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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2000
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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INNERDYNE, INC.
(Name of Subject Company)
INNERDYNE, INC.
(Name of Person(s) Filing Statement)
45764D102
(CUSIP Number of Class of Securities)
1244 REAMWOOD AVENUE
SUNNYVALE, CA 94089
(408) 745-6010
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
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WILLIAM G. MAVITY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INNERDYNE, INC.
1244 REAMWOOD AVENUE
SUNNYVALE, CA 94089
(408) 745-6010
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
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COPY TO:
ALAN TALKINGTON, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
400 SANSOME STREET
SAN FRANCISCO, CA 94111
(415) 392-1122
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/ / CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
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1. SUBJECT COMPANY INFORMATION.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 relates is InnerDyne, Inc., a Delaware corporation.
The address of the principal executive offices of InnerDyne is 1244 Reamwood
Avenue, Sunnyvale, California 94089. The telephone number of the principal
executive offices of InnerDyne is (408) 745-6010. The title of the class of
equity securities to which this Schedule 14D-9 relates is common stock, par
value $0.01 per share (the "Shares"). As of November 10, 2000, there were
23,173,520 Shares outstanding.
2. IDENTITY AND BACKGROUND OF FILING PERSON.
The name, business address and business telephone number of InnerDyne, which
is the person filing this Schedule 14D-9, are set forth in Item 1 above.
The Schedule 14D-9 relates to the offer of Tyco Acquisition Corp. X ("Tyco
Acquisition"), a Delaware corporation and a wholly-owned subsidiary of Tyco
International Ltd. ("Tyco"), a Bermuda company, disclosed in a tender offer
statement on Schedule TO and the prospectus included therewith, dated
October 18, 2000, to exchange each outstanding Share for a fraction of a Tyco
common share, based on an exchange ratio determined by dividing $7.50 by the
average share price computed by taking the average of the daily volume-weighted
selling prices per Tyco common share on the New York Stock Exchange (as reported
by Bloomberg Financial Markets) for the five consecutive trading days ending on
the second trading day before the expiration date preceding the first acceptance
of shares in the offer, upon the terms and subject to the conditions set forth
in the prospectus, and in the related letter of transmittal.
The offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 3, 2000, among Tyco Acquisition, VLMS, Inc. a Delaware corporation
and wholly-owned subsidiary of Tyco Acquisition ("Merger Sub") and InnerDyne,
and guaranteed by Tyco. The merger agreement provides that, among other things,
as soon as practicable following the satisfaction or waiver of the conditions
set forth in the merger agreement, Merger Sub will be merged with and into
InnerDyne, and InnerDyne will continue as the surviving corporation (the
"Surviving Corporation"). At the effective time of the merger (the "Effective
Time"), each Share then outstanding (other than Shares held by Tyco, Merger Sub,
InnerDyne or Tyco Acquisition Corp. X or stockholders who perfect appraisal
rights under Delaware law, which will be available if the merger is completed
pursuant to Section 253 of the Delaware General Corporation Law) will be
converted into the right to receive the same consideration for which shares are
exchanged in the offer. A copy of the merger agreement is incorporated herein by
reference as Exhibit (e)(1).
The Schedule TO states that the principal executive office of Tyco is
located at The Zurich Centre, Second Floor, 90 Pitts Bay Road, Pembroke HM 08,
Bermuda and the principal executive offices of Tyco Acquisition and Merger Sub
are located at One Tyco Park, Exeter, New Hampshire, 03833.
3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
The information contained under the caption "Interest of Certain Persons" in
the prospectus included in the Schedule TO, and in the Information Statement
previously filed, is incorporated herein by reference. Each material agreement,
arrangement or understanding and any actual or potential conflict of interest
between InnerDyne and (1) InnerDyne's executive officers, directors or
affiliates or (2) Tyco, Merger Sub or Tyco Acquisition or their respective
executive officers, directors or affiliates, is either incorporated herein by
reference as a result of the previous sentence or set forth below.
TREATMENT OF OPTIONS
The merger agreement provides that except for options granted under
InnerDyne's 1989 Incentive Stock Plan after April 7, 1993, all outstanding
options under InnerDyne's stock option plans that are not fully vested will
become fully vested and immediately exercisable so that each option holder may
exercise its option to purchase Shares prior to the Effective Time. If an option
holder does not exercise
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his option to purchase Shares prior to the Effective Time, such option will
expire and the option holder will receive cash for such option as provided in
the merger agreement. The cash amount to be received will be equal to the amount
by which (i) the product of the Exchange Ratio and the Average Share Price,
(each as defined below) multiplied by the number of Shares for which the option
was exercisable as of the Effective Time exceeds (ii) the aggregate exercise
price of the Shares purchasable pursuant to such option (the "Cash Payment
Formula"). The "Exchange Ratio" is equal to $7.50 divided by the Average Share
Price and is subject to adjustment as provided in the merger agreement. The
"Average Share Price" is the average of the daily volume-weighted selling prices
per 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
second trading day before the expiration date preceding the first acceptance of
shares for exchange in the offer. If the merger transaction is not consummated,
the acceleration of the options shall not be effective and the options shall be
subject to their original vesting and exercise provisions contained in the stock
option plans.
Those option holders who were granted options under InnerDyne's 1989
Incentive Stock Plan after April 7, 1993 and who do not exercise their option to
purchase Shares before the Effective Time may choose to receive cash according
to the Cash Payment Formula or to have their options to purchase Shares
converted into options to purchase Tyco common shares. Any such holder desiring
to choose to receive cash according to the Cash Payment Formula must do so prior
to the Effective Time. If such holders do not choose to receive cash payment for
their options, each option will be exercisable for that number of whole Tyco
common shares equal to the product of the number of Shares that were issuable
upon exercise of the option immediately prior to the Effective Time, multiplied
by the Exchange Ratio and rounded down to the nearest whole number of Tyco
common shares. The exercise price per Tyco common share will be equal to the
quotient obtained by dividing the exercise price per share at which the option
was exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent. Such options will otherwise continue to
have, and be subject to, the same terms and conditions set forth in the 1989
Incentive Stock Plan and applicable stock option award agreement.
Options to purchase Shares have been granted to directors and executive
officers under various InnerDyne stock option plans.
The following table sets forth, with respect to each of the executive
officers and the non-employee directors of InnerDyne:
- the number of Shares subject to options held by such persons that will be
exercisable immediately upon the consummation of the merger (including
options that are currently exercisable as well as options which will
become exercisable in connection with the transactions contemplated by the
merger agreement);
- the weighted average exercise price of the options held by such persons;
- the aggregate cash value of such options, (i.e., the total stock value
less the exercise price) based upon an assumed per share amount of
consideration to be received by InnerDyne stockholders in the offer and
the merger of $7.50 in Tyco common shares, as set forth in the merger
agreement.
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<TABLE>
<CAPTION>
OPTIONS WHICH WEIGHTED AVERAGE
WILL BE EXERCISE PRICE AGGREGATE VALUE
NAME EXERCISABLE PER SHARE OF OPTIONS
---- ------------- ---------------- ---------------
<S> <C> <C> <C>
William G. Mavity................................. 985,416 $1.60 $5,813,954.40
Daniel J. Genter.................................. 329,990 $1.84 $1,867,743.40
Robert M. Curtis.................................. 92,000 $3.11 $ 403,880.00
Edward W. Benecke................................. 54,000 $3.74 $ 203,040.00
Steven N. Weiss................................... 30,000 $3.78 $ 111,600.00
John A. Hinds..................................... 20,000 $4.34 $ 63,200.00
</TABLE>
ASSUMPTION OF WARRANTS
InnerDyne has issued warrants to acquire its common stock to Cruttenden Roth
Incorporated. At the Effective Time, Tyco will assume each warrant to purchase
InnerDyne common stock and such warrant will become a warrant to purchase that
number (rounded to the nearest whole number) of Tyco common shares that
Cruttenden Roth would have been entitled to receive pursuant to the merger had
it exercised such warrant in full immediately prior to the Effective Time. The
per share exercise price for the shares purchasable pursuant to the warrant will
be determined by dividing the aggregate exercise price of InnerDyne Shares
otherwise purchasable pursuant to such warrant by the number of Tyco common
shares deemed purchasable pursuant to such warrant.
CERTAIN EXECUTIVE AGREEMENTS
InnerDyne entered into change of control agreements with executive officers
William G. Mavity, President and Chief Executive Officer of InnerDyne, and
Daniel J. Genter, Senior Vice President, Sales & Marketing. The agreement with
Mr. Mavity provides that if he is terminated without cause within two years
after a change in control, stock options granted to him over the course of his
employment with InnerDyne and held by the him on the date of termination will
become immediately vested on the termination date and will be exercisable in
accordance with the provisions of the option agreement and plan pursuant to
which such option was granted. In addition, Mr. Mavity would receive payments
for all salary, bonuses and unpaid vacation accrued as of the date of
termination and his benefits would be continued under InnerDyne's then existing
benefit plans and policies in effect on the date of termination and in
accordance with applicable law and the offer letter to such individual.
InnerDyne's agreement with Mr. Genter contains similar provisions but would be
triggered if he were to be terminated without cause within one year after a
change of control.
Under InnerDyne's offer letter to Mr. Mavity, dated September 15, 1993,
Mr. Mavity would receive a severance payment equal to one year of his base
salary if his employment with InnerDyne is terminated without cause. Mr. Genter
is a party to a letter agreement, dated August 15, 1999, with InnerDyne, which
provides that he would receive a severance payment equal to six months of his
base compensation upon his termination without cause by InnerDyne.
