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SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant / /
Filed by party other than the registrant /x/
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
/ / Definitive proxy statement Rule 14a-6(e)(2))
/ / Definitive additional materials
/x/ Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
ADT LIMITED
(Name of Registrant as Specified In Its Charter)
WESTERN RESOURCES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)4 and 0-
11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
The following complaint was filed by Westar Capital, Inc. in the United States
District Court for the Southern District of Florida on December 18, 1996.
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
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WESTAR CAPITAL, INC. x
Plaintiff, x
v. x COMPLAINT
Civ. No. ____
ADT Ltd., Michael A. Ashcroft, x
Stephen J. Ruzika, John E.
Danneberg, Alan B. Henderson, x
James S. Pasman, Jr., W. Peter
Slusser, William W. Stinson, x
Raymond S. Troubh, and
Republic Industries, Inc. x
Defendants. x
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Westar Capital, Inc. ("Westar"), a shareholder of ADT Ltd. ("ADT"), by
its undersigned attorneys, individually and derivatively, alleges as follows:
NATURE OF THESE PROCEEDINGS
1. ADT's board of directors, led by its Chairman and Chief Executive
Officer Michael A. Ashcroft, has, over the last several months, adopted a series
of measures that will permit it to entrench itself in office at the expense of
ADT and its shareholders. Indeed, Mr. Ashcroft's lucrative compensation package
at ADT -- over $5.2 million in salary, bonuses and other benefits and 12 million
stock options -- provides ample motivation for Mr. Ashcroft to retain his
position as long as possible. This comfortable status quo has been threatened by
Westar, an ADT shareholder who has been accumulating ADT stock since January of
this
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year. On December 18, 1996, Western Resources announced an intention to offer to
acquire all outstanding shares of ADT for a package of cash and securities worth
$22.50 per ADT share and, to facilitate this offer, is seeking to replace the
entire ADT board, including Mr. Ashcroft.
2. In preparation for a potential unsolicited takeover proposal by
Westar or someone else, the ADT Board of Directors ("ADT Board") has been
increasing its ability to thwart such a bid through several actions, the most
recent and dramatic of which was the adoption of a shareholder rights plan
(commonly known as a "Poison Pill") on November 4, 1996. The Poison Pill
effectively prevents Westar or any party from acquiring control of ADT without
first obtaining the approval of ADT's board of directors. The Pill renders
prohibitively expensive an acquisition of over 15% of ADT's stock.
3. The Pill can be redeemed by the ADT board and, therefore, potential
acquirors rejected by the board can attempt to persuade shareholders to vote the
current board out of office. As part of its entrenchment scheme, however, the
ADT Board has placed itself in a position to interfere with a shareholder vote.
Specifically, the board has parked approximately 2% of ADT common shares in a
subsidiary that, upon information and belief, it controls. Unless stopped by
this Court, these shares could be used by the board to affect a close proxy
contest such as the one that ensued
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earlier this year when a board proposal to increase Mr. Ashcroft's option
package passed by a margin of approximately 1% of ADT's outstanding stock.
4. Mr. Ashcroft and the ADT Board also used the occasion of a "merger"
announced earlier this year with Republic Industries, Inc. ("Republic"), to
fortify their control of the company. The "merger" itself was something of an
illusion because it was subject to ADT's receiving an opinion from an
independent financial advisor that the merger consideration -- .92857 shares of
Republic common stock -- was fair to ADT's shareholders. Such an opinion became
impractical when Republic's stock price plummeted immediately after the merger
was publicly announced on July 1, 1996. The merger agreement was terminated
barely three months later on September 27, 1996.
5. However, in connection with the merger discussions, ADT gave to
Republic the right for a 180-day period upon termination of the Merger Agreement
to purchase from ADT approximately 10% of ADT's outstanding shares at an
exercise price of $20 per share -- a discount on the value ADT had placed on its
shares in the merger agreement. The Warrant provides Mr. Ashcroft with a proxy
over any shares purchased pursuant to it, thus providing a means by which Mr.
Ashcroft can control 10% of ADT's voting power if the Warrant is exercised.
