<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
BERMUDA 7382 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
THE GIBBONS BUILDING
10 QUEEN STREET, SUITE 301
HAMILTON HM 11 BERMUDA
(441) 292-8674
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
MARK H. SWARTZ
C/O TYCO INTERNATIONAL (US) INC.
ONE TYCO PARK
EXETER, NEW HAMPSHIRE 03833
(603) 778-9700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
* Tyco International Ltd. maintains its registered and principal executive
offices at The Gibbons Building, 10 Queen Street, Suite 301, Hamilton HM 11
Bermuda. The executive offices of Tyco's principal United States subsidiary,
Tyco International (US) Inc., are located at One Tyco Park, Exeter, New
Hampshire 03833. The telephone number there is (603) 778-9700.
------------------------------
COPIES TO:
JOSHUA M. BERMAN, ESQ. PETER ALLAN ATKINS, ESQ.
ABBE L. DIENSTAG, ESQ. DAVID J. FRIEDMAN, ESQ.
KRAMER LEVIN NAFTALIS & FRANKEL LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
LLP
919 THIRD AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Shares, par value $0.20 per share(1).... 201,048,657(2) N/A $10,657,852,787(3) $2,962,884
</TABLE>
(1) Includes associated Preferred Stock Purchase Rights.
(2) Represents the estimated maximum number of Common Shares issuable upon
consummation of the merger of a subsidiary of the Registrant with and into
AMP Incorporated assuming the exercise of all options and other rights to
purchase or acquire shares of common stock, no par value, of AMP that are
exercisable prior to consummation of the merger.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 promulgated under the Securities Act of 1933, as amended, on the
basis of $47.78125, the average of the high and low prices of the AMP common
stock on the New York Stock Exchange on December 3, 1998, multiplied by
223,055,127, the maximum number of shares of AMP common stock to be
converted in the merger.
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Agreement and Plan of Merger, dated
as of November 22, 1998, described in the Joint Proxy Statement/Prospectus
included in this Registration Statement have been satisfied or waived.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS
SUBJECT TO COMPLETION, DECEMBER 11, 1998
[LOGO]
[LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Tyco International Ltd. and AMP Incorporated have
agreed on a business combination of Tyco and AMP and are seeking your vote FOR
this important transaction.
If the combination is effected, AMP will become an indirect wholly-owned
subsidiary of Tyco and shareholders of AMP will become Tyco shareholders. AMP is
the world leader in electrical and electronic connection devices and a producer
of an expanding number of connector intensive assemblies and total
interconnection systems. Tyco is a diversified manufacturing and service company
with combined annual revenue in excess of $17 billion. Through its Electrical
and Electronic Components group, Tyco designs, manufactures and distributes
electrical and electronic components, and designs, manufactures, installs and
services undersea cable communication systems. By combining the two companies,
Tyco and AMP expect to enhance long-term value for their shareholders. In
addition, the combination will give shareholders of AMP the opportunity to
participate in a larger, more diversified manufacturing and service company.
The combination will be effected through a merger of AMP with a wholly-owned
indirect subsidiary of Tyco. AMP shareholders are being asked, at AMP's special
meeting, to approve and adopt the merger agreement. Tyco shareholders are being
asked, at Tyco's special general meeting, to approve the issuance of Tyco common
shares to be delivered in connection with the merger. The merger cannot be
completed unless shareholders of AMP and Tyco approve each of these matters.
In the merger, shareholders of AMP will receive Tyco common shares in
exchange for their shares of AMP common stock. The exchange ratio, which is the
fraction of a Tyco common share that AMP shareholders will receive for each of
their shares of AMP common stock, will depend on the average trading price for
Tyco common shares over a period of time prior to the AMP special meeting. The
exchange ratio is designed to give AMP shareholders between $51.00 and $55.95 in
value of Tyco common shares (based on such average trading price) for each of
their AMP shares. AMP shareholders may call toll free 1-888-750-5835 at any time
after December , 1998 for current information on the exchange ratio. We
estimate that, on completion of the merger, former AMP shareholders will own
between % and % of the outstanding Tyco common shares.
In addition, Tyco shareholders are being asked at the Tyco special general
meeting, conditioned on completion of the merger, to increase the size of the
Tyco Board to twelve directors and to elect Robert Ripp, AMP's Chairman and
Chief Executive Officer, as a director of Tyco; to authorize an increase in the
authorized share capital of Tyco; and to authorize an increase in the number of
common shares in respect of which grants may be made under the Tyco
International Ltd. Long Term Incentive Plan. Approval of these matters is not a
condition to the merger.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
shareholders meeting, please take the time to vote by signing, dating and
returning the enclosed proxy card today. If you execute your proxy card without
indicating how you want to vote, your proxy will be counted as a vote in favor
of the proposal(s). If you fail to return your card, your shares will not be
counted as present or voting unless you attend and vote in person.
The dates, times and places of the meetings are as follows:
<TABLE>
<CAPTION>
For TYCO Shareholders: For AMP Shareholders:
<S> <C>
, 1999 , 1999
10:00 a.m. ( Time) 10:00 a.m. (local time)
[insert] Global Leadership Center
[insert] 411 S. 40th Street
Harrisburg, PA 17105
</TABLE>
This Joint Proxy Statement/Prospectus provides you with detailed information
about the proposed merger and, the full text of the merger agreement appears in
the back as Annex A. You can also get information about our companies from
documents we have filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
If you are an AMP shareholder and have any questions about the merger or how
to vote your shares, please contact Innisfree M&A Incorporated at 1-888-750-5834
(toll free in the United States). If you are a Tyco shareholder and have any
questions about the merger or how to vote your shares, please contact
at 1-800-XXX-XXXX (toll free in the United States).
<TABLE>
<CAPTION>
/s/ L. Dennis Kozlowski /s/ Robert Ripp
<S> <C>
L. Dennis Kozlowski Robert Ripp
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Tyco International Ltd. AMP Incorporated
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN
MATTERS WHICH SHOULD BE CONSIDERED BY SHAREHOLDERS WITH RESPECT TO THE
MERGER. Neither the Securities and Exchange Commission nor any state
securities commission has approved the merger described in this Joint Proxy
Statement/Prospectus or the securities to be issued under this Joint Proxy
Statement/Prospectus nor have they determined if this Joint Proxy
Statement/Prospectus is accurate or adequate. Furthermore, the Securities
and Exchange Commission has not determined the fairness or merits of the
merger. Any representation to the contrary is a criminal offense. The
information in this Joint Proxy Statement/Prospectus is not complete and may
be amended. This Joint Proxy Statement/Prospectus is not an offer to sell
nor is it seeking an offer to buy securities in any state where the offer or
sale is not permitted.