INDEMNIFICATION
InnerDyne, as the surviving corporation, will indemnify present and former
directors and officers of InnerDyne against all claims arising out of actions
and omissions occurring on or prior to the effective time of the merger to the
same extent as the InnerDyne Certificate of Incorporation or By-laws, or any
indemnification contract or agreement in effect on the date of the merger
agreement. Furthermore, Tyco Acquisition has also agreed to maintain for six
years, subject to certain cost limitations, a policy of directors' and officers'
liability insurance with respect to matters occurring on or before the Effective
Time of the merger for the benefit of the present and former directors and
officers of InnerDyne.
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THE MERGER AGREEMENT
The following is a description of the material terms of the merger agreement
but does not purport to describe all the terms of the agreement. The complete
text of the merger agreement is incorporated by reference as Exhibit (e)(1) to
this Schedule 14D-9. All stockholders are urged to read the merger agreement in
its entirety because it is the legal document that governs the offer and the
merger.
THE OFFER
TERMS OF THE OFFER. The merger agreement provides for Tyco Acquisition's
offer to exchange Tyco common shares in accordance with the exchange ratio
described below, for each outstanding share of common stock of InnerDyne that is
validly tendered and not properly withdrawn. The merger agreement provides that
the fraction of a Tyco common share into which each share of InnerDyne common
stock will be converted in the offer will be determined by dividing $7.50 by the
average of the daily volume-weighted selling prices per 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 second trading day before the
expiration date preceding the first acceptance of InnerDyne shares for exchange
in the offer.
The merger agreement prohibits Tyco Acquisition, without the consent of
InnerDyne, from amending or waiving the minimum tender condition or amending the
offer to change the form of consideration to be paid, decreasing the price per
share of InnerDyne common stock or the number of shares of InnerDyne common
stock sought in the offer, imposing additional conditions to the offer,
extending the expiration date of the offer except as described below or making
any other change which is adverse to the holders of the shares of InnerDyne
common stock.
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, Tyco
Acquisition will extend the offer until such conditions are satisfied or waived;
provided that (i) no extension will exceed ten business days and (ii) Tyco
Acquisition is not required to extend the offer beyond April 30, 2001.
OPTIONAL EXTENSIONS OF THE OFFER. Tyco Acquisition has the right (i) to
extend the offer if and to the extent required by applicable rules and
regulations of the SEC and (ii) if at least a majority but less than 90% of the
InnerDyne shares have been validly tendered in the offer at the scheduled or
extended expiration date, to accept the tendered shares and to extend the offer
for an aggregate period of not more than twenty business days beyond the
expiration date occurring prior to the first acceptance of InnerDyne shares for
exchange in the offer.
Tyco Acquisition has determined that it will exercise its right to extend
the offer if a majority but less than 90% of the outstanding shares are tendered
prior to the expiration date.
PROMPT EXCHANGE FOR INNERDYNE SHARES AFTER THE CLOSING OF THE
OFFER. Subject to the conditions of the offer, Tyco Acquisition will accept for
exchange, and will exchange all shares of InnerDyne common stock validly
tendered and not properly withdrawn pursuant to the offer as soon as practicable
after the expiration date of the offer and acceptance of the tendered shares.
THE MERGER
The merger agreement provides that Merger Sub will be merged with and into
InnerDyne as promptly as practicable following the satisfaction or waiver of the
conditions set forth in the merger agreement. Under the terms of the merger
agreement, at the closing of the merger, each outstanding share of InnerDyne
common stock will be converted into the same fraction of a Tyco common share as
was exchanged in the offer. Notwithstanding the foregoing, the merger
consideration will not be exchangeable in respect of InnerDyne shares held by
InnerDyne, Tyco, Tyco Acquisition or Merger Sub or stockholders exercising
appraisal rights, if available.
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EFFECTIVE TIME OF THE MERGER. The merger will become effective upon the
filing of certificate of merger with the Secretary of State of the State of
Delaware. The filing of the certificate of merger will take place as soon as
practicable after satisfaction or waiver of the conditions described below under
"Conditions to the Merger."
CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS. The
certificate of incorporation of InnerDyne in effect at the effective time will
be the certificate of incorporation of the surviving corporation (except that
such certificate of incorporation shall be amended to provide that the number of
shares that the surviving corporation shall have the authority to issue is
10,000 shares of common stock, par value $0.01 per share) until thereafter
amended in accordance with the provisions of the certificate of incorporation
and as provided by the DGCL. The By-laws of Merger Sub in effect at the
Effective Time will be the By-laws of the surviving corporation until thereafter
amended in accordance with the provisions of the By-laws, the certificate of
incorporation of the surviving corporation and the DGCL.
From and after the Effective Time and until their respective successors are
duly elected or appointed and qualified (i) the directors of Merger Sub at the
Effective Time will be the directors of the surviving corporation and (ii) the
officers of InnerDyne at the Effective Time will be the officers of the
surviving corporation.
INNERDYNE BOARD OF DIRECTORS
Upon the acceptance for exchange of shares of InnerDyne common stock
pursuant to the offer, Tyco Acquisition 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 InnerDyne's board of directors and
(ii) the percentage that the number of shares beneficially owned by Tyco and its
subsidiaries bears to the total number of shares of InnerDyne common stock
outstanding. Until the merger has become effective, InnerDyne's board of
directors will consist of at least two members who were directors of InnerDyne
prior to the consummation of the offer. The merger agreement provides that,
prior to the Effective Time of the merger, the affirmative vote of the
continuing InnerDyne directors will be required to:
- terminate the agreement on behalf of InnerDyne,
- amend the agreement when such amendment requires approval of InnerDyne's
board of directors,
- waive compliance with any rights, benefits or remedies contained in the
merger agreement,
- extend the time for performance of Tyco Acquisition and Merger Sub
obligations under the merger agreement, or
- approve any other action of InnerDyne which is reasonably likely to
adversely affect the holders of InnerDyne common stock.
TREATMENT OF INNERDYNE STOCK OPTIONS AND WARRANTS
Each InnerDyne stock option which was granted under the InnerDyne, Inc. 1987
Stock Option Plan, the InnerDyne, Inc. 1996 Stock Option Plan, and the
InnerDyne, Inc. 2000 Directors' Option Plan and options granted before April 8,
1993 under the InnerDyne, Inc. 1989 Incentive Stock Option Plan, whether or not
otherwise vested or exercisable, will become fully vested and exercisable
shortly before the Effective Time of the merger. Any such option that is not
exercised before the Effective Time will be cancelled at the Effective Time in
exchange for a cash payment equal to $7.50 (subject to certain adjustments
described in the merger agreement) less the exercise price-per-share of the
option, multiplied by the number of shares of InnerDyne common stock subject to
such option.
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Each InnerDyne stock option granted after April 7, 1993 under the 1989
Option Plan will be converted into an option to purchase Tyco common shares
unless the holder of such option elects to have it treated the same as other
InnerDyne stock options, as described in the previous paragraph. Each converted
option shall be exercisable upon the same terms and conditions as those under
the 1989 Option Plan and the applicable option agreement, including the vesting
schedule, except that (i) each such option will be exercisable for that number
of Tyco shares (rounded down to the nearest whole share) that the holder of such
option would have received had he exercised the option prior to the merger
(I.E., the number of shares the option was exercisable into immediately prior to
the effective time multiplied by the exchange ratio in the offer), and (ii) the
exercise price per Tyco share will be an amount (rounded up to the nearest whole
cent) equal to the exercise price per share subject to such option in effect
immediately prior to the Effective Time divided by the exchange ratio in the
offer.
Outstanding warrants expiring May 14, 2001 to acquire 232,500 shares of
InnerDyne common stock at a price of $4.20 per share will be converted as a
result of the merger into warrants to acquire Tyco common shares. The number of
Tyco shares issuable upon exercise of the warrants will be the number of shares
(rounded to the nearest whole number) that would have been received by
warrantholders if the warrants had been exercised immediately prior to the
merger. The exercise price per Tyco common share will be the aggregate exercise
price of the warrants divided by the number of Tyco shares issuable upon
exercise.
REPRESENTATIONS AND WARRANTIES
InnerDyne has made customary representations and warranties in the merger
agreement about itself. Tyco Acquisition has made customary representations and
warranties about Tyco and its subsidiaries.