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6. While giving Republic an opportunity to purchase a significant ADT
asset at a very favorable price, the Warrant provided no value to ADT's
shareholders. The ADT Board's granting the Warrant unconditionally in the
context of a merger that was conditioned on the receipt of a fairness opinion
was not in the best interests of ADT or its shareholders. However, the Warrant
did provide the ADT Board and Mr. Ashcroft with two weapons against an
unsolicited bid for the company: (1) it makes such a bid more expensive because
of the additional stock that would be issued pursuant to the Warrant; and (2) if
exercised, it places a block of votes under Mr. Ashcroft's control.
7. As demonstrated by the Warrant, ADT's board has lost sight of its
obligations to the corporation in its quest to retain control over the
corporation. Its entrenching behavior constitutes a continuing breach of the
board's fiduciary duties and can only be remedied by this Court.
JURISDICTION AND VENUE
8. This Court has subject matter jurisdiction pursuant to 28 U.S.C. ss.
1332 and the amount in controversy exceeds $50,000. Venue is proper because
certain of the acts and transactions giving rise to the claims alleged herein
occurred in this district. Moreover, ADT, through wholly-owned subsidiaries,
conducts business in this district; defendant Republic has its principal place
of
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business in this district, and the individual defendants either reside in this
district or, upon information and belief, travel to the district and/or project
themselves into the district on ADT business.
THE PARTIES
9. Plaintiff Westar is a Kansas corporation that currently owns
38,287,111 shares (including ADT's Liquid Yield Option Notes) or approximately
27% of ADT's outstanding shares. Westar is a wholly-owned subsidiary of Western
Resources, Inc. ("Western Resources"). Western Resources is a Kansas Corporation
that has its principal place of business in Topeka, Kansas.
10. On December 18, 1996, Western Resources and Westar announced an
offer for all outstanding shares of ADT (the "Western Resources Offer"). The
Western Resources Offer consists of a package of stock and cash for each share
of ADT stock in the amount of $22.50. Western Resources has also requested that
the ADT Board hold a special shareholders meeting to vote on proposals to (i)
remove the current ADT Board, (ii) reduce to two the number of directors on the
board, and (iii) elect two Western Resources nominees to the board. Consummation
of the Western Resources Offer is conditioned upon, among other things, (1)
redemption of the Poison Pill, (2) election of Western Resources' two nominees
to the ADT Board, and (3) the Warrant being declared invalid.
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11. Defendant ADT is incorporated under the laws of Bermuda. While its
"headquarters" are a law office in Bermuda, upon information and belief, it does
business in North America as a whole, and Florida specifically, through the
following wholly-owned subsidiaries: ADT, Inc., a Florida corporation with its
headquarters in Boca Raton; and ADT Holdings, Inc. and ADT Operations, Inc.,
both of which are headquartered in Boca Raton. (According to public sources, 76%
of ADT's worldwide revenues are generated through its North American
activities.) Upon information and belief, ADT conducts meetings of its board of
directors in Florida. Furthermore, ADT has disseminated press releases
concerning its business from Florida.
12. Defendant Michael Ashcroft is Chairman and Chief Executive Officer
of ADT and, upon information and belief, a resident of Florida.
13. Defendant Stephen J. Ruzika is a director of ADT and a resident of
Florida. Mr. Ruzika is also ADT's Chief Financial Officer, Executive Vice
President, and a member of the Executive Committee.
14. Defendants John E. Danneberg, Alan B. Henderson, James S Pasman,
Jr., W. Peter Slusser, William W. Stinson, and Raymond S. Troubh are directors
of ADT.
15. Defendant Republic is a Delaware corporation with its principal
executive offices at Fort Lauderdale, Florida.
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Derivative Allegations
16. Westar believes that the action herein may be asserted by Westar
individually. However, to the extent that this action is derivative, Westar did
not make demands upon the ADT Board of directors to institute an action
asserting the claims herein because, under the circumstances, demand was not
required, not necessary, and futile. The individual defendants participated in,
acquiesced in, and approved the wrongs alleged herein and did so in an
affirmative violation of their duties to ADT and to ADT's shareholders.