Joint Proxy Statement/Prospectus dated December , 1998 and first mailed to
shareholders on or about December , 1998.
<PAGE>
AMP INCORPORATED
P.O. Box 3608
Harrisburg, PA 17105-3608
----------
NOTICE OF SPECIAL MEETING
TO BE HELD ON JANUARY , 1999
----------
To the Shareholders of AMP Incorporated:
Notice is hereby given that a Special Meeting of Shareholders of AMP
Incorporated will be held at 10:00 a.m., local time, on , 1999, at the
AMP Global Leadership Center, 411 S. 40th Street Harrisburg, PA to consider and
act upon a proposal recommended by the Board of Directors of AMP to approve and
adopt the Agreement and Plan of Merger, dated as of November 22, 1998, by and
among Tyco International (PA) Inc. ("Tyco (PA)"), a wholly-owned subsidiary of
Tyco International Ltd., AMP Merger Corp., a wholly-owned subsidiary of Tyco
(PA), and AMP.
Only shareholders of record at the close of business on , 1998 are
entitled to notice of and to vote at the AMP Special Meeting or any adjournments
or postponements of the Special Meeting.
All shareholders are cordially invited to attend the AMP Special Meeting.
To ensure your representation at the AMP Special Meeting, please complete
and promptly return your proxy in the enclosed envelope. This will not prevent
you from voting in person, but will help to secure a quorum and avoid added
solicitation costs. You may revoke your proxy at any time before it is voted.
Please review the Joint Proxy Statement/Prospectus accompanying this notice for
more complete information regarding the matters proposed for your consideration
at the AMP Special Meeting.
By Order of the Board of Directors
David F. Henschel
General Counsel and Corporate
Secretary
DECEMBER , 1998
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE AMP SPECIAL MEETING.
THE BOARD OF DIRECTORS OF AMP UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
YOUR SUPPORT IS APPRECIATED.
<PAGE>
TYCO INTERNATIONAL LTD.
(Incorporated in Bermuda with limited liability)
------------------------
NOTICE OF SPECIAL GENERAL MEETING
---------------------
Notice is hereby given that a Special General Meeting of Tyco International
Ltd. will be held on , 1999 at 10:00 a.m., local time, at [insert
meeting place], for the following purposes:
1. to approve the issuance of Tyco common shares, par value $0.20 per
share, to be delivered in connection with the merger contemplated by the
Agreement and Plan of Merger, dated as of November 22, 1998, by and among
Tyco International (PA) Inc. ("Tyco (PA)"), AMP Merger Corp., a
wholly-owned subsidiary of Tyco (PA), and AMP Incorporated;
and, conditioned on the consummation of the merger,
2. to increase the number of directors of Tyco from eleven to twelve and to
elect Robert Ripp, AMP's current Chairman and Chief Executive Officer, as
a director of Tyco, to serve until the next annual general meeting of
Tyco;
3. to approve an increase in the authorized share capital of Tyco so that
the number of authorized common shares of Tyco shall equal 2,500,000,000
by the creation of an additional 996,250,000 common shares of the nominal
value of US$0.20 each, and to authorize the issue or other disposal by
the Tyco Board of such shares and to amend consequentially the Bye-Laws
of Tyco; and
4. to authorize an increase in the number of common shares in respect of
which grants may be made under the Tyco International Ltd. Long Term
Incentive Plan.
You are cordially invited to attend the Tyco special general meeting.
Whether or not you plan to attend the meeting, please sign, date and return the
accompanying proxy card to ensure that your shares are represented at the
meeting. If you attend the Tyco special general meeting, you may vote in person
if you wish, whether or not you have executed and returned your proxy card. Your
proxy may be revoked at any time before it is voted. Please review the Joint
Proxy Statement/Prospectus accompanying this notice for more complete
information regarding the matters proposed for your consideration at the Tyco
special general meeting.
By Order of the Board of Directors
Secretary
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM 11 Bermuda
DECEMBER , 1998
NOTES:
1. A shareholder is entitled to appoint a proxy to attend and vote at the
meeting on his or her behalf. A proxy must be a shareholder.
2. Proxy cards should be signed, dated and returned as soon as possible in
accordance with the instructions in the accompanying Joint Proxy
Statement/Prospectus of Tyco dated December , 1998 and the notes on the
proxy card.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE TYCO/AMP
MERGER......................................... iii
SUMMARY........................................ 1
The Companies.............................. 1
The Meetings............................... 2
Reasons for the Merger..................... 2
Recommendation to Shareholders............. 2
The Merger................................. 2
RISK FACTORS................................... 7
FORWARD LOOKING INFORMATION.................... 8
SELECTED FINANCIAL DATA OF TYCO AND AMP........ 9
Selected Consolidated Historical Financial
Data of Tyco............................. 9
Selected Consolidated Historical Financial
Data of AMP.............................. 11
Selected Tyco and AMP Unaudited Pro Forma
Combined Financial Information........... 12
Comparative Per Share Information.......... 13
AMP SPECIAL MEETING............................ 14
Purpose of the AMP Special Meeting......... 14
Solicitation of Proxies.................... 14
Record Date; Voting Rights; Proxies;
Required Vote............................ 14
Quorum..................................... 15
Other Information.......................... 15
Attendance at the Meeting.................. 15
TYCO SPECIAL GENERAL MEETING................... 16
Purpose of the Tyco Special General
Meeting.................................. 16
Solicitation of Proxies.................... 16
Voting Rights; Proxies..................... 17
Quorum..................................... 18
Required Vote.............................. 18
THE MERGER..................................... 19
Background of the Merger................... 19
Recommendation of the Board of Directors of
AMP; Reasons of AMP for the Merger....... 25
Opinion of AMP's Financial Advisor.........
