 1998 did not materially affect net working capital.
Working capital requirements are not anticipated to increase substantially in
Fiscal 1999.
During Fiscal 1998, the Company used cash of $3.82 billion to acquire
companies in its four business segments, $781.3 million to purchase property,
plant and equipment, $222.6 million to purchase treasury shares and $56.5
million to pay dividends to shareholders.
The level of capital expenditures is expected to increase moderately in
Fiscal 1999, and the primary source of funds for such expenditures is expected
to be cash from operations.
Expenditures for environmental matters are not expected to have a material
effect on the Company in Fiscal 1999. See Note 16 to the Consolidated Financial
Statements.
The source of the cash used for acquisitions was an increase in total debt,
proceeds from the sale of common shares and cash flows from operations. At
September 30, 1998, the Company's total debt was $5.00 billion, as compared to
$2.73 billion at September 30, 1997. The increase resulted principally from net
proceeds received of approximately $2.74 billion from the issuance of public
debt discussed below, partially offset by the repayment of amounts outstanding
under the sterling denominated bank facility and the exchange of $155.3 million
principal balance of LYON's for common shares. Goodwill and other intangible
assets were $6.40 billion at September 30, 1998, compared to $2.93 billion at
September 30, 1997. Shareholder's equity was $6.14 billion, or $10.46 per share,
at September 30, 1998, compared to $3.43 billion, or $6.39 per share, at
September 30, 1997. The increase in shareholders' equity was due primarily to
net proceeds of approximately $1.25 billion from the sale of 25.3 million common
shares, net income of $1.17 billion and proceeds of $307.4 million from the
exercise of options. Total debt as a percent of total capitalization (total debt
and shareholders' equity) was 45% at September 30, 1998 and 44% at September 30,
1997.
In February 1998, Tyco US entered into a new $2.25 billion credit agreement
with a group of commercial banks, giving it the right to borrow (a) up to $1.75
billion until February 12, 1999, with the ability to extend, at the option of
Tyco US, to February 12, 2000, and (b) up to $0.5 billion until February 12,
2003. Interest payable on borrowings is variable based upon the borrower's
option of selecting a Eurodollar rate plus margins ranging from 0.17% to 0.19%,
a certificate of deposit rate plus margins ranging from 0.295% to 0.315%, or a
base rate, as defined. If the outstanding principal amount of loans equals or
exceeds one-third of the commitments, the Eurodollar and certificate of deposit
margins are increased by 0.10%. Repayments of amounts outstanding under this
agreement are guaranteed by the Company. In accordance with the terms of this
agreement, in June 1998 Tyco US and Tyco International Group S.A. ("TIG"), a
wholly-owned subsidiary of the Company, elected that TIG become the borrower and
that Tyco US cease to be the borrower under this agreement. All other terms and
conditions in effect remained unchanged. Substantially all amounts outstanding
under this credit agreement have been classified as long-term, based on the
Company's ability and intent to refinance this obligation on a long term basis.
Simultaneous with the closing of the new credit agreement, Tyco US reduced
aggregate commitments available under the previously existing credit agreement
from $1.75 billion to $950 million. In March 1998, Tyco US terminated the $950
million credit agreement. Balances outstanding at the time of termination were
repaid with net proceeds from the sale of common shares, discussed below.
In March 1998, the Company sold 25.3 million common shares for
approximately $1.25 billion under a $2.0 billion public shelf registration
statement. The net proceeds from the sale were used to repay indebtedness
incurred for previous acquisitions.
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In June 1998, TIG issued $750 million 6 1/8% notes due 2001, $750 million
6 3/8% notes due 2005, $750 million 6 1/4% Dealer Remarketable
Securities(sm)("Drs.")(sm) due 2013 and $500 million 7.0% notes due 2028 under a
$3.75 billion public shelf registration statement. Under the terms of the Drs.,
the Remarketing Dealer has an option to remarket the Drs. in June 2003, which if
exercised would subject the Drs. to mandatory tender to the Remarketing Dealer
and reset the interest rate to an adjusted fixed rate until June 2013. If the
Remarketing Dealer does not exercise its option then all Drs. are required to be
tendered to the Company in June 2003. Repayment of amounts outstanding under
these debt securities are fully and unconditionally guaranteed by Tyco. The net
proceeds of approximately $2.74 billion were used to repay borrowings under the
$2.25 billion bank credit facility and uncommitted lines of credit of Tyco US.
In connection with the offering of these debt securities, TIG has entered into
two interest rate swap agreements to hedge a portion of the fixed interest rate
terms. These two swap agreements are each based on a notional amount of $650
million and are for a five and seven year term, respectively. Under the terms of
the agreements, TIG receives payments based on fixed interest rates and pays
variable rates, based on LIBOR, not to exceed a specified maximum. Interest is
received or paid semi-annually in June and December. During Fiscal 1998, the
effective interest rate on these instruments approximated the coupon rate.
In October 1998, TIG issued $800 million of debt in a private placement
offering consisting of two series of Notes: $400 million of 5.875% Notes due
November 2004 and $400 million of 6.125% Notes due November 2008. The Notes are
fully and unconditionally guaranteed by Tyco. The net proceeds of approximately
$791.7 million were used to repay borrowings under TIG's $2.25 billion bank
credit facility. In addition, TIG entered into an interest rate swap agreement
to hedge the fixed rate terms of the $400 million Notes due 2008. Under this
agreement, which expires in November 2008, TIG will receive payments at a fixed
rate of 6.125% and will make floating rate payments based on LIBOR, as defined.
See Note 4 to Consolidated Financial Statements.
The Company believes that its funding sources are adequate for its
anticipated requirements through expected cash flow from operations.
Backlog
Backlog at September 30, 1998 amounted to $4.1 billion, compared to $2.4
billion at September 30, 1997. Backlog increased in the Company's Electrical and
Electronic Components, Flow Control Products and Fire and Security Services
segments. Within the Electrical and Electronic Components group, backlog
increased principally due to contracts awarded to the Company's submarine
systems business. Within the Flow Control Products group, backlog increased
principally due to an increase in backlog at Earth Tech, including backlog
related to acquisitions, and in the Company's European flow control operations.
Within the Fire and Security Services group, backlog increased principally due
to an increase in backlog at the Company's worldwide security and North American
fire protection businesses.
YEAR 2000 COMPLIANCE
Year 2000 compliance programs and systems modifications were initiated by
the Company in Fiscal 1997 in an attempt to ensure that these systems and key
processes will remain functional. The Company is continuing its assessment of
the potential impact of the Year 2000 on date-sensitive information in computer
software programs and operating systems in its product development, financial
business systems and administrative functions, and has begun implementing
strategies to avoid adverse implications. This objective is expected to be
achieved either by modifying present systems using existing internal and
external programming resources or by installing new systems, and by monitoring
supplier, customer and other third-party readiness. Review of the systems
affecting the Company is progressing. The costs of the Company's Year 2000
program to date have not been material and the Company does not anticipate that
the costs of any required modifications to its information technology or
embedded technology systems will have a material adverse effect on its financial
position, results of operations or liquidity.
In the event that the Company or material third parties fail to complete
their Year 2000 compliance programs successfully and on time, the Company's
ability to operate its businesses, service customers, bill or
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<PAGE> 68
collect its revenues or purchase products in a timely manner could be adversely
affected. Although there can be no assurance that the conversion of the
Company's systems will be successful or that the Company's key third-party
relationships will have successful conversion programs, management does not
expect that any such failure would have a material adverse effect on the
financial position, results of operations or liquidity of the Company. The
Company has day-to-day operational contingency plans, and management is in the
process of updating these plans for possible Year 2000 specific operational
requirements.
ACCOUNTING AND TECHNICAL PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which is effective for fiscal years
beginning after June 15, 1999. This statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. The Company is currently analyzing this new standard.
FORWARD LOOKING INFORMATION
Certain statements in this report 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 statement
contained herein, in press releases, written statements or other documents filed
with the Securities and Exchange Commission, or in the Company's communications
and discussions with investors and analysts in the normal course of business
through meetings, phone calls and conference calls, regarding the consummation
and benefits of future acquisitions, as well as expectations with respect to
future sales, operating efficiencies and product expansion, are subject to known
and unknown risks, uncertainties and contingencies, many of which are beyond the
control of the Company, which may cause actual results, performance or
achievements to differ materially from anticipated results, performances or
achievements. Factors that might affect such forward looking statements include,
among other things, overall economic and business conditions; the demand for the
Company's goods and services; competitive factors in the industries in which the
Company competes; changes in government regulation; changes in tax requirements
(including tax rate changes, new tax laws and revised tax law interpretations);
interest rate fluctuations and other capital market conditions, including
foreign currency rate fluctuations; economic and political conditions in
international markets, including governmental changes and restrictions on the
ability to transfer capital across borders; the ability to achieve anticipated
synergies and other cost savings in connection with acquisitions; the timing,
impact and other uncertainties of future acquisitions; and the Company's ability
and its customers' and suppliers' ability to replace, modify or upgrade computer
programs in order to adequately address the Year 2000 issue.
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<PAGE> 69
TYCO INTERNATIONAL LTD.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED ACQUISITIONS
BEGINNING TO DISPOSALS, BALANCE AT
DESCRIPTION OF YEAR INCOME AND OTHER DEDUCTIONS(2) END OF YEAR
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996:
Allowances for doubtful $ 52.6 $47.2 $ (.5) $(15.1) $ 84.2
accounts(1).....................
Nine Months Ended September 30, 1997:
Allowances for doubtful 84.2 31.0 23.5 (31.0) 107.7
accounts(1).....................
Fiscal Year Ended September 30, 1998:
Allowances for doubtful 107.7 81.7 108.4 (40.9) 256.9
accounts(1).....................
</TABLE>
- ---------------
(1) Deducted from assets.
(2) Write-off of accounts receivable considered uncollectible.
68
<PAGE> 1
TYCO INTERNATIONAL GROUP S.A.
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL INDENTURE NO. 5
$400,000,000
5.875% Notes due 2004
THIS SUPPLEMENTAL INDENTURE NO. 5, dated as of November 2, 1998, among TYCO
INTERNATIONAL GROUP S.A., a Luxembourg company (the "Company"), TYCO
INTERNATIONAL LTD., a Bermuda company ("Tyco"), and THE BANK OF NEW YORK, a New
York banking corporation, as trustee (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company and Tyco have heretofore executed and delivered to the
Trustee an Indenture, dated as of June 9, 1998 (the "Indenture"), providing for
the issuance from time to time of one or more series of the Company's
Securities;
WHEREAS, Article Seven of the Indenture provides for various matters with
respect to any series of Securities issued under the Indenture to be established
in an indenture supplemental to the Indenture; and
WHEREAS, Section 7.1(e) of the Indenture provides that the Company, Tyco
and the Trustee may enter into an indenture supplemental to the Indenture to
establish the form or terms of Securities of any series as permitted by Sections
2.1 and 2.4 of the Indenture.
NOW THEREFORE: In consideration of the premises and the issuance of the
series of Securities provided for herein, the Company, Tyco and the Trustee
mutually covenant and agree for the equal and proportionate benefit of the
respective Holders of the Securities of such series as follows:
ARTICLE ONE
RELATION TO INDENTURE; DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.1 RELATION TO INDENTURE. This Supplemental Indenture No. 5
constitutes an integral part of the Indenture.
SECTION 1.2 DEFINITIONS. For all purposes of this Supplemental Indenture
No. 5, the following terms shall have the respective meanings set forth below:
"ADJUSTED REDEMPTION TREASURY RATE" means, with respect to any
redemption date, the annual rate equal to the semiannual equivalent yield
to
<PAGE> 2
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.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear or Cedel, as the case may be, that
apply to such transfer or exchange.
"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.
"CEDEL" means Cedel Bank, SA.
"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 Notes to be redeemed that will 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 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.
"CUSTODIAN" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"DEFINITIVE NOTE" means a certificated Note in the form of Exhibit A-1
hereto, registered in the name of the Holder thereof and issued in
accordance with Section 2.9 hereof, except that such Note shall not bear
the Global Note Legend.
"EUROCLEAR" means the Euroclear Clearance System.
"EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant
to Section 2.9(f) hereof; following the exchange of interests in the Rule
144A Global Note, the Regulation S Global Note and the Restricted
Definitive Note for Exchange Notes pursuant to an effective registration
statement, the defined term
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<PAGE> 3
"Exchange Notes" and "Notes" shall have the same meaning and be entitled to
the same rights under the Indenture.
"EXCHANGE OFFER" means the exchange offer by the Company of the
Exchange Notes for the Notes issued in reliance upon an exemption from
registration under the Securities Act on the date hereof in accordance with
the provisions of the Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" means an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, including the prospectus contained therein, all exhibits thereto
and all documents incorporated by reference therein filed by the Company
and Tyco in accordance with the Registration Rights Agreement in connection
with the Exchange Offer.
"GLOBAL NOTES" means, individually and collectively, any of the Notes
issued as global notes under the Indenture.
"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.9(g)(ii),
which is required to be placed on all Global Notes issued under the
Indenture.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"INITIAL PURCHASER" means each of Lehman Brothers Inc., J.P. Morgan
Securities Inc., Credit Suisse First Boston Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who is not also a QIB.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders
in connection with the Exchange Offer.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"NOTES" has the meaning assigned to it in Section 2.1 hereof.
"PARTICIPANT" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall
include Euroclear and Cedel).
"PARTICIPATING BROKER DEALER" means the Initial Purchasers and any
other broker-dealer which makes a market in the Notes and exchanges Notes
in the
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<PAGE> 4
Exchange Offer for Exchange Notes.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.9(g)(i) to be placed on all Notes issued under the Indenture except where
otherwise permitted by the provisions of the Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"QUOTATION AGENT" means a Redemption Reference Treasury Dealer
appointed as such agent by the Company.
"REDEMPTION REFERENCE TREASURY DEALER" means each of Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City
of New York 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.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of November 2, 1998, by and among the Company, Tyco and
the Initial Purchasers, as such agreement may be amended, modified or
supplemented from time to time.
"REGULATION S" means Regulation S promulgated under the Securities Act
or any successor rule or regulation substantially to the same effect.
"REGULATION S GLOBAL NOTE" means a global Note in the form of Exhibit
A-2 hereto bearing the Global Note Legend and the legend in Section
2.9(g)(iii) hereof and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the
Private Placement Legend.
"RESTRICTED PERIOD" means the period beginning on the date hereof and
ending on the date of receipt by the Trustee of (x) a written certificate
from the Depositary, together with copies of certificates required by Rule
903(b)(3)(ii)(B) under the Securities Act and (y) an Officers' Certificate
from the Company certifying as to the end of the end of the 40-day
restricted period as defined in Regulation S and any other matters required
by the Applicable Procedures.
"RULE 144" means Rule 144 promulgated under the Securities Act, any
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<PAGE> 5
successor rule or regulation to substantially the same effect or any
additional rule or regulation under the Securities Act that permits
transfers of restricted securities without registration such that the
transferee thereof holds securities that are freely tradeable under the
Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act or
any successor rule or regulation to substantially the same effect.
"RULE 144A GLOBAL NOTE" means a global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee.
"RULE 903" means Rule 903 promulgated under the Securities Act or any
successor rule or regulation substantially to the same effect.
"RULE 904" means Rule 904 promulgated the Securities Act or any
successor rule or regulation substantially to the same effect.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
of the Company and Tyco filed pursuant to the provisions of the
Registration Rights Agreement on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and
all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all documents incorporated by reference
therein.
"UNRESTRICTED GLOBAL NOTE" means a global Note (other than a
Regulation S Global Note) in the form of Exhibit A-1 attached hereto that
bears the Global Note Legend, and that is deposited with or on behalf of
and registered in the name of the Depositary, representing a series of
Notes that do not bear the Private Placement Legend.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"U.S. PERSON" means a U.S. Person as defined in Rule 902(o) under the
Securities Act.
SECTION 1.3 RULES OF CONSTRUCTION. For all purposes of this Supplemental
Indenture No. 5:
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<PAGE> 6
(a) capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(b) all references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture No. 5; and
(c) the terms "HEREIN", "HEREOF", "HEREUNDER" and other words of similar
import refer to this Supplemental Indenture No. 5.
ARTICLE TWO
THE SERIES OF NOTES
SECTION 2.1 TITLE OF THE SECURITIES. There shall be a series of Securities
designated as the "5.875% Notes due 2004" (the "Notes").
SECTION 2.2 FORM AND DATING.
(a) GENERAL.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 or A-2, as applicable, hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its authentication.
The Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of the Indenture Supplement No. 5, and the
Company, Tyco and the Trustee, by their execution and delivery of the Indenture
Supplement No. 5, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the
express provisions of the Indenture Supplement No. 5, the provisions of the
Indenture Supplement No. 5 shall govern and be controlling.
(b) RULE 144A GLOBAL NOTES; DEFINITIVE NOTES.
Notes issued in global form shall be substantially in the form of Exhibits
A-1 or A-2 attached hereto (including the Global Note Legend thereon). The
Company hereby designates The Depository Trust Company as the initial Depositary
for the Global Notes. Notes offered and sold to QIBs shall be issued initially
in the form of the Rule 144A Global Note, which shall be deposited on behalf of
the purchasers of the Notes represented thereby with the Trustee at its New York
office, as custodian for the Depositary, duly executed by the Company and Tyco
and authenticated by the Trustee as hereinafter provided. Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time as conclusively reflected in the books and
records of the Trustee endorsed thereon and that the aggregate principal amount
of outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemption. Any change in
the principal amount of a Global
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<PAGE> 7
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee as the custodian for the Depositary, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.9 hereof.
Notes offered and sold to Institutional Accredited Investors shall be
issued in definitive form in substantially the form of Exhibit A-1 attached
hereto (but without the Global Note Legend thereon).
(c) REGULATION S GLOBAL NOTES.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Global Note, which shall be deposited
on behalf of the purchasers of the Notes represented thereby with the Trustee,
at its New York office, as custodian for the Depositary, and registered in the
name of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by
the Company and Tyco and authenticated by the Trustee as hereinafter provided.
During the Restricted Period, interests in the Regulation S Global Note must be
held through Euroclear or Cedel, if the holders are participants in such
systems, or indirectly through organizations that are participants in such
systems.
Following the termination of the Restricted Period, beneficial interests in
the Regulation S Global Note may be held, directly or indirectly, in the account
of any Participant of the Depositary.
(d) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Global Note
that are held by Participants through Euroclear or Cedel Bank.
SECTION 2.3 LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate
principal amount of the Notes shall not initially exceed $400,000,000.
SECTION 2.4 PRINCIPAL PAYMENT DATE. Subject to the provisions of Section
2.7 hereof and Articles Four and Twelve of the Indenture, the principal of the
Notes shall be become due and payable in a single installment on November 1,
2004.
SECTION 2.5 INTEREST AND INTEREST RATES. Interest on the Notes shall be
payable semiannually on May 1 and November 1 of each year beginning on May 1,
1999 (each, an "INTEREST PAYMENT DATE"); PROVIDED, HOWEVER, that if an Interest
Payment Date would otherwise be a day that is not a Business Day, such Interest
Payment Date shall be the next succeeding Business Day, and no additional
interest shall be paid in respect of such intervening period. The interest rate
borne by the Notes will be 5.875% per annum until the Notes are paid in full
subject, however, to the following provisions. In the event that (i) the
Exchange Offer Registration
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Statement is not filed with the SEC on or prior to the 90th calendar day
following the original issue of the Notes, (ii) the Exchange Offer Registration
Statement has not been declared effective by the SEC on or prior to the 150th
calendar day following the original issue of the Notes or (iii) the Exchange
Offer is not consummated or a Shelf Registration Statement is not declared
effective, in either case, on or prior to the 180th calendar day following the
original issue of the Notes (each such event in clauses (i) through (iii) above,
a "REGISTRATION DEFAULT"), the interest rate borne by the Notes shall be
increased by an amount ("ADDITIONAL INTEREST") equal to an additional one
quarter of one percent (0.25%) per annum upon the occurrence of each
Registration Default, which rate will increase by an additional one quarter of
one percent (0.25%) per annum each 90-day period that such Additional Interest
continues to accrue under any such circumstance, provided that the maximum
aggregate increase in the interest rate will in no event exceed 1.0% per annum;
PROVIDED, HOWEVER, that no Additional Interest shall be payable if the Exchange
Offer Registration Statement is not filed or declared effective or the Exchange
Offer is not consummated as set forth above because of any changes in law, SEC
rules or regulations or applicable interpretations thereof by the staff of the
SEC (it being understood that in any such circumstance the Company shall be
required to file a Shelf Registration Statement and Additional Interest shall be
payable if such Shelf Registration Statement is not declared effective as
provided in clause (iii) above); and PROVIDED FURTHER that Additional Interest
shall only be payable in the case a Shelf Registration Statement is not declared
effective as aforesaid with respect to notes that have the right to be included,
and whose inclusion has been requested, in the Shelf Registration Statement.
Following the cure of all Registration Defaults applicable to the respective
Notes, the accrual of Additional Interest will cease and the interest rate will
revert to 5.875% per annum.
If a Shelf Registration Statement is declared effective but shall
thereafter become unusable by the Holder of Notes for any reason (whether or not
the Company had the right to prevent the Holders from distributing Notes during
the 30 day period described in the Indenture), and the aggregate number of days
in any consecutive twelve-month period for which the Shelf Registration
Statement shall not be usable exceeds 30 days, the interest rate borne by the
Notes included in such Shelf Registration Statement will be increased by an
amount ("ADDITIONAL INTEREST") equal to 0.25% per annum for the first 90-day
period (or portion thereof) beginning on the 31st such date that such Shelf
Registration Statement ceases to be usable, which rate shall be increased by an
additional 0.25% per annum at the beginning of each subsequent 90-day period,
provided the maximum aggregate increase in the interest rate will in no event
exceed 1.0% per annum. Upon the Shelf Registration Statement once again becoming
usable, the interest rate borne by the Notes included therein will be reduced to
the original interest rate if the Company is otherwise in compliance with the
Registration Rights Agreement with respect to such Notes at that time.