CONDUCT OF BUSINESS PENDING MERGER
The merger agreement obligates InnerDyne, until the earlier of the
termination of the merger agreement or the consummation of the merger, to
conduct its business only in the ordinary and usual course of business
consistent with its past practice, to use reasonable commercial efforts to
preserve the business organization of InnerDyne as it has historically been
conducted (it being understood that, notwithstanding the efforts of InnerDyne,
changes or disruptions resulting from the announcement of the execution of the
merger agreement and the proposed consummation of the transaction contemplated
by the merger agreement, including impacts on customers, distributors, license
partners, employees or consultants, may occur), to keep available the services
of the present officers, employees and consultants of InnerDyne and to preserve
the relationships of InnerDyne with its customers, suppliers and other persons
with which InnerDyne has significant business relations. In particular, subject
to certain exceptions, InnerDyne has agreed that, without Tyco Acquisition's
prior written consent, it will not:
1. amend or otherwise change InnerDyne's Certificate of Incorporation or
By-laws;
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 InnerDyne or any of its affiliates, subject to
certain exceptions in the case of InnerDyne's equity-based incentive
plans;
3. sell, pledge, dispose of or encumber any assets of InnerDyne, other than
sales of assets in the ordinary course of business and in a manner
consistent with past practice or pursuant to other limited exceptions;
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4. - declare, set aside, make or pay any dividend or other distribution in
respect of any of its capital 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 any of its securities or any
option, warrant or right to acquire any such securities, or
- settle, pay or discharge any claim, suit or other action brought or
threatened against InnerDyne with respect to or arising out of a
stockholder equity interest in InnerDyne;
5. - make any acquisitions,
- incur any indebtedness for borrowed money, other than pursuant to
existing credit facilities,
- 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 (including loans and advances to employees of
InnerDyne to fund the exercise price of InnerDyne options or otherwise
to purchase shares of InnerDyne common stock), other than in the
ordinary course of business consistent with past practice,
- authorize any capital expenditures or purchases of fixed assets which
are, in the aggregate, in excess of $1,200,000 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. - except as otherwise provided in the merger agreement, increase the
compensation or severance payable or to become payable to its
directors, officers, employees or consultants except in accordance
with past practice,
- grant any severance or termination pay (except to make payments
required to be made under obligations existing on the date of the
merger agreement in accordance with the terms of such obligations) to,
or enter into or amend any employment or severance agreement with, any
current or prospective employee of InnerDyne, or
- except as otherwise provided in the merger agreement, establish, adopt,
enter into or amend any collective bargaining agreement, benefit plan
(including 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;
7. change accounting policies or procedures;
8. make any tax election or settle or compromise any United States federal,
state, local or non-United States tax liability;
9. pay, discharge or satisfy any claims, liabilities or obligations out of
the ordinary course of business in excess of $100,000 in the aggregate;
10. enter into, modify or renew any contract, agreement or arrangement,
whether or not in writing, for the distribution of InnerDyne's products,
for the licensing of its technology or for any material research and
development collaboration; or
11. take, or agree in writing or otherwise to take, any of the actions
described in (1)--(10) above or any action which would make any of the
representations or warranties of InnerDyne
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contained in the merger agreement untrue or incorrect or prevent
InnerDyne from performing or cause InnerDyne 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,
Tyco will conduct its business and that of its subsidiaries in the ordinary
course of business and consistent with past practice, including actions taken by
Tyco or its subsidiaries in contemplation of the merger, and will not, without
the prior written consent of InnerDyne:
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 any
corporation, partnership, association or other business organization or
division thereof or of any assets of any other person or disposition of
assets, which, in any such case, 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
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, any action which would
make any of Tyco Acquisition's representations or warranties contained in
the merger agreement untrue or incorrect or prevent Tyco Acquisition from
performing its covenants under the merger agreement.
NO SOLICITATION
InnerDyne has agreed that it will not solicit or encourage the initiation of
any inquiries or proposals regarding any merger, sale of assets, sale of shares
of capital stock or similar transactions involving InnerDyne that if consummated
would constitute an "Alternative Transaction." An Alternative Transaction means:
- any transaction pursuant to which any third party acquires more than 30%
of the outstanding shares of any class of InnerDyne's equity securities,
whether from InnerDyne or pursuant to a tender offer or exchange offer or
otherwise,
- a merger or other business combination involving InnerDyne pursuant to
which any third party acquires more than 30% of the outstanding equity
securities of InnerDyne or the entity surviving such merger or business
combination,
- any transaction pursuant to which any third party acquires or would
acquire control of more than 30% of the fair market value of all of the
assets of InnerDyne immediately prior to such transaction, or
- any other consolidation, business combination, recapitalization or similar
transaction involving InnerDyne, other than transactions contemplated by
the offer and the merger agreement.
Any inquiry or proposal by a third party to effect an Alternative
Transaction is referred to as an "Acquisition Proposal."
Until the initial acceptance of the shares of InnerDyne for exchange in the
offer, if InnerDyne's board of directors, following consultation with
independent legal counsel, reasonably determines in
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good faith that such action is or is reasonably likely to be required to
discharge properly its fiduciary duties, InnerDyne'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 would, if consummated, constitute a "Superior Proposal." A
Superior Proposal means any proposal made by a third party to acquire,
directly or indirectly, for cash and/or securities, all of InnerDyne's
equity securities, or all or substantially all of InnerDyne's assets on
terms which InnerDyne'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 InnerDyne 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, and is also
more favorable to InnerDyne taking into account all other factors deemed
relevant by the InnerDyne board under Delaware law; however, a Superior
Proposal may be subject to a diligence review and other customary
conditions; and
- consider and negotiate a BONA FIDE Acquisition Proposal that is a Superior
Proposal not solicited in violation of the merger agreement.
Neither InnerDyne nor InnerDyne's Board of Directors may withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Tyco Acquisition, the
InnerDyne Board's recommendation with respect to the offer, its adoption of the
merger agreement or its approval of the merger, except to the extent that
InnerDyne'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.
In addition, unless the merger agreement has been terminated in accordance
with its terms, InnerDyne and InnerDyne'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 InnerDyne 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.
InnerDyne has agreed:
- that it will not redeem the rights issued under the Preferred Shares
Rights Agreement, dated as of September 19, 1997, as amended, between
InnerDyne and the American Stock Transfer and Trust Company, as Rights
Agent, or waive or amend any provision of that agreement, in any such case
to permit or facilitate the consummation of any Acquisition Proposal or
Alternative Transaction; however, a deferral of the distribution of rights
following the commencement of a tender offer or exchange offer is not
prohibited under the merger agreement.
- to immediately cease and cause to be terminated any existing discussions
or negotiations with any persons that were ongoing at the time of the
execution of the merger agreement; and
- not to release any third party from the confidentiality and standstill
provisions of any agreement to which InnerDyne is a party.
InnerDyne will ensure that the officers and directors of InnerDyne and any
investment banker or other advisor or representative retained by InnerDyne are
aware of the restrictions against solicitation of Alternative Transactions or
Acquisition Proposals described in the merger agreement.
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CERTAIN OTHER COVENANTS
ACCESS TO INFORMATION; CONFIDENTIALITY
InnerDyne will take all action necessary to afford, from the date of the
merger agreement to the Effective Time, Tyco Acquisition's officers, employees,
accountants, counsel and other representatives and agents reasonable access to
its properties, books, contracts, commitments and records and shall promptly
furnish Tyco Acquisition all information concerning InnerDyne's business,
properties and personnel as Tyco Acquisition may reasonably request and shall
make available to Tyco Acquisition appropriate individuals for discussion of
InnerDyne's business, properties and personnel as Tyco Acquisition may
reasonably request. Tyco Acquisition undertakes a similar covenant with respect
to Tyco for the benefit of InnerDyne.
Each party covenants to hold any confidential information of InnerDyne in
accordance with the confidentiality agreement between InnerDyne and Tyco.
CONSENTS; APPROVALS
Each of InnerDyne and Tyco Acquisition will 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 InnerDyne 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.
INDEMNIFICATION AND INSURANCE
For six years following the consummation of the merger, the certificate of
incorporation and by-laws of the surviving corporation will contain the same
indemnification provisions as currently set forth in InnerDyne's Certificate of
Incorporation and By-laws and such 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
InnerDyne at 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 certificate of
incorporation or by-laws, indemnify and hold harmless each present and former
director, officer or employee of InnerDyne 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 acts or omissions occurring at or prior to the
consummation of the merger, to the same extent as provided in InnerDyne's
Certificate of Incorporation or By-laws 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 InnerDyne's obligations under the indemnification agreements and
employment agreements with InnerDyne's officers and directors existing at or
before the consummation of the merger.
In addition, Tyco Acquisition will provide, or cause the surviving
corporation to provide, for a period of not less than six years after the
consummation of the merger, InnerDyne'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
InnerDyne's existing policy or, if substantially equivalent insurance coverage
is unavailable, the best available coverage; provided, however, that Tyco
Acquisition will not be required to pay an annual insurance premium in excess of
200% of the annual premium currently paid by InnerDyne for such insurance, but
in such case will purchase as much coverage as possible for such amount.
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NOTIFICATION OF CERTAIN MATTERS
The parties will give each other prompt notice of the occurrence or
nonoccurrence of any event which would reasonably be expected to cause any
representation or warranty contained in the merger agreement to be materially
untrue or inaccurate, or any material failure to comply with or satisfy any
covenant, condition or agreement contained in the merger agreement.
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. The foregoing covenant does not include 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 InnerDyne. In addition, the parties will use reasonable
best efforts to cause the offer and the merger to qualify as a reorganization
under the provisions of Section 368 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 InnerDyne will not issue any press release or make any
written public statement with respect to the merger or the merger agreement
without the prior consent of the other party, which consent will not be
unreasonably withheld, except as required by law or the rules and regulations of
the Nasdaq National Market or the New York Stock Exchange.
TYCO COMMON SHARES
Tyco Acquisition has covenanted to take all actions necessary so that Tyco
will issue to Tyco Acquisition the Tyco common shares to be delivered to
InnerDyne 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 prior to the effective time
of the merger.
CERTAIN EMPLOYEE BENEFITS
During the period from the effective time of the merger through
December 31, 2001, the surviving corporation will provide each person who was an
employee of InnerDyne at the Effective Time of the merger with coverage under
pension and welfare benefit plans, programs and arrangements providing benefits
not substantially less favorable in the aggregate to the coverage provided to
such employees immediately prior to the merger. The surviving corporation will
recognize service accrued by InnerDyne employees prior to the merger for
purposes of any eligibility requirements, waiting periods, vesting periods and
benefit accrual.
