-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Evrd7yHPEOGkxlSDyFdhZeUQHwnaInKpStxmxAb9BZNqNw4QdYajbymgMthRMGSm DXkzmzYOyQusd2YRsHkjwg== 0000950131-01-503345.txt : 20010914 0000950131-01-503345.hdr.sgml : 20010914 ACCESSION NUMBER: 0000950131-01-503345 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20010913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYCO INTERNATIONAL LTD /BER/ CENTRAL INDEX KEY: 0000833444 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] STATE OF INCORPORATION: D0 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-68240 FILM NUMBER: 1736714 BUSINESS ADDRESS: STREET 1: 90 PITTS BAY ROAD STREET 2: THE ZURICH CENTRE SECOND FLOOR CITY: PEMROKE HM 08 BERMU STATE: D0 BUSINESS PHONE: 4412928674 MAIL ADDRESS: STREET 1: C/O TYCO INTERNATIONAL (US) INC STREET 2: ONE TYCO PARK CITY: EXETER STATE: NH ZIP: 03833 FORMER COMPANY: FORMER CONFORMED NAME: ADT LIMITED DATE OF NAME CHANGE: 19930601 S-4/A 1 ds4a.txt AMENDMENT NO. 1 TO FORM S-4 As filed with the Securities and Exchange Commission on September 13, 2001 Registration No. 333-68240 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- TYCO INTERNATIONAL LTD. (Exact name of Registrant as specified in its charter) Bermuda 7382 Not Applicable (State or Other (Primary Standard (I.R.S. Employer Jurisdiction of Industrial Identification Number) Incorporation or Classification Code Organization) Number) --------------- The Zurich Centre, Second Floor 90 Pitts Bay Road Pembroke HM 08, Bermuda (441) 292-8674* (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------- Mark H. Swartz c/o Tyco International (US) Inc. One Tyco Park Exeter, New Hampshire 03833 (603) 778-9700 (Name, address, including zip code, and telephone number, including area code, of agent for service) * Tyco International Ltd. maintains its registered and principal executive offices at The Zurich Centre, Second Floor, 90 Pitts Bay Road, Pembroke HM 08, Bermuda. The executive offices of Tyco's principal United States subsidiaries are located at One Tyco Park, Exeter, New Hampshire 03833. The telephone number there is (603) 778-9700. Copies To: Abbe L. Dienstag, Meredith B. Cross, Fati Sadeghi, Esq. Victor I. Lewkow, Esq. Esq. Senior Corporate Esq. Kramer Levin Wilmer, Cutler & Counsel Cleary, Gottlieb, Naftalis & Pickering Tyco International Steen & Hamilton Frankel LLP 2445 M Street, (US) Inc. One Liberty Plaza 919 Third Avenue N.W. One Tyco Park New York, New York New York, New York Washington, D.C. Exeter, New 10006 10022 20037 Hampshire 03833 (212) 225-2000 (212) 715-9100 (202) 663-6000 (603) 778-9700 --------------- Approximate date of commencement of proposed sale to the public: As promptly as practicable after this Registration Statement becomes effective and upon consummation of the transactions described in the enclosed prospectus. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [X] --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- This registration statement registers common shares of Tyco International Ltd. deliverable in the offer of Tyco Acquisition Corp. XXIV (NV), a wholly- owned subsidiary of Tyco, for shares of common stock of Sensormatic Electronics Corporation and, if the offer is consummated, the merger of Sensormatic with and into Tyco Acquisition. Sensormatic also has outstanding 690,000 shares of 6 1/2% convertible preferred stock. If the offer is consummated, shares of convertible preferred stock not theretofore converted will be redeemed for cash prior to the merger. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus may be changed. We may not complete the + +offer and issue these securities until the registration statement filed with + +the Securities and Exchange Commission is effective. This prospectus is not + +an offer to sell these securities and we are not soliciting offers to buy + +these securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ [LOGO OF TYCO] Offer of Tyco Acquisition Corp. XXIV (NV) to Exchange Common Shares of Tyco International Ltd. Having a Value of $24.00 (determined and subject to an exception as described in this prospectus) for Each Outstanding Share of Common Stock of Sensormatic Electronics Corporation The offer and withdrawal rights will expire at 6:00 P.M., New York City time, on Monday, October 1, 2001, unless extended. On August 3, 2001, Tyco Acquisition Corp. XXIV (NV), a wholly-owned subsidiary of Tyco International Ltd., entered into an Agreement and Plan of Merger with Sensormatic Electronics Corporation. Tyco Acquisition's obligations under the merger agreement are guaranteed by Tyco. Tyco Acquisition is making this offer in accordance with the terms of the merger agreement. The Sensormatic board of directors unanimously recommends that Sensormatic common stockholders accept this offer and tender their shares pursuant to this offer. Tyco Acquisition is offering to exchange a fraction of a Tyco common share for each outstanding share of Sensormatic common stock that is validly tendered and not properly withdrawn. The fraction of a Tyco common share to be exchanged for each Sensormatic common share will equal $24.00 divided by a five trading day average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets. This average will be calculated for the five consecutive trading days ending on the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer. If the Tyco average share price is less than $46.25, Tyco may terminate the agreement unless Sensormatic's board of directors agrees to an exchange ratio of 0.5189 Tyco common shares for each Sensormatic common share, in which event Sensormatic common stockholders would receive a fraction of a Tyco common share valued, based on such average share price, at less than $24.00 for each Sensormatic common share. Our obligation to exchange Tyco common shares for Sensormatic common shares is subject to the conditions listed under "Conditions of the Offer," including, among others, the condition that prior to expiration of the offer there be validly tendered and not properly withdrawn at least a majority of the outstanding Sensormatic common shares on a fully-diluted basis, and that we have received U.S. and material non-U.S. regulatory approvals. If the offer is consummated, it will be followed by a merger of Sensormatic with and into Tyco Acquisition. In the merger, each Sensormatic common share not exchanged in the offer will be exchanged for the same fraction of a Tyco common share received for each Sensormatic common share in the offer. Tyco's common shares are listed on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol "TYC" and on the London Stock Exchange under the symbol "TYI." Sensormatic's common shares are listed on the New York Stock Exchange under the symbol "SRM." See "Risk Factors" beginning on page 13 for a discussion of risks which should be considered by Sensormatic common stockholders with respect to the offer and merger. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Tyco common shares to be issued in the offer or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is September 10, 2001 This document incorporates important business and financial information about Tyco and Sensormatic from documents filed with the SEC that have not been included in or delivered with this document. This information is available at the web site the SEC maintains at www.sec.gov, as well as from other sources. See "Where You Can Find More Information" beginning on page 1. You also may request copies of these documents from us, without charge, upon written or oral request to our information agent, MacKenzie Partners, Inc., 156 Fifth Avenue, New York, New York 10010, collect at 1-212-929-5500 or toll-free at 1-800-322- 2885. TABLE OF CONTENTS WHERE YOU CAN FIND MORE INFORMATION....................................... 1 QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION...................... 3 SUMMARY................................................................... 7 Introduction............................................................ 7 Information About Tyco and Sensormatic.................................. 7 The Offer............................................................... 9 Approval of the Merger.................................................. 11 Tax Treatment........................................................... 11 Accounting Treatment.................................................... 12 Risk Factors............................................................ 12 Comparison of Rights of Stockholders of Sensormatic and Shareholders of Tyco................................................................... 12 RISK FACTORS.............................................................. 13 FORWARD-LOOKING INFORMATION............................................... 16 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO AND SENSORMATIC... 17 Selected Consolidated Historical Financial Data of Tyco................. 18 Selected Consolidated Historical Financial Data of Sensormatic.......... 20 RECENT DEVELOPMENT OF SENSORMATIC......................................... 21 COMPARATIVE PER SHARE INFORMATION......................................... 22 COMPARATIVE MARKET VALUE INFORMATION...................................... 23 COMPARATIVE PER SHARE PRICES AND DIVIDENDS................................ 24 REASONS OF TYCO FOR THE OFFER AND THE MERGER.............................. 26 RECOMMENDATION OF THE BOARD OF DIRECTORS OF SENSORMATIC; REASONS OF SENSORMATIC FOR THE OFFER AND THE MERGER................................. 26 BACKGROUND OF THE OFFER................................................... 27 FINANCIAL FORECASTS....................................................... 29 THE OFFER................................................................. 30 Timing of the Offer..................................................... 31 Extension, Subsequent Offering Period, Termination and Amendment........ 31 Exchange of Sensormatic Common Shares; Delivery of Tyco Common Shares... 32 Cash Instead of Fractional Tyco Common Shares........................... 33 Procedure for Tendering Shares.......................................... 33 Withdrawal Rights....................................................... 34 Guaranteed Delivery..................................................... 35 Effect of Tender........................................................ 36 Direct Registration System.............................................. 36 Material U.S. Federal Income Tax and Bermuda Tax Consequences........... 37 Purpose of the Offer; The Merger; Appraisal Rights...................... 40 Conditions of the Offer................................................. 42 Dividends and Distributions............................................. 44 Regulatory Approvals.................................................... 44 Certain Effects of the Offer............................................ 46 Accounting Treatment.................................................... 48 Redemption of Sensormatic Preferred Stock............................... 48 Prepayment of Sensormatic Notes......................................... 48 Fees and Expenses....................................................... 49 Stock Exchange Listing.................................................. 49 THE MERGER AGREEMENT...................................................... 50 General................................................................. 50 The Offer............................................................... 50 The Merger.............................................................. 51
i Merger Consideration..................................................... 52 Exchange of Sensormatic Common Shares.................................... 53 Sensormatic Board of Directors........................................... 54 Representations and Warranties........................................... 54 Conduct of Business by Sensormatic....................................... 54 Conduct of Business of Tyco.............................................. 56 No Solicitation.......................................................... 56 Certain Other Covenants.................................................. 58 Conditions to the Merger................................................. 61 Termination; Fees and Expenses........................................... 61 Amendment and Waiver; Parties in Interest................................ 65 Guarantee................................................................ 65 AGREEMENTS WITH SENSORMATIC AND ITS AFFILIATES............................. 65 COMPARISON OF RIGHTS OF STOCKHOLDERS OF SENSORMATIC AND SHAREHOLDERS OF TYCO................................................................... 67 LEGAL EXPERTS.............................................................. 81 EXPERTS.................................................................... 81 MISCELLANEOUS.............................................................. 82 SCHEDULES Schedule I: Certain Information Concerning the Directors and Executive Officers of Tyco International Ltd. .................................... S-1 Schedule II: Certain Information Concerning the Directors and Executive Officers of Tyco Acquisition Corp. XXIV (NV)............................ S-4 ANNEX Annex A: Agreement and Plan of Merger by and between Tyco Acquisition Corp. XXIV (NV) and Sensormatic Electronics Corporation, dated as of August 3, 2001, including Guarantee of Tyco International Ltd. ......... A-1
ii WHERE YOU CAN FIND MORE INFORMATION Tyco and Sensormatic file annual, quarterly and special reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended. You may read and copy this information at, or obtain copies of this information by mail from, the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The filings of Tyco and Sensormatic with the SEC are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at www.sec.gov. You can also inspect reports, proxy statements and other information about Tyco and Sensormatic at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Tyco filed a registration statement on Form S-4 to register with the SEC the Tyco common shares to be issued pursuant to the offer and the merger. This prospectus is a part of that registration statement. As allowed by SEC rules, this prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement. In addition, we also filed with the SEC a statement on Schedule TO pursuant to Rule 14d-3 under the Exchange Act, furnishing certain information about the offer. You may obtain copies of the Form S-4 and the Schedule TO and the exhibits and any amendments to those documents in the manner described above. Sensormatic has filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 regarding the offer, a copy of which is being furnished to Sensormatic common stockholders together with this prospectus. You may obtain a copy of the Schedule 14D-9, including the exhibits and any amendments to that document, in the manner described above. The SEC allows us to "incorporate by reference" information into this prospectus, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained in any subsequent filing or directly in this prospectus. This prospectus incorporates by reference the documents set forth below that Tyco and Sensormatic have previously filed with the SEC. These documents contain important information about Tyco and Sensormatic and their finances.
TYCO SEC FILINGS (File No. 001-13836) PERIOD -------------------------- ------ Annual Report on Form 10-K Fiscal year ended September 30, 2000 Quarterly Reports on Form 10-Q Quarterly periods ended December 31, 2000, March 31, 2001 and June 30, 2001 Current Reports on Form 8-K Filed on November 1, 2000, November 15, 2000, February 9, 2001, March 15, 2001, March 29, 2001, April 3, 2001, May 24, 2001, June 15, 2001, July 25, 2001, August 3, 2001 and August 16, 2001 The description of Tyco Filed on March 1, 1999 common shares as set forth in its Registration Statement on Form 8-A/A
1
SENSORMATIC SEC FILINGS (File No. 001-10739) PERIOD ----------------------------- ------ Annual Report on Form 10-K Fiscal year ended June 30, 2000 Quarterly Reports on Form 10-Q Quarterly periods ended September 30, 2000, December 31, 2000 and March 31, 2001 Current Report on Form 8-K Filed on August 6, 2001 The description of Sensormatic Filed on May 14, 1991 common stock in its Registration Statement on Form 8-A
All documents filed by Tyco and Sensormatic with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this prospectus to the date that the merger is consummated, or, if the offer is terminated without shares being accepted for exchange, the date of termination, will also be deemed to be incorporated herein by reference. The information incorporated by reference is considered to be part of this document, except for any information that is superseded by information that is included in any subsequent filing or in this document. Any references to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 contained in any documents incorporated by reference are specifically excluded from incorporation into this document. Documents incorporated by reference are available from us without charge upon request to our information agent, MacKenzie Partners, Inc., 156 Fifth Avenue, New York, New York 10010, collect at 1-212-929-5500 or toll-free at 1- 800-322-2885. If you request any incorporated documents from us, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request. We have not authorized anyone to give any information or make any representation about our offer that is different from, or in addition to, that which is contained in this document or in any of the materials that we have incorporated by reference into this document. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this document speaks only as of the date of this document unless the information specifically indicates that another date applies. 2 QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION Q. What are Tyco and Sensormatic proposing? A. Tyco Acquisition Corp. XXIV (NV), a subsidiary of Tyco International Ltd., has entered into a merger agreement with Sensormatic Electronics Corporation. Tyco has guaranteed the obligations of Tyco Acquisition in the merger agreement. In accordance with this agreement, Tyco Acquisition is offering to exchange a fraction of a Tyco common share, determined as described in the response to the next question, for each outstanding share of Sensormatic common stock. After the offer is completed, Sensormatic will merge with and into Tyco Acquisition. As a result of the offer and the merger, Sensormatic will become a wholly-owned subsidiary of Tyco. Q. What will I receive in exchange for my Sensormatic common shares? A. We are offering to exchange a fraction of a Tyco common share for each outstanding share of Sensormatic common stock that is validly tendered and not properly withdrawn. Except as set forth in the next paragraph, the fraction of a Tyco common share which we will exchange for each Sensormatic common share validly tendered in the offer will equal $24.00 divided by a five trading day average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets. This average will be calculated for the five consecutive trading days ending on September 25, 2001, the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer. If the average share price of Tyco common shares is less than $46.25, Tyco Acquisition has the right to terminate the merger agreement unless, after Tyco Acquisition gives Sensormatic written notice of its intention to terminate the merger agreement, the Sensormatic board of directors, in its sole discretion, agrees to an exchange ratio of 0.5189, the exchange ratio determined by dividing $24.00 by $46.25. Based on an average share price that is less than $46.25, this 0.5189 exchange ratio would give Sensormatic common stockholders Tyco common shares valued at less than $24.00 for each share of Sensormatic common stock. In this circumstance, Tyco Acquisition and Sensormatic could also agree to a higher exchange ratio, although neither Tyco Acquisition nor Sensormatic is under any obligation to do so. If the average share price of Tyco's common shares is less than $46.25 and Tyco Acquisition does not give Sensormatic written notice of its intention to terminate the merger agreement, Sensormatic stockholders will receive $24.00 in value of Tyco common shares for each Sensormatic common share based on the average share price. You will not receive any fractional Tyco common shares in the offer. Instead, you will receive cash in an amount equal to the value, based upon the average Tyco common share price, of any fractional share you would otherwise have been entitled to receive. Q. How can I find out the final exchange ratio? A. We will issue a press release announcing the exchange ratio once it has been determined. The press release will be filed with the SEC on Form 425 in accordance with SEC rules. In addition, you can call MacKenzie Partners, Inc., our information agent, collect at 1-212-929-5500 or toll free at 1- 800-322-2885 for the average Tyco common share price for the preceding five trading days and the exchange ratio that would be in effect if these five trading days had been the relevant period for determining the average share price. Once the actual Tyco average share price and the exchange ratio are determined, you can obtain this information by calling the MacKenzie Partners telephone numbers. Q. How long will it take to complete the offer and the merger? A. We hope to complete the offer in October of 2001, with the timing dependent upon when we receive regulatory clearances. See "Antitrust" beginning on page 45. We expect to complete the merger shortly after we complete the offer if we acquire at least 90% of the Sensormatic common shares in the offer. If 3 less than 90% of the shares are tendered in the offer, then the merger will require Sensormatic stockholder approval, and we will complete the merger shortly after the special meeting of Sensormatic stockholders to approve the merger. In either case, however, we can only complete the merger if all shares of Sensormatic's 6 1/2% convertible preferred stock cease to be outstanding. As discussed below, Sensormatic has agreed to call all such shares for redemption following the initial acceptance of shares for exchange in the offer. If any shares of convertible preferred stock are outstanding when the offer is completed, we will have to wait until all such shares are converted or for the expiration of the 30-day call period for the preferred stock before completing the merger. See the question and answer below relating to the treatment of the convertible preferred stock. Q. Will I have to pay any fees or commissions? A. If you are the record owner of your Sensormatic common shares and you tender your Sensormatic common shares directly to the exchange agent, you will not have to pay brokerage fees or incur similar expenses. If you own your shares through a broker or other nominee, and your broker tenders the shares on your behalf, your broker may charge you a fee for doing so. You should consult your broker or other nominee to determine whether any charges will apply. Q. Does Sensormatic support the offer and the merger? A. Yes. Sensormatic's board of directors unanimously recommends that Sensormatic common stockholders accept the offer and tender their shares pursuant to the offer. Sensormatic's board of directors determined, by the unanimous vote of the directors present at a special meeting, that the terms of the offer and the merger are advisable, fair to, and in the best interests of, Sensormatic's common stockholders. Sensormatic's board of directors has also approved the merger agreement and the merger. You should note the potential for conflicts of interest and the benefits available to Sensormatic directors when considering Sensormatic's board of directors' recommendation to approve the offer and the merger. Sensormatic officers and directors have employment agreements, benefit plans, stock options and rights to indemnification that provide them with interests in the merger that may be considered different from, or in addition to, interests of Sensormatic stockholders. Information about the recommendation of Sensormatic's board of directors, and potential conflicts of interest, is more fully set forth in Sensormatic's Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed to Sensormatic stockholders together with this prospectus. Q. What percentage of Tyco common shares will Sensormatic stockholders own after the offer and the merger? A. After completion of the merger, former Sensormatic stockholders will own in the aggregate approximately 2% of the outstanding Tyco common shares. Q. How do I participate in your offer? A. To tender your Sensormatic common shares, you should do the following: . If you hold shares in your own name, complete and sign the enclosed letter of transmittal according to its instructions and return it with your share certificates, if applicable, to Mellon Investor Services LLC, the exchange agent for the offer, at the appropriate address specified on the back cover page of this prospectus before the expiration date of the offer or comply with the guaranteed delivery procedures. . If you hold your shares in "street name" through a broker or other nominee, instruct your nominee to tender your shares before the expiration date. For more information on the timing of the offer, extensions of the offer period and your rights to withdraw your Sensormatic common shares from the offer before the expiration date, please refer to "The Offer" beginning on page 30. 4 Q. Will I receive a physical certificate for the Tyco common shares that are delivered to me in the offer? A. No. If you are a record holder of Sensormatic common shares, your shares will be issued under Tyco's Direct Registration System. This means your shares will be held in an account maintained by Mellon Investor Services, Tyco's transfer agent. If you want a physical certificate, you may request one at any time. If you hold your Sensormatic common shares through a bank, broker or other nominee you will initially hold your Tyco common shares through that nominee. Q. Do the statements on the cover page regarding this prospectus being subject to change and the registration statement filed with the SEC not yet being effective mean that the offer has not commenced? A. No. Effectiveness of the registration statement is not necessary for the offer to commence. The SEC rules permit offers to begin before the related registration statement has become effective, and we are taking advantage of those rules with the goal of acquiring Sensormatic as quickly as we can. We cannot, however, accept for exchange any shares tendered in the offer until the registration statement is declared effective by the SEC and the other conditions to our offer have been satisfied or, if permissible, waived. Q. Are Tyco's financial condition and results relevant to my decision to tender my shares in the offer? A. Yes. You should consider Tyco's financial condition and results before you decide whether to tender your shares in the offer because shares of Sensormatic accepted in the offer will be exchanged for Tyco common shares. In considering Tyco's financial condition and results, you should review this prospectus and the documents incorporated by reference in this prospectus because they contain detailed business, financial and other information about Tyco. Q. If I decide not to tender, what will happen to my shares? A. If you decide not to tender your shares in the offer and the merger occurs, you will receive in the merger the same fraction of a Tyco common share for each Sensormatic common share you own as if you had tendered your Sensormatic common shares in the offer, without interest. Q. Will Sensormatic continue as a public company? A. No. If the merger occurs, Sensormatic will no longer be publicly owned. Even if the merger does not occur, if we purchase the tendered shares, there may be so few remaining Sensormatic common stockholders and publicly held Sensormatic common shares that the shares may no longer be eligible to be quoted on the New York Stock Exchange or other securities markets, there may not be a public trading market for the shares and Sensormatic may cease making filings with the SEC or otherwise cease being required to comply with SEC rules relating to publicly held companies. Q. What will happen to Sensormatic's convertible preferred stock? A. Sensormatic presently has outstanding 690,000 shares of convertible preferred stock. Each Sensormatic preferred share is convertible into approximately 12.8 Sensormatic common shares. This conversion ratio is determined by dividing the $250 liquidation preference of each Sensormatic preferred share by the conversion price of $19.52. Within one day following the initial acceptance of shares of Sensormatic common stock for exchange in the offer, Sensormatic will call all then outstanding shares of convertible preferred stock for redemption at a redemption price of 103.71% of liquidation preference plus accrued and unpaid dividends. The redemption will take effect on a redemption date that is 30 days from the date that Sensormatic issues the redemption notice. Holders of Sensormatic preferred shares may convert their preferred shares into Sensormatic common shares and tender these common shares at any time during the pendency of the offer. In connection with the offer, we and Sensormatic are delivering to the holders of Sensormatic preferred shares a notice of conversion and letter of transmittal to enable them to convert their preferred shares into Sensormatic common shares immediately prior to the initial acceptance of Sensormatic common shares or during a subsequent offering period and to tender the common shares issuable upon conversion in a single step. If the offer is not consummated, the preferred shares delivered 5 pursuant to the notice of conversion and letter of transmittal will not be converted. This procedure is also designed to preserve the right of holders of Sensormatic preferred stock, who would be entitled to the dividend on the Sensormatic preferred stock payable on October 1, 2001, to receive such dividend. If the offer is consummated, Sensormatic preferred shares that are not converted will be redeemed on the redemption date so that no shares of convertible preferred stock will be outstanding at the time of the merger. Q. Where can I find out more information about Tyco and Sensormatic? A. You can find out information about Tyco and Sensormatic from various sources described under "Where You Can Find More Information" beginning on page 1. Q. Who can I call with questions about the offer? A. You can contact our information agent, MacKenzie Partners, Inc., collect at 1-212-929-5500 or toll-free at 1-800-322-2885. 6 SUMMARY This summary highlights selected information from this document and does not contain all of the information that is important to you. To better understand the offer and the merger and for a more complete description of the legal terms of the offer and the merger, you should read carefully this entire document and the documents to which you have been referred. See "Where You Can Find More Information" beginning on page 1. In particular, you should read the documents attached to this document, including the merger agreement attached as Annex A hereto, and you should read Sensormatic's Solicitation/Recommendation Statement on Schedule 14D-9 enclosed with this prospectus. Unless otherwise indicated, "Sensormatic common shares" or the "shares" refers to shares of common stock of Sensormatic Electronics Corporation and "we," "our" and "us" refers to Tyco International Ltd. and its wholly-owned subsidiary, Tyco Acquisition Corp. XXIV (NV), through which we are proposing to acquire Sensormatic. Introduction We propose to acquire Sensormatic. We are offering to exchange a fraction of a Tyco common share having a value of $24.00, determined as described below, for each Sensormatic common share validly tendered and not properly withdrawn. The fraction of a Tyco common share to be exchanged for each Sensormatic common share will equal $24.00 divided by a five trading day average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets. This average will be calculated for the five consecutive trading days ending on the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer. Under certain circumstances the value of the Tyco common shares to be received for each Sensormatic common share will be less than $24.00. See the risk factor entitled "Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares for each Sensormatic common share" beginning on page 13. After completion of the offer, Sensormatic will merge with and into Tyco Acquisition. Each Sensormatic common share which has not been exchanged in the offer will be converted in the merger into the same fraction of a Tyco common share as is exchanged in the offer for each Sensormatic common share. Information About Tyco and Sensormatic Tyco International Ltd. The Zurich Centre, Second Floor 90 Pitts Bay Road Pembroke HM 08, Bermuda (441) 292-8674 Tyco is a diversified manufacturing and service company that, through its subsidiaries: . designs, manufactures and distributes electrical and electronic components and multi-layer printed circuit boards; . designs, manufactures and distributes disposable medical supplies and other specialty products; . designs, manufactures, installs and services fire detection and suppression systems, installs, monitors and maintains electronic security systems and designs, manufactures, distributes and services specialty valves; . designs, engineers, manufactures, installs, operates and maintains undersea cable communications systems; and . offers vendor, equipment, commercial, factoring, consumer and structured financing and leasing capabilities through its indirect wholly-owned subsidiary, The CIT Group, Inc., acquired on June 1, 2001. 7 Tyco operates in more than 100 countries around the world and expects revenues for its fiscal year ending September 30, 2001 to exceed $38 billion. 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 its existing businesses, developing new markets and acquiring complementary businesses and products. Combining the strengths of its existing operations and its business acquisitions, Tyco seeks to enhance shareholder value through increased earnings per share and strong cash flows. Tyco reviews acquisition opportunities in the ordinary course of business, some of which may be material and some of which are currently under investigation, discussion or negotiation. There can be no assurance that any of these acquisitions will be consummated. Tyco's common shares are listed on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol "TYC" and on the London Stock Exchange under the symbol "TYI." Tyco's registered and principal executive offices are located at the above address in Bermuda. The executive offices of Tyco's principal United States subsidiaries and of Tyco Acquisition are located at One Tyco Park, Exeter, New Hampshire 03833, and the telephone number there is (603) 778-9700. For additional information regarding the business of Tyco, please see Tyco's Form 10-K and other filings of Tyco with the SEC, which are incorporated by reference into this document. See "Where You Can Find More Information" on page 1. Sensormatic Electronics Corporation 951 Yamato Road Boca Raton, FL 33431 (561) 989-7000 Sensormatic is a global leader in electronic security. Sensormatic develops, manufactures, markets, distributes and services advanced lines of electronic security products for article protection, video surveillance, access control and asset tracking. Sensormatic has three product divisions: electronic article surveillance systems, video systems, including closed circuit television, and access control and asset tracking and management systems. Sensormatic's electronic article surveillance products include reusable hard tags and disposable labels used with its detection and deactivation systems. Sensormatic's video systems include various types of micro-processor-controlled closed circuit television cameras, digital recording devices and monitoring systems. Sensormatic's access control and asset tracking and management systems provide intelligent tagging, tracking and access systems to monitor the movements of people and assets. Sensormatic's customers include 93 of the top 100 retailers in the world, as well as more than half of the Fortune 500 companies. Sensormatic employs approximately 5,500 individuals and has one of its industry's largest network of sales, service and support professionals, along with an extensive network of third party dealers and distributors, meeting the needs of customers in 113 countries. For additional information regarding Sensormatic's business, please see Sensormatic's Form 10-K and other filings with the SEC, which are incorporated by reference into this document. See "Where You Can Find More Information" on page 1. 8 The Offer (Page 30) Conditions Of the Offer Our obligation to exchange Tyco common shares for Sensormatic common shares pursuant to the offer is subject to the satisfaction of several conditions including: . at least a majority of the outstanding Sensormatic common shares, on a fully-diluted basis, having been validly tendered and not properly withdrawn; . waiting periods under applicable U.S. and material non-U.S. antitrust laws having expired or been terminated; . the registration statement of which this prospectus is a part having been declared effective by the SEC; . the shares of Tyco to be issued in the offer and merger having been approved for listing on the New York Stock Exchange; . the tax opinions of PricewaterhouseCoopers LLP and Cleary, Gottlieb, Steen & Hamilton, described in "Material U.S. Federal Income Tax and Bermuda Tax Consequences" beginning on page 37, not having been withdrawn; . Sensormatic not having breached any covenant, representation or warranty in a manner that would have a material adverse effect, as defined in the merger agreement, on Sensormatic; . there not having occurred any other event that is reasonably likely to result in a material adverse effect on Sensormatic; . no proceeding having been instituted, pending or threatened by a governmental authority seeking to prohibit or restrain the offer or impose conditions that would have a material adverse effect on Sensormatic or materially restrict the safety or security business of Tyco; . no law having been enacted or order entered having the foregoing consequences; and . the merger agreement not having been terminated. The first five of these conditions are referred to as the basic conditions of the offer and we cannot waive these conditions without Sensormatic's consent. There are also other conditions to the offer. For further details, see "Conditions of the Offer" beginning on page 42. Timing; Extension, Termination and Amendment of the Offer Our offer is currently scheduled to expire at 6:00 p.m. New York City time on Monday, October 1, 2001. However, if the conditions to the offer are not satisfied or waived on any scheduled expiration date of the offer, we will extend the offer from time to time for such amount of time as is reasonably necessary to permit such conditions to be satisfied or waived; provided, that (a) without Sensormatic's consent, no single extension shall exceed 10 business days and (b) we will not be required to extend the offer beyond March 3, 2002. We will also extend the offer for any period required by any rule or regulation of the SEC applicable to the offer, but we are not required to do so beyond March 3, 2002. During any such extension, all Sensormatic common shares previously tendered and not properly withdrawn will remain subject to the offer, subject to your right to withdraw your Sensormatic common shares. If all the conditions to the offer are satisfied or waived, we will accept all tendered shares for exchange following the expiration date in effect at the time of acceptance. We may thereafter extend the offer for an additional period or periods totaling between three and 20 business days. During this extension period, which we refer to as a subsequent offering period, we will promptly accept for exchange all Sensormatic common 9 shares that are validly tendered. We expect to provide a subsequent offering period if less than 90% of the Sensormatic common shares on a fully-diluted basis have been tendered or any shares of Sensormatic's convertible preferred stock remain outstanding at the time Sensormatic common shares are initially accepted for exchange in the offer. We reserve the right to increase the exchange ratio or to make any other changes in the terms and conditions of the offer; provided, however, that without the prior written consent of Sensormatic: . the basic conditions may not be changed or waived, and . no change may be made that changes the form or decreases the amount of consideration to be paid, decreases the number of shares sought in the offer, imposes conditions to the offer in addition to those set forth in the merger agreement, changes the offer conditions, extends the expiration date of the offer beyond the initial expiration date of the offer, except as described above, or makes any other change to any of the terms of and conditions to the offer that is adverse to the holders of the Sensormatic common shares. Any increase in the exchange ratio or other change, amendment, extension or termination of the offer will be made by giving written or oral notice to the exchange agent. We will follow any change, amendment, extension or termination with a public announcement as promptly as practicable. In the case of an extension, any such announcement will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. Subject to applicable law, including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the offer be promptly sent to stockholders in a manner reasonably designed to inform stockholders of such change, and without limiting the manner in which we may choose to make any public announcement, we assume no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to a news wire service with national circulation in the United States. Exchange of Shares; Delivery of Tyco Common Shares According to the terms and subject to the conditions of the offer, including, if the offer is extended or amended, the terms and conditions of any such extension or amendment, we will accept for exchange, and will exchange, shares validly tendered and not properly withdrawn as promptly as practicable after the expiration date. Withdrawal Rights Your tender of Sensormatic common shares pursuant to the offer is irrevocable. However, other than during the subsequent offering period, Sensormatic common shares tendered pursuant to the offer may be withdrawn at any time prior to the expiration date, and, unless we previously accepted them pursuant to the offer, may also be withdrawn at any time after October 21, 2001. Sensormatic common shares tendered during the subsequent offering period will be accepted promptly following tender. Procedure for Tendering Shares For you to validly tender Sensormatic common shares pursuant to our offer, . you must transmit to the exchange agent, and the exchange agent must receive a properly completed and duly executed letter of transmittal, or a manually executed facsimile of that document, along with any required signature guarantees, the share certificates, and any other required documents, at one of the 10 exchange agent's addresses set forth on the back cover of this prospectus, or you must tender your Sensormatic common shares pursuant to the procedures for book-entry tender set forth in "The Offer" beginning on page 30, and receive a confirmation of receipt of such tender, in each case before the expiration date, or . you must comply with the guaranteed delivery procedures set forth in "Guaranteed Delivery" beginning on page 35. No Solicitation Provisions; Termination Fee and Expenses Sensormatic has agreed that it will not solicit or encourage the initiation of any inquiries or proposals regarding any alternative acquisition transactions with third parties. Sensormatic may respond to unsolicited transaction proposals if required by the Sensormatic board's fiduciary duties. Sensormatic must promptly notify Tyco if it receives proposals for any such alternative acquisition transactions. For further details, see "No Solicitation" beginning on page 56. If the merger is terminated under specified circumstances, generally including an alternative acquisition transaction, Sensormatic may be required to pay a termination fee of $70 million to Tyco and pay reasonable out-of- pocket expenses of up to $5 million to Tyco and Tyco Acquisition. Tyco Acquisition may be required to pay to Sensormatic up to $5 million of Sensormatic's reasonable out-of-pocket expenses if the merger is terminated under certain circumstances. See "Termination; Fees and Expenses" beginning on page 61 for a discussion of the circumstances in which the fee and expenses are payable. The termination fee and the no-solicitation provisions may have the effect of discouraging persons who might be interested in entering into an acquisition transaction with Sensormatic from proposing an alternative acquisition transaction. Approval of the Merger (Page 40) If at the end of the offer, including any subsequent offering period, we have received at least a majority but less than 90% of the outstanding Sensormatic common shares, we will effect a long-form merger as permitted under Delaware law which would require notice to and approval by Sensormatic stockholders. If a vote is required, we will vote our majority shares in favor of the merger, so that approval of the merger will be assured. If at the end of the offer we have received 90% or more of the outstanding Sensormatic common shares, we will effect a short-form merger as permitted under Delaware law, which would not require approval by the stockholders of Sensormatic. Tax Treatment (Page 37) Sensormatic and Tyco have received opinions that the offer and the merger will qualify as a tax-free reorganization for United States federal income tax purposes, provided that the offer and the merger are completed under the current terms of the merger agreement, including the requirement that the merger is consummated as soon as practicable after consummation of the offer. Provided that the offer and the merger qualify as a tax-free reorganization, a Sensormatic stockholder's receipt of Tyco common shares in the offer or the merger generally will be tax-free for United States federal income tax purposes, except for taxes resulting from the receipt of cash, if any, instead of a fraction of a Tyco common share. The above described tax treatment of the offer and the merger to Sensormatic stockholders depends on, among other things, some facts that will not be known until the completion of the merger. To review tax consequences of the offer and the merger in greater detail, see "Material U.S. Federal Income Tax and Bermuda Tax Consequences" beginning on page 37. 11 Accounting Treatment (Page 48) Tyco will account for the offer and the merger as a purchase for financial reporting purposes. The acquisition of Sensormatic would not be considered material to Tyco and, accordingly, Tyco is not required to include pro forma financial information in this prospectus. Risk Factors (Page 13) In deciding whether to tender your shares pursuant to the offer, you should read carefully this prospectus and the documents to which we refer you. You should carefully take into account the following risk factors: . Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares per share of Sensormatic common stock; . the risks associated with integrating Sensormatic into Tyco, including the risk that the anticipated benefits of the business combination may not be fully realized; . the receipt of Tyco common shares in exchange for your Sensormatic common shares could be taxable to you; . the price of Tyco common shares could depend upon factors different than those affecting the price of Sensormatic common stock; and . the rights of shareholders of Tyco under Bermuda law in some ways are not as favorable as the rights of stockholders of Sensormatic under Delaware law. See "Risk Factors" beginning on page 13 for a more complete discussion of these factors. Comparison of Rights of Stockholders of Sensormatic and Shareholders of Tyco (Page 67) The rights of Tyco shareholders are governed by Bermuda law and Tyco's Memorandum of Association and Bye-laws. The rights of Sensormatic stockholders are governed by Delaware law and Sensormatic's Restated Certificate of Incorporation and Bylaws. The rights of Tyco shareholders under Bermuda law are different from the rights of stockholders of Sensormatic. For a summary of material differences between the rights of Tyco shareholders and Sensormatic stockholders, see "Comparison of Rights of Stockholders of Sensormatic and Shareholders of Tyco" beginning on page 67. 12 RISK FACTORS In deciding whether to tender your shares pursuant to the offer, you should read carefully this prospectus, the accompanying Solicitation/Recommendation Statement on Schedule 14D-9 of Sensormatic and the documents to which we refer you. You should also carefully consider the following factors: Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares for each Sensormatic common share. Although the offer and the merger are designed to give Sensormatic stockholders $24.00 in value of Tyco common shares for each of their shares of Sensormatic common stock, they could receive less in market value. The merger agreement values the Tyco common shares that Sensormatic stockholders will receive based upon the average share price of the Tyco common shares computed by taking the average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets, over the five consecutive trading days ending on the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer. Sensormatic stockholders will receive less than $24.00 in value of Tyco common shares, calculated on the basis of the average share price, if the average share price is less than $46.25 and Sensormatic agrees to fix the exchange ratio at 0.5189, which is the exchange ratio determined by dividing $24.00 by $46.25, in order to prevent Tyco Acquisition from terminating the merger agreement. We also could agree with Sensormatic upon an exchange ratio that is higher than 0.5189 but that is lower than the ratio that would provide Sensormatic stockholders with $24.00 in value of Tyco common shares for each share of Sensormatic common stock. On the last trading date prior to the announcement of the merger agreement, the closing price for Tyco common shares was $52.78. The closing price of Tyco common shares on September 7, 2001, the last trading day prior to the date of this prospectus for which it was practical to obtain this price, was $46.58. Under the merger agreement, the Tyco common shares received by Sensormatic stockholders in exchange for their Sensormatic common stock are valued based upon the average share price calculated as described above. However, you will not receive your Tyco shares until some time after the average share price and the exchange ratio are determined. The exchange ratio will not change as a result of this time difference. Because of market fluctuations, the market price of the Tyco shares at the time you receive them is likely to be lower or higher than the average Tyco share price used to determine the exchange ratio. These fluctuations occur for many reasons, including changes in the business, operations or prospects of Tyco, regulatory considerations or general market or economic conditions. If the market price for Tyco common shares at the time you receive your Tyco common shares pursuant to the offer is less that the average share price specified above, Sensormatic stockholders would receive for each of their Sensormatic common shares Tyco common shares with a market value of less than $24.00. If you do not tender your shares in the offer and the offer is consummated, your shares will be exchanged for Tyco common shares in the subsequent merger of Sensormatic with and into Tyco Acquisition. The consideration you receive in the merger in exchange for your Sensormatic common shares will be the same as the consideration that you would have received had you exchanged your shares in the offer. In particular, the exchange ratio will not be re-adjusted based on the trading price of Tyco common shares or Sensormatic common shares at the time of the merger. Depending on the market value of Tyco common shares at the time of the merger, the value that you receive for your Sensormatic common shares in the merger could be less than $24.00 per share. 13 Benefits of the combination may not be realized. If we complete the proposed merger, we will integrate two companies that have previously operated independently. The consolidation of functions, the integration of departments, systems and procedures, and the relocation of staff may present management challenges. We may not be able to integrate the operations of Sensormatic with our operations without encountering difficulties. The integration may not be completed as rapidly as we expect or achieve the anticipated benefits of the merger. The successful integration of Tyco and Sensormatic will require, among other things, integration of Tyco's and Sensormatic's products and services, sales and marketing, information and software systems, coordination of employee retention, hiring and training, and coordination of ongoing and future research and development efforts. The diversion of the attention of management to the integration effort and any difficulties encountered in combining operations could adversely affect the combined company's businesses. The receipt of Tyco common shares could be taxable to you. Before the consummation of the offer and the merger, it cannot be determined whether the receipt of Tyco common shares in exchange for your Sensormatic common shares will be tax free to you for U.S. federal income tax purposes, although we expect this will be the case. Tax-free treatment depends upon facts and circumstances that will not be known until the consummation of the offer and the merger, particularly whether the merger will be consummated as soon as practicable after consummation of the offer, as required by the merger agreement. If, contrary to our expectations, the merger is not completed as soon as practicable after consummation of the offer, the merger and the offer may not be treated as an integrated transaction for U.S. federal income tax purposes, and, as a result, the receipt of Tyco common shares could be taxable to you. You are urged to consult your tax advisor to determine the specific tax consequences to you of the offer and the merger, including any U.S. federal, state, local, non-U.S. or other tax consequences, and any tax return filing or other reporting requirements. See "Material U.S. Federal Income Tax and Bermuda Tax Consequences" on page 37. The trading price of Tyco common shares may be affected by factors different from those affecting the price of Sensormatic common stock; the Tyco common share price could decline following the offer and the merger. Upon completion of the offer and the merger, holders of Sensormatic common stock will become holders of Tyco common shares. Tyco's business differs from that of Sensormatic, and Tyco's results of operations, as well as the trading price of Tyco common shares, may be affected by factors different from those affecting Sensormatic's results of operations and the price of Sensormatic common shares. The price of Tyco common shares may decrease after the exchange ratio is determined, Sensormatic common shares are accepted for payment in the offer, or the merger is consummated. The rights of shareholders of Tyco under Bermuda law in some ways are not as favorable as the rights of stockholders of Sensormatic under Delaware law. Tyco is a Bermuda company and Sensormatic is a Delaware corporation and after you receive Tyco shares in the offer or the merger you will become Tyco shareholders and all your rights as such shareholder will be governed by Bermuda law and Tyco's Memorandum of Association and Bye-laws. . Shareholders may be limited in their ability to obtain jurisdiction over Tyco outside Bermuda, so that certain remedies available to stockholders of Sensormatic, such as class action lawsuits under U.S. federal and Delaware law, might not be available to Tyco shareholders. 14 . The right to bring a derivative action in the name of a company for a wrong to the company committed by present or former directors of the company is more limited under Bermuda law than under Delaware law. . Under Bermuda law and Tyco's Bye-laws, only shareholders holding 5% or more of the outstanding Tyco common shares or numbering 100 or more are entitled to propose a resolution at a Tyco general meeting. Tyco's board of directors can waive these requirements, and the staff of the SEC has taken the position that the SEC's proxy rules may require Tyco to include in its proxy materials proposals of shareholders who do not satisfy such requirements. Sensormatic stockholders do not have to satisfy such requirements to propose a resolution at a Sensormatic stockholders meeting. . There are provisions in Sensormatic's Restated Certificate of Incorporation and Bylaws that could deter, delay or prevent a hostile or coercive third party bid to acquire Sensormatic. Tyco's Memorandum of Association and Bye-laws do not contain similar provisions. 15 FORWARD-LOOKING INFORMATION Certain statements contained in or incorporated by reference into this document are "forward-looking statements." All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements involve risks and uncertainties. In particular, any statements regarding the timing or benefits of the offer or the merger and the value of the Tyco common shares to be received by Sensormatic stockholders as consideration for the merger, as well as expectations with respect to future sales earnings, cash flows, operating efficiencies, product expansion, backlogs, financings and share repurchases are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of Tyco and Sensormatic, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward-looking statements include, among other things: . the impact of fluctuations in the share price of Tyco common shares; . overall economic and business conditions; . the demand for Tyco's and Sensormatic's goods and services; . competitive factors in the industries in which Tyco and Sensormatic compete; . the risk factors described above under the heading "Risk Factors;" . changes in U.S. and non-U.S. government regulations; . changes in tax requirements, including tax rate changes, new tax laws and revised tax law interpretations; . results of litigation; . 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 in connection with the acquisition of Sensormatic, Tyco's recent acquisition of The CIT Group, Inc. and other acquisitions; . the timing, impact and other uncertainties of future acquisitions by Tyco; and . the timing of construction and the successful operation of the TyCom Global Network by Tyco's majority owned subsidiary, TyCom Ltd., Tyco's undersea cable communications business. These factors and the risk factors described in the previous section are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. We cannot assure you that projected results or events will be achieved. For additional factors that might affect such forward-looking statements with respect to Sensormatic, see Sensormatic's Annual Report on Form 10-K, Sensormatic's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and Sensormatic's other filings with the SEC. See "Where You Can Find More Information" on page 1. 16 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO AND SENSORMATIC The following information is being provided to assist you in analyzing the financial aspects of the merger. The selected financial information for Tyco for the nine months ended June 30, 2001 and 2000 was derived from the unaudited Consolidated Financial Statements included in Tyco's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001. The data presented for Tyco for the nine months ended June 30, 2001 and 2000 are unaudited and, in the opinion of Tyco's management, include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of such data. Tyco's results for the nine months ended June 30, 2001 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2001. The selected financial information for Tyco for the fiscal years ended September 30, 2000, 1999 and 1998 was derived from the audited Consolidated Financial Statements included in Tyco's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. The selected financial information for Tyco for the nine months ended September 30, 1997 was derived from the audited Consolidated Financial Statements included in Tyco's Annual Report on Form 10- K/A filed on June 26, 2000. The selected financial information for Tyco for the year ended December 31, 1996 was derived from the audited Consolidated Financial Statements included in Tyco's Current Report on Form 8-K filed on June 3, 1999. The selected financial information for Sensormatic for the nine months ended March 31, 2001 and 2000 was derived from the unaudited Consolidated Financial Statements included in Sensormatic's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2001. The data presented for Sensormatic for the quarters ended March 31, 2001 and 2000 are unaudited and, in the opinion of Sensormatic's management, include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of such data. Sensormatic's results for the nine months ended March 31, 2001 are not necessarily indicative of the results to be expected for the fiscal year ended June 30, 2001. Information on Sensormatic's unaudited financial results for the fiscal year and quarter ended June 30, 2001 is set forth under "Recent Development of Sensormatic" beginning on page 21. The selected financial information for Sensormatic for the years ended June 30, 2000, 1999 and 1998 was derived from the audited Consolidated Financial Statements included in Sensormatic's Annual Reports on Form 10-K for the years ended June 30, 2000 and 1999. The selected financial information for Sensormatic for the years ended June 30, 1997 and 1996 was derived from the audited Consolidated Financial Statements included in Sensormatic's Annual Reports on Form 10-K for the year ended June 30, 1997. The information should be read in conjunction with the historical financial statements and related notes contained in the annual, quarterly and other reports filed by Tyco and Sensormatic with the SEC. See "Where You Can Find More Information" on page 1. 17 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO (1)
Nine Months Ended Nine Months June 30, Year Ended September 30, Ended Year Ended -------------------- ----------------------------- September 30, December 31, 2001(2) 2000(2) 2000(3) 1999(4) 1998(5) 1997(6)(7) 1996(8)(9) ---------- --------- --------- --------- --------- ------------- ------------ (Unaudited) (in millions, except per share data) Consolidated Statements of Operations Data: Total revenues......... $ 26,549.7 $21,126.5 $30,691.9 $22,496.5 $19,061.7 $12,742.5 $14,671.0 Income (loss) from continuing operations............ 3,376.7 2,610.0 4,520.1 1,067.7 1,168.6 (348.5) 49.4 Income (loss) from continuing operations per common share(10): Basic................. 1.91 1.55 2.68 0.65 0.74 (0.24) 0.02 Diluted............... 1.89 1.52 2.64 0.64 0.72 (0.24) 0.02 Cash dividends per common share(10)...... See (11) below. Consolidated Balance Sheet Data (End of Period): Total assets........... $106,892.8 $40,404.3 $32,344.3 $23,440.7 $16,960.8 $14,686.2 Long-term debt......... 38,036.1 9,461.8 9,109.4 5,424.7 2,785.9 2,202.4 Mandatorily redeemable preference shares..... 260.0 -- -- -- -- -- Total shareholders' equity................ 31,187.2 17,033.2 12,369.3 9,901.8 7,478.7 7,022.6
- -------- (1) On April 2, 1999, October 1, 1998, August 29, 1997 and August 27, 1997, Tyco merged with AMP Incorporated, United States Surgical Corporation, Keystone International, Inc. and Inbrand Corporation, respectively. On July 2, 1997, Tyco, formerly called ADT Limited, merged with Tyco International Ltd., a Massachusetts corporation at the time ("Former Tyco"). These five combinations were accounted for under the pooling of interests method of accounting. As such, the consolidated financial data presented above include the effect of the mergers, except for the period prior to January 1, 1997, which does not include Inbrand due to immateriality. (2) Income from continuing operations in the nine months ended June 30, 2001 includes a charge of $184.3 million for the write-off of purchased in- process research and development, net charges of $86.9 million, of which $78.8 million is included in cost of sales, for restructuring and other non-recurring items, a charge of $27.9 million for the impairment of long-lived assets, a net gain of $276.6 million on the sale of businesses and investments and a net gain of $64.1 million on the sale of shares of a subsidiary. Income from continuing operations in the nine months ended June 30, 2000 includes charges of $99.0 million for the impairment of long-lived assets and a net credit of $81.3 million, of which net charges of $1.0 million is included in cost of sales, for merger, restructuring and other non-recurring items. See Notes 2, 7 and 8 to the Consolidated Financial Statements contained in Tyco's quarterly report on Form 10-Q for the quarterly period ended June 30, 2001, which is incorporated by reference in this document. (3) Income from continuing operations in the fiscal year ended September 30, 2000 includes a net charge of $176.3 million, of which $1.0 million is included in cost of sales, for restructuring and other non-recurring charges, and charges of $99.0 million for the impairment of long-lived assets. See Notes 12 and 16 to the Consolidated Financial Statements contained in Tyco's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, which is incorporated by reference in this document. Income from continuing operations for the fiscal year ended September 30, 2000 includes a one-time pre-tax gain of $1,760.0 million related to the issuance of common shares by a subsidiary. See Note 15 to the Consolidated Financial Statements contained in Tyco's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. (4) Income from continuing operations in the fiscal year ended September 30, 1999 includes charges of $1,035.2 million for merger, restructuring and other non-recurring charges, of which $106.4 million is included in cost of sales, and charges of $507.5 million for the impairment of long-lived assets related to 18 the mergers with U.S. Surgical Corporation and AMP and AMP's profit improvement plan. See Notes 12 and 16 to the Consolidated Financial Statements contained in Tyco's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. (5) Income from continuing operations in the fiscal year ended September 30, 1998 includes charges of $80.5 million primarily related to costs to exit certain businesses in U.S. Surgical Corporation's operations and restructuring charges of $12.0 million related to the continuing operations of U.S. Surgical Corporation. In addition, AMP recorded restructuring charges of $185.8 million in connection with its profit improvement plan and a credit of $21.4 million to restructuring charges representing a revision of estimates related to its 1996 restructuring activities. See Note 16 to the Consolidated Financial Statements contained in Tyco's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. (6) In September 1997, Tyco changed its fiscal year end from December 31 to September 30. Accordingly, the nine-month transition period ended September 30, 1997 is presented. (7) Loss from continuing operations in the nine months ended September 30, 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, and charges of $24.3 million for litigation and other related costs and $5.8 million for restructuring charges in U.S. Surgical Corporation's operations. The results for the nine months ended September 30, 1997 also include 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. (8) Prior to their respective mergers, ADT, Keystone, U.S. Surgical Corporation and AMP had December 31 fiscal year ends and Former Tyco had a June 30 fiscal year end. The selected consolidated financial data have been combined using a December 31 fiscal year end for ADT, Keystone, Former Tyco, U.S. Surgical Corporation and AMP for the year ended December 31, 1996. (9) Income from continuing operations 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 the United Kingdom, $98.0 million to exit various product lines and manufacturing operations associated with AMP's operations and $8.8 million of fees and expenses related to ADT's acquisition of Automated Security (Holdings) plc, a United Kingdom company. (10) Per share amounts have been retroactively restated to give effect to the mergers with Former Tyco, Keystone, Inbrand, U.S. Surgical Corporation and AMP; a 0.48133 reverse stock split (1.92532 after giving effect to the subsequent stock splits) effected on July 2, 1997; and two-for-one stock splits distributed on October 22, 1997 and October 21, 1999, both of which were effected in the form of a stock dividend. (11) Tyco has paid a quarterly cash dividend of $0.0125 per common share since July 2, 1997, the date of the Former Tyco/ADT merger. Prior to the merger with ADT, Former Tyco had paid a quarterly cash dividend of $0.0125 per share of common stock since January 1992. ADT had not paid any dividends on its common shares since 1992. U.S. Surgical Corporation paid quarterly dividends of $0.04 per share in the year ended September 30, 1998 and the nine months ended September 30, 1997 and aggregate dividends of $0.08 per share in 1996. AMP paid dividends of $0.27 per share in the first two quarters of the year ended September 30, 1999, $0.26 per share in the first quarter and $0.27 per share in the last three quarters of the year ended September 30, 1998, $0.26 per share in each of the three quarters of the nine months ended September 30, 1997 and aggregate dividends of $1.00 per share in 1996. The payment of dividends by Tyco in the future will depend on business conditions, Tyco's financial condition and earnings and other factors. 19 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF SENSORMATIC
Nine Months Ended March 31, Year Ended June 30, ---------------- ---------------------------------------------- 2001 2000(1) 2000(1) 1999(2) 1998(3) 1997(4) 1996(5) -------- ------- -------- -------- -------- -------- -------- (Unaudited) (in millions, except per share amounts) Consolidated Statement of Operations Data: Revenues............... $ 802.0 $786.2 $1,100.0 $1,017.5 $ 986.9 $1,025.7 $ 994.6 Operating income (loss)................ 82.0 86.0 136.1 81.5 40.1 2.1 (134.5) Net income (loss)...... 39.7 42.7 72.2 38.1 (32.7) (21.4) (97.7) Income (loss) applicable to common stockholders.......... 31.3 33.7 60.3 26.6 (35.2) (21.4) (97.7) Basic.................. 0.40 0.44 0.79 0.35 (0.47) (0.29) (1.33) Diluted................ 0.40 0.44 0.78 0.35 (0.47) (0.29) (1.33) Cash dividends per common share.......... -- -- -- -- -- 0.22 0.22 Consolidated Balance Sheet Data (End of period): Total assets........... $1,701.8 $1,762.9 $1,775.6 $1,799.5 $1,646.6 $1,621.3 Total debt............. 382.2 427.5 508.1 548.7 523.3 516.5 Stockholders' equity(6)............. 972.8 945.8 889.7 902.0 772.9 831.7
- -------- (1) Net income for the nine months ended March 31, 2000 and for fiscal 2000 includes a restructuring reversal of $8.3 million and a litigation insurance recovery of $0.5 million. (2) Net income for 1999 includes a litigation insurance recovery of $6.2 million. (3) Net income for 1998 includes a litigation settlement charge of $53.0 million, restructuring charges and inventory write-downs relating to restructuring activities of $21.9 million and a litigation insurance recovery of $7.3 million. (4) Net income for 1997 includes restructuring charges of $26.8 million. (5) Net income for 1996 includes restructuring charges of $65.7 million and inventory write-downs related to restructuring activities of $19.6 million. (6) In fiscal 1998, Sensormatic issued 6 1/2% convertible preferred stock for net proceeds of $166.7 million. 20 RECENT DEVELOPMENT OF SENSORMATIC On August 2, 2001, Sensormatic announced its unaudited results for fiscal year 2001 and the fourth quarter ended June 30, 2001. Sensormatic reported its results using both its historical method, which it refers to as "Pre-SAB 101," and using new accounting rules, which it refers to as the "Reported" results. The Reported results take into account the SEC's accounting rule SAB 101, adopted by Sensormatic beginning in the fourth quarter of 2001. By adopting SAB 101, Sensormatic now recognizes revenue after product installation is complete and all customer acceptance provisions have been met where post-shipment obligations exist. Prior to the adoption of SAB 101, Sensormatic recognized revenue for equipment sales when title transferred, generally upon shipment. Reported results also include the effects of EITF 00-10, which requires shipping and handling costs billed to a customer to be classified as revenue, and $11.1 million in charges related to expense reduction actions that were announced in April 2001. As a result of EITF 00-10, Sensormatic has adopted a policy to include shipping and handling costs in its cost of sales, rather than in operating expenses, as previously reported. Pre-SAB 101 For the quarter ended June 30, 2001, Sensormatic reported net income of $24.1 million, or $0.27 per diluted common share (EPS), compared with net income of $29.4 million, or EPS of $0.34, for the quarter ended June 30, 2000. Revenue for the quarter ended June 30, 2001 was $301.1 million, compared with revenue of $313.9 million in the quarter ended June 30, 2000. Excluding foreign currency exchange effects, revenue for the fourth quarter of 2001 was $309.7 million. For the full 2001 fiscal year, Sensormatic reported net income of $63.8 million, or EPS of $0.67, compared with net income of $66.0 million, or EPS of $0.70, in fiscal 2000, excluding the benefits in fiscal 2000 from restructuring reversals and litigation recoveries. Fiscal 2001 revenue was $1.103 billion compared with $1.100 billion in the previous year. Excluding the effects of foreign currency exchange, revenue for the year was $1.144 billion, a gain of 4.0% over the previous year, and EPS would have been approximately $0.76. At June 30, 2001, Sensormatic had a cash balance of $269.4 million, an increase of 20.3% percent compared to $223.9 million cash on hand at June 30, 2000. The fourth quarter and full fiscal year of 2001 produced $58.3 million and $96.1 million, respectively, of free cash flow. Sensormatic defines free cash flow as cash from operating activities less cash used for investing activities excluding acquisitions and restructuring. Sensormatic's net debt to total capitalization ratio stood at 10.5%, as of June 30, 2001. Sensormatic defines the net debt to total capitalization ratio as debt net of cash divided by the sum of debt net of cash and stockholders' equity. Reported Results In accordance with the adoption of SAB 101 and EITF 00-10, Sensormatic has restated its unaudited quarterly results for fiscal 2001. The table below summarizes these quarterly results and the results for the full year.