Additional Interest in accordance with this paragraph shall be computed based
upon the actual number of days elapsed in each 90-day period in which the Shelf
Registration Statement is unusable. For all purposes of this Indenture
Supplement No. 5, the term interest shall include "Additional Amounts" and
"Additional Interest".
The interest payable on each Interest Payment Date shall be the amount of
interest accrued from November 2, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
until the principal amount of the Notes has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
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The interest payable on any Note which is punctually paid or duly provided
for on any Interest Payment Date shall be paid to the Person in whose name such
Note is registered at the close of business on the April 15 or October 15 (in
each case, whether or not a Business Day), respectively, immediately preceding
such Interest Payment Date (each, a "Regular Record Date"). Interest payable on
any Note which is not punctually paid or duly provided for on any Interest
Payment Date therefor shall forthwith cease to be payable to the Person in whose
name such Note is registered at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date, and such interest shall
instead be paid to the Person in whose name such Note is registered at the close
of business on the record date established for such payment by notice by or on
behalf of the Company to the Holders of the Notes mailed by first-class mail not
less than 15 days prior to such record date to their last addresses as they
shall appear upon the Security register, such record date to be not less than
five days preceding the date of payment of such defaulted interest.
The Company and Tyco shall notify the Trustee within five Business Days
after each and every date (an "EVENT DATE") on which an event occurs in respect
of which Additional Interest is required to be paid. The obligation to pay
Additional Interest shall be deemed to accrue from and including the day
following the applicable Event Date. Additional Interest shall be paid by
depositing with the Trustee for the benefit of the Holders of the Notes entitled
to receive such Additional Interest, on or before the applicable Interest
Payment Date, immediately available funds in sums sufficient to pay the
Additional interest then due. Additional Interest shall be payable to the Person
otherwise entitled to be paid the interest payable on the Notes on such Interest
Payment Date.
SECTION 2.6 PLACE OF PAYMENT. The place of payment where the Notes may be
presented or surrendered for payment, where the principal of and interest and
any other payments due on the Notes are payable, where the Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to and upon the Company in respect of the Notes and the Indenture may be
served shall be in the Borough of Manhattan, The City of New York, and the
office or agency maintained by the Company for such purpose shall initially be
the Corporate Trust Office of the Trustee.
At the option of the Company, interest on the Notes may be paid (i) by
check mailed to the address of the Person entitled thereto as such address shall
appear in the register of Holders of the Notes or (ii) at the expense of the
Company, by wire transfer to an account maintained by the Person entitled
thereto as specified in writing to the Trustee by such Person by the applicable
record date.
SECTION 2.7 REDEMPTION. The Notes are 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 Notes, and (ii) as determined by the
Quotation Agent, the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payment 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 plus 15 basis
points plus, in each case, accrued interest thereon to the date of redemption.
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The Notes are also subject to redemption to the extent described in Article
Twelve of the Indenture.
The Company shall have no obligation to redeem or purchase the Notes
pursuant to any sinking fund or analogous provisions or upon the happening of
any specified event or at the option of any Holder of the Notes.
SECTION 2.8 CURRENCY. Principal and interest on the Notes shall be payable
in United States dollars.
SECTION 2.9 TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 90 days after the date of such notice from the Depositary; or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Global Note be exchanged by the Company for Definitive Notes
prior to the expiration of the Restricted Period. Global Notes may also be,
subject to compliance with the terms of this Section 2.9, exchanged for
Definitive Notes (x) upon the request of any holder of Notes if an Event of
Default has occurred and is continuing for a period of at least 180 days or (y)
in connection with any transfer of an interest in the Global Note to an
Institutional Accredited Investor. Upon the occurrence of any of the preceding
events, Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.10 and 2.12 of the Indenture.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES.
The transfer and exchange of beneficial interests in the Global Notes shall
be effected through the Depositary, in accordance with the provisions of the
Indenture and the Applicable Procedures. Transfers of beneficial interests in
the Global Notes also shall require compliance with either subparagraph (i) or
(ii) below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME TYPE OF GLOBAL NOTE.
Beneficial interests in any Rule 144A Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in a
Rule 144A Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend.
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Beneficial interests in any Regulation S Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in a
Regulation S Global Note; provided, however, that prior to the expiration
of the Restricted Period beneficial interests in the Regulation S Global
Note may only be transferred in accordance with the Applicable Procedures
of Euroclear and Cedel. Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.9(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN
GLOBAL NOTES. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.9(b)(i) above, and, subject to
any other requirement in this Section 2.9, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in a Global Note of
another type in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B), subject to Section
2.9(a), (1) a written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable Procedures
directing the Depositary to cause to be issued a Definitive Note in an
amount equal to the beneficial interest to be transferred or exchanged and
(2) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall
be registered to effect the transfer or exchange; provided that in no event
shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Global Note prior to the
expiration of the Restricted Period. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained herein and in the Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.9(h) hereof.
(iii) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RULE 144A
GLOBAL NOTE OR A REGULATION S GLOBAL NOTES FOR BENEFICIAL INTERESTS IN AN
UNRESTRICTED GLOBAL NOTE. A beneficial interest in Rule 144A Global Note
may be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
if (x) the exchange or transfer complies with the requirements of Section
2.9(b)(ii) above and (y):
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal or via the
Depositary's book-entry system in a form acceptable to the Trustee
that it is not (1) a broker-dealer, (2) a
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Person participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the Company,
and such Letter of Transmittal or book-entry system certification
shall satisfy the requirements of Section 2.9(ii);
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
If any such transfer is effected at a time when an Unrestricted
Global Note has not yet been issued, the Company shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.5 of the
Indenture, the Trustee shall authenticate one or more Unrestricted Global
Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests so transferred.
(iv) TRANSFER AND EXCHANGE OF INTERESTS TO AND FROM REGULATION S
GLOBAL NOTES (OTHER THAN AS PROVIDED IN CLAUSE (iii) ABOVE).
(A) TRANSFER AND EXCHANGE OF INTERESTS IN A REGULATION S
GLOBAL NOTE PRIOR TO THE TERMINATION OF THE RESTRICTED PERIOD FOR
BENEFICIAL INTERESTS IN A RULE 144A GLOBAL NOTE. A beneficial
interest in any Regulation S Global Note may be exchanged by any
holder thereof for a beneficial interest in a Rule 144A Global Note
or transferred to a Person who takes delivery thereof in the form of
a beneficial interest in a Rule 144A Global Note, if (x) the exchange
or transfer complies with the requirements of Section 2.9(b)(ii)
above, and (y) the holder of the beneficial interest in the
Regulation S Global Note delivers to the Trustee and the Registrar a
letter in the form of Exhibit B with the certification set forth in
paragraph 1 or Exhibit C with the certification set forth in
paragraph 2(b), as applicable, completed.
(B) TRANSFER AND EXCHANGE OF INTERESTS IN A REGULATION S
GLOBAL NOTE FOLLOWING THE TERMINATION OF THE RESTRICTED PERIOD FOR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A beneficial
interest in any Regulation S Global Note following the termination of
the
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Restricted Period may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Note or transferred to
a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, if (x) the exchange or
transfer complies with the requirements of Section 2.9(b)(ii) above
and (y) the holder of the Regulation S Global Note delivers to the
Trustee and the Registrar a letter in the form of Exhibit B with the
certification set forth in paragraph 4(b) or Exhibit C with the
certification set forth in paragraph 1(a), as applicable, completed.
(C) TRANSFER AND EXCHANGE OF INTERESTS IN A RULE 144A GLOBAL
NOTE FOR BENEFICIAL INTERESTS IN A REGULATION S GLOBAL NOTE. A
beneficial interest in any Rule 144A Global Note may be exchanged by
any holder thereof for a beneficial interest in a Regulation S Global
Note or transferred to a Person who takes delivery thereof in the
form of a beneficial interest in a Regulation S Global Note, if (x)
the exchange or transfer complies with the requirements of Section
2.9(b)(ii) above and (y) the holder of the beneficial interest in the
Rule 144A Global Note delivers to the Trustee and the Registrar a
letter in the form of Exhibit B with the certification set forth in
paragraph 2 or Exhibit C with the certification set forth in
paragraph 2(b), as applicable, completed.
(c) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN GLOBAL NOTES FOR
DEFINITIVE NOTES.
(i) BENEFICIAL INTERESTS IN RULE 144A GLOBAL NOTES TO RESTRICTED
DEFINITIVE NOTES. If any holder of a beneficial interest in a Rule 144A
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note in the
circumstances set forth in Section 2.9(a) hereof, such Definitive Note
shall be subject to all restrictions on transfer contained therein and
shall be issued, upon receipt by each of the Trustee and the Registrar of
the following documentation:
(A) if the holder of a beneficial interest in a Rule 144A
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, Exhibit C with the certification set
forth in paragraph (2)(a) completed;
(B) if such beneficial interest is being transferred in
accordance with Rule 144A under the Securities Act, a letter in the
form of Exhibit B with the certification set forth in paragraph 1
completed;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a letter in the form of
Exhibit B with the certification set forth in paragraph 2 completed;
or
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(D) if any such beneficial interest is being transferred to
an Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act, a letter in the
form of Exhibit B with the certification set forth in paragraph 3(d)
completed.
(ii) intentionally omitted.
(iii) BENEFICIAL INTERESTS IN RULE 144A GLOBAL NOTES OR REGULATION S
GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. Subject to Section 2.9(a), a
holder of a beneficial interest in a Rule 144A Global Note or Regulation S
Global Note may exchange such beneficial interest for an Unrestricted
Definitive Note or may transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note only
if such exchange or transfer is in accordance with the Applicable
Procedures and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
(iv) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in an
Unrestricted Global Note may, in the circumstances described in Section
2.9(a), exchange such beneficial interest for an Unrestricted Definitive
Note or transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note.
Any transfer pursuant to this Section 2.9(c) shall satisfy the
requirements of Section 2.9(b)(ii). In any such case, the Trustee shall
cause the aggregate principal
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<PAGE> 15
amount of the applicable Global Note to be reduced accordingly pursuant to
Section 2.9(h) hereof, and the Company shall execute and the Trustee, upon
receipt of an Authentication Order in accordance with Section 2.5 of the
Indenture, shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Restricted Definitive Note issued in exchange for a beneficial interest in
a Global Note pursuant to this Section 2.9(c) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS IN
GLOBAL NOTES.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RULE 144A
GLOBAL NOTES. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Rule 144A Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Rule 144A Global Note,
then, upon receipt by each of the Trustee and the Registrar of a letter in
the form of Exhibit B with the certification set forth in paragraph 1 or
Exhibit C with the certification set forth in paragraph 2(b), as
applicable, completed, the Trustee shall cancel the Restricted Definitive
Note and increase or cause to be increased the aggregate principal amount
of the appropriate Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
or via the Depositary's book-entry system in a form acceptable to the
Trustee, that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
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(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time if permitted by the Applicable Procedures and applicable law. Upon
receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the Unrestricted
Global Notes.
(iv) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
REGULATION S GLOBAL NOTES. A beneficial interest in any Restricted
Definitive Note may be exchanged by any holder thereof who is a non-U.S.
Person for a beneficial interest in a Regulation S Global Note or
transferred to a Non U.S. Person who takes delivery thereof in the form of
a beneficial interest in a Regulation S Global Note, if (x) the holder of
the Restricted Definitive Note delivers to the Trustee and the Registrar a
letter in the form of Exhibit B with the certification set forth in
paragraph 2 or Exhibit C with the certification set forth in paragraph
2(b), as applicable, completed and (y) if the Trustee and the Registrar so
request or if the Applicable Procedures so require, an Opinion of Counsel
in form reasonably acceptable to the Trustee and the Registrar is furnished
to the Trustee and the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected at a time when a Global
Note of the appropriate type has not yet been issued, the Company shall
issue and, upon receipt of an Authentication Order in accordance with
Section 5 of the Indenture the Trustee shall authenticate one or more
Global Notes in an aggregate principal amount equal to the principal amount
of Definitive Notes so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.9(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.9(e).
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(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any
restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then
the transferor must deliver a letter in the form of Exhibit B with
certification set forth in paragraph 1 completed,
(B) if the transfer will be made to a Non-U.S. Person in an
offshore transaction in accordance with Rule 903 or 904 under the
Securities, then the transferor must deliver a letter in the form of
Exhibit B with the certification set forth in paragraph 2 completed;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a letter in the form of Exhibit B
with the appropriate certification set forth in paragraph 3
completed, as well as an Opinion of Counsel in form and substance
acceptable to the Trustee.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
or via the Depositary's book-entry system in a form acceptable to the
Trustee, that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel
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<PAGE> 18
to the effect that the transfer is permitted, and that upon transfer
the Notes will not be restricted, under the Securities Act, is
furnished to the Trustee and Registrar.
(iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) EXCHANGE OFFER; SHELF REGISTRATION STATEMENT
(i) Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.5 of the Indenture,
the Trustee shall authenticate (x) one or more Unrestricted Global Notes in
an aggregate principal amount equal to the principal amount of the
beneficial interests in the Rule 144A Global Notes and Regulation S Global
Notes tendered for acceptance by Persons that certify in the applicable
Letters of Transmittal that (A) they are not broker-dealers, (B) they are
not participating in a distribution of the Exchange Notes and (C) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (y) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Rule 144A Global Notes and/or Regulation S Global
Notes to be reduced accordingly, and the Company shall execute and the
Trustee shall, upon receipt of an Authentication Order in accordance with
Section 2.5 of the Indenture, authenticate and deliver to the Persons
designated by the Holders of the Restricted Definitive Notes so accepted
Unrestricted Definitive Notes in the appropriate principal amount.
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<PAGE> 19
(ii) Following the effectiveness of a Shelf Registration Statement
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.5, of the Indenture the Trustee shall
authenticate from time to time (x) one or more Unrestricted Global Notes,
or, if there shall be at the time one or more Unrestricted Global Notes
outstanding and such increase can be effected in accordance with Applicable
Procedures, the Trustee shall increase or cause to be increased the
aggregate principal amount thereof, in each case in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Global Notes sold by Persons that certify as to the consummation of such
sale under the Shelf Registration Statement in a manner acceptable to the
Trustee and the Company and (y) Unrestricted Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes sold by Persons that certify as to the consummation of
such sale under the Shelf Registration Statement in a manner acceptable to
the Trustee and the Company. Concurrently with the issuance of such
Unrestricted Global Notes, the Trustee shall cause the aggregate principal
amount of the applicable Rule 144A Global Notes and/or the Regulation S
Global Notes to be reduced accordingly, and the Company shall execute and
the Trustee shall, upon receipt of an Authentication Order in accordance
with Section 2.5 of the Indenture, authenticate and deliver to the Persons
designated by the Holders of Restricted Definitive Notes so sold
Unrestricted Definitive Notes in the appropriate principal amount.
(g) LEGENDS.
The following legends shall appear on the face of all Global Notes and
Definitive Notes issued under the Indenture unless specifically stated otherwise
in the applicable provisions of the Indenture.
(i) PRIVATE PLACEMENT LEGEND. Except as permitted by subparagraph (B)
below, each Note (and all Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER: REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE
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<PAGE> 20
TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK,
AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (A FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE JURISDICTION; AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT."
(B) Notwithstanding the foregoing, any Note which is (i) a
Regulation S Note (and any Note issued in exchange therefor or
substitution thereof after the Restricted Period), (ii) a Note which
has been exchanged or transferred pursuant to the Exchange
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<PAGE> 21
Offer Registration Statement or the Shelf Registration Statement, or
(iii) a Note which has been transferred in accordance with Rule 144,
provided that in such case an Opinion of Counsel is delivered which
states that the Note does not have to bear the Private Placement
Legend in the cases where such opinion is required under this
Indenture, shall not bear the Private Placement Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN CERTAIN CIRCUMSTANCES IN THE SUPPLEMENTAL
INDENTURE NO. 5, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY."
(iii) REGULATION S GLOBAL NOTE LEGEND. The Regulation S Global Note
shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS
AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). DURING THE RESTRICTED
PERIOD, INTERESTS IN THIS NOTE MAY ONLY BE HELD THROUGH EUROCLEAR AND
CEDEL."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES.
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 of the Indenture. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal
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<PAGE> 22
amount of Notes represented by such Global Note shall be reduced accordingly and
an endorsement shall be made on such Global Note by the Trustee or by the
Depositary to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary to reflect such increase.
SECTION 2.10 DEFEASANCE AND COVENANT DEFEASANCE. The provisions of Article
Nine of the Indenture shall apply to the Notes.
ARTICLE THREE
MISCELLANEOUS PROVISIONS
SECTION 3.1 RATIFICATION. The Indenture, as supplemented and amended by
this Supplemental Indenture No. 5, is in all respects hereby adopted, ratified
and confirmed.
SECTION 3.2 COUNTERPARTS. This Supplemental Indenture No. 5 may be executed
in any number of counterparts, each of which when so executed shall be deemed an
original; and all such counterparts shall together constitute but one and the
same instrument.
SECTION 3.3 AMENDMENTS. This Supplemental Indenture No. 5 may be amended by
the Company and Tyco without the consent of any holder of the Notes in order for
the restrictions on transfer contained herein to be in compliance with
applicable law or the Applicable Procedures.
SECTION 3.4 APPLICABLE PROCEDURES. Notwithstanding anything else herein,
the Company shall not be required to permit a transfer to a global note that is
not permitted by the Applicable Procedures.
SECTION 3.5 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE NO. 5 AND EACH NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 5 to be duly executed as of the day and year first written above.
TYCO INTERNATIONAL GROUP S.A.
By: _________________________
Name:
Title:
TYCO INTERNATIONAL LTD.
By: _________________________
Name:
Title:
THE BANK OF NEW YORK, Trustee
By: _________________________
Name:
Title:
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<PAGE> 24
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Tyco International Group S.A.
[__________________]
The Bank of New York
[__________________]
Re: 5.875% Notes due 2004
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 9, 1998, and
the Supplemental Indenture No. 5 dated November 2, 1998 (collectively, the
"Indenture") among Tyco International Group S.A., Tyco International Ltd. and
The Bank of New York as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [___] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any
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<PAGE> 25
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
2. [___] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S GLOBAL NOTE, OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [__] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE RESTRICTED DEFINITIVE NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [__] such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [__] such Transfer is being effected to the Company or a subsidiary
thereof;
or
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<PAGE> 26
(c) [__] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [__] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by a certificate
executed by the Transferee in the form of Exhibit D to the Indenture.
4. [ ] Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the
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<PAGE> 27
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_______________________________
[Insert Name of Transferor]
By:
_______________________________
Name:
Title:
Dated: ______________ __, ____.
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<PAGE> 28
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _____), or
(ii) [ ] Regulation S Global Note (CUSIP _____).
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _____), or
(ii) [ ] Regulation S Global Note (CUSIP _____), or
(iii) [ ] Unrestricted Global Note (CUSIP _____); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the
Indenture.
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EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Tyco International Group S.A.
[_________________]
The Bank of New York
[_________________]
Re: 5.875% Notes due 2004
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 9, 1998, and
the Supplemental Indenture No. 5 dated November 2, 1998 (collectively, the
"Indenture") among Tyco International Group S.A., Tyco International Ltd. and
the Bank of New York.
____________, (the "Owner") owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RULE 144A GLOBAL NOTE OR REGULATION S GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE
NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities
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<PAGE> 30
Act and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RULE
144A GLOBAL NOTES OR REGULATION S GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES
OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RULE 144A GLOBAL
NOTES OR REGULATION S GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Rule 144A Global Note
or a Regulation S Global Notes for a Restricted Definitive Note with an equal
principal amount, the Owner hereby certifies that the Restricted Definitive Note
is being acquired for the Owner's own account without transfer. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS TO BENEFICIAL INTEREST IN A RULE 144A GLOBAL
NOTE OR A REGULATION S GLOBAL NOTE. In connection with the Exchange of the
Owner's Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note,
[ ] Regulation S Global Note, with an equal principal amount, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Rule 144A Global Notes or
Regulation S Global Notes and pursuant to and in accordance with the Securities
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, the beneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Rule 144A Global Note or Regulation S Global Notes and
in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________________
[Insert Name of Owner]
By:
___________________________________
Name:
Title:
Dated: __________________ __, ____.
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<PAGE> 31
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Tyco International Group S.A.
[_________________]
The Bank of New York
[_________________]
Re: 5.875% Notes due 2004
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 9, 1998, and
the Supplemental Indenture No. 5 dated November 2, 1998 (collectively, the
Indenture") among Tyco International Group S.A., Tyco International Ltd. And The
Bank of New York as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1993, as
amended (the "Securities Act")),
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<PAGE> 32
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Notes for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or other applicable securities
laws and we have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand and acknowledge that the Notes have not been registered
under the Securities Act, or any other applicable securities law and may not be
offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities law, or pursuant to an exemption therefrom, and in each case in
compliance with the conditions for transfer set forth below. We agree on our own
behalf and on behalf of any investor account for which we are purchasing Notes
to offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a "Qualified Institutional Buyer" within the meaning of
Rule 144A (a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales to non-U.S. persons that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the meaning
of subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) or Rule 501 under the
Securities Act that is acquiring the Notes for its own account or for the
account of such an institutional "accredited investor" for the investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver
to the trustee (the "Trustee") under the Indenture pursuant to which the Notes
are issued a letter from the transferee substantially in the form of this letter
or as acceptable to the Trustee, which shall provide, among other things, that
the transferee is a person or entity as defined in paragraph 1 of this letter
and that is acquiring such Notes for investment purposes and not for
distribution violation of the Securities Act. We acknowledge that the Company
and the Trustee reserve the right prior to any offer, sale or other transfer of
the Notes pursuant to clauses (d), (e) and (f) above prior to the Resale
Restriction Termination Date to require the delivery of any opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
3. We are acquiring the Notes purchased by us for our own account or for
one or more accounts as to each of which we exercise sole investment discretion.
-4-
<PAGE> 33
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By: (Name of Purchaser)
Date:
____________________________________
[Insert Name of Accredited Investor]
By:
____________________________________
Name:
Title:
Dated: _________________ __, ____.