BACKGROUND FACTS
17. According to ADT's public filings, over the last three years Mr.
Ashcroft has been compensated handsomely by the ADT Board:
Total Compensation Options to purchase ADT
common shares received
each year
1993 $3,649,414 4,750,000
1994 $3,766,216 750,000
1995 $5,244,533 1,500,000
----------- ---------
Total $12,660,163 7,000,000
18. Additionally, in February 1996, ADT's board of directors approved
and proposed to shareholders a further enhancement to Mr. Ashcroft's option
package. Specifically, under the new package Mr. Ashcroft would be permitted to
exchange 3 million of his existing options (which he
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purchased for only $2.50 per option) for 8 million new options at a higher
exercise price (giving Mr. Ashcroft a net gain of 5 million options).
Shareholder opposition to the proposal was strong, and the proposal only passed
by 1,440,934 votes -- approximately 1% of ADT's outstanding shares.
19. Besides his employment relationship with ADT, Mr. Ashcroft has also
engaged in business dealings with the company. According to ADT's public
filings, in December 1995, ADT sold its European vehicle auction business to an
entity in which Mr. Ashcroft held an interest. In connection with this
transaction, ADT disclosed that "a leading European investment banking firm" had
opined that the value received by ADT from the Ashcroft group was "fair" but
provided no other information regarding the opinion, including who provided it,
under what circumstances, and what else it said.
20. In stark contrast to the benefits ADT has bestowed upon Mr.
Ashcroft, the company's performance has declined. ADT's 1995 net income
decreased by over 50%, with earnings per share dropping from 76(cent) to
31(cent).
21. Perhaps concerned about increasing Westar ownership of ADT stock
(Westar first acquired an 11.7% interest in ADT in January 1996 and increased
that ownership to approximately 24% by March 1996), and perhaps disconcerted by
the extremely close margin of the vote on
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his 1996 option package, Mr. Ashcroft has led the ADT Board on a campaign of
entrenchment over the last few months pursuant to which the ADT Board has
adopted a series of measures that will enhance its ability to impede a takeover
proposal to the shareholders of the company.
The Poison Pill
22. Central to the ADT Board's entrenchment scheme is the Poison Pill
that was adopted on November 4, 1996. (An ADT press release, dated November 4,
1996, announcing adoption of the poison pill, was disseminated from Boca Raton,
Florida.) The Poison Pill is designed to prevent an acquisition of the Company
by rendering a purchase of 15% or more of ADT's shares prohibitively expensive.
23. The Poison Pill disseminates rights to ADT shareholders which are
triggered when any person "become[s] the beneficial owner of 15 per cent or more
of ADT's common shares or has commenced a tender or exchange offer which, if
consummated, would result in any person becoming the beneficial owner of 15 per
cent or more of ADT's common shares." The Poison Pill is not triggered by the
fact that some shareholders, such as Westar, owned over 15% of ADT's shares at
the time of the Pill's adoption, but is triggered if such shareholders purchase
any additional ADT stock. The ADT Board can redeem the rights at its discretion
at any point before they are triggered. Significantly, the
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potential acquiror who triggers the issuance of the rights does not receive such
rights.
24. The rights permit the holder "to purchase, for the rights purchase
price, ADT common shares having a market value of twice the rights purchase
price." The theory behind the Poison Pill is that prospective acquirors will not
dare to trigger this half-price bargain because it will result in so many rights
being exercised and, consequently, so much additional ADT stock being issued
that the prospective acquiror will not be able to afford to buy enough of the
stock to obtain control over the company.
25. The Poison Pill acts to peculiarly discriminate against Westar in
two ways: first, as mentioned previously, because Westar is already a 27% ADT
shareholder, it, unlike other ADT shareholders, is effectively precluded from
purchasing a single additional ADT share; second, the Poison Pill makes it
impossible for Westar to sell its 27% interest in a single block because, by
doing so, the purchaser would trigger the Pill.