Fiscal quarter ended Fiscal quarter Fiscal quarter Fiscal quarter Fiscal year September 30, ended December ended ended June 30, ended June 2000 31, 2000 March 31, 2001 2001 30, 2001 -------------- -------------- -------------- -------------- ----------- Revenue (in millions)... $269.2 $291.7 $247.8 $288.6 $1,097.3 EPS..................... $(0.24)(1) $ 0.25 $ 0.03 $ 0.10(2) $ 0.15(2)
- -------- (1) Includes cumulative effect of change in accounting principle related to the adoption of SAB 101 of ($0.35). (2) For the three months and twelve months ended June 30, 2001, results include charges totaling $11.1 million related to expense reduction actions announced on April 26, 2001. 21 COMPARATIVE PER SHARE INFORMATION
Tyco and Sensormatic Sensormatic Tyco Sensormatic Unaudited Equivalent Historical Historical Pro Forma Unaudited Pro Per Share Per Share Combined Per Forma Per Data Data(1) Share Data(2) Share Data(2) ---------- ----------- ------------- ------------- At or for the nine months ended June 30, 2001 (Unaudited) Income from continuing operations per common share(3): Basic.................... $1.91 $0.40 $ 1.85 $0.84 Diluted.................. 1.89 0.40 1.82 0.83 Cash dividends per common share..................... See (4) below Book value per common share(5).................. 16.11 10.16 16.87 7.67 At or for the year ended September 30, 2000 Income from continuing operations per common share(3): Basic.................... $2.68 $0.79 $ 2.66 $1.21 Diluted.................. 2.64 0.78 2.62 1.19 Cash dividends per common share..................... See (4) below Book value per common share(5).................. 10.11 10.11 11.12 5.06
- -------- (1) Tyco has a September 30 fiscal year end. Sensormatic has a June 30 fiscal year end. For purposes of the above comparative per share information, operating results for the nine months ended June 30, 2001 reflect the results of Tyco for such period and Sensormatic for the nine months ended March 31, 2001; and, the operating results for the fiscal year ended September 30, 2000 reflect the results of Tyco for such period and of Sensormatic for the year ended June 30, 2000. For the book value per common share at June 30, 2001, the financial position at June 30, 2001 was used for Tyco and the financial position at March 31, 2001 was used for Sensormatic; and at September 30, 2000, the financial position at September 30, 2000 was used for Tyco and the financial position at June 30, 2000 was used for Sensormatic. (2) The Tyco and Sensormatic unaudited pro forma combined income and book value per common share are based on Sensormatic stockholders receiving 0.4547 of a Tyco common share for each share of Sensormatic common stock held, corresponding to a Tyco common share price of $52.78, which was the closing price per Tyco common share on the New York Stock Exchange on August 2, 2001. The Sensormatic equivalent pro forma per share data are calculated by multiplying the unaudited pro forma combined per share data by 0.4547. (3) See Notes (2) and (3) to "Selected Consolidated Historical Financial Data of Tyco" on page 18 and Note (1) to "Selected Consolidated Historical Financial Data of Sensormatic" on page 20 for information on certain non- recurring items. (4) See Note (11) to "Selected Consolidated Historical Financial Data of Tyco" on page 18 and see "Selected Consolidated Historical Financial Data of Sensormatic" on page 20 for information on cash dividends per common share. (5) Book value per common share is calculated by dividing net assets less convertible preferred stock, as applicable, by common shares outstanding for the respective periods, as described in Note 1 above. 22 COMPARATIVE MARKET VALUE INFORMATION The following table sets forth: . the closing prices per share and aggregate market value of Tyco common shares and of Sensormatic common stock on the New York Stock Exchange, on August 2, 2001, the last trading day prior to the public announcement of the proposed merger, and on September 7, 2001, the last practicable full trading day prior to the date of this document; and . the equivalent price per share and equivalent market value of Sensormatic common stock, based on the exchange ratio that would apply if the Tyco average share price during the pricing period were equal to the Tyco closing price on the New York Stock Exchange on August 2, 2001 and September 7, 2001.
Sensormatic Sensormatic Tyco Historical Historical Equivalent(1) ---------------- -------------- -------------- On August 2, 2001 Closing price per common share........................ $ 52.78 $ 14.94 $ 24.00 Market value of common shares(2).................... $102,231,166,666 $1,320,568,472 $2,121,395,136 On September 7, 2001 Closing price per common share........................ $ 46.58 $ 22.68 $ 24.00 Market value of common shares(2).................... $ 90,225,861,007 $2,012,646,084 $2,129,784,216
- -------- (1) The Sensormatic equivalent data for August 2, 2001 corresponds to an exchange ratio of 0.4547 and the Sensormatic equivalent data for September 7, 2001 corresponds to an exchange ratio of 0.5152. (2) Market value based on 1,936,930,024 Tyco common shares and 79,554,374 shares of Sensormatic common stock and the assumed conversion of 690,000 shares of Sensormatic preferred stock into approximately 8,837,090 shares of Sensormatic common stock outstanding as of August 2, 2001, 1,937,008,609 Tyco common shares and 79,903,919 shares of Sensormatic common stock and the assumed conversion of 690,000 shares of Sensormatic preferred stock into approximately 8,837,090 shares of Sensormatic common stock outstanding as of September 7, 2001, excluding shares held in treasury or by subsidiaries. The number of Tyco common shares outstanding as of August 2, 2001 and September 7, 2001 includes 4,684,810 and 4,269,696 shares, respectively, issuable upon exchange of exchangeable shares of CIT Exchangeco Inc., a wholly-owned subsidiary of Tyco. Market values are likely to differ from values based on the average share price. See the risk factor entitled "Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares for each Sensormatic common share" on page 13. 23 COMPARATIVE PER SHARE PRICES AND DIVIDENDS Tyco Tyco common shares are listed and traded on the New York Stock Exchange, the London Stock Exchange and the Bermuda Stock Exchange. The following table sets forth the high and low sales prices per Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets, and the dividends paid on such shares for the quarterly periods presented below. The price and dividends for Tyco common shares have been restated to reflect a two-for-one stock split distributed on October 21, 1999, which was effected in the form of a stock dividend.
Tyco Common Shares ----------------- Dividend Per High Low Common Share -------- -------- ------------ Fiscal 1999: First Quarter................................... $39.5938 $20.1563 $0.0125 Second Quarter.................................. 39.9688 33.7500 0.0125 Third Quarter................................... 47.4063 35.1875 0.0125 Fourth Quarter.................................. 52.9375 47.1250 0.0125 Fiscal 2000: First Quarter................................... $53.8750 $23.0625 $0.0125 Second Quarter.................................. 53.2500 32.0000 0.0125 Third Quarter................................... 51.3750 41.0000 0.0125 Fourth Quarter.................................. 59.1875 45.5625 0.0125 Fiscal 2001: First Quarter................................... $58.8750 $44.5000 $0.0125 Second Quarter.................................. 63.2100 41.4000 0.0125 Third Quarter................................... 59.3000 40.1500 0.0125 Fourth Quarter (through September 7, 2001)...... 55.2900 46.5100 0.0125
See "Comparative Market Value Information" on page 23 for recent Tyco common share price information. Shareholders are urged to obtain current market quotations. See also the risk factor entitled "Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares for each Sensormatic common share" on page 13. Under the terms of the merger agreement, other than its regularly scheduled quarterly dividend of $0.0125 per Tyco common share, Tyco is not permitted to declare, set aside, make or pay any dividend or distribution in respect of its capital stock from the date of the merger agreement until the earlier of the termination of the merger agreement and the consummation of the merger. The payment of dividends by Tyco in the future will be determined by Tyco's board of directors and will depend on business conditions, Tyco's financial condition and earnings and other factors. 24 Sensormatic Sensormatic's common stock is traded on the New York Stock Exchange under the symbol "SRM." The following table sets forth for the periods indicated, the range of the high and low sale prices per common share. Sensormatic's fiscal year end is June 30 and the information is presented on a fiscal year basis. Sensormatic does not pay dividends on its common stock.
Sensormatic Common Shares ----------------- High Low -------- -------- Fiscal 2000: First Quarter................................................ $14.5000 $11.1250 Second Quarter............................................... 17.9375 10.5000 Third Quarter................................................ 22.8750 15.0000 Fourth Quarter............................................... 23.1875 14.6875 Fiscal 2001: First Quarter................................................ $19.0000 $12.5000 Second Quarter............................................... 21.9375 14.0625 Third Quarter................................................ 22.5800 15.7500 Fourth Quarter............................................... 20.0000 12.0000 Fiscal 2002: First Quarter (through September 7, 2001).................... $23.6400 $13.5200
See "Comparative Market Value Information" on page 23 for recent Sensormatic common stock price information. Stockholders are urged to obtain current market quotations. Under the terms of the merger agreement, Sensormatic is not permitted to declare, set aside, make or pay any dividend or distribution in respect of its capital stock, other than regular dividends under its 6 1/2% convertible preferred stock, from the date of the merger agreement until the earlier of the termination of the merger agreement and the consummation of the merger. 25 REASONS OF TYCO FOR THE OFFER AND THE MERGER At a meeting of the executive committee of Tyco's board of directors held on August 1, 2001, the executive committee determined that the acquisition of Sensormatic was in keeping with its corporate strategy of complementing its internal growth with acquisitions that are likely to benefit from cost reductions and synergies when combined with Tyco's existing operations and that are expected to be accretive to earnings per share. In reaching its decision to adopt the merger agreement, the executive committee considered the following material factors: . the expectation that Sensormatic's business could be readily integrated with Tyco's Fire and Security services segment, enabling Tyco to broaden its product offerings and creating a fully integrated fire, security and access product line; . the leading positions that Sensormatic occupies in its principal markets, and its premier technology in acoustical magnetic systems and radio frequency identification (RFID) technology; . the expectation that the distribution of Sensormatic's products can be greatly expanded through the sales force of Tyco's ADT subsidiary; . the expectation that the acquisition of Sensormatic will enhance the recurring service and monitoring business of Tyco's Fire and Security Services segment; . the opportunity that the acquisition provides for Tyco's entry into the manufacturing of security products with first-class technology; . the expectation that the acquisition of Sensormatic, before restructuring and similar charges and assuming the realization of certain of the cost savings referred to below and other synergies, would be immediately accretive to Tyco's earnings per share; . the belief of Tyco's management that there are prospects for reduction of Sensormatic's corporate costs, possible elimination of facilities of the combined company and potential cost reductions for purchased materials and services; . the prospect of utilization of Sensormatic's business as a platform for further growth in the markets served by Sensormatic; and . Tyco's history of growth through acquisitions, including its substantial experience integrating acquired businesses with existing operations and thereby achieving synergies and cost savings. RECOMMENDATION OF THE BOARD OF DIRECTORS OF SENSORMATIC; REASONS OF SENSORMATIC FOR THE OFFER AND THE MERGER At a meeting held on August 2, 2001, by the unanimous vote of all directors present, the Sensormatic board of directors determined that the terms of the offer and the merger are advisable, fair to, and in the best interests of, Sensormatic's common stockholders. At this meeting the Sensormatic board of directors approved the merger agreement, the offer, the merger and the other transactions contemplated by the merger agreement. The board of directors of Sensormatic unanimously recommends that holders of the Sensormatic common shares accept the offer and tender their shares pursuant to the offer. Information about the recommendation of Sensormatic's board of directors is more fully set forth in Sensormatic's Solicitation/Recommendation Statement on Schedule 14D-9, which has been mailed to Sensormatic common stockholders with this document. The Solicitation/Recommendation Statement of Sensormatic on Schedule 14D-9 includes as Annex A the opinion of Morgan Stanley & Co. Incorporated, dated August 3, 2001, to the effect that, as of such date, and based on and subject to the matters described in the opinion, the consideration to be received by holders of Sensormatic common shares pursuant to the merger agreement was fair from a financial point of view to such holders. You should read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Morgan Stanley in rendering its opinion. 26 BACKGROUND OF THE OFFER In early 1999, representatives of Tyco and Sensormatic had preliminary discussions regarding a possible business combination following which the companies entered into a confidentiality and standstill agreement and Tyco received information regarding Sensormatic and its business. Subsequently, Tyco did not express any interest in pursuing further discussions regarding a possible transaction with Sensormatic. There were no further discussions until the recent discussions described below commenced. In March 2001, a representative of Tyco's Fire and Security Services Group contacted representatives of Sensormatic to inquire concerning Sensormatic's interest in discussing a possible transaction with Tyco. Ronald G. Assaf, Chairman of the Board of Sensormatic, met with representatives of Tyco's Fire and Security Services Group and discussed generally Sensormatic's retail security business. The parties met again during the first week of May, 2001 to discuss a possible acquisition of Sensormatic by Tyco. At that meeting, Mr. Assaf indicated that Sensormatic believed its stock price was depressed at that time as a consequence of general economic conditions and that, therefore, any acquisition proposal from Tyco would have to offer a substantial premium over the then prevailing Sensormatic stock price. In the second week of May, a representative of Tyco's Fire and Security Services Group contacted Mr. Assaf confirming Tyco's continued interest in potentially acquiring Sensormatic. Mr. Assaf indicated that Sensormatic's board would be unlikely to pursue an acquisition proposal with a value of less than $25.00 per Sensormatic common share. On June 21, 2001, a representative of Tyco's Fire and Security Services Group called Mr. Assaf to indicate that Tyco was prepared to pursue an acquisition transaction at a value of $21.00 per Sensormatic common share. Mr. Assaf responded that he believed that the Sensormatic board was unlikely to proceed with discussions on that basis. On June 28, 2001, L. Dennis Kozlowski, Chairman of the Board, President and Chief Executive Officer of Tyco, contacted Mr. Assaf with a revised indication of interest in acquiring Sensormatic for a value of between $23.00 and $25.00 per Sensormatic common share. Mr. Assaf responded that Sensormatic would be prepared to consider a business combination transaction with Tyco in which Sensormatic stockholders would receive a fraction of a Tyco common share with a value at the high end of that price range in exchange for each of their Sensormatic common shares. Mr. Kozlowski indicated that Tyco would favorably consider structuring the transaction as a stock for stock exchange. Between June 29 and July 20, 2001, representatives of the parties had various conversations concerning Tyco's indication of interest. During these conversations the representatives of Sensormatic consistently expressed Sensormatic's position that any indication of interest from Tyco should reflect an exchange offer followed by a merger with a value of $25.00 per Sensormatic common share. The indication of interest was also discussed by Sensormatic's board at its regular meeting on June 29, 2001. On July 5, 2001, the parties entered into a confidentiality and standstill agreement in connection with Tyco's interest in exploring a transaction with Sensormatic. On July 16, 2001, Tyco commenced business and legal due diligence of Sensormatic, which continued through August 2, 2001. On July 23, 2001, Tyco submitted a written non-binding indication of interest, subject to confirmatory due diligence, approval by both boards of directors and execution of a mutually satisfactory definitive agreement, to acquire Sensormatic through an exchange offer to be followed by a merger in which each Sensormatic common share would be exchanged for a fraction of a Tyco common share valued at $24.00, provided that if Tyco's per share selling price fell below a certain unspecified price, Tyco would be able to terminate the transaction. On July 24, 2001, in discussions between representatives of Tyco and representatives of Sensormatic, Tyco proposed that this floor price would be $47.50 and that Tyco would be able to terminate the transaction in these circumstances unless the Sensormatic board of directors agreed to an exchange ratio of 0.5053 of a Tyco common share for each Sensormatic common share. 27 On July 25, 2001, the Sensormatic board held a telephonic meeting with its legal and financial advisors and discussed Tyco's proposal. Subsequently on July 25, 2001, representatives of Sensormatic and Tyco agreed that they would present to their respective boards of directors a transaction, subject to the conditions set forth in Tyco's July 23 indication of interest, pursuant to which each Sensormatic common share would be exchanged for a fraction of a Tyco common share valued at $24.00, but that Tyco would be able to terminate the transaction if the Tyco per share selling price was $46.25 or lower, unless the Sensormatic board then agreed to an exchange ratio of 0.5189 of a Tyco common share for each Sensormatic common share. On July 26, 2001, Tyco delivered an initial draft merger agreement to Sensormatic. Beginning on July 27, 2001, legal representatives of Sensormatic and Tyco held numerous discussions regarding the terms and conditions of the proposed merger agreement and various other legal and regulatory issues. From July 27 to July 29, 2001, Sensormatic representatives conducted business and legal due diligence of Tyco. On July 30, 2001, the Sensormatic board met with its legal and financial advisors to consider the proposed terms of the transaction. Between July 30 and August 2, 2001, representatives of Tyco and Sensormatic and their respective advisors continued negotiations of the terms and conditions of the proposed merger agreement. On August 1, 2001, the executive committee of Tyco's board of directors received management presentations on the proposed acquisition of Sensormatic. The committee discussed various factors relevant to the transaction, including the structure of the transaction, Sensormatic's products and market leadership positions, estimates of cost reductions and synergies, and estimated transaction and accounting costs. Following these discussions, the committee approved the acquisition of Sensormatic in the form of a share for share exchange transaction in which Sensormatic stockholders would receive $24.00 in value for each of their Sensormatic common shares. The approval was subject to the conclusion of due diligence to the satisfaction of Mr. Kozlowski and the negotiation of transaction terms consistent with the approval of the Tyco executive committee. A representative of Tyco advised Sensormatic of such approval. On August 2, 2001, the Sensormatic board, with all but one director present, met telephonically to discuss with its legal and financial advisors the terms and conditions of the offer and the merger set forth in the merger agreement. At this meeting, Morgan Stanley & Co. Incorporated, Sensormatic's financial advisor, delivered its oral opinion, subsequently confirmed in writing, that the consideration to be received by the holders of Sensormatic's common shares pursuant to the merger agreement was fair from a financial point of view to such holders. Morgan Stanley's opinion does not address the fairness of this consideration if Tyco Acquisition gives notice of termination because the Tyco average share price is less than $46.25 and the Sensormatic board agrees to an exchange ratio of 0.5189. The directors present at the meeting unanimously approved the merger agreement and the transactions contemplated thereby, including the offer and the merger. Early in the morning on August 3, 2001, Sensormatic and Tyco executed the merger agreement and issued a joint press release announcing the transaction. For additional information about the background to the transaction which is solely within the knowledge of Sensormatic see "Item 4. (b)(i)--Solicitation and Recommendation--Background to the Offer; Contacts with Tyco" of Sensormatic's Solicitation and Recommendation Statement on Schedule 14D-9 which is enclosed with this document. 28 FINANCIAL FORECASTS As part of its preparation of its annual budget, Sensormatic's management from time to time has prepared internal financial forecasts regarding its anticipated future operations for the year. Sensormatic has provided certain of these internal forecasts to Tyco. The internal financial forecasts prepared by Sensormatic's management reflected projected information, a summary of which is set forth below (in millions, except per share amounts). The forecasts include Sensormatic's forecasted results through June 30, 2002.
Fiscal Year Ending June Gross Operating Operating Net 30 Revenues Profit Expenses Income Income EPS - ----------------------- ------------ -------- --------- --------- ------ ---------- 2002(1)................. $1,169-1,184 $533-548 $370 $132-147 $72-82 $0.88-1.00
(1) Presented on a pre-SAB 101 basis, but not including goodwill amortization. These forecasts were not prepared with a view toward public disclosure, and investors should not unduly rely on such forecasts. We are not including these forecasts in this prospectus to influence your decision whether to tender your shares in the offer, but because these forecasts were made available by Sensormatic to Tyco. These forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Sensormatic management. In particular, the forecasts may be affected by Sensormatic's ability to achieve strategic goals, objectives and targets over the applicable period. These assumptions necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond Sensormatic's control. The forecast also reflects assumptions as to certain business decisions that are subject to change. See "Forward-Looking Information" on page 16. Accordingly, actual results are likely to vary significantly from those set forth in these forecasts. In addition, these forecasts were not prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally accepted accounting principles. None of Sensormatic, Sensormatic's board of directors, Sensormatic's advisors, agents, representatives, or independent consultants and none of Tyco, Tyco's board of directors including its executive committee, Tyco's advisors, agents, representatives or independent consultants can give you any assurance that actual results will not differ from these forecasts, nor do they assume any obligation to update or revise these forecasts. Neither Sensormatic nor Tyco intends to make publicly available any update or other revisions to any of the forecasts to reflect circumstances existing after the date of preparation of the forecasts or the occurrence of unanticipated events, even if experience or future changes in assumed conditions make it clear that the forecasts are inaccurate. The inclusion of these forecasts in this prospectus should not be regarded as a representation by Sensormatic, Tyco or any other person that the forecasted results will be achieved. The prospective financial information included in this prospectus has been prepared by, and is in the responsibility of, Sensormatic's management. PricewaterhouseCoopers LLP has neither examined nor compiled the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report included in this prospectus relates to Sensormatic's historical financial information. It does not extend to the prospective financial information and should not be read to do so. 29 THE OFFER We are offering to exchange a fraction of a Tyco common share having a value, except under the circumstances described below, of $24.00, determined as described below, for each outstanding share of Sensormatic common stock validly tendered and not properly withdrawn, subject to the terms and conditions described in this prospectus and the related letter of transmittal. The fraction of a Tyco common share for which each share of Sensormatic common stock will be exchanged in the offer will be determined by dividing $24.00 by the average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets, for each of the five consecutive trading days in the period ending on the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer. If the average share price of Tyco common shares is less than $46.25, we have the right to terminate the merger agreement unless, after we give Sensormatic written notice of our intention to terminate the merger agreement, Sensormatic's board of directors agrees to an exchange ratio of 0.5189, which is the exchange ratio determined by dividing $24.00 by $46.25. Based on an average share price that is less than $46.25, this 0.5189 exchange ratio would give Sensormatic stockholders Tyco common shares valued at less than $24.00 for each Sensormatic common share based on the Tyco average share price described above. In this circumstance, we could also agree with Sensormatic's board of directors upon a higher exchange ratio, although neither we nor Sensormatic's board of directors is under any obligation to do so. If the average share price of Tyco's common shares is less than $46.25 and we do not give Sensormatic written notice of our intention to terminate the merger agreement, Sensormatic stockholders will receive $24.00 in value of Tyco common shares for each Sensormatic common share based on the average share price referred to above. See the risk factor entitled "Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares for each Sensormatic common share" on page 13. On September 7, 2001, the closing price of the Tyco common shares on the New York Stock Exchange was $46.58. If the five trading day period ending on September 7, 2001 had been the relevant period for determining the average share price, the average share price would be $49.86 and Sensormatic stockholders would receive 0.4814 of a Tyco common share for each Sensormatic common share. The value of this fraction of a Tyco common share, based upon the average share price, would equal $24.00. The table below illustrates the fraction of a Tyco common share that would be received for each Sensormatic common share at different hypothetical average share prices. The actual average share price and exchange ratio will be calculated over the period described above and may differ from the examples set forth below. The information below is illustrative only and will not determine the actual consideration that Sensormatic stockholders would receive in the offer.
Average Value Share Exchange Per Sensormatic Price Ratio Common Share* ------- -------- --------------- $55.00 0.4364 $24.00 54.00 0.4444 24.00 53.00 0.4528 24.00 52.00 0.4615 24.00 51.00 0.4706 24.00 50.00 0.4800 24.00 49.00 0.4898 24.00 48.50 0.4948 24.00 48.00 0.5000 24.00 47.50 0.5053 24.00 47.00 0.5106 24.00 46.25 0.5189 24.00 46.00 0.5189** 23.87** 45.50 0.5189** 23.61** 45.00 0.5189** 23.35** 44.00 0.5189** 22.83**
30 - -------- * Based upon the average share price. ** Assumes that we have exercised our right to terminate the merger agreement unless Sensormatic agrees to an exchange ratio of 0.5189 and that Sensormatic has agreed to this exchange ratio. If we do not exercise this right, the exchange ratio would be $24.00 divided by the average share price and Sensormatic stockholders would receive $24.00 in value for each Sensormatic common share based upon the average share price. If the average share price is below $46.25, we could also agree with Sensormatic to an exchange ratio that is greater than 0.5189 but less than the exchange ratio equal to $24.00 divided by the average share price. If that were the case, the value received by Sensormatic common stockholders would be higher than the value set forth in the table above but less than $24.00. The term "expiration date" means 6:00 p.m., New York City time, on Monday, October 1, 2001, unless we extend the period of time for which the offer is open, in which case the term "expiration date" means the latest time and date on which the offer, as so extended, expires. If we accept shares for exchange and extend the offer for a subsequent offering period, "expiration date" also refers to each time and date thereafter to which the offer is extended. See "Extension, Termination and Amendment" below. You will not receive any fractional Tyco common shares. Instead, you will receive cash in an amount equal to the value, based on the Tyco average share price referred to above, of any fractional shares you would otherwise have been entitled to receive. If you are the record owner of your shares and you tender your shares directly to the exchange agent, you will not be obligated to pay any charges or expenses of the exchange agent or any brokerage commissions. If you own your shares through a broker or other nominee, and your broker tenders the shares on your behalf, your broker may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. We are making this offer in order to acquire all of the outstanding shares of Sensormatic common stock. As soon as practicable after completion of the offer, Sensormatic will merge with and into Tyco Acquisition. The purpose of the merger is to complete the acquisition of all of the Sensormatic common shares not tendered and exchanged pursuant to the offer. In the merger, each then outstanding Sensormatic common share, except for treasury shares, Sensormatic common shares owned by Tyco and Tyco Acquisition and shares as to which appraisal rights are exercised, would be converted into the same fraction of a Tyco common share as is exchanged in the offer. Our obligation to exchange Tyco common shares for Sensormatic common shares in the offer is subject to the conditions referred to under "Conditions of the Offer" beginning on page 42. Timing of the Offer The offer is scheduled to expire at 6:00 p.m., New York City time on Monday, October 1, 2001. For more information, see the discussion under "Extension, Termination and Amendment" below. Extension, Subsequent Offering Period, Termination and Amendment If the conditions to the offer are not satisfied or waived on any scheduled expiration date of the offer, we will extend the offer, from time to time for such amount of time as is reasonably necessary to permit such conditions to be satisfied or waived; provided, however, that no single extension will exceed 10 business days and we will not be required to extend the offer beyond March 3, 2002. We will also extend the offer for any 31 period required by any rule or regulation of the SEC applicable to the offer, but we are not required to do so beyond March 3, 2002. During any extension, all Sensormatic common shares previously tendered and not properly withdrawn will remain subject to the offer, subject to your right to withdraw your Sensormatic common shares. See the discussion under "Withdrawal Rights" for more details on page 34. If all the conditions to the offer are satisfied or waived, we will accept all tendered shares for exchange following the expiration date in effect at the time of acceptance and we may thereafter extend the offer for an additional period or periods totaling between three and 20 business days. During this subsequent offering period, we will promptly accept for exchange all Sensormatic common shares that are validly tendered. We expect to provide a subsequent offering period if less than 90% of the Sensormatic common shares on a fully-diluted basis have been tendered or any shares of Sensormatic's convertible preferred stock remain outstanding at the time Sensormatic common shares are initially accepted for exchange in the offer. We reserve the right to increase the exchange ratio or to make any other changes in the terms and conditions of the offer; provided, however, that without the prior written consent of Sensormatic: . the basic conditions may not be changed or waived, and . no change may be made that changes the form or decreases the amount of consideration to be exchanged, decreases the number of shares sought in the offer, imposes conditions to the offer in addition to those set forth in the merger agreement, changes the offer conditions, extends the expiration date of the offer beyond the initial expiration date of the offer, except as provided above, or makes any other change to any of the terms of and conditions to the offer that is adverse to the holders of the Sensormatic common shares. We will follow any extension change, amendment, or termination of the offer as promptly as practicable, with a public announcement. In the case of an extension, any announcement will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. Subject to applicable law, including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the offer be promptly sent to stockholders in a manner reasonably designed to inform stockholders of the change, and without limiting the manner in which we may choose to make any public announcement, we assume no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to a news wire service with national circulation in the United States. If we make a material change in the terms of the offer or the information concerning the offer, or if we waive a material condition of the offer, we will extend the offer to the extent required under the Exchange Act. If, prior to the expiration date, we change the percentage of Sensormatic common shares being sought or the consideration offered to you, that change will apply to all holders whose Sensormatic common shares are accepted for exchange before or after such change pursuant to the offer. If at the time notice of that change is first published, sent or given to you, the offer is scheduled to expire at any time earlier than the tenth business day from and including the date that the notice is first so published, sent or given, we will extend the offer until the expiration of that 10 business-day period. For purposes of the offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. Exchange of Sensormatic Common Shares; Delivery of Tyco Common Shares Upon the terms and subject to the conditions of the offer, including, if the offer is extended or amended, the terms and conditions of the extension or amendment, we will accept for exchange all Sensormatic common shares validly tendered and not properly withdrawn as promptly as permitted to do so under applicable law and will exchange Tyco common shares for the shares of Sensormatic common stock promptly thereafter. In all 32 cases, exchange of Sensormatic common shares tendered and accepted for exchange pursuant to the offer will be made only after timely receipt by the exchange agent of certificates for those Sensormatic common shares or a confirmation of a book-entry transfer of those Sensormatic common shares in the exchange agent's account at The Depository Trust Company, a properly completed and duly executed letter of transmittal or a manually signed facsimile of that document, along with any required signature guarantees, or an agent's message in connection with a book-entry transfer, and any other documents required by the letter of transmittal that accompanies this prospectus. For purposes of the offer, we will be deemed to have accepted for exchange Sensormatic common shares validly tendered and not properly withdrawn when we notify the exchange agent of our acceptance of the tenders of those Sensormatic common shares pursuant to the offer. The exchange agent will deliver Tyco common shares in exchange for Sensormatic common shares pursuant to the offer, and cash instead of fractional Tyco common shares, as soon as practicable after delivery of our notice. The exchange agent will act as agent for tendering stockholders for the purpose of receiving Tyco common shares and cash to be paid instead of fractional Tyco common shares and any dividend or distribution payable pursuant to the terms of the merger agreement and transmitting such stock and cash to you. You will not receive any interest on any cash that we pay you, even if there is a delay in making the exchange. For additional information on how the exchange agent will deliver Tyco common shares to you, see "Direct Registration System" on page 36. If we do not accept any tendered Sensormatic common shares for exchange pursuant to the terms and conditions of the offer for any reason, or if certificates are submitted for more Sensormatic common shares than are tendered, we will return certificates for such unexchanged Sensormatic common shares without expense to the tendering stockholder. In the case of Sensormatic common shares tendered by book-entry transfer of such Sensormatic common shares into the exchange agent's account at DTC pursuant to the procedures set forth below under the discussion entitled "Procedure for Tendering Shares," those Sensormatic common shares will be credited to an account maintained within DTC, as soon as practicable following expiration or termination of the offer. Cash Instead of Fractional Tyco Common Shares We will not issue fractional Tyco common shares pursuant to the offer. Instead, each tendering stockholder who would otherwise be entitled to a fractional Tyco common share will receive cash in an amount equal to the product obtained by multiplying (i) the fractional share interest to which the holder would otherwise be entitled by (ii) the Tyco average share price used to calculate the exchange ratio. Procedure for Tendering Shares For you to validly tender Sensormatic common shares pursuant to the offer, . you must transmit to the exchange agent, and the exchange agent must receive at one of its addresses set forth on the back cover of this prospectus, a properly completed and duly executed letter of transmittal, or a manually executed facsimile of that document, along with any required signature guarantees or an agent's message in the case of a book-entry transfer, the share certificates, and any other documents required by the letter of transmittal or you must tender those Sensormatic common shares pursuant to the procedures for book-entry tender set forth below, and a book-entry confirmation of receipt of such tender must be received, in each case before the expiration date, or . you must comply with the guaranteed delivery procedures set forth below. The term "agent's message" means a message, transmitted by DTC to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Sensormatic common shares which are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce that agreement against the participant. 33 The exchange agent will establish an account with respect to the Sensormatic common shares at DTC for purposes of the offer within two business days after the date of this prospectus, and any financial institution that is a participant in DTC may make book-entry delivery of the Sensormatic common shares by causing DTC to transfer such Sensormatic common shares into the exchange agent's account in accordance with DTC's procedure for the transfer. However, although delivery of Sensormatic common shares may be effected through book-entry at DTC, the letter of transmittal, or a manually signed facsimile thereof, along with any required signature guarantees, or an agent's message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the exchange agent prior to the expiration date, or the guaranteed delivery procedures described below must be followed. Delivery of physical certificates and documents to the exchange agent must be to one of the addresses set forth on the back page of this prospectus. Signatures on all letters of transmittal must be guaranteed by an eligible institution, except in cases in which Sensormatic common shares are tendered either by a registered holder of Sensormatic common shares who has not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on the letter of transmittal or for the account of an eligible institution. By "eligible institution" we mean a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agent's Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution," as that term is defined in Rule 17Ad-15 promulgated under the Exchange Act. If the certificates for Sensormatic common shares are registered in the name of a person other than the person who signs the letter of transmittal, or if certificates for unexchanged Sensormatic common shares are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear(s) on the certificates, with the signature(s) on the certificates or stock powers guaranteed in the manner we have described above. The method of delivery of Sensormatic common share certificates and all other required documents, including delivery through DTC, is at your option and risk, and the delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, we recommend registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery. To prevent backup federal income tax withholding with respect to cash in lieu of fractional shares received pursuant to the offer, you must provide the exchange agent with your correct U.S. taxpayer identification number and certify whether you are subject to backup withholding of U.S. federal income tax by completing the substitute U.S. Internal Revenue Service Form W-9 included in the letter of transmittal. Some stockholders, including, among others, all corporations and some non-U.S. individuals, are not subject to these backup withholding and reporting requirements. In order for a non-U.S. individual to qualify as an exempt recipient, the stockholder must submit a U.S. Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 may be obtained from the exchange agent upon request. Withdrawal Rights Your tender of Sensormatic common shares pursuant to the offer is irrevocable. However, other than during the subsequent offering period, Sensormatic common shares tendered pursuant to the offer may be withdrawn at any time prior to the applicable expiration date, and, unless we have previously accepted them pursuant to the offer, may also be withdrawn at any time after October 21, 2001. If Tyco extends the offer for a subsequent offering period, Sensormatic common shares tendered during the subsequent offering period will be accepted promptly following tender. 34 For your withdrawal to be effective, the exchange agent must receive from you a written, telex or facsimile transmission notice of withdrawal at one of its addresses set forth on the back cover of this prospectus, and your notice must include your name, address, social security number, the certificate number(s) and the number of Sensormatic common shares to be withdrawn as well as the name of the registered holder, if it is different from that of the person who tendered those Sensormatic common shares. If Sensormatic common shares have been tendered pursuant to the procedures for book-entry tender discussed under "Procedure for Tendering Shares," any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Sensormatic common shares and must otherwise comply with DTC's procedures. If certificates have been delivered or otherwise identified to the exchange agent, the name of the registered holder and the serial numbers of the particular certificates evidencing the Sensormatic common shares withdrawn must also be furnished to the exchange agent, as stated above, prior to the physical release of the certificates. We will decide all questions as to the form and validity, including time of receipt, of any notice of withdrawal, in our sole discretion, and our decision shall be final and binding. An eligible institution must guarantee all signatures on the notice of withdrawal unless the Sensormatic common shares have been tendered for the account of an eligible institution. Neither we, the exchange agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification. Any Sensormatic common shares properly withdrawn will be deemed not to have been validly tendered for purposes of our offer. However, you may re-tender withdrawn Sensormatic common shares by following one of the procedures discussed under "Procedure for Tendering Shares" or "Guaranteed Delivery" at any time prior to the expiration date. Guaranteed Delivery If you wish to tender Sensormatic common shares pursuant to the offer and your certificates are not immediately available or you cannot deliver the certificates and all other required documents to the exchange agent prior to the expiration date or cannot complete the procedure for book-entry transfer on a timely basis, your Sensormatic common shares may nevertheless be tendered, so long as all of the following conditions are satisfied: . you make your tender by or through an eligible institution; . a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by us, is received by the exchange agent as provided below on or prior to the expiration date; and . the certificates for all tendered Sensormatic common shares or a confirmation of a book-entry transfer of such securities into the exchange agent's account at DTC as described above, in proper form for transfer, together with a properly completed and duly executed letter of transmittal or a manually signed facsimile thereof, with any required signature guarantees or, in the case of a book-entry transfer, an agent's message and all other documents required by the letter of transmittal are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of such notice of guaranteed delivery. You may deliver the notice of guaranteed delivery by hand or transmit it by facsimile transmission or mail to the exchange agent and you must include a guarantee by an eligible institution in the form set forth in that notice. In all cases, we will exchange Sensormatic common shares tendered and accepted for exchange pursuant to our offer only after timely receipt by the exchange agent of certificates for Sensormatic common shares (or timely confirmation of a book-entry transfer of such securities into the exchange agent's account at DTC as described above), a properly completed and duly executed letter(s) of transmittal or a manually signed facsimile(s) thereof, or an agent's message in connection with a book-entry transfer, and any other required documents. 35 Effect of Tender By executing a letter of transmittal as set forth above, you irrevocably appoint our designees as your attorneys-in-fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your Sensormatic common shares tendered and accepted for exchange by us and, unless the exchange ratio is appropriately adjusted to reflect such issuance, with respect to any and all other Sensormatic common shares and other securities issued or issuable on or after August 3, 2001 in respect of the Sensormatic common shares you tender to us. That appointment is effective, and voting rights will be affected, when and only to the extent that we deposit all Tyco common shares that we have to deliver to you, for Sensormatic common shares that you have tendered and not withdrawn with the exchange agent. All such proxies will be considered coupled with an interest in the tendered Sensormatic common shares and therefore shall not be revocable. Upon the effectiveness of this appointment, all prior proxies that you have given for your tendered shares will be revoked, and you may not give any subsequent proxies (and, if given, they will not be deemed effective). Our designees will, with respect to the Sensormatic common shares for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper at any annual, special or adjourned meeting of Sensormatic's stockholders or otherwise. We reserve the right to require that, in order for Sensormatic common shares to be deemed validly tendered, immediately upon our receipt of your tender of those Sensormatic common shares, we must be able to exercise full voting rights with respect to such Sensormatic common shares. We will determine questions as to the validity, form, eligibility, including time of receipt, and acceptance for exchange of any tender of Sensormatic common shares, in our sole discretion, and our determination shall be final and binding. We reserve the absolute right to reject any and all tenders of Sensormatic common shares that we determine are not in proper form or the acceptance of or exchange for which may, in the opinion of our counsel, be unlawful. We expressly reserve the right to increase the exchange ratio or to make any other changes in the terms and conditions of the offer; provided, however, that without the prior written consent of Sensormatic: . the basic conditions may not be changed or waived; and . no change may be made that changes the form or decreases the amount of consideration to be exchanged, decreases the number of shares sought in the offer, imposes conditions to the offer in addition to those set forth in the merger agreement, changes the offer conditions, extends the expiration date of the offer beyond the initial expiration date of the offer, except as provided above, or makes any other change to the terms of and conditions to the offer which is adverse to the holders of the shares. No tender of Sensormatic common shares will be deemed to have been validly made until all defects and irregularities in tenders of Sensormatic common shares have been cured or waived. Neither we, the exchange agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any Sensormatic common shares or will incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of our offer, including the letter of transmittal and instructions thereto, will be final and binding. The tender of Sensormatic common shares pursuant to any of the procedures described above will constitute a binding agreement between us and you upon the terms and subject to the conditions of the offer. Direct Registration System The Tyco common shares delivered in exchange for your tendered Sensormatic common shares in the offer and the merger will be issued under Tyco's direct registration system. This means that you will not receive certificates for your Tyco common shares. Instead, your Tyco common shares will be issued as an electronic credit to an account created for you by Mellon Investor Services, Tyco's transfer agent. The transfer agent will send to you an account statement confirming the crediting of the Tyco common shares to your account. A brochure describing the features and benefits of this system will be enclosed with your first account 36 statement. If you wish to obtain a physical certificate for the Tyco common shares that you receive in the offer or merger, you may request one at any time. The brochure that will accompany your first account statement will describe how to obtain a physical certificate. Material U.S. Federal Income Tax and Bermuda Tax Consequences U.S. Federal Income Tax Consequences The following discussion is a summary of the material U.S. federal income tax consequences of the exchange of Sensormatic common stock for Tyco common shares pursuant to the offer and merger and the ownership of Tyco common shares. The discussion which follows is based on the U.S. Internal Revenue Code, U.S. Treasury Regulations promulgated thereunder, administrative rulings and pronouncements and judicial decisions as of the date hereof, all of which are subject to change, possibly with retroactive effect. The discussion below, except where specifically noted, does not address the effects of any state, local or non-United States tax laws. In addition, the discussion below relates to persons who hold Sensormatic common stock and will hold Tyco common shares as capital assets. The tax treatment of a Sensormatic stockholder may vary depending upon such stockholder's particular situation, and certain stockholders may be subject to special rules not discussed below. Such stockholders would include, for example, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, stockholders who hold shares of Sensormatic as part of a hedge, straddle, constructive sale or conversion transaction, and individuals who received Sensormatic common stock pursuant to the exercise of employee stock options or otherwise as compensation. As used in this section, a "U.S. Holder" means a beneficial owner of Sensormatic common stock who exchanges Sensormatic common stock for Tyco common shares and who is, for U.S. federal income tax purposes: . a citizen or resident of the U.S.; . a corporation, partnership or other entity, other than a trust, created or organized in or under the laws of the U.S. or any political subdivision thereof; . an estate whose income is subject to U.S. federal income tax regardless of its source; or . a trust (1) if, in general, a court within the U.S. is able to exercise primary supervision over its administration and one or more U.S. persons have authority to control all of its substantial decisions, or (2) that has a valid election in effect under applicable U.S. treasury regulations to be treated as a U.S. person. As used in this section, a non-U.S. Holder is a holder of Sensormatic common stock who exchanges Sensormatic common stock for Tyco common shares and who is not a U.S. Holder. 1. Consequences of the offer and the merger In the opinions of PricewaterhouseCoopers LLP, tax advisor to Tyco, and Cleary, Gottlieb, Steen & Hamilton, tax counsel to Sensormatic: . The offer and the merger will be treated for U.S. federal income tax purposes as a reorganization, within the meaning of Section 368(a) of the U.S. Internal Revenue Code, that is not subject to Section 367(a)(1) of the Code pursuant to U.S. Treasury Regulation Section 1.367(a)-3(c), other than with respect to holders of Sensormatic common stock who are or will be "five-percent transferee shareholders" within the meaning of U.S. Treasury Regulation Section 1.367(a)-3(c)(5)(ii) and do not enter into five year gain recognition agreements in the form provided in U.S. Treasury Regulation Section 1.367(a)-8; and 37 . Each of Tyco, Tyco Acquisition and Sensormatic will be a party to the reorganization within the meaning of Section 368(b) of the Code. Based on those conclusions, the following additional material U.S. federal income tax consequences will result from the offer and the merger, other than with respect to Sensormatic stockholders who are five percent transferee shareholders and who do not enter into gain recognition agreements as described above: . A Sensormatic stockholder will not recognize any income, gain or loss as a result of the receipt of Tyco common shares in exchange for Sensormatic common stock pursuant to the offer and/or merger, except for cash received in lieu of a fractional Tyco common share; . The tax basis to a Sensormatic stockholder of the Tyco common shares received in exchange for Sensormatic common stock pursuant to the offer and/or merger, including any fractional share interest in Tyco common shares for which cash is received, will equal such Sensormatic stockholder's tax basis in the Sensormatic common stock surrendered in exchange therefor; . The holding period of a Sensormatic stockholder for the Tyco common shares received pursuant to the offer and/or merger will include the holding period of the Sensormatic common stock surrendered in exchange therefor; . A Sensormatic stockholder who is a U.S. Holder and who receives cash in lieu of a fractional share interest in Tyco common shares pursuant to the offer and/or merger will be treated as having received such cash in exchange for such fractional share interest and generally will recognize capital gain or loss on such deemed exchange in an amount equal to the difference between the amount of cash received and the basis of the Sensormatic stock allocable to such fractional share. Non-U.S. Holders who receive cash in lieu of a fractional share interest in Tyco common shares will not be subject to United States income or withholding tax except as set forth in paragraph 3.b below; and . No income, gain or loss will be recognized by Tyco, Tyco Acquisition or Sensormatic as a result of the transfer to Sensormatic stockholders of the Tyco common shares provided by Tyco to Tyco Acquisition pursuant to the offer and the merger. The above opinions, which are not binding on the U.S. Internal Revenue Service or the courts, are conditioned upon the assumption, which we refer to as the supporting condition, that the offer and the merger are completed under the current terms of the merger agreement, including the requirement that the merger be completed as soon as practicable after consummation of the offer. The ability to satisfy the supporting condition, and therefore the federal income tax consequences of the offer and the merger, depends in part on facts that will not be available until the completion of the merger. There can be no assurance that the merger will be completed or that the supporting condition will be satisfied, although we expect that it will be. In addition to the supporting condition, the above opinions are based on, among other things, facts existing as of the date hereof, on certain representations as to factual matters made by Tyco, Tyco Acquisition and Sensormatic and on the assumption as to the absence of material changes in facts or in law between the date hereof and the effective time of the merger. If the supporting condition is not satisfied, in which event the offer and the merger may not be treated as an integrated transaction for U.S. federal income tax purposes, or if such representations or assumption are incorrect in certain material respects, the conclusions reached in the opinions could be jeopardized and the tax consequences of the offer and the merger could differ materially from those set forth above. In particular, in such event the exchange by Sensormatic stockholders of Sensormatic common shares for Tyco common shares in the offer and/or the merger could be taxable depending on the particular facts surrounding the offer and/or the merger, some of which may not be available until completion of the merger. If the offer and/or the merger are taxable, then U.S. Holders generally would recognize gain or loss on the exchange of Sensormatic common shares for Tyco common shares in such taxable transaction measured by the difference between the fair market value of the Tyco common shares (together with any cash received in lieu of a fractional Tyco common share) received by such stockholders and such stockholders' respective tax bases in the Sensormatic common shares surrendered. 38 2. Transfer taxes In the event that any state or local transfer taxes are imposed on Sensormatic stockholders as a result of the offer or merger, Sensormatic will pay all such transfer taxes, if any, directly to state and local taxing authorities on behalf of all Sensormatic stockholders. Any such payments by Sensormatic made on behalf of the Sensormatic stockholders may result in dividend income to each Sensormatic stockholder on behalf of whom such payment is made. The amount of such dividend income attributable to each share of Sensormatic common stock cannot be determined at this time, but is not expected to be material. 3. Ownership of Tyco common shares a. U.S. Holders Distributions Distributions made to U.S. Holders on Tyco common shares will be treated as dividends and taxable as ordinary income to the extent that such distributions are made out of Tyco's current or accumulated earnings and profits as determined for U.S. federal income tax purposes, with any excess being treated as a tax-free return of capital which reduces such U.S. Holder's tax basis in the Tyco common shares to the extent thereof, and thereafter as capital gain from the sale or exchange of property. The U.S. federal income tax treatment described in the immediately preceding sentence applies whether or not such distributions are treated as a return of capital for nontax purposes. Amounts taxable as dividends generally will be treated as foreign source "passive" income for foreign tax credit purposes. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution by Tyco. U.S. Holders of Tyco common shares that are corporations generally will not be entitled to claim a dividends received deduction with respect to distributions by Tyco, because Tyco is a foreign corporation. Disposition Gain or loss recognized by a U.S. Holder of Tyco common shares on the sale, exchange or other taxable disposition of Tyco common shares will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on such sale, exchange or other disposition and such U.S. Holder's adjusted tax basis in the Tyco common shares surrendered. Such gain or loss will be long term capital gain or loss if such U.S. Holder's holding period for its Tyco common shares is more than one year. Any gain or loss so recognized generally will be United States source. Information Reporting and Backup Withholding Certain U.S. Holders may be subject to information reporting with respect to payments of dividends on, and the proceeds of the disposition of, Tyco common shares. U.S. Holders who are subject to information reporting and who do not provide appropriate information when requested may also be subject to backup withholding. U.S. Holders should consult their tax advisors regarding the imposition of backup withholding and information reporting with respect to distributions on, and dispositions of, Tyco common shares. b. Non-U.S. Holders Distributions and Disposition In general, and subject to the discussion below under "Information Reporting and Backup Withholding," a non-U.S. Holder will not be subject to U.S. federal income or withholding tax on income from distributions with respect to, or gain upon the disposition of, Tyco common shares, unless either (1) the income or gain is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the U.S. or (2) in the case of gain realized by an individual non-U.S. Holder upon a disposition of Tyco common shares, the non- U.S. Holder is present in the U.S. for 183 days or more in the taxable year of the sale and certain other conditions are met. 39 In the event that clause (1) in the preceding paragraph applies, such income or gain generally will be subject to regular U.S. federal income tax in the same manner as if such income or gain, as the case may be, were realized by a U.S. Holder. In addition, if such non-U.S. Holder is a non-U.S. corporation, such income or gain may be subject to a branch profits tax at a rate of 30%, although a lower rate may be provided by an applicable income tax treaty. In the event that clause (2), but not clause (1), in the preceding paragraph applies, the gain generally will be subject to tax at a rate of 30%, or such lower rate as may be provided by an applicable income tax treaty. Information Reporting and Backup Withholding If the Tyco common shares are held by a non-U.S. Holder through a non-U.S., and non-U.S.-related, broker or financial institution, information reporting and backup withholding generally would not be required with respect to distributions on and dispositions of Tyco common shares. Information reporting, and possibly backup withholding, may apply if the Tyco common shares are held by a non-U.S. Holder through a U.S., or U.S.-related, broker or financial institution and the non-U.S. Holder fails to provide appropriate information. Non-U.S. Holders should consult their tax advisors regarding the imposition of backup withholding and information reporting with respect to distributions on and dispositions of Tyco common shares. Bermuda Tax Consequences In the opinion of Appleby Spurling & Kempe, attorneys in Bermuda for Tyco, there will be no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable in respect of the delivery of Tyco common shares to Sensormatic stockholders in exchange for Sensormatic common shares pursuant to the offer and the merger. In addition, as of the date hereof, there is no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable in respect of capital gains realized on a disposition of Tyco common shares or in respect of distributions by Tyco with respect to Tyco common shares. Furthermore, Tyco has received from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act of 1966 an undertaking that, in the event of there being enacted in Bermuda any legislation imposing any tax computed on profits or income, including any dividend or capital gains withholding tax, or computed on any capital assets, gain or appreciation or any tax in the nature of an estate or inheritance tax or duty, the imposition of such tax shall not be applicable to Tyco or any of its operations, nor to its common shares nor to obligations of Tyco until the year 2016. This undertaking applies to Tyco common shares. It does not, however, prevent the application of Bermuda taxes to persons ordinarily resident in Bermuda. General The foregoing discussion is intended only as a summary and does not purport to be a complete analysis or listing of all potential tax effects relevant to a decision whether to tender Sensormatic common shares in the offer. Sensormatic stockholders are urged to consult their tax advisors concerning the federal, state, local and non-U.S. tax consequences of the offer and merger to them. Purpose of the Offer; The Merger; Appraisal Rights. We are making the offer and will consummate the merger in order to acquire all of the outstanding Sensormatic common shares. As soon as practicable after completion of the offer, Sensormatic will merge with and into Tyco Acquisition. The purpose of the merger is to acquire all Sensormatic common shares not tendered and exchanged pursuant to the offer. In the merger, each then outstanding Sensormatic common share, except for shares held in Sensormatic's treasury or by a Sensormatic subsidiary, shares held by us and any shares for which appraisal rights are available and have been exercised, will be converted into the same fraction of a Tyco common share as is exchanged in the offer for each Sensormatic common share. Under Section 251 of the Delaware General Corporation Law, the approval of the board of directors of Sensormatic and the affirmative vote of the holders of a majority of its outstanding shares entitled to vote are 40 required to approve and adopt a merger and a merger agreement. Stockholder approval is not required if the conditions described below for a short-form merger are satisfied. The Sensormatic board of directors has previously approved the merger. If we complete the offer, we would have a sufficient number of Sensormatic common shares to approve the merger without the affirmative vote of any other holder of Sensormatic common shares. Section 253 of the Delaware General Corporation Law would permit the merger to occur without a vote of Sensormatic's stockholders, which we refer to as a "short-form merger," if we were to acquire at least 90% of the outstanding Sensormatic common shares in the offer or otherwise, including as a result of additional shares accepted for exchange during the subsequent offering period or purchased following conclusion of the offer. If, however, we do not acquire at least 90% of the then outstanding Sensormatic common shares pursuant to the offer or otherwise, and a vote of Sensormatic's stockholders is required under the Delaware General Corporation Law, a longer period of time will be required to effect the merger. If a vote is required, we will vote our majority shares in favor of the merger. We have agreed in the merger agreement to effect the merger at the earliest practicable time, and if we obtain ownership of 90% of the outstanding Sensormatic common shares in the offer on a fully-diluted basis, to effect the merger as a short-form merger. Whether the merger requires a vote of Sensormatic stockholders or is effected through the short-form merger, we cannot complete the merger if any shares of the Sensormatic's convertible preferred stock are outstanding. This is required as a condition to the opinions that tax-free treatment will apply to the offer and the merger. Sensormatic has agreed to call all then outstanding shares of convertible preferred stock for redemption not later than one business day following the initial acceptance of shares for exchange in the offer. These shares will be redeemed on the 30th day after Sensormatic issues a notice of redemption. Shares of convertible preferred stock may be converted prior to the expiration date and tendered in the offer. However, if any shares of convertible preferred stock are outstanding following completion of the offer and are not converted prior to the redemption date for the preferred stock, we will not be able to consummate the merger until the redemption date at the earliest. For additional information, see "Redemption of Sensormatic Preferred Stock" on page 48. Appraisal Rights Under Delaware law, Sensormatic stockholders do not have appraisal rights in connection with the offer. Stockholders will not have appraisal rights in connection with the merger, unless: . the short form merger procedures are used; or . prior to the record date for the vote on the merger, the Sensormatic common shares have been delisted from the New York Stock Exchange, have not been listed on another national stock exchange or on NASDAQ, and are held of record by less than 2,000 holders. If appraisal rights are available, dissenting stockholders of Sensormatic who comply with the procedures of Section 262 of the Delaware General Corporation Law will be entitled to a judicial determination of the fair value of their Sensormatic common shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, and to receive payment of such fair value in cash, together with a fair rate of interest thereon. Any such judicial determination of the fair value of the Sensormatic common shares could be based upon factors other than, or in addition to, the price per Sensormatic common share to be paid in the merger or the market value of the Sensormatic common shares. The value so determined could be more or less than the price per Sensormatic common share to be paid in the merger. If appraisal rights are available, notice of the availability of such rights will be sent to stockholders that are eligible to exercise such rights, as required by the Delaware General Corporation Law. Even if you would otherwise be entitled to appraisal rights, if you fail to take any action required by Delaware law, your rights to an appraisal will be waived or terminated. 41 Conditions of the Offer The offer is subject to a number of conditions, which are described below. The first five conditions are referred to as the basic conditions of the offer. These conditions may not be modified or waived without Sensormatic's prior written consent. Minimum Tender Condition There must be validly tendered and not properly withdrawn prior to the expiration of the offer a number of Sensormatic common shares which will constitute at least a majority of the total number of outstanding Sensormatic common shares on a fully-diluted basis as of the date that we accept the Sensormatic common shares pursuant to the offer. As used throughout this prospectus, the term "fully-diluted basis" refers to the total number of outstanding shares of Sensormatic, assuming the exercise of all options, rights and convertible securities that are convertible or exercisable at the time or within 180 days thereafter. Based on information supplied to us by Sensormatic, the number of Sensormatic common shares needed to satisfy the minimum tender condition would have been 48,375,929 as of September 7, 2001. Antitrust Condition This condition requires that any applicable waiting periods under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 or material laws of foreign jurisdictions, including the European Commission, that may be applicable to the offer and the merger have expired or been terminated. For a detailed discussion, see "Antitrust" on page 45. Registration Statement Effectiveness Condition The registration statement on Form S-4 of which this prospectus is a part must have become effective under the Securities Act and not be the subject of any stop order or proceedings seeking a stop order. Listing Condition The Tyco common shares to be delivered in the offer must have been approved for listing on the New York Stock Exchange. Tax Opinion Condition The tax opinions of PricewaterhouseCoopers LLP, tax advisor to Tyco, and Cleary, Gottlieb, Steen & Hamilton, tax counsel to Sensormatic, described in "Material U.S. Federal Income Tax and Bermuda Tax Consequences" beginning on page 37, to the effect that the offer and the merger will be treated as a tax- free reorganization for U.S. federal income tax purposes must not have been withdrawn. Other Conditions of the Offer The offer, and the requirement that we accept Sensormatic common shares for exchange or exchange or deliver any Tyco common shares, is also subject to the condition that none of the following will have occurred and be continuing at the time of the expiration date of the offer which, in our good faith judgment, regardless of the circumstances giving rise to the condition, other than our action or omission in breach of the merger agreement, makes it inadvisable to proceed with the offer: . there shall be in effect an injunction or other order, decree, judgment or ruling by a governmental authority of competent jurisdiction or a statute, rule, regulation or order shall have been promulgated, or enacted by a governmental authority of competent jurisdiction which in any such case (1) restrains or prohibits the making or consummation of the offer or the consummation of the merger, (2) prohibits or restricts the ownership or operation by us (or any of our affiliates or subsidiaries) of any material 42 portion of Sensormatic's business or assets, or any material portion of Tyco's security or safety business or which would substantially deprive us and/or our affiliates or subsidiaries of the benefit of ownership of Sensormatic's business or assets, or compels us (or any of our affiliates or subsidiaries) to dispose of or hold separate any material portion of Sensormatic's business or assets, or any material portion of Tyco's security or safety business or which would substantially deprive us and/or our affiliates or subsidiaries of the benefit of ownership of the Sensormatic's business or assets, (3) imposes material limitations on our ability effectively to acquire or to hold or to exercise full rights of ownership of the Sensormatic common shares, including, without limitation, the right to vote the shares acquired by us pursuant to the offer or the merger on all matters properly presented to Sensormatic's stockholders, (4) imposes any material limitations on our ability and/or the ability of our affiliates or subsidiaries effectively to control in any material respect the business and operations of Sensormatic, (5) as a result of the offer and the merger materially restricts any future business activity by Tyco or any of its affiliates relating to the security or safety business, including, without limitation, by requiring the prior consent of any person or entity, including any governmental authority, to future transactions by Tyco or any of its affiliates, or (6) imposes any liability as a result of the offer or the merger on the other transactions contemplated by the merger agreement which, if borne by Sensormatic, would have a material adverse effect on Sensormatic; or . there has been instituted, pending or threatened an action by a governmental authority seeking to restrain or prohibit the making or consummation of the offer, the consummation of the merger or to impose any other restriction, prohibition, obligation or limitation referred to in the preceding bullet point; or . the merger agreement has been terminated in accordance with its terms; or . there shall have occurred (1) any general suspension of, or limitation on prices for, trading in the Sensormatic common shares or the trading of the Tyco common shares on the New York Stock Exchange, (2) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States or (3) in the case of any of the foregoing clauses existing at the time of the execution of the merger agreement, a material acceleration or worsening thereof; or . we and Sensormatic have agreed that we will amend or terminate the offer or postpone the exchange of shares pursuant thereto; or . any of the representations and warranties of Sensormatic contained in the merger agreement shall have been untrue when made or shall have become untrue, as determined in accordance with the materiality principles for making this determination set out in the merger agreement; or . Sensormatic has failed to perform each obligation and agreement and complied with each covenant to be performed and complied with by it under the merger agreement in all material respects; or . Sensormatic's board of directors has withdrawn or adversely modified or amended its recommendation of the offer or has recommended another transaction; or . (A) any person or group, other than we and our affiliates, has acquired beneficial ownership of more than 25% of the outstanding Sensormatic common shares, or has been granted any options or rights, conditional or otherwise, to acquire a total of more than 25% of the outstanding Sensormatic common shares and which, in each case, does not tender the shares beneficially owned by it in the offer; (B) any new group has been formed which beneficially owns more than 25% of the outstanding Sensormatic common shares and which does not tender the shares beneficially owned by it in the offer; or (C) any person or group, other than we or one or more of our affiliates, has entered into an agreement in principle or definitive agreement with Sensormatic with respect to a tender or offer for any Sensormatic common shares or a merger, consolidation or other business combination with or involving Sensormatic; or . any change, development, effect or circumstance has occurred and is continuing that would reasonably be expected to have a material adverse effect, as defined in the merger agreement, on Sensormatic; or 43 . Sensormatic has filed for bankruptcy or another person has filed a bankruptcy petition against Sensormatic that is not dismissed within two business days; The foregoing conditions are for our sole benefit and may be asserted regardless of the circumstances giving rise to the condition. We may, in our reasonable discretion, waive these conditions in whole or in part, other than the minimum tender condition, the antitrust condition, the registration statement effectiveness condition, the listing condition or the tax opinion condition. Those basic conditions may only be waived with Sensormatic's prior written consent. Dividends and Distributions Other than quarterly dividends to holders of Sensormatic preferred stock, Sensormatic is prohibited prior to the consummation of the merger from declaring or paying any dividend or distribution in respect of any of its capital stock. No adjustment will be made to the consideration that holders of Sensormatic preferred stock who convert and tender their preferred stock pursuant to the procedure provided in the notice of conversion and letter of transmittal would receive as a result of payment of the required dividends on the Sensormatic preferred stock. If Sensormatic were to declare or pay any other dividend or distribution and because of this Tyco Acquisition were to make an adjustment to the consideration that holders of Sensormatic common shares would receive in the offer, the offer will remain open for a period of at least 10 business days from the time that the adjustment is publicly announced. Regulatory Approvals Except as set forth herein, we are not aware of any licenses or regulatory permits that appear to be material to the business of Sensormatic and that might be adversely affected by our acquisition of Sensormatic common shares in the offer. In addition, except as set forth herein, we are not aware of any filings, approvals or other actions by or with any governmental authority or administrative or regulatory agency that would be required for our acquisition or ownership of the Sensormatic common shares. Should any such approval or other action be required, we expect to seek such approval or action, except as described under "State Takeover Laws." Should any such approval or other action be required, we cannot be certain that we would be able to obtain any such approval or action without substantial conditions or that adverse consequences might not result to Sensormatic's businesses, or that certain parts of Sensormatic's, Tyco or any of its subsidiaries' businesses might not have to be disposed of or held separate in order to obtain such approval or action. In that event, subject to the provisions of the merger agreement, we may not be required to purchase any Sensormatic common shares in the offer. State Takeover Laws Sensormatic is incorporated under the laws of the State of Delaware. In general, Section 203 of the Delaware General Corporation Law prevents an "interested stockholder," which is generally a person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock, or an affiliate or associate thereof, from engaging in a "business combination," which is defined to include mergers and certain other transactions, with a Delaware corporation for a period of three years following the date such person became an interested stockholder unless, among other things, prior to such date the board of directors of the corporation approved either the business combination or the transaction in which the interested shareholder became an interested shareholder. The board of directors of Sensormatic has recommended the offer, approved the merger agreement and the other transactions contemplated by such agreement, and such approval is sufficient to render inapplicable to the merger the provisions of Section 203 of the Delaware General Corporation Law. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations that are incorporated, or have substantial assets, shareholders, or whose business operations otherwise have substantial economic effects, in such states. Sensormatic conducts business in a number of states throughout the United States, some of which may have enacted takeover laws as described above. We do not believe that any such takeover statutes are applicable to the offer or the merger and have not attempted to comply with any such state takeover statutes in connection therewith. 