Recommendation of the Board of Directors of
Tyco; Reasons of Tyco for the Merger..... 31
Opinion of Tyco's Financial Advisor........ 32
Interests of Certain Persons in the
Merger................................... 36
<CAPTION>
PAGE
---------
<S> <C>
Certain U.S. Federal Income Tax and Bermuda
Tax Consequences......................... 40
Anticipated Accounting Treatment........... 43
Certain Legal Matters...................... 44
U.S. Federal Securities Laws
Consequences............................. 44
Dividends.................................. 45
THE EXCHANGE RATIO AND ITS EFFECT ON AMP
SECURITIES AND EQUITY-BASED BENEFIT PLANS...... 46
General.................................... 46
The Exchange Ratio......................... 46
Fractional Shares.......................... 47
Treatment of AMP Equity-Based Awards....... 47
Illustrative Table of Exchange Ratios and
Value of Tyco Common Shares to be
Delivered in Connection with the
Merger................................... 48
Stock Exchange Listing..................... 49
Dissenters Rights.......................... 49
CERTAIN PROVISIONS OF THE MERGER AGREEMENT AND
RELATED AGREEMENTS............................. 50
General.................................... 50
The Merger Agreement....................... 50
Effective Time............................. 50
Directors and Officers..................... 50
Exchange Procedures........................ 50
Representations and Warranties............. 51
Conduct of Business by AMP................. 51
Conduct of Business by Tyco................ 52
No Solicitation............................ 52
Certain Other Covenants.................... 53
Conditions to the Merger................... 55
Termination................................ 57
Amendment and Waiver; Parties in
Interest................................. 60
Stock Option Agreement..................... 60
Guarantees................................. 61
COMPARATIVE PER SHARE PRICES AND DIVIDENDS..... 62
Tyco....................................... 62
AMP........................................ 63
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION.......................... 64
BUSINESSES OF TYCO............................. 72
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Electric and Electronic Components......... 72
Disposable and Specialty Products.......... 74
Fire and Security Services................. 77
Flow Control Products...................... 80
BUSINESS OF AMP................................ 83
DESCRIPTION OF SHARE CAPITAL OF TYCO........... 87
Authorized Share Capital................... 87
Tyco Common Shares......................... 87
Tyco Preference Shares..................... 88
Stock Exchange Listing..................... 88
EXPANSION OF TYCO BOARD AND ELECTION OF TYCO
DIRECTOR PROPOSAL.............................. 89
Information Concerning Nominee............. 89
Tyco Directors and Executive Officers...... 89
Security Ownership of Certain Beneficial
Owners of Tyco and Tyco Management....... 93
Tyco Executive Compensation................ 97
Key Employee Corporate Loan Program........ 99
TYCO CAPITAL INCREASE PROPOSAL................. 100
<CAPTION>
PAGE
---------
<S> <C>
TYCO LTIP SHARE INCREASE PROPOSAL.............. 100
COMPARISON OF SHAREHOLDER RIGHTS............... 104
OTHER MATTERS.................................. 116
LEGAL MATTERS.................................. 116
EXPERTS........................................ 117
FUTURE SHAREHOLDER PROPOSALS................... 117
WHERE TO FIND MORE INFORMATION................. 117
INDEX OF DEFINED TERMS......................... 120
ANNEXES
Annex A--Agreement and Plan of Merger and
Tyco Guarantee
Annex B--Stock Option Agreement and Tyco
Guarantee
Annex C--Opinion of Credit Suisse First
Boston Corporation
Annex D--Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Annex E--Tyco International Ltd. Long Term
Incentive Plan
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE TYCO/AMP MERGER
Q: WHY HAVE TYCO INTERNATIONAL LTD. AND AMP INCORPORATED AGREED TO A
BUSINESS COMBINATION?
A: AMP is the world leader in electrical and electronic connection devices
and a producer of an expanding number of connector intensive assemblies and
total interconnection systems. Tyco is a diversified manufacturing and service
company with expected combined annual revenues in excess of $17 billion. Through
its Electrical and Electronic Components group, Tyco designs, manufactures and
distributes electrical and electronic components, and designs, manufactures,
installs and services undersea cable communication systems.
For the two companies, the transaction is an attractive strategic
combination which should create opportunities for synergies and cost savings.
For AMP shareholders, among other things, the merger presents the opportunity to
receive a significant premium for their shares over the trading value of AMP
common stock on August 4, 1998, when AlliedSignal Inc. announced its intention
to seek to acquire AMP in cash, and over the $44.50 in cash per share that
AlliedSignal proposed. At the same time, the transaction should enable AMP
shareholders to participate in a larger, more diversified manufacturing and
service company. For Tyco, the merger is consistent with its strategy of
complementing its internal growth with acquisitions that are likely to benefit
from synergies and cost savings when combined with Tyco's existing operations
and that are expected to be accretive to earnings per share.
THE BOARD OF DIRECTORS OF AMP UNANIMOUSLY RECOMMENDS THAT AMP SHAREHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF MERGER (REFERRED TO
THROUGHOUT THIS JOINT PROXY STATEMENT/PROSPECTUS AS THE "MERGER AGREEMENT"). THE
BOARD OF DIRECTORS OF TYCO UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE
FOR THE PROPOSALS SUBMITTED TO THE TYCO SHAREHOLDERS, INCLUDING APPROVAL OF THE
ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE MERGER.
Q: HOW WILL THE COMBINATION OF TYCO AND AMP BE EFFECTED?
A: The combination will be effected through the merger of AMP with an
indirect wholly-owned Pennsylvania subsidiary of Tyco. AMP will be the surviving
corporation in the merger, and will become an indirect wholly-owned subsidiary
of Tyco.
Q: WHAT WILL HAPPEN TO THE STOCK OF AMP IN THE MERGER?
A: In the merger, AMP shareholders will receive Tyco common shares in
exchange for their shares of AMP common stock. The exchange ratio is the
fraction of a Tyco common share that AMP shareholders will receive in the merger
for each of their shares of AMP common stock. The exchange ratio will be
determined based on the average of the daily weighted averages of the trading
price of Tyco common shares on the New York Stock Exchange over the 15
consecutive trading days ending four trading days prior to the date of the
special meeting of AMP shareholders to vote on the merger (which, if the special
meeting is adjourned, refers to the date to which the meeting is adjourned).
This average is referred to throughout this document as the "Average Stock
Price." Cash will be paid for fractional shares.
Q: HOW IS THE EXCHANGE RATIO OF AMP SHARES FOR TYCO COMMON SHARES
DETERMINED?
A: The exchange ratio has been designed to give AMP shareholders between
$51.00 and $55.95 in value of Tyco common shares for each of their AMP shares.
For this purpose, the value of the Tyco common shares is deemed to be the
Average Stock Price.
- - If the Average Stock Price is equal to or greater than $67.00 but less than or
equal to $73.50, the exchange ratio will be 0.7612 Tyco common shares for each
share of AMP common stock, corresponding to a value of between $51.00 (0.7612
X $67.00) and $55.95 (0.7612 X $73.50).
- - If the Average Stock Price is greater than $73.50, the exchange ratio will be
reduced, so that the product of the exchange ratio and the Average Stock Price
is $55.95 (i.e., AMP shareholders will receive $55.95 in value (based upon the
Average Stock Price) of Tyco common shares for each share of AMP common
stock).
iii
<PAGE>
- - If the Average Stock Price is equal to or greater than $60.00 but less than
$67.00, the exchange ratio will be increased, so that the product of the
exchange ratio and the Average Stock Price is $51.00 (i.e., AMP shareholders
will receive $51.00 in value (based upon the Average Stock Price) of Tyco
common shares for each share of AMP common stock).