26. By adopting the Poison Pill, the ADT Board has given itself
complete power to prevent any stockholder from acquiring more than 15% of ADT's
stock. In light of the attractive offer made by Westar, the ADT Board's
fiduciary duties require them to either redeem the rights or render them
inapplicable to the Western Resources Offer.
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The Republic Warrant
27. The Poison Pill was only adopted after another alternative had
collapsed -- an ADT-supported merger with Republic pursuant to which Mr.
Ashcroft would have realized millions of dollars of profits on his options and
maintained his high-salaried position with ADT.
28. On July 1, 1996, Republic and ADT announced that they had executed
the Merger Agreement. Pursuant to the Merger Agreement, ADT shareholders were to
receive 0.92857 shares of Republic common stock for each share of ADT common
stock and ADT would become a wholly-owned subsidiary of Republic. Furthermore,
Mr. Ashcroft would remain Chairman of ADT and be appointed to Republic's board
of directors. A joint Press Release describing the Merger Agreement was
disseminated from Fort Lauderdale, Florida and stated, "[t]he [Republic/ADT]
transaction [was] valued at approximately $5 billion. The exchange ratio was
based on a price of $26 for each share of ADT Common Stock."
29. In a highly unusual decision, the ADT Board did not obtain an
opinion from an investment banker that the merger consideration was fair to
ADT's shareholders before it entered into the Merger Agreement with Republic.
Instead, the Merger Agreement was conditioned on ADT's subsequent receipt of a
fairness opinion and gave either party the right to terminate the Merger
Agreement if ADT did not receive such an opinion by July 15, 1996. This
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provision of the Merger Agreement was subsequently amended to extend the time
for ADT to obtain a fairness opinion -- and concomitant right to terminate --
until the time a proxy statement was distributed to ADT's shareholders regarding
the Merger.
30. The coincidental timing of the ADT Board's approving additional
options to Mr. Ashcroft just a few months before a merger was announced did not
go unnoticed. A Business Week article, dated July 29, 1996, entitled "Playing
the Options Shuffle" reported:
Here's an interesting coincidence. In February, ADT Chairman
Michael Ashcroft traded 3 million in-the-money company
options for 8 million new options at a higher strike price.
If he had cashed out his old options instead, he would have
bagged at least a $ 7.2 million profit.
Turns out that the new options became even more valuable.
Come early July, H. Wayne Huizenga's Republic Industries
agreed to buy alarm-system provider ADT. The all-stock deal
initially valued ADT at nearly $ 5 billion, or $ 26 a share.
If Ashcroft, whose new options would fully vest upon a change
of control at the company, could sell at that price, he would
net $ 80 million.
ADT and Ashcroft didn't return calls seeking comment on
whether he had any idea back in February that ADT might be
sold. Republic also wouldn't specify when the deal was first
discussed but says that it was put together fast. ADT's board
has been generous to Ashcroft in other ways, paying him $ 5.2
million and granting him 1.5 million options in 1995 -- even
though net income fell 50%.
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31. By contrast, ADT has publicly maintained that its discussions with
Republic were concentrated over a few days and did not go back to the time when
the additional options to Mr. Ashcroft were approved. A July 7, 1996 report in
The Sunday Telegraph newspaper in London stated that the principal negotiations
between ADT and Republic took place over one frantic June 28-30 weekend:
Two weeks ago Ashcroft took a call from his old friend.
Huizenga had recently started out with his third company
Republic, and was already expanding it through acquisition.
Republic is focused on waste, second-hand car dealerships and
electronic security.
Huizenga asked if they could meet and made Ashcroft a
generous offer. The talks culminated in frantic negotiations
last weekend and by Monday the two sides had the terms of the
all-share takeover to announce to the New York stock
exchange.
32. The July 1 merger announcement triggered a precipitous drop in the
market price of Republic's stock -- the currency for the merger. Between July 1
and July 16, Republic's stock price fell from $291/8 to $2015/16 (a drop of over
30%). Consequently, on September 30, 1996, ADT and Republic issued a joint press
release (disseminated from Fort Lauderdale, Florida), announcing that the
agreement had been terminated because of "stock market conditions".