44 We reserve the right to challenge the validity or applicability of any state law allegedly applicable to the offer or the merger, and nothing herein nor any action that we take in connection with the offer is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the offer or the merger, and it is not determined by an appropriate court that the statutes in question do not apply or are invalid as applied to the offer or the merger, as applicable, we may be required to file certain documents with, or receive approvals from, the relevant state authorities, and we might be unable to accept for exchange Sensormatic common shares tendered in the offer or be delayed in continuing or consummating the offer. In that case, we may not be obligated to accept for purchase, or pay for, any Sensormatic common shares tendered. Antitrust The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Tyco from accepting for exchange shares tendered in the offer until certain information and materials have been furnished to the U.S. Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and certain waiting periods have expired or been terminated. On August 17, 2001, Tyco and Sensormatic each filed their Premerger Notification and Report Forms pursuant to the HSR Act with the FTC and the Antitrust Division. We expect that the waiting period will expire at 11:59 p.m. New York City time on September 17, 2001, although the waiting period could be terminated earlier by the FTC and the Antitrust Division or extended if the FTC or the Antitrust Division requests additional information or documentary material. If such a request is made, the waiting period will be extended until 11:59 p.m., New York City time, on the thirtieth day after substantial compliance by the parties with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with Tyco's consent. At any time before or after the exchange of shares pursuant to the offer, either the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the exchange of shares pursuant to the offer or seeking the divestiture of shares purchased in the offer or the divestiture of substantial assets of Tyco, its subsidiaries or Sensormatic. If the acquisition of shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material from Tyco pursuant to the HSR Act, the offer may, and to the extent required by the merger agreement will, be extended and, in any event, the acquisition of and payment for shares will be deferred until after any applicable waiting period, agreement or court order blocking the transaction expires or is terminated. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law or to rights of Tyco Acquisition or Sensormatic to terminate the merger agreement, except as provided in the merger agreement. It is a condition to the offer that the waiting period applicable under the HSR Act to the offer expire or be terminated. See "Conditions of the Offer." The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of shares pursuant to the offer. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. As in any case, there can be no assurance that a challenge to the offer on antitrust grounds will not be made or, if such a challenge is made, what the result would be. The acquisition of shares in the offer is also subject to notification to, and approval by, the Commission of the European Communities under Council Regulation (EEC) No. 4064/89 of 21 December 1989, as amended, on the control of concentrations. Tyco submitted a formal notification on Form CO on August 29, 2001. The Commission will have one month from the filing of the Form CO in which to assess whether the proposed merger will create or strengthen a dominant position as a result of which competition would be impeded in the European common market or in a substantial part of it. At the end of the initial one month review period, the Commission generally must either clear the proposed merger or, where it has "serious doubts" as to the compatibility of the proposed merger with the European common market, open an in-depth second phase 45 investigation, which may last for a further four months. The initial one month review period may be extended to six weeks if the notifying party offers commitments designed to address any competition concerns identified by the Commission, or if a member state of the European Union requests the transaction be referred for investigation by its own domestic competition authority in circumstances where the transaction impacts on a distinct national market. During the review process, conditions may be imposed on, or commitments required to be given by, the notifying party. Other than in exceptional circumstances, we may not exercise the voting rights attached to the Sensormatic common shares and may not otherwise implement the proposed merger until the Commission has issued a clearance decision. The offer and the merger are also subject to notification to the Commissioner of Competition under the pre-merger notification requirements of the Competition Act (Canada). The offer cannot be consummated and the merger cannot be completed until the parties have either filed a notification and the applicable waiting periods have expired or the Commissioner of Competition has issued an advance ruling certificate or "ARC." Where the Commissioner has issued an ARC, the parties are exempted from the obligation to file a notification. The parties anticipate that they will file a short-form notification, which ordinarily allows a transaction to be completed on the 15th day after the Commissioner has received the notification, although the Commissioner may still challenge a transaction at any time up to three years after its completion. Tyco does not believe that the consummation of the offer and the merger will result in a violation of any applicable antitrust laws. However, there can be no assurance that no governmental agency will challenge the offer and the merger on antitrust grounds. State antitrust authorities and private parties in certain circumstances may bring legal action under the antitrust laws seeking to enjoin the merger or to impose conditions on the merger. Tyco and Sensormatic each conducts operations in a number of countries other than the United States, the European Union and Canada, and filings may have to be made with the governments of these countries under their respective pre- merger notification statutes. Where necessary, the parties intend to make such filings. Certain Effects of the Offer Reduced Liquidity; Possible Delisting. The purchase of Sensormatic common shares pursuant to the offer will reduce the number of holders of Sensormatic common shares and the number of Sensormatic common shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Sensormatic common shares held by the public. Sensormatic common shares are principally traded on the New York Stock Exchange. Depending on the number of Sensormatic common shares acquired pursuant to the offer, following consummation of the offer, Sensormatic common shares may no longer meet the requirements of the New York Stock Exchange for continued listing. If, following the closing of the offer, shares of Sensormatic no longer meet the requirements of the New York Stock Exchange for continued listing and the shares were no longer listed on the New York Stock Exchange, the market for the shares could be adversely affected. If the shares no longer meet the requirements of the New York Stock Exchange, it is possible that the shares would continue to trade in the over- the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Sensormatic common shares and the availability of quotations for Sensormatic common shares would, however, depend upon the number of holders of shares remaining at that time, the interest in maintaining a market in Sensormatic common shares on the part of securities firms, the possible termination of registration of the shares under the Exchange Act, as described below, and other factors. We cannot predict whether the reduction in the number of Sensormatic common shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Sensormatic common shares. Tyco Acquisition intends to cause the delisting of the Sensormatic common shares from the New York Stock Exchange following consummation of the merger. 46 According to Sensormatic, as of September 7, 2001, there were approximately 79,903,919 Sensormatic common shares outstanding, held by approximately 3,037 holders of record. Status as "Margin Securities." The Sensormatic common shares are presently "margin securities" under the regulations of the Federal Reserve Board, which has the effect, among other things, of allowing brokers to extend credit on the collateral of Sensormatic common shares. Depending on the factors similar to those described above with respect to listing and market quotations, following consummation of the offer, the Sensormatic common shares may no longer constitute "margin securities" for the purposes of the Federal Reserve Board's margin regulations, in which event the Sensormatic common shares would be ineligible as collateral for margin loans made by brokers. Financing of the Offer and the Merger. The securities required to consummate the offer and the merger come from Tyco's authorized but unissued shares. We expect to incur customary fees for the information agent, the exchange agent, the financial printer, counsel and other professionals. We will obtain all of such funds from Tyco's available capital resources Going Private Transactions. The SEC has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the merger or another business combination following the purchase of Sensormatic common shares pursuant to the offer in which Tyco Acquisition seeks to acquire the remaining shares not held by it. We believe that Rule 13e-3 will not be applicable to the merger. Rule 13e-3 requires, among other things, that certain financial information concerning Sensormatic and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to shareholders prior to consummation of the transaction. Plans for Sensormatic. Except as otherwise set forth in this offer, it is expected that initially following the merger, the business and operations of Sensormatic will be continued substantially as they are being conducted, but within Tyco's Fire and Security Services unit. By its inclusion within the Tyco Fire and Security Services unit, Sensormatic will be able promptly to begin marketing its products through Tyco's global Fire and Security Services distribution network. Following the merger, Tyco intends to conduct a comprehensive review of Sensormatic's business, operations, capitalization and management with a view to optimizing Sensormatic's potential in conjunction with Tyco's businesses. Based upon Tyco's past acquisition experience, we expect that over time this will lead to integration of facilities, management and other personnel, raw materials acquisition, regulatory efforts and administrative functions. We also anticipate that Tyco's Fire and Security Services unit will apply its considerable resources toward developing new products and services using Sensormatic's existing assets and technology. Registration Under the Exchange Act. Sensormatic common shares are currently registered under the Exchange Act. Sensormatic can terminate that registration upon application to the SEC if the outstanding shares are not listed on a national securities exchange and if there are fewer than 300 holders of record of Sensormatic common shares. Termination of registration of the Sensormatic common shares under the Exchange Act would reduce the information that Sensormatic must furnish to its stockholders and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with stockholders meetings pursuant to Section 14(a) and the related requirement of furnishing an annual report to stockholders, no longer applicable with respect to Sensormatic common shares. In addition, if Sensormatic common shares are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going- private" transactions would no longer be applicable to Sensormatic. Furthermore, the ability of "affiliates" of Sensormatic and persons holding "restricted securities" of Sensormatic to dispose of such securities pursuant to Rule 144 under the Securities Act may be impaired or eliminated. If registration of the shares under the Exchange Act were terminated, they would not be listed on the New York Stock Exchange nor included on the Federal Reserve Board's list of "margin securities." 47 Accounting Treatment Tyco will account for the merger under the "purchase" method of accounting in accordance with generally accepted accounting principles. Therefore, the total merger consideration paid by Tyco in connection with the merger, together with the direct costs of the merger, will be allocated to Sensormatic's assets and liabilities based on their fair market values, with any excess being treated as goodwill. The assets and liabilities and results of operations of Sensormatic will be consolidated into the assets and liabilities and results of operations of Tyco after the merger. Redemption of Sensormatic Preferred Stock Sensormatic presently has outstanding 690,000 shares of its 6 1/2% convertible preferred stock, each of which has a liquidation preference of $250 per share. The preferred shares trade through depositary receipts, each of which represents a one-tenth interest in a preferred share. The preferred shares are convertible into Sensormatic common shares based on a current conversion price of $19.52 per Sensormatic common share, resulting in a right to exchange each preferred share and each depositary receipt for approximately 12.8 and 1.28 Sensormatic common shares, respectively. If common shares are accepted for exchange in the offer, Sensormatic has agreed to redeem all then outstanding preferred shares in accordance with the terms of the certificate of designations governing the preferred shares. Among other things, these provisions require Sensormatic to mail a notice of redemption to the holders of the preferred shares at least 30 days in advance of the redemption date. Pursuant to the merger agreement, Sensormatic will mail such notice to the holders of the preferred shares no later than one business day after the initial acceptance of Sensormatic common shares for exchange. The redemption date will be the thirtieth day after the mailing of such notice, and the redemption price will be 103.71% of the liquidation preference plus accrued and unpaid dividends. Holders of the preferred shares may convert and tender their shares at any time during the pendency of the offer, including during any subsequent offering period. Preferred shares that are not converted will be redeemed on the redemption date, so that no preferred shares will be outstanding at the time of the merger. In connection with the offer, Tyco and Sensormatic is delivering to the holders of the Sensormatic preferred shares a notice of conversion and letter of transmittal to enable them to convert their shares into common stock as of immediately prior to the initial acceptance of shares in the offer or during any subsequent offering period and to tender the common stock issued upon conversion in a single step. If the offer is not consummated, the preferred shares delivered pursuant to the notice of conversion and the letter of transmittal will not be converted. Holders of Sensormatic preferred shares as of September 21, 2001, the record date for the next dividend payment date on the preferred shares which is payable on October 1, 2001, who convert their preferred shares and tender the Sensormatic common shares issuable upon conversion in the offer pursuant to the procedure provided in the notice of conversion and letter of transmittal, will receive the October 1, 2001 dividend whether or not such conversion is effected and will receive this dividend prior to such conversion if it is effected. Prepayment of Sensormatic Notes Sensormatic has outstanding $135 million principal amount of 8.21% senior notes due January 30, 2003 and $230 million principal amount of 7.74% senior notes due March 29, 2006. On August 3, 2001, Sensormatic mailed to holders of the notes notices stating that the signing of the merger agreement is a "Change of Control Event" as defined in the respective note agreement. Pursuant to these notices and according to the provisions of the respective note agreement and contingent on consummation of the offer, Sensormatic is making an offer to prepay the notes upon initial acceptance of shares for exchange in the offer at 100% of the principal amount plus accrued interest to the date of prepayment plus 50% of the "make-whole amount." 48 With respect to the 7.74% senior notes, in the event that ten days expire after more than 50% of the Sensormatic common shares are tendered in the offer, without withdrawals reducing such percentage to 50% or less, the date of prepayment for holders who accepted the offer would be the expiration of such ten day period. The merger agreement permits the Sensormatic board to recommend and Sensormatic to advise its stockholders to delay tender of their common shares into, or temporarily withdraw their tendered common shares from, the offer in order to avoid a date of prepayment prior to the consummation of the offer. In addition, in the event that all the holders of the 8.21% senior notes do not accept Sensormatic's offer of prepayment, depending on the amount of convertible preferred stock outstanding and unconverted on the redemption date for the convertible preferred stock, Sensormatic may be required to prepay its 8.21% senior notes in order that the redemption of the convertible preferred stock will not violate the terms of these notes. The redemption price for the 8.21% senior notes in this case would be their principal amount plus accrued interest plus 100% of the "make-whole" amount. As provided in the merger agreement, following initial acceptance of Sensormatic common shares for exchange in the offer, Tyco Acquisition will cause to be provided to Sensormatic funds required by Sensormatic to prepay the 7.74% senior notes and 8.21% senior notes as described in this section or as may otherwise be required in connection with the offer and the merger. Sensormatic also has outstanding a credit agreement, dated as of December 9, 1999, among Sensormatic, certain borrowing subsidiaries, the Bank of America, N.A. and certain other financial institutions. In accordance with the terms of this credit agreement and in connection with the signing of the merger agreement, Sensormatic provided to Bank of America, the administrative agent, notice that Sensormatic may be required to prepay its public notes as described above. If Sensormatic prepays its notes, the credit agreement requires Sensormatic to prepay the principal amount of these loans, to terminate the commitment of each lender in the credit facility and to cash collateralize outstanding letters of credit, if any. Fees and Expenses We have retained MacKenzie Partners, Inc. as information agent in connection with the offer. The information agent may contact holders of Sensormatic common shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward material relating to the offer to beneficial owners of Sensormatic common shares. We will pay the information agent customary fees for these services in addition to reimbursing the information agent for its reasonable out-of-pocket expenses. We have agreed to indemnify the information agent against certain liabilities and expenses in connection with the offer, including certain liabilities under the U.S. federal securities laws. In addition, we have retained Mellon Investor Services LLC as the exchange agent for the offer and as conversion agent to facilitate the procedure for conversion and tender of the Sensormatic preferred shares in connection with the offer. We will pay Mellon Investor Services' reasonable and customary fees for its services, will reimburse Mellon Investor Services for its reasonable out-of-pocket expenses and will indemnify Mellon Investment Services against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws. Except as set forth above, we will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Sensormatic common shares pursuant to the offer. We will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers. Stock Exchange Listing Tyco's common shares are listed on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol "TYC" and on the London Stock Exchange under the symbol "TYI." 49 THE MERGER AGREEMENT General This section describes the material provisions of the merger agreement and Tyco's guarantee of Tyco Acquisition's obligations under the merger agreement. This description is not complete, and stockholders are encouraged to read the full text of the merger agreement which is attached as Annex A to this document. In addition, important information about the merger agreement, the offer and the merger is provided in the previous section entitled "The Offer" beginning on page 30. The Offer Terms of the Offer The merger agreement provides for (i) an offer to exchange Tyco common shares in accordance with the exchange ratio described below, for each outstanding share of common stock of Sensormatic that is validly tendered and not properly withdrawn, followed by (ii) a merger of Sensormatic with and into Tyco Acquisition. The merger agreement provides that, except as described below, the fraction of a Tyco common share into which each Sensormatic common share will be converted in the offer will be determined by dividing $24.00 by the average of the Tyco share price described below under "The Exchange Ratio." The merger agreement prohibits us, without the consent of Sensormatic, from changing or waiving the basic conditions, from changing the form or decreasing the amount of consideration to be exchanged, decreasing the number of shares sought in the offer, imposing conditions to the offer in addition to those described in "Conditions of the Offer" beginning on page 42, changing the offer conditions, extending the expiration date of the offer beyond its initial expiration date, except as provided in the merger agreement, or making any other change to the terms and conditions to the offer which is adverse to the holders of the shares. The Exchange Ratio The exchange ratio is designed to give Sensormatic stockholders $24.00 in value of Tyco common shares for each of their Sensormatic common shares so long as the value of a Tyco common share is at least $46.25, as further discussed in the following paragraph. The value of a Tyco common share for these purposes will be calculated by taking the average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange, as reported by Bloomberg Financial Markets, for each of the five consecutive trading days ending on the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer. The exchange ratio is determined by dividing $24.00 by this average share price. If the average share price of Tyco common shares is less than $46.25 per share, Tyco Acquisition has the right to terminate the merger agreement unless, after Tyco Acquisition gives Sensormatic written notice of its intention to terminate the merger agreement, Sensormatic agrees to an exchange ratio of 0.5189, the exchange ratio determined by dividing $24.00 by $46.25. Tyco Acquisition's notice of termination must be delivered no later than, the third trading day prior to October 1, 2001, the initially-scheduled expiration date of the offer. If Sensormatic's board of directors agrees to proceed with the 0.5189 exchange ratio, the board must give notice to Tyco Acquisition to that effect no later than the second trading day prior to October 1, 2001. Based on an average share price that is less than $46.25, this 0.5189 exchange ratio would give Sensormatic common stockholders Tyco common shares valued at less than $24.00 for each share of Sensormatic common stock. In this circumstance, Tyco Acquisition and Sensormatic could also agree to a higher exchange ratio, although neither Tyco Acquisition nor Sensormatic is under any obligation to do so. If the average share price of Tyco common shares is less than $46.25 and Tyco Acquisition does not give Sensormatic written notice of its intention to terminate the merger agreement, Sensormatic stockholders will receive $24.00 in value of Tyco common shares for each share of Sensormatic common stock at an exchange ratio to be calculated based on the Tyco average share price. 50 See the risk factor entitled "Sensormatic common stockholders could receive less than $24.00 in value of Tyco common shares for each Sensormatic common share" on page 13. Adjustments to Exchange Ratio If any change in the outstanding shares of capital stock of Tyco or Sensormatic occurs from the date of the merger agreement until the effective time of the merger, including any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares or any stock dividend, the exchange ratio and any amounts payable pursuant to the offer, merger or the merger agreement will be adjusted appropriately. Fractional Tyco Common Shares No fractional Tyco common shares will be issued in the offer or the merger. Sensormatic stockholders who would otherwise be entitled to a fraction of a Tyco common share will instead receive a cash payment, without interest, determined by multiplying the fractional share interest to which such holder would otherwise be entitled by the Tyco average share price used in determining the exchange ratio. Conditions of the Offer The offer is subject to a number of conditions, which are described in "Conditions of the Offer" beginning on page 42. Mandatory Extensions of the Offer If any of the conditions to the offer are not satisfied or waived on any scheduled expiration date of the offer, we will extend the offer until such conditions are satisfied or waived; provided that (i) no extension will exceed ten business days and (ii) we are not required to extend the offer beyond March 3, 2002. If and to the extent required by the applicable rules and regulations of the SEC, we will extend the offer, but we are not required to do so beyond March 3, 2002. Optional Extensions of the Offer If all of the conditions to the offer are satisfied or waived, we are required to accept all tendered shares for exchange following the expiration date in effect at the time of this initial acceptance and have the right to extend the offer for an additional period or periods totaling up to 20 business days. In accordance with SEC rules, if we provide for this subsequent offering period, we will extend the offer for a minimum of three business days, publicly announce the extension and the approximate number and percentage of Sensormatic common shares tendered to date no later than 9:00 a.m. New York City time on the next business day after the expiration date of the initial offering period, immediately begin the subsequent offering period and promptly accept for exchange all shares validly tendered during this period. Prompt Exchange for Sensormatic Common Shares After the Closing of the Offer Subject to the terms of the merger agreement and the satisfaction, or waiver to the extent permitted by the merger agreement, of the conditions of the offer, we will accept for exchange, and will exchange, all Sensormatic common shares validly tendered and not properly withdrawn pursuant to the offer promptly after the expiration date of the offer. The Merger General Unless the merger agreement is terminated as described below, as soon as practicable after the satisfaction or waiver of the closing conditions set forth in the merger agreement, Tyco Acquisition and Sensormatic will file merger documentation with the Secretaries of State of the states of Delaware and Nevada, as prescribed by the Delaware General Corporation Law and the Nevada General Corporation Law, respectively, at which time the merger will be effective. 51 At the effective time of the merger, upon the terms and subject to the conditions of the merger agreement and the applicable provisions of the Delaware General Corporation Law, the state law that applies to Sensormatic which is a Delaware corporation, and the Nevada General Corporation Law, the state law that applies to Tyco Acquisition which is a Nevada corporation, Sensormatic will be merged with and into Tyco Acquisition, the separate corporate existence of Sensormatic will cease and Tyco Acquisition will continue as the surviving corporation. Charter Documents; Directors and Officers. The articles of incorporation and bylaws of Tyco Acquisition in effect immediately prior to the effective time, which are required to contain at that time the indemnification provisions described under "indemnification and insurance" on page 58, will be the articles of incorporation of the surviving corporation, except that the name of the surviving corporation shall be changed to "Sensormatic Electronics Corporation," until thereafter amended in accordance with the applicable provisions of the articles of incorporation and bylaws and as provided by the Nevada General Corporation Law. From and after the effective time of the merger and until their respective successors are duly elected or appointed and qualified, (i) the directors of Tyco Acquisition immediately prior to the effective time will be the directors of the surviving corporation, each to hold office in accordance with the articles of incorporation and bylaws of the surviving corporation, and (ii) the officers of Sensormatic immediately prior to the effective time will be the officers of the surviving corporation. Merger Consideration General Under the terms of the merger agreement, at the effective time of the merger, each outstanding Sensormatic common share will be converted into the same fraction of a Tyco common share as was exchanged in the offer. Stock Options Each option to acquire Sensormatic common shares outstanding immediately prior to the effective time of the merger will, at the effective time, become fully vested and exercisable and otherwise will continue to have, and be subject to, the same terms and conditions set forth in the relevant Sensormatic stock option plan and applicable award agreement and any other agreement or arrangement with respect to such options in effect immediately prior to the effective time of the merger, except that (i) each Sensormatic stock option will be exercisable for that number of whole Tyco common shares equal to the product of the number of Sensormatic common shares that would have been issuable upon exercise of such Sensormatic stock option immediately prior to the effective time of the merger multiplied by the exchange ratio, rounded to the nearest whole number of Tyco common shares, and (ii) the exercise price per share for the Tyco common shares issuable upon exercise of such Sensormatic stock option will be equal to the quotient determined by dividing the exercise price per Sensormatic common share at which such Sensormatic stock option was exercisable immediately prior to the effective time by the exchange ratio, rounded to the nearest whole cent. Restricted Stock At the effective time, all restrictions and forfeiture provisions applicable to any outstanding restricted Sensormatic common share granted or awarded under any Sensormatic plan will lapse to the extent provided in any agreement between Sensormatic and the recipient of the restricted shares. These shares will be treated like any other Sensormatic common shares in the merger. 52 Stock Purchase Plans Beginning with the date of the merger agreement, Sensormatic will not establish, or implement any decisions to establish, any new employee stock purchase plans, nor will it extend the availability of the Sensormatic stock purchase plans to any employees not previously eligible to be included in the Sensormatic stock purchase plans. Sensormatic will terminate its current stock purchase plan prior to the effective time of the merger and all Sensormatic common shares under the Sensormatic stock purchase plan will be treated like all other Sensormatic common shares. Cancellation Each Sensormatic common share held by Sensormatic or any of its subsidiaries or owned by Tyco or Tyco Acquisition immediately prior to the effective time of the merger will be cancelled and extinguished at the effective time and not exchanged for or otherwise converted into Tyco common shares. Exchange of Sensormatic Common Shares As necessary from time to time following the effective time, Tyco Acquisition will make available to Mellon Investor Services LLC, as exchange agent, (1) the Tyco common shares required for the exchange of Sensormatic common shares in the merger and (2) an amount of cash sufficient to permit Mellon Investor Services to make the necessary payments of cash in lieu of fractional Tyco common shares. Promptly after the consummation of the merger, Tyco Acquisition will instruct Mellon Investor Services to mail to each holder of record, as of the effective time, of a certificate which immediately prior to the effective time represented outstanding Sensormatic common shares whose shares were converted into the right to receive Tyco common shares, a letter of transmittal and instructions as to how to surrender such certificates in exchange for Tyco common shares and payment for any fractional Tyco common shares. Holders of certificates previously representing Sensormatic common shares will not be paid dividends or distributions on the Tyco common shares and will not be paid cash in lieu of a fractional Tyco common share until such certificates are surrendered to Mellon Investor Services for exchange. When such certificates are surrendered, the holder will receive any unpaid dividends with a record date after the consummation of the merger and any cash in lieu of a fractional Tyco common share without interest. For all other corporate purposes, these certificates will represent, from and after the consummation of the merger, the right to receive the number of Tyco common shares and cash in respect of fractional Tyco common shares into which such Sensormatic common shares are actually converted in the merger. Mellon Investor Services will deliver Tyco common shares in exchange for lost, stolen or destroyed certificates formerly representing Sensormatic common shares if the owner of these certificates signs an affidavit of loss, theft or destruction, as appropriate. Tyco Acquisition also may, in its discretion, require the holder of these lost, stolen or destroyed certificates to deliver a bond in a reasonable sum as an indemnity against any claim that might be made against Tyco, Tyco Acquisition or Mellon Investor Services with respect to allegedly lost, stolen or destroyed certificates. Any portion of the exchange fund which remains undistributed to the holders of Sensormatic common shares for six months after the effective time shall be delivered to Tyco Acquisition upon demand, and any holders of certificates formerly representing Sensormatic common shares who have not theretofore complied with the exchange instructions will thereafter look only to Tyco Acquisition for the Tyco common shares, any cash in respect of fractional Tyco common shares to which they are entitled and any dividends or other distributions with respect to Tyco common shares to which they are entitled, in each case without any interest thereon. 53 Sensormatic Board of Directors Upon the acceptance for exchange of Sensormatic common shares pursuant to the offer, we will be entitled to designate a number of directors, rounded up to the next whole number, that equals the product of (i) the total number of directors on Sensormatic's board of directors and (ii) the percentage that the number of shares owned by Tyco and Tyco Acquisition bears to the total number of Sensormatic common shares outstanding at that time. Until the merger has become effective, Sensormatic's board of directors will include at least two members who were directors of Sensormatic prior to the consummation of the offer. The merger agreement provides that if Tyco Acquisition's designees are appointed to Sensormatic's board of directors prior to the effective time, the affirmative vote of the continuing Sensormatic directors will be required for Sensormatic to: . amend or terminate the merger agreement or agree or consent to any amendment or termination of the merger agreement, . waive any of Sensormatic's or its stockholders' rights, benefits or remedies under the merger agreement, . extend the time for performance of Tyco Acquisition's obligations under the merger agreement, or . approve any other action of Sensormatic which is reasonably likely to adversely affect the holders of Sensormatic common shares, other than Tyco Acquisition and its affiliates. The continuing Sensormatic directors will have the sole authority to assert and seek to enforce any and all of Sensormatic's rights and remedies and to take any action to seek to enforce any obligations of Tyco Acquisition under the merger agreement. Tyco Acquisition's designees will abstain and not act upon any such action by the continuing Sensormatic directors. Sensormatic shall pay the reasonable fees and expenses of one firm of independent counsel retained by the continuing Sensormatic directors in connection with their duties as continuing directors or actions to be taken by Sensormatic and for the purpose of enforcing Sensormatic's rights and remedies under the merger agreement. Representations and Warranties Sensormatic has made customary representations and warranties in the merger agreement about itself. We have made customary representations and warranties about Tyco and its subsidiaries. Conduct of Business by Sensormatic Sensormatic has agreed that, prior to the consummation of the merger, unless Tyco Acquisition otherwise agrees in writing, Sensormatic will conduct its business, and will cause its subsidiaries to conduct their businesses, only in the ordinary course of business and in a manner consistent with past practice. Sensormatic will also use reasonable commercial efforts to preserve substantially intact the business organization of Sensormatic and its subsidiaries, to keep available the services of the present officers, employees and consultants of Sensormatic and its subsidiaries and to preserve the present relationships of Sensormatic and its subsidiaries with customers, suppliers and other persons with which Sensormatic or any of its subsidiaries has significant business relations. In particular, subject to certain exceptions, Sensormatic has agreed that neither it nor any of its subsidiaries, without the prior written consent of Tyco Acquisition, will: 1. amend or otherwise change Sensormatic's Restated Certificate of Incorporation or Bylaws; 2. issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock or any other ownership interest in Sensormatic or any of its subsidiaries or affiliates, except for the issuance of Sensormatic common shares upon the exercise of stock options outstanding on the date of the merger agreement or upon the conversion or redemption of the Sensormatic preferred stock; 54 3. sell, pledge, dispose of or encumber any assets of Sensormatic or any of its subsidiaries, other than sales of assets in the ordinary course of business and in a manner consistent with past practice, dispositions of obsolete or worthless assets or sales of immaterial assets not in excess of $2 million in the aggregate; 4.. declare, set aside, make or pay any dividend or other distribution in respect of any of its capital stock, other than dividends to Sensormatic paid by a wholly-owned subsidiary of Sensormatic other than Sensormatic Electronics Corporation (Puerto Rico) that are not cross-border dividends, and other than dividends to holders of Sensormatic preferred stock, . split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, . amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, or permit any subsidiary to amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its or its subsidiaries' securities, except (1) under the terms of certain existing agreements, (2) to the extent necessary to comply with tax withholding obligations in connection with the exercise of stock options and (3) that Sensormatic may give notice of redemption and redeem the Sensormatic preferred stock, . settle, pay or discharge any claim, suit or other action brought or threatened against Sensormatic with respect to or arising out of a stockholder equity interest in Sensormatic, or . make any cross-border capital contributions to a subsidiary; 5. .make any acquisitions, . incur any indebtedness for borrowed money other than (1) under Sensormatic's or any of its subsidiaries' existing committed or uncommitted credit facilities, after providing Tyco Acquisition with prior notice of borrowings or reborrowings and (2) other borrowings not in excess of $4 million in the aggregate, . issue any debt securities or assume, guarantee or endorse or otherwise become responsible for, the obligations of any person, or make any loans or advances, other than in the ordinary course of business consistent with past practice, but not loans and advances to employees of Sensormatic to fund the exercise of Sensormatic options or otherwise to purchase Sensormatic common shares, except to employees who had the right to receive such loans or advances on the date of the merger agreement, . authorize any capital expenditures or purchases of fixed assets which are, in the aggregate, in excess of $40 million over the 12 months from the date of the merger agreement, or . enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the above; 6.. increase the compensation or severance payable or to become payable to its directors, officers, employees or consultants, except for increases in salary, wages or bonuses of employees in accordance with past practice, . grant any severance or termination pay, except for obligations existing on the date of the merger agreement or in accordance with past practice, to, or enter into or amend any employment or severance agreement with, any current or prospective employee, other than newly hired employees and employees promoted in the ordinary course of business whose annual salary does not exceed $100,000 and whose severance benefits do not exceed one times their annual salary, or . establish, adopt, enter into or amend any collective bargaining agreement, benefit plan, trust, fund, policy or arrangement for the benefit of any current or former directors, officers, employees or consultants or any of their beneficiaries, except as may be required by law, by existing agreement or as would not result in a material increase in the cost of maintaining such bargaining agreement, benefit plan, trust, fund, policy or arrangement; 55 7. change accounting policies or procedures, except as required by a change in GAAP occurring after the date of the merger agreement; 8. make any tax election or settle or compromise any U.S. federal, state, local or non-U.S. tax liability; 9. pay, discharge or satisfy any claims, liabilities or obligations out of the ordinary course of business in excess of $5 million in the aggregate; 10. enter into, modify or renew any contract, agreement or arrangement, whether or not in writing, for the licensing of its technology other than user licenses and license-back agreements for technology acquired or co-developed after the date of the merger agreement; or 11. take, or agree in writing or otherwise to take, any of the actions described in (1) through (10) above or any action which would make any of the representations or warranties of Sensormatic contained in the merger agreement untrue or incorrect or prevent Sensormatic from performing or cause Sensormatic not to perform its covenants under the merger agreement. Conduct of Business of Tyco Tyco Acquisition has agreed that, prior to the consummation of the merger, unless Sensormatic otherwise agrees in writing, it will take all action necessary to cause Tyco to conduct its business and will cause its subsidiaries to conduct their businesses in the ordinary course of business and consistent with past practice, including actions taken by Tyco or its subsidiaries in contemplation of the merger or other business acquisitions otherwise in compliance with the merger agreement, and will not, without the prior written consent of Sensormatic: 1. amend or otherwise change Tyco's Memorandum of Association or Bye-Laws; 2. make or agree to make any acquisition of any business or assets or disposition of assets which would materially delay or prevent the consummation of the offer, the merger and the other transactions contemplated by the merger agreement; 3. declare, set aside, make or pay any dividend or other distribution on any of its capital stock, other than the regular quarterly cash dividends of up to $0.0125 per share and other than a dividend to Tyco by a wholly-owned subsidiary of Tyco; 4. change accounting policies or procedures, except as required by a change in GAAP occurring after the date of the merger agreement; or 5. take, or agree in writing or otherwise to take, actions described in (1) through (4) above or any action which would make any of the representations or warranties of Tyco Acquisition contained in the merger agreement untrue or incorrect or prevent Tyco Acquisition from performing or cause Tyco Acquisition not to perform its covenants under the merger agreement. No Solicitation Sensormatic has agreed that it will not solicit or knowingly encourage the initiation of any inquiries or proposals regarding any merger, sale of assets, sale of shares of capital stock or similar transactions involving Sensormatic or any of its subsidiaries that if consummated would constitute an "Alternative Transaction." An Alternative Transaction means: . any transaction pursuant to which any third party acquires more than 25% of the outstanding shares of any class of Sensormatic's equity securities, whether from Sensormatic or pursuant to a tender offer, an exchange offer or otherwise, . a merger or other business combination involving Sensormatic pursuant to which any third party acquires more than 25% of the outstanding equity securities of Sensormatic or the entity surviving such merger or business combination, 56 . any transaction pursuant to which any third party acquires or would acquire control of more than 25% of the fair market value of all of the assets of Sensormatic and its subsidiaries, taken as a whole, immediately prior to such transaction, or . any other consolidation, business combination, recapitalization or similar transaction involving Sensormatic or any of its significant subsidiaries, other than transactions contemplated by the merger agreement. Any inquiry or proposal by a third party to effect an Alternative Transaction is referred to as an "Acquisition Proposal." If Sensormatic's board of directors, following consultation with independent legal counsel, reasonably determines in good faith that such action is or is reasonably likely to be required to discharge properly its fiduciary duties, Sensormatic's board of directors, after notice to Tyco Acquisition, is permitted to: . furnish information to a third party which has made, but was not solicited to make in violation of the merger agreement, a bona fide Acquisition Proposal that Sensormatic's board of directors concludes in good faith after consulting with a nationally recognized investment banking firm would, if consummated, constitute a "Superior Proposal," as defined below; and . consider and negotiate a bona fide Acquisition Proposal that Sensormatic's board of directors concludes in good faith after consulting with a nationally recognized investment banking firm is a Superior Proposal not solicited in violation of the merger agreement. A Superior Proposal is any proposal made by a third party to acquire, directly or indirectly, for cash and/or securities, all of Sensormatic's common stock entitled to vote generally in the election of directors, or all or substantially all of Sensormatic's assets, on terms which Sensormatic's board of directors reasonably believes, after consultation with a nationally recognized financial advisor, to be more favorable from a financial point of view to Sensormatic stockholders than the merger and the transactions contemplated by the merger agreement, taking into account at the time of determination any changes to the financial terms of the merger proposed by Tyco Acquisition, although a Superior Proposal may be subject to a diligence review and other customary conditions. Neither Sensormatic nor Sensormatic's board of directors may withdraw or modify, or propose to withdraw or modify, in a manner adverse to Tyco Acquisition, the approval by Sensormatic's board of directors of the offer, the merger agreement and the merger, except to the extent that Sensormatic's board of directors reasonably determines in good faith and after consultation with independent legal counsel that it is or is reasonably likely to be required to do so in order to discharge properly its fiduciary duties. At any time prior to consummation of the offer, Sensormatic's board of directors may recommend and Sensormatic or its directors, officers, employees, agents and affiliates may advise Sensormatic stockholders to delay the tender of their Sensormatic common shares into, or temporarily withdraw tendered shares from, the offer in order to avoid, prior to consummation of the offer, the occurrence of a "change of control" or similar event from occurring which may require prepayment pursuant to any indebtedness of Sensormatic. Any such recommendation will not be deemed a breach of the merger agreement or a withdrawal or modification of, or a proposal to withdraw or modify in any respect, the recommendation of Sensormatic's board of directors to Sensormatic stockholders to accept the offer and to approve and adopt the merger agreement and the merger. In addition, unless the merger agreement has been terminated in accordance with its terms, Sensormatic and Sensormatic's board of directors may not enter into any agreement with respect to, or otherwise approve or recommend, or propose to approve or recommend, any Acquisition Proposal or Alternative Transaction. The merger agreement expressly provides that the foregoing covenants do not prohibit Sensormatic from taking and disclosing to its stockholders a position regarding an Alternative Transaction or Acquisition Proposal required by the Exchange Act or from making any disclosure to its stockholders required by applicable law, rule or regulation or by the New York Stock Exchange. 57 Sensormatic has agreed: . to immediately cease and cause to be terminated any existing discussions or negotiations with any third party that were ongoing at the time of the execution of the merger agreement; . not to release any third party from the confidentiality and standstill provisions of any agreement to which Sensormatic is a party except for a release from standstill provisions in connection with a Superior Proposal; . to notify Tyco Acquisition orally and in writing within 24 hours after receipt of, or modification or amendment to, any Acquisition Proposal or any request for nonpublic information relating to Sensormatic or any of its subsidiaries in connection with an Acquisition Proposal and to disclose to Tyco Acquisition the terms of all Acquisition Proposals and the identity of the person making all Acquisition Proposals; and . to promptly notify Tyco Acquisition orally and in writing if it enters into negotiations concerning any Acquisition Proposal. Sensormatic will ensure that the officers and directors of Sensormatic and its subsidiaries and any investment banker or other advisor or representative retained by Sensormatic are aware of the restrictions described above. Certain Other Covenants Consents; Approvals Each of Sensormatic and Tyco Acquisition will use its reasonable best efforts, and Tyco Acquisition will cause Tyco to use its reasonable best efforts, to obtain, and to cooperate with each other in order to obtain, all consents, waivers, approvals, authorizations or orders. Each of Sensormatic and Tyco Acquisition will make all filings required in connection with the authorization, execution and delivery of the merger agreement and the consummation by them of the transactions contemplated thereby. Agreements with Respect to Affiliates Sensormatic will identify to Tyco Acquisition all persons who are anticipated to be "affiliates" of Sensormatic for purposes of Rule 145 under the Securities Act at the time of the meeting of the Sensormatic stockholders, if one is required. Sensormatic will use its reasonable best efforts to cause each person identified as an "affiliate" to deliver to Tyco Acquisition a written agreement that he or she will only dispose of Tyco common shares in compliance with the securities laws. Indemnification and Insurance For six years following the consummation of the merger, the articles of incorporation and bylaws of the surviving corporation will contain the same indemnification provisions as currently set forth in Sensormatic's Restated Certificate of Incorporation and Bylaws, and these provisions will not be amended, modified or otherwise repealed in any manner that would adversely affect the rights thereunder of individuals who were directors, officers, employees or agents of Sensormatic at or prior to the consummation of the merger unless otherwise required by law. After the consummation of the merger, the surviving corporation will, to the fullest extent permitted under applicable law or under its articles of incorporation or bylaws, indemnify and hold harmless each present and former director, officer or employee of Sensormatic or any of its subsidiaries against any costs or expenses, judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the transactions contemplated by the merger agreement or otherwise with respect to any 58 acts or omissions occurring at or prior to the consummation of the merger, to the same extent as provided in Sensormatic's Restated Certificate of Incorporation or Bylaws or any applicable contract or agreement as in effect on the date of the merger agreement, in each case for a period of six years following the consummation of the merger. Following the merger, the surviving corporation will honor and fulfill in all respects Sensormatic's obligations under the indemnification agreements and employment agreements with Sensormatic's officers and directors existing at or before the consummation of the merger. In addition, for a period of not less than six years after the consummation of the merger, the surviving corporation will provide Sensormatic's current directors and officers with an insurance and indemnification policy that provides coverage for events occurring at or prior to the consummation of the merger that is no less favorable than Sensormatic's existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that the surviving corporation will not be required to pay an annual insurance premium in excess of 200% of the annual premium currently paid by Sensormatic for such insurance, but in such case will purchase as much coverage as possible for such amount. These provisions are not intended in any way to limit the rights of the indemnified persons under Sensormatic's Restated Certificate of Incorporation and Bylaws or any agreements permitted under the merger agreement, which rights are intended to survive the merger and to be binding on the surviving corporation and its successors and assigns. Further Action/Tax Treatment The parties to the merger agreement will use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by the merger agreement, to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and otherwise to satisfy or cause to be satisfied all conditions precedent to each of their obligations under the merger agreement. This covenant includes Tyco's obligation to agree to divest, abandon, license, enter into, modify, maintain or renew any contract or arrangement regarding, or take similar action with respect to, any assets of Tyco or Sensormatic which are in the aggregate not material to Tyco or Sensormatic. In addition, Tyco Acquisition and Sensormatic will, and Tyco Acquisition will cause Tyco to, use its reasonable best efforts to cause the offer and the merger to qualify as a reorganization under the provisions of Section 368(a) of the U.S. Internal Revenue Code, as specified in the merger agreement, and will not, either before or after the consummation of the merger, take any actions or fail to take any actions which might reasonably be expected to prevent the offer and the merger from so qualifying. Public Announcements Tyco Acquisition and Sensormatic will not issue any press release or make any written public statement with respect to the offer, the merger or the merger agreement and the transactions contemplated thereby without the prior consent of the other party, which consent will not be unreasonably withheld. A party is permitted to make disclosures without the consent of the other party as required by law or the rules and regulations of the New York Stock Exchange, if the disclosing party has used all reasonable efforts to consult with the other party. Tyco Common Shares Tyco Acquisition will take all actions necessary so that Tyco will issue to Tyco Acquisition the Tyco common shares to be delivered to Sensormatic stockholders in the offer and the merger. Tyco has also guaranteed to use its best efforts to list on the New York Stock Exchange the Tyco common shares to be delivered in the offer and the merger. 59 Certain Employee Benefits During the period from the effective time through June 30, 2002, the surviving corporation will provide each person who was an employee of Sensormatic or any of its subsidiaries at the effective time of the merger with salary and employee benefits that are comparable in the aggregate to those provided to such employee immediately prior to the effective time, provided, however, that the surviving corporation has the right to amend any employee plans, including, without limitation, any retiree welfare benefit plans or pension benefit plans in effect as of the effective time, and to commence the participation of such employees in Tyco Acquisition's health and welfare benefit plans effective as of January 1, 2002. During this same period, the surviving corporation will maintain severance plans, policies and programs for the benefit of these employees that are at least as favorable as the plans, policies and programs applicable to such employees immediately prior to the effective time, without amendment or modification adverse to any such employee. After this period, subject to certain exceptions, the surviving corporation will provide these employees with benefits that are comparable in the aggregate to those provided to similarly situated employees of subsidiaries of Tyco. The surviving corporation will recognize service accrued by Sensormatic employees prior to the effective time for all purposes, except for benefit accrual under defined benefit pension plans, will waive pre-existing condition limitations and eligibility waiting periods under any group health plan and will give credit for amounts paid prior to the effective time for purposes of applying deductibles, co-payments and out-of-pocket maximums. From and after the initial acceptance of shares for exchange in the offer, Sensormatic and the surviving corporation will honor in accordance with their terms all benefits and obligations under the Sensormatic employee benefit plans and all agreements with employees and consultants of Sensormatic, each as in effect on the date of the merger agreement or as amended pursuant to the merger agreement. Annual bonuses for Sensormatic's fiscal year ended June 30, 2001 under Sensormatic's employee benefit plans that are not paid prior to the effective time of the merger will be paid by the surviving corporation in accordance with Sensormatic's plans and customary practices. Sensormatic will amend its 401(k) plans and any other employee benefit plan, where necessary, to preclude any additional purchases of Sensormatic common shares and will communicate this amendment to the participants in such plans. These provisions may not be enforced against the surviving corporation by any employee of Sensormatic or any other person. Subject to compliance with these provisions, they do not prevent the surviving corporation or any other subsidiary of Tyco from amending or modifying any employee benefit plan, program or arrangement in any respect in accordance with its terms or, subject to the terms of the relevant plan, terminating or modifying the terms and conditions of employment or other service of any person. Redemption of Sensormatic Preferred Stock Not later than one business day after the initial acceptance of Sensormatic common shares for exchange in the offer by Tyco Acquisition, Sensormatic will publicly announce and mail a notice of redemption for all outstanding shares of Sensormatic preferred stock, if any are outstanding at that time, with the redemption to occur on the thirtieth day following this announcement and notice date. Funds for Sensormatic Notes Following the initial acceptance of shares for exchange in the offer, Tyco Acquisition will cause Sensormatic to be provided with the funds required to enable Sensormatic to prepay Sensormatic's outstanding 8.21% Senior Notes due January 30, 2003 and outstanding 7.74% Senior Notes due March 29, 2006, as required in accordance with the terms of these notes or as otherwise required in connection with the merger agreement. 60 Conditions to the Merger The obligations of the parties to consummate the merger are subject to the satisfaction at or prior to the effective time of the following conditions: 1. Effectiveness of Registration Statement. The registration statement of which this document is a part has become effective under the Securities Act and the SEC has not issued any stop order suspending the effectiveness of the registration statement, nor has the SEC initiated or threatened any proceedings for that purpose or in respect of this document; 2. Stockholder Adoption. If the requirements for a short-form merger are not satisfied, the holders of the requisite number of Sensormatic common shares have approved the merger and the merger agreement; 3. Antitrust. All waiting periods applicable to the consummation of the merger under the HSR Act have expired or been terminated, and all necessary clearances and approvals for the merger under any non-U.S. antitrust laws have been obtained, other than for clearances or approvals under any non-U.S. antitrust laws which, if not obtained, would not be reasonably expected to have a material adverse effect on Sensormatic, Tyco or Tyco's Fire and Security Group; 4. Governmental Actions. No judgment, decree or order of any governmental authority, administrative agency or court of competent jurisdiction preventing consummation of the merger is in effect; 5. Illegality. No statute, rule, regulation or order is enacted, entered, enforced or deemed applicable to the merger which makes the consummation of the merger illegal; and 6. Redemption of Sensormatic Preferred Stock. All shares of Sensormatic preferred stock have been redeemed or converted and have ceased to be outstanding. Termination; Fees and Expenses Termination Rights The merger agreement may be terminated: 1. by mutual written consent duly authorized by the respective boards of directors of Tyco Acquisition and Sensormatic at any time prior to the initial acceptance of shares for exchange in the offer; 2. by either Tyco Acquisition or Sensormatic, if the initial acceptance of shares for exchange in the offer has not been consummated on or prior to March 3, 2002; provided, however, that this right to terminate is not available to any party whose failure to fulfill any of its obligations under the merger agreement has been the cause of, or resulted in, the failure of the acceptance of shares for exchange in the offer to occur on or prior to March 3, 2002; 3. by either Tyco Acquisition or Sensormatic, if the offer has terminated or expired in accordance with its terms without the exchange of shares pursuant to the offer; provided, however, that this right to terminate is not available to any party whose failure to fulfill any of its obligations under the merger agreement has been the cause of, or resulted in, the failure of any condition to the offer to be satisfied or the failure to exchange shares pursuant to the offer; 4. by either Tyco Acquisition or Sensormatic, if, at any time prior to the effective time, a court of competent jurisdiction or any governmental, regulatory, or administrative agency or commission has issued a nonappealable final order, decree or ruling or taken any other nonappealable final action having the effect of permanently restraining, enjoining or otherwise prohibiting the offer or the merger; 5. by Tyco Acquisition, if, prior to the initial acceptance of shares for exchange in the offer, whether or not permitted to do so by the merger agreement, the board of directors of Sensormatic or 61 Sensormatic: (a)(i) withdraws, modifies or changes its approval or recommendation of the merger agreement, the offer or the merger in a manner adverse to Tyco Acquisition, (ii) approves or recommends to the Sensormatic stockholders an Acquisition Proposal or Alternative Transaction, or (iii) approves or recommends that the stockholders of Sensormatic tender their shares in any tender or offer that is an Alternative Transaction, or (b) takes any position or makes any disclosures to Sensormatic's stockholders required by applicable law, rule or regulation or by the New York Stock Exchange having the effect of any of the foregoing; 6. by Tyco Acquisition or Sensormatic, prior to the initial acceptance of shares for exchange in the offer, if any representation or warranty of the other party set forth in the merger agreement was untrue when made; 7. by Tyco Acquisition or Sensormatic, prior to the initial acceptance of shares for exchange in the offer, if any representation or warranty of the other party set forth in the merger agreement has become untrue other than by reason of a material breach of any covenant or agreement on the part of the party making such representation or warranty; 8. by Tyco Acquisition or Sensormatic, prior to the initial acceptance of shares for exchange in the offer, upon a material breach by the other party of any covenant or agreement set forth in the merger agreement; 9. by Sensormatic, prior to the initial acceptance of shares for exchange in the offer, in order to accept a Superior Proposal, if: . Sensormatic's board of directors has authorized Sensormatic, subject to complying with the terms of the merger agreement, to enter into a definitive agreement with respect to a Superior Proposal and Sensormatic has notified Tyco Acquisition in writing that it intends to enter into such an agreement, attaching a summary of the material terms, . Tyco has not made, within two full business days of receipt of Sensormatic's written notification of its intention to enter into a definitive agreement with respect to a Superior Proposal, a written offer that Sensormatic's board of directors determines, in good faith after consultation with its financial advisors, is at least as favorable to Sensormatic and its stockholders as the Superior Proposal, and . prior to such termination, Sensormatic has paid or caused to be paid to Tyco Acquisition in immediately available funds the fees and expenses required to be paid pursuant to the merger agreement; or 10. by Tyco Acquisition, prior to the initial acceptance of shares for exchange in the offer, if the average of the daily volume-weighted averages of the per share selling prices of a Tyco common share on the New York Stock Exchange for each of the five consecutive trading days ending on the fourth trading day prior to and not including October 1, 2001, the initial date designated for the expiration of the offer, is less than $46.25, provided that: . Tyco Acquisition has given Sensormatic notice of its intention to terminate for the reason set forth in this paragraph prior to 5:00 p.m. New York City time on September 26, 2001, the third trading day immediately preceding October 1, 2001, and . Sensormatic has not, by 5:00 p.m. New York City time on September 27, 2001, the second trading day immediately preceding October 1, 2001, delivered a notice to Tyco Acquisition agreeing that the exchange ratio will equal 0.5189. If Sensormatic delivers such notice with respect to the exchange ratio, the merger agreement will not be terminated and the exchange ratio for all purposes of the merger agreement will equal 0.5189 or, if the parties agree in their respective sole and absolute discretion, a higher number. If a misrepresentation or breach is curable prior to the date then designated for expiration of the offer, the merger agreement may not be terminated under paragraph 6, 7 or 8 prior to the designated expiration date 62 except upon not less than five business days' prior notice and thereafter so long as such party continues to exercise its reasonable best efforts to cure. The merger agreement contains principles for the determination of whether a representation or warranty has become untrue pursuant to paragraphs 6 and 7 above. Some representations and warranties are deemed untrue if they fail to be true and correct in all material respects and all other representations and warranties are deemed untrue only if they fail to be true and correct in all respects, except where their failure to be true and correct would not reasonably be expected to have a material adverse effect on Sensormatic or Tyco, as the case may be. "Material adverse effect" is defined in the merger agreement as any change, effect, development or circumstance that is materially adverse to the business, assets, including intangible assets, financial condition or results of operations of Sensormatic and its subsidiaries or Tyco and its subsidiaries, as the case may be, in each case taken as a whole; provided, however, that the following is excluded from the definition of material adverse effect and from any determination as to whether a material adverse effect has occurred or may occur: changes, effects, developments or circumstances (i) affecting (A) the security or safety industries generally, (B) the United States securities markets generally or (C) economic, regulatory, or political conditions generally or (ii) arising from or relating to the merger agreement, the transactions contemplated by the merger agreement or the announcement of the merger agreement or the transactions contemplated by it, including, without limitation, any effects on personnel, customers and suppliers. Fees And Expenses Except as set forth below, each of the parties to the merger agreement will pay its own fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement, whether or not the offer or merger is consummated. However, if the offer or merger is not consummated, Tyco Acquisition and Sensormatic will share equally (i) all SEC filing fees and printing expenses incurred in connection with the printing and filing of this document, including any preliminary materials related thereto, and any amendments or supplements thereto, the registration statement, the post-effective amendment to the registration statement, the Schedule 14D-9 and any other related offer documents, and (ii) conveyance and similar taxes required to be paid by Sensormatic pursuant to the merger agreement prior to the consummation of the merger. Sensormatic will pay Tyco a fee of $70 million, and will pay the actual, documented and reasonable out-of-pocket expenses of Tyco and Tyco Acquisition relating to the transactions contemplated by the merger agreement, including, but not limited to, reasonable fees and expenses of counsel and accountants and out-of-pocket expenses (but not fees) of financial advisors, of up to $5 million, upon the first to occur of any of the following events: 1. the termination of the merger agreement by Tyco Acquisition or Sensormatic due to either (i) the initial acceptance of shares for exchange in the offer not having occurred on or prior to March 3, 2002 or (ii) the offer having terminated or expired in accordance with its terms without the exchange of shares pursuant to the offer, if . the minimum tender condition has not been satisfied and no other condition to the offer has been unsatisfied at the time of termination, other than any condition that shall not have been satisfied as a result of a misrepresentation or breach of any covenant by Sensormatic, and . Tyco Acquisition has made no misrepresentation and is not in breach of the merger agreement such that Sensormatic would be permitted to terminate the merger agreement; and . either: . prior to such termination, there shall be outstanding a bona fide Acquisition Proposal which has been made directly to the stockholders of Sensormatic or has otherwise become publicly known 63 or there shall be outstanding an announcement by any credible third party of a bona fide intention to make an Acquisition Proposal, in each case whether or not conditional and whether or not such proposal shall have been rejected by the board of directors of Sensormatic; or . Sensormatic or any third party publicly announces an Alternative Transaction within nine months following the date of termination of the merger agreement; in the case of either of the above two paragraphs, such transaction is at any time thereafter consummated on substantially the terms previously announced or on terms more favorable to Sensormatic stockholders and provides for a consideration per Sensormatic common share with a fair market value at least equal to the exchange ratio multiplied by the average share price used to determine the exchange ratio, as described under "Terms of the Offer" on page 50 above; and 2. termination of the merger agreement by Tyco Acquisition under the circumstances described in paragraph 5 under "Conditions to Termination" above; or 3. the termination of the merger agreement by Sensormatic due to the acceptance by Sensormatic's board of directors of a Superior Proposal under the circumstances described in paragraph 9 under "Conditions to Termination" above. If Tyco Acquisition terminates the merger agreement because Sensormatic has materially breached a covenant or agreement, as described in paragraph 8 under "Conditions to Termination" above, Sensormatic must pay Tyco and Tyco Acquisition their respective expenses relating to the transactions contemplated by the merger agreement in an amount not to exceed $5 million. In addition, Sensormatic must pay Tyco a fee of $70 million if such breach is willful and either: . prior to such termination, there shall be outstanding a bona fide Acquisition Proposal which has been made directly to the stockholders of Sensormatic or has otherwise become publicly known or there shall be outstanding an announcement by any credible third party of a bona fide intention to make an Acquisition Proposal, in each case whether or not conditional and whether or not such proposal shall have been rejected by the board of directors of Sensormatic, or . Sensormatic or any third party publicly announces an Alternative Transaction within nine months following the date of termination of the merger agreement; and in either case, such transaction is at any time thereafter consummated on substantially the terms previously announced or on terms that are more favorable to Sensormatic stockholders. If Sensormatic terminates the merger agreement because Tyco Acquisition or Tyco has materially breached a covenant or agreement, as described in paragraph 8 under "Conditions to Termination" above, Tyco or Tyco Acquisition must pay Sensormatic its expenses relating to the transactions contemplated by the merger agreement in an amount not to exceed $5 million. If Tyco Acquisition terminates the merger agreement because a representation or warranty of Sensormatic was untrue when made, as described in paragraph 6 under "Conditions to Termination" above, Sensormatic must pay Tyco and Tyco Acquisition their respective expenses relating to the transactions contemplated by the merger agreement in an amount not to exceed $5 million. If Sensormatic terminates the merger agreement because a representation or warranty that Tyco Acquisition made was untrue when made, as described in paragraph 6 under "Conditions to Termination" above, Tyco Acquisition must pay Sensormatic its expenses relating to the transactions contemplated by the merger agreement in an amount not to exceed $5 million. The fee and/or expenses described above are payable within one business day after a demand for payment following the occurrence of the event requiring such payment. However, in no event will Sensormatic or Tyco Acquisition be required to pay such fee and/or expenses to any entity entitled thereto if, immediately prior to the termination of the merger agreement, the other entity entitled thereto was in material breach of its 64 obligations under the merger agreement. None of the provisions described in this section is intended to relieve any party from liability for any willful breach or willful misrepresentation. For purposes of this "Fees and Expenses" section, the definition of Alternative Transaction set forth under "No Solicitation" beginning on page 56 above is modified by replacing "25%," as it appears in that definition, with "40%." The fee payable under certain circumstances by Sensormatic to Tyco is intended, among other things, to compensate Tyco and Tyco Acquisition for their respective costs, including lost opportunity costs, if certain actions or inactions by Sensormatic or its stockholders lead to the abandonment of the merger. This may have the effect of increasing the likelihood that the offer and merger will be consummated in accordance with the terms of the merger agreement. The fee may also have the effect of discouraging other persons from making an offer to acquire all of or a significant interest in Sensormatic by increasing the cost of any such acquisition. Amendment and Waiver; Parties in Interest The parties to the merger agreement may amend the merger agreement in writing by action taken by or on behalf of their respective boards of directors at any time prior to the consummation of the merger. However, after approval of the merger and adoption of the merger agreement by the Sensormatic stockholders, the merger agreement cannot be amended without stockholder approval if stockholder approval of the amendment is required by law. On August 23, 2001, Tyco Acquisition and Sensormatic amended the merger agreement to clarify certain language to be consistent with the intention of the parties. At any time prior to the consummation of the merger, any party to the merger agreement may extend the time for the performance of any of the obligations or other acts by the other, waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement, or waive compliance with any of the agreements or conditions contained in the merger agreement. This extension or waiver will be valid if set forth in writing by the party or parties granting this extension or waiver. The merger agreement is binding upon and inures solely to the benefit of its parties. Nothing in the merger agreement, express or implied, confers upon any other person any right, benefit or remedy of any nature whatsoever, other than certain indemnification and insurance obligations of Tyco Acquisition and Sensormatic following the consummation of the merger which are intended for the benefit of certain specified officers and directors of Sensormatic and may be enforced by these individuals, and other than the right of Sensormatic stockholders to receive the merger consideration if the merger is consummated, but not otherwise. In addition, Tyco may enforce the fee and expenses provisions described under "Fee and Expenses" beginning on page 49. Guarantee Tyco has irrevocably guaranteed each and every representation, warranty, covenant, agreement and other obligation of Tyco Acquisition under the merger agreement. AGREEMENTS WITH SENSORMATIC AND ITS AFFILIATES Except for the merger agreement, customary confidentiality agreements executed in connection with the parties' negotiation of the transactions contemplated by the merger agreement, and the proposed arrangements with certain executives of Sensormatic described below, Tyco and its subsidiaries have not entered into any contracts or other arrangements or any material transactions with Sensormatic or its subsidiaries or any of Sensormatic's directors, executive officers or other affiliates within the past two years. Tyco has offered to enter into a retention agreement with Sensormatic's chief executive officer. Tyco also intends to offer to enter into retention agreements with some or all of Sensormatic's other executive officers. 65 The retention agreements may supersede certain provisions of existing agreements Sensormatic has entered into with its executive officers. The retention agreements would provide for certain levels of salary, bonus and benefits consistent with Tyco's practice, in exchange for the executive officers' continued employment with Sensormatic for a retention period of at least one year following the consummation of the merger and the executives' agreement to certain non-competition, non-solicitation and confidentiality covenants for a period of time following termination of employment. The amounts payable under the retention agreements would not materially exceed the amounts that would be payable under the comparable provisions of the existing agreements that would be superseded. The terms of any such retention agreement will be determined by the mutual agreement of Tyco and the affected executive officer entering into such retention agreement. We refer you to Item 3 of Sensormatic's Solicitation/Recommendation Statement on Schedule 14D-9 and to the Information Statement attached as Annex B to the Schedule 14D-9 for a discussion of Sensormatic's existing agreements with certain of its executive officers and potential conflicts of interest of Sensormatic's directors and officers regarding their consideration of the merger agreement, the offer and the merger. 66 COMPARISON OF RIGHTS OF STOCKHOLDERS OF SENSORMATIC AND SHAREHOLDERS OF TYCO Sensormatic is a Delaware corporation, and the rights of Sensormatic's stockholders are governed by Sensormatic's Restated Certificate of Incorporation, which in this document we refer to as "Sensormatic's Certificate," its Bylaws and Delaware law. Upon consummation of the merger, Sensormatic's stockholders will become shareholders of Tyco. The shareholder rights of the holders of Tyco common shares are governed by Tyco's Memorandum of Association, its Bye-laws and Bermuda law. The following is only a summary of material differences between the rights of a Sensormatic stockholder and the rights of a Tyco common shareholder arising from differences between the corporate laws of Delaware and those of Bermuda and the governing instruments of the two companies. This summary is not a complete description of those laws or governing instruments. We encourage you to read carefully and in their entirety Sensormatic's Certificate, Sensormatic's Bylaws, Tyco's Memorandum of Association and Tyco's Bye-laws. Copies of Tyco's Memorandum of Association and Bye-laws and Sensormatic's Restated Certificate of Incorporation and Bylaws have been filed with the SEC and will be sent to stockholders of Sensormatic upon request. See "Where You Can Find More Information" on page 1.
Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Authorized Capital Shares . 125,000,000 shares of common stock . 2,500,000,000 common shares . 10,000,000 shares of preferred stock . 125,000,000 preference shares. One share is designated as a special voting preference share. Preferred Shares . Sensormatic's Certificate authorizes . The Tyco Bye-Laws authorize Tyco to issue Sensormatic to issue up to 10,000,000 up to shares of preferred stock, par value 125,000,000 preference shares of the $0.01 per share, and provide for the nominal value issuance of one or more series of of U.S.$1.00 each. One such share has been preferred shares. 690,000 shares of the designated a super voting preference preferred stock have been designated 6 share, which share provides voting rights 1/2% convertible preferred stock. If the in Tyco with respect to approximately offer is consummated, all of the 4,300,000 currently outstanding outstanding convertible preferred stock exchangeable shares of CIT Exchangeco will either be converted into Inc., a subsidiary of Tyco, equivalent on Sensormatic common shares or redeemed a per share basis to the voting rights of prior to consummation of the merger. See 0.6907 of a Tyco common share. Each "Redemption of Sensormatic Preferred exchangeable share is exchangeable for Stock" on page 48. 0.6907 of a Tyco common share. . In addition, Sensormatic's Certificate authorizes the Board to fix the . The preference shares may be issued in designations and number of shares more than one series which may be constituting each series of preferred designated and to which may be attached shares and fix the relative rights of such rights and restrictions as the Tyco each series. Board of Directors may determine.
67 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Special Meetings of Shareholders . Sensormatic stockholders may not . Tyco shareholders holding at call a special meeting of least 10% of the paid-up capital Sensormatic stockholders. of Tyco may require Tyco to call a special general meeting. . Special meetings of Sensormatic . The Tyco Bye-laws provide that stockholders may be held at any the Tyco Board of Directors may time when called by the Chairman call a special general meeting of of Sensormatic's Board of Tyco shareholders whenever it Directors, the President or the judges it necessary. majority of the Sensormatic's Board of Directors. Quorum . The presence in person or by proxy . The presence, in person or by proxy, of the holders of one-third of the of any two Tyco shareholders at a voting power of the outstanding shareholders meeting generally Sensormatic stock entitled to vote constitutes a quorum. on the matters that are to be voted on at that meeting constitutes a quorum. Voting Rights . Each share of Sensormatic common . Any proposal at a general meeting may stock is entitled to one vote on be decided by a show of hands of the all matters submitted to shareholders present in person unless Sensormatic stockholders. a poll is demanded. Where a poll is demanded, a shareholder is entitled to one vote for each Tyco common share held by the shareholder. . Except for certain matters . Under Bermuda law and the Tyco Bye- described under "Board of Laws any question proposed for Directors," "Amendments to Charter consideration at a general meeting is Documents and Bylaws" and "Sale, generally decided on a simple Lease or Exchange of Assets, majority of votes. Mergers, Share Acquisitions, Business Combinations and Related . The Tyco Bye-laws provide that a Tyco Provisions," a majority of votes shareholder will lose voting rights: cast is generally required for an action by Sensormatic (1) for the period the shareholder stockholders, except that only a fails to comply with a notice plurality of votes cast is from Tyco requesting specified required for the election of information regarding such directors. person's interest in Tyco common shares, plus an additional 90 days; (2) if such shareholder fails after notice by Tyco to make a takeover offer in accordance with the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers in the United Kingdom as applied by or in accordance with the Tyco Bye- laws; (3) upon notice by the Tyco Board of Directors, for a period of 180 days if such shareholder acquires three percent or more of Tyco's issued share capital of any class of and fails to notify Tyco of such acquisition within two days; or 68 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- (4) upon notice by the Tyco Board of Directors, for a period of 180 days if such shareholder holds 3% or more of Tyco's issued share capital of any class and fails to notify Tyco of a change in the shareholder's interests amounting to 1% or more of the share capital of any class. Notice of Stockholder Meetings . Delaware law requires and . Under Bermuda law and the Tyco Bye- Sensormatic's Bylaws provide that laws, at least 5 days' notice must be notice of stockholder meetings be given of any shareholders meeting. given to holders of record not more than 60 nor less than 10 days prior to an annual or special meeting. Shareholder Nominations and Proposals . For a stockholder to bring . Any Tyco shareholder may nominate nominations or other business a director for election by notice before an annual meeting, the to Tyco. Such a notice must be stockholder (who must be a holder given to the Secretary of Tyco not of record at the time such notice less than six and not more than 28 is given) must have given timely clear days before the date of the notice in writing to Sensormatic's relevant general meeting and be Secretary and the business must be accompanied by the written consent a proper subject for stockholder of the nominee. Under Bermuda law, action under Delaware law. only Tyco shareholders holding not Generally, notice is timely if it less than 5% of the total voting is given not less than 60 days and rights or 100 or more shareholders not more than 90 days prior to the in number may require a proposal annual meeting, provided that if be submitted to an annual general less than 70 days' notice or prior meeting. Generally, notice of such public disclosure of the date of a proposal must be received by the meeting is given, Sensormatic Tyco not less than six weeks must receive a stockholder's before the annual general meeting. notice not later than 15 days The Tyco Board can waive these after the date the notice of the requirements regarding shareholder meeting is mailed or public proposals, and the staff of the disclosure of the meeting is first SEC has taken the position that made. Nominations of persons for the SEC's proxy rules may require election to the Sensormatic Board Tyco to include in its proxy of Directors may be made at a materials proposals of special meeting of stockholders at shareholders who do not satisfy which directors are to be elected these requirements. by any Sensormatic stockholder who is entitled to vote at the meeting, who complies with the notice procedures and who is a stockholder of record at the time the notice is given. Nominations of directors and shareholder proposals must set forth the information specified in Sensormatic's Bylaws. Shareholder Consent in Lieu of Meetings . Sensormatic stockholders are not . Pursuant to Bermuda law, action by permitted to take action by written consent of shareholders is written consent in lieu of a permitted where the written shareholder meeting. resolution is signed by all of the shareholders, or all the shareholders of the relevant class of shares, who would be entitled to attend and vote at a meeting, with the exception of a resolution to remove an auditor or a director before the expiration of his or her term of office. 69 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Stockholder Rights of Inspection . Delaware law allows any stockholder to inspect the . Bermuda law allows a shareholder corporation's stock ledger, a list to inspect the company's register of its stockholders and its other of members, its bye-laws minutes books and records; provided that of general meetings and audited the inspection is for a purpose financial statements. Bermuda law reasonably related to the person's does not provide a general right interest as a stockholder. for shareholders to inspect or obtain copies of other corporate records except those available for public inspection, including the certificate of incorporation, memorandum of association and register of directors and officers. Stockholder Preemptive Rights . Delaware law provides that no . Bermuda law does not confer stockholder shall have any preemptive rights on shareholders, preemptive rights to purchase in respect of the issue of additional securities of the additional securities of a Bermuda corporation unless the certificate company, but would permit such of incorporation expressly grants rights to be conferred by a these rights. Sensormatic's company's bye-laws. The Tyco Bye- Certificate of Incorporation does laws do not provide for any such not provide for preemptive rights preemptive rights. for Sensormatic's stockholders. Derivative Actions . Sensormatic stockholders do not . Tyco shareholders may not have a direct and individual generally initiate an action for a right to enforce rights which wrongdoing to the company. In could be asserted by Sensormatic certain limited circumstances, itself. Instead, under Delaware however, Tyco shareholders may law, they may in certain proceed in a derivative action. circumstances enforce the rights derivatively on behalf of . The Bermuda courts would Sensormatic through a judicial ordinarily follow English process. precedent, which permits a shareholder to commence a . Under Delaware law, a complaint derivative action only if: in a derivative suit must: (1) the act complained of is (1) state that the plaintiff was a alleged to be beyond the stockholder at the time of the corporate power of the company transaction with respect to or to be illegal; which the plaintiff complains or that the plaintiff's shares (2) the act complained of is thereafter became the alleged to constitute a fraud plaintiff's by operation of against the minority law; and shareholders by the majority shareholders who have used (2) (a) allege with particularity their controlling position to the efforts plaintiff has made prevent the company from to obtain the action the taking action against the plaintiff desires from the wrongdoers; directors of the company or (b) state the reasons for the (3) an act requires approval by a plaintiff's failure to obtain greater percentage of the the action or for not making company's shareholders than the effort to obtain the actually approved it; or action. (4) there is an absolute necessity The plaintiff must remain a to waive the general rule that stockholder throughout the a shareholder may not bring a duration of the derivative suit. derivative action so that the company's Memorandum of Association or Bye-laws are not violated. 70 Delaware Law and Current Bermuda Law and Current Governing Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- . Under Bermuda law, a shareholder who complains that the affairs of a company are being or have been conducted in a manner oppressive or prejudicial to some of the shareholders, including himself, may petition the court for relief, and the court has wide discretion to grant relief if it is satisfied that the complaint is so justified and that: (1) to wind up the company would unfairly prejudice those shareholders, but (2) the facts otherwise would justify a winding-up order on just and equitable grounds. Traditionally, such relief has been granted in relatively limited circumstances. Board of Directors . Delaware law permits, and . Bermuda law would permit a Sensormatic's Certificate classified Board of Directors, provides for, a classified Board but the Tyco Bye-laws do not of Directors.The Board is divided provide for one. into three classes in as near equal number as possible, with the term of one class expiring at each annual meeting. . The Tyco Bye-laws provide that the number of directors may be determined by the shareholders in general meeting, provided that . Sensormatic's Bylaws provide that there are at least two directors. the size of Sensormatic's Board The Tyco Board of Directors is of Directors is determined by a currently composed of 12 resolution approved by a majority directors. The Tyco Bye-laws of the Board of Directors, but require that a director be a shall not be more than fifteen or shareholder. less than five. Sensormatic's Board of Directors is currently composed of nine directors, with three directors in each class. A Sensormatic director is not required to be a stockholder. Removal of Directors; Vacancies . Sensormatic's Certificate and . A director of Tyco may be removed Bylaws provide that any from office, with or without Sensormatic director may be cause, by the shareholders at a removed from office, only with general meeting, who may elect cause, by the affirmative vote at another director in his or her a stockholder meeting of holders place, or by written resolution of a majority of the outstanding signed by all the other shares of stock entitled to vote directors. The Tyco Bye-laws for the election of directors. authorize the Tyco Board of Any vacancy or newly created Directors to fill any casual directorships occurring in the vacancy in the Tyco Board of Sensormatic Board of Directors Directors and authorize the may be filled by a vote of the remaining Directors to act majority of directors then in notwithstanding any vacancy. A office, though less than a director so appointed holds quorum, or by a sole remaining office until the next annual director. The directors chosen general meeting. hold office until the next annual election and until their successors are duly elected and qualified. 71 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Amendments to Charter Documents and Bylaws . Under Delaware law, unless the . Under Bermuda law, a company may certificate of incorporation alter its Memorandum of requires a greater vote, any Association by resolution passed amendment to the certificate of at a general meeting of incorporation requires: shareholders of which due notice has been given and, where (1) the recommendation of the required, with the consent of the Board of Directors; Minister of Finance. Such a resolution requires an (2) the affirmative vote of a affirmative vote of a majority of majority of the outstanding the votes cast and need not be stock entitled to vote recommended by the Board of thereon; and Directors. (3) the affirmative vote of a . Holders of at least 20% in par majority of the outstanding value of the company's issued stock of each class entitled share capital or any class to vote thereon as a class. thereof may apply to the Bermuda Supreme Court to annul any . In addition, provisions of alteration. Upon such Sensormatic's Certificate of application, the alteration will Incorporation relating to number, not have effect except in so far classification, term of office, as it is confirmed by the Court. qualification, election and removal of directors and the . The Tyco Bye-laws may only be filling of vacancies and newly amended by the Tyco Board and created directorships, such amendment becomes effective stockholder action by written only after confirmation by the consent, limitation of liability Tyco shareholders. of directors, indemnification of directors and officers, . The Tyco Bye-laws provide that, stockholder approval of mergers, if Tyco has two or more classes sales of substantially all of the of shares, the rights attached to assets, share purchases or other any class of shares, unless business combinations or changes otherwise provided by the terms in supermajority voting of such class, may be varied provisions can only be amended by either by the consent in writing the affirmative vote of the of the holders of three-fourths holders of 80% of the outstanding of the shares of the class, or by shares entitled to vote, unless a resolution passed at a separate such change is submitted to the meeting of the holders of such stockholders with the unanimous class of shares by holders of recommendation of the Board of three-fourths of the shares of Directors. such class voting at such separate meeting. Certain . Sensormatic's Bylaws may be procedural rules of such a altered, amended or repealed at separate meeting differ from the any meeting of the Board of rules of a Tyco general meeting. Directors or by the stockholders by a vote of the holders of a . Pursuant to Bermuda law, holders majority of the outstanding of at least 10% of a class of shares entitled to vote, provided shares in a company in which the that notice of the proposed share capital is divided into alteration, amendment or repeal different classes may apply to is contained in the notice of the the Bermuda Supreme Court to meeting where the action is to be cancel any variation of the taken. Any amendment by the Board rights attached to the class of of Directors of Sensormatic's shares. Upon such application, Bylaws may be further amended or that variation will not have repealed by a majority of the effect unless and until it is stockholders. The stockholders confirmed by the Court. may also limit the power of the Board of Directors to alter or amend the Bylaws. Notwithstanding the above, any amendment of the provisions of Sensormatic's Bylaws relating to classification, term of office, qualification, election and removal of directors and the filling of vacancies and newly created directorships, 72 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- directors requires the unanimous approval of the Board or the affirmative vote of the holders of 80% of the outstanding shares entitled to vote on the election of directors. Share Purchases . Under Delaware law, no . Generally, Tyco may purchase its corporation may purchase or shares for cancellation, if, on redeem its own shares of capital the date on which the purchase is stock for cash or other property to be effected there are no when the capital of the reasonable grounds for believing corporation is impaired or when that Tyco is, or after the the purchase or redemption would purchase would be, unable to pay cause any impairment of the its liabilities as they become capital of the corporation. due and subject to certain Sensormatic may only repurchase statutory requirements as to the or redeem its stock if funds from which payment in Sensormatic's remaining assets respect of such purchase may be after the repurchase or made. redemption are sufficient to pay any of its outstanding debts. . A subsidiary of Tyco also may purchase Tyco common shares. Tyco . Unless stock is held in a common shares owned by a fiduciary capacity, Delaware law subsidiary of Tyco may be voted prohibits subsidiaries from on all matters on which voting their parent company's shareholders are entitled to vote stock or counting that stock for and are counted for quorum quorum purposes. purposes. . Delaware law and Sensormatic's . Bermuda law permits Tyco to Certificate permits Sensormatic constitute and issue preference to issue shares of preferred shares which are redeemable at stock that are redeemable at the the option of either the company option of either Sensormatic or or the holder. the holder of the stock or upon the happening of a specified event. Sale, Lease or Exchange of Assets, Mergers, Share Acquisitions, Business Combinations and Related Provisions . Delaware law requires the . Under Bermuda law, a company's affirmative vote of a majority of shareholders are not generally the outstanding stock entitled to required to approve a sale, lease vote thereon to authorize any or exchange of all or merger, consolidation, substantially all of a company's dissolution or sale of property and assets. Bermuda law substantially all of the assets does require, however, that of a corporation, except that, shareholders approve certain unless required by its forms of mergers and certificate of incorporation: (i) reconstructions. A compromise or no authorizing stockholder vote arrangement in connection with a is required of a corporation scheme for the reconstruction of surviving a merger if (A) that the company on terms which corporation's certificate of include the transfer of all or incorporation is not amended in part of the undertaking or the any respect by the merger, (B) property of the company to each share of stock of that another company requires the corporation outstanding approval of a majority in number immediately prior to the representing three-fourths in effective date of the merger will value of the shareholders or be an identical outstanding share class of shareholders, as the of the surviving corporation case may be, present and voting after the effective date of the either in person or by proxy at merger; and (C) the number of the meeting, and the sanction of shares to be issued in the merger the Bermuda Supreme Court. plus those initially issued upon conversion of any other . Pursuant to Bermuda law, an securities to be issued in the amalgamation of two or more merger do not exceed 20% of that companies requires Board approval corporation's outstanding common and the approval of the stock immediately prior to the shareholders of each effective date of the merger. 73 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- . Generally, Section 203 of the company by a three-fourths Delaware General Corporate Law majority. The required vote of prohibits "business shareholders may be reduced to not combinations," including mergers, less than a majority by a sales and leases of assets, company's bye-laws. The Tyco Bye- issuances of securities and laws contain no such provision. similar transactions, by a For purposes of approval of an corporation or a direct or amalgamation, all shares, whether indirect majority-owned or not otherwise entitled to vote, subsidiary of the corporation carry the right to vote. A with an "interested stockholder" separate vote of a class of shares who beneficially owns 15% or more is required if the rights of such of a corporation's voting stock class would be altered by virtue within three years after the of the amalgamation. person or entity becomes an interested stockholder, subject . The Tyco Bye-laws permit the Tyco to certain exceptions. In Board to make applicable to Tyco accordance with Section 203(b)(6) certain rules of the City Code on of the Delaware General Corporate Takeovers and Mergers issued by Law, Sensormatic's Board of the Panel on Takeovers and Directors' approval of the merger Mergers in the United Kingdom. agreement and the transactions contemplated thereby rendered the . The City Code on Takeovers and antitakeover provisions of Mergers requires any person or Section 203 of the Delaware group acting in concert which General Corporate Law acquires shares that, together innapplicable to the offer and with shares previously owned by the merger. it, have 30% or more of the voting power of a company, to . Sensormatic's Certificate make an offer to purchase all provides that the affirmative equity shares of the company and vote of the holders of 80% of the any of the company's voting non- outstanding shares of voting equity capital shares of the type stock shall be generally required held by such person or group. The (1) to adopt any agreement of offer price must not be less than merger with respect to the highest price paid in the Sensormatic or any of ts preceding 12 months for shares of subsidiaries; (2) to authorize the same class by such person or the sale of all or substantially anyone in such group and must be all of the assets of Sensormatic made in cash or include a cash or any of its subsidiaries; or alternative. (3) to authorize the issuance or transfer by Sensormatic or any of . If a person or group owns 30% or its subsidiaries of any of their more of the Tyco common shares, securities to another person in and the Tyco Board determines exchange for cash, securities or that an offer under the City Code other assets, or a combination is not expedient or the person or thereof, if, as of the date of group is required to make such an the Board action or record date offer but fails to do so, the of the stockholder meeting, such Tyco Board may by notice require other person is, or at any time such a person or group to make an within the preceding twelve offer which: months has been, the beneficial owner of five percent or more of (1) includes all shares of every the outstanding voting shares of class of share capital of Tyco Sensormatic. and, if the Tyco Board so requires, all securities of Tyco . In addition, Sensormatic's convertible into Tyco common Certificate provides that the shares; affirmative vote of 80% of the outstanding shares of voting stock (2) is in cash or includes a cash shall be generally required (1) to alternative; liquidate or dissolve Sensormatic; (2) to authorize any offer by (3) is made within 30 days of the Sensormatic to purchase shares of Tyco Board's notice; its outstanding voting stock, except pursuant to redemption (4) remains open for at least 14 provisions of Sensormatic's days after the offer becomes preferred stock; or (3) to unconditional; authorize any reclassification of Sensormatic's securities or any (5) requires payment to be made recapitalization to decrease the within 21 days after the offer number of holders of Sensormatic's becomes unconditional; and voting stock, in each case if, as of the date of the Board action or record date of the stockholder meeting, any other 74 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- person is the beneficial owner of (6) is at a price not less than the five percent or more of the highest price paid in the outstanding voting stock of preceding 12 months for shares Sensormatic. of the same class by the person or any member of the group, or, if the price is unavailable or inappropriate, then at a price fixed by the Tyco Board. The purchase price for convertible securities must be on terms the Tyco Board considers fair and reasonable. . These provisions in Sensormatic's . The Rules Governing Substantial Certificate do not apply if the Acquisitions of Shares issued by Board of Directors has passed a the Takeover Panel provide, resolution approving the subject to certain exceptions, transaction and a majority of that a person or group acting in directors voting in favor of such concert may not acquire in a resolution were directors prior to period of seven days shares such five percent acquisition. As representing 10% of more of the a result, these provisions of voting shares of a company if Sensormatic's Certificate are those shares, when aggregated with inapplicable to the offer and the shares of the company already held merger as the Board of Directors by the person or group, would passed such a resolution. carry more than 15%, but less than 30%, of the total voting rights of the company. The Tyco Board may require compliance with these rules and may require any person or group to dispose of any Tyco common shares acquired in violation of these rules. . Under the Tyco Bye-laws, any person who acquires an interest in 3% or more of the issued share capital of any class of Tyco is required to notify Tyco of that interest and of any change in that person's interest amounting to 1% or more of the issued capital of any class. Any such notification must be made within two business days after the relevant event. In determining the percentage interest of any person for these and similar purposes, interests of persons acting in concert may be aggregated. Required Purchase and Sale of Shares; Short Form Merger . Stockholder approval is also not . Pursuant to Bermuda law, if a required under Delaware law for scheme or contract involving the mergers or consolidations in transfer of shares or any class of which a parent corporation merges shares in a Bermuda company to or consolidates with a subsidiary another company has, within four of which it owns at least 90% of months after the making of the the outstanding shares of each offer in this regard by the class of stock entitled to vote transferee company, been approved on such merger or consolidation. by the holders of not less than 90% in value of the shares or class of shares for which the offer was made, then within two months after the date of such approval being obtained, the transferee company may give notice to any dissenting shareholder that it desires to acquire his or her shares. Such transferee company will then be entitled and bound to 75 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- acquire such shares on the terms on which shareholders that approved such scheme or contract transferred their shares, unless the Bermuda Supreme Court orders otherwise upon application by the dissenting shareholder. . Under Bermuda law, within one month of the transfer of 90% in value of a Bermuda company's shares or any class of shares to another company under a scheme or contract, the transferee company is required to notify the holders of the remaining shares of such transfer. Within three months of the giving of such notice, any remaining holder of shares may require the transferee company to acquire his or her shares on the same terms as provided for in the scheme or contract, or upon such terms as may be agreed, or upon such terms as the Bermuda Supreme Court may determine upon application of the transferee company or the shareholder. . Under Bermuda law, a holder or olders of not less than 95% of the shares or any class of shares in a Bermuda company may give notice to the remaining shareholders or class of shareholders of the intention to acquire their shares, on the terms set out in the notice. Bermuda law provides that when such notice is given the acquiring holder or holders shall be entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless the remaining shareholders exercise statutory appraisal rights. . Under Bermuda law, an amalgamation is only permitted without a shareholder vote when it is between a parent company and its wholly- owned subsidiary or between two or more wholly-owned subsidiaries. 76
Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Dissenter's Rights . Under Delaware law, in certain . Under Bermuda law, a properly dissenting situations, appraisal rights may be shareholder who did not vote in favour available in connection with a merger or of an amalgamation and who is not consolidation. Appraisal rights are not satisfied that he or has been offered available under Delaware law to fair value for his or her shares may stockholders of the surviving corporation apply to the court to appraise the fair when a corporation is to be the surviving value of his or her shares. If the court corporation and no vote of its appraised value is greater than the stockholders is required to approve the value received or to be received in the merger. In addition, no appraisal rights amalgamation, the company must pay the are available under Delaware law to court appraised value to the dissenting holders of shares of any class of or shareholder within one month of the series of stock which is either: appraisal, unless it decides to terminate the amalgamation. (1) listed on a national securities . Bermuda law additionally provides a exchange or designated as a national right of appraisal in respect of the market system security on an acquisition of shares by a 95% holder interdealer quotation system by the discussed under "Required Purchase and National Association of Securities Sale of Shares; Short-Form Merger" Dealers, Inc.; or above. (2) held of record by more than 2,000 stockholders. . Notwithstanding paragraphs (1) and (2) above, appraisal rights shall be available to those stockholders who are required by the terms of the merger or consolidation to accept for that stock anything other than: (1) shares of stock of the corporation surviving or resulting from the merger or consolidation or of another corporation, or depository receipts in respect thereof, which shares or depositary receipts, as of the effective date of the merger or consolidation, are listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 stockholders; (2) cash in lieu of fractional shares or fractional depository receipts in the foregoing paragraphs; or (3) any combination of the items listed above. . If all the stock of a subsidiary party to a short form merger is not owned by the parent corporation, appraisal rights are available for shares of the subsidiary.
77 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Fiduciary Duties of Directors . Directors of corporations . Directors of a Bermuda company incorporated or organized under have fiduciary duties to the Delaware law have fiduciary company. Pursuant to Bermuda obligations to the corporation law, every director and officer and its stockholders. Pursuant of a company must, in exercising to these fiduciary obligations, his or her powers and the directors must act in discharging his or her duties, accordance with the duties of act honestly and in good faith "due care" and "loyalty." The with a view to the best duty of care generally requires interests of the company and that the directors act in an exercise the care, diligence and informed and deliberative manner skill that a reasonably prudent and they inform themselves, person would exercise in prior to making a business comparable circumstances. decision, of all material Bermuda law and the Tyco Bye- information reasonably available laws also generally require a to them. The duty of loyalty can director who is interested in be described as the duty to act any material contract with the in good faith in a manner which company to disclose the nature the directors reasonably believe of that interest. The Tyco Bye- to be in the best interests of laws also preclude a director the corporation and its from voting on any such stockholders. Delaware law contract, subject to certain generally provides that no limited exceptions. transaction between a director and a corporation is void or . Bermuda courts have not voidable because of a director's interpreted the fiduciary self-interest or because the obligation of a director in a director participates in the transaction that would be a meeting of the board that "change of control" as authorizes the transaction, necessarily requiring that the provided adequate disclosure is director seek to obtain the made to the board or the highest value reasonably stockholders before the available for the shareholders transaction is approved or the of the company. transaction is fair to the corporation. . Bermuda law generally requires . In certain circumstances, the consent of 90% of the including a transaction that shareholders having the right to would be a "change of control," vote for any loan to or judicial decisions under guarantee of the obligations of Delaware law have interpreted a director of the company. the fiduciary duties of a "Director" for this purpose director to require that the includes the spouse or children director seek to obtain the of the director or any company highest value reasonably of which 20% or more of the available for the stockholders equity or loan capital is owned of the corporation. or controlled by the director. . Delaware law allows loans to and guarantees of obligations of officers and directors without any stockholder approval. Indemnification of Officers and Directors . Sensormatic's Certificate and . Bermuda law permits a company to Bylaws provide for indemnify its officers and indemnification of directors and employees with respect to any officers to the fullest extent loss arising or liability permitted by Delaware law. No attaching to such person by amendment to Sensormatic's virtue of any rule of law Certificate may adversely alter concerning any negligence, these provisions with respect to default, breach of duty, or acts or omissions of directors breach of trust of which the prior to such amendment. Under officer or employer may be guilty Delaware law, Sensormatic in relation to the company or any generally has the power to of its subsidiaries, provided indemnify its present and former that the company may not directors, officers, employees indemnify an officer or employee and agents against expenses, against any liability arising out including attorneys' fees, of his or her fraud or judgments, fines and amounts paid dishonesty. The Tyco Bye-laws in settlements reasonably provide that every director, incurred by them in connection secretary and other officer of with Tyco shall 78 Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- any suit to which they are, or are be indemnified by Tyco by reason of threatened to be made, a party by any contract entered into, or any reason of their serving in those act or thing done, by such officer positions so long as they acted in in the discharge of his or her good faith and in a manner they duties, to the extent permitted by reasonably believed to be in or not Bermuda law. Bermuda law also opposed to the best interest of permits a company to indemnify an Sensormatic, and with respect to officer against liability incurred any criminal action, they had no in defending any civil or criminal reasonable cause to believe their proceedings in which judgment is conduct was unlawful. With respect given in his or her favor or in to suits by or in the right of a which he or she is acquitted, or corporation, however, when the Bermuda Supreme Court indemnification is not available if grants relief to such officer. The a person is finally adjudged to be Court may relieve an officer from liable to Sensormatic, unless the liability for negligence, default, court determines that breach of duty or breach of trust indemnification is appropriate. if it appears to the Court that such officer has acted honestly and . Sensormatic's Bylaws set forth reasonably and, in all the the procedures which must be circumstances, ought fairly to be followed by a director or officer excused. seeking indemnification, the manner in which determinations as to payment of indemnification and advances for expenses by Sensormatic are to be made, the timing of such payments and the methods of challenging such determinations. . Tyco maintains directors' and officers' insurance as permitted by Bermuda law. . Under Sensormatic's Certificate and Bylaws, a director or officer is entitled to receive payment in advance of any expenses incurred in connection with such proceeding, consistent with Delaware law. Under Delaware law, a director or officer must undertake to repay such expenses if it is ultimately determined that he is not entitled to indemnification. . Sensormatic maintains directors' and officers' insurance as permitted by Delaware law. Director Liability . Sensormatic's Certificate of . Bermuda law permits a company to Incorporation eliminates the exempt an officer from loss or personal liability of each liability in circumstances where director of Sensormatic to the it is permissible for the company fullest extent permitted by to indemnify such officer, as Delaware law. Delaware law indicated above. The Tyco Bye- provides that the certificate of laws exclude the liability of any incorporation of a corporation officer of Tyco for any error of may include a provision which judgment, omission, default or limits or eliminates the oversight in relation to the liability of directors to the execution of his or her duties, corporation or its stockholders except in respect of willful for monetary damages for breach negligence, willful default, of fiduciary duty as a director, fraud or dishonesty. provided the liability does not arise from certain prescribed conduct, including breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, the payment of unlawful dividends or expenditure of funds for unlawful stock repurchases or redemptions or transactions for which a director derived an improper personal benefit. 79
Delaware Law and Current Governing Bermuda Law and Current Documents of Sensormatic Governing Documents of Tyco ---------------------------------- --------------------------- Dividends . Under Delaware law, a Delaware . Bermuda law provides that a company may corporation may pay dividends out of not declare a dividend, or make a surplus or, if there is no surplus, out distribution out of contributed surplus, of net profits for the fiscal year in if there are reasonable grounds for which declared and for the preceding believing that the company is, or after fiscal year. Delaware law also provides such payment would be, unable to pay its that dividends may not be paid out of liabilities as they become due, or if net profits if, after the payment of the the realizable value of the company's dividend, capital is less than the assets would thereby be less than the capital represented by the outstanding aggregate of its liabilities and its stock of all classes having a preference issued share capital and share premium upon the distribution of assets. accounts. Under the Tyco Bye-laws, Sensormatic's Bylaws provide that the dividends may only be paid out of directors have the right to declare profits available for the purpose. The dividends at any regular or special Tyco Bye-laws provide that the Tyco meeting to the full extent permitted by Board of Directors may from time to time law. declare dividends.
80 LEGAL EXPERTS The validity of the Tyco common shares to be delivered to Sensormatic stockholders in connection with the offer and with the merger will be passed upon by Appleby Spurling & Kempe, Hamilton, Bermuda, special counsel to Tyco. Certain other legal matters in connection with the offer and the merger will be passed upon for Tyco and Tyco Acquisition by Kramer Levin Naftalis & Frankel LLP, New York, New York, and by Appleby Spurling & Kempe. Michael L. Jones, secretary of Tyco, is a partner in Appleby Spurling & Kempe. Certain tax matters in connection with the offer and the merger will be passed upon for Sensormatic by Cleary, Gottlieb, Steen & Hamilton, New York, New York. EXPERTS The consolidated financial statements and financial statement schedule of Tyco as of September 30, 2000 and 1999, and for each of the three years in the period ended September 30, 2000, included in Tyco's Annual Report on Form 10-K filed on December 21, 2000, and incorporated by reference in this prospectus, have been audited by PricewaterhouseCoopers, independent accountants, as set forth in their report included therein. In its report, that firm states that with respect to a certain subsidiary its opinion is based upon the report of other independent accountants, namely Arthur Andersen LLP (as it relates to the consolidated balance sheet of AMP Incorporated and its subsidiaries as of September 30, 1998, and the related consolidated statements of income, shareholders' equity and cash flows for the year ended September 30, 1998). The consolidated financial statements and financial statement schedule referred to above have been incorporated herein in reliance on said reports given on the authority of such firms as experts in auditing and accounting. The consolidated balance sheets as of December 31, 2000 and 1999 and the related consolidated statements of income, changes in stockholders' equity and cash flows of The CIT Group, Inc. and its subsidiaries for each of the years in the three-year period ended December 31, 2000 have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent certified public accountants, also incorporated by reference herein, and upon the authority of KPMG LLP as experts in accounting and auditing. The consolidated balance sheets as of June 30, 2000 and 1999 and the related consolidated statements of income, changes in shareholders' equity and cash flows of Sensormatic and its subsidiaries for each of the two years in the period ended June 30, 2000 have been incorporated by reference in this prospectus in reliance upon the report of PricewaterhouseCoopers LLP, independent accountants, and given on the authority of PricewaterhouseCoopers LLP as experts in accounting and auditing. The consolidated statements of operations, stockholders' equity and cash flows of Sensormatic and its subsidiaries for the year ended June 30, 1998 and the related financial statement schedule have been incorporated by reference herein and in the registration statement in reliance upon the report of Ernst & Young LLP, independent certified public accountants, also incorporated by reference herein, and upon the authority of Ernst & Young LLP as experts in accounting and auditing. 81 MISCELLANEOUS The offer is being made solely by this prospectus and the related letter of transmittal and is being made to holders of all outstanding Sensormatic common shares. We are not aware of any jurisdiction where the making of the offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If we become aware of any valid state statute prohibiting the making of the offer or the acceptance of shares pursuant thereto, we will make a good faith effort to comply with any such state statute. If, after such good faith effort, we cannot comply with any such state statute, the offer will not be made to, nor will tenders be accepted from or on behalf of, the holders of shares in such state. In any jurisdiction where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer shall be deemed to be made on our behalf by one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or make any representation on behalf of Tyco, Tyco Acquisition or Sensormatic not contained in this prospectus or in the letter of transmittal, and if given or made, such information or representation must not be relied upon as having been authorized. 82 SCHEDULE I CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF TYCO INTERNATIONAL LTD. The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director of Tyco, each executive officer of Tyco and certain executive officers of Tyco's subsidiaries. Unless otherwise indicated, positions held shown in the following table are positions with Tyco. Except as set forth below, each such person is a citizen of the United States of America. None of the listed persons, during the past five years, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding of any violation of such laws.
Present Principal Name and Position Held & Occupation or Employment Current Business Address and Five-Year Employment History ------------------------ -------------------------------- L. Dennis Kozlowski................. Mr. Kozlowski has been Chairman of the Board of Chairman of the Board, Directors, Chief Executive Officer and President of President and Chief Tyco since July 1997. He was Chairman of the Board Executive Officer of Directors of Tyco International (US) Inc. from One Tyco Park January 1993 to July 1997. He has been Chief Exeter, NH 03833 Executive Officer of Tyco (US) since July 1992 and President of Tyco (US) since 1989. Lord Michael A. Ashcroft KCMG....... Lord Ashcroft has been Chairman of Carlisle Holdings Director Limited (services company) since 1987. He was Carlisle Holdings Ltd. Chairman of the Board of Directors and Chief 60 Market Square Executive officer of ADT Limited from 1984 to July Belize City, Belize 1997. Lord Ashcroft is a citizen of Great Britain and Belize. Joshua M. Berman.................... Mr. Berman was counsel to the law firm of Kramer Director and Vice President Levin Naftalis & Frankel LLP from 1985 to 2000. He One Town Center Road has been Vice President of Tyco since July 1997. Boca Raton, FL 33486 Richard S. Bodman................... Mr. Bodman has been Managing General Partner of VMS Director Group (venture capital) since May 1996. Previously, AT&T Ventures LLC he was Senior Vice President, Corporate Strategy and 2 Wisconsin Circle Development, of AT&T Corporation (communications) Suite 610 from August 1990 to May 1996. Chevy Chase, MD 20815 John F. Fort, III................... Mr. Fort was Chairman of the Board and Chief Director Executive Officer of Tyco (US) from 1982 to 1992. He 1323 North Boulevard has been Chairman of the Board of Directors of Houston, TX 77006 Insilco Corp. (diversified manufacturer) since November 1998. Stephen W. Foss..................... Mr. Foss has been Chairman and Chief Executive Director Officer of Foss Manufacturing Company, Inc. Foss Manufacturing Company, Inc. (manufacturer of synthetic fibers and non-woven 380 Lafayette Road fabrics) since 1969. Hampton, NH 03842
S-1
Present Principal Name and Position Held & Occupation or Employment Current Business Address and Five-Year Employment History ------------------------ -------------------------------- Wendy E. Lane....................... Ms. Lane has been Chairman of Lane Holdings, Inc. Director (private equity investment firm) since 1992. Lane Holdings, Inc. 348 Grove Street Needham, MA 02492 James S. Pasman, Jr................. Mr. Pasman has been Director of CSAM Income Fund, Director Inc. and Director of CSAM Strategic Global Income One Tyco Park Fund, Inc. since 1988. Mr. Pasman is also Trustee of Exeter, NH 03833 Deutsche Bank VIT Funds and Director of approximately 50 funds in the Warburg Pincus Funds Complex and the Credit Suisse Institutional Funds Complex. W. Peter Slusser.................... Mr. Slusser has been the President of Slusser Director Associates, Inc. (investment banking firm) since Slusser Associates, Inc. 1988. One Citicorp Center Suite 5100 153 East 53rd Street New York, NY 10022 Mark H. Swartz...................... Mr. Swartz has been Executive Vice President and Executive Vice President, Chief Chief Financial Officer of Tyco since July 1997. He Financial Officer and Director has been Vice President of TyCom Ltd. (undersea One Tyco Park fiber optic networks and services) since March 2000. Exeter, NH 03833 He has been Vice President and Chief Financial Officer of Tyco (US) since 1995. From 1993 to 1995, he was Tyco (US)'s Director of Mergers and Acquisitions. Frank E. Walsh, Jr. ................ Mr. Walsh has been Chairman of the Sandy Hill Director Foundation (charitable organization) since August Sandy Hill Foundation 1996. Previously, he was Chairman of Westray Capital 330 South Street Corporation (investment firm) from October 1989 to Morristown, NJ 07962 January 1996. Joseph F. Welch..................... Mr. Welch has been President and Chief Executive Director Officer of The Bachman Company (producer of snacks) The Bachman Company since 1980. 50 North Fourth Street Reading, PA 19612 Mark A. Belnick..................... Mr. Belnick has been Executive Vice President and Executive Vice President Chief Corporate Counsel of Tyco since September and Chief Corporate Counsel 1998. Previously, he had been a senior partner with One Tyco Park the international law firm of Paul, Weiss, Rifkind, Exeter, NH 03833 Wharton & Garrison since 1987. Jerry R. Boggess.................... Mr. Boggess has been President of Tyco Fire and President of Tyco Fire Security Services Group since August 1993 and Vice and Security Services President of Tyco (US) since February 1996. Three Tyco Park Exeter, NH 03833
S-2
Present Principal Name and Position Held & Occupation or Employment Current Business Address and Five-Year Employment History ------------------------ -------------------------------- Albert R. Gamper, Jr. .............. Mr. Gamper has been President and Chief Executive President and Chief Executive Officer of Tyco's subsidiary, The CIT Group, Inc. Officer of The CIT Group, Inc. since June 2001. Before Tyco acquired CIT in June 1211 Avenue of the Americas 2001, he served as Chairman of the Board of CIT from New York, NY 10036 January 2000, as President and Chief Executive Officer from December 1989 and as a director from May 1984. From May 1987 to December 1989, Mr. Gamper served as Chairman of the Board and Chief Executive Officer of CIT. Prior to December 1989, Mr. Gamper also held a number of executive positions at Manufacturers Hanover Corporation, a prior owner of CIT, where he had been employed since 1962. Neil R. Garvey...................... Mr. Garvey has been President and Chief Executive President and Chief Executive Officer of TyCom Ltd. since March 2000 and President Officer of TyCom Ltd. of TyCom (US) Inc. (formerly Tyco Submarine Systems One Tyco Park Ltd.) since July 1997. He was President of Simplex Exeter, NH 03833 Technologies, a subsidiary of Tyco, from July 1995 to June 1997 and Vice President of Sales and Marketing of Simplex Technologies from June 1992 to July 1995. Juergen W. Gromer................... Mr. Gromer has been President of Tyco Electronics President of Tyco Electronics since April 1999. He was Senior Vice President, Postfach Carl Benz Str. 12-14 Worldwide Sales and Service, of AMP Incorporated, 64625 Benshiem, Germany which was acquired by Tyco in April 1999, from 1998 to April 1999. Previously, he was President of the Global Automotive Division and Corporate Vice President of AMP from 1997 to 1998 and Vice President and General Manager of various divisions of AMP from 1990 to 1997. Mr. Gromer is a citizen of the Federal Republic of Germany. Richard J. Meelia................... Mr. Meelia has been President of Tyco Healthcare President of Tyco Group since 1995. He was Group President of Kendall Healthcare Group Healthcare Products Company, which was acquired by One Tyco Park Tyco (US) in October 1994, from 1991 to 1995. Exeter, NH 03833
S-3 SCHEDULE II CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF TYCO ACQUISITION CORP. XXIV (NV) The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Tyco Acquisition Corp. XXIV (NV). Each such person is a citizen of the United States of America. None of the listed persons, during the past five years, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding of any violation of such laws.