InnerDyne's severance and retention bonus programs in effect prior to the
Effective Time of the merger are required to be maintained for at least one year
following the closing date of the merger, without any modification that would
reduce benefits under such programs.
These provisions are subject to certain limitations and qualifications set
forth in the merger agreement. These provisions may not be enforced against the
surviving corporation by any employee of InnerDyne, and they do not prevent the
surviving corporation or any other subsidiary of Tyco from
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amending or modifying any employee benefit plan, program or arrangement in any
respect or terminating or modifying the terms and conditions of employment or
other service of any person, except as described in the immediately preceding
paragraph.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER
The obligations of the parties to consummate the merger are subject to the
satisfaction of the following conditions:
1. EFFECTIVENESS OF REGISTRATION STATEMENT. The SEC has not issued any stop
order suspending the effectiveness of the registration statement of which
the prospectus is a part, nor has it started or threatened any
proceedings for that purpose or in respect of the registration statement;
2. STOCKHOLDER ADOPTION. If less than 90% of the outstanding shares of
InnerDyne common stock were tendered and not withdrawn in the offer, the
requisite number of InnerDyne stockholders 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 InnerDyne, Tyco
or Tyco's healthcare products business;
4. 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; and
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.
TERMINATION; FEES AND EXPENSES
CONDITIONS TO TERMINATION
The merger agreement may be terminated:
1. by mutual written consent duly authorized by the boards of directors of
Tyco Acquisition and InnerDyne, at any time prior to the initial
acceptance of shares for exchange in the offer;
2. by either Tyco Acquisition or InnerDyne prior to the initial acceptance
of shares for exchange in the offer, if the initial acceptance of shares
for exchange in the offer has not been consummated on or prior to
April 30, 2001; 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 April 30, 2001;
3. by either Tyco Acquisition or InnerDyne, 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 conditions to the offer to be satisfied;
4. by either Tyco Acquisition or InnerDyne, if, at any time prior to the
consummation of the merger, a court of competent jurisdiction or
governmental, regulatory or administrative agency
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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 InnerDyne or InnerDyne:
- withdraws, modifies or changes its approval or recommendation of the
merger agreement, the offer or the merger in a manner adverse to Tyco
Acquisition,
- approves or recommends to the stockholders of InnerDyne an Acquisition
Proposal or Alternative Transaction,
- approves or recommends that the stockholders of InnerDyne tender their
shares in any tender or exchange offer that is an Alternative
Transaction, or
- takes any position or makes any disclosures to InnerDyne's stockholders
required by applicable law, rule or regulation having the effect of any
of the foregoing; or
6. by Tyco Acquisition or InnerDyne, prior to the initial acceptance of
shares for exchange in the offer:
- if any representation of the other party set forth in the merger
agreement was untrue in any material respect when made or has become
untrue in material respect, or
- upon a material breach of any covenant or agreement set forth in the
merger agreement by the other party;
provided, that, if such misrepresentation or breach is curable prior to the date
designated for expiration of the offer, as such date may be extended, following
which Tyco Acquisition first accepts shares for exchange, and the party in
breach exercises its reasonable best efforts to cure the same, the merger
agreement may not be terminated under this clause while such party continues to
exercise such efforts;
7. by InnerDyne in order to accept a Superior Proposal, if:
- Tyco Acquisition has not accepted any shares for exchange pursuant to
the offer,
- InnerDyne's board of directors determines after consultation with
independent counsel that it is, or is reasonably likely to be, required
to accept such proposal to properly discharge its fiduciary duties,
- InnerDyne has given Tyco Acquisition two full business days advance
notice of its intention to accept the Superior Proposal,
- InnerDyne in fact accepts such Superior Proposal,
- InnerDyne has paid Tyco Acquisition the fees and expenses required to
be paid pursuant to the merger agreement, and
- InnerDyne has complied in all material respects with its no
solicitation obligations described on page 8;
provided, however, that if the merger agreement is terminated in respect of
paragraphs 2 and 3 above, but the merger agreement could at the time also have
been terminated in respect of any other paragraph described above, the merger
agreement will also be deemed to have been terminated pursuant to such other
paragraphs.
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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, provided that, if the offer or merger is not
consummated, Tyco Acquisition and InnerDyne will share equally all filing fees
and printing expenses incurred in connection with the printing and SEC filing of
this document, the registration statement, the prospectus and any other related
offer documents.
InnerDyne will pay Tyco a fee of $6 million, and will pay the actual,
documented and reasonable out-of-pocket expenses of Tyco and Tyco Acquisition
relating to the merger of up to $600,000, upon the first to occur of any of the
following events:
1. the termination of the merger agreement by Tyco Acquisition or InnerDyne
due to either (i) the initial acceptance of shares for exchange in the
offer not having been consummated on or prior to April 30, 2001 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 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 InnerDyne, and
- either
- prior to such termination, there shall be outstanding a bona fide
Acquisition Proposal which has been made directly to the
stockholders of InnerDyne 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
InnerDyne) or
- InnerDyne or any third party publicly announces an Alternative
Transaction within 9 months following the date of termination of
the merger agreement and such transaction is at any time thereafter
consummated on substantially the terms previously announced;
2. Tyco Acquisition's termination of the merger agreement under the
circumstances described in paragraph 5 under "Conditions to Termination"
above; or
3. the termination of the merger agreement by InnerDyne due to the
acceptance by InnerDyne's Board of Directors of a Superior Proposal under
the circumstances described in paragraph 7 under "Conditions to
Termination" above.
If Tyco Acquisition terminates the merger agreement because InnerDyne has
breached a covenant or agreement (as described in paragraph 6 under "Conditions
to Termination" above), InnerDyne must pay Tyco and Tyco Acquisition their
respective expenses relating to the transactions contemplated by the merger
agreement in an amount not to exceed $600,000. In addition, InnerDyne must pay
Tyco Acquisition a fee of $6 million if:
- prior to such termination, there shall be outstanding a BONA FIDE
Acquisition Proposal which has been made directly to the stockholders
of InnerDyne 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 InnerDyne) or
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- InnerDyne or any third party publicly announces an Alternative
Transaction within 9 months following the date of termination of the
merger agreement and such transaction is at any time thereafter
consummated on substantially the terms previously announced.
If Tyco Acquisition terminates the merger agreement because a representation
or warranty of InnerDyne was untrue when made (as described in paragraph 6 under
"Conditions to Termination" above), InnerDyne must pay Tyco and Tyco Acquisition
their respective expenses in an amount not to exceed $600,000.
If InnerDyne terminates the merger agreement because a representation or
warranty of Tyco Acquisition was untrue when made (as described in paragraph 6
under "Conditions to Termination" above), Tyco Acquisition must pay InnerDyne
its expenses in an amount not to exceed $600,000.
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; provided that, in no event will InnerDyne 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 entity
entitled thereto was in material breach of its obligations under the merger
agreement.
The fee payable under certain circumstances by InnerDyne to Tyco Acquisition
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 InnerDyne 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 persons from making an offer to
acquire all of or a significant interest in InnerDyne 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 InnerDyne stockholders,
the merger agreement cannot be amended without stockholder approval if
stockholder approval of such amendment is required by law.
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. Any such extension or waiver
will be valid if set forth in writing by the party or parties granting such
extension or waiver.
The merger agreement is binding upon and inures solely to the benefit of the
parties thereto, and 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 InnerDyne following the consummation of the merger which are
intended for the benefit of certain specified officers and directors of
InnerDyne and may be enforced by such individuals and other than certain
obligations of the parties to pay certain fees and expenses.
GUARANTEE
Tyco has fully and unconditionally guaranteed the representations,
warranties, covenants, agreements and other obligations of Tyco Acquisition and
Merger Sub under the merger agreement.
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4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF INNERDYNE BOARD.
At a meeting held on October 3, 2000, the members of the InnerDyne board
voted to approve and adopt the merger agreement and the transactions
contemplated thereby, including the offer and the merger, and determined that
the transactions contemplated by the merger agreement, including the offer and
the merger, are advisable, fair to and in the best interests of InnerDyne's
stockholders.
The members of the InnerDyne board unanimously voted to recommend that
InnerDyne's stockholders accept the offer and tender their Shares pursuant to
the offer.
(b) BACKGROUND; REASONS FOR THE INNERDYNE BOARD'S RECOMMENDATION; OPINION OF
U.S. BANCORP PIPER JAFFRAY
BACKGROUND
From time to time over the past few years, InnerDyne has engaged in informal
discussions with participants in the minimally invasive surgical products
market, including U.S. Surgical Corporation, a subsidiary of Tyco International
Ltd. in its Tyco Healthcare division, concerning distribution rights for
InnerDyne's products. During these discussions, InnerDyne management indicated
that it would consider proposals for a partnership or merger that was sensible
from a business perspective and that would enhance value for InnerDyne
stockholders.
In the fall of 1999, U.S. Surgical contacted InnerDyne with an indication of
interest for a potential business combination. Following execution of a
non-disclosure agreement, representatives of the parties, including William
Mavity, president and chief executive officer of InnerDyne, met on October 20,
1999 to exchange background information concerning their respective businesses
and to discuss potential synergies. InnerDyne management also shared its sense
of the value that the InnerDyne board required in order to consider a business
combination transaction. These discussions were reported to the InnerDyne board
at its meeting in November 1999.