- - If the Average Stock Price is less than $60.00, the exchange ratio will be
increased, so that the product of the exchange ratio and the Average Stock
Price remains $51.00 (i.e., AMP shareholders will receive $51.00 in value
(based upon the Average Stock Price) of Tyco common shares for each share of
AMP stock). In this case, Tyco may call off the merger unless AMP agrees to an
exchange ratio equal to 0.8500. If AMP agrees to fix the exchange ratio at
0.8500, then Tyco will not have the right to call off the merger and the
exchange ratio will be 0.8500. In this case, AMP shareholders will receive
Tyco shares with a value (based on the Average Stock Price) of less than
$51.00.
Assuming that December , 1998 was the date of the special meeting of AMP
shareholders, the Average Stock Price would be $ . Should the Average Stock
Price actually used in calculating the exchange ratio be equal to this price,
the exchange ratio would be and AMP shareholders would receive Tyco common
shares having a value of $ (based on such Average Stock Price) for each share
of AMP common stock.
A table setting forth a range of Average Stock Prices, the resulting
exchange ratio and illustrative values of Tyco common shares (based upon the
Average Stock Price) to be received by AMP shareholders at each such Average
Stock Price appears in the Summary section of the Joint Proxy
Statement/Prospectus on page and in the full text on page . The value of
the Tyco common shares shown in the table are illustrative only. After the
exchange ratio is determined, the value of the Tyco common shares to be received
by AMP shareholders in the merger will fluctuate with fluctuations in the market
price of Tyco common shares.
Q: HOW WILL SHAREHOLDERS KNOW WHAT THE ACTUAL EXCHANGE RATIO IS?
A: Shareholders can call toll free 1-888-750-5835 at any time after December
, 1998 for the Average Stock Price for the preceding 15 trading days and the
exchange ratio that would be in effect based on that price. The actual exchange
ratio will be available at the same toll-free number after the close of business
on January , 1999 (assuming the AMP special meeting is held on January ,
1999).
Q: WHEN WILL THE MERGER TAKE EFFECT?
A: AMP and Tyco expect that the merger will become effective promptly after
shareholders of AMP approve and adopt the merger agreement and shareholders of
Tyco approve the issuance of the Tyco common shares to be delivered in
connection with the merger, provided that the other conditions to the merger
have been satisfied. The special shareholders meetings of both AMP and Tyco are
scheduled for January , 1999.
Q: WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
FOR THE SHAREHOLDERS OF AMP?
A: The receipt of Tyco common shares in the merger will generally be tax
free to the shareholders of AMP. Tax matters are very complicated, and the tax
consequences of the merger to you will depend on the facts of your own
situation. You should consult your tax advisor for a full understanding of the
tax consequences of the merger to you. For a general discussion of the tax
consequences of the merger, see "Risk Factors" and "Certain U.S. Federal Income
Tax and Bermuda Tax Consequences."
Q: WILL SHAREHOLDERS HAVE APPRAISAL RIGHTS?
A: No. Neither Tyco shareholders nor AMP shareholders will have any
appraisal rights or other rights to demand fair value in cash as a result of the
merger.
Q: WHAT SHOULD SHAREHOLDERS DO NOW?
A: Shareholders should mail their signed proxy card in the enclosed postage
paid envelope, as soon as possible, so that their shares will be represented at
the special shareholders meetings. THE BOARD OF DIRECTORS OF AMP UNANIMOUSLY
RECOMMENDS THAT AMP SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
iv
<PAGE>
THE BOARD OF DIRECTORS OF TYCO UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS
VOTE FOR THE PROPOSALS SUBMITTED TO THE TYCO SHAREHOLDERS, INCLUDING APPROVAL OF
THE ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE
MERGER. After the merger is completed, AMP shareholders will receive written
instructions for exchanging their share certificates.
Q: CAN SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED IN A SIGNED
PROXY CARD?
A: Yes. Shareholders can change their vote in one of the following ways at
any time before their proxies are voted at the special shareholders meetings.
First, shareholders can revoke their proxies by written notice. Second,
shareholders can submit new, later dated proxy cards. Third, shareholders can
attend the appropriate special shareholders meeting and vote in person. In
addition, Tyco shareholders may alter the instructions as to how their proxies
are to vote (without revoking the proxies) by giving notice of the alteration to
the Secretary of Tyco before the vote is taken.
Q: SHOULD AMP SHAREHOLDERS SEND IN THEIR SHARE CERTIFICATES NOW?
A: No. After the merger is completed, AMP shareholders will be sent written
instructions for sending in their share certificates and receiving the Tyco
common shares and cash, if any, to which they are entitled.
Q: WHOM SHOULD SHAREHOLDERS CALL WITH QUESTIONS?
A: AMP shareholders who have questions about the merger or how to vote their
shares, should call Innisfree M&A Incorporated at 1-888-750-5834 (toll free in
the United States).
Tyco shareholders who have questions about the merger or how to vote their
shares should call at 1-800-XXX-XXXX (toll free in the United States).
v
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO BETTER UNDERSTAND THE MERGER AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH YOU HAVE BEEN REFERRED. SEE "WHERE TO
FIND MORE INFORMATION" (PAGE ).
THE COMPANIES
TYCO INTERNATIONAL LTD.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM 11 Bermuda
(441) 292-8674
Tyco is a diversified manufacturing and service company that, through its
subsidiaries:
- designs, manufactures and distributes electrical and electronic components
and designs, manufactures, installs and services undersea cable
communication systems;
- designs, manufactures and distributes disposable medical supplies and
other specialty products, and conducts vehicle auctions and related
services;
- designs, manufactures, installs and services fire detection and
suppression systems and installs, monitors and maintains electronic
security systems; and
- designs, manufactures and distributes flow control products.
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
On July 2, 1997, a wholly-owned subsidiary of what was formerly called ADT
Limited merged with Tyco International Ltd., a Massachusetts corporation
("Former Tyco"). Upon consummation of the merger, ADT (the continuing public
company) changed its name to Tyco International Ltd.
Tyco's registered and principal executive offices are located at the above
address in Bermuda. The executive offices of Tyco International (US) Inc.,
Tyco's principal United States subsidiary, are located at One Tyco Park, Exeter,
New Hampshire 03833, and its telephone number is (603) 778-9700.
For further information on the businesses of Tyco, see "Businesses of Tyco."