Present Principal Name and Position Held & Occupation or Employment Current Business Address and Five-year Employment History ------------------------ -------------------------------- Jerry R. Boggess.......... * Director and President Three Tyco Park Exeter, NH 03833 Irving Gutin.............. Mr. Gutin has been Senior Vice President of Tyco Director and Vice (US) for more than the past five years. President One Tyco Park Exeter, NH 03833 M. Brian Moroze........... Mr. Moroze has been General Counsel to Tyco (US) Director and Vice since 1994. President One Tyco Park Exeter, NH 03833 Mark A. Belnick........... * Vice President One Tyco Park Exeter, NH 03833 Bernard J. Doherty........ Mr. Doherty has been Senior Vice President, Vice President and Secretary and General Counsel of Grinnell Secretary Corporation, an indirect subsidiary of Tyco, since One Tyco Park 1994. Exeter, NH 03833 Mark D. Foley............. Mr. Foley was appointed Senior Vice President, Vice President Finance in October 2000. He was formerly Director of One Tyco Park Financial Operations from August 1999 until October Exeter, NH 03833 2000 and Assistant Corporate Controller from September 1996 until August 1999. From 1991 to 1996, Mr. Foley worked in various capacities within Tyco's tax department. Previously, he worked with Ernst & Young. Michael A. Robinson....... Mr. Robinson joined Tyco (US) in March 1998 and is Vice President and currently Senior Vice President and Corporate Treasurer Treasurer of Tyco (US). From 1993 to 1998 he was an One Tyco Park investment banker with Merrill Lynch & Co. Exeter, NH 03833 Scott Stevenson........... Mr. Stevenson joined Tyco (US) in February 1998 and Vice President and is currently Senior Vice President, Tax of Tyco Assistant Treasurer (US). Prior to joining Tyco, he had been a partner One Town Center Road with the public accounting firm of Coopers & Lybrand Boca Raton, FL 33486 LLP since 1988.
S-4
Present Principal Name and Position Held & Occupation or Employment Current Business Address and Five-year Employment History ------------------------ -------------------------------- Mark H. Swartz..................... * Vice President One Tyco Park Exeter, NH 03833
- -------- * Please see the information in Schedule I. S-5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ANNEX A AGREEMENT AND PLAN OF MERGER BY AND BETWEEN TYCO ACQUISITION CORP. XXIV (NV) and SENSORMATIC ELECTRONICS CORPORATION including GUARANTEE of TYCO INTERNATIONAL LTD. Dated as of August 3, 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Table of Contents
Page ---- ARTICLE I EXCHANGE OFFER AND MERGER..................................... A-5 SECTION 1.01 The Offer.............................................. A-5 SECTION 1.02 Company Action......................................... A-8 SECTION 1.03 Directors.............................................. A-8 SECTION 1.04 The Merger............................................. A-9 SECTION 1.05 Effective Time; Closing................................ A-9 SECTION 1.06 Effect of the Merger................................... A-9 SECTION 1.07 Articles of Incorporation; Bylaws...................... A-10 SECTION 1.08 Directors and Officers................................. A-10 SECTION 1.09 Effect on Capital Stock................................ A-10 SECTION 1.10 Exchange of Certificates............................... A-11 SECTION 1.11 No Further Ownership Rights in the Company Common Stock.................................................. A-13 SECTION 1.12 Tax Consequences....................................... A-13 SECTION 1.13 Taking of Necessary Action; Further Action............. A-13 SECTION 1.14 Appraisal Rights....................................... A-13 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ A-13 SECTION 2.01 Organization and Qualification; Subsidiaries........... A-13 SECTION 2.02 Certificate of Incorporation and Bylaws................ A-14 SECTION 2.03 Capitalization......................................... A-14 SECTION 2.04 Authority Relative to this Agreement................... A-15 SECTION 2.05 No Conflict; Required Filings and Consents............. A-16 SECTION 2.06 Compliance; Permits.................................... A-17 SECTION 2.07 SEC Filings; Financial Statements...................... A-17 SECTION 2.08 Absence of Certain Changes or Events................... A-18 SECTION 2.09 No Undisclosed Liabilities............................. A-18 SECTION 2.10 Absence of Litigation.................................. A-18 SECTION 2.11 Employee Benefit Plans; Employment Agreements.......... A-18 SECTION 2.12 Employment and Labor Matters........................... A-21 SECTION 2.13 Registration Statement; Proxy Statement/Prospectus..... A-22 SECTION 2.14 Restrictions on Business Activities.................... A-23 SECTION 2.15 Title to Property...................................... A-23 SECTION 2.16 Taxes.................................................. A-23 SECTION 2.17 Environmental Matters.................................. A-24 SECTION 2.18 Brokers................................................ A-25 SECTION 2.19 Intellectual Property.................................. A-25 SECTION 2.20 Interested Party Transactions.......................... A-27 SECTION 2.21 Insurance.............................................. A-27 SECTION 2.22 Product Liability and Recalls.......................... A-27 SECTION 2.23 Opinion of Company Financial Advisor................... A-27 ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR.................. A-27 SECTION 3.01 Organization and Qualification; Subsidiaries........... A-27 SECTION 3.02 Capitalization......................................... A-28 SECTION 3.03 Authority Relative to this Agreement................... A-29 SECTION 3.04 No Conflicts; Required Filings and Consents............ A-29 SECTION 3.05 Compliance............................................. A-30 SECTION 3.06 SEC Filings; Financial Statements...................... A-30 SECTION 3.07 Absence of Certain Changes or Events................... A-30 SECTION 3.08 No Undisclosed Liabilities............................. A-30
i
Page ---- SECTION 3.09 Absence of Litigation.................................. A-31 SECTION 3.10 Registration Statement; Proxy Statement/Prospectus..... A-31 SECTION 3.11 Brokers................................................ A-31 SECTION 3.12 Ownership of Acquiror; No Prior Activities............. A-32 SECTION 3.13 Ownership Interest in the Company...................... A-32 ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER....................... A-32 SECTION 4.01 Conduct of Business by the Company Pending the Merger.. A-32 SECTION 4.02 No Solicitation........................................ A-34 SECTION 4.03 Conduct of Business by Guarantor Pending the Merger.... A-36 ARTICLE V ADDITIONAL AGREEMENTS......................................... A-37 SECTION 5.01 Stockholder Approval; Preparation of Post-Effective Amendment and Proxy Statement/Prospectus............... A-37 SECTION 5.02 Company Stockholders Meeting........................... A-38 SECTION 5.03 Access to Information; Confidentiality................. A-38 SECTION 5.04 Consents; Approvals.................................... A-38 SECTION 5.05 Agreements with Respect to Affiliates.................. A-39 SECTION 5.06 Indemnification and Insurance.......................... A-39 SECTION 5.07 Notification of Certain Matters........................ A-40 SECTION 5.08 Further Action/Tax Treatment........................... A-40 SECTION 5.09 Public Announcements................................... A-41 SECTION 5.10 Guarantor Common Shares................................ A-41 SECTION 5.11 Conveyance Taxes....................................... A-41 SECTION 5.12 Stock Incentive Plans; Restricted Shares; Other Programs............................................... A-41 SECTION 5.13 Certain Employee Benefits.............................. A-42 SECTION 5.14 Reports of Tenders..................................... A-43 SECTION 5.15 Accountant's Letters................................... A-43 SECTION 5.16 Compliance with State Property Transfer Statutes....... A-43 SECTION 5.17 Redemption of Company Preferred Stock.................. A-44 SECTION 5.18 Prepayment of Company Indebtedness..................... A-44 ARTICLE VI CONDITIONS TO THE MERGER..................................... A-44 SECTION 6.01 Conditions to Obligation of Each Party to Effect the Merger................................................. A-44 ARTICLE VII TERMINATION................................................. A-45 SECTION 7.01 Termination............................................ A-45 SECTION 7.02 Effect of Termination.................................. A-47 SECTION 7.03 Fees and Expenses...................................... A-47 ARTICLE VIII GENERAL PROVISIONS......................................... A-48 SECTION 8.01 Effectiveness of Representations, Warranties and Agreements............................................. A-48 SECTION 8.02 Notices................................................ A-48 SECTION 8.03 Certain Definitions.................................... A-50 SECTION 8.04 Amendment.............................................. A-50 SECTION 8.05 Waiver................................................. A-50 SECTION 8.06 Headings............................................... A-51 SECTION 8.07 Severability........................................... A-51 SECTION 8.08 Entire Agreement....................................... A-51 SECTION 8.09 Assignment............................................. A-51 SECTION 8.10 Parties in Interest.................................... A-51 SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative.. A-51 SECTION 8.12 Governing Law; Jurisdiction............................ A-51 SECTION 8.13 Counterparts........................................... A-52
ii
Page ---- SECTION 8.14 WAIVER OF JURY TRIAL..................................... A-52 SECTION 8.15 Performance of Guarantee................................. A-52 SECTION 8.16 Enforcement.............................................. A-52 ANNEX I CONDITIONS TO THE OFFER.................................. A-54
iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of August 3, 2001 (this "Agreement"), by and between TYCO ACQUISITION CORP. XXIV (NV) ("Acquiror"), a Nevada corporation and a direct, wholly-owned subsidiary of TYCO INTERNATIONAL LTD. ("Guarantor"), a Bermuda company, and SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation (the "Company"). W I T N E S S E T H: WHEREAS, the respective Boards of Directors of Acquiror and the Company and the Executive Committee of the Guarantor's Board of Directors have approved this Agreement, and declared that it is advisable that Acquiror acquire all of the outstanding shares of common stock, par value $0.01 per share (the "Company Common Stock"), of the Company (the "Shares") through (i) an exchange offer (the "Offer") to exchange common shares, par value $0.20 per share, of Guarantor ("Guarantor Common Shares") for all of the then issued and outstanding Shares and (ii) a merger of the Company with and into Acquiror (the "Merger"), each pursuant to and upon the terms and subject to the conditions of this Agreement and in accordance with the applicable provisions of the Nevada General Corporation Law (the "NGCL") and the Delaware General Corporation Law (the "DGCL"); WHEREAS, Acquiror and the Company intend, by approving resolutions authorizing this Agreement, to adopt this Agreement as a plan of reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder, and that the Offer and the Merger (together, the "Transaction") and other transactions contemplated by this Agreement be undertaken pursuant to such plan. For accounting purposes, the Merger is intended to be accounted for as a "purchase" under United States generally accepted accounting principles ("GAAP"); WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, Guarantor has agreed fully and unconditionally to guarantee all the representations, warranties, covenants, agreements and other obligations of Acquiror in this Agreement (the "Guarantee"); and WHEREAS, the Company and Acquiror desire to make certain representations, warranties and agreements in connection with, and establish various conditions precedent to, the transactions contemplated hereby. NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements hereinafter set forth, and intending to be legally bound hereby the parties hereto agree as follows: Definitions: "Acquiror" is defined in the preamble. "Acquiror Common Stock" is defined in Section 1.09(d). "Acquisition Proposal" is defined in Section 4.02(a). "Adjusted Option" is defined in Section 5.12(a). "Affiliate Agreement" is defined in Section 5.05. "Affiliate Plan" is defined in Section 2.11(a). "affiliates" is defined in Section 8.03(a). A-1 "Agreement" is defined in the preamble. "Alternative Transaction" is defined in Section 4.02(a). "Appointment Time" is defined in Section 1.03(a). "Articles of Merger" is defined in Section 1.05. "Average Share Price" is defined in Section 1.01(a). "Basic Conditions" is defined in Annex I. "Benefits Continuation Period" is defined in Section 5.13(a). "business day" is defined in Section 8.03(b). "CERCLA" is defined in Section 2.17(f). "Certificates" is defined in Section 1.10(c). "Certificate of Merger" is defined in Section 1.05. "CGSH" is defined in Section 1.01(e). "Closing" is defined in Section 1.05. "Closing Date" is defined in Section 1.05. "COBRA" is defined in Section 2.11(b). "Code" is defined in the recitals. "Company" is defined in the preamble. "Company Affiliate Letter" is defined in Section 5.05. "Company Charter Documents" is defined in Section 2.02. "Company Common Stock" is defined in the recitals. "Company Disclosure Schedule" is defined in Section 2.01(a). "Company Employee" is defined in Section 5.13(a). "Company Employee Plans" is defined in Section 2.11(a). "Company Financial Advisor" is defined in Section 1.02(a). "Company Intellectual Property Assets" is defined in Section 2.19(a). "Company Permits" is defined in Section 2.06(b). "Company Preferred Stock" is defined in Section 2.03(a). "Company Restricted Shares" is defined in Section 1.09(c). "Company SEC Documents" is defined in Section 2.03(b). "Company Significant Subsidiaries" is defined in Section 2.01(a). "Company Stock Option Plans" is defined in Section 1.09(c). "Company Stock Options" is defined in Section 1.09(c). "Company Stock Purchase Plans" is defined in Section 1.09(c). "Company Stockholders Meeting" is defined in Section 2.04(c). "Company 2000 Form 10-K" is defined in Section 2.01(a). A-2 "Confidentiality Agreement" is defined in Section 5.03. "Continuing Director" is defined in Section 1.03(a). "control" is defined in Section 8.03(c). "Covered Persons" is defined in Section 5.06(c). "D&O Insurance" is defined in Section 5.06(d). "Daily Per Share Price" is defined in Section 1.01(a). "Daily Report" is defined in Section 5.14. "Designated Expiration Date" is defined in Section 1.01(a). "DGCL" is defined in the recitals. "DOL" is defined in Section 2.11(a). "dollars" is defined in Section 8.03(d). "Effective Time" is defined in Section 1.05. "8.21% Notes" is defined in Section 5.18. "Environmental Claim" is defined in Section 2.17(f). "Environmental, Health and Safety Laws" is defined in Section 2.05(c). "Environmental Laws" is defined in Section 2.17(f). "ERISA" is defined in Section 2.11(a). "Exchange Act" is defined in Section 1.01(a). "Exchange Agent" is defined in Section 1.10(a). "Exchange Fund" is defined in Section 1.10(b). "Exchange Ratio" is defined in Section 1.01(a). "Expenses" is defined in Section 7.03(b). "Fee" is defined in Section 7.03(b). "Fully Diluted Shares" is defined in Section 1.01(b). "GAAP" is defined in the recitals. "Governmental Authority" is defined in Section 2.05(c). "Guarantee" is defined in the recitals. "Guarantor" is defined in the preamble. "Guarantor Charter Documents" is defined in Section 3.01(a). "Guarantor Common Shares" is defined in the recitals. "Guarantor Preference Shares" is defined in Section 3.02(a). "Guarantor SEC Documents" is defined in Section 3.05(a). "Guarantor 2000 Form 10-K" is defined in Section 3.01(b). "HSR Act" is defined in Section 2.05(c). "Indemnified Parties" is defined in Section 5.06(b). A-3 "Intellectual Property Assets" is defined in Section 2.19(a). "IRS" is defined in Section 2.11(b). "ISO" is defined in Section 2.11(c). "knowledge" is defined in Section 8.03(e). "Material Adverse Effect" is defined in Section 2.01(b). "Materials of Environmental Concern" is defined in Section 2.17(f). "Merger" is defined in the recitals. "Merger Consideration" is defined in Section 1.09(a). "Minimum Condition" is defined in Section 1.01(b). "NGCL" is defined in the recitals. "Non-Competition Agreement" is defined in Section 2.11(h). "Non-U.S. Monopoly Laws" is defined in Section 2.05(c). "Non-U.S. Plan" is defined in Section 2.11(a). "Notes" is defined in Section 5.18. "NYSE" is defined in Section 1.01(a). "Offer" is defined in the recitals. "Offer Conditions" is defined in Section 1.01(a). "Offer Documents" is defined in Section 1.01(d). "OSHA" is defined in Section 2.17(f). "PCBs" is defined in Section 2.17(d). "person" is defined in Section 8.03(f). "person/group" is defined in Annex I. "Post-Effective Amendment" is defined in Section 5.01(a). "Post-1998 Company SEC Documents" is defined in Section 2.07(a). "Post-1998 Guarantor SEC Documents" is defined in Section 3.06(a). "Preliminary Prospectus" is defined in Section 1.01(d). "Proxy Statement/Prospectus" is defined in Section 2.13(a). "RCRA" is defined in Section 2.17(f). "Recommendations" is defined in Section 1.02(a). "Registration Statement" is defined in Section 1.01(d). "Responsible Employees" is defined in Section 8.03(e). "Rule 145" is defined in Section 5.05. "Schedule 14D-9" is defined in Section 1.02(b). "SEC" is defined in Section 1.01(c). "Securities Act" is defined in Section 1.01(d). A-4 "7.74% Notes" is defined in Section 5.18. "Shares" is defined in the recitals. "subsidiary or subsidiaries" is defined in Section 8.03(g). "Subsidiary Documents" is defined in Section 2.02. "Superior Proposal" is defined in Section 4.02(a). "Supplemental Company Disclosure Schedule" is defined in Section 2.05(a). "Surviving Corporation" is defined in Section 1.04. "Tax" is defined in Section 2.16(b). "Tax Return" is defined in Section 2.16(b). "Terminal Date" is defined in Section 1.01(c). "Terminating Breach" is defined in Section 7.01(h). "Terminating Change" is defined in Section 7.01(g). "Terminating Misrepresentation" is defined in Section 7.01(f). "Third Party" is defined in Section 4.02(a). "Third Party Intellectual Property Assets" is defined in Section 2.19(c). "Transaction" is defined in the recitals. "Transfer Agent" is defined in Section 1.02(c). "TSCA" is defined in Section 2.17(f). "2001 Company Balance Sheet" is defined in Section 2.09. "2001 Guarantor Balance Sheet" is defined in Section 3.08. ARTICLE I EXCHANGE OFFER AND MERGER SECTION 1.01 The Offer. (a) Provided that (i) this Agreement shall not have been terminated in accordance with Section 7.01 and (ii) none of the events set forth in clauses (6) (a) through (k) in Annex I hereto shall have occurred and be continuing, Acquiror shall, as soon as practicable after the date hereof, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the SEC's rules and regulations promulgated thereunder (the "Exchange Act")) the Offer. Each Share accepted by Acquiror pursuant to the Offer shall be exchanged for the right to receive from Acquiror that number of fully paid and nonassessable Guarantor Common Shares equal to the Exchange Ratio. The obligation of Acquiror to consummate the Offer and to accept for payment and to pay for any Shares tendered pursuant thereto shall be subject to only those conditions set forth in Annex I hereto (the "Offer Conditions"), any of which (other than the Basic Conditions) may be waived by Acquiror in its sole discretion. For purposes of this Agreement: "Average Share Price" means the average of the Daily Per Share Prices for the five consecutive trading days ending on the fourth trading day prior to and not including the initial Designated Expiration Date as set forth initially in the Offer (without giving effect to any extensions). "Daily Per Share Price" for any trading day means the volume-weighted average of the per share selling prices on the NYSE of Guarantor Common Shares for that day, as reported by Bloomberg Financial Markets (or if such service is unavailable, a service providing similar information selected by Acquiror and the Company). A-5 "Designated Expiration Date" means the date designated for the expiration of the Offer, after which Acquiror will first accept Shares for exchange, as such expiration date may be extended from time to time as required or permitted by this Agreement. "Exchange Ratio" means $24.00 divided by the Average Share Price, subject to adjustment as provided in Sections 1.09(e) and 7.01(j). "NYSE" means the New York Stock Exchange. (b) The initial Designated Expiration Date shall be the twentieth (20th) business day from and including the date of commencement of the Offer (determined in accordance with Rule 14d-2(a) under the Exchange Act). The Offer shall be subject to the condition that there shall be validly tendered in accordance with the terms of the Offer prior to the Designated Expiration Date and not properly withdrawn a number of Shares which, together with the Shares then owned by Guarantor and Acquiror (if any), represents at least a majority of the total number of outstanding Shares, assuming the exercise of all options, rights and convertible securities then currently exercisable or convertible or exercisable within 180 days thereafter and the issuance of all Shares that the Company is obligated to issue thereunder (such total number of Shares being hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Condition") and to the Offer Conditions and to no other conditions. Acquiror expressly reserves the right to waive the conditions to the Offer and to make any change in the terms or conditions of the Offer; provided that, without the prior written consent of the Company, Acquiror shall not (i) decrease the number of Shares sought pursuant to the Offer, (ii) change the form or decrease the amount of consideration to be paid in the Offer, (iii) impose conditions to the Offer in addition to the Offer Conditions, (iv) change or waive the Basic Conditions, (v) change the Offer Conditions, (vi) extend the Offer (except as set forth in the following paragraph), or (vii) make any other change to any of the terms of and conditions to the Offer which is adverse to the holders of Shares. (c) Subject to the terms of this Agreement and the satisfaction (or waiver to the extent permitted by this Agreement) of the Offer Conditions, Acquiror shall accept for exchange all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the scheduled Designated Expiration Date and shall exchange for Guarantor Common Shares all such Shares in accordance with the terms of this Agreement promptly after acceptance; provided that Acquiror shall (x) extend the Offer for successive extension periods not in excess of ten (10) business days per extension but in no event ending later than seven (7) months from the date hereof (the "Terminal Date"), if, at the scheduled Designated Expiration Date, any of the Offer Conditions shall not have been satisfied or waived, until such time as such conditions are satisfied or waived, and (y) extend the Offer, but in no event later than the Terminal Date, if and to the extent required by the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). In addition, Acquiror may extend the Offer after the acceptance of Shares thereunder for a further period of time by means of a subsequent offering period under Rule 14d- 11 promulgated under the Exchange Act, of not more than twenty (20) business days to meet the objective (which is not a condition to the Offer) that there be validly tendered, in accordance with the terms of the Offer, prior to the expiration date of the Offer (as so extended) and not withdrawn a number of Shares which, together with Shares then owned by Guarantor and Acquiror, represents at least 90% of the Fully Diluted Shares or otherwise in a manner consistent with this Agreement. In addition, the consideration to be paid pursuant to the Offer may be increased and the Offer may be extended to the extent required by law in connection with such increase in each case without the consent of the Company. (d) As soon as practicable after the date of this Agreement, Acquiror shall cause Guarantor to prepare and file with the SEC under the Securities Act of 1933, as amended, and the SEC's rules and regulations promulgated thereunder (the "Securities Act") a registration statement on Form S-4 to register the offer and sale of Guarantor Common Shares pursuant to the Offer and the Merger (the "Registration Statement"). The Registration Statement will include a preliminary prospectus containing the information required under Rule 14d-4(b) promulgated under the Exchange Act (the "Preliminary Prospectus"). As soon as practicable but not later than the date of commencement of the Offer, Acquiror shall (i) file, and cause Guarantor to file, with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer which will comply in all material A-6 respects with the provisions of, and satisfy in all material respect the requirements of, such Schedule TO and all applicable federal securities laws, and will contain or incorporate by reference all or part of the Preliminary Prospectus and the form of the related letter of transmittal (together with any supplements or amendments thereto, collectively the "Offer Documents") and (ii) cause the Offer Documents to be disseminated to holders of Shares. Acquiror and the Company each agree promptly to correct any information provided by it for use in the Registration Statement or the Offer Documents if and to the extent that it shall have become false or misleading in any material respect. Acquiror agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Acquiror shall cause Guarantor to use all reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after its filing and to maintain such effectiveness for so long as shall be required for the issuance of Guarantor Common Shares pursuant to the Offer. Following the time the Registration Statement is declared effective, Acquiror shall cause Guarantor to file the final prospectus included therein under Rule 424(b) promulgated pursuant to the Securities Act. Acquiror agrees to provide the Company with, and to consult with the Company regarding, any comments that may be received from the SEC or its staff with respect to the Offer Documents promptly after receipt thereof. (e) Acquiror shall cause Guarantor to include as an exhibit to the Registration Statement tax opinions of PricewaterhouseCoopers LLP and Cleary, Gottlieb, Steen & Hamilton ("CGSH"), in form and substance reasonably satisfactory to Acquiror and to the Company, on the basis of customary facts, representations, warranties and covenants of Guarantor, Acquiror and the Company and assumptions set forth in such opinions (including, without limitation assumptions that (i) the Minimum Condition will be satisfied and (ii) the Merger shall be completed promptly following the Offer), to the effect that the Transaction will be treated for United States federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code that is not subject to Section 367(a)(1) of the Code pursuant to Treasury Regulation Section 1.367(a)-3(c) (other than with respect to Company stockholders who are or will be "five-percent transferee shareholders" within the meaning of Treasury Regulation Section 1.367(a)-3(c)(5)(ii) and do not enter into five-year gain recognition agreements in the form provided in Treasury Regulation Section 1.367(a)-8), and that each of Guarantor, Acquiror and the Company will be a party to the reorganization within the meaning of Section 368(b) of the Code. No filing of, or amendment or supplement to, or correspondence to the SEC or its staff with respect to, the Registration Statement, the Schedule TO or the Offer Documents will be made by the Company, Acquiror or the Guarantor, without providing the other party and its counsel a reasonable opportunity to review and comment thereon. Acquiror will advise the Company promptly after Guarantor receives notice that the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension of the qualification of the Guarantor Common Shares issuable in connection with the Offer for offering or sale in any jurisdiction, or of any request by the SEC for amendment of the Registration Statement or comments thereon and responses thereto or requests by the SEC for additional information. If at any time prior to the time of consummation of the Offer any information relating to the Company or Acquiror, or any of their respective affiliates, officers or directors, should be discovered by the Company or Acquiror which should be set forth in an amendment or supplement to the Registration Statement so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other party and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of the Company. Acquiror shall cause Guarantor to issue and make available in accordance with this Agreement a number of Guarantor Common Shares as necessary from time to time to satisfy Acquiror's obligations under Sections 1.01(a) and 1.09(a). A-7 SECTION 1.02 Company Action. (a) The Company hereby consents to the Offer and represents that its Board of Directors, at a meeting duly called and held, has by unanimous vote of the directors participating therein (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and are fair to and in the best interest of the Company's stockholders, (ii) approved and adopted this Agreement and the transactions and other matters contemplated hereby, including the Offer and the Merger, in accordance with the requirements of the DGCL, and (iii) resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by the Company's stockholders subject to Section 4.02(c)(ii) (the recommendations referred to in this clause (iii) are collectively referred to in this Agreement as the "Recommendations"). The Company further represents that Morgan Stanley & Co. Incorporated (the "Company Financial Advisor") has rendered to the Company's Board of Directors its opinion that, as of the date of such opinion, the consideration to be received by the Company's stockholders in the Transaction is fair to such stockholders from a financial point of view. The Company has been advised that all of its directors and executive officers currently intend to tender their Shares pursuant to the Offer. (b) As soon as practicable on the day that the Offer is commenced, the Company will file with the SEC and disseminate to holders of Shares a Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D- 9"), which shall reflect the Recommendations; provided that they have not been withdrawn or modified as permitted hereby. The Company shall comply in all material respects with the provisions of, and satisfy in all material respects the requirements of, such Schedule 14D-9 and all applicable federal securities laws. The Company and Acquiror each agree promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect. The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Acquiror and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 and any material amendments thereto prior to it being filed with the SEC. The Company agrees to provide Acquiror with, and to consult with Acquiror regarding, any comments that may be received from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt thereof. Acquiror shall provide the Company all information reasonably requested by the Company for inclusion in the Schedule 14D-9 and any exhibits or annexes thereto. (c) The Company will promptly direct its transfer agent (the "Transfer Agent") to furnish Acquiror subject to the terms of the Confidentiality Agreement (as defined in Section 5.03), with mailing labels and any available listing or computer file containing the names and addresses of all record holders of Shares and lists of securities positions of Shares held in stock depositories, in each case as of the most recent practicable date, and shall direct the Transfer Agent to provide to Acquiror such additional information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Acquiror may reasonably request in connection with the Offer. Acquiror shall use such information only in connection with the transactions contemplated by this Agreement. (d) As promptly as practicable after the initial acceptance of Shares by Acquiror, but no later than one (1) business day after such initial acceptance of Shares, the Company shall publicly announce and mail a notice of redemption of all outstanding shares of the Company Preferred Stock in accordance with the applicable provisions of the Company's Certificate of Designations in respect thereof, which announcement and notice shall provide for such redemption on the thirtieth (30th) day following the date of such announcement and notice. SECTION 1.03 Directors. (a) Effective upon the acceptance for exchange by Acquiror of Shares pursuant to the Offer (the "Appointment Time"), Acquiror shall be entitled to designate the number of directors, rounded up to the next whole number, on the Company's Board of Directors that equals the product of (i) the total number of directors on the Company's Board of Directors (giving effect to the election of any additional directors pursuant to this Section 1.03) and (ii) the percentage that the number of Shares owned by Guarantor and Acquiror (including Shares accepted for exchange) bears to the total number of Shares outstanding, and the Company shall take all action reasonably necessary to cause Acquiror's designees to be elected or appointed to A-8 the Company's Board of Directors, including, without limitation, increasing the number of directors, or seeking and accepting resignations of incumbent directors, or both; provided that, prior to the Effective Time, the Company's Board of Directors shall always have at least two members who were directors of the Company prior to consummation of the Offer (each, a "Continuing Director"). If the number of Continuing Directors is reduced to less than two for any reason prior to the Effective Time, the remaining and departing Continuing Directors shall be entitled to designate a person to fill the vacancy and, thereafter, such person shall be a Continuing Director. Notwithstanding anything in this Agreement to the contrary, if Acquiror's designees are elected to the Company's Board of Directors prior to the Effective Time, the affirmative vote of the Continuing Directors shall be required for the Company to (a) amend or terminate this Agreement or agree or consent to any amendment or termination of this Agreement, (b) waive any of the Company's or its stockholders' rights, benefits or remedies hereunder, (c) extend the time for performance of Acquiror's obligations hereunder, or (d) approve any other action by the Company which is reasonably likely to adversely affect the interests of the stockholders of the Company (other than Acquiror and its affiliates) with respect to the transactions contemplated by this Agreement. The Continuing Directors shall have the sole authority to assert and seek to enforce any and all rights and remedies of the Company and to take any action to seek to enforce any obligations of Acquiror under this Agreement and Acquiror's designees shall abstain and not act upon any such action. If at any time the Continuing Directors reasonably deem it necessary to consult independent counsel (which may be CGSH) in connection with their duties as Continuing Directors or actions to be taken by the Company, the Continuing Directors may retain counsel for such purpose and for the purpose of enforcing the Company's rights and remedies under this Agreement, and the Company shall pay the reasonable fees and expenses of one such counsel incurred in connection therewith. (b) The Company's obligations to appoint designees to its Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder. The Company shall promptly take all actions required pursuant to this Section 1.03 and Rule 14f-l in order to fulfill its obligations under this Section 1.03 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-l to fulfill its obligations under this Section 1.03. Acquiror will supply to the Company in writing and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. SECTION 1.04 The Merger. Upon the terms and subject to the conditions of this Agreement and the applicable provisions of the DGCL and the NGCL, at the Effective Time, the Company shall be merged with and into Acquiror, the separate corporate existence of the Company shall cease, and Acquiror shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). SECTION 1.05 Effective Time; Closing. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by (a) filing articles of merger as contemplated by the NGCL (the "Articles of Merger") and (b) filing a properly executed agreement or certificate of merger as contemplated by the DGCL (the "Certificate of Merger"), each, together with any required related certificates, with the Secretaries of State of the States of Nevada and Delaware, as appropriate, in such forms as required by, and executed in accordance with the relevant provisions of, the NGCL and the DGCL, respectively. The Merger shall become effective at the time of the later to occur of such filings or at such later time, as may be agreed upon in writing by the Company and Acquiror, specified in the Articles of Merger and the Certificate of Merger (the "Effective Time") as soon as practicable on or after the Closing Date. The closing of the Merger (the "Closing") shall take place at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York, at a time and date to be specified by the parties, which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article VI, or at such other time, date and location as the parties hereto agree in writing (the "Closing Date"). SECTION 1.06 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the NGCL and the DGCL. Without limiting the A-9 generality of the foregoing, at the Effective Time, the Surviving Corporation shall possess all the property, rights, privileges, powers and franchises of Acquiror and the Company, and shall be subject to all debts, liabilities and duties of Acquiror and the Company. SECTION 1.07 Articles of Incorporation; Bylaws. (a) At the Effective Time, the Articles of Incorporation of Acquiror, which shall comply with Section 5.06, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended, as provided by the NGCL and such Articles of Incorporation, except that the name of the Surviving Corporation shall be changed to "Sensormatic Electronics Corporation". (b) At the Effective Time, the Bylaws of Acquiror, which shall comply with Section 5.06, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended, as provided by the NGCL and such Bylaws. SECTION 1.08 Directors and Officers. The directors of Acquiror immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. SECTION 1.09 Effect on Capital Stock. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Acquiror, the Company or the holders of any of the following securities: (a) Conversion of the Company Common Stock. Each share of the Company Common Stock issued and outstanding immediately prior to the Effective Time, other than any shares of the Company Common Stock to be canceled pursuant to Section 1.09(b) and other than shares as to which appraisal rights are exercised pursuant to Section 1.14, will be canceled and extinguished and automatically converted (subject to Section 1.09(e)) into the right to receive the number of Guarantor Common Shares equal to the Exchange Ratio upon surrender of the certificate representing such share of the Company Common Stock in the manner provided in Section 1.10 (together with the cash in lieu of fractional Guarantor Common Shares as specified below, the "Merger Consideration"). No fraction of a Guarantor Common Share will be issued by virtue of the Merger, but in lieu thereof, a cash payment shall be made pursuant to Section 1.10(e). (b) Cancellation of the Company-Owned and Acquiror-Owned Stock. Each share of the Company Common Stock held by the Company or any subsidiary of the Company or owned by Guarantor or Acquiror immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof. (c) Stock Incentive Plans; Stock Purchase Plans. At the Effective Time, (i) all options or rights ("Company Stock Options") to purchase Company Common Stock then outstanding, whether under (A) the Company's Amended 1989 Stock Incentive Plan, (B) the Company's 1995 Stock Incentive Plan, (C) the Company's Directors Stock Option Plan, as amended, (D) the Company's 1999 Stock Incentive Plan, (E) the Company's 1997 Consultants Stock Incentive Plan or (F) any other stock option or stock plan or agreement of the Company (collectively, the "Company Stock Option Plans"), (ii) all restricted shares of Company Common Stock granted or awarded under any of the Company Stock Option Plans (the "Company Restricted Shares") that are outstanding and (iii) all rights outstanding under any of the Company's U.S. or non-U.S. stock purchase plans (collectively, the "Company Stock Purchase Plans"), shall be treated in accordance with Section 5.12 of this Agreement. (d) Capital Stock of Acquiror. Each share of common stock, par value $0.01 per share, of Acquiror (the "Acquiror Common Stock") issued and outstanding immediately prior to the Effective Time shall constitute one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving A-10 Corporation. Following the Effective Time, each certificate evidencing ownership of shares of Acquiror Common Stock shall evidence ownership of such shares of capital stock of the Surviving Corporation. (e) Adjustments to Exchange Ratio. If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of Guarantor or the Company shall occur, including by reason of any reclassification, recapitalization, redenomination of share capital, stock split, reverse stock split or combination, exchange or readjustment of shares, or any stock dividend thereon with a record date during such period, the Daily Per Share Price, the Average Share Price, the Exchange Ratio, the Merger Consideration and any other amounts payable or to be delivered pursuant to the Offer, the Merger or otherwise pursuant to this Agreement (including without limitation, for purposes of Section 7.01(j)) shall be appropriately adjusted. SECTION 1.10 Exchange of Certificates. (a) Exchange Agent. Acquiror shall select a bank or trust company reasonably acceptable to the Company to act as the exchange agent (the "Exchange Agent") in the Merger. (b) Exchange Fund. As necessary from to time following the Effective Time, Acquiror shall make available to the Exchange Agent, as needed for exchange in accordance with this Article I, (i) the Guarantor Common Shares required for exchange of Shares in the Merger and (ii) an amount of cash sufficient to permit the Exchange Agent to make the necessary payments of cash in lieu of fractional Guarantor Common Shares in accordance with Section 1.10(e) (such cash in lieu of fractional shares and Guarantor Common Shares, together with any dividends or distributions with respect thereto, are hereinafter referred to as the "Exchange Fund") payable pursuant to Section 1.09 in exchange for outstanding shares of the Company Common Stock. (c) Exchange Procedures. Promptly after the Effective Time, Acquiror shall instruct the Exchange Agent to mail to each holder of record, as of the Effective Time, of a certificate or certificates ("Certificates") which immediately prior to the Effective Time represented outstanding shares of the Company Common Stock whose shares were converted into the right to receive Guarantor Common Shares pursuant to Section 1.09, (i) a letter of transmittal in customary form (that shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and shall contain such other customary provisions as Acquiror may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for Guarantor Common Shares and cash in lieu of fractional shares. Upon surrender of Certificates for cancellation to the Exchange Agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Certificates shall be entitled to receive in exchange therefor solely that number of whole Guarantor Common Shares into which their shares of the Company Common Stock were converted at the Effective Time pursuant to Section 1.09 (which may be delivered in uncertificated form pursuant to Guarantor's direct registration system), cash in lieu of fractional shares that such holders have the right to receive pursuant to Section 1.10(e) and any dividends or distributions payable pursuant to Section 1.10(d), and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding Certificates will be deemed from and after the Effective Time, for all corporate purposes, to evidence only the right to receive the whole number of Guarantor Common Shares into which such shares of the Company Common Stock shall have been so converted and the right to receive an amount in cash in lieu of any fractional shares in accordance with Section 1.10(e) and any dividends or distributions payable pursuant to Section 1.10(d). No interest will be paid or accrued on any cash in lieu of fractional Guarantor Common Shares or on any unpaid dividends or distributions payable to holders of Certificates. In the event of a transfer of ownership of shares of the Company Common Stock that is not registered in the transfer records of the Company, the proper whole number of Guarantor Common Shares (which may be delivered in uncertificated form pursuant to Guarantor's direct registration system) may be issued to a transferee if the Certificate representing such shares of the Company Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. A-11 (d) Distributions With Respect to Unexchanged Shares. No dividends or other distributions declared or made with respect to Guarantor Common Shares with a record date after the Effective Time will be paid to the holders of any unsurrendered Certificates with respect to the Guarantor Common Shares represented thereby until the holders of record of such Certificates shall surrender such Certificates in accordance with Section 1.10(c). Subject to applicable law, following surrender of any such Certificates, the Exchange Agent shall deliver that whole number of Guarantor Common Shares issued in exchange therefor (which may be delivered in uncertificated form pursuant to Guarantor's direct registration system), without interest, at the time of such surrender, cash in lieu of fractional Guarantor Common Shares pursuant to Section 1.10(e), the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole Guarantor Common Shares and, at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender with respect to such whole Guarantor Common Shares. (e) Fractional Shares. No certificate or scrip representing fractional Guarantor Common Shares will be issued in the Offer or the Merger upon the surrender for exchange of Certificates, and such fractional Guarantor Common Shares will not entitle the owner thereof to vote or to any rights of a holder of Guarantor Common Shares. In lieu of any such fractional Guarantor Common Shares, each holder of Certificates who would otherwise have been entitled to a fraction of a Guarantor Common Share in exchange for such Certificate (after taking into account all Certificates delivered by such holder) pursuant to this Section shall receive from the Exchange Agent, as applicable, a cash payment in lieu of such fractional Guarantor Common Share, determined by multiplying (A) the fractional share interest to which such holder would otherwise be entitled by (B) the Average Share Price. (f) Required Withholding. The Exchange Agent shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement, and from any dividends or distributions payable pursuant to Section 1.10(d), to any holder or former holder of the Company Common Stock such amounts as may be required to be deducted or withheld therefrom under the Code or under any provision of state, local or foreign tax law or under any other applicable law. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the person to whom such amounts would otherwise have been paid. (g) Lost, Stolen or Destroyed Certificates. In the event that any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, solely that whole number of Guarantor Common Shares into which the shares of the Company Common Stock represented by such Certificates were converted pursuant to Section 1.09 (which may be issued in uncertificated form pursuant to Guarantor's direct registration system), cash in lieu of fractional Guarantor Common Shares, if any, as may be required pursuant to Section 1.10(e) and any dividends or distributions payable pursuant to Section 1.10(d); provided, however, that Acquiror may, in its discretion and as a condition precedent to the delivery of any Guarantor Common Shares, cash and other distributions, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Guarantor, Acquiror, the Surviving Corporation or the Exchange Agent with respect to the Certificates alleged to have been lost, stolen or destroyed. (h) No Liability. Notwithstanding anything to the contrary in this Section 1.10, neither the Exchange Agent, Guarantor, Acquiror, the Surviving Corporation nor their respective affiliates shall be liable to a holder of Guarantor Common Shares or Company Common Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. (i) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the holders of Company Common Stock for six months after the Effective Time shall be delivered to Acquiror, upon demand, and any holders of Company Common Stock who have not theretofore complied with the provisions of this Section 1.10 shall thereafter look only to Acquiror for the Guarantor Common Shares, any A-12 cash in lieu of fractional Guarantor Common Shares to which they are entitled pursuant to Section 1.10(e) and any dividends or other distributions with respect to Guarantor Common Shares to which they are entitled pursuant to Section 1.10(d), in each case, without any interest thereon. SECTION 1.11 No Further Ownership Rights in the Company Common Stock. All Guarantor Common Shares issued in accordance with the terms hereof (including any cash paid in respect thereof pursuant to Section 1.10(d) and (e)) shall be deemed to have been issued in full satisfaction of all rights pertaining to shares of Company Common Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If after the Effective Time Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I. SECTION 1.12 Tax Consequences. It is intended by the parties hereto that the Transaction shall constitute a "reorganization" within the meaning of Section 368(a) of the Code. The parties hereto adopt this Agreement as a "plan of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. SECTION 1.13 Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Acquiror, the officers and directors of the Company, Acquiror and the Surviving Corporation will take all such lawful and necessary action in the name of the Company or Acquiror. SECTION 1.14 Appraisal Rights. Notwithstanding Section 1.09, if holders of Shares are entitled under the DGCL to appraisal rights with respect to the Merger, Shares outstanding immediately prior to the Effective Time and held by a holder who has demanded appraisal for such Shares in accordance with the DGCL shall not be converted into a right to receive from Acquiror the Merger Consideration unless such holder fails to perfect or withdraws or otherwise loses his or her right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses his or her right to appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive from Acquiror the Merger Consideration. The Company shall give Acquiror prompt notice of any demands received by the Company for appraisal of Shares, and Acquiror shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Acquiror, make any payment with respect to, or settle or offer to settle, any such demands. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Acquiror as follows: SECTION 2.01 Organization and Qualification; Subsidiaries. (a) Each of the Company and its subsidiaries is an entity duly organized, validly existing and (to the extent the concept of good standing exists in the applicable jurisdiction) in good standing under the laws of the jurisdiction of its organization and has the requisite corporate or other power and authority necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to be so organized, existing and in good standing or to have such power or authority would not reasonably be expected to have a Material Adverse Effect. Each of the Company and its subsidiaries is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not reasonably be expected to have a Material Adverse Effect. A true and complete list of all of the Company's "significant" subsidiaries, as defined in Rule 1-02 under Regulation S-X (the "Company Significant A-13 Subsidiaries"), is included as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 (the "Company 2000 Form 10- K"). A list of all subsidiaries of the Company together with the jurisdiction of organization of each such subsidiary and the percentage of each such subsidiary's outstanding capital stock owned by the Company or another subsidiary of the Company is contained in Section 2.01 of the written disclosure schedule previously delivered by the Company to Acquiror (the "Company Disclosure Schedule"). Except as set forth in Section 2.01 of the Company Disclosure Schedule or the Company SEC Documents, neither the Company nor any of its subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity (other than its wholly-owned subsidiaries), (i) with respect to which interest the Company or a subsidiary has invested (and currently owns) or is required to invest $5 million or more, or (ii) which is a publicly-traded entity unless such interest is held for investment by the Company or its subsidiary and comprises less than five percent of the outstanding stock of such entity. (b) "Material Adverse Effect," when used in connection with the Company or any of its subsidiaries or Guarantor or any of its Subsidiaries, as the case may be, means any change, effect, development or circumstance that is materially adverse to the business, assets (including intangible assets), financial condition or results of operations of the Company and its subsidiaries or Guarantor and its subsidiaries, as the case may be, in each case taken as a whole; provided, however, that the following shall be excluded from the definition of Material Adverse Effect and from any determination as to whether a Material Adverse Effect has occurred or may occur: changes , effects, developments or circumstances (i) affecting (A) the security or safety industries generally, (B) the United States securities markets generally or (C) economic, regulatory, or political conditions generally or (ii) arising from or relating to this Agreement, the transactions contemplated hereby or the announcement hereof or thereof, including, without limitation, any effects on personnel, customers and suppliers. SECTION 2.02 Certificate of Incorporation and Bylaws. The Company has heretofore made available to Acquiror a complete and correct copy of its Restated Certificate of Incorporation and Bylaws as amended to date (the "Company Charter Documents"), and will make available to Acquiror, as promptly as practicable, the certificates of incorporation and bylaws (or equivalent organizational documents) of each of its subsidiaries (the "Subsidiary Documents") reasonably requested by Acquiror. All such Company Charter Documents and Subsidiary Documents are in full force and effect, except in the case of Subsidiary Documents where the failure to be in force and effect would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is in violation of any of the provisions of its Restated Certificate of Incorporation or Bylaws or equivalent organizational documents, except for violations of the documents which do not and are not reasonably likely to materially interfere with the operations of such entity. SECTION 2.03 Capitalization. (a) The authorized capital stock of the Company consists of 125,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, of which 690,000 shares have been designated as 6 1/2% Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $250.00 per share (the "Company Preferred Stock"). As of July 31, 2001, (i) 79,406,898 shares of Company Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable (excluding treasury shares which are issued but not outstanding, all of which are not entitled to vote), and none of which has been issued in violation of preemptive or similar rights, (ii) 1,741,140 shares of Company Common Stock were held by subsidiaries of the Company, (iii) 8,332,826 shares of Company Common Stock were reserved for existing grants and 4,448,832 shares of Company Common Stock were reserved for future grants pursuant to the Company Stock Option Plans and (iv) 128,462 shares of Company Common Stock were reserved and available for future issuance pursuant to the Company Stock Purchase Plans. As of July 31, 2001, there were 690,000 outstanding shares of Company Preferred Stock. Except as set forth in Section 2.03 of the Company Disclosure Schedule, no change in such capitalization has occurred since July 31, 2001, except for changes resulting from the exercise or termination of Stock Options A-14 which were outstanding and exercisable as of July 31, 2001 (or were outstanding as of July 31, 2001 and became exercisable in accordance with their terms thereafter), forfeiture of restricted stock or transactions permitted by Section 4.01. Except as set forth in Section 2.01, this Section 2.03 or Section 2.11 or in Section 2.03 or Section 2.11 of the Company Disclosure Schedule or the Company SEC Documents and except for this Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments of any character binding on the Company relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any shares of capital stock of, or other equity interests in, the Company. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully paid and nonassessable and will not be issued in violation of preemptive or similar rights. (b) Except as set forth in Section 2.03 of the Company Disclosure Schedule or the reports, schedules, forms, statements, registration statements, proxy statements and other documents filed by the Company with the SEC since June 30, 2000 and prior to the date of this Agreement, including those incorporated by reference and not superseded by other Company SEC Documents (the "Company SEC Documents"), there are no obligations, contingent or otherwise, of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of the Company Common Stock or the capital stock of any subsidiary. Except as set forth in Section 2.03 of the Company Disclosure Schedule or the Company SEC Documents, there are no obligations, contingent or otherwise, of the Company or any of its subsidiaries to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any such subsidiary or any other entity other than guarantees of obligations of subsidiaries and intercompany book entry transactions, in either case entered into in the ordinary course of business. Except as set forth in Sections 2.01 or 2.03 of the Company Disclosure Schedule, (i) all of the outstanding shares of capital stock (other than directors' qualifying shares) of each of the Company's subsidiaries are duly authorized, validly issued, fully paid and nonassessable, and (ii) all such shares (other than directors' qualifying shares and a de minimis number of shares owned by employees of such subsidiaries) are owned by the Company or another subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations on the Company's voting rights, charges or other encumbrances of any nature whatsoever. Except as set forth in Section 2.01, this Section 2.03 or Section 2.11 or in Section 2.03 or Section 2.11 of the Company Disclosure Schedule or the Company SEC Documents and except for this Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments of any character binding on the Company's subsidiaries relating to the issued or unissued capital stock of the Company's subsidiaries or obligating the Company's subsidiaries to issue or sell any shares of capital stock of, or other equity interests in, the Company's subsidiaries. SECTION 2.04 Authority Relative to this Agreement. (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and, subject to obtaining any necessary stockholder approval of the agreement of merger contained herein, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than the requisite approval by the Company's stockholders of the agreement of merger contained herein in accordance with DGCL and the Company Charter Documents and the filings and recording of appropriate merger documents as required by the DGCL and the NGCL). (b) Assuming the accuracy of the representations and warranties in Section 3.13, the provisions of Section 203 of the DGCL and Article Eleventh of the Company's Restated Certificate of Incorporation will not apply to the Offer and the Merger. (c) As of the date hereof, the Board of Directors of the Company has by a unanimous vote of those directors present (i) determined that it is advisable and in the best interest of the Company's stockholders for the Company to enter into this Agreement and to consummate the Merger upon the terms and subject to the conditions of this Agreement, (ii) approved this Agreement and the transactions contemplated hereby in A-15 accordance with the applicable provisions of the DGCL and the Company Charter Documents, and (iii) recommended the approval of this Agreement by holders of the Company Common Stock and directed that this Agreement be submitted for consideration by the Company's stockholders at a meeting of the stockholders of the Company to consider the Merger Agreement (the "Company Stockholders Meeting"). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Guarantor and Acquiror of this Agreement and/or the Guarantee hereof, as applicable, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law). SECTION 2.05 No Conflict; Required Filings and Consents. (a) Subject to the following sentence, Section 2.05(a) of the Company Disclosure Schedule includes, as of the date hereof, a list of (i) other than intercompany, all loan agreements, indentures, mortgages, pledges, conditional sale or title retention agreements, security agreements, guaranties, standby letters of credit (to which the Company or any subsidiary is the responsible party), equipment leases or lease purchase agreements, each in an amount equal to or exceeding $6 million (other than leases outside the United States providing for payments of not more than $2 million per year) to which the Company or any of its subsidiaries is a party or by which any of them is bound; (ii) all contracts, agreements, commitments or other understandings or arrangements to which the Company or any of its subsidiaries is a party or by which any of them or any of their respective properties or assets are bound or affected, but excluding contracts, agreements, commitments or other understandings or arrangements entered into in the ordinary course of business and involving, in the case of any such contract, agreement, commitment, or other understanding or arrangement, individual payments or receipts by the Company or any of its subsidiaries of less than $4 million over the term of such contract, commitment, agreement, or other understanding or arrangement; and (iii) all agreements which are required to be filed as "material contracts" with the SEC pursuant to the requirements of the Exchange Act but which have not been so filed with the SEC. With regard to agreements for the purchase or sale of raw materials or inventory or for the provision of services in the ordinary course of business and licensing or royalty arrangements, the thresholds referred to in clauses (i) and (ii) of the preceding sentence shall be measured on an annual basis. Notwithstanding the foregoing, any agreement, commitment, understanding, arrangement or other document that would otherwise be disclosed in Section 2.05(a) of the Company Disclosure Schedule may be disclosed in Section 2.05 of a supplement to the Company Disclosure Schedule to be delivered to Acquiror not later than thirty (30) days following the date of this Agreement (the "Supplemental Company Disclosure Schedule") if the agreement or other document is in an amount, as determined in accordance with the other provisions of this Section 2.05(a), of less than $10 million. (b) Except as set forth in Section 2.05(b) and Sections 2.11(f) and (h) of the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Company Charter Documents, (ii) assuming compliance with the matters referred to in Section 2.05(c), conflict with or violate the Subsidiary Documents or any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the Company's or any of its subsidiaries' rights or alter the rights or obligations of any third party under, or give to others any rights of, or cause any, termination, amendment, redemption, acceleration or cancellation of, or result in the creation of a lien or encumbrance on (including a right to purchase) any of the properties or assets of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture, credit facility, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties is bound or affected, except, in the case of clause (ii) or (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. A-16 (c) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require the Company or any of its subsidiaries to make or seek any consent, approval, authorization or permit of, or filing with or notification to, any governmental, administrative, judicial or regulatory authority, domestic or foreign (each, a "Governmental Authority"), except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities laws, the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"), and the NYSE; filings and consents under any applicable non-U.S. laws intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade ("Non-U.S. Monopoly Laws"); filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval triggered by the Offer or the Merger or the transactions contemplated by this Agreement ("Environmental, Health and Safety Laws"); and the filing and recordation of appropriate merger or other documents as required by the NGCL and the DGCL; (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or materially delay consummation of the Offer or the Merger, or otherwise prevent or materially delay the Company from performing its material obligations under this Agreement, or would not otherwise reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; or (iii) as to which any necessary consents, approvals, authorizations, permits, filings or notifications have heretofore been obtained or filed, as the case may be, by the Company. SECTION 2.06 Compliance; Permits. (a) Except as set forth in Section 2.06(a) of the Company Disclosure Schedule or the Company SEC Documents, neither the Company nor any of its subsidiaries is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties is bound or affected, except for any such conflicts, defaults or violations which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (b) No investigation by any Governmental Authority with respect to the Company or its subsidiaries is pending or, to the knowledge of the Company, threatened, except as disclosed in the Company SEC Documents and except for such investigations which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; provided that the Company makes no representation in this Section 2.06(b) with respect to matters covered by Sections 2.11, 2.12, 2.16 and 2.17. (c) Except as set forth in Section 2.06(c)(x) of the Company Disclosure Schedule or the Company SEC Documents, the Company and its subsidiaries hold all permits, licenses, easements, variances, exemptions, consents, certificates, orders and approvals from Governmental Authorities which are material to the operation of the business of the Company and its subsidiaries, taken as a whole, as it is now being conducted (collectively, the "Company Permits"), except where the failure to hold such Company Permits would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. The Company and its subsidiaries are in compliance with the terms of the Company Permits, except as described in Section 2.06(c)(y) of the Company Disclosure Schedule and in the Company SEC Documents or where the failure to so comply would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.07 SEC Filings; Financial Statements. (a) The Company has filed all reports, schedules, forms, statements and other documents (including all exhibits thereto) required to be filed with the SEC since June 30, 1998 (the "Post-1998 Company SEC Documents"). Except as set forth in Section 2.07 of the Company Disclosure Schedule or the Company SEC Documents and taking into account any amendments and supplements filed prior to the date of this Agreement, such Post-1998 Company SEC Documents (i) were prepared in all material respects in accordance with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by A-17 a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light and at the time of the circumstances under which they were made, not misleading. None of the Company's subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Post-1998 Company SEC Documents was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or in the Company SEC Documents), and each fairly presents in all material respects the consolidated financial position of the Company and its subsidiaries at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements (i) should be read in conjunction with the consolidated financial statements contained in the Company 2000 Form 10-K, and (ii) were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. SECTION 2.08 Absence of Certain Changes or Events. Except as set forth in Section 2.08 or 4.01 of the Company Disclosure Schedule or the Company SEC Documents, and except as result from acts or omissions after the date hereof permitted under Section 4.01, since June 30, 2000, the Company has conducted its business in the ordinary course and there has not occurred: (i) any changes, effects or circumstances constituting, or which would reasonably be expected to constitute, individually or in the aggregate, a Material Adverse Effect; (ii) any amendments or changes in the Company Charter Documents; (iii) any material changes to any Company Employee Plans or other employee benefit arrangements or agreements, including the establishment of any new such plans, arrangements or agreements or the extension of coverage under any such plans, arrangements or agreements to new groups of employees or other individuals, except with respect to Non-U.S. Plans (as defined in Section 2.11(a)), (iv) any damage to, destruction or loss of any asset of the Company (whether or not covered by insurance) that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; (v) any material change by the Company in its accounting methods, principles or practices (other than as required by GAAP subsequent to the date hereof); or (vi) other than in the ordinary course of business, any sale of a material amount of assets of the Company. SECTION 2.09 No Undisclosed Liabilities. Except as set forth in Section 2.09 of the Company Disclosure Schedule or the Company SEC Documents, neither the Company nor any of its subsidiaries has any liabilities (absolute, accrued, contingent or otherwise), except liabilities (a) in the aggregate adequately provided for or disclosed in the Company's unaudited balance sheet (including any related notes thereto) as of March 31, 2001 included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (the "2001 Company Balance Sheet"), (b) incurred in the ordinary course of business and not required under GAAP to be reflected on the 2001 Balance Sheet, (c) incurred since March 31, 2001 in the ordinary course of business, (d) incurred in connection with this Agreement or the Offer or the Merger or the other transactions contemplated hereby, or (e) which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.10 Absence of Litigation. Except as set forth in Section 2.10 and Section 2.19(c) of the Company Disclosure Schedule or the Company SEC Documents or arising out of the transactions contemplated by this Agreement, there are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or any properties or rights of the Company or any of its subsidiaries, before any court, arbitrator or Governmental Authority, that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.11 Employee Benefit Plans; Employment Agreements. (a) "Company Employee Plans" shall mean all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all "employee welfare benefit plans" (as defined in Section 3(1) of ERISA), all similar plans maintained outside the United States and not required by applicable A-18 law (any non-U.S., non-statutory Company Employee Plan, a "Non-U.S. Plan") and all other bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar fringe or employee benefit plans, programs or arrangements (including those which contain change of control provisions or pending change of control provisions), and any employment, executive compensation or severance agreements (including those which contain change of control provisions or pending change of control provisions), whether maintained in the U.S. or a Non-U.S. Plan, as amended, modified or supplemented, maintained or contributed to by the Company or a subsidiary of the Company for the benefit of any former or current employee, officer or director (or any of their beneficiaries) of the Company or a subsidiary of the Company. The term "Affiliate Plan" shall mean any other such plan, program or arrangement with respect to which the Company or any subsidiary of the Company has or would reasonably be expected to have any material liability, either as a member of a controlled group of