After their October meeting, the parties exchanged information concerning
their respective businesses and operations. Representatives of U.S. Bancorp
Piper Jaffray, InnerDyne's financial advisor, prepared analyses for the
potential business combination, including a preliminary analysis concerning the
value of the InnerDyne businesses. These analyses were shared with Tyco
Healthcare. Subsequently, a representative of Tyco Healthcare conveyed to
InnerDyne management an interest in a business combination in a range of $4.00
to $4.50 per share of InnerDyne common stock. This expression of interest was
considered by the InnerDyne board of directors at a meeting on January 11, 2000.
The board concluded that the proposal did not reflect InnerDyne's value in light
of distribution and product development opportunities available to the company.
This position was relayed by Mr. Mavity to a representative of Tyco Healthcare.
The parties met again on February 1, 2000. At the meeting, U.S. Surgical
continued to express interest in a possible business combination, and
Mr. Mavity reviewed pending developments in the InnerDyne business, including
prospects for its vascular access products.
At a March 22, 2000 meeting of the InnerDyne board of directors, the board
discussed various strategic alternatives, including the discussions with U.S.
Surgical regarding a possible business combination. The board of directors also
considered keeping InnerDyne as an independent company and expanding its radial
dilation business, including expansion into the areas of oncological and
urological applications. The board of directors also discussed the possible
separation or sale of InnerDyne's coatings business. Mr. Mavity also reported on
a possible business combination with another party but that any further
development regarding this possible business combination was unlikely.
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On May 17, 2000, representatives of InnerDyne and Tyco Healthcare met again
to consider a possible business combination transaction. The parties discussed
developments in the InnerDyne and U.S. Surgical businesses and the potential
value that the proposed transaction could bring to InnerDyne and Tyco
Healthcare. Following the meeting, Tyco Healthcare verbally conveyed to
InnerDyne its interest in proceeding with the proposed transaction at a
valuation of $6.50 to $7.00 per share of InnerDyne common stock, subject to due
diligence.
At the board of directors meeting on May 31, 2000, Mr. Mavity reported that
the company which had expressed an interest in acquiring InnerDyne's coatings
business had declined to pursue the matter further. Mr. Mavity also reviewed
Tyco Healthcare's verbal proposal at that meeting, and U.S. Bancorp Piper
Jaffray prepared an updated valuation analysis which it presented to the
meeting. Following the meeting, Mr. Mavity conveyed to Tyco Healthcare the sense
of the board that the proposed range was not reflective of the value of
InnerDyne, in that it did not take into account the positive impact of recent
business developments. Mr. Mavity also informed Tyco Healthcare that the board
would give the Tyco proposal serious consideration if the range of value were
adjusted upward to better reflect these developments.
Representatives of the parties met again on July 25, 2000. The Tyco
Healthcare representatives indicated that based upon their updated analysis,
reflecting business developments and diligence since the prior meeting of the
parties, Tyco would be prepared to make an offer for InnerDyne in the range of
$7.00 to $7.50 per share, subject to the completion of due diligence. Tyco
Healthcare confirmed these discussions in a non-binding indication of interest
dated July 27, 2000 and indicated its desire to continue with its diligence
investigation.
Mr. Mavity and a representative of U.S. Bancorp Piper Jaffray reviewed the
Tyco proposal with the InnerDyne board of directors in a meeting on July 31,
2000. At the meeting, U.S. Bancorp Piper Jaffray reviewed its preliminary
financial analysis of the proposed transaction consideration. Counsel to
InnerDyne reviewed with the board its fiduciary duties with respect to a
potential merger. The board then authorized management to countersign the
non-binding indication of interest and to proceed with due diligence.
Representatives of the parties met to exchange due diligence information
during the first week of August 2000, and the parties provided additional
information to each other over the next several weeks. On August 17, 2000,
representatives of Tyco Healthcare contacted Mr. Mavity by telephone to report
that Tyco was prepared to offer $7.50 in value of Tyco common shares for each
share of InnerDyne common stock in a stock-for-stock exchange offer, subject to
customary conditions and approvals.
The offer value and proposed structure were considered by the InnerDyne
board of directors in a telephonic meeting on August 21, 2000. At the meeting,
the board reviewed an updated financial analysis of the proposed consideration
prepared by U.S. Bancorp Piper Jaffray. The board directed management to
continue discussions with Tyco and to commence negotiation of merger
documentation. Negotiation of the documentation began in late August and
continued until prior to the execution of the definitive merger agreement.
During this period, representatives of the two companies also communicated
concerning various business and financial issues.
On September 7, 2000, the InnerDyne board of directors met to discuss the
proposed transaction and related strategic issues. Management of InnerDyne
reviewed the background of the proposed transaction and the status of the
negotiations, including various issues relating to the draft merger agreement.
The board authorized management to continue negotiations with Tyco.
On September 25, 2000, the InnerDyne board of directors held a telephonic
meeting at which management briefed the board on the status of the negotiations
concerning the terms of the proposed transaction and representatives of U.S.
Bancorp Piper Jaffray performed a financial review of the proposed transaction
consideration.
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On October 3, 2000, at a regularly scheduled board meeting, the Tyco board
of directors approved the business combination with InnerDyne on the terms
contemplated by the merger agreement.
Also on October 3, 2000, the InnerDyne board of directors held a telephonic
board meeting to consider approval of the proposed transaction. Counsel for
InnerDyne reviewed the terms of proposed offer and merger as set forth in the
merger agreement and other transaction documents. U.S. Bancorp Piper Jaffray
delivered its oral opinion, which was subsequently confirmed in writing, that as
of such date, the consideration proposed to be paid in the transaction was fair
from a financial point of view to the stockholders of InnerDyne. The board felt
that it would be advantageous to enter into the proposed transaction at the
current time for the reasons set forth below, including uncertainty as to
whether the stock market's current positive perception of the value of smaller
medical device companies would continue; the opportunity of the combined company
to further enhance sales and quickly drive InnerDyne's technology into the
market; and the opportunity for InnerDyne stockholders to participate in a
significantly larger and more diversified company, to benefit from any future
growth of the combined company and to enjoy greater liquidity in their shares.
See "Reasons for the InnerDyne Board's Recommendation." Following discussion and
the receipt of the oral opinion of U.S. Bancorp Piper Jaffray, the InnerDyne
board unanimously approved the merger agreement, the exchange offer and the
merger.
The merger agreement and related documents were executed later that evening.
On October 4, 2000, prior to the opening of the U.S. financial markets, Tyco
and InnerDyne jointly announced the execution of the merger agreement.
On October 18, 2000, Tyco Acquisition commenced the exchange offer.
REASONS FOR THE INNERDYNE BOARD'S RECOMMENDATION
In approving the offer, the merger, the merger agreement and the
transactions contemplated by the merger agreement and recommending that all
holders of Shares accept the offer and tender their Shares pursuant to the
offer, the InnerDyne board considered and relied upon a number of factors,
including:
- the financial condition, results of operations, cash flows, earnings,
assets and prospects of InnerDyne, if it remains an independent company;
- the presentations of U.S. Bancorp Piper Jaffray, and its opinion to the
effect that, subject to the matters set out in such opinion, the
consideration to be paid in the offer and the merger is fair from a
financial point of view to InnerDyne's stockholders (see "Opinion of
InnerDyne's Financial Advisor" below and Annex B hereto);
- the market value of each share of InnerDyne to be exchanged for $7.50
worth of Tyco shares, pursuant to the terms of the transaction, represents
a premium of approximately 18.8% over the market price of InnerDyne stock
on the Nasdaq National Market one week prior to announcement, and a
premium of approximately 20.0% over the market price of InnerDyne stock on
the Nasdaq National Market four weeks prior to announcement;
- the positive stock market perception of the value of smaller medical
device companies at the present time may be temporary;
- the financial and other terms of the offer, the merger and the merger
agreement, including the benefits of the transaction being structured as a
first-step exchange offer and second-step merger, which may provide
InnerDyne's stockholders with an opportunity to receive Tyco common shares
on an accelerated basis;
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- the opportunity for the holders of shares of InnerDyne common stock to
participate in a significantly larger and more diversified company and, as
shareholders of the combined company, to have greater liquidity in their
shares and to benefit from any future growth of the combined company;
- the opportunity of the combined company to further enhance sales through
Tyco's broad-based, global sales organization will enable it to quickly
drive the beneficial technology into the market;
- the increasing competition in InnerDyne's markets from both existing and
potential competitors, some of which have greater assets and resources
than InnerDyne, which has occurred as a result of, among other reasons,
the consolidation taking place in the industry in general;
- historical information concerning Tyco's and InnerDyne's respective
businesses, financial performance and condition, operations, technology,
management and competitive position, including public reports concerning
results of operations filed with the SEC;
- the consideration to be received by InnerDyne stockholders in the merger
and an analysis of the market value of the Tyco common shares to be issued
in exchange for each share of InnerDyne common stock in light of
comparable merger transactions;
- current financial market conditions and historical market prices,
volatility and trading information with respect to Tyco common shares and
InnerDyne common stock;
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to the
parties' respective obligations, are reasonable;
- the impact of the merger on InnerDyne's customers and employees; and
- reports from management and financial advisors as to the results of their
due diligence investigation of Tyco.