AMP INCORPORATED
P.O. Box 3608
Harrisburg, PA 17105-3608
(717) 564-0100
AMP, a Pennsylvania corporation, is the world leader in the design,
manufacture and marketing of electronic, electrical and electro-optic connection
devices, and associated application tools and machines. In the past several
years, AMP has been diversifying into an expanding number of interconnection
systems, related components and connector-intensive assemblies. AMP's products
have uses in electronic, electrical, computer and telecommunications systems and
are becoming increasingly critical to the performance of these systems as voice,
data and video communications converge, system speeds increase and devices are
miniaturized. AMP's customers include original equipment manufacturers and their
subcontractors, utilities, government agencies, distributors, value-added
resellers, and customers who install, maintain and repair equipment. These
customers are found in the automotive, power technology, personal computer,
communications, and consumer industrial industries. AMP has more than 330
facilities located in 53 countries throughout the world.
In June of 1998, AMP announced the first elements of its profit improvement
plan, which is designed to improve significantly its operating margins and
operating performance.
1
<PAGE>
For further information on the business of AMP, including its profit
improvement plan, see "Business of AMP."
THE MEETINGS (PAGES AND )
The meetings of the AMP shareholders and the Tyco shareholders will be held
on January , 1999 at 10:00 a.m. local time.
The record date for AMP shareholders entitled to receive notice of and to
vote at the AMP special meeting is the close of business on , 199 .
On that date there were shares of AMP common stock outstanding.
However, based on a recent decision of the Federal District Court for the
Eastern District of Pennsylvania finding that the shares of AMP common stock
held by AlliedSignal Inc. are "control shares," the shares of AMP common stock
held by AlliedSignal are not presently entitled to be voted. Accordingly, absent
such decision being reversed on appeal, as of December , 1998, there were
shares of AMP common stock outstanding and entitled to vote.
Notice of the Tyco special general meeting is being sent to all holders of
record of Tyco common shares on December , 1998. On December , 1998 there
were common shares of Tyco outstanding. Holders of record of Tyco common
shares on the date of the Tyco special general meeting will be entitled to vote
at that meeting.
REASONS FOR THE MERGER (PAGE )
For AMP and Tyco, the merger is an attractive strategic combination which
creates opportunities for synergies and cost savings. For AMP shareholders,
among other things, the merger presents the opportunity to receive a significant
premium for their shares over the trading values of AMP stock when AlliedSignal
announced its intention on August 4, 1998 to seek to acquire AMP, and over the
$44.50 in cash per share price AlliedSignal proposed. At the same time, the
merger should enable AMP shareholders to participate in a larger and more
diversified company. For Tyco, the merger is consistent with its strategy of
complementing its internal growth with acquisitions that are likely to benefit
from synergies and cost savings when combined with Tyco's existing operations
and that are expected to be accretive to earnings per share.
To review the reasons for the merger in greater detail, see "Recommendation
of the Board of Directors of AMP; Reasons of AMP for the Merger"; and
"Recommendation of the Board of Directors of Tyco; Reasons of Tyco for the
Merger."
RECOMMENDATIONS TO SHAREHOLDERS (PAGES AND )
To AMP Shareholders:
The AMP Board of Directors believes that the merger is fair to you and in
your best interests and unanimously recommends that you vote FOR the proposal to
approve and adopt the merger agreement.
To Tyco Shareholders:
The Tyco Board of Directors believes that the merger is in your best
interests and unanimously recommends that you vote FOR:
- the proposal to approve the issuance of Tyco common shares to be delivered
in connection with the merger;
and, conditioned on the consummation of the merger,
- the proposal to increase the number of Tyco directors from 11 to 12 and
elect Robert Ripp, AMP's Chairman of the Board and Chief Executive
Officer, as a director of Tyco;
- the proposal to increase by 996,250,000 the number of authorized Tyco
common shares and to authorize the issue or other disposal by the Tyco
Board of such shares; and
- the proposal to increase by common shares the number of Tyco
common shares in respect of which grants may be made under the Tyco
International Ltd. Long Term Incentive Plan.
THE MERGER (PAGE )
THE MERGER AGREEMENT AND THE RELATED TYCO GUARANTEE ARE ATTACHED TO THE BACK
OF THIS DOCUMENT AS ANNEX A TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
2
<PAGE>
YOU SHOULD READ THESE DOCUMENTS, AS THEY ARE THE LEGAL DOCUMENTS THAT GOVERN THE
MERGER.
CONSEQUENCES OF THE MERGER
In the merger, AMP will merge with a subsidiary of Tyco International (PA)
Inc., a Pennsylvania corporation that is a wholly-owned subsidiary of Tyco. As a
result, AMP, as the surviving corporate entity, will become a direct wholly-
owned subsidiary of Tyco (PA) and an indirect wholly owned subsidiary of Tyco,
and the former shareholders of AMP will become shareholders of Tyco.
WHAT AMP SHAREHOLDERS WILL RECEIVE IN THE MERGER
In the merger, AMP shareholders will receive Tyco common shares in exchange
for their shares of AMP common stock. The number of Tyco common shares received
will depend on the exchange ratio. Cash will be paid for fractional shares.
ILLUSTRATIVE TABLE OF EXCHANGE RATIOS AND VALUE OF TYCO COMMON SHARES TO BE
DELIVERED TO AMP'S SHAREHOLDERS IN THE MERGER
The columns in the following table present (a) illustrative values of
Average Stock Prices within a range from $57.00 to $76.00, (b) the exchange
ratio at each of the Average Stock Prices presented in the table, and (c)
illustrative values of the fraction of a Tyco common share determined by
multiplying each of the Average Stock Prices presented in the table by the
corresponding exchange ratio.
THE VALUES OF TYCO COMMON SHARES IN COLUMN (C) ARE ILLUSTRATIVE ONLY AND DO
NOT REPRESENT THE ACTUAL CASH VALUE PER SHARE OF AMP COMMON STOCK THAT MIGHT BE
REALIZED BY ANY AMP SHAREHOLDER ON OR AFTER THE CONSUMMATION OF THE MERGER. THE
AMOUNT ANY AMP SHAREHOLDER WILL BE ABLE TO REALIZE UPON THE SALE OF THE TYCO
COMMON SHARES RECEIVED IN THE MERGER WILL DEPEND UPON THE MARKET PRICE PER SHARE
OF TYCO COMMON SHARES AT THE TIME OF SALE, WHICH WILL VARY DEPENDING UPON MANY
FACTORS, INCLUDING BOTH THOSE THAT ARE SPECIFIC TO TYCO AS WELL AS THOSE THAT
GENERALLY INFLUENCE THE TRADING PRICES OF SECURITIES. FOR A MORE DETAILED TABLE,
SEE "TABLE OF ILLUSTRATIVE VALUES."