-5-
<PAGE> 34
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTE DUE 2004
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN CERTAIN CIRCUMSTANCES DESCRIBED IN THE INDENTURE, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER:
REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT
1
<PAGE> 35
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS
PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
2
<PAGE> 36
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTE DUE 2004
No. 1
$200,000,000 CUSIP: 902118 AE 8
TYCO INTERNATIONAL GROUP S.A., a Luxembourg company (the "Issuer"), for value
received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Two Hundred Million Dollars on November 1, 2004, at the office
or agency of the Issuer in the Borough of Manhattan, The City of New York, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
semiannually on May 1 and November 1 of each year (each, an "Interest Payment
Date"; provided, however, that if an Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be the next
succeeding Business Day but no additional interest shall be paid in respect of
such intervening period), commencing May 1, 1999, the amount of interest on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title of this Note, from November 2, 1998 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for until said principal sum has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. For purposes of this Note, "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, regulation or executive order to be
closed.
The interest payable on any Interest Payment Date which is punctually paid or
duly provided for on such Interest Payment Date will be paid to the Person in
whose name this Note is registered at the close of business on the April 15 or
October 15 (in each case, whether or not a Business Day), as the case may be
(each, a "Regular Record Date"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest shall instead be paid to the Person in whose name this
Note is registered at the close of business on the record date established for
such payment by notice by or on behalf of the Issuer to the Holders of the Notes
mailed by first-class mail not less than 15 days prior to such record date to
their last addresses as they shall appear upon the Security register, such
record date to be not less than five days preceding the date of payment of such
defaulted interest. At the option of the Issuer, interest on the Notes may be
paid (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register of Holders of the Notes or (ii) at the
expense of the Issuer, by wire transfer to an account maintained by the Person
entitled thereto as specified in writing to the Trustee by such Person by the
applicable record date of the Notes.
3
<PAGE> 37
All references in the Notes (and related Guarantees) to interest shall
include any Additional Interest or Additional Amounts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
4
<PAGE> 38
IN WITNESS WHEREOF, TYCO INTERNATIONAL GROUP S.A. has caused this instrument
to be signed by its duly authorized officers.
Dated: November 2, 1998
TYCO INTERNATIONAL GROUP S.A.
By:________________________________
Title:
By:________________________________
Title:
5
<PAGE> 39
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: __________________________
Authorized Signatory
6
<PAGE> 40
GUARANTEE
For value received, TYCO INTERNATIONAL LTD. hereby absolutely,
unconditionally and irrevocably guarantees to the holder of this Note the
payment of principal of, and interest on, the Security upon which this Guarantee
is endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest on, if any, of such Note, if lawful, and the payment or performance of
all other obligations of the Issuer under the Indenture or the Notes, to the
holder of such Note and the Trustee, all in accordance with and subject to the
terms and limitations of such Note and Article Thirteen of the Indenture. This
Guarantee will not become effective until the Trustee duly executes the
certificate of authentication on this Note. This Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of law principles thereof. All references in this Guarantee
to interest shall include any Additional Amounts or Additional Interest.
Dated: November 2, 1998
TYCO INTERNATIONAL LTD.
By: ______________________________________
Title:
7
<PAGE> 41
REVERSE OF NOTE
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTES DUE 2004
1. Indenture. (a) This Note is one of a duly authorized issue of notes of
the Issuer (hereinafter called the "Notes") of a series designated as the 5.875%
Notes due 2004 of the Issuer, initially limited in aggregate principal amount to
$400,000,000, all issued or to be issued under and pursuant to an indenture,
dated as of June 9, 1998, as amended and supplemented by Supplemental Indenture
No. 5, dated as of November 2, 1998 (as so amended and supplemented, the
"Indenture"), among the Issuer, Tyco International Ltd. ("Tyco") and The Bank of
New York, as Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Issuer, Tyco, the Trustee and the Holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "Securities") may be issued
under the Indenture in one or more series, which different series may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any) and may otherwise vary from the Notes and each other, as in the
Indenture provided.
(c) All capitalized terms used in this Note (or the related Guarantee)
which are defined in the Indenture and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
2. Amendments and Waivers. (a) The Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series to be affected (voting as one class), evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders of the Securities of each such series; PROVIDED, that no such
supplemental indenture shall (i) extend the final maturity of any Security, or
reduce the principal amount thereof, or reduce the
8
<PAGE> 42
rate or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 4.1 of the Indenture or
the amount thereof provable in bankruptcy pursuant to Section 4.2 of the
Indenture, or impair or affect the rights of any Holder to institute suit for
the payment thereof, without the consent of the Holder of each Security so
affected, or (ii) reduce the aforesaid percentage of Securities, the Holders of
which are required to consent to any such supplemental indenture, without the
consent of the Holder of each Security affected.
(b) It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Securities of any series, prior to
any declaration accelerating the maturity of such Securities, the Holders of a
majority in aggregate principal amount Outstanding of the Securities of such
series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or all or certain series of the Securities, as the case may be)
waive any such past default or Event of Default and its consequences. The
preceding sentence shall not, however, apply to a default in the payment of the
principal of or premium, if any, or interest on any of the Securities. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, Tyco or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of this Note, and (ii) as determined by the
Quotation Agent, 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 plus 25 basis
points plus, in each case, accrued interest thereon to the date of redemption.
This Note is also subject to redemption to the extent provided in Article Twelve
of the Indenture.
"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
9
<PAGE> 43
its principal amount) equal to the Comparable Redemption Treasury Price for such
redemption 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.
"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 Notes to be redeemed that will 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 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 Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City of
New York 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.
5. Certain Covenants. The Indenture restricts the Issuer's ability to
merge, consolidate or sell substantially all of its assets. In addition, the
Issuer is obliged to abide by certain covenants, including covenants limiting
the amount of liens it may incur, as well as its ability to enter into sale and
leaseback transactions, a covenant limiting the ability of its subsidiaries to
incur indebtedness, and a covenant requiring it to pay or discharge all taxes,
all as more fully described in the Indenture. All of such covenants are subject
to the covenant Defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have occurred
and be continuing under the Indenture, the principal hereof may be declared, and
upon such declaration
10
<PAGE> 44
shall become, due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.
7. Defeasance. The Indenture contains provisions for Defeasance and
covenant Defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
8. Denominations; Transfer. (a) The Notes are issuable in registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.
(b) Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture. This Note may also be surrendered
for exchange at the aforesaid office or agency for Notes in other authorized
denominations in an equal aggregate principal amount. No service charge shall be
made for any registration of transfer or any exchange of the Notes, except that
the Issuer may require payment of any tax or other governmental charge imposed
in connection therewith.
(c) A certificate in global form representing all of a portion of the
Notes may not be transferred except as a whole by the Depositary for such series
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or any such nominee to a
successor Depositary for such Notes or a nominee of such successor Depositary.
9. Holder as Owner. The Issuer, Tyco, the Trustee and any authorized agent
of the Issuer, Tyco or the Trustee may deem and treat the registered Holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the principal hereof
and, subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, Tyco or the Trustee or any authorized
agent of the Issuer, Tyco or the Trustee shall be affected by any notice to the
contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer or Tyco in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of the
Issuer, Tyco or of any successor corporation of either of them, either directly
or through the Issuer, Tyco or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11
<PAGE> 45
11. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Notes other than Holders of Unrestricted Global Notes
and Holders of Unrestricted Definitive Notes shall have all the rights set forth
in the Registration Rights Agreement, dated as of November 2, 1998, among the
Issuer, Tyco International Ltd. and the parties named on the signature pages
thereof.
12. Governing Law. The laws of the State of New York govern the Indenture
and this Note.
12
<PAGE> 46
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note of Tyco International Group S.A. and all rights thereunder and
hereby irrevocably constitutes and appoints such person attorney to transfer
such Note on the books of Tyco International Group S.A., with full power of
substitution in the premises.
Dated:
---------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY,
A MEMBER ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR BY SUCH OTHER
ENTITY WHOSE SIGNATURE IS ON FILE WITH AND ACCEPTABLE TO THE TRANSFER
AGENT.
13
<PAGE> 47
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in the Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of
decrease in increase in Principal Amount of this Global Signature of Authorized
Date of Principal Amount Principal Amount Note following such decrease (or Officer of Trustee or Note
Exchange of this Global Note of this Global Note increase) Custodian
- -------- ------------------- ------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Schedule may be used by the Trustee in respect of a Global Note, and, if
so used, shall be deemed a part thereof for all purposes.
14
<PAGE> 48
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTE DUE 2004
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN CERTAIN CIRCUMSTANCES DESCRIBED IN THE INDENTURE, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER:
REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (F) PURSUANT TO
1
<PAGE> 49
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR ANY OTHER
APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D)
OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF
NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
2
<PAGE> 50
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTE DUE 2004
No. 2
$200,000,000 CUSIP: 902118 AE 8
TYCO INTERNATIONAL GROUP S.A., a Luxembourg company (the "Issuer"), for value
received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Two Hundred Million Dollars on November 1, 2004, at the office
or agency of the Issuer in the Borough of Manhattan, The City of New York, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
semiannually on May 1 and November 1 of each year (each, an "Interest Payment
Date"; provided, however, that if an Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be the next
succeeding Business Day but no additional interest shall be paid in respect of
such intervening period), commencing May 1, 1999, the amount of interest on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title of this Note, from November 2, 1998 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for until said principal sum has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. For purposes of this Note, "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, regulation or executive order to be
closed.
The interest payable on any Interest Payment Date which is punctually paid or
duly provided for on such Interest Payment Date will be paid to the Person in
whose name this Note is registered at the close of business on the April 15 or
October 15 (in each case, whether or not a Business Day), as the case may be
(each, a "Regular Record Date"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest shall instead be paid to the Person in whose name this
Note is registered at the close of business on the record date established for
such payment by notice by or on behalf of the Issuer to the Holders of the Notes
mailed by first-class mail not less than 15 days prior to such record date to
their last addresses as they shall appear upon the Security register, such
record date to be not less than five days preceding the date of payment of such
defaulted interest. At the option of the Issuer, interest on the Notes may be
paid (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register of Holders of the Notes or (ii) at the
expense of the Issuer, by wire transfer to an account maintained by the Person
entitled thereto as specified in writing to the Trustee by such Person by the
applicable record date of the Notes.
3
<PAGE> 51
All references in the Notes (and related Guarantees) to interest shall
include any Additional Interest or Additonal Amounts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
4
<PAGE> 52
IN WITNESS WHEREOF, TYCO INTERNATIONAL GROUP S.A. has caused this instrument
to be signed by its duly authorized officers.
Dated: November 2, 1998
TYCO INTERNATIONAL GROUP S.A.
By:________________________________
Title:
By:________________________________
Title:
5
<PAGE> 53
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: __________________________
Authorized Signatory
6
<PAGE> 54
GUARANTEE
For value received, TYCO INTERNATIONAL LTD. hereby absolutely,
unconditionally and irrevocably guarantees to the holder of this Note the
payment of principal of, and interest on, the Security upon which this Guarantee
is endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest on, if any, of such Note, if lawful, and the payment or performance of
all other obligations of the Issuer under the Indenture or the Notes, to the
holder of such Note and the Trustee, all in accordance with and subject to the
terms and limitations of such Note and Article Thirteen of the Indenture. This
Guarantee will not become effective until the Trustee duly executes the
certificate of authentication on this Note. This Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of law principles thereof. All references in this Guarantee
to interest shall include any Additional Amounts or Additional Interest.
Dated: November 2, 1998
TYCO INTERNATIONAL LTD.
By: ______________________________________
Title:
7
<PAGE> 55
REVERSE OF NOTE
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTES DUE 2004
1. Indenture. (a) This Note is one of a duly authorized issue of notes of
the Issuer (hereinafter called the "Notes") of a series designated as the 5.875%
Notes due 2004 of the Issuer, initially limited in aggregate principal amount to
$400,000,000, all issued or to be issued under and pursuant to an indenture,
dated as of June 9, 1998, as amended and supplemented by Supplemental Indenture
No. 5, dated as of November 2, 1998 (as so amended and supplemented, the
"Indenture"), among the Issuer, Tyco International Ltd. ("Tyco") and The Bank of
New York, as Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Issuer, Tyco, the Trustee and the Holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "Securities") may be issued
under the Indenture in one or more series, which different series may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any) and may otherwise vary from the Notes and each other, as in the
Indenture provided.
(c) All capitalized terms used in this Note (or the related Guarantee)
which are defined in the Indenture and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
2. Amendments and Waivers. (a) The Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series to be affected (voting as one class), evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders of the Securities of each such series; PROVIDED, that no such
supplemental indenture shall (i) extend the final maturity of any Security, or
reduce the principal amount thereof, or reduce the
8
<PAGE> 56
rate or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 4.1 of the Indenture or
the amount thereof provable in bankruptcy pursuant to Section 4.2 of the
Indenture, or impair or affect the rights of any Holder to institute suit for
the payment thereof, without the consent of the Holder of each Security so
affected, or (ii) reduce the aforesaid percentage of Securities, the Holders of
which are required to consent to any such supplemental indenture, without the
consent of the Holder of each Security affected.
(b) It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Securities of any series, prior to
any declaration accelerating the maturity of such Securities, the Holders of a
majority in aggregate principal amount Outstanding of the Securities of such
series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or all or certain series of the Securities, as the case may be)
waive any such past default or Event of Default and its consequences. The
preceding sentence shall not, however, apply to a default in the payment of the
principal of or premium, if any, or interest on any of the Securities. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, Tyco or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of this Note, and (ii) as determined by the
Quotation Agent, 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 plus 25 basis
points plus, in each case, accrued interest thereon to the date of redemption.
This Note is also subject to redemption to the extent provided in Article Twelve
of the Indenture.
"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
9
<PAGE> 57
its principal amount) equal to the Comparable Redemption Treasury Price for such
redemption 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.
"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 Notes to be redeemed that will 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 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 Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City of
New York 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.
5. Certain Covenants. The Indenture restricts the Issuer's ability to
merge, consolidate or sell substantially all of its assets. In addition, the
Issuer is obliged to abide by certain covenants, including covenants limiting
the amount of liens it may incur, as well as its ability to enter into sale and
leaseback transactions, a covenant limiting the ability of its subsidiaries to
incur indebtedness, and a covenant requiring it to pay or discharge all taxes,
all as more fully described in the Indenture. All of such covenants are subject
to the covenant Defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have occurred
and be continuing under the Indenture, the principal hereof may be declared, and
upon such declaration
10
<PAGE> 58
shall become, due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.
7. Defeasance. The Indenture contains provisions for Defeasance and
covenant Defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
8. Denominations; Transfer. (a) The Notes are issuable in registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.
(b) Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture. This Note may also be surrendered
for exchange at the aforesaid office or agency for Notes in other authorized
denominations in an equal aggregate principal amount. No service charge shall be
made for any registration of transfer or any exchange of the Notes, except that
the Issuer may require payment of any tax or other governmental charge imposed
in connection therewith.
(c) A certificate in global form representing all of a portion of the
Notes may not be transferred except as a whole by the Depositary for such series
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or any such nominee to a
successor Depositary for such Notes or a nominee of such successor Depositary.
9. Holder as Owner. The Issuer, Tyco, the Trustee and any authorized agent
of the Issuer, Tyco or the Trustee may deem and treat the registered Holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the principal hereof
and, subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, Tyco or the Trustee or any authorized
agent of the Issuer, Tyco or the Trustee shall be affected by any notice to the
contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer or Tyco in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of the
Issuer, Tyco or of any successor corporation of either of them, either directly
or through the Issuer, Tyco or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11
<PAGE> 59
11. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Notes other than Holders of Unrestricted Global Notes
and Holders of Unrestricted Definitive Notes shall have all the rights set forth
in the Registration Rights Agreement, dated as of November 2, 1998, among the
Issuer, Tyco International Ltd. and the parties named on the signature pages
thereof.
12. Governing Law. The laws of the State of New York govern the Indenture
and this Note.
12
<PAGE> 60
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note of Tyco International Group S.A. and all rights thereunder and
hereby irrevocably constitutes and appoints such person attorney to transfer
such Note on the books of Tyco International Group S.A., with full power of
substitution in the premises.
Dated:
---------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY,
A MEMBER ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR BY SUCH OTHER
ENTITY WHOSE SIGNATURE IS ON FILE WITH AND ACCEPTABLE TO THE TRANSFER
AGENT.
13
<PAGE> 61
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in the Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of
decrease in increase in Principal Amount of this Global Signature of Authorized
Date of Principal Amount Principal Amount Note following such decrease (or Officer of Trustee or Note
Exchange of this Global Note of this Global Note increase) Custodian
- -------- ------------------- ------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Schedule may be used by the Trustee in respect of a Global Note, and, if
so used, shall be deemed a part thereof for all purposes.
14
<PAGE> 62
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTE DUE 2004
THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS
AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED
IN THE INDENTURE (AS DEFINED HEREIN). DURING THE RESTRICTED PERIOD, INTERESTS IN
THIS NOTE MAY ONLY BE HELD THROUGH EUROCLEAR AND CEDEL.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9 OF SUPPLEMENTAL INDENTURE NO.
5, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY.
1
<PAGE> 63
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTE DUE 2004
No. 3
$0 CUSIP: L93727AAO
TYCO INTERNATIONAL GROUP S.A., a Luxembourg company (the "Issuer"), for value
received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Zero Dollars on November 1, 2004, at the office or agency of
the Issuer in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay
semiannually on May 1 and November 1 of each year (each, an "Interest Payment
Date"; provided, however, that if an Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be the next
succeeding Business Day but no additional interest shall be paid in respect of
such intervening period), commencing May 1, 1999, the amount of interest on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title of this Note, from November 2, 1998 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for until said principal sum has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. For purposes of this Note, "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, regulation or executive order to be
closed.
The interest payable on any Interest Payment Date which is punctually paid or
duly provided for on such Interest Payment Date will be paid to the Person in
whose name this Note is registered at the close of business on the April 15 or
October 15 (in each case, whether or not a Business Day), as the case may be
(each, a "Regular Record Date"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest shall instead be paid to the Person in whose name this
Note is registered at the close of business on the record date established for
such payment by notice by or on behalf of the Issuer to the Holders of the Notes
mailed by first-class mail not less than 15 days prior to such record date to
their last addresses as they shall appear upon the Security register, such
record date to be not less than five days preceding the date of payment of such
defaulted interest. At the option of the Issuer, interest on the Notes may be
paid (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register of Holders of the Notes or (ii) at the
expense of the Issuer, by wire transfer to an account maintained by the Person
entitled thereto as specified in writing to the Trustee by such Person by the
applicable record date of the Notes.
2
<PAGE> 64
All references in the Notes (and related Guarantees) to interest shall
include any Additional Interest or Additional Amounts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
3
<PAGE> 65
IN WITNESS WHEREOF, TYCO INTERNATIONAL GROUP S.A. has caused this
instrument to be signed by its duly authorized officers.
Dated: November 2, 1998
TYCO INTERNATIONAL GROUP S.A.
By:________________________________
Title:
By:________________________________
Title:
4
<PAGE> 66
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: __________________________
Authorized Signatory
5
<PAGE> 67
GUARANTEE
For value received, TYCO INTERNATIONAL LTD. hereby absolutely,
unconditionally and irrevocably guarantees to the holder of this Note the
payment of principal of, and interest on, the Security upon which this Guarantee
is endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest on, if any, of such Note, if lawful, and the payment or performance of
all other obligations of the Issuer under the Indenture or the Notes, to the
holder of such Note and the Trustee, all in accordance with and subject to the
terms and limitations of such Note and Article Thirteen of the Indenture. This
Guarantee will not become effective until the Trustee duly executes the
certificate of authentication on this Note. This Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of law principles thereof. All references in this Guarantee
to interest shall include any Additional Amounts or Additional Interest.
Dated: November 2, 1998
TYCO INTERNATIONAL LTD.
By: _______________________________________
Title:
6
<PAGE> 68
REVERSE OF NOTE
TYCO INTERNATIONAL GROUP S.A.
5.875% NOTES DUE 2004
1. Indenture. (a) This Note is one of a duly authorized issue of notes of
the Issuer (hereinafter called the "Notes") of a series designated as the 5.875%
Notes due 2004 of the Issuer, initially limited in aggregate principal amount to
$400,000,000, all issued or to be issued under and pursuant to an indenture,
dated as of June 9, 1998, as amended and supplemented by Supplemental Indenture
No. 5, dated as of November 2, 1998 (as so amended and supplemented, the
"Indenture"), among the Issuer, Tyco International Ltd. ("Tyco") and The Bank of
New York, as Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Issuer, Tyco, the Trustee and the Holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "Securities") may be issued
under the Indenture in one or more series, which different series may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any) and may otherwise vary from the Notes and each other, as in the
Indenture provided.
(c) All capitalized terms used in this Note (or the related Guarantee)
which are defined in the Indenture and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
2. Amendments and Waivers. (a) The Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series to be affected (voting as one class), evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders of the Securities of each such series; PROVIDED, that no such
supplemental indenture shall (i) extend the final maturity of any Security, 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 the principal of an Original Issue Discount Security
that would be due and payable upon an acceleration of the maturity thereof
pursuant to
7
<PAGE> 69
Section 4.1 of the Indenture or the amount thereof provable in bankruptcy
pursuant to Section 4.2 of the Indenture, or impair or affect the rights of any
Holder to institute suit for the payment thereof, without the consent of the
Holder of each Security so affected, or (ii) reduce the aforesaid percentage of
Securities, the Holders of which are required to consent to any such
supplemental indenture, without the consent of the Holder of each Security
affected.
(b) It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Securities of any series, prior to
any declaration accelerating the maturity of such Securities, the Holders of a
majority in aggregate principal amount Outstanding of the Securities of such
series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or all or certain series of the Securities, as the case may be)
waive any such past default or Event of Default and its consequences. The
preceding sentence shall not, however, apply to a default in the payment of the
principal of or premium, if any, or interest on any of the Securities. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, Tyco or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of this Note, and (ii) as determined by the
Quotation Agent, 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 plus 25 basis
points plus, in each case, accrued interest thereon to the date of redemption.
This Note is also subject to redemption to the extent provided in Article Twelve
of the Indenture.
"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.
8
<PAGE> 70
"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.
"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 Notes to be redeemed that will 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 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 Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City of
New York 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.