33. One newspaper report somewhat more critically suggested that the
"real surprise" was not that the proposed merger had been abandoned, but why "it
had taken the two
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companies so long" to realize that "the transaction was based on
financial engineering rather than industrial logic." News reports
explained the deal's problems:
The two sides couldn't agree on a final price for the stock
swap as Republic's shares lost almost a third of their value
after the July merger announcement. The stock dropped amid
a falling market and fear by some investors that the
acquisition-hungry Huizenga was issuing too much stock to pay
for companies.
(See, e.g., "Republic's $4 Billion Merger With ADT Dies," The Florida
Times-Union (Jacksonville), October 1, 1996).
34. Despite being stymied in their attempts to merge with Republic, Mr.
Ashcroft and his fellow board members had used the occasion of the merger
discussions to put in place an entrenchment device that survived the termination
of the Merger -- the Warrant. The Warrant provides that, if the Merger Agreement
is terminated -- as it has been -- Republic has the right for a 180-day period
from termination to purchase from ADT 15 million ADT shares at an exercise price
of $20 per share. The Warrant further provides that Mr. Ashcroft shall have
Republic's proxy to vote any shares purchased pursuant to the Warrant for a two-
year period following the date that the Warrant is exercised. The Warrant also
restricts Republic's ability to tender shares purchased pursuant to the Warrant
to "tender offers which the Board of Directors of ADT recommends . . . ."
Finally, the Warrant provides that shares
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purchased pursuant to it can only be transferred with the consent of ADT and can
not be sold to any single purchaser in an amount greater than five million
shares. Id.
35. A warrant to buy 15 million ADT shares at $20 per share at
a time when ADT was purportedly valuing itself at $26 per share for merger
purposes was an extraordinarily valuable asset to give to Republic. The only
apparent consideration received by ADT for the Warrant was Republic's agreement
to the Merger. However, unlike the Warrant, that agreement was conditional and
could evaporate if no opinion was obtained that the Republic stock was fair
consideration to ADT's shareholders. The board of directors breached its duty of
care to ADT and its shareholders in unconditionally granting the Warrant before
they were certain that Republic's stock was sufficiently valuable merger
consideration to be fair.
36. While providing no value to ADT or its shareholders, the Warrant
does provide Mr. Ashcroft and the ADT Board with another weapon against unwanted
suitors in two respects:
a. Until expiration, the Warrant acts as a deterrent to
future acquisition proposals by rendering more expensive
any acquisition proposal above $20 (which would likely
trigger Republic's decision to purchase ADT shares at a
discount). For example, in response to Westar's $22.50
per share acquisition proposal, Republic has the right
to purchase ADT shares at $20 per share. If this right
is exercised, Republic
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would realize a $37.5 million windfall and Westar would
incur a $37.5 million expense when the Western Resources
Offer is consummated; and
b. Once exercised, the Warrant places approximately 10% of
the company's outstanding shares under ADT's control for
two years because Republic agreed to give Mr. Ashcroft a
proxy over the shares for that time period. This permits
Mr. Ashcroft to undermine the voting rights of the ADT
shareholders by voting the Republic stock as he sees
fit.
37. One financial analyst summarized the potential effect of the
Warrant on future acquisition proposals:
In the short term, however, buying interest [in ADT] could be
muted. Republic Industries, under its agreement, has a
warrant to buy 15 million ADT shares at $20 for the next six
months, making any deal above that price more expensive for a
buyer.
(See "Market sinks Huizenga bid for ADT," Chicago Sun-Times, Financial Section,
October 1, 1996.)
38. ADT fortified the suspicion that the Warrant is an entrenchment
device when it strengthened its antitakeover features after the Republic Merger
Agreement was terminated. Simultaneous with ADT's announcement of that
termination, it also announced that the parties had amended the Warrant to
preclude Republic from selling, assigning or otherwise transferring shares
purchased pursuant to the Warrant to any person whom Republic had
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"reasonable cause to believe . . . has acquired interests in shares of the
Company which amount to 10% or more of the issued share capital of any class of
the Company." This provision -- which restricts Republic's ability to transfer
ADT shares to a 10% shareholder such as Westar -- surely did not promote the
Merger since it had already been terminated. Instead, the only effect of the
amendment is to enhance the Warrant's entrenchment effect.