corporations or trades or businesses, as defined under Section 414 of the Code and comparable provisions of ERISA, or by contractual arrangement. Section 2.11(a) of the Company Disclosure Schedule lists each material Company Employee Plan and each material Affiliate Plan; provided, however, that any Non-U.S. Plan that otherwise would be disclosed on Section 2.11(a) of the Company Disclosure Schedule may be disclosed in Section 2.11(a) of the Supplemental Company Disclosure Schedule. With respect to each plan included on the Company Disclosure Schedule or, with respect to Non-U.S. Plans, on the Supplemental Company Disclosure Schedule, the Company shall indicate whether such plan includes a change in control provision. With respect to each Company Employee Plan or Affiliate Plan listed in Section 2.11(a) of the Company Disclosure Schedule, the Company has made available to Acquiror, and with respect to each Non-U.S. Plan listed in the Supplemental Company Disclosure Schedule, the Company will make available to Acquiror at such time as the Supplemental Company Disclosure Schedule is delivered to Acquiror, to the extent applicable: (i) each such written Company Employee Plan (and, with respect to Non-U.S. Plans that provide equity-based benefits, a written description in English of such Non-U.S. Plan that is written in a language other than English) and any related trust agreement, insurance and other contract (including a policy), if any, the most recently prepared summary plan description, if any, summary of material modifications the substance of which is not already incorporated in the corresponding summary plan description or Company Employee Plan document, if any, and written communications distributed to plan participants that would reasonably be expected to materially modify the terms of any Company Employee Plan, whether through information actually conveyed in the communication or a failure to convey information; (ii) the three most recent annual reports on Form 5500 series (or equivalent filing with respect to Non-U.S. Plans), with accompanying schedules and attachments, filed with respect to each Company Employee Plan, whether maintained in the U.S. or a Non-U.S. Plan, required to make such a filing, provided, however, that other than the most recent Form 5500 with accompanying schedules and attachments, such materials may be made available to Acquiror at such time as the Supplemental Company Disclosure Schedule is delivered to Acquiror; (iii) the most recent actuarial valuation, if any, for each Company Employee Plan and Affiliate Plan subject to Title IV of ERISA and for each Non-U.S. Plan, to the extent applicable; (iv) the latest reports, if any, which have been filed with the Department of Labor ("DOL") to satisfy the alternative method of compliance for pension plans for certain selected employees pursuant to DOL regulation Section 2520.104-23; and (v) the most recent favorable determination letters issued for each Company Employee Plan and related trust which is intended to be qualified under Section 401(a) of the Code (and, if an application for such determination is pending, a copy of the application for such determination). (b) Except as set forth in Section 2.11(b) of the Company Disclosure Schedule or, with respect to Non-U.S. Plans, the Supplemental Company Disclosure Schedule, (i) none of the Company Employee Plans or Affiliate Plans promises or provides material medical or other material welfare benefits to any director, officer, employee or consultant (or any of their beneficiaries) after their service with the Company or its subsidiary or affiliate terminates, other than as required by Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA (hereinafter, "COBRA"), or any similar state or non-U.S. laws; (ii) none of the Company Employee Plans or Affiliate Plans is a "multiemployer plan" as such term is defined in Section 3(37) of ERISA and no Non-U.S. Plan is a multiemployer plan, no Company Employee Plan or Affiliate Plan has incurred any withdrawal liability that remains unsatisfied and the transactions contemplated hereby are not reasonably likely to result in the assessment of any withdrawal liability; (iii) neither the Company, any of its subsidiaries, nor, to A-19 the knowledge of the Company, any other party in interest or disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of the Code), has engaged in a transaction with respect to any Company Employee Plan or Affiliate Plan which would reasonably be expected to subject the Company or any subsidiary, directly or indirectly, to a tax, penalty or other liability for prohibited transactions under ERISA or Section 4975 of the Code that would reasonably be expected to have a Material Adverse Effect; (iv) with respect to the Company Employee Plans, neither the Company or any of its subsidiaries, nor any executive of the Company or one of its subsidiaries as fiduciary of the Company Employee Plans or, to the knowledge of the Company, any other fiduciary of any Company Employee Plan has breached any of the responsibilities or obligations imposed upon fiduciaries under Title I of ERISA, except for such breach that would not reasonably be expected to have a Material Adverse Effect; (v) all Company Employee Plans, and all Affiliate Plans have been established and maintained in accordance with their terms and have been operated in compliance with the requirements of applicable law (including, but not limited to, to the extent applicable, the notification and other requirements of COBRA, the Health Insurance Portability and Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity Act of 1996, and the Women's Health and Cancer Rights Act of 1998) except for such failure as would not reasonably be expected to have a Material Adverse Effect; (vi) each Company Employee Plan which is intended to be qualified under Section 401(a) of the Code is the subject of a favorable determination letter from the Internal Revenue Service (the "IRS"), and nothing has occurred which would reasonably be expected to result in the disqualification of any such plan; (vii) all contributions required to be made with respect to any Company Employee Plan (whether pursuant to the terms of such plan, Section 412 of the Code, any collective bargaining agreement, or otherwise) have been made or accrued on the Company's financial statements on or before their due dates (including any extensions thereof), except to the extent any failure to have made or accrued such a contribution on or before its due date could not reasonably be expected to result in a current or future liability that would reasonably be expected to have a Material Adverse Effect; (viii) no Company action has occurred that resulted or, pursuant to applicable non-U.S. law, is reasonably likely to result in any adverse liability for any Non-U.S. Plan that reasonably would be expected to have a Material Adverse Effect; and (ix) other than routine claims for benefits made in the ordinary course of the operation of the Company Employee Plans or Affiliate Plans, there are no pending, nor to the Company's knowledge, any threatened, claims, investigations or causes of action with respect to any Company Employee Plan or Affiliate Plan, whether maintained in the U.S. or a Non-U.S. Plan, whether made by a participant or beneficiary of such a plan, a governmental agency or otherwise, against the Company or any subsidiary of the Company, any Company director, officer or employee, any Company Employee Plan, or Affiliate Plan or any fiduciary of a Company Employee Plan or Affiliate Plan that would reasonably be expected to have a Material Adverse Effect. (c) The Company has provided to Acquiror a true and complete list of each current or former employee, consultant, officer or director of the Company or any of its subsidiaries who, as of the date hereof, holds (i) any option to purchase the Company Common Stock or commitments for future options, together with the number of shares of the Company Common Stock subject to such option, the exercise price of such option (to the extent determined as of the date hereof), whether such option is intended to qualify as an incentive stock option within the meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of such option; and (ii) any shares of Company Common Stock that are unvested or subject to a repurchase option, risk of forfeiture or other condition providing that such shares may be forfeited or repurchased by the Company upon any termination of the shareholder's employment, directorship or other relationship with the Company or any of its subsidiaries or which shares are subject to performance-based vesting. (d) To the extent not already included and so labeled in Section 2.11(a) or such other section of the Company Disclosure Schedule as is specifically referenced in Section 2.11(d) of the Company Disclosure Schedule, Section 2.11(d) of the Company Disclosure Schedule sets forth a true and complete (i) list of all material outstanding agreements with any consultants who provide services to the Company or any of its subsidiaries; (ii) list of all material agreements with respect to the services of independent contractors or leased employees who provide services to the Company or any of its subsidiaries, whether or not they participate in any of the Company Employee Plans; (iii) description of any situation in which a material portion of the A-20 workforce of a component of the Company or its subsidiaries, whether such component is a subsidiary, unit, work location, line of business or otherwise, is composed of non common law employees, whether consultants, independent contractors or otherwise, which description shall include, if applicable, representative samples of agreements with such non common law employees; and (iv) list of all worker council agreements of the Company or any of its subsidiaries with or relating to its employees, provided, however, that the Company may include the information required pursuant to this Section 2.11(d) on the Supplemental Company Disclosure Schedule. (e) No Company Employee Plan or Affiliate Plan is subject to Title IV of ERISA. (f) Except as set forth in Section 2.11(f) of the Company Disclosure Schedule, the consummation of the transactions contemplated by this Agreement, either alone or in combination with another event, will not (i) result in any material payment (including, without limitation, severance, golden parachute or bonus payments or otherwise) becoming due pursuant to any Company Employee Plan to any current or former director, officer, employee or consultant of the Company, (ii) result in any material increase in the amount of compensation or benefits payable pursuant to any Company Employee Plan in respect of any director, officer, employee or consultant of the Company, or (iii) accelerate the vesting or timing of payment of any material benefits or compensation payable pursuant to any Company Employee Plan in respect of any director, officer, employee or consultant of the Company. (g) There are no complaints, charges or claims against the Company or any of its subsidiaries pending or, to the knowledge of the Company, threatened to be brought by or filed with any Governmental Authority based on, arising out of, in connection with or otherwise relating to the classification of any individual by the Company as an independent contractor or "leased employee" (within the meaning of Section 414(n) of the Code) rather than as an employee, and no conditions exist under which the Company or any of its subsidiaries is reasonably likely to incur any such liability that in each case would reasonably be expected to have a Material Adverse Effect. (h) The Company has provided or made available to Acquiror (i) with respect to each participant in the Company's executive severance plans, whether such employee has entered into an agreement or a provision of an agreement prohibiting or restricting such employee from accepting employment or otherwise engaging in activity that is in competition with the business of the Company or its subsidiaries (other than with respect to the use of confidential information or trade secrets) after the termination of such individual's employment with the Company (a "Non-Competition Agreement"); and (ii) a description of those classes of employees that are required to execute a Non- Competition Agreement, provided, however, that the Company may include the information required under clauses (i) and (ii) of this Section 2.11(h) in Section 2.11(h) of the Supplemental Company Disclosure Schedule. SECTION 2.12 Employment and Labor Matters. Except as set forth in Section 2.11(b) or Section 2.12 of the Company Disclosure Schedule, or in the Company SEC Documents or, in the case of non-U.S. agreements, contracts or activities referred to in Subsection (b), Section 2.12 of the Supplemental Company Disclosure Schedule: (a) Each of the Company and its subsidiaries is in compliance, and has not failed to be in compliance as a result of which it would reasonably be expected now or in the future to have liability, with all applicable U.S. and non-U.S. laws, agreements and contracts relating to employment practices, terms and conditions of employment, and the employment of former, current, and prospective employees, independent contractors and "leased employees" (within the meaning of Section 414(n) of the Code) of the Company or any of its subsidiaries including all such U.S. and non-U.S. laws, agreements and contracts relating to wages, hours, collective bargaining, employment discrimination, immigration, disability, civil rights, human rights, fair labor standards, occupational safety and health, workers' compensation, pay equity, wrongful discharge and violation of the potential rights of such former, current, A-21 and prospective employees, independent contractors and leased employees, and has timely prepared and filed all appropriate forms (including Immigration and Naturalization Service Form I-9) required by any relevant Governmental Authority, except where the failure to be or have been in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any of its subsidiaries is a party to any U.S. or non-U.S. collective bargaining agreement or other labor union contract applicable to persons employed by the Company or its subsidiaries, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any employees of the Company or any of its subsidiaries. (c) Neither the Company nor any of its subsidiaries is in breach of any U.S. or non-U.S. collective bargaining agreement or labor union contract, or has any knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of the Company or any of its subsidiaries which breach, strike, slowdown, work stoppage, lockout or threat would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.13 Registration Statement; Proxy Statement/Prospectus. (a) Subject to the accuracy of the representations of Acquiror in Section 3.10: (i) the information supplied by the Company specifically for inclusion in the Registration Statement pursuant to which the Guarantor Common Shares to be issued in connection with the Offer and the Merger will be registered with the SEC shall not, at the respective times the Registration Statement (including any amendments or supplements thereto) is filed with the SEC or is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements included therein not misleading; (ii) neither the Schedule 14D-9 nor any of the information supplied by the Company specifically for inclusion in the Offer Documents will, at the respective times any such documents or any amendments or supplements thereto are filed with the SEC, are first published, sent or given to stockholders of the Company, or at any time Acquiror initially accepts for exchange Shares pursuant to the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements included therein not misleading; and (iii) the information supplied by the Company specifically for inclusion in the proxy statement/ prospectus in connection with the Company Stockholders Meeting (such proxy statement/prospectus as amended or supplemented is referred to herein as the "Proxy Statement/Prospectus") will not, at the time the Proxy Statement/Prospectus, if any, is filed with the SEC or first sent to stockholders or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) If at any time prior to the Effective Time any event or circumstance relating to the Company, any of its affiliates, officers or directors is discovered by the Company which is required to be set forth in an amendment to the Registration Statement or a supplement to the Offer Documents, the Schedule 14D-9 or the Proxy Statement/Prospectus, the Company will promptly inform Acquiror. (c) The Schedule 14D-9 shall comply as to form in all material respects with the requirements of all applicable laws, including the Securities Act and the Exchange Act. (d) Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Guarantor or Acquiror or any of their respective affiliates which is included or incorporated by reference in, or furnished in connection with the preparation of, the Offer Documents, the Schedule 14d-9, the Registration Statement or the Proxy Statement/Prospectus. A-22 SECTION 2.14 Restrictions on Business Activities. Except for this Agreement or as set forth in Section 2.14 of the Company Disclosure Schedule or the Company SEC Documents, to the Company's knowledge, there is no agreement, judgment, injunction, order or decree binding upon the Company or any of its subsidiaries which has or would reasonably be expected to have the effect of prohibiting or impairing the conduct of business by the Company or any of its subsidiaries as currently conducted by the Company or such subsidiary, or restricting any transactions (including payment of dividends and distributions) between the Company and its subsidiaries, except for any prohibition or impairment as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.15 Title to Property. Except as set forth in Sections 2.15 and 2.19(b) of the Company Disclosure Schedule or the Company SEC Documents, each of the Company and its subsidiaries has good title to all of its owned real properties and other owned assets, free and clear of all liens, charges and encumbrances, except liens for taxes not yet due and payable and such liens or other imperfections of title, if any, as do not materially interfere with the present use of the property affected thereby or which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and except for liens which secure indebtedness reflected in the 2001 Balance Sheet; and, to the knowledge of the Company, all leases pursuant to which the Company or any of its subsidiaries lease from others material amounts of real or personal property are in good standing, valid and effective in accordance with their respective terms, and there is not, to the knowledge of the Company, under any of such leases, any existing material default or event of default (or event which with notice or lapse of time, or both, would constitute a material default or event of default), except where the lack of such good standing, validity and effectiveness or the existence of such default or event of default would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.16 Taxes. Except as set forth or referred to in Section 2.16 of the Company Disclosure Schedule or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (a) The Company and each of its subsidiaries has timely and accurately filed, or caused to be timely and accurately filed, all Tax Returns required to be filed by it, and has paid, collected or withheld, or caused to be paid, collected or withheld, all amounts of Taxes required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the 2001 Company Balance Sheet have been established or which are being contested in good faith. There are no claims or assessments pending against the Company or any of its subsidiaries for any alleged deficiency in any Tax, there are no pending or, to the knowledge of the Company, threatened audits or investigations for or relating to any liability in respect of any Taxes, and the Company has not been notified in writing of any proposed Tax claims or assessments against the Company or any of its subsidiaries (other than in each case, claims or assessments for which adequate reserves in the 2001 Company Balance Sheet have been established or which are being contested in good faith). Neither the Company nor any of its subsidiaries has executed any waivers or extensions of any applicable statute of limitations to assess any amount of Taxes. There are no outstanding requests by the Company or any of its subsidiaries for any extension of time within which to file any Tax Return or within which to pay any amounts of Taxes shown to be due on any Tax Return. To the best knowledge of the Company, there are no liens for amounts of Taxes on the assets of the Company or any of its subsidiaries except for statutory liens for current Taxes not yet due and payable. There are no outstanding powers of attorney enabling any party to represent the Company or any of its subsidiaries with respect to Taxes. Other than with respect to the Company and its subsidiaries, neither the Company nor any of its subsidiaries is liable for Taxes of any other Person, or is currently under any contractual obligation to indemnify any person with respect to any amounts of Taxes (except for customary agreements to indemnify lenders or security holders in respect of Taxes and except for provisions in agreements for the divestiture of subsidiaries, assets or business lines of the Company or its subsidiaries that require the Company or its subsidiaries (as applicable) to indemnify a purchaser or purchaser group for amounts of Taxes of the Company or its subsidiaries (as applicable) in the nature of sales or similar Taxes incurred as a consequence of any such divestiture transactions), or is a party to any tax sharing A-23 agreement or any other agreement providing for payments by the Company or any of its subsidiaries with respect to any amounts of Taxes. (b) For purposes of this Agreement, the term "Tax" shall mean any United States federal, national, state, provincial, local or other jurisdictional income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, estimated, alternative, or add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge imposed by any Governmental Authority, together with any interest or penalty imposed thereon. The term "Tax Return" shall mean a report, return or other information (including any attached schedules or any amendments to such report, return or other information) required to be supplied to or filed with a Governmental Authority with respect to any Tax, including an information return, claim for refund, amended return or declaration or estimated Tax. SECTION 2.17 Environmental Matters. (a) Except as set forth in Section 2.17(a) to the Company Disclosure Schedule or in the Company SEC Documents or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, the operations and properties of the Company and its subsidiaries are and at all times have been in compliance with the Environmental Laws, which compliance includes the possession by the Company and its subsidiaries of all permits and governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof. (b) Except as set forth in Section 2.17(b) of the Company Disclosure Schedule or the Company SEC Documents or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, there are no Environmental Claims, including claims based on "arranger liability," pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed. (c) Except as set forth on Section 2.17(c) of the Company Disclosure Schedule or in the Company SEC Documents, there are no past or present actions, circumstances, conditions, events or incidents, including the release, emission, discharge, presence or disposal of any Materials of Environmental Concern, that are reasonably likely to form the basis of any Environmental Claim against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries have retained or assumed, except for such Environmental Claims that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (d) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d) of the Company Disclosure Schedule or the Company SEC Documents, (i) there are no off-site locations where the Company or any of its subsidiaries has stored, disposed or arranged for the disposal of Materials of Environmental Concern which have been listed on the National Priority List, CERCLIS, or state Superfund site list, and the Company and its subsidiaries have not been notified that any of them is a potentially responsible party at any such location; (ii) there are no underground storage tanks located on property owned or leased by the Company or any of its subsidiaries; (iii) there is no friable asbestos containing material contained in or forming part of any building, building component, structure or office space owned, leased or operated by the Company or any of its subsidiaries; and (iv) there are no polychlorinated biphenyls ("PCBs") or PCB-containing items contained in or forming part of any building, building component, structure or office space owned, leased or operated by the Company or any of its subsidiaries. (e) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, all Company Permits that the Company is required to have obtained under Environmental Laws have been obtained and are maintained by the Company, were duly issued by the appropriate Governmental Authority, are in full force and effect and are not subject to appeal. The Company has not received notice, or otherwise has no knowledge, that any Company Permit has been or will be, rescinded, terminated, limited, or A-24 amended, which rescission, termination, limitation or amendment would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect on the Company. No additional capital expenditures will be required by the Company for purposes of compliance with the terms or conditions of any Company Permits or Company Permit renewals, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not require the assignment or transfer of any Company Permit, except for (i) non- assignability or non-transferability of Company Permits which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect and (ii) those Company Permits that may be assigned or transferred on or prior to the Effective Time without the consent of any Person and without causing any such Company Permit to be rescinded, terminated or limited. (f) For purposes of this Agreement: (i) "Environmental Claim" means any claim, action, cause of action, investigation or notice (in each case in writing or, if not in writing, to the knowledge of the Company) by any person or entity alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from the presence, or release or threat of release into the environment, of any Material of Environmental Concern at any location, whether or not owned or operated by the Company or any of its subsidiaries. (ii) "Environmental Laws" means, as they exist on the date hereof, all applicable United States federal, state, local and non-U.S. laws, regulations, codes and ordinances, relating to pollution or protection of human health (as relating to the environment or the workplace) and the environment (including ambient air, surface water, ground water, land surface or sub-surface strata), including laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern, including, but not limited to Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et seq., Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., Toxic Substances Control Act ("TSCA"), 15 U.S.C. (S) 2601 et seq., Occupational Safety and Health Act ("OSHA"), 29 U.S.C. (S) 651 et seq., the Clean Air Act, 42 U.S.C. (S) 7401 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., each as may have been amended or supplemented, and any applicable environmental transfer statutes or laws. (iii) "Materials of Environmental Concern" means chemicals, pollutants, contaminants, hazardous materials, hazardous substances and hazardous wastes, medical waste, toxic substances, petroleum and petroleum products and by-products, asbestos-containing materials, PCBs, and any other chemicals, pollutants, substances or wastes, in each case regulated under any Environmental Law. SECTION 2.18 Brokers. No broker, finder or investment banker, other than the Company Financial Advisor, the fees and expenses of which will be paid by the Company, is entitled to any brokerage, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Acquiror a complete and correct copy of all agreements between the Company and the Company Financial Advisor pursuant to which such firm would be entitled to any payment relating to the transactions contemplated hereunder. SECTION 2.19 Intellectual Property. (a) As used herein, the term "Intellectual Property Assets" shall mean all worldwide intellectual property rights, including, without limitation, patents, trademarks, service marks, copyrights, and registrations and applications therefor, licenses, trade names, Internet domain names, know-how, trade secrets, computer software programs and development tools and proprietary information, technologies and processes, and all documentation and media describing or relating to the above, in any format, A-25 whether hard copy or machine-readable only. As used herein, "Company Intellectual Property Assets" shall mean the Intellectual Property Assets used or owned by the Company or any of its subsidiaries. (b) Except as set forth in Section 2.19(b) of the Company Disclosure Schedule, the Company and/or each of its subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all the Company Intellectual Property Assets that are used in and are material to the business of the Company and its subsidiaries as currently conducted, without infringing or violating the rights of others, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (c) Except as set forth in Section 2.19(c) of the Company Disclosure Schedule or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no claims (i) are currently pending or, are threatened by any person with respect to the Company Intellectual Property Assets, or (ii) are currently pending or threatened by any person with respect to the Intellectual Property Assets of a third party (the "Third Party Intellectual Property Assets") to the extent arising out of any use, reproduction or distribution of, or of products or methods covered by, such Third Party Intellectual Property Assets by or through the Company or any of its subsidiaries. (d) Except as set forth in Section 2.19(d) of the Company Disclosure Schedule, there are no valid grounds for any bona fide claim to the effect that the manufacture, offer for sale, sale, licensing or use of any product, system or method either (i) now used, offered for sale, sold or licensed or, (ii) to the Company's knowledge as of the date hereof, scheduled for commercialization prior to the first anniversary of the date hereof, in each case by or for the Company or any of its subsidiaries, infringes on any Third Party Intellectual Property Assets, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (e) Section 2.19(e) of the Company Disclosure Schedule or, in the case of non-U.S. Company Intellectual Property only, Section 2.19(e) of the Supplemental Company Disclosure Schedule sets forth a list, to the Company's knowledge, of (i) all material patents and patent applications owned by the Company and/or each of its subsidiaries worldwide; (ii) all material trademark and service mark registrations and all trademark and service mark applications; (iii) all material common law trademarks, material trade dress and material slogans; (iv) all material trade names owned by the Company and/or each of its subsidiaries worldwide; (v) all material copyright registrations and copyright applications owned by the Company and/or each of its subsidiaries worldwide; (vi) all Internet domain name registrations owned by the Company and/or its subsidiaries worldwide; and (vii) all licenses owned by the Company and/or each of its subsidiaries in which the Company and/or each of its subsidiaries is (A) a licensor with respect to any of the patents, trademarks, service marks, trade names, Internet domain names, or copyrights listed in Section 2.19(e) of the Company Disclosure Schedule or the Supplemental Company Disclosure Schedule which are material to the Company or (B) a licensee of any other person's patents, trade names, trademarks, service marks or copyrights material to the Company, except for any licenses of software programs that are commercially available "off the shelf." Section 2.19(e) of the Company Disclosure Schedule and Section 2.19(e) of the Supplemental Disclosure Schedule, collectively, will not fail to disclose any Company Intellectual Property Asset where the failure to own or license such Company Intellectual Property Asset would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Except as set forth in Section 2.19(e)(viii) of the Company Disclosure Schedule or, with respect to non-U.S. matters only, Section 2.19(e)(viii) of the Supplemental Company Disclosure Schedule, the Company and/or each of its subsidiaries has made all necessary filings and recordations to protect and maintain its interest in the patents, patent applications, trademark and service mark registrations, trademark and service mark applications, Internet domain names, copyright registrations and copyright applications and licenses set forth in Section 2.19(e) of the Company Disclosure Schedule, except where the failure to so protect or maintain would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (f) To the knowledge of the Company, except as set forth in Sections 2.19(e)(viii) or 2.19(f) of the Company Disclosure Schedule or in the Company SEC Documents or, with respect to non-U.S. matters only, A-26 Section 2.19(f) of the Supplemental Company Disclosure Schedule: (i) each U.S. and material non-U.S. patent, trademark or service mark registration and copyright registration of the Company and/or each of its subsidiaries is valid and subsisting and (ii) each material license of the Company Intellectual Property Assets listed on Section 2.19(e) of the Company Disclosure Schedule is valid, subsisting and enforceable. (g) Except as set forth in Section 2.19(g) of the Company Disclosure Schedule, to the Company's knowledge, there is no unauthorized use, infringement or misappropriation of any of the Company's material Intellectual Property Assets by any third party, including any employee, former employee, independent contractor or consultant of the Company or any of its subsidiaries. SECTION 2.20 Interested Party Transactions. Except as set forth in Section 2.20 of the Company Disclosure Schedule or the Company SEC Documents or for events as to which the amounts involved do not, in the aggregate, exceed $300,000, since the Company's proxy statement dated October 6, 2000, no event has occurred that would be required to be reported as a Certain Relationship or Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC. SECTION 2.21 Insurance. Except as set forth in Section 2.21 of the Company Disclosure Schedule or the Company SEC Documents, all material fire and casualty, general liability, business interruption, product liability and sprinkler and water damage insurance policies maintained by the Company are with reputable insurance carriers, provide adequate coverage for all normal risks incident to the business of the Company and its subsidiaries and their respective properties and assets and are in character and amount appropriate for the businesses conducted by the Company, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.22 Product Liability and Recalls. (a) Except as set forth in Section 2.22(a) of the Company Disclosure Schedule or the Company SEC Documents, to the Company's knowledge, there is no claim, pending or threatened, against the Company or any of its subsidiaries for injury to person or property of employees or any third parties suffered as a result of the sale of any product or performance of any service by the Company or any of its subsidiaries, including claims arising out of the defective or unsafe nature of its products or services, which would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (b) Except as set forth in Section 2.22(b) of the Company Disclosure Schedule or the Company SEC Documents, there is no pending or, to the knowledge of the Company, threatened recall or investigation of any product sold by the Company, which recall or investigation would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.23 Opinion of Company Financial Advisor. The Board of Directors of the Company has been advised by the Company Financial Advisor to the effect that in its opinion, as of the date of this Agreement, the consideration to be received by the Company's stockholders in the Transaction is fair from a financial point of view to such holders. ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR Acquiror hereby represents and warrants to the Company as follows: SECTION 3.01 Organization and Qualification; Subsidiaries. (a) Each of Guarantor and Acquiror is duly incorporated, validly existing and in good standing (to the extent the concept of good standing exists in the applicable jurisdiction) under the laws of its jurisdiction of incorporation and has the requisite corporate power and authority necessary to own, lease and operate the properties it purports to own, lease and operate and to carry on its business as now conducted, except where the failure to be so organized, existing and in good A-27 standing or to have such power and authority would not reasonably be expected to have a Material Adverse Effect. Each of Guarantor and Acquiror is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities make such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Acquiror has heretofore made available to the Company true and complete copies of Guarantor's Memorandum of Association and Bye-Laws, as amended to date (the "Guarantor Charter Documents"). (b) Each subsidiary of Guarantor is an entity duly organized, validly existing and in good standing (to the extent the concept of good standing exists in the applicable jurisdiction) under the laws of its jurisdiction of organization, has the requisite corporate or other power and authority necessary to own, lease and operate the properties it purports to own, lease and operate and to carry on its business as now conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Each subsidiary of Guarantor is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified or in good standing would not reasonably be expected to have a Material Adverse Effect. All of Guarantor's significant subsidiaries and their respective jurisdictions of incorporation are included in the subsidiary list contained in Guarantor's Annual Report on Form 10-K for the fiscal year ended September 30, 2000 (the "Guarantor 2000 Form 10-K"). SECTION 3.02 Capitalization. (a) The authorized capital stock of Guarantor consists of 2,500,000,000 Guarantor Common Shares and 125,000,000 Preference Shares, par value $1.00 per share ("Guarantor Preference Shares"). As of June 30, 2001 (i) 1,935,521,933 Guarantor Common Shares were issued and outstanding, all of which are duly authorized, validly issued, fully paid and non- assessable, and none of which have been issued in violation of preemptive or similar rights, (ii) one Guarantor Preference Share has been designated as a Super Voting Preference Share and is validly issued, fully paid and non- assessable and not issued in violation of preemptive or similar rights, and (iii) no more than 9,000,000 Guarantor Common Shares and no Guarantor Preference Shares were held by subsidiaries of Guarantor. As of June 30, 2001, no more than 243,000,000 Guarantor Common Shares were reserved for issuance upon exercise of stock options issued under Guarantor's stock option plans. (b) Except (i) as set forth in Section 3.02(a), (ii) for changes since June 30, 2001 resulting from the exercise of stock options, (iii) for securities of Guarantor or its subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of Guarantor set forth in the Guarantor SEC Documents and the conversion or exchange thereof, (iv) for other rights to acquire immaterial (individually and in the aggregate) amounts of Guarantor Common Shares and changes resulting from the exercise thereof, (v) for changes resulting from the grant of stock based compensation to directors or employees or (vi) for changes resulting from the issuance of stock or other securities in connection with a merger or other acquisition or business combination, an underwritten public offering or an offering pursuant to Rule 144A under the Securities Act approved by Guarantor's Board of Directors and undertaken in compliance with Section 4.03(b), as applicable, there are no outstanding (x) shares of capital stock or voting securities of Guarantor, (y) securities of Guarantor convertible into or exchangeable for shares of capital stock or voting securities of Guarantor or (z) options or other rights to acquire from Guarantor or other obligations of Guarantor to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Guarantor. Except as set forth in the Guarantor SEC Documents (as defined in Section 3.05), there are no outstanding obligations of Guarantor or any of its subsidiaries to repurchase, redeem or otherwise acquire any of its equity securities. (c) The Guarantor Common Shares to be delivered as Merger Consideration have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will have been validly issued A-28 and will be fully paid and nonassessable, and the issuance thereof is not subject to any preemptive or other similar right. SECTION 3.03 Authority Relative to this Agreement. (a) The execution, delivery and performance by Guarantor and Acquiror of this Agreement, the execution, delivery and performance by Guarantor of the Guarantee and the consummation by Guarantor and Acquiror of the transactions contemplated hereby and thereby, as applicable, are within the respective corporate powers of Guarantor and Acquiror and have been duly and validly authorized by all necessary corporate action. This Agreement has been duly and validly executed and delivered and constitutes a valid and binding agreement of Acquiror enforceable against Acquiror in accordance with its terms, and the Guarantee has been duly and validly executed and delivered and constitutes a valid and binding agreement of Guarantor enforceable against it in accordance with its terms. (b) At a meeting duly called and held, or by written consent in lieu of meeting, the Board of Directors of Acquiror has (i) determined that this Agreement, the Offer, the Merger and the other transactions contemplated hereby are fair to and in the best interests of Acquiror, and (ii) approved this Agreement and the transactions contemplated hereby. At a meeting duly called and held, the Executive Committee of the Guarantor's Board of Directors has approved the Guarantee and the transactions contemplated thereby and the issuance of the Guarantor Common Shares to be delivered to the Company stockholders in connection with the Merger. SECTION 3.04 No Conflicts; Required Filings and Consents. (a) The execution, delivery and performance by Acquiror of this Agreement, the execution, delivery and performance by Guarantor of the Guarantee and the consummation by Acquiror and Guarantor of the Offer and the Merger and the other transactions contemplated hereby and thereby, as applicable, require no action by or in respect of, or filing with, any Governmental Authority, other than (i) the filing of Articles of Merger with the Secretary of State of the State of Nevada and a Certificate of Merger with respect to the Merger with the Secretary of State of the State of Delaware, (ii) compliance with any applicable requirements of the HSR Act and applicable Non-U.S. Monopoly Laws, (iii) compliance with any applicable requirements of the Securities Act, the Exchange Act, any applicable state securities laws, the NYSE, the London Stock Exchange and the Bermuda Stock Exchange, (iv) compliance with Environmental, Health and Safety Laws and (v) any actions or filings the absence of which would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect or materially impair the ability of Acquiror to consummate the Offer and the Merger and the other transactions contemplated by this Agreement or the ability of Guarantor to fulfill its obligations under the Guarantee. (b) The execution, delivery and performance by Acquiror of this Agreement, the execution, delivery and performance by Guarantor of the Guarantee and the consummation by Acquiror and Guarantor of the Offer and the Merger and other transactions contemplated hereby and thereby, as applicable, do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the Guarantor Charter Documents or the articles of incorporation or bylaws of Acquiror (or equivalent organizational documents), (ii) assuming compliance with the matters referred to in Section 3.04(a), contravene, conflict with or result in a violation or breach of any provision of any law, rule, regulation, judgment, injunction, order or decree applicable to Guarantor or any of its subsidiaries, (iii) require any consent or other action by any person under, constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Guarantor or any of its subsidiaries is entitled under any provision of any Material Agreement or instrument binding upon Guarantor or any of its subsidiaries or any material license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of Acquiror and its subsidiaries; provided that, for purposes of this Subsection 3.04(b)(iii), "Material Agreement" shall mean any agreement identified in the Guarantor 2000 Form 10-K or in any of Guarantor's quarterly reports on Form 10-Q filed with respect to any quarter of its 2001 fiscal year or any agreement entered into since the date of Guarantor's latest quarterly report on Form 10-Q that would be required to be so identified in Guarantor's Annual Report on Form 10-K for the year ended September 30, 2001 or (iv) result in the creation or imposition of any encumbrance on any material asset of Guarantor or any of its subsidiaries. A-29 SECTION 3.05 Compliance. (a) Except as set forth in the reports, schedules, forms, statements, registration statements, proxy statements and other documents (the "Guarantor SEC Documents") filed by the Guarantor with the SEC since September 30, 2000 and prior to the date of this Agreement, including those incorporated therein by reference and not superseded by other Guarantor SEC Documents, neither Guarantor nor any of its subsidiaries is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to Guarantor or any of its subsidiaries or by which its or any of their respective properties is bound or affected or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Guarantor or any of its subsidiaries is a party or by which Guarantor or any of its subsidiaries or its or any of their respective properties is bound or affected, except for any such conflicts, defaults or violations which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (b) No investigation by any Governmental Authority with respect to the Guarantor or its subsidiaries is pending or, to the knowledge of Guarantor, threatened, except as disclosed in the Guarantor SEC Documents and except for such investigations which, if they resulted in adverse findings, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 3.06 SEC Filings; Financial Statements. (a) Guarantor has filed with the SEC all reports, schedules, forms, statements and other documents (including all exhibits thereto) required to be filed with the SEC since September 30, 1998 (the "Post-1998 Guarantor SEC Documents"). Except as set forth in the Guarantor SEC Documents and taking into account any amendments and supplements filed prior to the date of this Agreement, such Post-1998 Guarantor SEC Documents, (i) were prepared in all material respects in accordance with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of and at the time of the circumstances under which they were made, not misleading. Except for Tycom Ltd. and The CIT Group, Inc., none of the Guarantor's subsidiaries is required to file with the SEC periodic reports pursuant to the Exchange Act. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Post-1998 Guarantor SEC Documents were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or in the Post-1998 Guarantor SEC Documents), and each fairly presents in all material respects, the consolidated financial position of Guarantor and its consolidated subsidiaries at the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated, except that for purposes of the foregoing representation, the unaudited interim financial statements (i) should be read in conjunction with the Guarantor's consolidated financial statements contained in the Guarantor 2000 Form 10-K, and (ii) were or are subject to normal and recurring year end adjustments which were not or are not expected to be material in amount. SECTION 3.07 Absence of Certain Changes or Events. Except as set forth in the Guarantor SEC Documents, since September 30, 2000, the business of Guarantor and its subsidiaries has been conducted in the ordinary course and there has not occurred: (i) any change, effect or circumstance, including any damage to, destruction or loss of any asset of Guarantor (whether or not covered by insurance) constituting, or which would reasonably be expected to constitute, individually or in the aggregate, a Material Adverse Effect; (ii) any amendments or changes in the Guarantor Charter Documents, except as necessary to designate Guarantor's Super Voting Preference Share; (iii) any material change by Guarantor in its accounting methods, principles or practices (other than as required by GAAP subsequent to the date of this Agreement); or (iv) any sale of a material amount of assets of Guarantor, except in the ordinary course of business. SECTION 3.08 No Undisclosed Liabilities. Except as set forth in the Guarantor SEC Documents, neither Guarantor nor any of its subsidiaries has any liabilities (absolute, accrued, contingent or otherwise), A-30 except liabilities (a) in the aggregate adequately provided for in Guarantor's unaudited balance sheet (including any related notes thereto) as of March 31, 2001 included in Guarantor's Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2001 (the "2001 Guarantor Balance Sheet"), (b) incurred in the ordinary course of business and not required under GAAP to be reflected on the 2001 Guarantor Balance Sheet, (c) incurred since March 31, 2001 in the ordinary course of business, (d) incurred in connection with this Agreement or the Offer or the Merger or the other transactions contemplated hereby, or (e) which would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 3.09 Absence of Litigation. Except as set forth in the Guarantor SEC Documents or arising out of the transactions contemplated by this Agreement, there are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of Guarantor, threatened against Guarantor or any of its subsidiaries, or any properties or rights of Guarantor or any of its subsidiaries, before any court, arbitrator or Governmental Authority, that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 3.10 Registration Statement; Proxy Statement/Prospectus. (a) Subject to the accuracy of the representations of the Company in Section 2.13: (i) the Registration Statement, as it may be amended, pursuant to which the Guarantor Common Shares to be issued in connection with the Offer and the Merger will be registered with the SEC shall not, at the respective times the Registration Statement (including any amendments or supplements thereto) is filed with the SEC or is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements included therein not misleading; (ii) neither the Offer Documents nor any of the information supplied by Guarantor or Acquiror specifically for inclusion in the Schedule 14D-9 will, at the respective times any such documents or any amendments or supplements thereto are filed with the SEC, are first published, sent or given to stockholders of the Company or become effective under the Securities Act, or at any time Acquiror accepts for exchange Shares pursuant to the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements included therein not misleading; and (iii) the Proxy Statement/Prospectus will not, at the time the Proxy Statement/Prospectus is filed with the SEC or first sent to stockholders or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, at such time and in light of the circumstances under which they were made, not misleading. (b) If at any time prior to the Effective Time any event or circumstance relating to Acquiror or any of its affiliates, officers or directors should be discovered by Acquiror which should be set forth in an amendment to the Registration Statement or a supplement to the Offer Documents, the 14D-9 or the Proxy Statement/Prospectus, Acquiror will promptly inform the Company. (c) The Offer Documents, the Registration Statement and Proxy Statement/Prospectus shall comply as to form in all material respects with the requirements of all applicable laws, including the Securities Act and the Exchange Act. (d) Notwithstanding the foregoing, Acquiror makes no representation or warranty with respect to any information supplied by the Company which is included or incorporated by reference in, or furnished in connection with the preparation of, the Offer Documents, the Registration Statement or the Proxy Statement/Prospectus. SECTION 3.11 Brokers. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Acquiror or Guarantor who might be entitled to any fee or A-31 commission from Acquiror, Guarantor or any of their respective affiliates in connection with the transactions contemplated by this Agreement. SECTION 3.12 Ownership of Acquiror; No Prior Activities. (a) Acquiror was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. (b) Except for obligations or liabilities incurred by Acquiror in connection with its incorporation or organization and the transactions contemplated by this Agreement and except for this Agreement and any other agreements or arrangements contemplated by this Agreement, Acquiror has not incurred, directly or indirectly, through any subsidiary or affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. SECTION 3.13 Ownership Interest in the Company. Other than by reason of this Agreement or the transactions contemplated hereby, neither Acquiror nor any of its affiliates is, or has been at any time during the previous three years, an "interested stockholder" of the Company, as that term is defined in Section 203 of the DGCL. ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER SECTION 4.01 Conduct of Business by the Company Pending the Merger. The Company covenants and agrees that, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, unless Acquiror shall otherwise agree in writing, and except as set forth in Section 4.01 of the Company Disclosure Schedule, the Company shall conduct its business and shall cause the businesses of its subsidiaries to be conducted only in, and the Company and its subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company shall use reasonable commercial efforts to preserve substantially intact the business organization of the Company and its subsidiaries, to keep available the services of the present officers, employees and consultants of the Company and its subsidiaries and to preserve the present relationships of the Company and its subsidiaries with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement, neither the Company nor any of its subsidiaries shall, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, directly or indirectly do, or propose to do, any of the following without the prior written consent of Acquiror, which, in the case of clauses (c), (d)(iv), (e)(iv), (f), (h), (i) or (j) will not be unreasonably withheld or delayed: (a) amend or otherwise change the Company Charter Documents; (b) issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, or any other ownership interest (including, without limitation, any phantom interest) in the Company, any of its subsidiaries or affiliates (except for the issuance of shares of Company Common Stock issuable pursuant to Company Stock Options outstanding on the date hereof and except for the conversion or redemption of the Company Preferred Stock); (c) sell, pledge, dispose of or encumber any assets of the Company or any of its subsidiaries (except for (i) sales of assets in the ordinary course of business and in a manner consistent with past practice, (ii) dispositions of obsolete or worthless assets, and (iii) sales of immaterial assets not in excess of $2 million in the aggregate); (d) (i) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly-owned A-32 subsidiary of the Company (other than Sensormatic Electronics Corporation (Puerto Rico)) may declare and pay a dividend to its parent that is not a cross-border dividend and except that dividends may be declared and paid to holders of Company Preferred Stock, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) except (A) as required by the terms of any security or agreement as in effect on the date hereof and set forth in Sections 2.11(f) or 4.01 of the Company Disclosure Schedule and (B) to the extent necessary to effect withholding to meet minimum tax withholding obligations in connection with the exercise of any Company Stock Option, amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, or permit any subsidiary to amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, including, without limitation, shares of Company Common Stock, or any option, warrant or right, directly or indirectly, to acquire any such securities, or propose to do any of the foregoing (except that the Company may give notice of redemption and redeem the Company Preferred Stock), (iv) settle, pay or discharge any claim, suit or other action brought or threatened against the Company with respect to or arising out of a stockholder equity interest in the Company, or (v) make any cross-border capital contributions to a subsidiary. (e) (i) acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof other than those listed on Section 4.01 of the Company Disclosure Schedule; (ii) incur any indebtedness for borrowed money, except for (A), after providing Acquiror with prior notice of any such borrowing or reborrowing, borrowings and reborrowings under the Company's or any of its subsidiaries' existing committed or uncommitted credit facilities listed in the Company SEC Documents or on Section 4.01 of the Company Disclosure Schedule in an amount not to exceed the maximum amount available under such credit facilities on the date hereof and (B) other borrowings not in excess of $4 million in the aggregate; (iii) issue any debt securities or assume, guarantee (other than guarantees of the Company's subsidiaries entered into in the ordinary course of business and except as required by any agreement in effect on the date hereof and identified in Section 4.01 of the Company Disclosure Schedule) or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business consistent with past practice (but not loans or advances to employees of the Company to fund the exercise price of Company Stock Options or otherwise to purchase shares of the Company Common Stock, except rights of employees to receive such loans or advances as such rights exist on the date hereof); (iv) authorize any capital expenditures or purchases of fixed assets which are, in the aggregate, in excess of $40 million over the next 12-month period; or (v) enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the matters prohibited by this Section 4.01(e); (f) except as set forth in Section 4.01 of the Company Disclosure Schedule, as required by law or as provided in an existing obligation of the Company, (i) increase the compensation or severance payable or to become payable to its directors, officers, employees or consultants, except for increases in salary, wages or bonuses of employees of the Company or its subsidiaries, including in connection with promotions, in accordance with past practices; (ii) grant any severance or termination pay (except to make payments required to be made under obligations existing on the date hereof in accordance with the terms of such obligations or in accordance with past practice) to, or enter into or amend any employment or severance agreement, with any current or prospective employee of the Company or any of its subsidiaries, except for new hire employees and promotions in the ordinary course of business whose annual salary does not exceed $100,000 and whose severance benefits do not exceed one times annual salary; or (iii) establish, adopt, enter into or amend any collective bargaining agreement, Company Employee Plan, including, without limitation, any plan that provides for the payment of bonuses or incentive compensation, trust, fund, policy or arrangement for the benefit of any current or former directors, officers, employees or consultants or any of their beneficiaries, except, in each case, as may be required by law or existing agreement or as would not result in a material increase in the cost of maintaining such collective bargaining agreement, Company Employee Plan, trust, fund, policy or arrangement; A-33 (g) take any action to change accounting policies or procedures (including, without limitation, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable), except as required by a change in GAAP occurring after the date hereof; (h) make any Tax election or settle or compromise any United States federal, state, local or non-U.S. Tax liability; (i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $5 million in the aggregate, other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the financial statements contained in the Company SEC Documents or incurred in the ordinary course of business and consistent with past practice or incurred in connection with this Agreement and the transactions contemplated hereby; (j) enter into, modify or renew any contract, agreement or arrangement, whether or not in writing, for the licensing of its technology other than user licenses and license-back agreements for technology acquired or co- developed after the date of this Agreement; or (k) take, or agree in writing or otherwise to take, any of the actions described in Sections 4.01(a) through (j) above, or any action which would reasonably be expected to make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect or prevent the Company from performing or cause the Company not to perform its covenants hereunder. Additionally, the Company shall use its commercially reasonable efforts to obtain any and all written consents of customers which, pursuant to the terms of any contracts, agreements or arrangements with such customers, are required to prevent the termination of such contracts, agreements or arrangements in connection with, or as a result of, the transactions contemplated by this Agreement, except if and insofar as the failure to obtain such consents would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 4.02 No Solicitation. (a) The Company shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or any of its subsidiaries, solicit or knowingly encourage the initiation of (including by way of furnishing information) any inquiries or proposals regarding any merger, sale of assets, sale of shares of capital stock (including, without limitation, by way of a tender offer) or similar transactions involving the Company or any subsidiaries of the Company that if consummated would constitute an Alternative Transaction (as defined below) (any of the foregoing inquiries or proposals being referred to herein as an "Acquisition Proposal"). Nothing contained in this Agreement shall prevent the Board of Directors of the Company from (i) furnishing information to a third party which has made a bona fide Acquisition Proposal that the Board of Directors of the Company concludes in good faith after consulting with a nationally recognized investment banking firm would, if consummated, reasonably be expected to constitute a Superior Proposal (as defined below) not solicited in violation of this Agreement, provided that such third party has executed an agreement with confidentiality provisions substantially similar to those then in effect between the Company and a subsidiary of Guarantor or (ii) subject to compliance with the other terms of this Section 4.02, including Sections 4.02(c) and (d), considering and negotiating a bona fide Acquisition Proposal that the Board of Directors of the Company concludes in good faith after consulting with a nationally recognized investment banking firm would, if consummated, constitute a Superior Proposal not solicited in violation of this Agreement; provided, however, that, as to each of clauses (i) and (ii), the Board of Directors of the Company reasonably determines in good faith (after due consultation with independent counsel, which may be CGSH) that it is or is reasonably likely to be required to do so in order to discharge properly its fiduciary duties. For purposes of this Agreement, "Alternative Transaction" means any of (i) a transaction pursuant to which any person (or group of persons) other than Acquiror or its affiliates (a "Third Party") acquires or would acquire more than 25% of the outstanding shares of any class of equity securities of the Company, whether from the Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other A-34 business combination involving the Company pursuant to which any Third Party acquires or would acquire more than 25% of the outstanding equity securities of the Company or the entity surviving such merger or business combination, (iii) any transaction pursuant to which any Third Party acquires or would acquire control of assets (including for this purpose the outstanding equity securities of subsidiaries of the Company and securities of the entity surviving any merger or business combination including any of the Company's subsidiaries) of the Company, or any of its subsidiaries having a fair market value (as determined by the Board of Directors of the Company in good faith) equal to more than 25% of the fair market value of all the assets of the Company and its subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any other consolidation, business combination, recapitalization or similar transaction involving the Company or any Company Significant Subsidiary, other than the transactions contemplated by this Agreement; provided, however, that the term Alternative Transaction shall not include any acquisition of securities by a broker dealer in connection with a bona fide public offering of such securities. For purposes of this Agreement, a "Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the Company Common Stock entitled to vote generally in the election of directors or all or substantially all the assets of the Company, on terms which the Board of Directors of the Company reasonably believes (after consultation with a financial advisor of nationally recognized reputation, which may be the Company Financial Advisor) to be more favorable from a financial point of view to its stockholders than the Merger and the transactions contemplated by this Agreement taking into account at the time of determination any changes to the financial terms of this Agreement proposed by Acquiror; provided, however, that a Superior Proposal may be subject to a due diligence review of confidential information and to other customary conditions. (b) The Company shall notify Acquiror promptly (but in no event later than 24 hours) after receipt of any Acquisition Proposal, or any modification of or amendment to any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board of Directors of the Company or any subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Acquiror shall be made orally and in writing, and shall indicate the identity of the person making the Acquisition Proposal or intending to make an Acquisition Proposal or requesting non-public information or access to the books and records of the Company or any subsidiary, the terms of any such Acquisition Proposal or modification or amendment to an Acquisition Proposal, and whether the Company is providing or intends to provide the person making the Acquisition Proposal with access to information concerning the Company as provided in Section 4.02(a). The Company shall keep Acquiror fully informed, on a current basis, of any material changes in the status and any material changes or modifications in the material terms of any such Acquisition Proposal, indication or request. The Company shall also promptly notify Acquiror, orally and in writing, if it enters into negotiations concerning any Acquisition Proposal. (c) (i) Except to the extent the Board of Directors of the Company reasonably determines in good faith (after due consultation with independent counsel, which may be CGSH) that it is or is reasonably likely to be required to act to the contrary in order to discharge properly its fiduciary duties (and, with respect to the approval, recommendation or entering into any, Acquisition Proposal, it may take such contrary action only after the second full business day following Acquiror's receipt of written notice of the Board of Directors' intention to do so), neither the Company nor the Board of Directors of the Company shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to Acquiror, the approval by such Board of Directors of this Agreement, the Offer or the Merger. (ii) Notwithstanding the foregoing, the Board of Directors may recommend and the Company or its directors, officers, employees, agents and affiliates may advise the Company's stockholders, at any time prior to consummation of the Offer, to delay the tender of their Shares into, or temporarily withdraw tendered Shares from, the Offer in order to avoid (prior to consummation of the Offer) the occurrence of a "change of control" or similar event from occurring which may require prepayment pursuant to any indebtedness of the Company. A-35 It is hereby agreed that any such recommendation or advice by the Board of Directors or the Company or its directors, officers, employees, agents and affiliates shall not be deemed a withdrawal or modification of, or a proposal to withdraw or modify in any respect, the Recommendations or a breach of this Agreement. (d) The Company and the Board of Directors of the Company shall not enter into any agreement (other than a confidentiality agreement entered into not in violation of Section 4.02(a)) with respect to, or otherwise approve or recommend, or propose to approve or recommend, any Acquisition Proposal or Alternative Transaction, unless this Agreement has been terminated in accordance with its terms. (e) Nothing contained in this Section 4.02 shall prohibit the Company from taking and disclosing to its stockholders a position required by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act or from making any disclosure to its stockholders required by applicable law, rule or regulation or by the NYSE. (f) The Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any persons (other than Acquiror) conducted heretofore with respect to any of the foregoing. The Company agrees not to release any third party from the confidentiality and standstill provisions of any agreement to which the Company is a party, except for a release from standstill provisions in connection with a Superior Proposal. (g) The Company shall ensure that the officers and directors of the Company and the Company's subsidiaries and any investment banker or other advisor or representative retained by the Company are aware of the restrictions described in this Section 4.02. It is understood that any violation of the restrictions set forth in this Section 4.02 by any officer or director of the Company or the Company subsidiaries, by any investment banker, attorney or other advisor or representative of the Company retained in connection with this Agreement and the transactions contemplated hereby or by any other advisor or representative of the Company at the direction or with the consent of the Company shall be deemed to be a breach of this Section 4.02 by the Company. SECTION 4.03 Conduct of Business by Guarantor Pending the Merger. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the initial acceptance of Shares for exchange in the Offer, Acquiror covenants and agrees that, unless the Company shall otherwise agree in writing, Acquiror shall take all action necessary so that (i) Guarantor shall conduct its business, and cause the businesses of its subsidiaries to be conducted, in the ordinary course of business and consistent with past practice, including actions taken by Guarantor or its subsidiaries in contemplation of the Offer or the Merger or other business acquisitions otherwise in compliance with this Agreement, and (ii) Guarantor shall not directly or indirectly do, or propose to do, any of the following without the prior written consent of the Company: (a) amend or otherwise change the Guarantor Charter Documents; (b) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets of any other person, or dispose of any assets, which, in any such case, would materially delay or prevent the consummation of the Offer, the Merger and the other transactions contemplated by this Agreement; (c) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly owned subsidiary of Guarantor may declare and pay a dividend to its parent, and except that Guarantor may declare and pay quarterly cash dividends on the Guarantor Common Shares of $0.0125 per share consistent with past practice; A-36 (d) take any action to change its accounting policies or procedures (including, without limitation, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable), except as required by a change in GAAP occurring after the date hereof; or (e) take or agree in writing or otherwise to take any of the actions described in Sections 4.03(a) through (d) above that would make any of the representations or warranties of Acquiror contained in this Agreement untrue or incorrect or prevent Acquiror from performing or cause Acquiror not to perform its covenants hereunder. ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.01 Stockholder Approval; Preparation of Post-Effective Amendment and Proxy Statement/Prospectus. (a) If Section 5.02(c) shall not apply and approval of the Company's stockholders is required by applicable law in order to consummate the Merger, the Company shall, and Acquiror shall cause Guarantor to, as soon as practicable following the acceptance of Shares pursuant to the Offer, prepare, and the Company shall file with the SEC, the Proxy Statement/Prospectus with respect to the Company Stockholders Meeting, and the Company shall, and Acquiror shall cause Guarantor to, prepare and Acquiror shall cause Guarantor to file with the SEC a post-effective amendment to the Registration Statement (the "Post-Effective Amendment") for the offer and exchange of the Guarantor Common Shares pursuant to the Merger and in which the Proxy Statement/Prospectus will be included as a prospectus. The Company shall, and Acquiror shall cause Guarantor to, use all reasonable efforts to have the Post-Effective Amendment declared effective under the Securities Act as promptly as practicable after such filing and to maintain such effectiveness for so long as shall be required for the issuance of the Guarantor Common Shares in the Merger. The Company shall use all reasonable efforts to cause the Proxy Statement/Prospectus to be mailed to the Company's stockholders as promptly as practicable after the Post-Effective Amendment is declared effective under the Securities Act. Acquiror shall also cause Guarantor to take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or to file a general consent to service of process) required to be taken under the applicable state securities laws in connection with the issuance of Guarantor Common Shares in the Offer and the Merger, and the Company shall furnish to Guarantor all information concerning the Company and the holders of capital stock of the Company as may be reasonably requested in connection with any such action and the preparation, filing and distribution of the Proxy Statement/Prospectus. No filing of, or amendment or supplement to, or correspondence to the SEC or its staff with respect to, the Post-Effective Amendment or the Proxy Statement/Prospectus will be made by the Company or the Guarantor, without providing the other party a reasonable opportunity to review and comment thereon. (b) Acquiror will advise the Company, promptly after Guarantor receives notice thereof, of the time when the Post-Effective Amendment has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the Guarantor Common Shares issuable in connection with the Merger for offering or sale in any jurisdiction, or any request by the SEC for amendment of the Post-Effective Amendment or comments thereon and responses thereto or requests by the SEC for additional information. The Company will advise Acquiror, promptly after it receives notice thereof, of any request by the SEC for the amendment of the Proxy Statement/Prospectus or comments thereon and responses thereto or requests by the SEC for additional information. If at any time prior to the Effective Time any information relating to the Company or Acquiror, or any of their respective affiliates, officers or directors, should be discovered by the Company or Acquiror which should be set forth in an amendment or supplement to either of the Post-Effective Amendment or the Proxy Statement/Prospectus so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other party hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of the Company. A-37 (c) The Proxy Statement/Prospectus shall include the recommendation of the Board of Directors of the Company in favor of approval of the Merger and adoption of this Agreement. Notwithstanding anything to the contrary set forth in this Section 5.01 or Section 5.02, the Company shall not be obligated to take the action set forth in the preceding sentence of this Section 5.01(c) or to take the actions set forth in Section 5.02 to the extent that the Board of Directors of the Company determines (after due consultation with independent counsel, which may be CGSH) that such action is, or is reasonably likely to be, inconsistent with the proper discharge of its fiduciary duties. SECTION 5.02 Company Stockholders Meeting. (a) If Section 5.02(c) shall not apply and approval of this Agreement by the Company's stockholders is required by applicable law in order to consummate the Merger, the Company shall, prior to or as soon as practicable following the date upon which the Post-Effective Amendment becomes effective, establish a record date for, duly call, give notice of, convene and hold the Company Stockholders Meeting as promptly as practicable for the purpose of voting upon the approval of this Agreement, and the Company shall use all reasonable efforts to cause the Proxy Statement/Prospectus to be mailed to the Company's stockholders and to hold the Company Stockholders Meeting as promptly as practicable after the Post- Effective Amendment is declared effective under the Securities Act. The Company shall solicit from its stockholders proxies in favor of approval of this Agreement and shall take all other reasonable action necessary or advisable to secure the vote or consent of stockholders in favor of such approval. (b) Acquiror agrees to vote all Shares acquired in the Offer or otherwise beneficially owned by Acquiror, Guarantor or any of their subsidiaries in favor of adoption of this Agreement and approval of the Merger at the Company Stockholders Meeting and to take such other actions to effectuate as promptly as practicable the Merger in accordance with Section 92A.190 of the NGCL and Section 252 of the DGCL, on the terms and subject to the conditions set forth in this Agreement. (c) Notwithstanding the foregoing, if Acquiror shall acquire at least 90% of the Fully Diluted Shares in the Offer, the parties hereto shall take all necessary actions to cause the Merger to become effective, as soon as practicable after the expiration of the Offer and the redemption of any outstanding Company Preferred Stock, without a meeting of stockholders of the Company, in accordance with Section 92A.190 of the NGCL and Section 253 of the DGCL. SECTION 5.03 Access to Information; Confidentiality. Upon reasonable notice and subject to restrictions contained in confidentiality agreements (from which such party shall use reasonable efforts to be released), the Company shall (and shall cause its subsidiaries to) and Acquiror shall cause Guarantor and its subsidiaries to (i) afford to the officers, employees, accountants, counsel and other representatives of the other, reasonable access during reasonable hours, during the period after the execution and delivery of this Agreement and prior to the Effective Time, to the properties, books, contracts, commitments and records of the Company or the Guarantor, as applicable, and, (ii) during such period, furnish promptly to the other all information concerning the business, properties and personnel of the Company or the Guarantor, as applicable, as such other party may reasonably request, and each shall make available to the other the appropriate individuals (including attorneys, accountants and other professionals) for discussion of the Company's or Guarantor's, as applicable, business, properties and personnel as either Acquiror or the Company may reasonably request. Such information shall be kept confidential in accordance with the terms of the confidentiality agreement, dated July 5, 2001 (the "Confidentiality Agreement"), between Guarantor and the Company. SECTION 5.04 Consents; Approvals. The Company and Acquiror shall each use its reasonable best efforts (and Acquiror shall cause Guarantor to use its reasonable best efforts) to obtain and to cooperate with each other in order to obtain as promptly as practicable all consents, waivers, approvals, authorizations or orders (including, without limitation, all United States and non-U.S. governmental and regulatory rulings and approvals), and the Company and Acquiror shall make (and Acquiror shall cause Guarantor to make) as promptly as practicable all filings (including, without limitation, all filings with United States and non-U.S. governmental or regulatory agencies) required in connection with the authorization, execution and delivery of A-38 this Agreement by the Company and Acquiror and the consummation by them of the transactions contemplated hereby. The Company and Acquiror shall promptly furnish (and Acquiror shall cause Guarantor to furnish) all information required to be included in the Offer Documents, Schedule TO, Schedule 14D-9, the filing pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act, Proxy Statement/Prospectus and the Registration Statement, or for any application or other filing to be made pursuant to the rules and regulations of any United States or non-U.S. governmental body in connection with the transactions contemplated by this Agreement. The Company shall, and Acquiror shall cause Guarantor to, cause all documents that it is responsible for filing with the SEC or other regulatory authorities under Section 5.01 and this Section 5.04 to comply in all material respects with all applicable requirements of law and the rules and regulations promulgated thereunder. SECTION 5.05 Agreements with Respect to Affiliates. The Company shall deliver to Acquiror, prior to the date the Post-Effective Amendment becomes effective under the Securities Act, a letter (the "Company Affiliate Letter") identifying all persons who are anticipated to be "affiliates" of the Company at the time of the Company Stockholders Meeting for purposes of Rule 145 under the Securities Act ("Rule 145"). The Company shall use its reasonable best efforts to cause each person who is identified as an "affiliate" in the Company Affiliate Letter to deliver to Acquiror, prior to the date of the initial acceptance of Shares for exchange in the Offer, a written agreement (an "Affiliate Agreement") restricting the sales of Guarantor securities by such affiliates in accordance with the restrictions on affiliates under Rule 145, in a form mutually agreeable to the Company and Acquiror. SECTION 5.06 Indemnification and Insurance. (a) The Articles of Incorporation and Bylaws of the Surviving Corporation shall contain all the provisions with respect to indemnification set forth in the Company Charter Documents on the date hereof, which provisions shall not be amended, modified or otherwise repealed for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder as of the Effective Time of individuals who at or prior to the Effective Time were directors, officers, employees or agents of the Company, unless such modification is required after the Effective Time by law and then only to the minimum extent required by such law. (b) The Surviving Corporation shall, to the fullest extent permitted under applicable law or under the Surviving Corporation's Articles of Incorporation or Bylaws, indemnify and hold harmless each present and former director, officer or employee of the Company or any of its subsidiaries (collectively, the "Indemnified Parties") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, (x) arising out of or pertaining to the transactions contemplated by this Agreement or (y) otherwise with respect to any acts or omissions occurring at or prior to the Effective Time, to the same extent as provided in the Company Charter Documents or any applicable contract or agreement as in effect on the date hereof, in each case for a period of six years after the Effective Time. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time) and subject to the specific terms of any indemnification contract, (i) any counsel retained by the Indemnified Parties for any period after the Effective Time shall be reasonably satisfactory to the Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation shall pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received; provided that the Indemnified Parties shall be required to reimburse the Surviving Corporation for such payments in the circumstances and to the extent required by the Company Charter Documents, any applicable contract or agreement or applicable law; and (iii) the Surviving Corporation will cooperate in the defense of any such matter; provided, however, that the Surviving Corporation shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); and provided, further, that, in the event that any claim or claims for indemnification are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims. The Indemnified Parties as a group may retain only one law firm to represent them in each applicable jurisdiction with respect to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties, in which case each Indemnified A-39 Party with respect to whom such a conflict exists (or group of such Indemnified Parties who among them have no such conflict) may retain one separate law firm in each applicable jurisdiction. (c) The Surviving Corporation shall honor and fulfill in all respects the obligations of the Company pursuant to indemnification agreements and employment agreements (the employee parties under such agreements being referred to as the "Covered Persons") with the Company's directors and officers existing at or before the Effective Time. (d) In addition, Acquiror shall provide, or cause the Surviving Corporation to provide, for a period of not less than six years after the Effective Time, the Company's current directors and officers with an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time (the "D&O Insurance") that is no less favorable than the existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that Acquiror and the Surviving Corporation shall not be required to pay an annual premium for the D&O Insurance in excess of 200% of the annual premium currently paid by the Company for such insurance, but in such case shall purchase as much such coverage as possible for such amount. (e) From and after the Effective Time, Acquiror shall unconditionally guarantee the timely payment of all funds owing by, and the timely performance of all other obligations of, the Surviving Corporation under this Section 5.06. (f) Nothing contained in this Section 5.06 is intended to limit in any manner and at any time rights that any Indemnified Party may have under and in accordance with all provisions of the Company Charter Documents, including, but not limited to, rights under the respective Article of the Company's Restated Certificate of Incorporation and the respective Article of the Company's Bylaws in each case dealing with indemnification, or any contract or agreement in effect on the date hereof or whose execution following the date hereof is permitted by the terms of this Agreement, which rights shall survive the Effective Time and shall be binding on the Surviving Corporation and all successors and assigns of the Surviving Corporation, in accordance with their respective terms. (g) This Section 5.06 shall survive the consummation of the Merger at the Effective Time, is intended to benefit the Company, the Surviving Corporation, the Indemnified Parties and the Covered Persons, shall be binding on all successors and assigns of the Surviving Corporation and shall be enforceable by the Indemnified Parties and the Covered Persons. SECTION 5.07 Notification of Certain Matters. The Company shall give prompt notice to Acquiror, and Acquiror shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would reasonably be expected to cause any representation or warranty contained in this Agreement to be materially untrue or inaccurate, or (ii) any failure of the Company or Acquiror, as the case may be, materially to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; and provided further that failure to give such notice shall not be treated as a breach of covenant for purposes of Section 7.01(h) unless the failure to give such notice results in material prejudice to the other party. SECTION 5.08 Further Action/Tax Treatment. (a) Upon the terms and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to, take, or cause to be taken, all actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and otherwise to satisfy or cause to be satisfied all conditions precedent to its obligations under this Agreement. The foregoing covenant shall include, without limitation, (i) the obligation by the Company to, and (ii) the obligation by Guarantor to, and/or to permit the Company to, agree to divest, abandon, license, hold separate or take similar action with A-40 respect to any assets (tangible or intangible) which are, in the aggregate, not material to Guarantor or the Company, as applicable (but shall not include any obligation by Guarantor to agree to divest, abandon, license, hold separate or take similar action with respect to any assets (tangible or intangible) material, in the aggregate, to Guarantor or the Company, as applicable). (b) Notwithstanding anything herein to the contrary, each of Acquiror and the Company shall, and Acquiror shall cause Guarantor to, use its reasonable best efforts to cause the Transaction to qualify, and will not (either before or after the Merger) take any actions, or fail to take any action, which could reasonably be expected to prevent the Transaction from qualifying as a reorganization under the provisions of Section 368(a) of the Code that is not subject to Section 367(a)(1) of the Code pursuant to Treasury Regulation Section 1.367(a)-3(c) (other than with respect to Company stockholders who are or will be "five-percent transferee shareholders" within the meaning of Treasury Regulation Section 1.367(a)-3(c)(5)(ii) and do not enter into five- year gain recognition agreements in the form provided in Treasury Regulation Section 1.367(a)-8). Acquiror shall, and shall cause the Surviving Corporation and Guarantor to, report, to the extent required by the Code or the regulations thereunder, the Transaction for United States federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Each of Acquiror and the Company shall make, and shall cause their affiliates (including Guarantor) to make, such representations, warranties and covenants as shall be requested reasonably in the circumstances by PricewaterhouseCoopers LLP and CGSH in order for such firms to render their opinions referred to in Section 1.01(e). SECTION 5.09 Public Announcements. Acquiror and the Company shall consult with each other before issuing any press release or making any written public statement with respect to the Transaction or this Agreement and the transactions contemplated hereby and shall not issue any such press release or make any such public statement without the prior consent of the other party, which shall not be unreasonably withheld; provided, however, that either party may, without the prior consent of the other, issue such press release or make such public statement as may upon the advice of counsel be required by law (including, without limitation, Rules 165 and 425 under the Securities Act and Rule 14a-12 under the Exchange Act) or the rules and regulations of the NYSE if it has used all reasonable efforts to consult with the other party. SECTION 5.10 Guarantor Common Shares. (a) Acquiror shall take all action necessary so that Guarantor shall transfer to Acquiror the Guarantor Common Shares to be delivered by Acquiror to the holders of Company Common Stock in the Transaction. (b) Acquiror will take all action necessary so that Guarantor will use its best efforts to cause the Guarantor Common Shares to be delivered by Acquiror to the holders of Company Common Stock in the Transaction to be listed, upon official notice of issuance, on the NYSE prior to the Effective Time. SECTION 5.11 Conveyance Taxes. Acquiror and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications, or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees, and any similar taxes which become payable in connection with the transactions contemplated hereby that are required or permitted to be filed on or before the Effective Time, and the Company shall be responsible for the payment of all such taxes and fees. SECTION 5.12 Stock Incentive Plans; Restricted Shares; Other Programs. (a) At the Effective Time, Acquiror shall, and shall cause its affiliates to, take all necessary action to provide that each outstanding Company Stock Option shall become fully vested and exercisable and otherwise will continue to have, and be subject to, the same terms and conditions set forth in the relevant Company Stock Option Plan and applicable award agreement immediately prior to the Effective Time; except that, (i) each Company Stock Option will be fully vested and exercisable for that number of whole Guarantor Common Shares equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such the Company Stock Option, immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded to the nearest A-41 whole number of Guarantor Common Shares, and (ii) the per share exercise price for the Guarantor Common Shares issuable upon exercise of such Company Stock Option will be equal to the quotient determined by dividing the exercise price per share of the Company Common Stock at which such Company Stock option was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded to the nearest whole cent (each such Company Stock Option, as modified, an "Adjusted Option"); provided, however, that to the extent that any Company Stock Option qualified as an incentive stock option pursuant to Section 422 of the Code immediately prior to the Effective Time, the provisions of this Section 5.12 shall be applied in good faith to comply with Sections 422 and 424(a) of the Code. (b) At the Effective Time, Acquiror and the Company shall cause all restrictions and forfeiture provisions applicable to any outstanding Company Restricted Shares to lapse to the extent provided under any applicable employment, consulting, severance, termination, change in control or similar agreement or arrangement or any award agreement under or relating to any Company Stock Option Plan, in each case, as in effect as of the date hereof, or the Long Term Incentive Plan and shall cause such shares to be converted into Guarantor Common Shares in accordance with Section 1.09. (c) Acquiror will cause Guarantor to take all corporate action necessary to reserve for issuance as of or as soon as administratively practicable after the Effective Time a sufficient number of Guarantor Common Shares for delivery upon exercise of the Adjusted Options, or upon the exchange of Company Restricted Shares, and to deliver to holders of Adjusted Options upon the exercise of such options, and to holders of Company Restricted Shares, Guarantor Common Shares registered pursuant to the Securities Act and listed on the NYSE. (d) Beginning on the date hereof, the Company shall not establish any new employee stock purchase plans or extend the availability of the Company Stock Purchase Plans to any employees not previously eligible to be included in the Company Stock Purchase Plans, or, in either case, implement any decisions to do the same, whether or not such decisions have been communicated to employees. The Company shall terminate Company Stock Purchase Plans prior to the Effective Time. All shares of Company Common Stock under the Company Stock Purchase Plans shall be treated as all other shares of Company Common Stock. Acquiror shall, to the extent legally and administratively feasible, enable employees of the Company and its subsidiaries to participate in Guarantor's employee stock purchase plan, in a manner consistent with the current practice of Acquiror's affiliates. SECTION 5.13 Certain Employee Benefits. (a) From the Effective Time through June 30, 2002 (the "Benefits Continuation Period"), the Surviving Corporation shall provide each person who, as of the Effective Time, is an employee of the Company or any subsidiary of the Company (a "Company Employee") with salary and employee benefits that are comparable in the aggregate to those provided to such Company Employee immediately prior to the Effective Time, provided, however, that (i) the Surviving Corporation shall have the right to amend any Company Employee Plans, including without limitation, any retiree welfare benefit plans or pension benefit plans, in effect as of the Effective Time and (ii) the Surviving Corporation shall have the right to commence the participation of the Company Employees in Acquiror's health and welfare benefit plans effective as of January 1, 2002. During the Benefits Continuation Period, Acquiror shall cause the Surviving Corporation to maintain severance plans, policies and programs for the benefit of each Company Employee that are at least as favorable as the plans, policies and programs applicable to such employees immediately prior to the Effective Time, without amendment or modification adverse to any such employee. (b) After the Benefits Continuation Period the Surviving Corporation shall provide the Company Employees with employee benefits that are comparable in the aggregate to those provided to similarly situated employees of subsidiaries of the Guarantor. For the avoidance of doubt, it is understood that the Surviving Corporation shall have no obligation to provide Company Employees with post- termination welfare or pension benefits, except to the extent required by applicable law or contractual agreement. (c) With respect to the benefits provided pursuant to this Section 5.13, (i) service accrued by Company Employees during employment with the Company and its subsidiaries (including any predecessor entity) prior A-42 to the Effective Time shall be recognized for all purposes, except for benefit accruals with respect to defined benefit pension plans, (ii) any and all pre- existing condition limitations (to the extent such limitations did not apply to a pre-existing condition under the applicable Company Employee Plan) and eligibility waiting periods under any group health plan shall be waived with respect to such Company Employees and their eligible dependents, and (iii) Company Employees shall be given credit for amounts paid under a Company Employee Plan during the applicable period for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the employee welfare plans in which any Company Employee becomes entitled to participate. (d) From and after the initial acceptance of Shares for exchange in the Offer, the Company shall and Acquiror shall cause Company to, and from and after the Effective Time, Acquiror shall cause the Surviving Corporation to, honor in accordance with their terms all benefits and obligations under the Company Employee Plans, and consulting agreements including without limitation each employment, retirement, severance and change in control agreement, plan or arrangement, each as in effect on the date of this Agreement (or as amended as contemplated hereby or with the prior written consent of Acquiror); provided, however, that nothing herein shall prevent the Surviving Corporation or any other subsidiary of Guarantor from amending or modifying any employee benefit plan, program or arrangement in any respect in accordance with its terms or, subject to the terms of the Company Employee Plans (as so amended or modified, if applicable), terminating or modifying the terms and conditions of employment or other service of any particular employee or any other person, except in any such case as precluded by law or the terms of a Company Employee Plan. (e) If not paid prior to the Effective Time, Acquiror shall cause the Surviving Corporation to pay each Company Employee his or her respective annual bonus for the Company's fiscal year ended June 30, 2001, in accordance with the terms of any applicable Company Employee Plan, program or arrangement and in accordance with the Company's customary practices. (f) It is expressly agreed that the provisions of Section 5.13 are not intended to be for the benefit of or otherwise enforceable by any third party, including, without limitation, any Company Employees. (g) The Company shall amend its 401(k) savings plan and any other Company Employee Plan which permits participants to elect to invest in stock of the Company, where necessary, to preclude any additional purchases of stock of the Company, as of a date no later than two (2) days prior to the Effective Time, and the Company shall communicate this amendment to the participants in such plans. SECTION 5.14 Reports of Tenders. From and after the day following the commencement of the Offer pursuant to Section 1.01(a), Acquiror shall instruct the exchange agent for the Offer (I) to deliver to the Company and to CGSH a daily report (the "Daily Report") at the end of each business day during the period from the day following commencement of the Offer until the Offer is consummated of (i) the total number of Shares tendered and the total number of Shares withdrawn pursuant to the Offer from the day of commencement of the Offer through and including the day of such Daily Report and (ii) the percentage that the total number of tendered Shares represents of the total number of outstanding Shares and (II) to respond to any reasonable inquiries from the Company or CGSH concerning the foregoing matters. SECTION 5.15 Accountant's Letters. Upon reasonable notice from the other, the Company shall use its best efforts to cause PricewaterhouseCoopers LLP to deliver to Acquiror, and Acquiror shall use its best efforts to cause PricewaterhouseCoopers to deliver to the Company, a letter covering such matters as are reasonably requested by Acquiror or the Company, as the case may be, and as are customarily addressed in accountants' "comfort letters." SECTION 5.16 Compliance with State Property Transfer Statutes. The Company agrees that it shall use its reasonable commercial efforts to comply promptly with all requirements of applicable state property transfer laws as may be required by the relevant state agency and shall take all action necessary to cause the transactions contemplated hereby to be effected in compliance with applicable state property transfer laws. The A-43 Company, after consultation with Acquiror, shall determine which actions must be taken prior to or after the Effective Time to comply with applicable state property transfer laws. The Company agrees to provide Acquiror with any documents required to be submitted to the relevant state agency prior to submission, and the Company shall not take any action to comply with applicable state property transfer laws without Acquiror's prior consent, which consent shall not be unreasonably withheld or delayed. Acquiror shall provide, and shall take all action necessary such that Guarantor shall provide, to the Company any assistance reasonably requested by the Company with respect to such compliance. SECTION 5.17 Redemption of Company Preferred Stock. The Company shall redeem the Company Preferred Stock in accordance with the announcement and notice specified in Section 1.02(d). SECTION 5.18 Prepayment of Company Indebtedness. Following the initial acceptance of Shares for exchange in the Offer, Acquiror shall cause to be provided to the Company funds, in such amount or amounts and at such time or times as shall be required by the Company (i) in order to prepay those of the Company's outstanding 8.21% Senior Notes due January 30, 2003 (the "8.21% Notes") and outstanding 7.74% Senior Notes due March 29, 2006 (the "7.74% Notes", and together with the 8.21% Notes the "Notes") as shall be presented for prepayment in accordance with their terms arising as a result of the consummation of the Offer or (ii) in order to prepay the Notes as may otherwise be required in connection with this Agreement. ARTICLE VI CONDITIONS TO THE MERGER SECTION 6.01 Conditions to Obligation of Each Party to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Effectiveness of the Registration Statement. The Post-Effective Amendment shall have been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Post- Effective Amendment shall have been issued by the SEC and no proceedings for that purpose and no similar proceeding in respect of the Proxy Statement/Prospectus shall have been initiated or threatened by the SEC; (b) Stockholder Approval. Unless Section 5.02(c) shall apply, this Agreement and the Merger shall have been approved by the requisite vote of the stockholders of the Company; (c) Antitrust. All waiting periods applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated, and all clearances and approvals required to be obtained in respect of the Merger prior to the Effective Time under any Non-U.S. Monopoly Laws shall have been obtained, except where the failure to have obtained any such clearances or approvals with respect to any Non-U.S. Monopoly Laws would not reasonably be expected to have a Material Adverse Effect on the Company, Guarantor or Guarantor's Fire and Security Group; (d) Governmental Actions. There shall not be in effect any judgment, decree or order of any Governmental Authority, administrative agency or court of competent jurisdiction preventing consummation of the Merger; (e) Illegality. No statute, rule, regulation or order shall be enacted, entered, enforced or deemed applicable to the Merger which makes the consummation of the Merger illegal; and (f) Redemption of Company Preferred Stock. All shares of Company Preferred Stock shall have been redeemed or converted and shall cease to be outstanding. A-44 ARTICLE VII TERMINATION SECTION 7.01 Termination. This Agreement may be terminated: (a) prior to the initial acceptance of Shares for exchange in the Offer, by mutual written consent duly authorized by the Boards of Directors of Acquiror and the Company; or (b) prior to the initial acceptance of Shares for exchange in the Offer, by either Acquiror or the Company if the initial acceptance of Shares for exchange in the Offer shall not have been consummated on or prior to the Terminal Date; provided, however, that the right to terminate this Agreement under this Section 7.01(b) shall not be available to any party whose failure to fulfill any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the acceptance of Shares for exchange in the Offer to occur on or prior to such date; or (c) by either Acquiror or the Company if the Offer shall have terminated or expired in accordance with its terms without the exchange of Shares pursuant to the Offer, provided that the right to terminate this Agreement under this Section 7.01(c) shall not be available to any party who failed to fulfill any of its obligations under this Agreement or, whose failure to fulfill such obligations has been the cause of, or resulted in the failure of, any conditions to the Offer to be satisfied or the failure to exchange Shares pursuant to the Offer; or (d) at any time prior to the Effective Time by either Acquiror or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action having the effect of permanently restraining, enjoining or otherwise prohibiting the Offer or the Merger; or (e) prior to the initial acceptance of Shares for exchange in the Offer, by Acquiror, if, whether or not permitted to do so by this Agreement, the Board of Directors of the Company or the Company shall (x) (i) withdraw, modify or change its approval or recommendation of this Agreement, the Offer or the Merger in a manner adverse to Acquiror, (ii) approve or recommend to the stockholders of the Company an Acquisition Proposal or Alternative Transaction; or (iii) approve or recommend that the stockholders of the Company tender their shares in any tender or exchange offer that is an Alternative Transaction or (y) take any position or make any disclosures to the Company's stockholders permitted pursuant to Section 4.02(e) which has the effect of any of the foregoing; or (f) prior to the initial acceptance of Shares for exchange in the Offer, by Acquiror or the Company, if any representation or warranty of the Company or Acquiror, respectively, set forth in this Agreement shall be untrue when made (a "Terminating Misrepresentation"); provided that, if such Terminating Misrepresentation is curable prior to the Designated Expiration Date (as the same may be from time to time extended in accordance with Section 1.01(c)) by the Company or Acquiror, as the case may be, through the exercise of its reasonable best efforts neither Acquiror nor the Company, respectively, may terminate this Agreement under this Section 7.01(f) prior to the Designated Expiration Date except upon not less than five (5) business days' prior notice and thereafter for so long as the Company or Acquiror, as the case may be, continues to exercise such reasonable best efforts; or (g) prior to the initial acceptance of Shares for exchange in the Offer, by Acquiror or the Company, if any representation or warranty of the Company or Acquiror, respectively, set forth in this Agreement (other than those made as of a specified date), shall have become untrue (a "Terminating Change"), in either case other than by reason of a Terminating Breach; provided that, if any such Terminating Change is curable, prior to the Designated Expiration Date (as the same may be from time to time extended in accordance with Section 1.01(c)), by the Company or Acquiror, as the case may be, through the exercise of its reasonable best efforts, neither Acquiror nor the Company, respectively, may terminate this Agreement under this Section 7.01(g) prior to the Designated Expiration Date except upon not less than A-45 five (5) business days' prior notice and thereafter for so long as the Company or Acquiror, as the case may be, continues to exercise such reasonable best efforts; or (h) prior to the initial acceptance of Shares for exchange in the Offer, by Acquiror or the Company, upon a material breach of any covenant or agreement on the part of the Company or Acquiror, respectively, set forth in this Agreement (a "Terminating Breach"); provided that, except for any breach of the Company's obligations under Section 4.02, if such Terminating Breach is curable prior to the Designated Expiration Date (as the same may be from time to time extended in accordance with Section 1.01(c)), by the Company or Acquiror, as the case may be, through the exercise of its reasonable best effort, neither Acquiror nor the Company, respectively, may terminate this Agreement under this Section 7.01(h) prior to the Designated Expiration Date except upon not less than five (5) business days' prior notice and thereafter for so long as the Company or Acquiror, as the case may be, continues to exercise such reasonable best efforts; or (i) prior to the initial acceptance of Shares for exchange in the Offer, by the Company, in order to accept a Superior Proposal; provided that (A) the Board of Directors of the Company shall have authorized the Company, subject to complying with the terms of this Agreement, including Section 4.02, to enter into a definitive agreement with respect to a Superior Proposal and the Company shall have notified Acquiror in writing that it intends to enter into such an agreement, attaching a summary of the material terms thereof, (B) Acquiror shall not have made, within two full business days (disregarding any partial business days) of receipt of the Company's written notification of its intention to enter into a definitive agreement with respect to a Superior Proposal, a written offer that the Board of Directors of the Company determines, in good faith after consultation with its financial advisors, is at least as favorable to the Company and its stockholders as the Superior Proposal, and (C) the Company prior to such termination pursuant to this clause shall have paid or caused to be paid to Acquiror in immediately available funds the Fee and the Expenses required to be paid pursuant to Section 7.03(b); or (j) prior to the initial acceptance of Shares for exchange in the Offer, by Acquiror, if the Average Share Price is less than $46.25, provided that (i) Acquiror shall have given the Company notice of its intention to terminate pursuant to this Section 7.01(j) prior to 5:00 p.m. New York City time on the third trading day immediately preceding and not including the Designated Expiration Date and (ii) the Company shall not, by 5:00 p.m. New York City time on the second trading day immediately preceding and not including the Designated Expiration Date, have delivered a notice to Acquiror agreeing that the Exchange Ratio shall equal 0.5189; provided further that if the Company shall deliver the notice referred to in the preceding clause (ii), this Agreement shall not be terminated under this Section 7.01(j) and the Exchange Ratio for all purposes of this Agreement shall equal 0.5189 or, if the parties shall so agree in their respective sole and absolute discretion, a higher number. For purposes of Section 7.01(f) and 7.01(g) and paragraph (f) of the Offer Conditions, (w) all representations and warranties shall be interpreted without giving effect to the words "materially" or "material" or to any qualification based on such terms or based on the defined term "Material Adverse Effect"; (x) any representation and warranty (other than those contained in Sections 2.03(a), 2.04, 2.13, 2.18, 2.23, 3.02, 3.03, 3.11, 3.12 and 3.13) shall be deemed untrue if such representation and warranty shall fail to be true and correct in all respects except (A) as a result of acts or omissions required or permitted under this Agreement or (B) where the failure of such representations and warranties to be true and correct would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Company or Guarantor, as the case may be; (y) any representation and warranty contained in Section 2.03(a), 2.04, 2.13, 2.18, 2.23, 3.02 (a) and (b), 3.03, 3.11, 3.12 and 3.13 shall be deemed untrue if such representation and warranty shall fail to be true and correct in all material respects; and A-46 (z) the representation contained in Section 3.02(c) shall be deemed untrue if it shall fail to be true and correct in any respect. SECTION 7.02 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.01, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto or any of its affiliates, directors, officers or stockholders except that the Company or Acquiror may have liability or obligations as set forth in Section 7.03 and as set forth in or contemplated by Section 8.01 hereof. Notwithstanding the foregoing, nothing herein shall relieve the Company or Acquiror from liability for any willful breach hereof or willful misrepresentation herein (it being understood that (x) the provisions of Section 7.03 do not constitute a sole or exclusive remedy for such willful breach or misrepresentation and (y) the mere existence of a Material Adverse Effect, by itself, shall not constitute such a willful breach). SECTION 7.03 Fees and Expenses. (a) Except as set forth in this Section 7.03, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Offer or the Merger is consummated; provided, however, that if the Offer or Merger is not consummated, Acquiror and the Company shall share equally (i) all SEC filing fees and printing expenses incurred in connection with the printing and filing of the Registration Statement (including financial statements and exhibits), the Offer Documents, the Schedule 14D-9, the Post-Effective Amendment (including financial statement and exhibits) and the Proxy Statement/Prospectus (including any preliminary materials related thereto) and any amendments or supplements thereto and (ii) conveyance and similar taxes required to be paid by the Company prior to the Effective Time pursuant to Section 5.11. (b) The Company shall pay Guarantor a fee of $70 million (the "Fee"), and shall pay Acquiror's and Guarantor's respective actual, documented and reasonable out-of-pocket expenses, relating to the transactions contemplated by this Agreement (including, but not limited to, reasonable fees and expenses of counsel and accountants and out-of-pocket expenses (but not fees) of financial advisors) ("Expenses" as applicable to Acquiror, Guarantor or the Company), such payment of Expenses not to exceed $5 million, upon the first to occur of any of the following events: (i) the termination of this Agreement by Acquiror or the Company pursuant to 7.01(b) or Section 7.01(c); provided that (i) the Minimum Condition shall not have been satisfied and no other condition to the Offer shall have been unsatisfied at the time of termination (other than any condition that shall not have been satisfied as a result of a Terminating Misrepresentation, Terminating Change or a Terminating Breach on the part of the Company) and there shall not have been a Terminating Misrepresentation, Terminating Change or Terminating Breach on the part of Acquiror and (ii) (A) prior to such termination, (1) there shall be outstanding a bona fide Acquisition Proposal which has been made directly to the stockholders of the Company or has otherwise become publicly known or (2) there shall be outstanding an announcement by any credible third party of a bona fide intention to make an Acquisition Proposal (in each case whether or not conditional and whether or not such proposal shall have been rejected by the Board of Directors of the Company) or (B) an Alternative Transaction shall be publicly announced by the Company or any third party within nine (9) months following the date of termination of this Agreement, and such transaction, in the case of clause (A) or (B), shall at any time thereafter be consummated on substantially the terms theretofore announced (or on terms that are more favorable to the stockholders of the Company), and shall provide for a per share consideration with a fair market value at least equal to the Exchange Ratio multiplied by the Average Share Price. (ii) the termination of this Agreement by Acquiror pursuant to Section 7.01(e); or (iii) the termination of this Agreement by the Company pursuant to Section 7.01(i). (c) Upon a termination of this Agreement by Acquiror or the Company, as the case may be, pursuant to Section 7.01(h), the Company shall pay to Guarantor and Acquiror or Guarantor or Acquiror shall pay the Company, as the case may be, their respective Expenses relating to the transactions contemplated by this Agreement, but in no event more than $5 million. In addition, if termination is by Acquiror, the Company shall A-47 pay Guarantor the Fee if the Terminating Breach is willful and either (A) prior to such termination, (1) there shall be outstanding a bona fide Acquisition Proposal which has been made directly to the stockholders of the Company or has otherwise become publicly known or (2) there shall be outstanding an announcement by any credible third party of a bona fide intention to make an Acquisition Proposal (in each case whether or not conditional and whether or not such proposal shall have been rejected by the Board of Directors of the Company) or (B) an Alternative Transaction shall be publicly announced by the Company or any third party within nine (9) months following the date of termination of this Agreement, and such transaction, in the case of clause (A) or (B), shall at any time thereafter be consummated on substantially the terms theretofore announced (or on terms that are more favorable to the stockholders of the Company). The remedies available pursuant to this Section 7.03(c) shall be in addition to, but without duplication in any way of, the remedies referred to in Section 7.02. (d) Upon a termination of this Agreement by Acquiror pursuant to Section 7.01(f), the Company shall pay to Guarantor and Acquiror their respective Expenses relating to the transactions contemplated by this Agreement, but in no event more than $5 million. Upon a termination of this Agreement by the Company pursuant to Section 7.01(f), Acquiror shall pay to the Company its Expenses relating to the transactions contemplated by this Agreement, but in no event more than $5 million. (e) The Fee and/or Expenses payable pursuant to Section 7.03(b), 7.03(c) or 7.03(d) shall be paid within one business day after a demand for payment following the first to occur of any of the events described in Section 7.03(b), 7.03(c) or 7.03(d) as applicable; provided that in no event shall the Company or Acquiror, as the case may be, be required to pay such Fee and/or Expenses to the entities entitled thereto if, immediately prior to the termination of this Agreement, the other entity entitled to receive such Fee and/or Expenses was in material breach of its obligations under this Agreement. (f) For purposes of this Section 7.03, the definition of Alternative Transaction set forth in Section 4.02(a) shall be modified to replace "25%," as it appears in such definition, with "40%". ARTICLE VIII GENERAL PROVISIONS SECTION 8.01 Effectiveness of Representations, Warranties and Agreements. (a) Except as otherwise provided in this Section 8.01, the representations, warranties and agreements of each party hereto shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any other party hereto, any person controlling any such party or any of their officers or directors, whether prior to or after the execution of this Agreement. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 7.01, except that the agreements set forth in Article I and Sections 5.06 and 5.08(b) and any other agreement in this Agreement which contemplates performance after the Effective Time shall survive the Effective Time indefinitely and those set forth in Sections 7.02 and 7.03 and this Article VIII shall survive termination indefinitely. The Confidentiality Agreement shall survive termination of this Agreement in accordance with its terms. (b) Any disclosure made with reference to one or more Sections of the Company Disclosure Schedule or the Supplemental Company Disclosure Schedule shall be deemed disclosed with respect to each other section therein as to which such disclosure is relevant; provided that such relevance is reasonably apparent. Disclosure of any matter in the Company Disclosure Schedule or the Supplemental Company Disclosure Schedule shall not be deemed an admission that such matter is material or is required to be disclosed. SECTION 8.02 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made if and when delivered personally or by overnight courier to the parties at the following addresses or sent by electronic transmission, with confirmation A-48 received, to the telecopy numbers specified below (or at such other address or telecopy number for a party as shall be specified by like notice): (a) If to Acquiror: Tyco Acquisition Corp. XXIV (NV) c/o Tyco International (US) Inc. One Tyco Park Exeter, NH 03833 Attn: President Telecopy: (603) 778-7700 Confirm: (603) 778-9700 With a copy (which shall not constitute notice) to: Tyco International (US) Inc. One Tyco Park Exeter, NH 03833 Attn: General Counsel Telecopy: (603) 778-7700 Confirm: (603) 778-9700 and Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 Attn: Abbe L. Dienstag, Esq. Telecopy: (212) 715-8000 Confirm: (212) 715-9100 If to the Company: Sensormatic Electronics Corporation 951 Yamato Road Boca Raton, FL 33431 Attn: President and Chief Executive Officer Telecopy: (561) 989-7017 Confirm: (561) 989-7000 With a copy (which shall not constitute notice) to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Attn: Victor I. Lewkow, Esq. Telecopy: (212) 225-3999 Confirm: (212) 225-2000 and a copy to: Salans, Hertzfeld, Heilbronn, Christy & Viener Rockefeller Center 620 Fifth Avenue New York, NY 10020-2457 Attn: Jerome LeWine, Esq. Telecopy: (212) 632-5555 Confirm: (212) 632-5500 A-49 SECTION 8.03 Certain Definitions. For purposes of this Agreement, the term: (a) "affiliates", with respect to any person, means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; (b) "business day" means any day other than a day on which banks in New York City are required or authorized to be closed; (c) "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; (d) "dollars" or "$" means United States dollars; (e) "knowledge" means, with respect to any matter in question, that the executive officers, or the responsible employee having primary or substantial oversight responsibility for the matter (the "Responsible Employees"), of the Company, Acquiror or Guarantor, as the case may be, have or at any time had actual knowledge of such matter. The Responsible Employees of the Company for the matters that are the subject of the following Sections of this Agreement are as follows: for Section 2.03 Compliance; Permits, the Executive Vice President--Integrated Solutions Group; for Section 2.10 Absence of Litigation, the Vice President--General Counsel; for Section 2.11 Employee Benefit Plans; Employment Agreements, the Senior Vice President--Human Resources; for Section 2.12 Employment and Labor Matters, the Senior Vice President--Human Resources; for Section 2.14 Restrictions on Business Activities, the Vice President--General Counsel; for Section 2.15 Title to Property, the Senior Vice President and Chief Financial Officer; for Section 2.16 Taxes, the Director of Corporate Tax; for Section 2.17 Environmental Matters, the Vice President--General Counsel; for Section 2.19 Intellectual Property, the Intellectual Property Counsel; and for Section 2.22 Product Liability and Recalls, the Executive Vice President--Integrated Solutions Group; (f) "person" means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act); and (g) "subsidiary" or "subsidiaries" of the Company, the Surviving Corporation, Acquiror, Guarantor or any other person means any corporation, partnership, joint venture or other legal entity of which the Company, the Surviving Corporation, Acquiror, Guarantor or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. When reference is made in this Agreement to the Company, Acquiror or Guarantor, such reference shall include their respective subsidiaries, as and to the extent the context so requires, whether or not explicitly stated in this Agreement. SECTION 8.04 Amendment. Subject to Section 1.03, this Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after approval of the Merger and this Agreement by the stockholders of the Company, no amendment may be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended, except by an instrument in writing signed by the parties hereto. SECTION 8.05 Waiver. Subject to Section 1.03, at any time prior to the Effective Time, any party hereto may with respect to any other party hereto (a) extend the time for the performance of any of the obligations or other acts, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (c) waive compliance with any of the agreements or conditions A-50 contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. SECTION 8.06 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 8.07 Severability. (a) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. (b) The Company and Acquiror agree that the Fee provided in Section 7.03(b) is fair and reasonable in the circumstances. If a court of competent jurisdiction shall nonetheless, by a final, nonappealable judgment, determine that the amount of the Fee exceeds the maximum amount permitted by law, then the amount of the Fee shall be reduced to the maximum amount permitted by law in the circumstances, as determined by such court of competent jurisdiction. SECTION 8.08 Entire Agreement. This Agreement and the Guarantor's guarantee hereof constitute the entire agreement and supersede all prior agreements and undertakings (other than the Confidentiality Agreement), both written and oral, among the parties, or any of them, with respect to the subject matters hereof and thereof, except as otherwise expressly provided herein or therein. SECTION 8.09 Assignment. This Agreement shall not be assigned by operation of law or otherwise, except that all or any of the rights of Acquiror hereunder may be assigned to Guarantor or any direct or indirect wholly-owned subsidiary of Guarantor provided that no such assignment shall relieve the assigning party of its obligations hereunder. SECTION 8.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, including, without limitation, by way of subrogation, other than Section 5.06 (which is intended to be for the benefit of the Indemnified Parties and Covered Persons and may be enforced by such Indemnified Parties and Covered Persons) and Section 7.03 (which contains provisions intended to be for the benefit of Guarantor and may be enforced by Guarantor) and other than the right of the stockholders of the Company to receive the Merger Consideration if, but only if, the Merger is consummated and not otherwise. SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 8.12 Governing Law; Jurisdiction. (a) This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York applicable to contracts executed and fully performed within the State of New York, except to the extent that the DGCL applies and, to that extent, by the internal laws of the State of Delaware. (b) Each of the parties hereto submits to the exclusive jurisdiction of the courts of the State of New York and the federal courts of the United States located in the City of New York, Borough of Manhattan, with respect to any claim or cause of action arising out of this Agreement or the transactions contemplated hereby. A-51 SECTION 8.13 Counterparts. This Agreement may be executed in two or more counterparts, and by the different parties hereto in separate counterparts (by facsimile or original signature), each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 8.14 WAIVER OF JURY TRIAL. EACH OF ACQUIROR AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 8.15 Performance of Guarantee. Unless otherwise previously performed, Acquiror shall cause Guarantor to perform all of its obligations under the Guarantee. SECTION 8.16 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. IN WITNESS WHEREOF, Acquiror and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. TYCO ACQUISITION CORP. XXIV (NV) /s/ Mark H. Swartz By___________________________________ Name: Mark H. Swartz Title: Vice President SENSORMATIC ELECTRONICS CORPORATION /s/ Per-Olof Loof By___________________________________ Name: Per-Olof Loof Title: President and Chief Executive Officer A-52 GUARANTEE Tyco International Ltd. ("Guarantor") irrevocably guarantees each and every representation, warranty, covenant, agreement and other obligation of Acquiror, and/or any of its permitted assigns (and where any such representation or warranty is made to the knowledge of Acquiror, such representation or warranty shall be deemed made to the knowledge of Guarantor), and the full and timely performance of their respective obligations under the provisions of the foregoing Agreement between Tyco Acquisition Corp. XXIV (NV) and Sensormatic Electronics Corporation. This is a guarantee of payment and performance, and not of collection, and Guarantor acknowledges and agrees that this guarantee is full and unconditional, and no release or extinguishment of Acquiror's obligations or liabilities (other than in accordance with the terms of the Agreement), whether by decree in any bankruptcy proceeding or otherwise, shall affect the continuing validity and enforceability of this guarantee, as well as any provision requiring or contemplating performance by Guarantor. Guarantor hereby waives, for the benefit of the Company, (i) any right to require the Company as a condition of payment or performance by Guarantor, to proceed against Acquiror or pursue any other remedy whatsoever and (ii) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, except to the extent that any such defense is available to Acquiror. Without limiting in any way the foregoing guarantee, Guarantor covenants and agrees to take all actions to enable Acquiror to adhere to the provisions of Sections 1.01, 1.09, 1.10, 1.13, 4.03, 5.01, 5.03, 5.04, 5.08, 5.10, 5.12, 5.15 and 5.16 and each other provision of the Agreement which requires an act or omission on the part of Guarantor or any of its subsidiaries to enable Acquiror to comply with its obligations under the Agreement. The provisions of Article VIII of the Agreement are incorporated herein, mutatis mutandis, except that notices and other communications hereunder to Guarantor shall be delivered to Tyco International Ltd., The Zurich Centre, Second Floor, 90 Pitts Bay Road, Pembroke HM 08, Bermuda, Attn: Chief Corporate Counsel and Chief Financial Officer, Telecopy No. (441) 295-9647, Confirm No. (441) 292-8674 (with a copy as provided therefor in Section 8.02(a)). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement. We understand that the Company is relying on this guarantee in entering into the Agreement and may enforce this guarantee as if Guarantor were a party thereto. TYCO INTERNATIONAL LTD. /s/ Mark H. Swartz By___________________________________ Name: Mark H. Swartz Title: Executive Vice President and Chief Financial Officer A-53 ANNEX I CONDITIONS TO THE OFFER Notwithstanding any other provision of the Offer, subject to the terms of this Agreement, Acquiror shall not be required to accept for exchange or exchange or deliver any Guarantor Common Shares for any Shares tendered (subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act relating to Acquiror's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), if by the Designated Expiration Date (as such date may be extended in accordance with the requirements of Section 1.01(c)), (1) the Minimum Condition shall not have been satisfied, (2) the applicable waiting period under the HSR Act and any applicable material Non-U.S. Monopoly Laws shall not have expired or been terminated (provided that a Non-U.S. Monopoly Law shall not be deemed immaterial if a violation of such law would result in criminal liability), (3) the Registration Statement shall not have become effective under the Securities Act or shall be the subject of any stop order or proceedings seeking a stop order, (4) the Guarantor Common Shares to be issued in the Offer and the Merger shall not have been approved for listing on the NYSE, subject to official notice of issuance, (5) the tax opinion of PricewaterhouseCoopers LLP and CGSH required to be filed as an exhibit to the Registration Statement pursuant to Section 1.01(e) shall not have been filed or shall have been withdrawn (the conditions set forth in clauses (1) through (5) being referred to as the "Basic Conditions") or (6) at any time on or after the date of this Agreement and prior to the acceptance for exchange of Shares pursuant to the Offer, any of the following conditions exist: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a statute, rule, regulation or order shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, (ii) prohibits or restricts the ownership or operation by Acquiror (or any of its affiliates or subsidiaries) of any material portion of the Company's business or assets, or any material portion of Guarantor's security or safety business or which would substantially deprive Acquiror and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or compels Acquiror (or any of its affiliates or subsidiaries) to dispose of or hold separate any material portion of the Company's business or assets, or any material portion of Guarantor's security or safety business or which would substantially deprive Acquiror and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, (iii) imposes material limitations on the ability of Acquiror effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote Shares acquired by Acquiror pursuant to the Offer or the Merger on all matters properly presented to the stockholders of the Company, (iv) imposes any material limitations on the ability of Acquiror and/or its affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company, (v) as a result of the Transaction materially restricts any future business activity by Guarantor (or any of its affiliates) relating to the security or safety business, including, without limitation, by requiring the prior consent of any person or entity (including any Governmental Authority) to future transactions by Guarantor (or any of its affiliates), or (vi) imposes any liability as a result of the Offer or Merger on the other transactions contemplated by this Agreement which, if borne by the Company, would have a Material Adverse Effect on the Company; or (b) there shall have been instituted, pending or threatened an action by a Governmental Authority seeking to restrain or prohibit the making or consummation of the Offer, the consummation of the Merger or to impose any other restriction, prohibition, obligation or limitation referred to in the foregoing paragraph (a); or (c) this Agreement shall have been terminated by the Company or Acquiror in accordance with its terms; or (d) there shall have occurred and shall be continuing (i) any general suspension of, or limitation on prices for, trading in the Shares or the trading of the Guarantor Common Shares on the NYSE, (ii) a A-54 declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States or (iii) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening thereof; or (e) Acquiror and the Company shall have agreed that Acquiror shall amend the Offer to terminate the Offer or postpone the exchange of Shares pursuant thereto; or (f) applying the principles of the final paragraph of Section 7.01, any of the representations and warranties of the Company contained in the Agreement shall have been untrue when made (or, if made as of a specified date, as of such date) or the representations and warranties of the Company contained in the Agreement (other than those made as of a specified date) shall have become untrue; or (g) the Company shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under this Agreement in all material respects; or (h) the Company's Board of Directors shall have modified or amended its recommendation of the Offer in any manner adverse to Acquiror or shall have withdrawn its recommendation of the Offer, or shall have recommended acceptance of any Acquisition Proposal or Alternative Transaction or shall have resolved to do any of the foregoing; or (i) (A) any corporation, entity or "group" (as defined in Section 13(d)(3) of the Exchange Act) ("person/group"), other than Acquiror and its affiliates, shall have acquired beneficial ownership of more than 25% of the outstanding Shares, or shall have been granted any options or rights, conditional or otherwise, to acquire a total of more than 25% of the outstanding Shares and which, in each case, does not tender the Shares beneficially owned by it in the Offer; (B) any new group shall have been formed which beneficially owns more than 25% of the outstanding Shares and which does not tender the Shares beneficially owned by it in the Offer; or (C) any person/group (other than Acquiror or one or more of its affiliates) shall have entered into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company; or (j) any change, development, effect or circumstance shall have occurred and shall be continuing that would reasonably be expected to have a Material Adverse Effect on the Company; or (k) the Company shall commence a case under any chapter of Title XI of the United States Code or any similar law or regulation; or a petition under any chapter of Title XI of the United States Code or any similar law or regulation is filed against the Company which is not dismissed within two (2) business days; which, in the good faith judgment of Acquiror in any such case, and regardless of the circumstances (including any action or omission by Acquiror or its affiliates that does not constitute a breach of this Agreement) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for exchange or exchange. The foregoing conditions are for the sole benefit of Acquiror and may be asserted by Acquiror regardless of the circumstances (including any action or omission by Acquiror or its affiliates that does not constitute a breach of this Agreement) giving rise to any such condition or (other than the Basic Conditions) may, subject to the terms of this Agreement, be waived by Acquiror in its reasonable discretion in whole at any time or in part from time to time. The failure by Acquiror at any time to exercise its rights under any of the foregoing conditions shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right which may be asserted at any time or from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for exchange shall promptly be returned to the tendering stockholders. A-55 The exchange agent for the offer is: [LOGO OF MELLON INVESTOR SERVICES] By mail: By overnight delivery: By hand delivery: Reorganization Reorganization Department Reorganization Department 85 Challenger Road Department P.O. Box 3301 Mail Stop--Reorg 120 Broadway South Hackensack, New Ridgefield Park, New Jersey 13th Floor Jersey 07660 New York, New York 10271 07606 Facsimile transmission (for eligible institutions only): (201) 296-4293 Confirm receipt of facsimile by telephone only: (201) 296-4860 ---------------- Questions and requests for assistance may be directed to the information agent at the address and telephone numbers listed below. Additional copies of this prospectus, the letter of transmittal and other tender offer materials may be obtained from the information agent as set forth below, and will be furnished promptly at our expense. Facsimile copies of the letter of transmittal, properly completed and duly executed, will be accepted. The letter of transmittal, certificates for shares and any other required documents should be sent or delivered by each stockholder of Sensormatic or his broker, dealer, commercial bank, trust company or other nominee to the exchange agent at one of its addresses set forth above. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the offer. The information agent for the offer and the merger is: 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or CALL TOLL-FREE (800) 322-2885 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Bye-Law 102 of the Tyco Bye-Laws provides, in part, that Tyco shall indemnify its directors and other officers for all costs, losses and expenses which they may incur in the performance of their duties as director or officer, provided that such indemnification is not otherwise prohibited under the Companies Act 1981 of Bermuda. Section 98 of the Companies Act 1981 prohibits such indemnification against any liability arising out of the fraud or dishonesty of the director or officer. However, such section permits Tyco to indemnify a director or officer against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or when other similar relief is granted to him. The Registrant maintains $250,000,000 of insurance to reimburse the directors and officers of Tyco and its subsidiaries for charges and expenses incurred by them for wrongful acts claimed against them by reason of their being or having been directors or officers of the Registrant or any subsidiary thereof. Such insurance specifically excludes reimbursement of any director or officer for any charge or expense incurred in connection with various designated matters, including libel or slander, illegally obtained personal profits, profits recovered by the Registrant pursuant to Section 16(b) of the Exchange Act and deliberate dishonesty. ITEM 21. EXHIBITS
Exhibit Number Description ------- ----------- 2.1 Agreement and Plan of Merger by and between Tyco Acquisition Corp. XXIV (NV) and Sensormatic Electronics Corporation, dated as of August 3, 2001, guaranteed by Tyco International Ltd. (included as Annex A to the prospectus which forms a part of this registration statement) 2.2 Amendment No. 1 dated as of August 23, 2001, to the Agreement and Plan of Merger by and between Tyco Acquisition Corp. XXIV (NV) and Sensormatic Electronics Corporation, dated as of August 3, 2001, acknowledged by Tyco International Ltd. 5 Opinion of Appleby Spurling & Kempe regarding the validity of the Tyco common shares registered hereunder* 8.1 Tax Opinion of PricewaterhouseCoopers LLP* 8.2 Tax Opinion of Cleary, Gottlieb, Steen & Hamilton* 8.3 Tax Opinion of Appleby Spurling & Kempe* 23.1 Consent of PricewaterhouseCoopers 23.2 Consent of KPMG LLP 23.3 Consent of Arthur Andersen LLP 23.4 Consent of PricewaterhouseCoopers LLP 23.5 Consent of Ernst & Young LLP 23.6 Consent of Appleby Spurling & Kempe (contained in Exhibit 5 and Exhibit 8.3)* 23.7 Consent of PricewaterhouseCoopers LLP (contained in Exhibit 8.1)* 23.8 Consent of Cleary, Gottlieb, Steen & Hamilton (contained in Exhibit 8.2)* 24.1 Power of Attorney (contained on the signature page hereto)* 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery*
II-1
Exhibit Number Description ------- ----------- 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees* 99.4 Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients* 99.5 Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9* 99.6 Summary Advertisement as published in The Wall Street Journal on August 23, 2001* 99.7 Form of Notice of Conversion and Letter of Transmittal relating to the conversion and tender of 6 1/2% Convertible Preferred Stock of Sensormatic Electronics Corporation 99.8 Form of Notice of Guaranteed Delivery relating to the conversion and tender of Sensormatic 6 1/2% Convertible Preferred Stock* 99.9 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees relating to the conversion and tender of Sensormatic 6 1/2% Convertible Preferred Stock* 99.10 Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients relating to the conversion and tender of Sensormatic 6 1/2% Convertible Preferred Stock*
- -------- * Previously filed. ITEM 22. UNDERTAKINGS The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the maximum aggregate offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; Provided, however, that paragraphs (1)(i) and (1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8, or Form F-3, and the information required to be included in post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 The Registrant undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned Registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. The Registrant undertakes that every prospectus: (i) that is filed pursuant to the paragraph immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned Registrant hereby undertakes to supply by means of a post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Exeter, State of New Hampshire, on the 10th day of September, 2001. TYCO INTERNATIONAL LTD. /s/ Mark H. Swartz By: _________________________________ Mark H. Swartz Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed by the following persons on September 10, 2001 in the capacities indicated below.