5. Certain Covenants. The Indenture restricts the Issuer's ability to
merge, consolidate or sell substantially all of its assets. In addition, the
Issuer is obliged to abide by certain covenants, including covenants limiting
the amount of liens it may incur, as well as its ability to enter into sale and
leaseback transactions, a covenant limiting the ability of its subsidiaries to
incur indebtedness, and a covenant requiring it to pay or discharge all taxes,
all as more fully described in the Indenture. All of such covenants are subject
to the covenant defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have occurred
and be continuing under the Indenture, the principal hereof may be declared, and
upon such declaration shall become, due and payable in the manner, with the
effect and subject to the conditions provided in the Indenture.
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<PAGE> 71
7. Defeasance. The Indenture contains provisions for defeasance and
covenant defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
8. Denominations; Transfer. (a) The Notes are issuable in registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.
(b) Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture. This Note may also be surrendered
for exchange at the aforesaid office or agency for Notes in other authorized
denominations in an equal aggregate principal amount. No service charge shall be
made for any registration of transfer or any exchange of the Notes, except that
the Issuer may require payment of any tax or other governmental charge imposed
in connection therewith.
(c) A certificate in global form representing all of a portion of the
Notes may not be transferred except as a whole by the Depositary for such series
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or any such nominee to a
successor Depositary for such Notes or a nominee of such successor Depositary.
9. Holder as Owner. The Issuer, Tyco, the Trustee and any authorized agent
of the Issuer, Tyco or the Trustee may deem and treat the registered Holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the principal hereof
and, subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, Tyco or the Trustee or any authorized
agent of the Issuer, Tyco or the Trustee shall be affected by any notice to the
contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer or Tyco in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of the
Issuer, Tyco or of any successor corporation of either of them, either directly
or through the Issuer, Tyco or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Notes other than Holders of Unrestricted Global Notes
and Holders of Unrestricted Definitive Notes shall have all the rights set forth
in the Registration Rights Agreement, dated as of
10
<PAGE> 72
November 2, 1998, among the Issuer, Tyco International Ltd. and the parties
named on the signature pages thereof.
12. Governing Law. The laws of the State of New York govern the Indenture
and this Note.
11
<PAGE> 73
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
the within Note of Tyco International Group S.A. and all rights thereunder and
hereby irrevocably constitutes and appoints such person attorney to transfer
such Note on the books of Tyco International Group S.A., with full power of
substitution in the premises.
Dated:
---------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY,
A MEMBER ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR BY SUCH OTHER
ENTITY WHOSE SIGNATURE IS ON FILE WITH AND ACCEPTABLE TO THE TRANSFER
AGENT.
12
<PAGE> 74
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in the Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of
decrease in increase in Principal Amount of this Global Signature of Authorized
Date of Principal Amount Principal Amount Note following such decrease (or Officer of Trustee or Note
Exchange of this Global Note of this Global Note increase) Custodian
- -------- ------------------- ------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Schedule may be used by the Trustee in respect of a Global Note, and, if
so used, shall be deemed a part thereof for all purposes.
13
<PAGE> 1
TYCO INTERNATIONAL GROUP S.A.
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL INDENTURE NO. 6
$400,000,000
6.125% Notes due 2008
THIS SUPPLEMENTAL INDENTURE NO. 6, dated as of November 2, 1998, among TYCO
INTERNATIONAL GROUP S.A., a Luxembourg company (the "Company"), TYCO
INTERNATIONAL LTD., a Bermuda company ("Tyco"), and THE BANK OF NEW YORK, a New
York banking corporation, as trustee (the "Trustee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and Tyco have heretofore executed and delivered to the
Trustee an Indenture, dated as of June 9, 1998 (the "Indenture"), providing for
the issuance from time to time of one or more series of the Company's
Securities;
WHEREAS, Article Seven of the Indenture provides for various matters with
respect to any series of Securities issued under the Indenture to be established
in an indenture supplemental to the Indenture; and
WHEREAS, Section 7.1(e) of the Indenture provides that the Company, Tyco
and the Trustee may enter into an indenture supplemental to the Indenture to
establish the form or terms of Securities of any series as permitted by Sections
2.1 and 2.4 of the Indenture.
NOW THEREFORE: In consideration of the premises and the issuance of the
series of Securities provided for herein, the Company, Tyco and the Trustee
mutually covenant and agree for the equal and proportionate benefit of the
respective Holders of the Securities of such series as follows:
ARTICLE ONE
RELATION TO INDENTURE; DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.1 RELATION TO INDENTURE. This Supplemental Indenture No. 6
constitutes an integral part of the Indenture.
SECTION 1.2 DEFINITIONS. For all purposes of this Supplemental Indenture
No. 6, the following terms shall have the respective meanings set forth below:
"ADJUSTED REDEMPTION TREASURY RATE" means, with respect to any
redemption date, the annual rate equal to the semiannual equivalent yield
to
<PAGE> 2
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.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear or Cedel, as the case may be, that
apply to such transfer or exchange.
"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.
"CEDEL" means Cedel Bank, SA.
"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 Notes to be redeemed that will 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 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.
"CUSTODIAN" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"DEFINITIVE NOTE" means a certificated Note in the form of Exhibit A-1
hereto, registered in the name of the Holder thereof and issued in
accordance with Section 2.9 hereof, except that such Note shall not bear
the Global Note Legend.
"EUROCLEAR" means the Euroclear Clearance System.
"EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant
to Section 2.9(f) hereof; following the exchange of interests in the Rule
144A Global Note, the Regulation S Global Note and the Restricted
Definitive Note for Exchange Notes pursuant to an effective registration
statement, the defined term
2
<PAGE> 3
"Exchange Notes" and "Notes" shall have the same meaning and be entitled to
the same rights under the Indenture.
"EXCHANGE OFFER" means the exchange offer by the Company of the
Exchange Notes for the Notes issued in reliance upon an exemption from
registration under the Securities Act on the date hereof in accordance with
the provisions of the Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" means an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, including the prospectus contained therein, all exhibits thereto
and all documents incorporated by reference therein filed by the Company
and Tyco in accordance with the Registration Rights Agreement in connection
with the Exchange Offer.
"GLOBAL NOTES" means, individually and collectively, any of the Notes
issued as global notes under the Indenture.
"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.9(g)(ii),
which is required to be placed on all Global Notes issued under the
Indenture.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"INITIAL PURCHASER" means each of Lehman Brothers Inc., J.P. Morgan
Securities Inc., Credit Suisse First Boston Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who is not also a QIB.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders
in connection with the Exchange Offer.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"NOTES" has the meaning assigned to it in Section 2.1 hereof.
"PARTICIPANT" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall
include Euroclear and Cedel).
"PARTICIPATING BROKER DEALER" means the Initial Purchasers and any
other broker-dealer which makes a market in the Notes and exchanges Notes
in the
3
<PAGE> 4
Exchange Offer for Exchange Notes.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.9(g)(i) to be placed on all Notes issued under the Indenture except where
otherwise permitted by the provisions of the Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"QUOTATION AGENT" means a Redemption Reference Treasury Dealer
appointed as such agent by the Company.
"REDEMPTION REFERENCE TREASURY DEALER" means each of Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City
of New York 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.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of November 2, 1998, by and among the Company, Tyco and
the Initial Purchasers, as such agreement may be amended, modified or
supplemented from time to time.
"REGULATION S" means Regulation S promulgated under the Securities Act
or any successor rule or regulation substantially to the same effect.
"REGULATION S GLOBAL NOTE" means a global Note in the form of Exhibit
A-2 hereto bearing the Global Note Legend and the legend in Section
2.9(g)(iii) hereof and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the
Private Placement Legend.
"RESTRICTED PERIOD" means the period beginning on the date hereof and
ending on the date of receipt by the Trustee of (x) a written certificate
from the Depositary, together with copies of certificates required by Rule
903(b)(3)(ii)(B) under the Securities Act and (y) an Officers' Certificate
from the Company certifying as to the end of the end of the 40-day
restricted period as defined in Regulation S and any other matters required
by the Applicable Procedures.
"RULE 144" means Rule 144 promulgated under the Securities Act, any
4
<PAGE> 5
successor rule or regulation to substantially the same effect or any
additional rule or regulation under the Securities Act that permits
transfers of restricted securities without registration such that the
transferee thereof holds securities that are freely tradeable under the
Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act or
any successor rule or regulation to substantially the same effect.
"RULE 144A GLOBAL NOTE" means a global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee.
"RULE 903" means Rule 903 promulgated under the Securities Act or any
successor rule or regulation substantially to the same effect.
"RULE 904" means Rule 904 promulgated the Securities Act or any
successor rule or regulation substantially to the same effect.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
of the Company and Tyco filed pursuant to the provisions of the
Registration Rights Agreement on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and
all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all documents incorporated by reference
therein.
"UNRESTRICTED GLOBAL NOTE" means a global Note (other than a
Regulation S Global Note) in the form of Exhibit A-1 attached hereto that
bears the Global Note Legend, and that is deposited with or on behalf of
and registered in the name of the Depositary, representing a series of
Notes that do not bear the Private Placement Legend.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"U.S. PERSON" means a U.S. Person as defined in Rule 902(o) under the
Securities Act.
SECTION 1.3 RULES OF CONSTRUCTION. For all purposes of this Supplemental
Indenture No. 6:
5
<PAGE> 6
(a) capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(b) all references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this
Supplemental Indenture No. 6; and
(c) the terms "HEREIN", "HEREOF", "HEREUNDER" and other words of
similar import refer to this Supplemental Indenture No. 6.
ARTICLE TWO
THE SERIES OF NOTES
SECTION 2.1 TITLE OF THE SECURITIES. There shall be a series of Securities
designated as the "6.125% Notes due 2008" (the "Notes").
SECTION 2.2 FORM AND DATING.
(a) GENERAL.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 or A-2, as applicable, hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its authentication.
The Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of the Indenture Supplement No. 6, and the
Company, Tyco and the Trustee, by their execution and delivery of the Indenture
Supplement No. 6, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the
express provisions of the Indenture Supplement No. 6, the provisions of the
Indenture Supplement No. 6 shall govern and be controlling.
(b) RULE 144A GLOBAL NOTES; DEFINITIVE NOTES.
Notes issued in global form shall be substantially in the form of Exhibits
A-1 or A-2 attached hereto (including the Global Note Legend thereon). The
Company hereby designates The Depository Trust Company as the initial Depositary
for the Global Notes. Notes offered and sold to QIBs shall be issued initially
in the form of the Rule 144A Global Note, which shall be deposited on behalf of
the purchasers of the Notes represented thereby with the Trustee at its New York
office, as custodian for the Depositary, duly executed by the Company and Tyco
and authenticated by the Trustee as hereinafter provided. Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time as conclusively reflected in the books and
records of the Trustee endorsed thereon and that the aggregate principal amount
of outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemption. Any change in
the principal amount of a Global
6
<PAGE> 7
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee as the custodian for the Depositary, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.9 hereof.
Notes offered and sold to Institutional Accredited Investors shall be
issued in definitive form in substantially the form of Exhibit A-1 attached
hereto (but without the Global Note Legend thereon).
(c) REGULATION S GLOBAL NOTES.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Global Note, which shall be deposited
on behalf of the purchasers of the Notes represented thereby with the Trustee,
at its New York office, as custodian for the Depositary, and registered in the
name of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by
the Company and Tyco and authenticated by the Trustee as hereinafter provided.
During the Restricted Period, interests in the Regulation S Global Note must be
held through Euroclear or Cedel, if the holders are participants in such
systems, or indirectly through organizations that are participants in such
systems.
Following the termination of the Restricted Period, beneficial interests in
the Regulation S Global Note may be held, directly or indirectly, in the account
of any Participant of the Depositary.
(d) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Global Note
that are held by Participants through Euroclear or Cedel Bank.
SECTION 2.3 LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate
principal amount of the Notes shall not initially exceed $400,000,000.
SECTION 2.4 PRINCIPAL PAYMENT DATE. Subject to the provisions of Section
2.7 hereof and Articles Four and Twelve of the Indenture, the principal of the
Notes shall be become due and payable in a single installment on November 1,
2008.
SECTION 2.5 INTEREST AND INTEREST RATES. Interest on the Notes shall be
payable semiannually on May 1 and November 1 of each year beginning on May 1,
1999 (each, an "INTEREST PAYMENT DATE"); PROVIDED, HOWEVER, that if an Interest
Payment Date would otherwise be a day that is not a Business Day, such Interest
Payment Date shall be the next succeeding Business Day, and no additional
interest shall be paid in respect of such intervening period. The interest rate
borne by the Notes will be 6.125% per annum until the Notes are paid in full
subject,
7
<PAGE> 8
however, to the following provisions. In the event that (i) the Exchange Offer
Registration Statement is not filed with the SEC on or prior to the 90th
calendar day following the original issue of the Notes, (ii) the Exchange Offer
Registration Statement has not been declared effective by the SEC on or prior to
the 150th calendar day following the original issue of the Notes or (iii) the
Exchange Offer is not consummated or a Shelf Registration Statement is not
declared effective, in either case, on or prior to the 180th calendar day
following the original issue of the Notes (each such event in clauses (i)
through (iii) above, a "REGISTRATION DEFAULT"), the interest rate borne by the
Notes shall be increased by an amount ("ADDITIONAL INTEREST") equal to an
additional one quarter of one percent (0.25%) per annum upon the occurrence of
each Registration Default, which rate will increase by an additional one quarter
of one percent (0.25%) per annum each 90-day period that such Additional
Interest continues to accrue under any such circumstance, provided that the
maximum aggregate increase in the interest rate will in no event exceed 1.0% per
annum; PROVIDED, HOWEVER, that no Additional Interest shall be payable if the
Exchange Offer Registration Statement is not filed or declared effective or the
Exchange Offer is not consummated as set forth above because of any changes in
law, SEC rules or regulations or applicable interpretations thereof by the staff
of the SEC (it being understood that in any such circumstance the Company shall
be required to file a Shelf Registration Statement and Additional Interest shall
be payable if such Shelf Registration Statement is not declared effective as
provided in clause (iii) above); and PROVIDED FURTHER that Additional Interest
shall only be payable in the case a Shelf Registration Statement is not declared
effective as aforesaid with respect to notes that have the right to be included,
and whose inclusion has been requested, in the Shelf Registration Statement.
Following the cure of all Registration Defaults applicable to the respective
Notes, the accrual of Additional Interest will cease and the interest rate will
revert to 6.125% per annum.
If a Shelf Registration Statement is declared effective but shall
thereafter become unusable by the Holder of Notes for any reason (whether or not
the Company had the right to prevent the Holders from distributing Notes during
the 30 day period described in the Indenture), and the aggregate number of days
in any consecutive twelve-month period for which the Shelf Registration
Statement shall not be usable exceeds 30 days, the interest rate borne by the
Notes included in such Shelf Registration Statement will be increased by an
amount ("ADDITIONAL INTEREST") equal to 0.25% per annum for the first 90-day
period (or portion thereof) beginning on the 31st such date that such Shelf
Registration Statement ceases to be usable, which rate shall be increased by an
additional 0.25% per annum at the beginning of each subsequent 90-day period,
provided the maximum aggregate increase in the interest rate will in no event
exceed 1.0% per annum. Upon the Shelf Registration Statement once again becoming
usable, the interest rate borne by the Notes included therein will be reduced to
the original interest rate if the Company is otherwise in compliance with the
Registration Rights Agreement with respect to such Notes at that time.
Additional Interest in accordance with this paragraph shall be computed based
upon the actual number of days elapsed in each 90-day period in which the Shelf
Registration Statement is unusable. For all purposes of this Indenture
Supplement No. 6, the term interest shall include "Additional Amounts" and
"Additional Interest".
The interest payable on each Interest Payment Date shall be the amount of
interest accrued from November 2, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
until the principal amount of the Notes has
8
<PAGE> 9
been paid or duly provided for. Interest shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
The interest payable on any Note which is punctually paid or duly provided
for on any Interest Payment Date shall be paid to the Person in whose name such
Note is registered at the close of business on the April 15 or October 15 (in
each case, whether or not a Business Day), respectively, immediately preceding
such Interest Payment Date (each, a "Regular Record Date"). Interest payable on
any Note which is not punctually paid or duly provided for on any Interest
Payment Date therefor shall forthwith cease to be payable to the Person in whose
name such Note is registered at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date, and such interest shall
instead be paid to the Person in whose name such Note is registered at the close
of business on the record date established for such payment by notice by or on
behalf of the Company to the Holders of the Notes mailed by first-class mail not
less than 15 days prior to such record date to their last addresses as they
shall appear upon the Security register, such record date to be not less than
five days preceding the date of payment of such defaulted interest.
The Company and Tyco shall notify the Trustee within five Business Days
after each and every date (an "EVENT DATE") on which an event occurs in respect
of which Additional Interest is required to be paid. The obligation to pay
Additional Interest shall be deemed to accrue from and including the day
following the applicable Event Date. Additional Interest shall be paid by
depositing with the Trustee for the benefit of the Holders of the Notes entitled
to receive such Additional Interest, on or before the applicable Interest
Payment Date, immediately available funds in sums sufficient to pay the
Additional interest then due. Additional Interest shall be payable to the Person
otherwise entitled to be paid the interest payable on the Notes on such Interest
Payment Date.
SECTION 2.6 PLACE OF PAYMENT. The place of payment where the Notes may be
presented or surrendered for payment, where the principal of and interest and
any other payments due on the Notes are payable, where the Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to and upon the Company in respect of the Notes and the Indenture may be
served shall be in the Borough of Manhattan, The City of New York, and the
office or agency maintained by the Company for such purpose shall initially be
the Corporate Trust Office of the Trustee.
At the option of the Company, interest on the Notes may be paid (i) by
check mailed to the address of the Person entitled thereto as such address shall
appear in the register of Holders of the Notes or (ii) at the expense of the
Company, by wire transfer to an account maintained by the Person entitled
thereto as specified in writing to the Trustee by such Person by the applicable
record date.
SECTION 2.7 REDEMPTION. The Notes are 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 Notes, and (ii) as determined by the
Quotation Agent, the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payment of interest accrued as of the date of redemption)
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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 plus 25 basis points plus, in each case, accrued interest thereon to the
date of redemption.
The Notes are also subject to redemption to the extent described in Article
Twelve of the Indenture.
The Company shall have no obligation to redeem or purchase the Notes
pursuant to any sinking fund or analogous provisions or upon the happening of
any specified event or at the option of any Holder of the Notes.
SECTION 2.8 CURRENCY. Principal and interest on the Notes shall be payable
in United States dollars.
SECTION 2.9 TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES.
A Global Note may not be transferred as a whole except by the Depositary to
a nominee of the Depositary, by a nominee of the Depositary to the Depositary or
to another nominee of the Depositary, or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary. All Global
Notes will be exchanged by the Company for Definitive Notes if (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 90 days after the date of such
notice from the Depositary; or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged
for Definitive Notes and delivers a written notice to such effect to the
Trustee; provided that in no event shall the Regulation S Global Note be
exchanged by the Company for Definitive Notes prior to the expiration of the
Restricted Period. Global Notes may also be, subject to compliance with the
terms of this Section 2.9, exchanged for Definitive Notes (x) upon the request
of any holder of Notes if an Event of Default has occurred and is continuing for
a period of at least 180 days or (y) in connection with any transfer of an
interest in the Global Note to an Institutional Accredited Investor. Upon the
occurrence of any of the preceding events, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.10 and
2.12 of the Indenture.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES.
The transfer and exchange of beneficial interests in the Global Notes shall
be effected through the Depositary, in accordance with the provisions of the
Indenture and the Applicable Procedures. Transfers of beneficial interests in
the Global Notes also shall require
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compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME TYPE OF GLOBAL NOTE.
Beneficial interests in any Rule 144A Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in a
Rule 144A Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend. Beneficial interests in any
Regulation S Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in a Regulation S Global Note;
provided, however, that prior to the expiration of the Restricted Period
beneficial interests in the Regulation S Global Note may only be
transferred in accordance with the Applicable Procedures of Euroclear and
Cedel. Beneficial interests in any Unrestricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.9(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN
GLOBAL NOTES. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.9(b)(i) above, and, subject to
any other requirement in this Section 2.9, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in a Global Note of
another type in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B), subject to Section
2.9(a), (1) a written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable Procedures
directing the Depositary to cause to be issued a Definitive Note in an
amount equal to the beneficial interest to be transferred or exchanged and
(2) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall
be registered to effect the transfer or exchange; provided that in no event
shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Global Note prior to the
expiration of the Restricted Period. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained herein and in the Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.9(h) hereof.
(iii) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RULE 144A
GLOBAL NOTE OR A REGULATION S GLOBAL NOTES FOR BENEFICIAL INTERESTS IN AN
UNRESTRICTED GLOBAL NOTE. A beneficial interest in Rule 144A Global Note
may be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person
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who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if (x) the exchange or transfer complies with the
requirements of Section 2.9(b)(ii) above and (y):
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal or via the
Depositary's book-entry system in a form acceptable to the Trustee
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company, and such Letter of
Transmittal or book-entry system certification shall satisfy the
requirements of Section 2.9(ii);
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
If any such transfer is effected at a time when an Unrestricted Global
Note has not yet been issued, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.5 of the Indenture,
the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the aggregate principal amount of
beneficial interests so transferred.
(iv) TRANSFER AND EXCHANGE OF INTERESTS TO AND FROM REGULATION S
GLOBAL NOTES (OTHER THAN AS PROVIDED IN CLAUSE (III) ABOVE).
(A) TRANSFER AND EXCHANGE OF INTERESTS IN A REGULATION S GLOBAL
NOTE PRIOR TO THE TERMINATION OF THE RESTRICTED PERIOD FOR BENEFICIAL
INTERESTS IN A RULE 144A GLOBAL NOTE. A beneficial interest in any
Regulation S Global Note may be exchanged by any holder thereof for a
beneficial interest in a Rule 144A Global Note or transferred to a
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Person who takes delivery thereof in the form of a beneficial interest
in a Rule 144A Global Note, if (x) the exchange or transfer complies
with the requirements of Section 2.9(b)(ii) above, and (y) the holder
of the beneficial interest in the Regulation S Global Note delivers to
the Trustee and the Registrar a letter in the form of Exhibit B with
the certification set forth in paragraph 1 or Exhibit C with the
certification set forth in paragraph 2(b), as applicable, completed.