The Parking of ADT Shares in a Subsidiary
39. Another entrenchment device utilized by the ADT Board is the
parking of ADT shares in a subsidiary that, upon information and belief, is
controlled by the ADT Board, in order to enable the board to affect the outcome
of a close shareholder vote.
40. In connection with ADT's 1996 annual stockholders meeting, ADT
disclosed that 3,182,787 shares, representing over 2% of ADT's outstanding
stock, were owned by an unidentified ADT "subsidiary" and that the subsidiary
was "entitled to vote" those shares. Under Bermuda corporate law, ADT's country
of incorporation, a company is a subsidiary of another company if it is directly
or indirectly controlled by that other company.
41. The subsidiary's shares provide the board with a "safety valve" in
the event of a close vote. For example, the 1996 proposal regarding Mr.
Ashcroft's option package passed by a mere 1.44 million votes -- just 1% of
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ADT's outstanding stock. If ADT used its control over its subsidiary to vote its
shares in favor of the options proposal, those shares would have swung the vote
in favor of a proposal that would otherwise have been rejected by shareholders.
It is a breach of the board's fiduciary duty to interfere with a shareholder
vote in such a manner.
COUNT ONE: AGAINST ALL
DEFENDANTS EXCEPT REPUBLIC
(FOR BREACH OF FIDUCIARY DUTY)
(POISON PILL)
42. Westar repeats and realleges the allegations in paragraphs __
through __, as if set forth in full herein.
43. The ADT Board's deployment of the Poison Pill is a violation of
their fiduciary duties because until redeemed, the Pill (i) prevents an
acquisition of the company including, but not limited to, the attractive
proposal made by Westar; (ii) shelters a poor-performing and highly-paid
management from a change in control; and (iii) deprives ADT's stockholders of
the opportunity to receive full value for their shares. The Poison Pill acts to
entrench the board in office, which is an unlawful, improper and collateral
purpose.
44. The Poison Pill also discriminates against -- indeed, specifically
penalizes -- Westar because it (i) prevents Westar from selling its shares as a
block to a third party, and (ii) prohibits Westar from purchasing any more
shares of ADT stock. Moreover, the pill is by nature
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discriminatory because the party who triggers the poison pill rights does not
receive such rights.
45. This discrimination and punitive conduct is unlawful and in breach
of the ADT Board's fiduciary duties.
46. Westar has no adequate remedy at law.
COUNT TWO: AGAINST ALL
DEFENDANTS EXCEPT REPUBLIC
(BREACH OF FIDUCIARY DUTY)
47. Westar repeats and realleges the allegations in paragraphs __
through __, as if set forth in full herein.
48. A shareholder's most fundamental right is the right to vote. A
board of directors breaches its fiduciary duty if it uses its control of the
corporate machinery in order to subvert shareholder voting rights.
49. Upon information and belief, ADT has done just that by placing ADT
stock in the hands of a subsidiary it controls and purporting to permit that
subsidiary to vote those shares. This device permits ADT to use the subsidiary's
stock to swing a vote in its favor.
50. Westar has requested, pursuant to ADT's by- laws, that the ADT
Board schedule a special meeting of ADT shareholders, at which time Westar will
seek to replace the entire ADT Board with Western Resources' two nominees. ADT
should not be permitted to vote its subsidiary's stock at this meeting and this
issue must be resolved in advance of that meeting.
51. Westar has no adequate remedy at law.
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COUNT THREE: BREACH OF
FIDUCIARY DUTY AGAINST ALL
DEFENDANTS EXCEPT REPUBLIC
(WARRANT)
52. Westar repeats and realleges the allegations in paragraphs __
through __, as if set forth in full herein.