InnerDyne's board of directors also considered the terms of the merger
agreement regarding InnerDyne's rights to consider and negotiate other strategic
transaction proposals, as well as the possible effects of the provisions
regarding termination fees. In addition, InnerDyne's board of directors noted
that the offer and merger are expected to be a tax-free transaction. InnerDyne's
board of directors also considered various alternatives to the merger, including
remaining as an independent company. InnerDyne's board of directors believed
that these factors, including the board's review of the terms of the merger
agreement, supported the board's recommendation of the merger when viewed
together with the risks and potential benefits of the merger. InnerDyne's board
of directors also identified and considered a variety of potentially negative
factors in its deliberations concerning the merger, including, but not limited
to:
- the possibility that the merger might not be completed and the effect of
the public announcement of the merger on InnerDyne's sales and operating
results, and its ability to attract and retain key technical, marketing
and management personnel;
- the risk that the potential benefits sought in the merger might not be
fully realized; and
- the risk that despite the efforts of the combined company, key technical,
marketing and management personnel might not remain employed by the
combined company.
InnerDyne's board of directors believed that these risks were outweighed by
the potential benefits of the merger.
The InnerDyne board did not assign relative weights to the foregoing factors
or determine that any factor was of particular importance. Rather, the InnerDyne
board viewed its position and recommendations as being based on the totality of
the information presented to and considered by the
19
<PAGE>
InnerDyne board. In addition, individual members of the InnerDyne board may have
given different weights to different factors.
The foregoing discussion of the information and factors considered by the
InnerDyne board is not intended to be exhaustive but is believed to include the
material factors considered by the InnerDyne board. In view of the wide variety
of factors, both positive and negative, considered by the InnerDyne board, the
InnerDyne board did not find it practical to, and did not, quantify or otherwise
assign relative weights to the specific factors considered.
OPINION OF INNERDYNE'S FINANCIAL ADVISOR
InnerDyne retained U.S. Bancorp Piper Jaffray to render to the board of
directors an opinion as to the fairness, from a financial point of view, of the
consideration to be received by InnerDyne stockholders in the transaction.
U.S. Bancorp Piper Jaffray delivered to the board of directors of InnerDyne
on October 3, 2000 its opinion, as of that date and based upon and subject to
the assumptions, factors and limitations set forth in the written opinion and
described below, that the consideration proposed to be received by InnerDyne
stockholders (other than Tyco or its affiliates) in the proposed transaction was
fair, from a financial point of view, to those stockholders. A copy of U.S.
Bancorp Piper Jaffray's written opinion is attached to this document as Annex B
and is incorporated into this document by reference. The board does not expect
to receive a "bring down" opinion from U.S. Bancorp Piper Jaffray at the time
the exchange ratio is set.
While U.S. Bancorp Piper Jaffray rendered its opinion and provided certain
analyses to the board of directors, U.S. Bancorp Piper Jaffray was not requested
to and did not make any recommendation to the board of directors as to the
specific form or amount of the consideration to be received by InnerDyne
stockholders in the proposed transaction, which was determined through
negotiations between InnerDyne and Tyco. U.S. Bancorp Piper Jaffray's written
opinion, which was directed to the InnerDyne board of directors, addresses only
the fairness, from a financial point of view, of the proposed consideration to
be received by InnerDyne stockholders in the proposed transaction, does not
address InnerDyne's underlying business decision to proceed with or effect the
transaction and does not constitute a recommendation to any InnerDyne
stockholder.
In arriving at its opinion, U.S. Bancorp Piper Jaffray's review included:
- a draft of the merger agreement, dated October 3, 2000;
- selected financial, operating, business and other information relative to
Tyco and InnerDyne;
- publicly available market and securities data of Tyco, InnerDyne and of
selected public companies deemed comparable to InnerDyne; and
- to the extent publicly available financial information relating to
selected transactions deemed comparable to the proposed transaction.
In addition, U.S. Bancorp Piper Jaffray visited the headquarters of
InnerDyne and conducted discussions with members of management of both InnerDyne
and Tyco concerning the business outlook of InnerDyne on a stand-alone basis and
as a subsidiary of Tyco.
The following is a summary of the material analyses and other information
that U.S. Bancorp Piper Jaffray prepared and relied on in delivering its opinion
to the board of directors of InnerDyne:
IMPLIED CONSIDERATION
Giving effect to the exchange ratio, the resulting implied value of Tyco
share consideration of $7.50 per share of InnerDyne common stock (based on the
closing trading price for Tyco common shares on
20
<PAGE>
October 3, 2000 of $51.13) and the outstanding InnerDyne common stock and common
stock equivalents, U.S. Bancorp Piper Jaffray calculated the aggregate implied
value of the stock consideration payable in the transaction for InnerDyne common
stock to be approximately $188.6 million. U.S. Bancorp Piper Jaffray also
calculated that stockholders of InnerDyne would be issued an aggregate of 0.21%
of the total Tyco common shares and common share equivalents outstanding after
the transaction.
INNERDYNE MARKET ANALYSIS
U.S. Bancorp Piper Jaffray reviewed the stock trading history of InnerDyne
common stock. U.S. Bancorp Piper Jaffray presented the recent common stock
trading information contained in the following table:
<TABLE>
<S> <C>
Closing price on October 3, 2000............................ $7.13
30 calendar day closing average............................. 6.33
60 calendar day closing average............................. 6.50
90 calendar day closing average............................. 6.70
52 week high trade.......................................... 9.94
52 week low trade........................................... 2.75
</TABLE>
U.S. Bancorp Piper Jaffray also presented selected price data of InnerDyne
against the comparable group described below.
INNERDYNE COMPARABLE COMPANY ANALYSIS
U.S. Bancorp Piper Jaffray compared financial information and valuation
ratios relating to InnerDyne to corresponding data and ratios from five publicly
traded companies deemed comparable to InnerDyne. This group included ConMed
Corporation, The Cooper Companies, Inc., Mentor Corporation, Haemonetics
Corporation, and STAAR Surgical Company. This group was selected from companies
with a market capitalization greater than $150 million that operate in the
surgery segment of the medical technology industry and have historical revenues
greater than $50 million and projected earnings growth of greater than 15%.
This analysis produced multiples of selected valuation data as follows:
<TABLE>
<CAPTION>
COMPARABLE COMPANIES
-----------------------------------------
INNERDYNE(1) LOW MEAN MEDIAN HIGH
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Company value to latest twelve months revenue....... 8.0x 1.3x 2.6x 2.4x 4.9x
Company value to latest twelve months earnings
before interest and taxes......................... 90.3x 7.8x 11.8x 9.9x 19.6x
Company value to estimated calendar 2001 revenue.... 4.4x 1.2x 2.2x 2.2x 4.0x
Share price to estimated calendar 2000 net income
per share......................................... 75.0x 10.1x 15.5x 14.7x 22.3x
Share price to estimated calendar 2001 net income
per share......................................... 37.5x 8.8x 18.1x 13.8x 38.3x
</TABLE>
------------------------
(1) Based on value of transaction consideration.
21
<PAGE>
COMPARABLE TRANSACTION ANALYSIS
U.S. Bancorp Piper Jaffray reviewed 13 acquisition transactions (the
"Comparable Transactions") involving companies that it deemed comparable to
InnerDyne. It selected these transactions by searching SEC filings, public
company disclosures, press releases, industry and popular press reports,
databases and other sources and by applying the following criteria:
- transactions that were announced between January 1, 1995 and October 3,
2000
- transactions in which the acquiring company purchased at least 50% of the
target company with cash and/or stock
- transactions involving target companies with similar SIC codes to
InnerDyne
- transactions in which the target company operated in the general surgery
segment of the medical technology industry.
U.S. Bancorp Piper Jaffray compared the resulting multiples of selected
valuation data to multiples for InnerDyne derived from the implied value payable
in the transaction.
<TABLE>
<CAPTION>
COMPARABLE TRANSACTIONS
-----------------------------------------
INNERDYNE LOW MEAN MEDIAN HIGH
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Company value to latest twelve months sales........... 8.0x 1.6x 3.8x 2.6x 11.9x
Company value to latest twelve months earnings before
interest and taxes.................................. 90.3x 10.9x 21.1x 18.8x 36.4x
Equity value to latest twelve months net income....... 125.0x 22.0x 35.2x 30.5x 61.6x
</TABLE>
PREMIUMS PAID ANALYSIS
U.S. Bancorp Piper Jaffray reviewed publicly available information for
selected completed or pending transactions to determine the implied premiums
payable in the transactions over recent trading prices. It selected these
transactions by searching SEC filings, public company disclosures, press
releases, industry and popular press reports, databases and other sources and by
applying the following criteria:
- transactions that were announced or completed between January 1, 1995 and
October 3, 2000
- transactions involving a change in control
- transactions in which the target company operated in the medical
technology industry.
U.S. Bancorp Piper Jaffray performed its analysis on 76 transactions that
satisfied the criteria, and the table below shows a comparison of premiums paid
in these transactions to the premium that would be paid to InnerDyne
stockholders based on the implied value payable in the transaction. The premium
calculations for InnerDyne stock are based upon an assumed announcement date of
October 3, 2000.