(B) TRANSFER AND EXCHANGE OF INTERESTS IN A REGULATION S GLOBAL
NOTE FOLLOWING THE TERMINATION OF THE RESTRICTED PERIOD FOR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A beneficial interest in any
Regulation S Global Note following the termination of the Restricted
Period may be exchanged by any holder thereof for a beneficial
interest in an Unrestricted Global Note or transferred to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, if (x) the exchange or transfer complies
with the requirements of Section 2.9(b)(ii) above and (y) the holder
of the Regulation S Global Note delivers to the Trustee and the
Registrar a letter in the form of Exhibit B with the certification set
forth in paragraph 4(b) or Exhibit C with the certification set forth
in paragraph 1(a), as applicable, completed.
(C) TRANSFER AND EXCHANGE OF INTERESTS IN A RULE 144A GLOBAL
NOTE FOR BENEFICIAL INTERESTS IN A REGULATION S GLOBAL NOTE. A
beneficial interest in any Rule 144A Global Note may be exchanged by
any holder thereof for a beneficial interest in a Regulation S Global
Note or transferred to a Person who takes delivery thereof in the form
of a beneficial interest in a Regulation S Global Note, if (x) the
exchange or transfer complies with the requirements of Section
2.9(b)(ii) above and (y) the holder of the beneficial interest in the
Rule 144A Global Note delivers to the Trustee and the Registrar a
letter in the form of Exhibit B with the certification set forth in
paragraph 2 or Exhibit C with the certification set forth in paragraph
2(b), as applicable, completed.
(c) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN GLOBAL NOTES FOR
DEFINITIVE NOTES.
(i) BENEFICIAL INTERESTS IN RULE 144A GLOBAL NOTES TO RESTRICTED
DEFINITIVE NOTES. If any holder of a beneficial interest in a Rule 144A
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note in the
circumstances set forth in Section 2.9(a) hereof, such Definitive Note
shall be subject to all restrictions on transfer contained therein and
shall be issued, upon receipt by each of the Trustee and the Registrar of
the following documentation:
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(A) if the holder of a beneficial interest in a Rule 144A
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, Exhibit C with the certification set forth
in paragraph (2)(a) completed;
(B) if such beneficial interest is being transferred in
accordance with Rule 144A under the Securities Act, a letter in the
form of Exhibit B with the certification set forth in paragraph 1
completed;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a letter in the form of Exhibit
B with the certification set forth in paragraph 2 completed; or
(D) if any such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act, a letter in the form
of Exhibit B with the certification set forth in paragraph 3(d)
completed.
(ii) intentionally omitted.
(iii) BENEFICIAL INTERESTS IN RULE 144A GLOBAL NOTES OR REGULATION S
GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. Subject to Section 2.9(a), a
holder of a beneficial interest in a Rule 144A Global Note or Regulation S
Global Note may exchange such beneficial interest for an Unrestricted
Definitive Note or may transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note only
if such exchange or transfer is in accordance with the Applicable
Procedures and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
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(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
(iv) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A holder of a beneficial interest in an Unrestricted
Global Note may, in the circumstances described in Section 2.9(a), exchange
such beneficial interest for an Unrestricted Definitive Note or transfer
such beneficial interest to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Note.
Any transfer pursuant to this Section 2.9(c) shall satisfy the
requirements of Section 2.9(b)(ii). In any such case, the Trustee shall
cause the aggregate principal amount of the applicable Global Note to be
reduced accordingly pursuant to Section 2.9(h) hereof, and the Company
shall execute and the Trustee, upon receipt of an Authentication Order in
accordance with Section 2.5 of the Indenture, shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Restricted Definitive Note issued in
exchange for a beneficial interest in a Global Note pursuant to this
Section 2.9(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS IN
GLOBAL NOTES.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RULE 144A
GLOBAL NOTES. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Rule 144A Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Rule 144A Global Note,
then, upon receipt by each of the Trustee and the Registrar of a letter in
the form of Exhibit B with the certification set forth in paragraph 1 or
Exhibit C with the certification set forth in paragraph 2(b), as
applicable, completed, the Trustee shall cancel the Restricted Definitive
Note and increase or cause to be increased the aggregate principal amount
of the appropriate Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted
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Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
or via the Depositary's book-entry system in a form acceptable to the
Trustee, that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time if permitted by the Applicable Procedures and applicable law. Upon
receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the Unrestricted
Global Notes.
(iv) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN REGULATION
S GLOBAL NOTES. A beneficial interest in any Restricted Definitive Note may
be exchanged by any holder thereof who is a non-U.S. Person for a
beneficial interest in a Regulation S Global Note or transferred to a Non
U.S. Person who takes delivery thereof in the form of a beneficial interest
in a Regulation S Global Note, if (x) the holder of the Restricted
Definitive Note delivers to the Trustee and the Registrar a letter in the
form of Exhibit B with the certification set forth in paragraph 2 or
Exhibit C with the certification set forth in paragraph 2(b), as
applicable, completed and (y) if the Trustee and the Registrar so request
or if the Applicable Procedures so require, an Opinion of Counsel in form
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reasonably acceptable to the Trustee and the Registrar is furnished to the
Trustee and the Registrar to the effect that such exchange or transfer is
in compliance with the Securities Act.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected at a time when a Global
Note of the appropriate type has not yet been issued, the Company shall
issue and, upon receipt of an Authentication Order in accordance with
Section 5 of the Indenture the Trustee shall authenticate one or more
Global Notes in an aggregate principal amount equal to the principal amount
of Definitive Notes so transferred.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.9(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.9(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any
restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then
the transferor must deliver a letter in the form of Exhibit B with
certification set forth in paragraph 1 completed,
(B) if the transfer will be made to a Non-U.S. Person in an
offshore transaction in accordance with Rule 903 or 904 under the
Securities, then the transferor must deliver a letter in the form of
Exhibit B with the certification set forth in paragraph 2 completed;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a letter in the form of Exhibit B
with the appropriate certification set forth in paragraph 3 completed,
as well as an Opinion of Counsel in form and substance acceptable to
the Trustee.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
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delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
or via the Depositary's book-entry system in a form acceptable to the
Trustee, that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) such transfer is effected pursuant to Rule 144 of the
Securities Act, a letter in the form of Exhibit B with the
certification set forth in paragraph 4(a) completed, and, if the
Trustee and the Registrar so request or the Applicable Procedures so
require, an Opinion of Counsel to the effect that the transfer is
permitted, and that upon transfer the Notes will not be restricted,
under the Securities Act, is furnished to the Trustee and Registrar.
(iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) EXCHANGE OFFER; SHELF REGISTRATION STATEMENT
(i) Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.5 of the Indenture,
the Trustee shall authenticate (x) one or more Unrestricted Global Notes in
an aggregate principal amount equal to the principal amount of the
beneficial interests in the Rule 144A Global Notes and Regulation S Global
Notes tendered for acceptance by Persons that certify in the applicable
Letters of Transmittal that (A) they are not broker-dealers, (B) they are
not participating in a distribution of the Exchange Notes and (C) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer
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and (y) Definitive Notes in an aggregate principal amount equal to the
principal amount of the Restricted Definitive Notes accepted for exchange
in the Exchange Offer. Concurrently with the issuance of such Notes, the
Trustee shall cause the aggregate principal amount of the applicable Rule
144A Global Notes and/or Regulation S Global Notes to be reduced
accordingly, and the Company shall execute and the Trustee shall, upon
receipt of an Authentication Order in accordance with Section 2.5 of the
Indenture, authenticate and deliver to the Persons designated by the
Holders of the Restricted Definitive Notes so accepted Unrestricted
Definitive Notes in the appropriate principal amount.
(ii) Following the effectiveness of a Shelf Registration Statement the
Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.5, of the Indenture the Trustee shall
authenticate from time to time (x) one or more Unrestricted Global Notes,
or, if there shall be at the time one or more Unrestricted Global Notes
outstanding and such increase can be effected in accordance with Applicable
Procedures, the Trustee shall increase or cause to be increased the
aggregate principal amount thereof, in each case in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Global Notes sold by Persons that certify as to the consummation of such
sale under the Shelf Registration Statement in a manner acceptable to the
Trustee and the Company and (y) Unrestricted Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes sold by Persons that certify as to the consummation of
such sale under the Shelf Registration Statement in a manner acceptable to
the Trustee and the Company. Concurrently with the issuance of such
Unrestricted Global Notes, the Trustee shall cause the aggregate principal
amount of the applicable Rule 144A Global Notes and/or the Regulation S
Global Notes to be reduced accordingly, and the Company shall execute and
the Trustee shall, upon receipt of an Authentication Order in accordance
with Section 2.5 of the Indenture, authenticate and deliver to the Persons
designated by the Holders of Restricted Definitive Notes so sold
Unrestricted Definitive Notes in the appropriate principal amount.
(g) LEGENDS.
The following legends shall appear on the face of all Global Notes and
Definitive Notes issued under the Indenture unless specifically stated otherwise
in the applicable provisions of the Indenture.
(i) PRIVATE PLACEMENT LEGEND. Except as permitted by subparagraph (B)
below, each Note (and all Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
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"SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER: REPRESENTS THAT (1) IT IS (A) A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) NOT A U.S. PERSON AND IS
ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY
EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED
HEREBY (A FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR ANY
OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS
PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE),
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SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT."
(B) Notwithstanding the foregoing, any Note which is (i) a
Regulation S Note (and any Note issued in exchange therefor or
substitution thereof after the Restricted Period), (ii) a Note which
has been exchanged or transferred pursuant to the Exchange Offer
Registration Statement or the Shelf Registration Statement, or (iii) a
Note which has been transferred in accordance with Rule 144, provided
that in such case an Opinion of Counsel is delivered which states that
the Note does not have to bear the Private Placement Legend in the
cases where such opinion is required under this Indenture, shall not
bear the Private Placement Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN CERTAIN CIRCUMSTANCES IN THE SUPPLEMENTAL
INDENTURE NO. 6, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY."
(iii) REGULATION S GLOBAL NOTE LEGEND. The Regulation S Global Note
shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S
21
<PAGE> 22
GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
DURING THE RESTRICTED PERIOD, INTERESTS IN THIS NOTE MAY ONLY BE HELD
THROUGH EUROCLEAR AND CEDEL."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES.
At such time as all beneficial interests in a particular Global Note have
been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 of the Indenture. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary to reflect
such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary to reflect such increase.
SECTION 2.10 DEFEASANCE AND COVENANT DEFEASANCE. The provisions of Article
Nine of the Indenture shall apply to the Notes.
ARTICLE THREE
MISCELLANEOUS PROVISIONS
SECTION 3.1 RATIFICATION. The Indenture, as supplemented and amended by
this Supplemental Indenture No. 6, is in all respects hereby adopted, ratified
and confirmed.
SECTION 3.2 COUNTERPARTS. This Supplemental Indenture No. 6 may be executed
in any number of counterparts, each of which when so executed shall be deemed an
original; and all such counterparts shall together constitute but one and the
same instrument.
SECTION 3.3 AMENDMENTS. This Supplemental Indenture No. 6 may be amended by
the Company and Tyco without the consent of any holder of the Notes in order for
the restrictions on transfer contained herein to be in compliance with
applicable law or the Applicable Procedures.
SECTION 3.4 APPLICABLE PROCEDURES. Notwithstanding anything else herein,
the
22
<PAGE> 23
Company shall not be required to permit a transfer to a global note that is not
permitted by the Applicable Procedures.
SECTION 3.5 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE NO. 6 AND EACH NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF.
23
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 6 to be duly executed as of the day and year first written above.
TYCO INTERNATIONAL GROUP S.A.
By: _________________________
Name:
Title:
TYCO INTERNATIONAL LTD.
By: _________________________
Name:
Title:
THE BANK OF NEW YORK, Trustee
By: _________________________
Name:
Title:
24
<PAGE> 25
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Tyco International Group S.A.
[_________________________]
The Bank of New York
[_________________________]
Re: 6.125% Notes due 2008
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 9, 1998, and
the Supplemental Indenture No. 6 dated November 2, 1998 (collectively, the
"Indenture") among Tyco International Group S.A., Tyco International Ltd. and
The Bank of New York as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [___] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any
<PAGE> 26
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
2. [___] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S GLOBAL NOTE, OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [__] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE RESTRICTED DEFINITIVE NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [__] such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [__] such Transfer is being effected to the Company or a subsidiary
thereof;
or
<PAGE> 27
(c) [__] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [__] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by a certificate
executed by the Transferee in the form of Exhibit D to the Indenture.
4. [ ] Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the
<PAGE> 28
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_______________________________
[Insert Name of Transferor]
By:
_______________________________
Name:
Title:
Dated: ______________ __, ____.
<PAGE> 29
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _____), or
(ii) [ ] Regulation S Global Note (CUSIP _____).
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _____), or
(ii) [ ] Regulation S Global Note (CUSIP _____), or
(iii) [ ] Unrestricted Global Note (CUSIP _____); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the
Indenture.
<PAGE> 30
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Tyco International Group S.A.
[_________________________]
The Bank of New York
[_________________________]
Re: 6.125% Notes due 2008
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 9, 1998, and
the Supplemental Indenture No. 6 dated November 2, 1998 (collectively, the
"Indenture") among Tyco International Group S.A., Tyco International Ltd. and
the Bank of New York.
____________, (the "Owner") owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RULE 144A GLOBAL NOTE OR REGULATION S GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE
NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities
-1-
<PAGE> 31
Act and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RULE
144A GLOBAL NOTES OR REGULATION S GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES
OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RULE 144A GLOBAL
NOTES OR REGULATION S GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Rule 144A Global Note
or a Regulation S Global Notes for a Restricted Definitive Note with an equal
principal amount, the Owner hereby certifies that the Restricted Definitive Note
is being acquired for the Owner's own account without transfer. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS TO BENEFICIAL INTEREST IN A RULE 144A GLOBAL
NOTE OR A REGULATION S GLOBAL NOTE. In connection with the Exchange of the
Owner's Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note,
[ ] Regulation S Global Note, with an equal principal amount, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Rule 144A Global Notes or
Regulation S Global Notes and pursuant to and in accordance with the Securities
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, the beneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Rule 144A Global Note or Regulation S Global Notes and
in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________________
[Insert Name of Owner]
By:
___________________________________
-2-
<PAGE> 32
Name:
Title:
Dated: __________________ __, ____.
-3-
<PAGE> 33
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Tyco International Group S.A.
[_________________________]
The Bank of New York
[_________________________]
Re: 6.125% Notes due 2008
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of June 9, 1998, and
the Supplemental Indenture No. 6 dated November 2, 1998 (collectively, the
Indenture") among Tyco International Group S.A., Tyco International Ltd. And The
Bank of New York as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1993, as
amended (the "Securities Act")),
-4-
<PAGE> 34
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Notes for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or other applicable securities
laws and we have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand and acknowledge that the Notes have not been registered
under the Securities Act, or any other applicable securities law and may not be
offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities law, or pursuant to an exemption therefrom, and in each case in
compliance with the conditions for transfer set forth below. We agree on our own
behalf and on behalf of any investor account for which we are purchasing Notes
to offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a "Qualified Institutional Buyer" within the meaning of
Rule 144A (a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales to non-U.S. persons that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the meaning
of subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) or Rule 501 under the
Securities Act that is acquiring the Notes for its own account or for the
account of such an institutional "accredited investor" for the investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver
to the trustee (the "Trustee") under the Indenture pursuant to which the Notes
are issued a letter from the transferee substantially in the form of this letter
or as acceptable to the Trustee, which shall provide, among other things, that
the transferee is a person or entity as defined in paragraph 1 of this letter
and that is acquiring such Notes for investment purposes and not for
distribution violation of the Securities Act. We acknowledge that the Company
and the Trustee reserve the right prior to any offer, sale or other transfer of
the Notes pursuant to clauses (d), (e) and (f) above prior to the Resale
Restriction Termination Date to require the delivery of any opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
3. We are acquiring the Notes purchased by us for our own account or for
one or more accounts as to each of which we exercise sole investment discretion.
-5-
<PAGE> 35
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By: (Name of Purchaser)
Date:
__________________________________
[Insert Name of Accredited Investor]
By:
__________________________________
Name:
Title:
Dated: _________________ __, ____.
-6-
<PAGE> 36
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTE DUE 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN CERTAIN CIRCUMSTANCES DESCRIBED IN THE INDENTURE, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER:
REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT
1
<PAGE> 37
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS
PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
2
<PAGE> 38
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTE DUE 2008
No. 1
$200,000,000 CUSIP: 902118 AG 3
TYCO INTERNATIONAL GROUP S.A., a Luxembourg company (the "Issuer"), for value
received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Two Hundred Million Dollars on November 1, 2008, at the office
or agency of the Issuer in the Borough of Manhattan, The City of New York, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
semiannually on May 1 and November 1 of each year (each, an "Interest Payment
Date"; provided, however, that if an Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be the next
succeeding Business Day but no additional interest shall be paid in respect of
such intervening period), commencing May 1, 1999, the amount of interest on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title of this Note, from November 2, 1998 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for until said principal sum has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. For purposes of this Note, "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, regulation or executive order to be
closed.
The interest payable on any Interest Payment Date which is punctually paid or
duly provided for on such Interest Payment Date will be paid to the Person in
whose name this Note is registered at the close of business on the April 15 or
October 15 (in each case, whether or not a Business Day), as the case may be
(each, a "Regular Record Date"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest shall instead be paid to the Person in whose name this
Note is registered at the close of business on the record date established for
such payment by notice by or on behalf of the Issuer to the Holders of the Notes
mailed by first-class mail not less than 15 days prior to such record date to
their last addresses as they shall appear upon the Security register, such
record date to be not less than five days preceding the date of payment of such
defaulted interest. At the option of the Issuer, interest on the Notes may be
paid (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register of Holders of the Notes or (ii) at the
expense of the Issuer, by wire transfer to an account maintained by the Person
entitled thereto as specified in writing to the Trustee by such Person by the
applicable record date of the Notes.
3
<PAGE> 39
All references in the Notes (and related Guarantees) to interest shall
include any Additional Interest or Additional Amounts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
4
<PAGE> 40
IN WITNESS WHEREOF, TYCO INTERNATIONAL GROUP S.A. has caused this instrument
to be signed by its duly authorized officers.
Dated: November 2, 1998
TYCO INTERNATIONAL GROUP S.A.
By:________________________________
Title:
By:________________________________
Title:
5
<PAGE> 41
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: __________________________
Authorized Signatory
6
<PAGE> 42
GUARANTEE
For value received, TYCO INTERNATIONAL LTD. hereby absolutely,
unconditionally and irrevocably guarantees to the holder of this Note the
payment of principal of, and interest on, the Security upon which this Guarantee
is endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest on, if any, of such Note, if lawful, and the payment or performance of
all other obligations of the Issuer under the Indenture or the Notes, to the
holder of such Note and the Trustee, all in accordance with and subject to the
terms and limitations of such Note and Article Thirteen of the Indenture. This
Guarantee will not become effective until the Trustee duly executes the
certificate of authentication on this Note. This Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of law principles thereof. All references in this Guarantee
to interest shall include any Additional Amounts or Additional Interest.
Dated: November 2, 1998
TYCO INTERNATIONAL LTD.
By: _______________________________
Title:
7
<PAGE> 43
REVERSE OF NOTE
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTES DUE 2008
1. Indent(a) This Note is one of a duly authorized issue of notes of the
Issuer (hereinafter called the "Notes") of a series designated as the 6.125%
Notes due 2008 of the Issuer, initially limited in aggregate principal amount to
$400,000,000, all issued or to be issued under and pursuant to an indenture,
dated as of June 9, 1998, as amended and supplemented by Supplemental Indenture
No. 6, dated as of November 2, 1998 (as so amended and supplemented, the
"Indenture"), among the Issuer, Tyco International Ltd. ("Tyco") and The Bank of
New York, as Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Issuer, Tyco, the Trustee and the Holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "Securities") may be issued
under the Indenture in one or more series, which different series may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any) and may otherwise vary from the Notes and each other, as in the
Indenture provided.
(c) All capitalized terms used in this Note (or the related Guarantee)
which are defined in the Indenture and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
2. Amendments and Waivers. (a) The Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series to be affected (voting as one class), evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders of the Securities of each such series; PROVIDED, that no such
supplemental indenture shall (i) extend the final maturity of any Security, or
reduce the principal amount thereof, or reduce the
8
<PAGE> 44
rate or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 4.1 of the Indenture or
the amount thereof provable in bankruptcy pursuant to Section 4.2 of the
Indenture, or impair or affect the rights of any Holder to institute suit for
the payment thereof, without the consent of the Holder of each Security so
affected, or (ii) reduce the aforesaid percentage of Securities, the Holders of
which are required to consent to any such supplemental indenture, without the
consent of the Holder of each Security affected.
(b) It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Securities of any series, prior to
any declaration accelerating the maturity of such Securities, the Holders of a
majority in aggregate principal amount Outstanding of the Securities of such
series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or all or certain series of the Securities, as the case may be)
waive any such past default or Event of Default and its consequences. The
preceding sentence shall not, however, apply to a default in the payment of the
principal of or premium, if any, or interest on any of the Securities. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, Tyco or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of this Note, and (ii) as determined by the
Quotation Agent, 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 plus 25 basis
points plus, in each case, accrued interest thereon to the date of redemption.
This Note is also subject to redemption to the extent provided in Article Twelve
of the Indenture.
"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
9
<PAGE> 45
its principal amount) equal to the Comparable Redemption Treasury Price for such
redemption 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.
"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 Notes to be redeemed that will 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 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 Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City of
New York 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.
5. Certain Covenants. The Indenture restricts the Issuer's ability to
merge, consolidate or sell substantially all of its assets. In addition, the
Issuer is obliged to abide by certain covenants, including covenants limiting
the amount of liens it may incur, as well as its ability to enter into sale and
leaseback transactions, a covenant limiting the ability of its subsidiaries to
incur indebtedness, and a covenant requiring it to pay or discharge all taxes,
all as more fully described in the Indenture. All of such covenants are subject
to the covenant Defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have occurred
and be continuing under the Indenture, the principal hereof may be declared, and
upon such declaration
10
<PAGE> 46
shall become, due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.