53. As directors of ADT, defendants are obliged to exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. They are also required to act in the best interests of
the company as a whole and not for any improper, unlawful, or collateral
purposes.
54. A rational and prudent board would not have granted the Warrant to
Republic. By granting the Warrant and thereby (i) giving away a corporate asset
for inadequate consideration, (ii) making more expensive any proposal to acquire
the company above the Warrant's exercise price of $20 per share, (iii) allowing
over 10% of ADT's shares to be held subject to Mr. Ashcroft's control upon
exercise of the Warrant, (iv) restricting Republic's ability to tender shares
purchased pursuant to the Warrant to "tender offers which the Board of Directors
of ADT recommends," and (v) precluding Republic from selling greater than five
million shares to any single purchaser, the ADT Board breached its fiduciary
duties to ADT and its shareholders and acted for an improper purpose.
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55. If the Warrant is exercised and the shares are voted against
Westar's proposals at the special meeting, Westar will have no adequate remedy
at law.
COUNT FOUR: FOR AIDING AND
ABETTING A BREACH OF FIDUCIARY
DUTY AGAINST REPUBLIC INDUSTRIES
56. Westar repeats and realleges the allegations in paragraphs __
through __, as if set forth in full herein.
57. Republic, through its Chairman H. Wayne Huizenga and its board of
directors, acted in concert with, and knowingly participated in breaches of
fiduciary duties by the ADT Board by agreeing to the Warrant and its amendments.
The Warrant provides no value to ADT's shareholders and was authorized for the
improper purpose of entrenching the ADT Board.
58. Republic's conduct has caused, and is continuing to cause, harm to
ADT and its shareholders, including Westar.
WHEREFORE, Westar respectfully requests that this Court enter judgment
as follows:
(a) Declaring that ADT's board of directors is in breach of their
fiduciary duty to ADT and to ADT's stockholders by continuing to deploy the
poison pill;
(b) Compelling ADT's Board of Directors to redeem the poison pill or
take such actions as are required to render ADT's poison pill inapplicable to
Westar or the Western Resources Offer;
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(c) Declaring that ADT is prohibited from causing its subsidiary to
vote any shares of ADT it owns on any matter put to a vote of ADT's
shareholders, including matters subject to a vote at any special meeting of
ADT's shareholders requested by Westar;
(d) Enjoining, preliminarily and permanently, ADT from causing its
subsidiary to vote any ADT shares on any matter put to a vote of ADT's
shareholders, including matters subject to a vote at the special meeting of
ADT's shareholders requested by Westar;
(e) Enjoining, preliminarily and permanently, ADT and Republic from
enforcing their respective rights, duties and obligations under the Warrant;
(f) Declaring that the Warrant is null and void and of no further force
and effect;
(g) In the event that the Warrant is exercised by Republic, rescinding
any purchase of shares pursuant to the Warrant;
(h) Enjoining, preliminarily and permanently, ADT, Republic and Mr.
Ashcroft from exercising any voting rights associated with any shares received
pursuant to exercise of the Warrant on any matter put to a vote of ADT's
shareholders, including matters subject to a vote at the upcoming special
meeting of ADT's shareholders;
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(i) Awarding Westar and/or ADT damages for the losses and costs it has
sustained and will sustain as a result of the conduct of ADT's Board of
Directors;
(j) Awarding Westar and/or ADT the costs and disbursements of this
action together with reasonable attorneys' fees; and
(k) Awarding Westar and/or ADT such other and proper relief as the
Court may deem just and proper.
(l) Jury trial is demanded.
December 18, 1996.