<TABLE>
<CAPTION>
INNERDYNE LOW MEAN MEDIAN HIGH
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
One week before announcement......................... 27.7% (11.8)% 34.9% 31.3% 150.9%
One month before announcement........................ 15.4% (9.3)% 45.9% 40.7% 130.0%
</TABLE>
INNERDYNE DISCOUNTED CASH FLOW ANALYSIS
U.S. Bancorp Piper Jaffray performed a discounted cash flow analysis for
InnerDyne in which it calculated the present value of the projected hypothetical
future cash flows of InnerDyne using internal financial planning data prepared
by InnerDyne management. U.S. Bancorp Piper Jaffray estimated a range of
theoretical values for InnerDyne based on the net present value of its implied
annual cash flows and a terminal value for InnerDyne in 2004 calculated based
upon a multiple of operating
22
<PAGE>
income. U.S. Bancorp Piper Jaffray applied a range of discount rates of 17% to
21% and a range of terminal value multiples of 10.0x to 12.0x of forecasted 2004
earnings before interest and taxes. This analysis yielded the following results:
<TABLE>
<S> <C>
PER SHARE EQUITY VALUE OF INNERDYNE
Low.................................................... $ 5.93
Mid.................................................... 6.72
High................................................... 7.60
AGGREGATE EQUITY VALUE OF INNERDYNE
(in thousands)
Low.................................................... $147,951
Mid.................................................... 168,260
High................................................... 191,076
</TABLE>
ANALYSIS OF TYCO COMMON SHARES
U.S. Bancorp Piper Jaffray reviewed general background information
concerning Tyco, including recent financial and operating results and outlook,
the price performance of Tyco common shares over the previous twelve months
relative to the S&P 500 Composite Index and the Dow Jones Industrial Average,
and the stock price and volume over selected periods. U.S. Bancorp Piper Jaffray
also reviewed the stock trading history of Tyco common shares at the dates or
for the periods indicated below.
<TABLE>
<S> <C>
Closing price on October 3, 2000....................... $51.13
30 calendar day closing average........................ 53.51
60 calendar day closing average........................ 54.48
90 calendar day closing average........................ 54.03
52 week high trade..................................... 59.19
52 week low trade...................................... 22.50
</TABLE>
In reaching its conclusion as to the fairness of the transaction
consideration and in its presentation to the board of directors, U.S. Bancorp
Piper Jaffray did not rely on any single analysis or factor described above,
assign relative weights to the analyses or factors considered by it, or make any
conclusion as to how the results of any given analysis, taken alone, supported
its opinion. The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial analysis or summary description. U.S. Bancorp
Piper Jaffray believes that its analyses must be considered as a whole and that
selection of portions of its analyses and of the factors considered by it,
without considering all of the factors and analyses, would create a misleading
view of the processes underlying the opinion.
The analyses of U.S. Bancorp Piper Jaffray are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Analyses relating to the value of
companies do not purport to be appraisals or valuations or necessarily reflect
the price at which companies may actually be sold. No company or transaction
used in any analysis for purposes of comparison is identical to InnerDyne, Tyco
or the transaction. Accordingly, an analysis of the results of the comparisons
is not mathematical; rather, it involves complex considerations and judgments
about differences in the companies to which InnerDyne and Tyco were compared and
other factors that could affect the public trading value of the companies.
For purposes of its opinion, U.S. Bancorp Piper Jaffray relied upon and
assumed the accuracy, completeness and fairness of the financial statements and
other information provided to it by InnerDyne and Tyco, or otherwise made
available to it, and did not assume responsibility for the
23
<PAGE>
independent verification of that information. Information prepared for financial
planning purposes was not prepared with the expectation of public disclosure.
U.S. Bancorp Piper Jaffray relied upon the assurances of the management of
InnerDyne that the information provided to it by InnerDyne and Tyco was prepared
on a reasonable basis, the financial planning data and other business outlook
information reflects the best currently available estimates and judgment of
management, and management was not aware of any information or facts that would
make the information provided to U.S. Bancorp Piper Jaffray incomplete or
misleading.
For purposes of its opinion, U.S. Bancorp Piper Jaffray assumed that neither
Tyco, on a consolidated basis, nor InnerDyne is a party to any material pending
transaction, including external financing, recapitalizations, acquisitions other
than this transaction, any previously publicly announced transaction or in the
ordinary course of business.
In arriving at its opinion, U.S. Bancorp Piper Jaffray was not requested to
perform and did not perform any appraisals or valuations of any specific assets
or liabilities of InnerDyne and was not furnished with any such appraisals or
valuations. Appraisals are essential to a liquidation analysis of a company, but
are not essential to the value of a business as a going concern. Consistent with
customary fairness opinion practice involving a solvent business entity, U.S.
Bancorp Piper Jaffray analyzed InnerDyne as a going concern and accordingly
expressed no opinion as to the liquidation value of InnerDyne. U.S. Bancorp
Piper Jaffray made no physical inspection of the properties or assets of
InnerDyne or Tyco. U.S. Bancorp Piper Jaffray expressed no opinion regarding
whether the necessary regulatory approvals or other conditions to consummation
of the transactions contained in the merger agreement will be obtained or
satisfied. U.S. Bancorp Piper Jaffray expressed no opinion as to the price at
which shares of InnerDyne or Tyco have traded or at which the shares of
InnerDyne, Tyco or the combined company may trade at any future time. The
opinion is based on information available to U.S. Bancorp Piper Jaffray and the
facts and circumstances as they existed and were subject to evaluation on the
date of the opinion. Events occurring after that date could materially affect
the assumptions used in preparing the opinion. U.S. Bancorp Piper Jaffray has
not undertaken to and is not obligated to affirm or revise its opinion or
otherwise comment on any events occurring after the date it was given.
U.S. Bancorp Piper Jaffray, as a customary part of its investment banking
business, evaluates businesses and their securities in connection with mergers
and acquisitions, underwritings and secondary distributions of securities,
private placements and valuations for estate, corporate and other purposes. U.S.
Bancorp Piper Jaffray makes a market in the common stock of InnerDyne and
provides research coverage for InnerDyne. In the ordinary course of its
business, U.S. Bancorp Piper Jaffray and its affiliates may actively trade
securities of InnerDyne and Tyco for their own accounts or the accounts of their
customers and, accordingly, may at any time hold a long or short position in
such securities.
Under the terms of the engagement letter dated April 28, 1997, InnerDyne has
agreed to pay U.S. Bancorp Piper Jaffray a fee equal to 1.00% of the aggregate
consideration up to $20 million, and 1.50% of any aggregate consideration above
$20 million, paid to InnerDyne or its stockholders in connection with a purchase
or sale transaction of InnerDyne, for U.S. Bancorp Piper Jaffray's financial
advisory services. InnerDyne paid U.S. Bancorp Piper Jaffray a retainer fee of
$25,000 which will be credited against payment of the fee for financial advisory
services. InnerDyne also agreed to pay U.S. Bancorp Piper Jaffray $150,000 for
rendering its opinion, that will be credited against payment of the fee for
financial advisory services, unless such fee for financial advisory services is
less than $400,000. The contingent nature of the financial advisory fee may have
created a potential conflict of interest in that InnerDyne would be unlikely to
consummate the transaction unless it had received the opinion of U.S. Bancorp
Piper Jaffray. Whether or not the transaction is consummated, InnerDyne has
agreed to pay the reasonable out-of-pocket expenses of U.S. Bancorp Piper
Jaffray and to indemnify U.S. Bancorp Piper Jaffray against liabilities
incurred. These liabilities include liabilities under the federal securities
laws in connection with the engagement of U.S. Bancorp Piper Jaffray by the
board of directors.
24
<PAGE>
(c) INTENT TO TENDER.
To InnerDyne's knowledge, after reasonable inquiry and in view of the
obligations under the tender offer and merger agreement, all executive officers,
directors and affiliates of InnerDyne will tender all Shares held of record or
beneficially owned by them (other than options to acquire Shares). All of
InnerDyne's directors and officers will tender all of their shares pursuant to
the offer; such shares constitute less than eight percent of the outstanding
shares (assuming exercise of all options).
5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
InnerDyne engaged U.S. Bancorp Piper Jaffray as its exclusive financial
advisor, pursuant to the terms of the U.S. Bancorp Piper Jaffray Letter
Agreement, dated April 28, 1997, to provide financial advisory and investment
banking services to InnerDyne in connection with the exploration of a possible
business combination with Tyco. See Item 4 for a discussion of the fees and
expenses payable by InnerDyne to U.S. Bancorp Piper Jaffray in connection with
the transaction with Tyco.
6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in the Shares have been effected during the past 60 days by
InnerDyne or any of its executive officers, directors or other affiliates.
7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by InnerDyne in response to the offer which relate to
a tender offer or other acquisition of InnerDyne's securities by InnerDyne or
any other person.
(b) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by InnerDyne in response to the offer which relate
to, or would result in, (i) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving InnerDyne, (ii) a purchase, sale or
transfer of a material amount of assets of InnerDyne, or (iii) any material
change in the present dividend rate or policy, or indebtedness or capitalization
of InnerDyne.
(c) Except as indicated in Items 3 and 4 above, there are no transactions,
board of directors resolutions, agreements in principle or signed contracts
entered into in response to the offer that relate to one or more of the matters
referred to in Item 7(a) or (b) above.
8. ADDITIONAL INFORMATION.
(a) The Information Statement previously filed as Annex A to Schdule 14D-9
was furnished to InnerDyne's stockholders pursuant to Rule 14f-1 under the
Securities Exchange Act in connection with the possible designation by Tyco,
pursuant to the merger agreement, of certain persons to be appointed to the
InnerDyne board other than at a meeting of InnerDyne's stockholders, and such
information is incorporated herein by reference.
(b) The information contained in all of the Exhibits referred to in Item 9
below is incorporated herein by reference.
25
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Tyco International Ltd. and InnerDyne file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room North East Regional Office Midwest Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Suite 1024 Room 1300 Suite 1400
Chicago, Illinois
Washington, D.C. 20549 New York, New York 10048 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet worldwide website that contains reports,
proxy statements and other information about issuers, like Tyco and InnerDyne,
who file electronically with the SEC. The address of that site is
http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
Schedule 14D-9, 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 Schedule 14D-9, except
for any information superseded by information contained directly in this
Schedule 14D-9.