7. Defeasance. The Indenture contains provisions for Defeasance and
covenant Defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
8. Denominations; Transfer. (a) The Notes are issuable in registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.
(b) Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture. This Note may also be surrendered
for exchange at the aforesaid office or agency for Notes in other authorized
denominations in an equal aggregate principal amount. No service charge shall be
made for any registration of transfer or any exchange of the Notes, except that
the Issuer may require payment of any tax or other governmental charge imposed
in connection therewith.
(c) A certificate in global form representing all of a portion of the
Notes may not be transferred except as a whole by the Depositary for such series
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or any such nominee to a
successor Depositary for such Notes or a nominee of such successor Depositary.
9. Holder as Owner. The Issuer, Tyco, the Trustee and any authorized agent
of the Issuer, Tyco or the Trustee may deem and treat the registered Holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the principal hereof
and, subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, Tyco or the Trustee or any authorized
agent of the Issuer, Tyco or the Trustee shall be affected by any notice to the
contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer or Tyco in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of the
Issuer, Tyco or of any successor corporation of either of them, either directly
or through the Issuer, Tyco or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11
<PAGE> 47
11. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Notes other than Holders of Unrestricted Global Notes
and Holders of Unrestricted Definitive Notes shall have all the rights set forth
in the Registration Rights Agreement, dated as of November 2, 1998, among the
Issuer, Tyco International Ltd. and the parties named on the signature pages
thereof.
12. Governing Law. The laws of the State of New York govern the Indenture
and this Note.
12
<PAGE> 48
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note of Tyco International Group S.A. and all rights thereunder and
hereby irrevocably constitutes and appoints such person attorney to transfer
such Note on the books of Tyco International Group S.A., with full power of
substitution in the premises.
Dated:
-----------------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY,
A MEMBER ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR BY SUCH OTHER
ENTITY WHOSE SIGNATURE IS ON FILE WITH AND ACCEPTABLE TO THE TRANSFER
AGENT.
13
<PAGE> 49
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in the Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of
decrease in increase in Principal Amount of this Global Signature of Authorized
Date of Principal Amount Principal Amount Note following such decrease (or Officer of Trustee or Note
Exchange of this Global Note of this Global Note increase) Custodian
- -------- ------------------- ------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Schedule may be used by the Trustee in respect of a Global Note, and, if
so used, shall be deemed a part thereof for all purposes.
14
<PAGE> 50
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTE DUE 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN CERTAIN CIRCUMSTANCES DESCRIBED IN THE INDENTURE, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER:
REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT
1
<PAGE> 51
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS
PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
2
<PAGE> 52
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTE DUE 2008
No. 2
$200,000,000 CUSIP: 902118 AG 3
TYCO INTERNATIONAL GROUP S.A., a Luxembourg company (the "Issuer"), for value
received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Two Hundred Million Dollars on November 1, 2008, at the office
or agency of the Issuer in the Borough of Manhattan, The City of New York, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, and to pay
semiannually on May 1 and November 1 of each year (each, an "Interest Payment
Date"; provided, however, that if an Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be the next
succeeding Business Day but no additional interest shall be paid in respect of
such intervening period), commencing May 1, 1999, the amount of interest on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title of this Note, from November 2, 1998 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for until said principal sum has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. For purposes of this Note, "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, regulation or executive order to be
closed.
The interest payable on any Interest Payment Date which is punctually paid or
duly provided for on such Interest Payment Date will be paid to the Person in
whose name this Note is registered at the close of business on the April 15 or
October 15 (in each case, whether or not a Business Day), as the case may be
(each, a "Regular Record Date"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest shall instead be paid to the Person in whose name this
Note is registered at the close of business on the record date established for
such payment by notice by or on behalf of the Issuer to the Holders of the Notes
mailed by first-class mail not less than 15 days prior to such record date to
their last addresses as they shall appear upon the Security register, such
record date to be not less than five days preceding the date of payment of such
defaulted interest. At the option of the Issuer, interest on the Notes may be
paid (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register of Holders of the Notes or (ii) at the
expense of the Issuer, by wire transfer to an account maintained by the Person
entitled thereto as specified in writing to the Trustee by such Person by the
applicable record date of the Notes.
3
<PAGE> 53
All references in the Notes (and related Guarantees) to interest shall
include any Additional Interest or Additional Amounts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
4
<PAGE> 54
IN WITNESS WHEREOF, TYCO INTERNATIONAL GROUP S.A. has caused this instrument
to be signed by its duly authorized officers.
Dated: November 2, 1998
TYCO INTERNATIONAL GROUP S.A.
By:________________________________
Title:
By:________________________________
Title:
5
<PAGE> 55
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: __________________________
Authorized Signatory
6
<PAGE> 56
GUARANTEE
For value received, TYCO INTERNATIONAL LTD. hereby absolutely,
unconditionally and irrevocably guarantees to the holder of this Note the
payment of principal of, and interest on, the Security upon which this Guarantee
is endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest on, if any, of such Note, if lawful, and the payment or performance of
all other obligations of the Issuer under the Indenture or the Notes, to the
holder of such Note and the Trustee, all in accordance with and subject to the
terms and limitations of such Note and Article Thirteen of the Indenture. This
Guarantee will not become effective until the Trustee duly executes the
certificate of authentication on this Note. This Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of law principles thereof. All references in this Guarantee
to interest shall include any Additional Amounts or Additional Interest.
Dated: November 2, 1998
TYCO INTERNATIONAL LTD.
By: ______________________________________
Title:
7
<PAGE> 57
REVERSE OF NOTE
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTES DUE 2008
1. Indenture. (a) This Note is one of a duly authorized issue of notes of
the Issuer (hereinafter called the "Notes") of a series designated as the 6.125%
Notes due 2008 of the Issuer, initially limited in aggregate principal amount to
$400,000,000, all issued or to be issued under and pursuant to an indenture,
dated as of June 9, 1998, as amended and supplemented by Supplemental Indenture
No. 6, dated as of November 2, 1998 (as so amended and supplemented, the
"Indenture"), among the Issuer, Tyco International Ltd. ("Tyco") and The Bank of
New York, as Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Issuer, Tyco, the Trustee and the Holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "Securities") may be issued
under the Indenture in one or more series, which different series may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any) and may otherwise vary from the Notes and each other, as in the
Indenture provided.
(c) All capitalized terms used in this Note (or the related Guarantee)
which are defined in the Indenture and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
2. Amendments and Waivers. (a) The Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series to be affected (voting as one class), evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders of the Securities of each such series; PROVIDED, that no such
supplemental indenture shall (i) extend the final maturity of any Security, or
reduce the principal amount thereof, or reduce the
8
<PAGE> 58
rate or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 4.1 of the Indenture or
the amount thereof provable in bankruptcy pursuant to Section 4.2 of the
Indenture, or impair or affect the rights of any Holder to institute suit for
the payment thereof, without the consent of the Holder of each Security so
affected, or (ii) reduce the aforesaid percentage of Securities, the Holders of
which are required to consent to any such supplemental indenture, without the
consent of the Holder of each Security affected.
(b) It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Securities of any series, prior to
any declaration accelerating the maturity of such Securities, the Holders of a
majority in aggregate principal amount Outstanding of the Securities of such
series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or all or certain series of the Securities, as the case may be)
waive any such past default or Event of Default and its consequences. The
preceding sentence shall not, however, apply to a default in the payment of the
principal of or premium, if any, or interest on any of the Securities. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, Tyco or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of this Note, and (ii) as determined by the
Quotation Agent, 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 plus 25 basis
points plus, in each case, accrued interest thereon to the date of redemption.
This Note is also subject to redemption to the extent provided in Article Twelve
of the Indenture.
"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
9
<PAGE> 59
its principal amount) equal to the Comparable Redemption Treasury Price for such
redemption 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.
"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 Notes to be redeemed that will 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 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 Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City of
New York 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.
5. Certain Covenants. The Indenture restricts the Issuer's ability to
merge, consolidate or sell substantially all of its assets. In addition, the
Issuer is obliged to abide by certain covenants, including covenants limiting
the amount of liens it may incur, as well as its ability to enter into sale and
leaseback transactions, a covenant limiting the ability of its subsidiaries to
incur indebtedness, and a covenant requiring it to pay or discharge all taxes,
all as more fully described in the Indenture. All of such covenants are subject
to the covenant Defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have occurred
and be continuing under the Indenture, the principal hereof may be declared, and
upon such declaration
10
<PAGE> 60
shall become, due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.
7. Defeasance. The Indenture contains provisions for Defeasance and
covenant Defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
8. Denominations; Transfer. (a) The Notes are issuable in registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.
(b) Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture. This Note may also be surrendered
for exchange at the aforesaid office or agency for Notes in other authorized
denominations in an equal aggregate principal amount. No service charge shall be
made for any registration of transfer or any exchange of the Notes, except that
the Issuer may require payment of any tax or other governmental charge imposed
in connection therewith.
(c) A certificate in global form representing all of a portion of the
Notes may not be transferred except as a whole by the Depositary for such series
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or any such nominee to a
successor Depositary for such Notes or a nominee of such successor Depositary.
9. Holder as Owner. The Issuer, Tyco, the Trustee and any authorized agent
of the Issuer, Tyco or the Trustee may deem and treat the registered Holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the principal hereof
and, subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, Tyco or the Trustee or any authorized
agent of the Issuer, Tyco or the Trustee shall be affected by any notice to the
contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer or Tyco in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of the
Issuer, Tyco or of any successor corporation of either of them, either directly
or through the Issuer, Tyco or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11
<PAGE> 61
11. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Notes other than Holders of Unrestricted Global Notes
and Holders of Unrestricted Definitive Notes shall have all the rights set forth
in the Registration Rights Agreement, dated as of November 2, 1998, among the
Issuer, Tyco International Ltd. and the parties named on the signature pages
thereof.
12. Governing Law. The laws of the State of New York govern the Indenture
and this Note.
12
<PAGE> 62
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note of Tyco International Group S.A. and all rights thereunder and
hereby irrevocably constitutes and appoints such person attorney to transfer
such Note on the books of Tyco International Group S.A., with full power of
substitution in the premises.
Dated:
---------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY,
A MEMBER ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR BY SUCH OTHER
ENTITY WHOSE SIGNATURE IS ON FILE WITH AND ACCEPTABLE TO THE TRANSFER
AGENT.
13
<PAGE> 63
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in the Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of
decrease in increase in Principal Amount of this Global Signature of Authorized
Date of Principal Amount Principal Amount Note following such decrease (or Officer of Trustee or Note
Exchange of this Global Note of this Global Note increase) Custodian
- -------- ------------------- ------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Schedule may be used by the Trustee in respect of a Global Note, and, if
so used, shall be deemed a part thereof for all purposes.
14
<PAGE> 64
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTE DUE 2008
THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS
AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED
IN THE INDENTURE (AS DEFINED HEREIN). DURING THE RESTRICTED PERIOD, INTERESTS IN
THE NOTE MAY ONLY BE HELD THROUGH EUROCLEAR AND CEDEL.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.9 OF SUPPLEMENTAL INDENTURE NO.
6, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY.
1
<PAGE> 65
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTE DUE 2008
No. 3
$0 CUSIP: L93727AB8
TYCO INTERNATIONAL GROUP S.A., a Luxembourg company (the "Issuer"), for value
received, hereby promises to pay to CEDE & CO. or registered assigns, the
principal sum of Zero Dollars on November 1, 2008, at the office or agency of
the Issuer in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay
semiannually on May 1 and November 1 of each year (each, an "Interest Payment
Date"; provided, however, that if an Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be the next
succeeding Business Day but no additional interest shall be paid in respect of
such intervening period), commencing May 1, 1999, the amount of interest on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum specified in the title of this Note, from November 2, 1998 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for until said principal sum has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months. For purposes of this Note, "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, regulation or executive order to be
closed.
The interest payable on any Interest Payment Date which is punctually paid or
duly provided for on such Interest Payment Date will be paid to the Person in
whose name this Note is registered at the close of business on the April 15 or
October 15 (in each case, whether or not a Business Day), as the case may be
(each, a "Regular Record Date"), immediately preceding such Interest Payment
Date. Interest payable on this Note which is not punctually paid or duly
provided for on any Interest Payment Date therefor shall forthwith cease to be
payable to the Person in whose name this Note is registered at the close of
business on the Regular Record Date immediately preceding such Interest Payment
Date, and such interest shall instead be paid to the Person in whose name this
Note is registered at the close of business on the record date established for
such payment by notice by or on behalf of the Issuer to the Holders of the Notes
mailed by first-class mail not less than 15 days prior to such record date to
their last addresses as they shall appear upon the Security register, such
record date to be not less than five days preceding the date of payment of such
defaulted interest. At the option of the Issuer, interest on the Notes may be
paid (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the register of Holders of the Notes or (ii) at the
expense of the Issuer, by wire transfer to an account maintained by the Person
entitled thereto as specified in writing to the Trustee by such Person by the
applicable record date of the Notes.
2
<PAGE> 66
All references in the Notes (and related Guarantees) to interest shall
include any Additional Interest or Additional Amounts.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
3
<PAGE> 67
IN WITNESS WHEREOF, TYCO INTERNATIONAL GROUP S.A. has caused this instrument
to be signed by its duly authorized officers.
Dated: November 2, 1998
TYCO INTERNATIONAL GROUP S.A.
By:________________________________
Title:
By:________________________________
Title:
4
<PAGE> 68
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: __________________________
Authorized Signatory
5
<PAGE> 69
GUARANTEE
For value received, TYCO INTERNATIONAL LTD. hereby absolutely,
unconditionally and irrevocably guarantees to the holder of this Note the
payment of principal of, and interest on, the Security upon which this Guarantee
is endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest on, if any, of such Note, if lawful, and the payment or performance of
all other obligations of the Issuer under the Indenture or the Notes, to the
holder of such Note and the Trustee, all in accordance with and subject to the
terms and limitations of such Note and Article Thirteen of the Indenture. This
Guarantee will not become effective until the Trustee duly executes the
certificate of authentication on this Note. This Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of law principles thereof. All references in this Guarantee
to interest shall include any Additional Amounts or Additional Interest.
Dated: November 2, 1998
TYCO INTERNATIONAL LTD.
By: _________________________________
Title:
6
<PAGE> 70
REVERSE OF NOTE
TYCO INTERNATIONAL GROUP S.A.
6.125% NOTES DUE 2008
1. Indenture. (a) This Note is one of a duly authorized issue of notes of
the Issuer (hereinafter called the "Notes") of a series designated as the 6.125%
Notes due 2008 of the Issuer, initially limited in aggregate principal amount to
$400,000,000, all issued or to be issued under and pursuant to an indenture,
dated as of June 9, 1998, as amended and supplemented by Supplemental Indenture
No. 6, dated as of November 2, 1998 (as so amended and supplemented, the
"Indenture"), among the Issuer, Tyco International Ltd. ("Tyco") and The Bank of
New York, as Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Issuer, Tyco, the Trustee and the Holders of the Notes.
(b) Other debentures, notes, bonds or other evidences of indebtedness
(together with the Notes, hereinafter called the "Securities") may be issued
under the Indenture in one or more series, which different series may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions (if any), may be subject to different sinking, purchase or analogous
funds (if any) and may otherwise vary from the Notes and each other, as in the
Indenture provided.
(c) All capitalized terms used in this Note (or the related Guarantee)
which are defined in the Indenture and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
2. Amendments and Waivers. (a) The Indenture contains provisions
permitting the Issuer and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding of all series to be affected (voting as one class), evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders of the Securities of each such series; PROVIDED, that no such
supplemental indenture shall (i) extend the final maturity of any Security, 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 the principal of an Original Issue Discount Security
that would be due and payable upon an acceleration of the maturity thereof
pursuant to
7
<PAGE> 71
Section 4.1 of the Indenture or the amount thereof provable in bankruptcy
pursuant to Section 4.2 of the Indenture, or impair or affect the rights of any
Holder to institute suit for the payment thereof, without the consent of the
Holder of each Security so affected, or (ii) reduce the aforesaid percentage of
Securities, the Holders of which are required to consent to any such
supplemental indenture, without the consent of the Holder of each Security
affected.
(b) It is also provided in the Indenture that, with respect to certain
defaults or Events of Default regarding the Securities of any series, prior to
any declaration accelerating the maturity of such Securities, the Holders of a
majority in aggregate principal amount Outstanding of the Securities of such
series (or, in the case of certain defaults or Events of Default, all or certain
series of the Securities) may on behalf of the Holders of all the Securities of
such series (or all or certain series of the Securities, as the case may be)
waive any such past default or Event of Default and its consequences. The
preceding sentence shall not, however, apply to a default in the payment of the
principal of or premium, if any, or interest on any of the Securities. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
3. Obligation to Pay Principal, Premium, if Any, and Interest. No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, Tyco or any other
obligor on the Notes, which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note in the manner, at the respective
times, at the rate, at the place and in the coin or currency herein prescribed.
4. Redemption. This Note may be redeemed, in whole or in part, at the
option of the Issuer at any time at a redemption price equal to the greater of
(i) 100% of the principal amount of this Note, and (ii) as determined by the
Quotation Agent, 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 plus 25 basis
points plus, in each case, accrued interest thereon to the date of redemption.
This Note is also subject to redemption to the extent provided in Article Twelve
of the Indenture.
"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.
8
<PAGE> 72
"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.
"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 Notes to be redeemed that will 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 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 Lehman Brothers
Inc. and four other primary U.S. Government securities dealers in The City of
New York 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.
5. Certain Covenants. The Indenture restricts the Issuer's ability to
merge, consolidate or sell substantially all of its assets. In addition, the
Issuer is obliged to abide by certain covenants, including covenants limiting
the amount of liens it may incur, as well as its ability to enter into sale and
leaseback transactions, a covenant limiting the ability of its subsidiaries to
incur indebtedness, and a covenant requiring it to pay or discharge all taxes,
all as more fully described in the Indenture. All of such covenants are subject
to the covenant defeasance procedures outlined in the Indenture.
6. Effect of Event of Default. If an Event of Default shall have occurred
and be continuing under the Indenture, the principal hereof may be declared, and
upon such declaration shall become, due and payable in the manner, with the
effect and subject to the conditions provided in the Indenture.
9
<PAGE> 73
7. Defeasance. The Indenture contains provisions for defeasance and
covenant defeasance at any time of the indebtedness on this Note upon compliance
by the Issuer with certain conditions set forth therein.
8. Denominations; Transfer. (a) The Notes are issuable in registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.
(b) Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture. This Note may also be surrendered
for exchange at the aforesaid office or agency for Notes in other authorized
denominations in an equal aggregate principal amount. No service charge shall be
made for any registration of transfer or any exchange of the Notes, except that
the Issuer may require payment of any tax or other governmental charge imposed
in connection therewith.
(c) A certificate in global form representing all of a portion of the
Notes may not be transferred except as a whole by the Depositary for such series
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or any such nominee to a
successor Depositary for such Notes or a nominee of such successor Depositary.
9. Holder as Owner. The Issuer, Tyco, the Trustee and any authorized agent
of the Issuer, Tyco or the Trustee may deem and treat the registered Holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the principal hereof
and, subject to the provisions on the face hereof, interest hereon, and for all
other purposes, and none of the Issuer, Tyco or the Trustee or any authorized
agent of the Issuer, Tyco or the Trustee shall be affected by any notice to the
contrary.
10. No Liability of Certain Persons. No recourse under or upon any
obligation, covenant or agreement of the Issuer or Tyco in the Indenture or any
indenture supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of the
Issuer, Tyco or of any successor corporation of either of them, either directly
or through the Issuer, Tyco or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.
11. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Notes other than Holders of Unrestricted Global Notes
and Holders of Unrestricted Definitive Notes shall have all the rights set forth
in the Registration Rights Agreement, dated as of
10
<PAGE> 74
November 2, 1998, among the Issuer, Tyco International Ltd. and the parties
named on the signature pages thereof.
12. Governing Law. The laws of the State of New York govern the Indenture
and this Note.
11
<PAGE> 75
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:
PLEASE INSERT TAXPAYER
IDENTIFICATION NUMBER OF ASSIGNEE
- ---------------------------------
- ---------------------------------
- ---------------------------------
PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
the within Note of Tyco International Group S.A. and all rights thereunder and
hereby irrevocably constitutes and appoints such person attorney to transfer
such Note on the books of Tyco International Group S.A., with full power of
substitution in the premises.
Dated:
---------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THE
SIGNATURE SHOULD BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY,
A MEMBER ORGANIZATION OF A NATIONAL STOCK EXCHANGE OR BY SUCH OTHER
ENTITY WHOSE SIGNATURE IS ON FILE WITH AND ACCEPTABLE TO THE TRANSFER
AGENT.
12
<PAGE> 76
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in the Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of
decrease in increase in Principal Amount of this Global Signature of Authorized
Date of Principal Amount Principal Amount Note following such decrease (or Officer of Trustee or Note
Exchange of this Global Note of this Global Note increase) Custodian
- -------- ------------------- ------------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Schedule may be used by the Trustee in respect of a Global Note, and, if
so used, shall be deemed a part thereof for all purposes.
13
<PAGE> 1
EXHIBIT 4.19
UNITED STATES SURGICAL CORPORATION
Officer's Certificate
March 17, 1998
Each of the undersigned, in his capacity as an officer of United
States Surgical Corporation, a Delaware corporation (the "Company"), hereby
certifies, pursuant to resolutions of the Board of Directors of the Company
adopted on February 3, 1998 and resolutions of the Transaction and Finance
Committee of the Board of Directors of the Company adopted on March 16, 1998,
that:
A. APPROVAL OF SENIOR INDENTURE AND APPOINTMENT OF SENIOR TRUSTEE
The Indenture relating to senior debt securities of the Company (the
"Senior Indenture") to be entered into by the Company, substantially in the form
attached hereto as Annex A, is hereby approved and the Bank of New York is
hereby appointed trustee thereunder.