<TABLE>
<CAPTION>
(C)
(A) MERGER
TYCO CONSIDERATION
AVERAGE (B) PER SHARE OF
STOCK EXCHANGE AMP COMMON
PRICE RATIO STOCK
- --------- ----------- ---------------
<S> <C> <C>
$ 76.00 0.7362 $ 55.9500
75.00 0.7460 55.9500
74.00 0.7561 55.9500
73.51 0.7611 55.9500
----------- ---------------
73.50 0.7612 55.9482
73.00 0.7612 55.5676
72.00 0.7612 54.8064
71.00 0.7612 54.0452
70.00 0.7612 53.2840
69.00 0.7612 52.5228
68.00 0.7612 51.7616
67.00 0.7612 51.0004
----------- ---------------
66.99 0.7613 51.0000
66.00 0.7727 51.0000
65.00 0.7846 51.0000
64.00 0.7969 51.0000
63.00 0.8095 51.0000
62.00 0.8226 51.0000
61.00 0.8361 51.0000
60.00 0.8500 51.0000
----------- ---------------
59.99* 0.8501 51.0000
59.00* 0.8644 51.0000
58.00* 0.8793 51.0000
57.00* 0.8947 51.0000
</TABLE>
- ------------------------
* If the Average Stock Price is less than $60.00, Tyco may call off the merger
unless AMP has agreed to an exchange ratio equal to 0.8500. If AMP agrees to
fix the exchange ratio at 0.8500, Tyco will not have the right to call off
the merger, and the exchange ratio will be 0.8500. In this case, AMP
shareholders will receive Tyco common shares with a value (based on the
Average Stock Price) of less than $51.00.
CERTAIN U.S. FEDERAL INCOME TAX AND BERMUDA TAX CONSEQUENCES
The transaction is intended to be a tax-free reorganization under the United
States Internal Revenue Code of 1986, as amended. Shareholders of AMP will
generally not have any taxable gain or loss for U.S. federal income tax purposes
upon receipt of Tyco common shares in the merger; however, a shareholder may be
required to pay
3
<PAGE>
taxes on cash received in lieu of a fractional Tyco common share. There will be
no Bermuda tax of any kind payable in respect of the exchange of shares in the
merger.
For further details, see "Risk Factors" and "Certain U.S. Federal Income Tax
and Bermuda Tax Consequences."
SHAREHOLDER VOTE REQUIRED
The favorable vote of sixty-six and two-thirds percent (66 2/3%) of the
votes cast by all AMP shareholders entitled to vote thereon is required to
approve and adopt the merger agreement.
The favorable vote of a majority of the votes cast by the Tyco shareholders
on the proposal to issue the Tyco common shares to be delivered in connection
with the merger is required to approve this proposal, as long as at least a
majority of the outstanding Tyco common shares vote on such proposal. Approval
of the other proposals to be considered at the Tyco special general meeting
requires the favorable vote of a majority of the Tyco common shares voted on
such matters. Approval of these other matters is not a condition of, but is
conditioned upon the consummation of the merger.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the AMP Board of Directors in favor of
the merger, AMP and Tyco shareholders should be aware that members of the Board
of Directors of AMP and certain members of its management will receive certain
benefits as a result of the merger that will be in addition to or different from
benefits received by AMP shareholders generally. For further details, see
"Interests of Certain Persons in the Merger."
CONDITIONS OF THE MERGER
The consummation of the merger depends upon satisfaction of a number of
conditions, including:
- approval and adoption of the merger agreement by the AMP shareholders;
- approval by the Tyco shareholders of the issuance of Tyco common shares to
be delivered in connection with the merger;
- the absence of legal restraints to the consummation of the merger;
- receipt of opinions with respect to the tax-free nature of the merger; and
- receipt of the opinion of PricewaterhouseCoopers confirming that the
merger qualifies for pooling of interests accounting treatment.
TERMINATION OF THE MERGER AGREEMENT
Either AMP or Tyco may call off the merger if:
- both parties consent in writing;
- the merger is not completed by July 31, 1999 through no fault of the party
seeking to call off the merger;
- there exist legal restraints preventing the merger;
- the AMP shareholders do not approve the merger or the Tyco shareholders do
not approve the issuance of the Tyco common shares to be delivered in
connection with the merger; or
- the other party breaches in a material way its representations,
warranties, covenants or agreements under the merger agreement and that
breach is not or cannot be remedied.
In addition, Tyco may also terminate the merger agreement if:
- the Board of Directors of AMP withdraws or adversely modifies its approval
or recommendation of the merger or recommends a business combination
transaction with a third party; or
- the Average Stock Price is less than $60.00, unless AMP agrees to fix the
exchange ratio at 0.8500.
For further details, see "Termination."
4
<PAGE>
TERMINATION FEE AND EXPENSES; STOCK OPTION AGREEMENT; CERTAIN
NON-SOLICITATION PROVISIONS
AMP is required to pay to Tyco a termination fee of $300 million, and pay up
to $30 million of Tyco's and Tyco (PA)'s reasonable out-of-pocket expenses, if
the merger agreement is terminated under certain circumstances, and up to $30
million of Tyco's reasonable out-of-pocket expenses (but not a termination fee)
if the merger agreement is terminated in certain other circumstances. Tyco is
required to pay to AMP up to $30 million of AMP's reasonable out-of-pocket
expenses if the merger agreement is terminated under certain circumstances.
For further details, see "Termination--Fees and Expenses."
AMP has granted an option to Tyco (PA) to purchase shares of AMP common
stock equal to approximately 19.9% of the outstanding shares of AMP common
stock. The option is exercisable under the same circumstances that the
termination fee is payable to Tyco, provided that the profit that Tyco (PA)
realizes on the exercise of the option may not exceed $301 million, less the
amount of the termination fee that is paid to Tyco. The full text of the Stock
Option Agreement dated November 22, 1998 is attached to the back of this
document as Annex B. See also "Stock Option Agreement."
The merger agreement has certain provisions pursuant to which AMP may not
redeem or amend its rights plan, approve a business combination transaction
other than the merger or enter into an agreement with respect to such a business
combination transaction until November 6, 1999, even if the merger agreement has
been terminated. These restrictions do not apply if the merger agreement is
terminated because of Tyco's breach, because Tyco's shareholders have not
approved the issuance of Tyco common shares to be delivered in connection with
the merger or because the merger has not been consummated by July 31, 1999. See
"No Solicitation."
The termination fee, the stock option agreement and the no-solicitation
provisions of the merger agreement may have the effect of discouraging persons
who might be interested in entering into a business combination with AMP from
proposing such a transaction, even where the consideration payable to AMP
shareholders in such a transaction would exceed the consideration payable in the
merger.