26
<PAGE>
9. EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Letter to the Stockholders of InnerDyne, Inc., dated October
18, 2000.*
(a)(2) Prospectus, dated November 14, 2000, amending and restating
the Prospectus dated October 18, 2000 (incorporated herein
by reference to Tyco International Ltd.'s Registration
Statement on Form S-4 (File No. 333-48180), as amended (the
"Tyco Form S-4")).
(a)(3) Joint Press Release of InnerDyne, Inc. and Tyco
International Ltd., dated October 4, 2000 (incorporated
herein by reference to InnerDyne's Form 425 filed on October
4, 2000).
(a)(4) Joint Press Release of InnerDyne, Inc. and Tyco
International Ltd., dated October 27, 2000 (incorporated
herein by reference to InnerDyne's Form 425 filed on
October 27, 2000).
(a)(5) Joint Press Release of InnerDyne, Inc. and Tyco
International Ltd., dated November 10, 2000 (incorporated
herein by reference to Tyco's Form 425 filed on
November 13, 2000).
(a)(6) Joint Press Release of InnerDyne, Inc. and Tyco
International Ltd., dated November 14, 2000.
(e)(1) Agreement and Plan of Merger, dated as of October 3, 2000,
among Tyco Acquisition Corp. X, VLMS, Inc. and InnerDyne,
Inc. and guaranteed by Tyco International Ltd. (incorporated
herein by reference to the Tyco Form S-4).
(e)(2) Opinion of U.S. Bancorp Piper Jaffray Inc. to the Board of
Directors of InnerDyne, Inc., dated October 3, 2000
(included as Annex B hereto).
(e)(3) 1996 Stock Option Plan (as amended and restated June 20,
2000) (previously filed as an exhibit to InnerDyne, Inc.'s
Report on Form S-8 on July 2, 1998 and incorporated herein
by reference (SEC File No. 333-58381)).
(e)(4) 2000 Directors' Stock Option Plan (as amended and restated
June 20, 2000) (previously filed as an exhibit to InnerDyne,
Inc.'s Report on Form S-8 on November 4, 1997 and
incorporated herein by reference (SEC File No. 333-39489)).
(e)(5) 2000 Employee Stock Purchase Plan (as amended and restated
June 20, 2000) (previously filed as an exhibit to InnerDyne,
Inc.'s Report on Form S-8 on November 4, 1997 and
incorporated herein by reference
(SEC File No. 333-39489)).
(e)(6) 1987 Stock Option Plan (previously filed as an exhibit to
InnerDyne, Inc.'s Registration Statement on Form S-4 on
January 31, 1994 and incorporated herein by reference
(SEC File No. 33-74624)).
(e)(7) Change of Control Agreement between William G. Mavity and
InnerDyne, Inc., dated September 12, 1996 (previously filed
as an exhibit to InnerDyne, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996 and incorporated
herein by reference).
(e)(8) Form of Senior Management Change of Control Agreement
(previously filed as an exhibit to InnerDyne, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996 and
incorporated herein by reference).
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
(e)(9) Letter Agreement by and between Daniel Genter and InnerDyne,
Inc., dated March 13, 1996 (previously filed as an exhibit
to InnerDyne, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by
reference).
(e)(10) Letter Agreement with William G. Mavity, dated September 15,
1993 (previously filed as an exhibit to InnerDyne, Inc.'s
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1993 and incorporated herein by reference.)
</TABLE>
------------------------
* Previously filed.
28
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 14, 2000
<TABLE>
<S> <C> <C>
INNERDYNE, INC.
By: /s/ WILLIAM G. MAVITY
-----------------------------------------
William G. Mavity
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
29
<PAGE>
ANNEX A
INNERDYNE, INC.
INFORMATION STATEMENT
Pursuant to Section 14(F) of the Securities and Exchange Act of 1934 and
Rule 14F-1 thereunder.
(Previously filed)
A-1
<PAGE>
ANNEX B
[US BANCORP LOGO]
800 Nicollet Mall
Minneapolis, MN 55402-7020
612 303-6000
October 3, 2000
The Board of Directors
InnerDyne, Inc.
1244 Reamwood Avenue
Sunnyvale, California 94089
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock (the "Common Stock") of InnerDyne, Inc.
("InnerDyne") of the proposed consideration to be received by the holders of
Common Stock pursuant to an Agreement and Plan of Merger to be dated as of
October 3, 2000 (the "Agreement") among InnerDyne, Tyco Acquisition Corp. X
("Parent"), a direct, wholly-owned subsidiary of Tyco International Ltd.
("Tyco") and VLMS, Inc. ("Merger Sub"), a direct, wholly-owned subsidiary of
Parent. Pursuant to the Agreement, Merger Sub will make a stock tender offer
("Tender Offer") for all of the outstanding shares of Common Stock at a purchase
price of $7.50 per share in Tyco common shares based on the average daily
volume-weighted selling price of a share of common stock for the five
consecutive trading days ending on a specified date prior to the tender offer
expiration date (the "Offer Price"). Following completion of the Tender Offer,
Merger Sub would be merged into InnerDyne (the "Merger") and each outstanding
share of Common Stock would be converted into the right to receive Tyco common
stock at the Offer Price. The terms and conditions of the Tender Offer and
Merger (collectively, the "Transaction") are more fully set forth in the
Agreement. The Transaction is intended to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and
is intended to be treated as a purchase for accounting purposes.
U.S. Bancorp Piper Jaffray Inc., as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, underwriting and secondary
distributions of securities, private placements and valuations for estate,
corporate and other purposes. We have acted as exclusive financial advisor to
InnerDyne in connection with the Agreement and will receive a fee for our
services, which is contingent upon consummation of the Tender Offer. In
addition, we will receive a separate fee for providing this opinion. This
opinion fee is not contingent upon the consummation of the Tender Offer.
InnerDyne has also agreed to indemnify us against certain liabilities in
connection with our services. We make a market in the Common Stock and provide
research coverage for InnerDyne. In the ordinary course of our business, we and
our
Member SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp.
B-1
<PAGE>
affiliates may actively trade securities of InnerDyne and Tyco for our own
account or the account of our customers and, accordingly, may at any time hold a
long or short position in such securities.
In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have reviewed (i) a draft copy of the Agreement and Plan of
Merger dated October 3, 2000, (ii) certain financial, operating, business and
other information relative to InnerDyne that was publicly available or furnished
by the management of InnerDyne, including certain publicly available market and
securities date of InnerDyne, (iii) to the extent publicly available, the stock
price premiums paid and financial terms of certain acquisition transactions
involving companies operating in industries in which InnerDyne operates and
operating performance and valuation analyses of selected public companies deemed
comparable to InnerDyne, and (iv) certain financial, operating, business and
other information relative to Tyco that was publicly available or furnished by
the management of Tyco, including certain publicly available market and
securities data of Tyco. In addition, we had discussions with members of the
management of InnerDyne concerning the financial condition, current operating
results and business outlook for InnerDyne on a stand-alone basis and as a
subsidiary of Parent.
We have relied upon and assumed the accuracy, completeness and fairness of
the financial statements and other information provided to us by InnerDyne and
Tyco, or otherwise made available to us, and have not assumed responsibility for
the independent verification of such information. We have relied upon the
assurances of the management of InnerDyne that the information provided to us by
InnerDyne has been prepared on a reasonable basis, and, with respect to
financial planning data and other business outlook information, reflects the
best currently available estimates and judgment of InnerDyne's management, and
that they are not aware of any information or facts that would make the
information provided to us incomplete or misleading. Without limiting the
generality of the foregoing, for the purpose of this opinion, we have assumed
that neither Tyco, on a consolidated basis, nor InnerDyne is a party to any
material pending transaction, including external financing, recapitalizations,
acquisitions or merger discussions, other than the Transaction, any previously
publicly announced transaction or in the ordinary course of business.
In arriving at our opinion, we have not performed any appraisals or
valuations of any specific assets or liabilities of InnerDyne, and have not been
furnished with any such appraisals or valuations. We express no opinion
regarding the liquidation value of any entity or regarding whether the necessary
regulatory approvals, equity financings of Tyco or other conditions to
consummation of the Transaction contained in the Agreement will be obtained or
satisfied.
This opinion is necessarily based upon the information available to us and
facts and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion.
We are not expressing any opinion herein as to the price at which shares of
Common Stock or Tyco common stock have traded or may trade at any future time.
We have not undertaken to reaffirm or revise this opinion or otherwise comment
upon any events occurring after the date hereof and do not have any obligation
to update, revise or reaffirm this opinion.
This opinion is directed to the Board of Directors of InnerDyne and is not
intended to be and does not constitute a recommendation to any stockholder of
InnerDyne. We were not requested to opine as to, and this opinion does not
address, the basic business decision to proceed with or effect the Transaction.
Except with respect to the use of this opinion in connection with the Schedule
14D-9 relating to the Tender Offer or the prospectus/proxy statement relating to
the Merger in accordance with the terms of the engagement letter, this opinion
shall not be published or otherwise used, nor shall any public references to us
be made, without our prior written approval.
B-2
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Based upon and subject to the foregoing and based upon such other factors as
we consider relevant, it is our opinion that the Offer Price proposed to be
received in the Transaction by the stockholders of InnerDyne pursuant to the
Agreement for the Common Stock is fair, from a financial point of view, to such
stockholders (other than Parent or its affiliates) as of the date hereof.
Sincerely,
/s/ U.S. Bancorp Piper Jaffray, Inc.
U.S. BANCORP PIPER JAFFRAY INC.
B-3