B. AUTHORIZATION OF 7-1/4% SENIOR NOTES DUE MARCH 15, 2008
There is hereby established a series of senior debt securities of the
Company to be issued under the Senior Indenture having the following terms:
1. Title of securities: 7-1/4% Senior Notes due March 15,
1998 (the "Notes")
2. Aggregate principal amount of
Notes: $300,000,000
3. Maturity date: March 15, 2008
4. Interest rate: 7-1/4% per annum
5. Issue price: 99.097% of principal amount plus
accrued interest, if any, from March
20, 1998 (Reflects an underwriting
discount of .750% from the initial
public offering price of 99.847%)
6. Date from which interest
accrues: From March 20, 1998
7. Interest payment dates: March 15 and September 15,
commencing September 15, 1998
<PAGE> 2
8. Regular record dates: The March 1 or September 1, as the
case may be, next preceding the
applicable interest payment date.
9. Redemption provisions: None
10. Sinking fund provisions: None
11. Conversion or exchange features: None
12. Defeasance and discharge: Sections 4.4 and 4.5 of the Senior
Indenture are applicable
13. Covenants: Covenants: The covenants provided
for in Article X of the Senior
Indenture will be applicable to the
Notes, except as set forth in the
immediately following sentences.
The percentage reference in clause
(11) of the "Limitation on Liens"
covenant contained in Section 10.7
of the Senior Indenture to 10.0%
shall be 5.0% provided, however,
that if and for so long as the
Notes are assigned a rating of Baa1
(or the equivalent) or higher by
Moody's Investors Service, Inc. or
its successors ("Moody's") and a
rating of BBB+ (or the equivalent)
or higher by Standard & Poor's
Ratings Services, a division of The
McGraw-Hill Companies, Inc. or its
successors ("S&P"), such percentage
shall be 10.0%; provided further,
that in the event Moody's or S&P is
no longer in existence or issuing
ratings, for purposes of
determining whether such percentage
shall be 5.0% or 10.0%, such
organization may be replaced by a
nationally recognized statistical
rating organization (as defined in
Rule 436 under the Securities Act
of 1933, as amended) designated by
the Company with notice to the
Trustee and the provisions of the
foregoing proviso shall apply to
the rating issued by such
replacement rating agency.
2
<PAGE> 3
14. Date of delivery: March 20, 1998
15. Form of the Notes:
A. BOOK ENTRY SECURITIES: The Notes will initially be issued in the form
of one or more book-entry securities deposited with, or on behalf
of, The Depository Trust Company (the "Depositary"), and registered
in the name of the Depositary or its nominee (each, a "Book-Entry
Note"), and the transfer of the Notes will be restricted in
accordance with the existing operating procedures of the Depositary.
The Company will make payments of principal, premium, if any, and
interest due on the Notes represented by one or more Book-Entry
Notes to the Depositary or its nominee, as the case may be, as the
registered owner of the related Book-Entry Note or Notes. The
Depositary will credit the accounts of the related participants in
accordance with its existing operating procedures.
B. EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES: Upon the
occurrence of any of the events described in the last paragraph of
Section 3.5 of the Senior Indenture, an owner of a beneficial
interest in a Book-Entry Note will be entitled to physical delivery
in certificated form of Notes equal in principal amount to such
beneficial interest and to have such Notes registered in its name.
Notes so issued in certificated form will be issued in denominations
of $1,000 or any amount in excess thereof that is an integral
multiple of $1,000 and will be issued in registered form only,
without coupons.
16. Payment of principal, premium, if any, and interest: So long as the
Notes are represented by one or more Book-Entry Notes, payments shall be
made as provided above; for certificated Notes, if any, payments shall be
made at the office or agency of the Company maintained in the Borough of
Manhattan, The City of New York, which initially is at the Corporate
Trust Office of the Trustee, 101 Barclay Street, New York, New York
10286; PROVIDED, HOWEVER, that at the option of the Company payment of
interest for certificated Notes may be made by check mailed to the
address of the person entitled thereto as such address shall appear in
the register of holders of the Notes.
The following additional matters pertain to the Notes:
1. The Notes are being issued specifically for the purpose of reducing
outstanding indebtedness under the Company's $450,000,000 Credit
Agreement (the "$450,000,000 Credit Facility") dated as of January 30,
1998 among the Company, the lenders party thereto, Bank of America
National Trust and Savings Association, as Syndication Agent, The Bank of
New York, as Administrative Agent, and Morgan Guaranty Trust
3
<PAGE> 4
Company of New York, as Documentation Agent. The Notes contain terms
and conditions substantially similar to or more favorable to the
Company and the lenders under each of (i) the $450,000,000 Credit
Facility, (ii) the Company's $325,000,000 Credit Agreement (the
"$325,000,000 Credit Facility") dated as of December 20, 1995 among
the Company, the eligible subsidiaries of the Company referred to
therein, the banks and issuing banks party thereto, NationsBank,
N.A., as Administrative Agent, the yen lenders party thereto, The
Bank of New York, as Yen Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent, and (iii) the
Company's $175,000,000 Credit Agreement (the "$175,000,000 Credit
Facility") dated as of September 16, 1996 among the Company, the
lenders party thereto, The Bank of New York, as Administrative
Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent, within the meaning of Section 5.17 of the
$450,000,000 Credit Facility, Section 6.17 of the $325,000,000
Credit Facility and Section 5.17 of the $175,000,000 Credit
Facility, respectively.
2. The Notes shall be in substantially the form of the Note attached
hereto as Annex B.
C. APPROVAL OF UNDERWRITING AGREEMENT
The underwriting agreement ("Underwriting Agreement") to be entered into
by the Company with Salomon Brothers Inc, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc., BancAmerica Robertson Stephens, BNY
Capital Markets, Inc., Chase Securities Inc. and NationsBanc Montgomery
Securities LLC, as underwriters, substantially in the form attached hereto as
Annex C, is hereby approved.
4
<PAGE> 5
IN WITNESS WHEREOF, each of the undersigned has hereunto executed
this Officers' Certificate as of the 17th day of March, 1998.
/s/ Howard M. Rosenkrantz
-----------------------------------------
Howard M. Rosenkrantz
President and Chief Operating Officer
/s/ Richard A. Douville
-----------------------------------------
Richard A. Douville
Senior Vice President and Chief Financial
Officer
/s/ Jeffrey B. Scialllo
-----------------------------------------
Jeffrey B. Scialllo
Vice President, Information Services and
Treasurer
5
<PAGE> 1
EXHIBIT 21.1
LIST OF ALL TYCO COMPANIES BY COUNTRY OF ORGANIZATION
ARGENTINA
A&E Argentina, S.A.
Grinnell Sistemas de Proteccion Contra Incedio S.A. de C.V.
Intecva Sudamericana S.R.L.
AUSTRALIA
ACN 000 233 536 Pty. Limited (1)
ACN 007 664 253 Pty. Limited (2)
ACN 069 907 384 Pty. Limited
ADT Security Systems Limited
Command Investments Pty. Limited
Complete Engineering Group Pty. Limited
Complete Engineering Service Division Pty. Ltd.
Environ Pty. Limited
Fire Control Pty Limited
Fire Guard A.F.S. Pty Ltd.
Firefair Pty Limited
Firmagroup Operations Holdings Pty Limited
G.F.P.S. Pty Limited (3)
GAAM Engineering Pty. Ltd.
Gold Energy (Aust) Pty. Limited
Grinnell Asia Pacific Pty Limited (4)
Kendall Australasia Pty Ltd.
Keystone Asia Pacific Pty. Ltd.
MB John Limited
Mather & Platt Pty. Ltd.
Newmac Building Products Pty. Limited
Panmedica Pty. Ltd.
Sherwood Medical Industries Pty. Limited
Silan Pty Limited
Super Nominees Pty Limited
- ----------------------------
(1) Also doing business under the following name: GAAM Fire & Rescue
(2) Also doing business under the following name: Firegard (Australia)
Company
(3) Also doing business under the following name: Guardian Fire Protection Co.
(4) Also doing business under the following names: Fire Guard A.F.S., Grinnell
ACT, Grinnell Controlled Atmospheres, Grinnell Flow Control, Grinnell Supply
Sales, Jefferson Electrical Services, O'Donnell Griffin, Planned Communications
Australia, WF Energy Controls
1
<PAGE> 2
TESP Pty. Limited
TISP Pty Limited
Tyco Australia Pty Ltd. (ACN 008 399 004) (5)
Tyco Building Products Pty Limited (6)
Tyco Engineering and Construction (Asia) Pty. Ltd.
Tyco Flow Control Pacific Pty. Limited
Tyco Grinnell Asia Pacific Pty Limited
Tyco International Pty Limited
Viking Fire Systems Pty Limited (7)
Yarway Australia Pty. Ltd.
AUSTRIA
Total Walther Feuerschutz und Sicherheit GmbH
BAHAMAS
Newington Limited
World Services Inc.
BARBADOS
Exeter Holdings Limited
INBRAND FSC Inc.
Kendall International FSC, Inc.
Keystone FSC Ltd.
SWD Foreign Sales Corporation
TSSL Foreign Sales Corporation
BELGIUM
1991 CIPE Benelux
1994 WHICH
1997 AIRVANS
ADT Security Services S.A.
BVBA Alarmcentrale AC
N.V. ADT Security Services S.A.
Sherwood Benelux S.A.
- --------------------------
(5) Also doing business under the following names: ACT Plumbing & Maintenance,
Advanced Systems Engineering, Building Asset Maintenance, E.P.S. Electrical &
Plubming Services, Fire Control Services, FHD Airconditioning, Goldfields Fire
Services, Masterbilt Industries, Olsen Engineering Company, Quintrix
Communications, safeguard Fire Systems, Simplex Fire Protection Company, Tyco
Fire Monitoring, Viking Fire Sprinklers, Williams Extinguisher Service, Wormald
Advanced Systems Engineering, Wormald Building Products, Wormald Control
Systems, Wormald Electronics, Wormald Fire & Safety, Wormald Fire Engineering,
Wormald Technology
(6) Also doing business under the following names: Cecon Fire Doors (NSW only),
Fire Systems Engineering, Metalbilt, Padde, Sealeck Doors & Windows
(7) Also doing business under the following name: Viking Fire Sprinklers (SA and
NT only)
2
<PAGE> 3
Wormald S.A.
Zettler Belgique S.A.
BERMUDA
Camron (Bermuda) Insurance Ltd.
Camron Finance (Bermuda) Limited
Cawich Limited
Electro-Protective Limited
Kral Steel, Ltd.
Tyco Holdings Limited
Tyco International Ltd.
BORNEO
Wormald Borneo Sdn. Bhd.
BRAZIL
Ansul do Brasil Ltda.
Grinnell Sistemas de Protecao contra Incendio Ltda.
Keystone do Brasil Ltda.
BRITISH VIRGIN ISLANDS
A-G Casualty Ltd.
Somerset Holdings Ltd.
CANADA
495649 Ontario Limited
919551 Ontario, Inc.
921150 Ontario, Inc.
ADT Canada Holdings Limited (72.84%)
ADT Finance, Inc.
ADT Security Services Canada, Inc.
Cantech Corporation
Extincto Ltee
Forward Safety Systems, Inc.
Hawley Group Canada Limited
Hygieia Holdings (Canada) Inc.
Inbrand Canada Inc.
Jenteck Controls Ltd.
Kendall Canada, Inc.
Keystone Canada, Co.
3
<PAGE> 4
Ludlow Canada, Inc.
Rust Environment & Infrastructure of Canada Inc.
Sherwood Medical Industries (Canada) Inc.
Tyco International of Canada Ltd. (8)
Unistrut of Canada Limited
Pony Express Residential Security Ltd.
Wells Fargo Alarm Services of Canada Limited
Century Industries Company
CAYMAN ISLANDS
Anderson-Greenwood Overseas Ltd.
Davis & Geck Caribe Limited
Davis & Geck Limited
CHANNEL ISLANDS
ASH Capital Finance
Driftwood Limited
Exbury Limited
Itoba Limited
Labyrinth Investments Limited
Linksview Limited
Tinwald Limited
CHILE
Comercial Kendall (Chile) Limitada
Interco Alarmas De Chile, S.A.
Santex, S.A.
Unistrut Chile Comercial E. Industrial Limitada
COLOMBIA
Kendall Colombia, S.A.
COSTA RICA
- ----------------------
(8) Also doing business under the following names: Canvil, Mueller Canada,
Grinnell Fire Protection, Grinnell Supply Sales, Wormald Canada, Scotia
Sprinklers, Wormald Fire Systems
4
<PAGE> 5
Carlisle Costa Rica S.A.
Kendall Innovadores en Cuidados al Paciente S.A.
CZECH REPUBLIC
Stabilni Hasici Zarizeni spol s.r.o.
Zettler C.R. Spol. s.r.o.
DENMARK
Thorn Security Danmark A/S
Wormald A/S
ECUADOR
Grinnell Sistemas de Proteccion Contra Incedio, S.A.
FRANCE
ADT Securite Services S.A.
ADT Security Services S.A.
Acheroise de Participations
Acroba S.A.
Bon & Naga S.A.
CEDI Securite
CEMOS S.A.
CIPE France SA
COFILION
DSI (34%)
Euroville
FINASUR
FIRENT
Gachot, SCA
Grinnell Distribution France Sarl
Gubri SA
INBRAND France SA
Kendall S.A.
Laboratoires Sherwood Davis & Geck S.A.
Labrotoire Alaune
Mather & Platt Wormald S.A.
Nomos Holding S.A.
Nomos SA
Omnium de Prevention et de Protection Incendie
PREFI
Sherwood-Davis & Geck Needles S.A.
Societe Europeene de Protection Control L'Incendie S.A.
Societe Industrial de Rosheim - S.I.R.ROS S.C.A.
TELESIX
TEP
TSA Gap (34%)
Tyco Europe S.A.
5
<PAGE> 6
Tyco Flow Control Holding S.A.
VISAGEST
WHICH
GERMANY
1994 CIPE Deutschland
1997 TEP Deutschland
1996 WHICH Deutschland
1998 JALEX
ARBO Medizin-Technologie GmbH
ARBO-tec Sensor-Technologie GmbH
AZ Elektroanlagenbau GmbH
AZ Immobilien GbR
B. Braun-Dexon GmbH (50%)
Babcock Sempell AG
Babcock Sempell Armaturen-Service GmbH
CDK Holding Deutschland GmbH
CDK Holding GmbH
Chemat GmbH
Erichs Armatur AB
GH Montage GmbH
Grinnell Flow Control GmbH
Grinnell Flow Control GmbH & Co. Distribution OHG
H&H Med. GmbH
Helmut Geissler Glasinstrumente GmbH
Kendall Medizinische Erzeugnisse GmbH
Keystone GmbH
Med. Holding GmbH
Medolas Gesellschaft Fur Medizintechnik MBH
NARVIK Armaturen Vertriebsgesellschaft mbH
Otto Fankhanel & Sohn GmbH
Pirna Copitz
Rathgeber BIOFORM GmbH
Raumschutzanlagenbau GmbH
SABO-Armaturen Service GmbH
Sempell Valves (Pvt) Ltd.
Sherwood Medical GmbH
Thorn Sicherheits GmbH
Total Walther Feuerschutz Loschmittel GmbH
Total Walther GmbH
Triangle Controls Ltd.
Tyco Holding GmbH
Tyco International Armaturen Holding GmbH i Gr.
Vonk Enschede BV
Zettler Hilfe e.V.
6
<PAGE> 7
GIBRALTAR
Stralen Investments Limited
Valera Holdings Limited
Velum 1998 Limited
Verdana Holdings Limited
GREECE
ADT Greece S.A. (82.5%)
Greene Insurance Limited
GUATEMALA
Grinnell Sistemas de Proteccion Contra Incendio, S.A. de C.V. (Guatamala)
Tyco Ingenieria y Construccion S.A.
HONG KONG
A&E Products (Far East) Limited
Crown Nation International Limited (50%)
Dawson Engineering Limited (50%)
Kendall (Asia) Medical Products Limited
Kendall Medical (Hong Kong) Limited
Keystone Valve Hong Kong, Ltd.
Modern China Giant Limited
ODG-Energy Controls Limited
Pioneer Faith International Limited (50%)
Sherwood Medical (Hong Kong) Limited
Thorn Security (Hong Kong) Limited
Tyco Engineering & Construction (HK) Limited
Tyco/Tudawe Trading Cooperation
Wormald Engineering Services Ltd.
HUNGARY
Total Walther Contractor and Engineering
INDIA
Keystone Valves (India) Pvt. Ltd.
Modern Alarms & Electronics Pvt Ltd.
Stenco Engineering Co. Pvt. Ltd.
7
<PAGE> 8
INDONESIA
P.T. ODG Wormald Indonesia (80%)
IRELAND
A.E.L. Video (Ireland) Limited
ABA Electronics Ltd.
ACE Alarm Systems Ltd.
ADT Limited
ADT Ltd.
Abel Alarms Ireland Ltd.
Allied Alarms & Safes Ltd.
Allied Alarms Ltd.
Allied Metal Products Ltd.
Allied Security Products Ltd.
Brangate Limited
Exeter Insurance Company Limited
Huet Security Ltd.
IAMASCO Plc
Kendall Medical Limited
Knightline Ltd.
Knightlock Ltd.
Knightvision Ltd.
Knightwatch Alarms, Ltd.
Mather & Platt (Ireland) Limited
Mather & Platt Ireland (Manufacturing) Limited
Modern Security Systems Limited
Sandalwood Limited
Securitag Ltd.
Security Control Risk & Monitoring Ltd.
Sherwood Medical Industries of Ireland Limited
Tyco Ireland Limited
ITALY
Biffi Italia S.r.l.
Kendall Medical S.R.L.
Meditec s.r.l.
Sherwood Medical Italia S.r.l.
Vanessa S.r.l.
Wormald Italiana S.P.A.
Zettler App. Eletricci S.p.A.
Zettler S.R.L.
8
<PAGE> 9
JAPAN
Nihon Kendall K.K.
Nippon Keystone Corporation
Nippon Sherwood Medical Industries Ltd. (58%)
KINGDOM OF SAUDI ARABIA
Abahsain-Cope, S.A. Ltd.
KOREA
Kendall Medical Ltd.
Keystone Valve (Korea) Limited
LUXEMBOURG
1997 CIPE Luxembourg
ADT Finance S.A.
ADT Luxembourg S.A.
Ocarina S.A.
Tyco Group S.a.r.l.
Tyco International Group S.A.
MALAYSIA
Brunsfield Holdings Sdn. Bhd.
Brunsfield Thorn Technology Sdn. Bhd. (50%)
Grinnell Supply Sales (Malaysia) Sdn. Bhd. (50%)
Innodouble (M) Sdn. Bhd. (51%)
Keystone Valve (M) Sdn. Bhd.
Kijang Merger Sdn Bhd
Kumpulan Injap Kebesan (M) Sdn. Bhd.
Mediquip Sdn. Bhd.
Thorn Security Services (Malaysia) Sdn. Bhd. (30%)
Tyco Engineering & Construction (Malaysia) Sdn. Bhd.
Tyco Flow Control (Malaysia) Sdn. Bhd.
Tyco Grinnell KM Sdn. Bhd. (30%)
MARSHALL ISLANDS
C.S. Tyco Provider, Inc.
9
<PAGE> 10
Coastal Cable Ship Co. Inc.
MAURITIUS
Tyco Asia Investments Limited
MEXICO
Ansul Mexico, S.A. de C.V.
Carlisle Recycling de Mexico S.A. de C.V.
Cima de Acuna S.A. de C.V.
Euro-Flex de Mexico, S.A. de C.V.
Especialidades Medicas Kenmex, S.A.
Grinnell Sistemas de Proteccion Contra Incendio Mexico S.A. de C.V.
Kelsar S.A. de C.V.
Kendall de Mexico S.A. de C.V.
Kenmex Holding Company, S.A. de C.V.
Plasticos Bajacal, S.A. de C.V.
Plasticos Mexical S.A. de C.V.
Productos de Atencion de Salud de Mexico, S.A.
Rust Servicos Ambientales E Infrastructura, S.A. de C.V.
Tyco Engineering and Construction S.A. De C.V.
Valvulas Keystone de Mexico S.A. de C.V.
NETHERLANDS
1994 CIPE Nederland
1997 TEP Nederland
ADT Canada B.V.
ADT Canada Holdings B.V.
ADT Finance B.V.
ADT Holdings B.V.
ADT Security Services B.V.
ADT Security Services Holdings B.V.
Automated Loss Prevention Systems BV
Automated Security Intl. BV
Grinnell Sales & Distribution B.V.
Inbrand Benelux B.V.
Inbrand Europe BV
Keystone Valve (Europa) B.V.
Nieuwkerk BV
Pritchard Services Group BV
Sherwood Medical Nederland B.V.
Thorn Security Nederland BV
Thuiszorg Direct BV (90%)
10
<PAGE> 11
Total Walther B.V.
Tyco Labs Holland I B.V.
Tyco Waterworks B.V.
Unistrut (Benelux) B.V.
Vital Disposables BV
Vital Medical BV
Walther Brandbeveiliging B.V.
Wormald B.V.
Zettler Netherlands N.V.
NETHERLANDS ANTILLES
ADT Finance NV
DE20 N.V.
NEW ZEALAND
A.F.A. Monitoring Limited
ADT Holding Co. No. 3 Limited
ADT Holdings Co. No. 1 Limited
ADT Holdings Co. No. 2 Limited
Armourguard Security Limited
Associated Fire Alarms Ltd. (39%)
Command Nominees Limited
Danks Bros. Limited
Enlist Consulting Limited
Fire Protection Inspection Services Ltd. 19%)
Holyhead Holdings Limited
Kendall New Zealand Limited
Key Contact Limited
Keystone New Zealand Limited
New Zealand Valve Company Limited
Nortrac Engineering Limited
Securacopy Services (1992) Limited
Seekers Communications Limited
Tyco New Zealand Limited
NORWAY
Ergoform AS (75.1%)
Wormald Control Systems A/S
Wormald Signalco A/S
11
<PAGE> 12
PANAMA
Kendall, S.A. (Panama)
PEOPLE'S REPUBLIC OF CHINA
Beijing Keystone Valve Co. Ltd.