GUARANTEES
Tyco fully and unconditionally guarantees each and every representation,
warranty, covenant, agreement and other obligation of Tyco (PA) under the merger
agreement and the stock option agreement.
REGULATORY APPROVALS
AMP and Tyco have given each other a commitment to use their reasonable best
efforts to take whatever actions are required to obtain necessary regulatory
approvals.
The U.S. Hart-Scott-Rodino statute prohibits AMP and Tyco from completing
the merger until they have furnished certain information and materials to the
Antitrust Division of the U.S. Department of Justice and the Federal Trade
Commission and the required waiting period has expired. The Antitrust Division
and the FTC have the authority to challenge the merger on antitrust grounds
before or after the merger is completed.
The merger is subject to notification to, and the approval of, the
Commission of the European Communities under Council Regulation (EEC) No.
4064/89 of 21 December, 1989 on the control of concentrations, as amended. The
merger may also be reviewed on antitrust grounds by other authorities in
jurisdictions where either AMP or Tyco has operations.
ANTICIPATED ACCOUNTING TREATMENT
Tyco and AMP expect the merger to qualify as a pooling of interests for
accounting purposes, which means that the companies will be treated as if they
had always been combined for accounting and financial reporting purposes. As a
condition to the merger, Tyco must receive an opinion from its independent
accounting firm regarding qualification of the merger as a pooling of interests
for accounting purposes. See "Anticipated Accounting Treatment."
5
<PAGE>
OPINION OF AMP'S FINANCIAL ADVISOR
AMP's financial advisor, Credit Suisse First Boston Corporation, has given a
written opinion to the board of directors of AMP as to the fairness, from a
financial point of view, of the exchange ratio set forth in the merger
agreement. The full text of the written opinion of Credit Suisse First Boston
Corporation dated November 22, 1998 is attached to the back of this document as
Annex C and should be read carefully in its entirety. THE OPINION OF CREDIT
SUISSE FIRST BOSTON CORPORATION IS DIRECTED TO THE AMP BOARD AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE ON THE MERGER.
OPINION OF TYCO'S FINANCIAL ADVISOR
Tyco's financial advisor, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, has given a written opinion to the board of directors of Tyco as
to the fairness to Tyco, from a financial point of view, of the consideration to
be delivered to AMP's shareholders in the merger. The full text of the written
opinion of Merrill Lynch dated November 22, 1998 is attached to the back of this
document as Annex D and should be read carefully in its entirety. THE OPINION OF
MERRILL LYNCH IS DIRECTED TO THE TYCO BOARD AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE ON THE
ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE MERGER OR
THE OTHER MATTERS BEING PRESENTED TO A VOTE BY TYCO SHAREHOLDERS.
DISSENTERS' RIGHTS
Neither AMP shareholders nor Tyco shareholders have dissenters' rights of
appraisal or other rights to demand fair value in cash by reason of the merger
or other transactions contemplated by the merger agreement.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION; LISTING
Tyco common shares are listed on the NYSE, the London Stock Exchange and the
Bermuda Stock Exchange. AMP common stock is listed on the NYSE. The NYSE closing
price for a Tyco common share was $65.0625 on November 20, 1998, the last
trading day prior to the public announcement of the proposed merger and was
$ on December 7, 1998, the most recent date for which prices were available
prior to the printing of this Joint Proxy Statement/Prospectus. The closing
price per share on the NYSE of AMP common stock was $45.125 on November 20, 1998
and $ on December 7, 1998. Shareholders are urged to obtain current market
quotations.
Application will be made to list the Tyco common shares to be delivered in
connection with the merger on the NYSE, and, in due course, on the London Stock
Exchange and the Bermuda Stock Exchange.
6
<PAGE>
RISK FACTORS
In evaluating the merger and the merger agreement, AMP shareholders should
take into account the following considerations, as well as other information
included in or incorporated by reference into this Joint Proxy
Statement/Prospectus:
ADJUSTABLE EXCHANGE RATIO. The merger agreement provides for adjustments to
the exchange ratio based upon the Average Stock Price for Tyco common shares.
These adjustments are designed so that AMP shareholders will receive at least
$51.00 but not more than $55.95 in value of Tyco common shares (as measured by
the Average Stock Price) for each share of AMP common stock exchanged in the
merger. However, if the Average Stock Price is less than $60.00, Tyco has the
right to call off the merger unless AMP agrees to an exchange ratio of 0.8500,
in which case AMP shareholders would receive Tyco common shares with a value
(based on the Average Stock Price) of less than $51.00. AMP shareholders should
also be aware that the price per Tyco common share at the time of the merger is
likely to be different than the Average Stock Price used to determine the
exchange ratio, which is determined on the basis of the average daily trading
prices of Tyco common shares over the 15 consecutive trading day period ending
four trading days immediately preceding the AMP shareholders special meeting.
After the exchange ratio is established and until the consummation of the
merger, the value of the merger consideration to be received by AMP shareholders
will fluctuate with fluctuations in the market price of Tyco common shares. The
price of Tyco common shares may fluctuate based upon changes in the business,
operations and prospects of Tyco, general market and economic conditions,
regulatory considerations and other factors. AMP shareholders are urged to
obtain current market quotations for Tyco common shares and AMP common stock and
to call 1-888-750-5835 at any time after December , 1998 for current
information on the Average Stock Price and the exchange ratio.
TAX TREATMENT. The merger is intended to be treated as a reorganization
within the meaning of Section 368 of the U.S. Internal Revenue Code of 1986, as
amended, and generally to be tax-free to the shareholders of AMP. It is a
condition to the obligations of each of AMP and Tyco (PA) to consummate the
merger that each receive opinions from its tax advisors with respect to the
tax-free nature of the merger. Such opinions will rely upon certain
representations as to factual matters, made as of the consummation of the
merger, by Tyco, Tyco (PA) and AMP. If such representations are incorrect in
certain material respects, the conclusions reached in the opinions could be
jeopardized and the receipt by AMP shareholders of Tyco common shares in the
merger may be taxable. See "Certain U.S. Federal Income Tax and Bermuda Tax
Consequences."
HISTORICAL PERFORMANCE NO INDICATION. The historical share price and
earnings performance of Tyco are not necessarily indicative of Tyco's future
share price or earnings results.
BERMUDA COMPANY. If the merger is consummated, shareholders of AMP will
become shareholders of a Bermuda company. There are significant differences
between the corporate laws of Bermuda and the corporate laws of Pennsylvania and
between the charter documents of AMP and Tyco. See "Comparison of Shareholder
Rights." These differences may materially affect the rights of AMP shareholders.