Name Title ---- ----- * Chairman of the Board, ____________________________________ President, Chief Executive L. Dennis Kozlowski Officer and Director (Principal Executive Officer) * Director ____________________________________ Michael A. Ashcroft * Director ____________________________________ Joshua M. Berman * Director ____________________________________ Richard S. Bodman
II-4
Name Title ---- ----- * Director ____________________________________ John F. Fort * Director ____________________________________ Stephen W. Foss * Director ____________________________________ Wendy E. Lane * Director ____________________________________ James S. Pasman, Jr. * Director ____________________________________ W. Peter Slusser /s/ Mark H. Swartz Director, Executive Vice ____________________________________ President and Chief Mark H. Swartz Financial Officer (Principal Accounting and Financial Officer) * Director ____________________________________ Frank E. Walsh, Jr. * Director ____________________________________ Joseph F. Welch
/s/ Mark H. Swartz *By: _______________________ Mark H. Swartz Attorney-in-Fact II-5 INDEX TO EXHIBITS
Exhibit No. Description of Document ------- ----------------------- 2.1 Agreement and Plan of Merger by and among Tyco Acquisition Corp. XXIV (NV) and Sensormatic Electronics Corporation, dated as of August 3, 2001, guaranteed by Tyco International Ltd. (included as Annex A to the prospectus which forms a part of this registration statement) 2.2 Amendment No. 1, dated as of August 23, 2001, to the Agreement and Plan of Merger by and between Tyco Acquisition Corp. XXIV (NV) and Sensormatic Electronics Corporation, dated as of August 3, 2001, acknowledged by Tyco International Ltd. 5 Opinion of Appleby Spurling & Kempe regarding the validity of the Tyco common shares registered hereunder* 8.1 Tax Opinion of PricewaterhouseCoopers LLP* 8.2 Tax Opinion of Cleary, Gottlieb, Steen & Hamilton* 8.3 Tax Opinion of Appleby Spurling & Kempe* 23.1 Consent of PricewaterhouseCoopers 23.2 Consent of KPMG LLP 23.3 Consent of Arthur Andersen LLP 23.4 Consent of PricewaterhouseCoopers LLP 23.5 Consent of Ernst & Young LLP 23.6 Consent of Appleby Spurling & Kempe (contained in Exhibit 5 and Exhibit 8.3)* 23.7 Consent of PricewaterhouseCoopers LLP (contained in Exhibit 8.1)* 23.8 Consent of Cleary, Gottlieb, Steen & Hamilton (contained in Exhibit 8.2)* 24.1 Power of Attorney (contained on the signature page hereto)* 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery* 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees* 99.4 Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients* 99.5 Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9* 99.6 Summary Advertisement as published in The Wall Street Journal on August 23, 2001* 99.7 Form of Notice of Conversion and Letter of Transmittal relating to the conversion and tender of 6 1/2% Convertible Preferred Stock of Sensormatic Electronics Corporation 99.8 Form of Notice of Guaranteed Delivery relating to the conversion and tender of Sensormatic 6 1/2% Convertible Preferred Stock.* 99.9 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees relating to the conversion and tender of Sensormatic 6 1/2% Convertible Preferred Stock.* 99.10 Form of Letter From Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients relating to the conversion and tender of Sensormatic 6 1/2% Convertible Preferred Stock.*
- -------- * Previously filed. EX-2.2 3 dex22.txt AMENDMENT NO. 1 TO AGREEMENT OF MERGER Exhibit 2.2 Amendment No. 1, dated as of August 23, 2001 (this "Amendment"), to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 3, 2001, between TYCO ACQUISITION CORP. XXIV (NV), ("Acquiror"), a Nevada Corporation and a direct, wholly owned subsidiary or TYCO INTERNATIONAL LTD. ("Guarantor"), a Bermuda company and SENSORMATIC ELECTRONICS CORPORATION, a Delaware corporation (the "Company"), including a guarantee (the "Guarantee") of Guarantor. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement. WITNESSETH: WHEREAS, Acquiror and the Company have entered into the Merger Agreement; and WHEREAS, Acquiror and the Company desire to amend the Merger Agreement, in accordance with Section 8.04 thereof, to (i) confirm their agreement with respect to the first sentence of Section 1.01(b) of the Merger Agreement and (ii) correct an error in the wording of Section 7.01(j) of the Merger Agreement, such correction to reflect the initial intentions and understandings of the parties with respect to such provision, such correction being consistent with the statements in the Prospectus, dated August 23, 2001, contained in Guarantor's Registration Statement on Form S-4 filed by Guarantor with the Securities and Exchange Commission in connection with the Offer, describing such provision; and NOW THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, Acquiror and the Company agree as follows: 1. Amendment to Section 1.01(b). Section 1.01(b) of the Merger Agreement is hereby amended by inserting the words "or such later day as the Company and Acquiror may mutually agree" at the end of the first sentence of this Section. 2. Amendment to Section 7.01(j). Section 7.01(j) of the Merger Agreement is hereby amended by inserting the word "initial" before the words "Designated Expiration Date" and the words "(without giving effect to any extensions)" after the words "Designated Expiration Date" both in clause (i) and in clause (ii) of this Section. 3. Authorization. Each party hereto represents to the other that such party (a) has all necessary corporate power and authority to enter into this Amendment; (b) the execution and delivery by each party hereto of this Amendment have been duly authorized by all requisite corporate action on the part of such party; and (c) this Amendment has been duly executed and delivered by each party hereto. 4. Merger Agreement Remains in Effect. Except as expressly amended by this Amendment, the Merger Agreement remains in full force and effect and nothing in this Amendment shall otherwise affect any other provision of the Merger Agreement or the rights and obligations of the parties thereto. 5. Counterparts. This Amendment may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same instrument. 6. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York applicable to contracts executed and fully performed within the State of New York, except to the extent that the DGCL applies and, to that extent, by the internal laws of the State of Delaware. 1 IN WITNESS WHEREOF, Acquiror and the Company have caused this Amendment to be signed by their respective officers thereunto duly authorized, all as of the date first written above. Tyco Acquisition Corp. XXIV (NV), By: /s/ Mark H. Swartz ---------------------------------- Name: Mark H. Swartz Title: Vice President Sensormatic Electronics Corporation By: /s/ Per-Olof Loof ---------------------------------- Name: Per-Olof Loof Title: President and Chief Executive Officer Acknowledged and Agreed that for all purposes of the Guarantee, the term Agreement shall mean the Merger Agreement as amended by this Amendment. Tyco International Ltd. By: /s/ Mark H. Swartz ------------------------------------- Name: Mark H. Swartz Title: Executive Vice President and Chief Financial Officer 2 EX-23.1 4 dex231.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-4 of Tyco International Ltd. of our report dated October 24, 2000, except as to Note 25 which is as of December 4, 2000, relating to the financial statements and financial statement schedule, which appears in Tyco International Ltd.'s Annual Report on Form 10-K for the year ended September 30, 2000. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers Hamilton, Bermuda September 10, 2001 EX-23.2 5 dex232.txt CONSENT OF KPMG LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors The CIT Group, Inc. We consent to the use of our report dated January 25, 2001, except as to Note 25, which is as of March 13, 2001, relating to the consolidated balance sheets of The CIT Group, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000, incorporated by reference in Amendment No. 1 to the Registration Statement on Form S-4 of Tyco International Ltd., which report appears in the April 3, 2001 Current Report on Form 8-K of Tyco International Ltd., which is also incorporated by reference herein, and to the reference to our firm under the heading "Experts" in the Registration Statement. /s/ KPMG LLP Short Hills, New Jersey September 10, 2001 EX-23.3 6 dex233.txt CONSENT OF ARTHUR ANDERSON LLP EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-4 of Tyco International Ltd. of our report dated February 12, 1999 (except with respect to the matter disclosed in Note 18 Merger with Tyco International Ltd., as to which the date is April 2, 1999) on our audit of the consolidated balance sheet of AMP Incorporated and subsidiaries as of September 30, 1998, and the related consolidated statements of income, shareholders' equity and cash flows for the year ended September 30, 1998 included in the Tyco International Ltd. Form 10-K filed December 21, 2000 and to all references to our Firm included in this Registration Statement. /s/ Arthur Andersen LLP Philadelphia, Pennsylvania September 10, 2001 EX-23.4 7 dex234.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of Tyco International Ltd. of our report dated August 1, 2000 relating to the financial statements and financial statement schedule which appears in Sensormatic Electronics Corporation's Annual Report on Form 10-K for the year ended June 30, 2000. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Miami, Florida September 10, 2001 EX-23.5 8 dex235.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.5 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated August 13, 1998, in Amendment No. 1 to the Registration Statement (Form S-4, No. 333-68240) and related Prospectus of Tyco International Ltd., with respect to the consolidated statements of operations, changes in shareholders' equity and cash flows and related schedule of Sensormatic Electronics Corporation for the year ended June 30, 1998 included in the Annual Report (Form 10-K) for the year ended June 30, 2000. /s/ Ernst & Young LLP West Palm Beach, Florida September 10, 2001 EX-99.1 9 dex991.txt FORM OF LETTER OF TRANSMITTAL Letter of Transmittal EXHIBIT 99.1 to Tender Outstanding Shares of Common Stock of SENSORMATIC ELECTRONICS CORPORATION to TYCO ACQUISITION CORP. XXIV (NV) a Wholly-Owned Subsidiary of Tyco International Ltd. in Exchange for Common Shares of TYCO INTERNATIONAL LTD. Having a Value of $24.00 (determined and subject to an exception as described below) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON MONDAY, OCTOBER 1, 2001, UNLESS THE OFFER IS EXTENDED. The exchange agent for the offer is: Mellon Investor Services LLC By Mail: By Overnight Delivery: By Hand Delivery: Reorganization Reorganization Department Reorganization Department 85 Challenger Road Department P.O. Box 3301 Mail Stop--Reorg 120 Broadway South Hackensack, New Ridgefield Park, New 13th Floor Jersey Jersey New York, New York 07606 07660 10271 Facsimile transmission (for eligible institutions only): (201) 296-4293 Confirm receipt of facsimile by telephone only: (201) 296-4860 Delivery of this letter of transmittal to an address other than as set forth above or transmission of instructions via facsimile to a number other than as set forth above will not constitute a valid delivery to the exchange agent. You must sign this letter of transmittal where indicated below and complete the Substitute Form W-9 provided below. Before completing this letter of transmittal, please read the instructions carefully. DESCRIPTION OF COMMON SHARES TENDERED - --------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) (If blank, please fill in exactly as name(s) appear(s) Common Shares Tendered on share certificate(s)) (Attach additional list if necessary) - ------------------------------------------------------------------------------- Share Certificate Total Number(s)/1/ Number of (Attach signed Number of Shares Shares list if necessary) Represented Tendered/2/ --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Total Number of Shares
- -------------------------------------------------------------------------------- (1) Need not be completed by book-entry stockholders. (2) Unless otherwise indicated, it will be assumed that all Sensormatic common shares represented by certificates delivered to the exchange agent are being tendered hereby. See Instruction 4. You have received this letter of transmittal in connection with the offer of Tyco Acquisition Corp. XXIV (NV), a Nevada corporation and a wholly-owned subsidiary of Tyco International Ltd., a Bermuda company, to exchange a fraction of a common share, par value $0.20 per share, of Tyco for each outstanding share of common stock, par value $0.01 per share, of Sensormatic Electronics Corporation, a Delaware corporation, as described in the prospectus dated August 23, 2001. The terms and conditions contained in the prospectus and in this letter of transmittal and any amendments and supplements thereto collectively constitute the "offer." You should use this letter of transmittal to deliver to the exchange agent your Sensormatic common shares represented by stock certificates for tender. If you are delivering your Sensormatic common shares by book-entry transfer to an account maintained by the exchange agent at The Depository Trust Company, you may use this letter of transmittal or you may use an agent's message (as defined in Instruction 1 below). In this document, stockholders who deliver certificates representing their Sensormatic common shares are referred to as "certificate stockholders." Stockholders who deliver their Sensormatic common shares through book-entry transfer are referred to as "book-entry" stockholders. If certificates for your Sensormatic common shares are not immediately available or you cannot deliver your certificates and all other required documents to the exchange agent on or prior to the expiration date of the offer, or you cannot comply with the book-entry transfer procedures on a timely basis, you may nevertheless tender your Sensormatic common shares according to the guaranteed delivery procedures set forth in the prospectus under "The Offer--Guaranteed Delivery." The term "expiration date" means 6:00 p.m., New York City time, on Monday, October 1, 2001, or, if the offer is extended, the latest time and date at which the offer, as extended, will expire. See Instruction 1. Delivery of documents to DTC will not constitute delivery to the exchange agent. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY. [_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution _______________________________________________ DTC Participant Number ______________________________________________________ Transaction Code Number _____________________________________________________ [_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ____________________________________________ Window Ticket Number (if any) or DTC Participant Number: ____________________ Date of Execution of Notice of Guaranteed Delivery: _________________________ Name of Institution that Guaranteed Delivery: _______________________________ 2 Ladies and Gentlemen: I (or we, if there are co-stockowners), hereby tender, upon the terms and subject to the conditions of the offer, the above-described Sensormatic common shares pursuant to Tyco Acquisition's offer to exchange a fraction of a Tyco common share having a value of $24.00 (determined as described in the prospectus), for each outstanding Sensormatic common share. If the Tyco average share price (determined as described in the prospectus) is less than $46.25, Tyco Acquisition may terminate the merger agreement unless Sensormatic's board of directors agrees to an exchange ratio of 0.5189 Tyco shares for each Sensormatic common share, in which event Sensormatic common stockholders would receive a fraction of a Tyco common share valued based on such average share price at less than $24.00 for each Sensormatic common share. Upon the terms and subject to the conditions of the offer, and effective upon acceptance of the Sensormatic common shares tendered with this letter of transmittal in accordance with the terms of the offer, I hereby sell, assign and transfer to Tyco Acquisition all right, title and interest in and to all of such Sensormatic common shares and, unless the exchange ratio is appropriately adjusted to reflect such issuance, any and all other Sensormatic common shares or other securities issued or issuable in respect thereof on or after August 3, 2001 ("distributions"). In addition, I irrevocably constitute and appoint the exchange agent as my true and lawful agent and attorney-in-fact with respect to such Sensormatic common shares and distributions, with full power of substitution, which power of attorney is an irrevocable power coupled with an interest, to: . deliver certificates for such Sensormatic common shares and all distributions, or transfer ownership of such Sensormatic common shares and all distributions on the account books maintained by DTC, together with all accompanying evidences of transfer and authenticity, to, or upon the order of Tyco Acquisition, . present such Sensormatic common shares and all distributions for transfer on the books of Sensormatic, and . receive all benefits and otherwise exercise all rights of beneficial ownership of such Sensormatic common shares and all distributions, all in accordance with the terms and subject to the conditions of the offer. By executing this letter of transmittal, I hereby irrevocably appoint each of Mark H. Swartz and Mark A. Belnick, acting singly, in their respective capacities as officers of Tyco Acquisition, and their successors, as my attorneys-in-fact and proxies, each with full power of substitution and resubstitution, . to vote at any annual or special meeting of Sensormatic's stockholders or any adjournment or postponement thereof or otherwise in such manner as each attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper, . to execute any written consent concerning any matter as each attorney-in- fact and proxy or his substitute shall in his sole discretion deem proper with respect to, and . to otherwise act as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, all of the Sensormatic common shares and all distributions tendered with this letter of transmittal and accepted for exchange by Tyco Acquisition. This appointment will be effective if and when, and only to the extent that, Tyco Acquisition accepts the Sensormatic common shares tendered with this letter of transmittal for exchange pursuant to the offer. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for exchange of such Sensormatic common shares in accordance with the terms of the offer. The acceptance for exchange shall, without further action, revoke any prior powers of attorney and proxies granted by me at any time with respect to such Sensormatic common shares and all distributions, and no subsequent powers of attorney, proxies, consents or revocations may be given by me and, if given, will not be deemed effective. In order for my Sensormatic common shares or distributions to be deemed validly tendered, immediately upon Tyco Acquisition's acceptance for exchange of my Sensormatic common shares, Tyco Acquisition or its designee must be able to exercise full voting, consent and other rights with respect to such Sensormatic common shares and all distributions, including voting at any meeting of Sensormatic's stockholders. I hereby represent and warrant that: (1) I have full power and authority to tender, sell, assign and transfer the Sensormatic common shares tendered with this letter of transmittal and all distributions; (2) I am the registered holder of 3 such Sensormatic common shares or the certificate(s) representing these shares have been endorsed to me or in blank or I am a participant in DTC whose name appears on a security position listing as the owner of the shares; and (3) such Sensormatic common shares are free and clear of all liens, restrictions, adverse claims and encumbrances. I will, upon request, execute and deliver any additional documents deemed by the exchange agent or Tyco Acquisition to be necessary or desirable to complete the sale, assignment and transfer of the Sensormatic common shares tendered with this letter of transmittal and all distributions. In addition, I shall remit and transfer promptly to the exchange agent for the account of Tyco Acquisition all distributions in respect of such Sensormatic common shares, accompanied by appropriate documentation of transfer, and, pending the remittance and transfer. Tyco Acquisition is entitled to all rights and privileges as owner of each distribution and may choose not to exchange such Sensormatic common shares or may reduce from the total consideration due, the amount or value of each distribution as determined by Tyco Acquisition in its sole discretion. I represent and warrant that I have received a copy of the prospectus and this letter of transmittal and agree to all the terms and conditions of the offer. All authority herein conferred or agreed to be conferred will survive my death or incapacity, and any of my obligations hereunder will be binding upon my heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns. Except as stated in the prospectus, this tender is irrevocable. The valid tender of Sensormatic common shares pursuant to any one of the procedures described in the prospectus under "The Offer--Procedure for Tendering Shares" and in the instructions to this letter of transmittal will constitute a binding agreement between me and Tyco Acquisition upon the terms and subject to the conditions of the offer. I recognize that under certain circumstances set forth in the prospectus, Tyco Acquisition may not be required to accept for exchange any of the Sensormatic common shares tendered hereby. If I am a certificate stockholder, my Tyco common shares will be issued under Tyco's Direct Registration System ("DRS"), and no physical certificate will be delivered in exchange for my Sensormatic common shares. Instead, the shares will be credited to an account maintained on my behalf by Mellon Investor Services LLC, Tyco's transfer agent. I can request a physical certificate from Tyco at any time. No fraction of a Tyco common share will be issued to me. Instead, a check will be issued to me for the cash value of any fraction of a Tyco common share that I would otherwise be entitled to receive. Unless "Special Issuance Instructions" or "Special Delivery Instructions" are provided below, please issue the Tyco common shares under DRS, any check for cash in lieu of fractional Tyco common shares and any certificates for Sensormatic common shares not tendered or not accepted for exchange in the name(s) of (and deliver any documents, as appropriate, to), the registered holder(s) appearing above under "Description of Shares Tendered." If "Special Issuance Instructions" or "Special Delivery Instructions" are provided below, please issue the Tyco common shares under DRS, any check for cash in lieu of a fractional Tyco common share and any certificates for Sensormatic common shares not tendered or not accepted for exchange in the name of (and deliver any documents, as appropriate, to), the person or persons as indicated. Unless otherwise indicated in "Special Issuance Instructions" below, please return any Sensormatic common shares tendered with this letter by book-entry transfer that are not accepted for exchange by crediting the account at DTC designated above. I recognize that Tyco Acquisition has no obligation to transfer any Sensormatic common shares from the name of the registered holder of such shares if Tyco Acquisition does not accept any or all of such shares for exchange. 4 SPECIAL PAYMENT INSTRUCTIONS (See SPECIAL DELIVERY INSTRUCTIONS Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7) Your DRS statement and a check Your DRS statement, a check for for any fractional share amount any fractional share amount and will be issued in the name(s) of certificates for the Sensormatic the registered holder(s) indi- common shares not tendered or not cated under "Description of accepted for exchange will be Shares Tendered," and any of your sent to the mailing address indi- Sensormatic common shares ten- cated under "Description of dered and delivered by book-entry Shares Tendered" unless otherwise transfer that are not accepted instructed below. for exchange will be returned by credit to the account maintained at DTC indicated above unless otherwise instructed below. Name______________________________ (Please Print) Address __________________________ Name _____________________________ (Please Print) __________________________________ (Include Zip Code) Address __________________________ __________________________________ __________________________________ Taxpayer Identification or Social (Include Zip Code) Security Number (See Substitute Form W-9) __________________________________ (Tax Identification or Social Security Number) (See Substitute Form W-9) Credit the shares tendered by book-entry transfer that are not accepted for exchange to the DTC account set forth below: __________________________________ (Account Number) 5 IMPORTANT: STOCKHOLDERS SIGN HERE (See Instruction 5) ____________________________________________________________________________ Signature(s) of Stockholder(s) Dated ____, 2001 (Must be signed by registered holder(s) exactly as name(s) appear(s) on the Sensormatic common stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) Name(s) ____________________________________________________________________ (Please Print) Capacity (full title) ______________________________________________________ Address ____________________________________________________________________ (Include Zip Code) Area Code and Telephone Number _____________________________________________ Taxpayer Identificationor Social Security Number ___________________________ (See Substitute Form W-9) GUARANTEE OF SIGNATURE(S) (For use by eligible institutions only; see Instructions 2 and 5) Name of Firm _______________________________________________________________ Address ____________________________________________________________________ (Include Zip Code) Authorized Signature _______________________________________________________ Name(s) ____________________________________________________________________ (Please Print) Area Code and Telephone Number _____________________________________________ Dated ____, 2001 Place medallion guarantee in space below. 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery Procedures. You must complete this letter of transmittal if you are tendering your Sensormatic common shares by (1) forwarding your Sensormatic common stock certificates and any other required documents to the exchange agent or (2) delivering your Sensormatic common shares pursuant to the book-entry transfer procedures without an agent's message. A manually executed facsimile of this document may be used in lieu of an original. For you to validly tender your Sensormatic common shares pursuant to the offer, . a properly completed and duly executed letter of transmittal, along with any required signature guarantees, the stock certificates and any other required documents must be transmitted to and received by the exchange agent at one of its addresses set forth in this letter of transmittal before the expiration date, or . if such Sensormatic common shares are tendered pursuant to the procedures for book-entry transfer, a book-entry confirmation of receipt must be received by the exchange agent before the expiration date and an agent's message, or a letter of transmittal as provided in the previous clause, must be received by the exchange agent before the expiration date, or . you must comply with the guaranteed delivery procedures set forth below and in the prospectus under "The Offer--Guaranteed Delivery." The procedures for delivering shares by book-entry transfer are described in the prospectus under "The Offer--Procedure for Tendering Shares." The term "agent's message" means a message transmitted by DTC to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Sensormatic common shares, that such participant has received and agrees to be bound by the terms of the letter of transmittal and that Tyco Acquisition may enforce such agreement against the participant. If you wish to tender Sensormatic common shares pursuant to the offer and your certificates for Sensormatic common shares are not immediately available or you cannot deliver the certificates and all other required documents to the exchange agent prior to the expiration date or you cannot complete the procedure for book-entry transfer on a timely basis, you may tender your Sensormatic common shares by properly completing and duly executing the notice of guaranteed delivery pursuant to the guaranteed delivery procedure set forth below and in the prospectus under "The Offer--Guaranteed Delivery." In order to tender your shares using guaranteed delivery procedures, . you must make your tender by or through an eligible institution; . a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by Tyco Acquisition, must be received by the exchange agent on or prior to the expiration date; and . either . the certificates for all tendered Sensormatic common shares in proper form for transfer, together with a properly completed and duly executed letter of transmittal, with any required signature guarantees, or . a book-entry confirmation with respect to all tendered Sensormatic common shares together with a properly completed and duly executed letter of transmittal with any required signature guarantees or an agent's message, and all other required documents must be received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. You may deliver the notice of guaranteed delivery by hand or transmit it by facsimile transmission or mail to the exchange agent. You must include a guarantee by an eligible institution in the form set forth in that notice. 7 The method of delivery of the Sensormatic common shares, this letter of transmittal, the certificate(s) representing Sensormatic common shares and all other required documents, including delivery through DTC, is at your sole risk and option. The delivery will be deemed made only when actually received by the exchange agent (including, in the case of a book-entry transfer, by book-entry confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No alternative, conditional or contingent tenders will be accepted, and no fractional Tyco common shares will be issued. By executing this letter of transmittal (or a manually signed facsimile), you waive any right to receive any notice of acceptance of your Sensormatic common shares for exchange. 2. Guarantee of Signatures. No signature guarantee is required on this letter of transmittal if: . you signed this letter of transmittal as the registered holder(s) of Sensormatic common shares (which term includes any participant in DTC whose name appears on a security position listing as the owner of Sensormatic common shares) tendered with this letter of transmittal, unless you have completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions," or . you are tendering Sensormatic common shares for the account of a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agent's Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution" (as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended). Institutions satisfying the criteria of the immediately preceding clause are referred to as "eligible institutions." In all other cases, all signatures on this letter of transmittal must be guaranteed by an eligible institution. See Instruction 5 of this letter of transmittal. 3. Inadequate Space. If the space provided under "Description of Shares Tendered" is inadequate, list the number of Sensormatic common shares tendered and the share certificate numbers on a separate signed schedule and attach the schedule to this letter of transmittal. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If you are tendering fewer than all of the Sensormatic common shares evidenced by any share certificate delivered to the exchange agent, fill in the number of Sensormatic common shares that are to be tendered in the box entitled "Number of Shares Tendered." New certificate(s) for the remainder of the Sensormatic common shares that were evidenced by the old certificates will be sent to you, unless you indicate otherwise in the appropriate box on this letter of transmittal, as soon as practicable after the expiration date or the termination of the offer. All Sensormatic common shares represented by certificates delivered to the exchange agent will be deemed to have been tendered unless you indicate otherwise. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If you are the registered holder(s) of the tendered Sensormatic common shares, please sign your name on this letter of transmittal as it appears on the face of your Sensormatic common share certificate(s) without alteration, enlargement or any change. If any of the tendered Sensormatic common shares are held of record by two or more joint owners, all such owners must sign this letter of transmittal. If any of the tendered Sensormatic common shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate letters of transmittal as there are different registrations of certificates. If a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity signs this letter of transmittal, such person should indicate his or her capacity when signing and submit proper evidence of that capacity satisfactory to Tyco Acquisition. 8 If you sign this letter of transmittal as the registered holder(s) of the transmitted Sensormatic common shares, no endorsements of the stock certificates or separate stock powers are required unless payment or certificates for Sensormatic common shares not tendered or not accepted for exchange are to be issued in the name of another person. Signatures on any such share certificates or stock powers must be guaranteed by an eligible institution. If a person other than the registered holder(s) signs this letter of transmittal and the transmitted Sensormatic common shares are evidenced by certificates, the stock certificates must be endorsed or accompanied by appropriate stock powers and signed exactly as the name(s) of the registered holder(s) appear(s) on the share certificates. Signature(s) on any such stock certificates or stock powers must be guaranteed by an eligible institution. 6. Stock Transfer Taxes. If delivery of the consideration in respect of the offer is to be made to, or if certificates for Sensormatic common shares not tendered or not accepted for exchange are to be registered in the name of, any person other than the registered holder(s), or if any person(s) other than the registered holder of the tendered certificates signed this letter of transmittal, the amount of any stock transfer taxes payable on account of a transfer to any other person will be deducted from the overall consideration paid unless evidence satisfactory to Tyco Acquisition of the payment of such taxes, or exemption therefrom, is submitted. 7. Special Issuance and Delivery Instructions. If the documentation for Tyco common shares delivered in the offer under DRS, any check for cash in lieu of fractional Tyco common shares, and certificates for Sensormatic common shares not accepted for exchange or not tendered are to be issued in the name of and/or delivered to, a person other than the person signing this letter of transmittal, or to an address other than that shown above, the appropriate boxes on this letter of transmittal should be completed. If you are delivering your Sensormatic common shares by book-entry transfer, you may request that Sensormatic common shares not purchased be credited to an account maintained at DTC and designated by you in the box entitled "Special Issuance Instructions." If no such instructions are given, any such Sensormatic common shares not purchased will be returned by crediting the DTC account designated above as the account from which such Sensormatic common shares were delivered. 8. Requests for Assistance or Additional Copies. You may direct any questions and requests for assistance or additional copies of the prospectus, this letter of transmittal, the notice of guaranteed delivery and the guidelines for certification of taxpayer identification number on Substitute Form W-9 to the information agent at its address and phone number set forth below, or from your broker, dealer, commercial bank, trust company or other nominee. 9. Waiver of Conditions. Subject to the terms of the merger agreement, Tyco Acquisition reserves the absolute right in its sole discretion to waive certain conditions to the offer and to make changes in the terms or the conditions to the offer. However, without the prior written consent of Sensormatic, no change can be made that changes or waives the basic conditions of the offer, decreases the number of Sensormatic common shares sought in the offer, changes the form or decreases the amount of consideration to be paid, imposes any conditions to the offer in addition to those set forth in the merger agreement, extends the offer (except as set forth in the merger agreement), or makes any other change to any of the terms and conditions to the offer that is adverse to the holders of Sensormatic common shares. 10. Lost, Destroyed or Stolen Share Certificates. If any certificate(s) representing your Sensormatic common shares has been lost, destroyed or stolen, you should contact the exchange agent for instructions at 1-888-634-6483. This letter of transmittal and related documents cannot be processed until the instructions of the exchange agent have been followed. Tyco Acquisition may, in its discretion, require you to deliver a bond in a reasonable sum as indemnity against any claim that might be made against Tyco, Tyco Acquisition or the exchange agent with respect to alleged lost, destroyed or stolen certificates. 11. Substitute Form W-9. Under United States federal income tax law, a stockholder whose tendered Sensormatic common shares are accepted for payment is required to provide the exchange agent (as payer) with such stockholder's correct U.S. social security number, U.S. individual taxpayer identification number or U.S. employer identification number (each, a taxpayer identification number or a "TIN") on Substitute Form W-9 provided below. If such stockholder is an individual, the TIN is such person's social security number. The TIN of a resident alien who does not have and is not eligible to obtain a social security number is such person's U.S. Internal Revenue Service ("IRS") individual taxpayer identification number. If a tendering stockholder is subject to federal backup withholding, the stockholder must cross out 9 item (2) in Part 2 of the "Certification" box on the Substitute Form W-9. If the exchange agent is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the IRS. In addition, any payment of cash in lieu of fractional shares that is made to such stockholder may be subject to U.S. federal backup withholding. If you have not been issued a TIN and have applied for a number or intend to apply for a number in the near future, you should write "Applied For" in the space provided for the TIN in Part I, check the box in Part III, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and payment is made before the exchange agent is provided with a TIN, the exchange agent may retain the applicable backup withholding percentage on any payment of cash in lieu of a fractional Tyco common share and either remit such amount to the U.S. Internal Revenue Service if such TIN is not provided within 60 days or pay over such amount to you upon the furnishing of a TIN within 60 days. The backup withholding rate will be 30.5% for payments made in 2001 and 30% for payments made in 2002 and 2003. If federal backup withholding applies, the exchange agent will retain the applicable backup withholding percentage on any payment of cash in lieu of a fractional share made to the stockholder. U.S. federal backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. Certain stockholders, including, among others, all corporations and certain non-United States individuals, are not subject to U.S. federal backup withholding. In order for a non-United States individual to qualify as an exempt recipient, that stockholder must submit to the exchange agent a properly completed IRS Form W-8BEN, signed under penalties of perjury, attesting to that individual's exempt status. Such forms may be obtained from the exchange agent. Exempt stockholders, other than non-United States individuals, should furnish their TIN, write "EXEMPT" on the face of the Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to the exchange agent. See the enclosed guidelines for certification of taxpayer identification number on Substitute Form W-9 for additional instructions. 10 IMPORTANT TAX INFORMATION (See also Instruction 11) Purpose of Substitute Form W-9 To prevent U.S. federal backup withholding on payments of cash in lieu of a fractional Tyco common share that are made to you with respect to Sensormatic common shares acquired pursuant to the offer, you are required to notify the exchange agent of your correct taxpayer identification number ("TIN") by completing the Substitute Form W-9 below certifying that the TIN provided on such form is correct (or that you are awaiting a TIN) and that (1) you are exempt from federal backup withholding, (2) you have not been notified by the IRS that you are subject to federal backup withholding as a result of a failure to report all interest or dividends, or (3) the IRS has notified you that you are no longer subject to federal backup withholding. What Number to Give the Exchange Agent You are required to give the exchange agent the TIN of the record holder(s) of the Sensormatic common shares. If the Sensormatic common shares are in more than one name or are not in the name of the actual owner, consult the enclosed guidelines for certification of taxpayer identification number on Substitute Form W-9 for additional guidelines on which number to report. PAYER: MELLON INVESTOR SERVICES LLC (See Instruction 11 and the enclosed guidelines for certification of taxpayer identification number on Substitute Form W-9) Part I: PLEASE PROVIDE YOUR Social Security Number TAXPAYER IDENTIFICATION OR ___________________ SUBSTITUTE NUMBER IN THE SPACE AT THE Employer Identification FORM W-9 RIGHT AND CERTIFY BY Number SIGNING AND DATING BELOW. -------------------------------------------------------- Part II: For Payees exempt from backup withholding, see the enclosed guidelines for certification of taxpayer's identification number on Substitute Form W-9 and complete as instructed under "Important Tax Information" above. For most individuals and sole proprietors, this is your social security number. For other entities, it is your employer identification number. If you do not have a number, see "How to obtain a TIN" in the enclosed guidelines. Note: if the account is in more than one name, see the chart on page 1 of the enclosed guidelines to determine what number to enter. Department of the Treasury Internal Revenue Service -------------------------------------------------------- Payer's Request for Certification: Under penalty of per- Taxpayer jury, I certify that: Identification (1) the number shown on this form is Number (TIN) my correct taxpayer identification number (or I am waiting for a number to be issued to me); and Part III Awaiting (2) I am not subject to backup with- TIN [_] holding either because I have not been notified by the Internal Revenue Service that I am subject to backup withholding as a result of a failure to report all interest and dividends or I have been notified by the IRS that I am no longer subject to backup withholding. Certification Instructions. You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or divi- dends on your tax return. However, if after being notified by the IRS that you were subject to backup withhold- ing you received another notification from the IRS stating that you are not longer subject to backup withholding, do not cross out such item (2). If you are awaiting a taxpayer identifi- cation number to be issued to you, check the box under Part III. Signature: _____________ Date: ______ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF THE APPLICABLE BACKUP WITHHOLDING PERCENTAGE ON ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW INSTRUCTION 11 AND THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART III OF SUBSTITUTE FORM W-9. Certificate of Awaiting Taxpayer Identification Number. I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number within sixty (60) days, the applicable backup withholding percentage on all reportable payments made to me will be withheld and remitted to the Internal Revenue Service until I provide a number. Signature: __________________________________ Date: _____________ Name (Please Print): _____________________________________________________ You may direct any questions or requests for assistance or additional copies of the prospectus, this letter of transmittal and other tender offer materials to the information agent at the telephone number and location listed below, or from your broker, dealer, commercial bank or trust company or other nominee. The information agent for the offer is: [LOGO OF MACKENZIE PARTNERS, INC.] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 EX-99.7 10 dex997.txt FORM OF NOTICE OF CONVERSION & LETTER OF TRANSMITT EXHIBIT 99.7 NOTICE OF CONVERSION and LETTER OF TRANSMITTAL To Convert Shares of Preferred Stock (Represented by Depositary Shares) and To Tender Resulting Shares of Common Stock of SENSORMATIC ELECTRONICS CORPORATION to TYCO ACQUISITION CORP. XXIV (NV) a Wholly Owned Subsidiary of Tyco International Ltd. In Exchange for Common Shares of TYCO INTERNATIONAL LTD. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 6:00 P.M., NEW YORK CITY TIME, ON MONDAY, OCTOBER 1, 2001, UNLESS THE OFFER IS EXTENDED. The Conversion Agent and the Exchange Agent for the Offer is: Mellon Investor Services LLC By Mail: By Overnight Delivery: By Hand Delivery: Reorganization Reorganization Department Reorganization Department 85 Challenger Road Department P.O. Box 3301 Mail Stop--Reorg 120 Broadway South Hackensack, New Ridgefield Park, New 13th Floor Jersey 07606 Jersey 07660 New York, New York 10271 Facsimile Transmission (for eligible institutions only): (201) 296-4293 Confirm Receipt of Facsimile by Telephone Only: (201) 296-4860 Delivery of this Notice of Conversion and Letter of Transmittal (this "Document") to an address other than as set forth above or transmission of instructions via facsimile to a number other than as set forth above will not constitute a valid delivery to the Conversion Agent. You must sign this Document where indicated below. Before completing this letter of transmittal, please read the instructions carefully. DESCRIPTION OF HOLDER AND NUMBER OF DEPOSITARY SHARES DELIVERED - --------------------------------------------------------------------------------
Name and Address of Holder Total Number of Depositary Shares Delivered/1/,/2/ - ----------------------------------------------------------------------------------------------------- -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- -------------------------------------------------- --------------------------------------------------
- -------------------------------------------------------------------------------- (1) All Sensormatic preferred shares of the holder that are delivered will be converted, and all common shares issuable upon such conversion will be tendered. (2) Each Depositary Share represents a one-tenth interest in a Preferred Share. Depositary Shares must be delivered in integral multiples of ten. You have received this Document as a holder of Depositary Shares ("Depositary Shares"), each representing a one-tenth interest in a share of 6 1/2% Convertible Preferred Stock, par value $0.01 per share (the "Preferred Shares"), of Sensormatic Electronics Corporation, a Delaware corporation ("Sensormatic"), in connection with the offer of Tyco Acquisition Corp. XXIV (NV), a Nevada corporation ("Tyco Acquisition") and a wholly owned subsidiary of Tyco International Ltd., a Bermuda company ("Tyco"), to exchange a fraction of a common share, par value $0.20 per share, of Tyco for each outstanding share of common stock, par value $0.01 per share, of Sensormatic ("Common Shares"), upon the terms and subject to the conditions contained in the prospectus, dated August 23, 2001 (the "Prospectus"), and in the related letter of transmittal for tendering Common Shares (the "Common Letter of Transmittal") and in any amendments and supplements thereto, which collectively constitute the "Offer." For purposes of this Document, you will also be deemed to be the holder of the Preferred Shares represented by your Depositary Shares, and delivery of such Depositary Shares pursuant to this Document will also constitute delivery of the Preferred Shares represented thereby pursuant to this Document. The terms and conditions of the Common Letter of Transmittal, insofar as they are relevant to holders of Preferred Shares who wish to convert and tender their Preferred Shares using this Document, are set forth in this Document. The Offer is not being made for Preferred Shares. Holders of Preferred Shares who wish to participate in the Offer may do so either by: . converting their Preferred Shares into Common Shares in accordance with the standard conversion procedures and tendering the Common Shares issued on conversion in accordance with the procedures set forth in the Prospectus and the Common Letter of Transmittal, or . converting their Preferred Shares into Common Shares and tendering the Common Shares issuable upon conversion in a single step utilizing the procedures set forth in and subject to the terms and conditions of this Document. If you convert your Preferred Shares and tender the Common Shares issuable upon conversion utilizing the procedures in this Document, you will receive the dividend payment on the Preferred Shares payable on October 1, 2001 if you were a holder of your Preferred Shares on the record date of September 21, 2001 (see below). Procedures for Converting and Tendering under this Document To facilitate conversion and tender of Preferred Shares through the procedure provided in this Document, Sensormatic has appointed Mellon Investor Services LLC as its conversion agent (the "Conversion Agent"). The Conversion Agent also acts as the exchange agent for the Offer. By delivering their Preferred Shares to the Conversion Agent, holders may convert their Preferred Shares, subject to Tyco Acquisition's initial acceptance of Common Shares in the Offer, and immediately tender the Common Shares issuable upon conversion pursuant to the Offer. In order for delivery of the Preferred Shares to the Conversion Agent for conversion and tender to be effected: . Depositary Shares representing the Preferred Shares being converted must be delivered by book-entry transfer to the account of the Conversion Agent at the Depository Trust Company ("DTC") and the Conversion Agent must receive confirmation of the transfer, . the Conversion Agent must receive this Document, properly completed and duly executed, or an agent's message, and . the Conversion Agent must receive any other deliveries that may be required pursuant to the terms of the Preferred Shares, in each case prior to the expiration time of the Offer. The "expiration time" of the Offer means 6:00 p.m., New York City time, on Monday, October 1, 2001, unless and until Tyco Acquisition extends the period of time for which the Offer is open, in which event the term "expiration time" will mean the latest time and date at which the Offer, as so extended by Tyco Acquisition, will expire. After Tyco Acquisition's initial acceptance of Common Shares in the Offer, Tyco Acquisition may, but is not required to, extend the 2 Offer for one or more periods totaling between three and 20 business days. This period or periods is referred to as a "subsequent offering period." Preferred Shares validly delivered for conversion and tender during the subsequent offering period will be deemed converted and tendered immediately upon delivery. If you cannot comply with the book-entry transfer procedures on a timely basis, you may nevertheless convert your Preferred Shares and tender the underlying Common Shares according to the guaranteed delivery procedures set forth in Instruction 1. If the Offer terminates without Tyco Acquisition accepting Common Shares for exchange in the Offer, any Depositary Shares delivered to the Conversion Agent will be returned to their holders. Only direct participants in DTC whose name appears on DTC's securities position listing as holders of Depositary Shares may deliver Preferred Shares to the Conversion Agent and convert and tender their Preferred Shares in accordance with the procedures provided in this Document. Beneficial owners whose shares are held directly or indirectly by DTC participants as nominees must arrange for their respective nominees to deliver the Depositary Shares that they beneficially own to the Conversion Agent on their behalf. Any DTC participant delivering Depositary Shares in accordance with the procedures of this Document is assumed to be an eligible institution. An "eligible institution" is any bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agent's Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution," as that term is defined in Rule 17Ad-15 promulgated under the Exchange Act. Conversion Price; Dividends The conversion price of the Preferred Shares is $19.52 and the liquidation preference is $25.00 per Depositary Share and $250.00 per Preferred Share, resulting in a conversion ratio of approximately 1.28 Common Shares for each Depositary Share and 12.8 Common Shares for each Preferred Share. Pursuant to the Certificate of Designations (as defined below), the next dividend to be paid on the Preferred Shares (the "Dividend") is payable on October 1, 2001 (the "Dividend Payment Date"). The record date for entitlement to the Dividend will be September 21, 2001. Conversion of any Preferred Shares through the procedures provided in this Document will not occur unless and until the Dividend is first paid. Holders of Preferred Shares as of the record date who convert their Preferred Shares and tender the Common Shares underlying such Preferred Shares in the Offer through the procedures provided in this Document will receive the Dividend even though those Preferred Shares are delivered to the Conversion Agent before the record date or before the Dividend Payment Date. Holders as of the record date who have delivered their Preferred Shares to the Conversion Agent will also receive the Dividend if the Offer is not consummated and the Preferred Shares are returned by the Conversion Agent. Call for Redemption If Common Shares are accepted for exchange in the Offer, Sensormatic has agreed to call for redemption all then outstanding Preferred Shares. If any Preferred Shares are outstanding at the time of initial acceptance of the Common Shares by Tyco Acquisition in the Offer, Sensormatic will mail a notice of redemption no later than one business day after such date. The redemption date will be the thirtieth day after the mailing of such notice and the redemption price will be 103.71% of the liquidation preference plus accrued and unpaid dividends. 3 Ladies and Gentlemen: The undersigned hereby gives Sensormatic notice of exercise of the undersigned's right to convert the above-described Preferred Shares into Common Shares in accordance with the terms of the Certificate of Designations of the Powers, Preferences and Relative, Participating Optional and other Special Rights of the Preferred Shares (the "Certificate of Designations") of Sensormatic, provided that the conversion of the Preferred Shares described above shall be effected and become irrevocable only as follows: . if the Depositary Shares representing such Preferred Shares are duly delivered for conversion prior to the time at which Tyco Acquisition first duly accepts for payment any Common Shares tendered pursuant to the Offer, such conversion shall be effective, and the resulting Common Shares shall be deemed to be tendered in the Offer, as of immediately prior to that initial acceptance of Common Shares for exchange in the Offer (which will not be prior to the initial expiration time set forth above); or . if the Depositary Shares representing such Preferred Shares are delivered during any subsequent offering period, such notice of conversion, shall be effective immediately on due delivery, and the resulting Common Shares shall be deemed to be immediately tendered in the Offer; and . the Dividend due to be paid on the Preferred Shares on the Dividend Payment Date pursuant to the Certificate of Designations will have been paid as described below. The conversion of the above-described Preferred Shares into Common Shares in the manner described above is referred to herein as the "Conversion." In any case, the Conversion shall be deemed not to occur if Tyco Acquisition does not accept any Common Shares for exchange in the Offer. If the Conversion does not occur, the above-described Depositary Shares will be returned to the undersigned promptly following the expiration time or termination of the Offer. Other than during a subsequent offering period, any Depositary Shares representing Preferred Shares surrendered for Conversion pursuant to the procedure provided in this Document may be withdrawn at any time prior to the expiration time of the Offer. For any withdrawal to be effective, the undersigned must follow the procedures for withdrawal in Instruction 2. Sensormatic agrees that this Document or an agent's message shall serve, upon receipt thereof by the Conversion Agent, as a "notice of conversion" to Sensormatic in accordance with section (e)(ii) of the Certificate of Designations with respect to any and all Preferred Shares delivered through a book-entry transfer of the Depositary Shares representing the same to the Conversion Agent's account at DTC. Sensormatic further acknowledges and agrees that the delivery of this Document, properly completed and duly executed, or an agent's message, and the Depositary Shares representing the Preferred Shares being converted to the Conversion Agent, including the enclosure of transfer or similar taxes related to the Conversion, if any, shall be deemed to fulfill all the requirements of section (e)(ii) of the Certificate of Designations for effecting a valid conversion of Preferred Shares. The undersigned acknowledges that the above- referenced Preferred Shares will not be converted if the undersigned fails to pay any transfer or similar taxes that may be required with respect to the Conversion. A holder of Preferred Shares will be deemed to have elected to convert all Depositary Shares representing the Preferred Shares of such holder delivered pursuant to these procedures. Upon Conversion, the undersigned further tenders to Tyco Acquisition the Common Shares issuable upon Conversion of the Preferred Shares delivered pursuant to this Document, as provided above, pursuant to, upon the terms and subject to the conditions of the Offer set forth in the Prospectus enclosed herewith, receipt of which is hereby acknowledged. As of immediately prior to the initial acceptance of Common Shares in the Offer or, if later, upon proper submission of all deliveries required to be made under the terms of this Document and the Certificate of Designations, the undersigned 4 hereby directs the Conversion Agent to effect the Conversion and to tender the Common Shares issuable upon Conversion on behalf of the undersigned in the Offer. No interest will be paid on any amount payable pursuant to the Conversion, in the Offer or in the merger of Sensormatic into Tyco Acquisition, regardless of any delay in making such payment. The representations and warranties set forth in this Document as to the rights, titles and interests of a holder of Depositary Shares as to such Depositary Shares and the Preferred Shares represented thereby and to the Common Shares underlying such Preferred Shares shall not be effective until immediately prior to Conversion. On the terms and subject to the conditions of the Offer, subject to, and effective upon, acceptance for exchange and exchange of the Common Shares issuable upon Conversion and tendered herewith in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to Tyco Acquisition all right, title and interest in and to all of such Common Shares. In addition, the undersigned irrevocably constitutes and appoints the exchange agent as its true and lawful agent and attorney-in-fact with respect to such Common Shares with full power of substitution, which power of attorney is an irrevocable power coupled with an interest, to: . transfer ownership of Common Shares issuable upon Conversion, together with all accompanying evidences of transfer and authenticity, to, or upon the order of, Tyco Acquisition, and . receive all benefits and otherwise exercise all rights of beneficial ownership of such Common Shares, all in accordance with and subject to the terms of the Offer. The undersigned hereby represents and warrants that: (i) the undersigned has full power and authority to give notice of and request the Conversion, tender, sale, assignment and transfer the Common Shares issuable upon Conversion delivered to the Conversion Agent in accordance with the procedures provided in this Document; (ii) the undersigned is the holder of the above-described Depositary Shares representing the Preferred Shares; (iii) such Depositary Shares and Preferred Shares are, and the Common Shares issuable upon Conversion will be, free and clear of all liens, restrictions, adverse claims and encumbrances; and (iv) the undersigned is an eligible institution. The undersigned will, upon request, execute and deliver any additional documents deemed by the exchange agent or Tyco Acquisition to be necessary to complete the sale, assignment and transfer of the Common Shares issuable upon Conversion and tendered in accordance with the procedures provided in this Document. The undersigned represents and warrants that the undersigned has received a copy of the Prospectus and this Document and agrees to all the terms and conditions of the Offer. All authority herein conferred or agreed to be conferred will be binding upon its administrators, representatives, trustees in bankruptcy, successors and assigns. Tenders of Common Shares following Conversion made pursuant to this Document will be irrevocable. The valid tender of Common Shares issuable upon Conversion pursuant to any one of the procedures described in the Prospectus under "The Offer--Procedure for Tendering Shares" and in the instructions to this Document will constitute a binding agreement between the undersigned and Tyco Acquisition upon the terms and subject to the conditions of the Offer. Under certain circumstances set forth in the Prospectus, Tyco Acquisition may not be required to accept for exchange any Common Shares and, if it does not, the Conversion will not occur. No fraction of a Tyco common share will be issued to the undersigned. Instead, a check will be issued to the undersigned for the cash value of any fraction of a Tyco common share that the undersigned would otherwise be entitled to receive. If the Offer is not consummated or if the undersigned fails to comply with the procedures for delivery of Preferred Shares to the Conversion Agent provided in this Document, the Depositary Shares representing the Preferred Shares delivered by the holder to the Conversion Agent will be returned to the account at DTC from which such delivery was made. 5 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS DOCUMENT CAREFULLY. Please provide the following book-entry information: Name of Tendering Institution: _________________________________________ DTC Participant Number: ________________________________________________ Transaction Code Number: _______________________________________________ [_]Check here if shares are being delivered pursuant to a notice of guaranteed delivery previously sent to the Conversion Agent and complete the following: Name of Holder: ________________________________________________________ DTC Participant Number: ________________________________________________ Date of Execution of Notice of Guaranteed Delivery: ____________________ Name of Institution that Guaranteed Delivery: __________________________ IMPORTANT: STOCKHOLDERS SIGN HERE ---------------------------------------------------------------------------- Signature of Stockholder Dated ________________, 2001 Name(s) ____________________________________________________________________ (Please Print) Capacity (full title) ______________________________________________________ Address ____________________________________________________________________ (Include Zip Code) Area Code and Telephone Number _____________________________________________ Taxpayer Identification or Social Security Number __________________________ (Must be signed by or on behalf of the holder exactly as the name appears on a security position listing. Please set forth full title(s) of person(s) acting on behalf of the holder.) 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE CONVERSION AND THE OFFER 1. Delivery of this Document and Shares. You must complete this Document if you are converting your Preferred Shares and tendering your Common Shares issuable upon Conversion by delivering the Depositary Shares representing your Preferred Shares pursuant to the book-entry transfer procedures without an agent's message. A manually executed facsimile of this document may be used in lieu of an original. For you to validly convert your Preferred Shares and tender your Common Shares issuable upon Conversion pursuant to the Offer and in accordance with the procedures provided in this Document: . a book-entry confirmation of receipt must be received by the Conversion Agent before the expiration time of the Offer and an agent's message or this Document, properly completed and duly executed, and any other required documents, must be received by the Conversion Agent before the expiration time; or . you must comply with the guaranteed delivery procedures set forth below. Since each Depositary Share represents one tenth of a Preferred Share, Depositary Shares must be submitted to the Conversion Agent in integral multiples of ten (10). The term "agent's message" means a message transmitted by DTC to, and received by, the Conversion Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC holding Depositary Shares converting the Preferred Shares and tendering the Common Shares issuable upon Conversion, that such participant has received and agrees to be bound by the terms of this Document and that the Conversion Agent and Tyco Acquisition may enforce such agreement against the participant. If you wish to convert Preferred Shares and tender the underlying Common Shares in the Offer pursuant to this Document and you cannot complete the procedure for book-entry transfer on a timely basis, you may do so by properly completing and duly executing the notice of guaranteed delivery pursuant to the guaranteed delivery procedure set forth below. In order to Convert your Preferred Shares using guaranteed delivery procedures, . a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by Sensormatic, must be received by the Conversion Agent on or prior to the expiration time of the Offer; and . a book-entry confirmation with respect to all Depositary Shares representing Preferred Shares to be converted together with this Document, properly completed and duly executed, or an agent's message, and all other required deliveries must be received by the Conversion Agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. You may deliver the notice of guaranteed delivery by hand, transmit it by facsimile transmission or mail it to the Conversion Agent, and you must include a guarantee by an eligible institution in the form set forth in that notice. The method of delivery of the Depositary Shares representing your Preferred Shares, this Document and all other required deliveries, including delivery through DTC, is at your sole risk and option. The delivery will be deemed made only when actually received by the Conversion Agent (including, in the case of Depositary Shares, receipt of a book-entry confirmation). If any documents are delivered by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. All notices of Conversion made pursuant to this Document are contingent on and subject to the conditions described above and no Conversion shall be effected until all such conditions are satisfied. Once Conversion is effected, all tenders will be made immediately and irrevocably. No fractional Common Shares or Tyco common shares will be issued. By executing this Document (or a manually signed facsimile) or delivering an agent's message, you waive any right to receive any notice of conversion of your Preferred Shares or acceptance of the Common Shares issuable upon Conversion for exchange. 7 2. Withdrawal of Conversion. You may withdraw delivery of your Preferred Shares for Conversion and tender at any time until Tyco Acquisition first accepts Common Shares for exchange in the Offer. If a subsequent offering period is available and you deliver your Preferred Shares for Conversion and tender during that period, you will not be able to withdraw your delivery. For your withdrawal to be effective, the Conversion Agent must receive from you a written, telex or facsimile transmission of a notice of withdrawal at one of its addresses set forth above. The notice of withdrawal must specify the name and number of the account at DTC to be credited with the Depositary Shares representing the withdrawn Preferred Shares and must otherwise comply with DTC's procedures. 3. Stock Transfer Taxes. Preferred Shares will not be converted and tendered if the holder fails to pay any transfer or similar taxes that may be required with respect to the Conversion of such Preferred Shares. 4. Waiver of Conditions. Tyco Acquisition reserves the absolute right in its sole discretion, subject to the merger agreement governing the Offer, to waive certain conditions to the Offer and to make changes in the terms or the conditions to the Offer. However, without the prior written consent of Sensormatic, no change in the terms and conditions of the Offer can be made that changes or waives the basic conditions of the Offer (as defined in the Prospectus), decreases the number of Common Shares sought in the Offer, changes the form or decreases the amount of consideration to be paid in the Offer, imposes any conditions to the Offer in addition to those set forth in the merger agreement governing the Offer, extends the Offer (except as set forth in the merger agreement), or makes any other change to any of the terms and conditions to the Offer that is adverse to the holders of Common Shares. 5. Requests for Assistance or Additional Copies. You may direct any questions and requests for assistance or additional copies of the Prospectus, this Document and other Conversion and Offer materials to the information agent at the telephone number and location listed below, or from your broker, dealer, commercial bank or trust company or other nominee. The information agent for the Offer is: [LOGO OF MACKENZIE PARTNERS, INC.] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 -----END PRIVACY-ENHANCED MESSAGE-----