Kendall-Yantai Medical Products Company, Ltd.
Keystone (Jingmen) Valve Co. Ltd. (80%)
Keystone Valve (China) Ltd.
Shenyang OYT-Grinnell Fire Door Manufacturing Company Limited
Shenyang Yarway Valve Co. Ltd.
PHILIPPINES
Tyco-PIECO Corporation, Inc. (80%)
Carlisle Philippines, Inc.
PORTUGAL
B. Braun-Dexon (Portugal) Produtos Hospitalares Ltda. (50%)
SINGAPORE
Grinnell Supply Sales Asia Pte. Ltd.
INBRAND Asia Pte. Ltd. (40%)
Kendall Medical Far East Pte. Ltd.
Keystone Southeast Asia Pte. Ltd.
Thorn Security Pte. Limited
Tyco Engineering and Construction (SEA) Pte. Ltd.
Tyco Laboratories International (1993) Pte. Ltd.
SLOVAK REPUBLIC
Total Walther - Stabilne hasiace zariadenia s.r.o.
SOUTH AFRICA
Intervalve (Pty) Ltd.
Kendall Medical (Proprietary) Limited
Kendall South Africa (50%)
12
<PAGE> 13
SPAIN
1990 CIPE Espana
ADT-Prosegur Sistemas de Seguridad S.A. (50%)
B. Braun-Dexon, S.A. (50%)
Belgicast Internacional S.L.
Division 7
Hygienical Absorbents, S.A.
INBRAND Espana, S.L.
Kendall Espana S.A.
Kendall Proclinics, S.L.
Wormald Mather & Platt Espana S.A. (9)
SWEDEN
Kendall Medical AB
Modern Prefabspecialisten Sprinkler i Lammhult AB
Wormald CZ s.r.o.
Wormald Fire Systems A.B.
SWITZERLAND
1993 CIPE Suisse
1997 TEP Suisse
ADT Franchising AG
ADT Monitoring Services AG
ADT Services AG
Confab Services AG
Kendall Medical AG (Kendall Medical Ltd.)
Neotecha A.G.
Sherwood Services AG
Total Walther Feuerschutz A.G.
Zettler AG
TAIWAN
Carlisle Taiwan, Inc.
Kendall Medical Ltd.
Keystone Valve (Taiwan) Ltd.
Wormald Engineering Systems Taiwan Ltd.
THAILAND
Kendall Gammatron Limited (85%)
Kendall Medical Ltd.
- ----------------------
(9) Also doing business under the following name: Wormald Espania
13
<PAGE> 14
Keystone Valve (Thailand) Ltd. (50%)
Tyco International (Thailand) Ltd. (50%)
TURKS AND CAICOS
Waveney Investments Limited
US VIRGIN ISLANDS
Ferrari Medical International, Inc.
Rochester Cable and Rope (FSC) Co., Inc.
Tyco International Sales Corp.
UNITED ARAB EMIRATES
Anderson-Greenwood Middle East (50%)
UNITED KINGDOM
A.R.C. Fire Protection Ltd.
A.S. (Overseas) Ltd.
ADT
ADT (UK) Holdings plc
ADT (UK) Limited
ADT Aviation Limited
ADT Finance PLC
ADT Fire & Security plc
ADT Group PLC
ADT Linen Services Limited
ADT Pension Fund Limited
ADT Properties Limited
ADT Securities Limited
ADT Security Systems Limited
ADT Travel Group Limited
ADT Travel Holdings Limited
ADT Travel Limited
ADT Trustees Limited
ADT UK Investments Limited
AFA-MINERVA Limited
ATG Manufacturing Ltd.
Abbey Security International Ltd.
Abbey Security Management Ltd.
Access Control Systems Limited
Advanced Absorbent Products Holdings Ltd.
Advanced Alarm Systems Limited
American District Telegraph Services International Limited
14
<PAGE> 15
Applied Maintenance Systems Limited
Argyle Medical Industries (U.K.) Limited
Ariel Burglary and Fire Protection Company Limited
Ash Group Services Ltd.
Ash Rentals Limited
Atlas Fire Engineering Limited
Audio Education Limited
Auto Auctions (Scotland) Limited
Auto Auctions Limited
Automated Loss Prevention Systems International Ltd.
Automated Loss Prevention Systems Limited
Automated Security (Equipment) Limited
Automated Security (Holdings) PLC
Automated Security (International) Limited
Automated Security (Investments) Limited
Automated Security (Properties) Ltd.
Automated Security Information Systems Technology Limited
Automated Security Limited
Avalon Emergency Systems Limited
BCA (Auctions) Limited
BCA (Mobile Homes) Limited
BCA Sports Management Limited
BCA Vehicle Preparation Limited
Basingkirk Estates Limited
Bedford Car Auctions Limited
Bissell Healthcare Limited
Britannia Access Systems Limited
Britannia Monitoring Services Limited
Britannia Photovision Limited
Britannia Security Group (C.I.) Limited
Britannia Security Group Limited
Britannia Security Systems (Midlands) Limited
Britannia Security Systems (Southern) Limited
Britannia Security Systems Limited
British Car Auctions (Aviation) Limited
British Car Auctions (Flying) Limited
Brocks Alarms Limited
CDK U.K. Limited
Camp Limited
Camp Pension Trustees Limited
Campeire Limited
Capitol Alarms Limited
Cellularm Limited
Charles Winn (Valves) Limited
Cheshire Alarm Services Ltd.
Chiltern Security Limited
15
<PAGE> 16
Cleaners (South West) Limited
Cleaners Limited
Coin Machine Sales Limited
Combat Alarms Limited
Comforta Healthcare Ltd. (UK)
Communication & Tracking Services Limited
Confab International Limited
Constable's Alarm Company Limited
Countrywide Leisure Holdings Limited
D.C.S. Alarms Limited
D.J. Security Alarms (Whales) Limited
D.J. Security Alarms Limited
Dicerule Limited
Discreet Disposables Ltd.
Donald Campbell Associates Limited
Dong Bang Minerva (UK) Limited
EMOS Rentals Limited
Edward Barber & Company Limited
Edward Barber (U.K.) Limited
Ellis Son & Paramore Limited
Emos Information Systems Limited
Excelsior Security Services Limited
Eyelevel Electronics Limited
Farnham Limited
Finesnatch Limited
Fire Defender (U.K.) Ltd. (50%)
Ford Electronic Services Limited
Freedom Systems Ltd.
Frome Motor Auction Sales Limited
Gailey Caravan and Leisure Limited
Ganmill Limited
General Cleaning Contractors Limited
Grinnell (U.K.) Ltd. (10)
Grinnell Manufacturing (U.K.) Limited (11)
Grinnell Sales & Distribution (U.K.) Ltd.
Group Sonitrol Security Systems Limited
HMC Factors Limited
Hawley International Finance Limited
Hertfordshire Security Systems Limited
Hindle Cockburns Limited
Home Improvement Holdings Limited
Huddersfield Motor Auctions Limited
Inbrand Ltd.
Inbrand UK Holdings Ltd.
- ----------------------------------------
10 Also doing business under the following names: Grinnell Firekil, GEM
Consultants
11 Also doing business under the following names: The Ansul Fabrication, Debro
Engineering & Presswork
16
<PAGE> 17
Inbrand UK Ltd.
Industrial Cleaners (UK) Limited
Intergrated Transport Systems Limited
JEL Building Management Limited
JEL Building Management Systems Limited
JMC Rehab Limited
James Deacon Security Limited
Johnson and Sons Limited
KS Lift Services Limited
Kaldistone Limited
Kean & Scott Limited
Kendall Company (U.K.) Limited, The
Keystone Valve (U.K.) Ltd.
Lander Urban Renewal Limited
Lastonet Products Limited
Leprodux Limited
Lesters Health Care Services Limited
Libas International Limited
Litepeel Limited
Live-In-Style Furniture Limited
Loss Prevention Ltd.
M1 Car Auctions Limited
M1 Motor Car Auctions Limited
M25 Motor Auctions Limited
M3 Car Auctions Limited
Markden No. 1 Limited
Markden No. 2 Limited
Markden No. 3 Limited
Markden No. 4 Limited
Markden No. 5 Limited
Markden No. 6 Limited
Mather & Platt (Exports) Ltd.
Mather & Platt Fire Protection Limited
Mather and Platt Alarms Limited
Measham Motor Auctions Limited
Meridian Fire Protection Limited
Midland Counties Motor Auctions Limited
Minerva Fire Defence Limited
Mobile Pressure Cleaning Limited
Modern Alarms (Scotland) Limited
Modern Alarms Limited
Modern Alarms Limited
Modern Automated Security Limited
Modern Automatic Alarms (N.I.) Limited
Modern Automatic Alarms Limited
Modern Carecall Limited
17
<PAGE> 18
Modern Homepack Limited
Modern Integrated Systems Limited
Modern Security Systems
Modern Security Systems (IOM) Ltd.
Modern Security Systems (Products) Limited
Modern Telecom Limited
Modern Telecom Security Limited
ODL Limited
OKD Limited
OMK Limited
PPR Alarms Limited
Phoenix Security Services Limited
Photovision Rentals Limited
Priory Security Services Limited
Pritchard Insurance Services Limited
Pritchard Laundries Limited
Pritchard Services Group Investments Limited
Progressive Securities Investment Trust Limited
Prospect Cleaning Supplies Limited
Prospect House Investments Limited
Prospect House No. 11 Limited
Prospect House No. 5 Limited
Prospect House No. 7 Limited
Provincial Limited
Pryor & Howard (1988) Limited
Redhill Security Services Limited
Region Protection (Notts) Limited
Renalarms Ltd.
S&W Bedrooms Limited
Screentone Limited
Securis Products Ltd.
Securitag International Limited
Security Alarms Limited
Security Centres (Scotland) Limited
Security Centres (UK) Holdings Limited
Security Centres (UK) Limited
Security Centres Holdings Intl. Ltd.
Security Centres Holdings Limited
Security Centres Investments Limited
Security Systems (Rental) Limited
Security Watch Limited
Shepton Holdings Limited
Shield Protection Limited
Show Contracts Limited
Sky Signs Limited
Snap Printing Limited
18
<PAGE> 19
Sonitrol Limited
Sovereign Security Systems Limited
Spensall Engineering Limited
Splendour Cleaning Services Limited
Stapp Limited
Steel Support Systems Limited
Steeplock Limited
Streets Machine Operating Company Limited
Stretford Security Services Limited
TSG Trustees Limited TVX Ltd.
Taskman Security Services Limited
Telecom Security Limited
Ten Acre Securities Ltd.
Thameside Lock and Safe Company Limited
The British Car Auction Group Limited
The British Security Consortium Limited
The City Laundry (Norwich) Limited
The Commercial Motor Auctions Limited
The Expedier Development Company Limited
The G B Auction Group Limited
The Mirror Laundries Limited
The Motor Auctions (Derby) Limited
The Motor Auctions (London) Limited
The Motor Auctions (Scotland) Limited
The Motor Auctions Group Limited
Thorn Security Group Limited
Thorn Security International Limited
Thorn Security Limited
Thornfire Limited
Total Lift Services Limited
Trade Fire Limited
Tunite Limited
Tustin Machine Tools Limited
Tyco Holdings (UK) Ltd.
Tyco Valves Limited
Tyne CarAuction Limited
UCP Universal Consumer Products Limited
Ultra Security Alarms Limited
Unifast Systems Limited
Unipower Limited
Unirax Limited
Unistrut Europe Ltd.
Unistrut Holdings Ltd.
Unistrut Limited
Vernon-Carus Limited
19
<PAGE> 20
Vic Engineering Limited
Vital Communications International Ltd.
W&S Freeman Limited
Wealdpoint Limited
White Group Electronics Limited
Wholematch Limited
Willow (Whales) Limited
Wormald Ansul (U.K.) Ltd. 12
Wormald Engineering Ltd.
Wormald Fire Systems Ltd.
Wormald Holdings (U.K.) Ltd.
Wormald Industrial Property Ltd.
Zettler Limited
URUGUAY
Bethany Trading Company
VENEZUELA
Ansul de Venezuela C.A.
Grinnell Sistemas de Proteccion Contra Incendio, S.A. (Venezuela)
Grupo Rust International Di Venezuela C.A.
Kendall de Venezuela, C.A.
Tyco Flow Control de Venezuela, CA
UNITED STATES OF AMERICA
ADT Holdings, Inc.
A&E Construction Products, Inc.
A-G Safety Services, Inc.
AA Property Holdings, Inc.
AAAA Dealer Services, Inc.
ADT Automotive Holdings, Inc.
ADT Automotive Services, Inc.
ADT Automotive, Inc.
ADT General Holdings, Inc.
ADT Investments II, Inc.
ADT Investments, Inc.
ADT Maintenance Services, Inc.
ADT Operations, Inc.
ADT Property Holdings, Inc.
- ---------------------------
12 Also doing business under the following names: Wormald Fire Systaems, Wormald
Engineering, Wormald Britannia, Wormald Lintott and Lintott Process Systems
20
<PAGE> 21
ADT Security Services, Inc.
ADT Security Systems, West, Inc.
ADT Services, Inc.
ADT Specialty Auctions, Inc.
ADT Title Holding Company I
ADT Title Holding Company II
Advanced Protection Services, Inc.
Alarms By Protectus, Inc.
Alternative Ways, Inc.
Alarm Specialist, Inc.
API Security, Inc.
ATC Sales Company
Allied Tube & Conduit Corporation
Anderson, Greenwood & Co.
Ansul, Incorporated 13
Armin Plastics Fairmont, Inc.
Armin Plastics, Inc. 14
Atcor, Inc.
Auction Transport, Inc.
Automated Security Corp.
Automated Security Holdings, Inc.
Beacon Security Systems, Inc.
BW - Canada Alarm (Wells Fargo) Corporation
British Car Auctions, Inc.
Burton, Adams, Kemp & King, Inc.
Certified Systems Central Station, Inc.
Certified Systems, Inc.
Crosby Valve, Inc.
C.S. Charles L. Brown, L.P. (75%)
C.S. Global Link, L.P. (75%)
C.S. Global Mariner, L.P. (75%)
C.S. Global Sentinel, L.P. (75%)
C.S. Long Lines, L.P. (75%)
CCTC International, Inc.
CV Holding Inc.
CVG Holding Corp.
Carlisle Plastics, Inc.
Coast Alarm Inc.
Confab Holding Corp.
Confab International L.P.
Crosby Valve International Ltd.
- -----------------------------
13 Also doing business under the following name: Ansul Fire Protection
14 Also doing business under the following names: Armin Plastics-Western Region,
Armin Plastics California, Armin Thermodynamics, Armin Plastics Northeast
Region, Armin Poly-Version, Armin Polyethylene Bag, Armin Roto-Lith, Armin
Plastics - Southeast Region, Armin Plastics North Carolina, Armin Plastics -
Central, Armin Plastics-Midwest Region, Armin Plastics Oklahoma
21
<PAGE> 22
Crosby Valve Sales & Services Corporation
Davis & Geck, Inc.
Dictograph Franchise Corporation
Dunk Automatic Sprinkler Company, Inc.
Earth Tech, Inc.
Earth Tech Holdings, Inc.
Earth Tech Engineers of New York, P.C.
Earth Technology Corporation (USA), The
Electro Signal Lab, Inc.
FCI Liquidations, Inc.
Fire Detection Consultants, Inc.
Flying Lion, Inc.
FRM Services, Inc.
Gimpel Corporation
Grinnell Corporation (15
Hanger Recycling Company Inc., The
Henry Pratt Company
Holmes Protection, Inc. (NY)
Holmes Protection Inc. (Il)
Holmes Protection Group, Inc.
James Jones Company
J.B. Smith Mfg. Co.
Jeppo Industries, Inc.
K.W. Cunningham & Associates, Inc.
Kendall Holding Company
Kendall Company LP, The (16)
Keystone France Holdings Corp.
Keystone Germany Holdings Corp.
Keystone Kuwait, Inc.
Keystone Middle East, Inc.
Keystone Saudi, Inc.
Keystone Valve-Middle East, Inc.
Ludlow Corporation (17)
Ludlow Jute Company Limited
Mid-Atlantic Security, Inc.
Mobile Security Communications, Inc. (19%)
Mueller Service Co.
ueller Co.
Mueller Co. Foundation
Mueller Holdings Corp.
- --------------------------------
(15) Also doing business under the following names: Anvil Products, Automatic
Sprinkler, Gem Sprinkler Company, Grinnell Flow Control, Grinnell Supply Sales
Company, Grinnell Fire Protection Systems Company, Hersey Products, Tyco Flow
Control, Tyco Fire & Security Services, Tyco Flow Control - Latin Division,
Zettler
(16) Also doing business under the following names: Kendall Healthcare, Kendall
International
(17) Also doing business under the following names: Accurate Forming, Ludlow
Coated Products, Ludlow Technical Products, Uni-Patch
22
<PAGE> 23
New England Fire Equipment Company, Inc.
Polyken Technologies Europe, Inc.
Private Products, Inc.
Protex Special Systems, Inc.
Redi-Electric Inc.
Robinson Alarm Companies, Inc.
Robinson Protective Alarm Company
Rochester Corporation, The
Rust Architecture Inc.
Rust Environment & Infrastructure Inc.
Rust Environment & Infrastructure of New York Inc.
Rust Environment & Infrastructure, P.E., Arch. & L.S., P.C.
Rust Environment & Infrastructure of Michigan Inc.
Rust Architecture & Geology of North Carolina, P.C.
Rust Environment & Infrastructure of North Carolina Inc.
Rust Environment & Infrastructure of Ohio Inc.
Security Systems of the Tri-State, Inc.
Security Solutions Inc.
Sherwood Medical Company
Sherwood Medical Company I
Sherwood-Accurate Inc.
Sigma Circuits, Inc.
Sigma Holding Corp.
Simplex Technologies Inc.
Sonitrol Corporation
Sonitrol Management Corporation
Star Sprinkler, Inc.
SSI Atlantic Crossing Holdings LLC
SSI Atlantic Crossing LLC
Suntronix Special Systems, Inc.
SWD Holding, Inc.
SWD Holding, Inc. I
T.J. Cope Inc.
TKC Holding Corp.
TME Management Corp.
TSSL Holding Corp.
Techcon International Inc.
Transoceanic Cable Ship Company, Inc.
Tri-City Auto Auction, Inc.
TSSL Finance Company, Inc.
Tyco Acquisition Corp. I
Tyco Acquisition Corp. II
Tyco Acquisition Corp. III
Tyco Acquisition Corp. IV
Tyco Acquisition Corp. V
Tyco Acquisition Corp. VI
23
<PAGE> 24
Tyco Acquisition Corp. VII
Tyco Acquisition Corp. VIII
Tyco Acquisition Corp. IX
Tyco Acquisition Corp. X
Tyco Acquisition Corp. XI
Tyco Acquisition Corp. XII
Tyco Acquisition Corp. XIII
Tyco Acquisition Corp. XIV
Tyco Acquisition Corp. XV
Tyco (US) Holdings, Inc.
Tyco Finance Corp.
Tyco Holdings, Inc.
Tyco International Asia, Inc.
Tyco Flow Control, Inc.
Tyco Valves & Controls, Inc.
Tyco Investments, Inc.
Tyco Receivables Corp.
Tyco Submarine Systems Ltd.
Tyco International (US) Inc.
Tyco Printed Circuit Group Inc.
Tri-Parish Security Systems, Inc.
Unistrut Corporation
Unistrut International Corp.
United States Construction Co.
The Waverly Group LLC
WGV Liquidations, Inc.
Water Holdings Corp.
Wells Fargo Alarm Services, Inc.
Wormald Americas, Inc.
Wells Fargo Pyro Technologies, Inc.
White Mountain Insurance Company
Yarway Corporation
24
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (File Nos. 333-21425, 333-33779, 333-43333, 333-50855 and
333-50855-01) and on Form S-8 (File Nos. 33-38249, 33-26970, 333-03975,
333-33999 and 333-34001) of Tyco International Ltd. of our report dated
October 23, 1998 on our audits of the Consolidated Financial Statements and the
Consolidated Financial Statement Schedule of Tyco International Ltd. as of
September 30, 1998 and 1997 and for the year ended September 30, 1998, the nine
months ended September 30, 1997 and the year ended December 31, 1996, which
report is included in this Annual Report on Form 10-K.
PricewaterhouseCoopers
Hamilton, Bermuda
December 9, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Annual Report on Form 10-K and to the incorporation by reference in the
Registration Statements on Form S-3 (File Nos. 333-21425, 333-33779, 333-43333,
333-50855 and 333-50855-01) and on Form S-8 (File Nos. 33-38249, 33-26970,
333-03975, 333-33999 and 333-34001) of Tyco International Ltd. of our report
dated January 31, 1997 on our audit of the consolidated statements of income,
changes in shareholders' investment and cash flows of Keystone International,
Inc. and subsidiaries for the year ended December 31, 1996, which financial
statements are not included herein. It also should be noted that we have not
audited any financial statements of Keystone International, Inc. and
subsidiaries subsequent to December 31, 1996 or performed any audit procedures
subsequent to the date of our report.
Arthur Andersen LLP
December 9, 1998
Houston, Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT OF TYCO INTERNATIONAL LTD. AS OF AND FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 820
<SECURITIES> 0
<RECEIVABLES> 2,217
<ALLOWANCES> 257
<INVENTORY> 1,460
<CURRENT-ASSETS> 5,743
<PP&E> 5,706
<DEPRECIATION> 1,996
<TOTAL-ASSETS> 16,527
<CURRENT-LIABILITIES> 5,048
<BONDS> 4,653
0
0
<COMMON> 117
<OTHER-SE> 6,020
<TOTAL-LIABILITY-AND-EQUITY> 16,527
<SALES> 12,311
<TOTAL-REVENUES> 12,311
<CGS> 8,046
<TOTAL-COSTS> 8,046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 82
<INTEREST-EXPENSE> 205
<INCOME-PRETAX> 1,718
<INCOME-TAX> 541
<INCOME-CONTINUING> 1,177
<DISCONTINUED> 0
<EXTRAORDINARY> 2
<CHANGES> 0
<NET-INCOME> 1,175
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 2.02
</TABLE>