-------------------------
Marty L. Steinberg
(Florida Bar # 187293)
Holland & Knight
701 Brickell Ave.
Suite 3000
Miami, Florida 33131
(305) 374-8500
Of Counsel:
John L. Hardiman
Tariq Mundiya
John C. Stellabotte
SULLIVAN & CROMWELL
125 Broad Street
New York, NY 10004
(212) 558-4000
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COMMON SHARES OF ADT LIMITED ("ADT") HELD BY WESTAR CAPITAL, INC. ("WESTAR") AND
CERTAIN DIRECTORS AND EXECUTIVE OFFICERS, EMPLOYEES AND OTHER REPRESENTATIVES,
INCLUDING DIRECTOR NOMINEES, OF WESTERN RESOURCES, INC. ("WESTERN RESOURCES")
AND WESTAR, AND CERTAIN TRANSACTIONS BETWEEN ANY OF THEM AND ADT
Western Resources and Westar may solicit proxies in order to replace
the Board of Directors of ADT with their nominees, Steven L. Kitchen and Steven
A. Millstein. The participants in this solicitation may include Western
Resources and Westar, John E. Hayes, Jr. and David C. Wittig, each a director of
Western Resources, and the following executive officers and employees of Western
Resources or Westar (unless otherwise indicated, each is an executive officer or
employee of Western Resources): Steven L. Kitchen (E.V.P. and C.F.O.), Carl M.
Koupal, Jr. (E.V.P. and C.A.O.), John K. Rosenberg (E.V.P. and G.C.), Jerry D.
Courington (Controller), James A Martin (V.P.), Richard D. Terrill (Secretary),
Steven A. Millstein (President, Westar Consumer), Michel' J. Philipp, Bruce A.
Akin, Craig A. Weingartner and Lori A. Finney.
Westar beneficially owns approximately 27% of the Common Shares of ADT
all of which were purchased in privately negotiated and open market purchases
during the last two years.
Other than as set forth herein, as of the date of this analysts
presentation, neither Western Resources or Westar nor any of their respective
directors, executive officers, employees or other representatives, including
director nominees, who may solicit proxies has any security holdings in ADT.
Although Salomon Brothers Inc ("Salomon"), Bear Stearns & Co. Inc.
("Bear Stearns") and Chase Securities Inc. ("Chase"), financial advisors to
Western Resources, and Barnes Associates, Inc. ("Barnes Associates") and
Deloitte & Touche, consultants to Western Resources, do not admit that they or
any of their directors, officers, employees or affiliates are a "participant,"
as defined in Schedule 14A promulgated under the Securities Exchange Act of 1934
by the Securities and Exchange Commission, or that Schedule 14A requires the
disclosure of certain information concerning them, Gregg S. Polle (Managing
Director), Arthur H. Tildesley, Jr. (Director), Bill Murphy (Vice President),
Chad Rucker and Lisa Grieve (each an Associate), in each case of Salomon,
Douglas T. Lake (Senior Managing Director), Rich Osler (Managing Director) and
David F. Huff (Vice President), in each case of Bear Stearns, Mark Davis
(Managing Director), John Bass (Vice President) and Andrew Quigley (Associate),
in each case of Chase, Michael S. Barnes (President) and Mark Gronowski (Senior
Vice President), in each case of Barnes Associates, and Tom Flaherty (National
Partner) and Chris Bracken (Senior Consultant), in each case of Deloitte &
Touche, may assist Western Resources and Westar in such a solicitation. Salomon,
Bear Stearns and Chase engage in full range of investment banking, securities
trading, market-making and brokerage services for institutional and individual
clients. In the normal course of their business, Salomon, Bear Stearns and Chase
may trade securities of ADT for their own account and the account of their
customers and, accordingly, may at any time hold a long or short position in
such securities. Salomon Brothers Inc has advised Western Resources that as of
December 13, 1996, Salomon held a short position with respect to 10,800 common
shares of ADT, and beneficially owned Liquid Yield Option Notes of an affiliate
of ADT exchangeable for 14,595 common shares of ADT. Bear Stearns and Chase have
advised Western Resources that they have no beneficial ownership of securities
of ADT or its affiliates.
Except as disclosed above, to the knowledge of Western Resources and
Westar, none of Western Resources or Westar, or their respective directors,
executive officers, employees or other representatives, including director
nominees, named above has any interest, direct or indirect, by security holdings
or otherwise, in ADT.
A registration statement relating to the Western Resources securities
referred to in this analysts presentation has been filed with the Securities and
Exchange Commission but has not yet become effective. This analysts presentation
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
Western Resources
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