Both Tyco and AMP shareholders should take into account the following
additional considerations in their evaluation of the matters to be voted upon at
their respective special meetings of shareholders:
ACCRETIVE NATURE OF MERGER. Tyco believes that the merger will be
immediately accretive to earnings per share based on the implementation by AMP
of its profit improvement plan and the achievement of additional cost savings
and the realization of other synergistic benefits. While Tyco and AMP believe
that such benefits are realizable, the timing for realization of these benefits,
as well as the amounts thereof, may be affected by factors beyond the control of
Tyco and AMP. See "Forward Looking Information."
ABILITY TO INTEGRATE AMP WITH TYCO'S EXISTING OPERATIONS. The anticipated
benefits of the merger to Tyco and its shareholders include the realization of
synergies and cost savings expected to be achieved
7
<PAGE>
following the merger through the combination of the businesses of Tyco and AMP.
In this regard, Tyco expects to enhance and accelerate AMP's profit improvement
plan, based upon Tyco's experiences with prior acquisitions. Tyco's ability to
achieve these objectives and to realize the anticipated benefits of the merger
will depend in large measure on the ability of Tyco to integrate AMP's business
and operations with Tyco's Electric and Electronic Components group following
the merger and to adapt AMP to Tyco's management culture. Although Tyco has been
successful in the past in integrating its acquired businesses with its existing
operations, AMP is substantially larger than any of Tyco's prior acquisitions.
Tyco could encounter unexpected difficulties in integrating AMP's business,
which would reduce or eliminate anticipated benefits of the merger.
EFFECTS ON AMP OF CURRENT ECONOMIC DOWNTURN. AMP services segments of the
electrical, electronic and electro-optical device industries that have been
adversely affected by the current economic downturn in Asia and other parts of
the world. The effects of this downturn on AMP have been more pronounced than on
the businesses of Tyco generally, in part because of the lesser dependence of
Tyco's Electrical and Electronic Components group on Asian business and in part
because of the diversified nature of Tyco's other businesses. Tyco is unable to
predict how long the economic disruptions in Asia will persist. In addition, the
effects of these disruptions on the business of AMP following the merger could
be greater than anticipated.
FORWARD LOOKING INFORMATION
Certain statements in this Joint Proxy Statement/Prospectus are "forward
looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. All forward looking statements involve risks and
uncertainties. In particular, any statements regarding the benefits of the
merger, as well as expectations with respect to future sales, operating
efficiencies and product expansion, are subject to known and unknown risks,
uncertainties and contingencies, many of which are beyond the control of Tyco
and/or AMP, which may cause actual results, performance or achievements to
differ materially from anticipated results, performance or achievements. Factors
that might affect such forward looking statements include, among other things
the ability to integrate AMP into Tyco's operations, overall economic and
business conditions, the demand for Tyco and/or AMP goods and services,
competitive factors in the industries in which Tyco and/or AMP compete, changes
in government regulation, changes in tax requirements (including tax rate
changes, new tax laws and revised tax law interpretations), interest rate
fluctuations and other capital market conditions, including foreign currency
rate fluctuations, economic and political conditions in international markets,
including governmental changes and restrictions on the ability to transfer
capital across borders, the ability to achieve anticipated synergies and other
cost savings in connection with acquisitions, the timing, impact and other
uncertainties of future acquisitions by Tyco and the ability of Tyco and AMP,
and the ability of their respective customers and suppliers, to replace, modify
or upgrade computer programs in order to adequately address the Year 2000 issue.
For a description of some of the factors or uncertainties that exist in AMP's
operations and business environment which could cause actual results to differ,
reference is made to the section entitled "Cautionary Statements for Purposes of
the 'Safe Harbor"' in AMP's Annual Report on Form 10-K for the year ended
December 31, 1997.
8
<PAGE>
SELECTED FINANCIAL DATA OF TYCO AND AMP
The following information is being provided to assist in analyzing the
financial aspects of the merger. The selected consolidated historical financial
data for Tyco reflects the combined results of operations and financial position
of Tyco and United States Surgical Corporation, which was acquired by Tyco on
October 1, 1998, restated for all periods presented pursuant to the pooling of
interests method of accounting. The information for Tyco has been derived from
Tyco's audited supplemental consolidated financial statements for the fiscal
year ended September 30, 1998, the nine months ended September 30, 1997 and the
year ended December 31, 1996, and certain historical financial information of
Tyco and US Surgical for the years ended December 31, 1995 and 1994. The
information for AMP has been derived from AMP's audited financial statements for
the years ended December 31, 1993 through 1997 and AMP's unaudited financial
statements for the nine months ended September 30, 1998 and September 30, 1997.
The information is only a summary. The information should be read in conjunction
with the historical financial statements and related notes contained in the
annual, quarterly and other reports filed by Tyco and AMP with the SEC. See
"Where to Find More Information." The unaudited pro forma information is
presented for illustrative purposes only and is not indicative of the operating
results or financial position that would have occurred if the merger had been
consummated at the dates indicated, nor is it necessarily indicative of future
operating results of the combined company. References in this Joint Proxy
Statement/ Prospectus to "$" mean United States dollars.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ------------------ -------------------------------
1998(1) 1997(1) 1996(2) 1995(2) 1994(2)
------------- ------------------ --------- --------- ---------
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales.................................. $ 13,537.2 $ 8,457.8 $ 9,216.4 $ 7,937.9 $ 7,159.6
Operating income (loss)(3)(4)(5)(6)........ 1,625.2 (376.0) 131.9 760.1 704.5
Income (loss) from continuing operations... 965.1 (697.7) (187.6) 346.7 324.0
Income (loss) from continuing operations
per common share(7):
Basic.................................... 1.54 (1.23) (0.40) 0.65 0.60
Diluted.................................. 1.50 (1.23) (0.40) 0.64 0.59
Cash dividends per common share(7)(8)...... 0.10 See (8) below.
CONSOLIDATED BALANCE SHEET DATA:
Total assets............................... $ 18,722.6 $ 12,141.6 $ 9,986.1 $ 8,623.3 $ 8,156.7
Long-term debt............................. 5,254.3 2,613.2 2,020.8 2,017.2 2,003.8
Shareholders' equity....................... 7,199.6 4,659.3 4,342.4 4,083.8 3,692.0
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. Accordingly, the nine-month transition period ended September
30, 1997 and the year ended September 30, 1998 is presented.
(2) On July 2, 1997, Tyco (formerly ADT) merged with Former Tyco. On August 27,
1997, August 29, 1997, and October 1, 1998, Tyco merged with INBRAND
Corporation, Keystone International, Inc., and US Surgical, respectively.
These four combinations are more fully described in Notes 1 and 2 to the
Supplemental Consolidated Financial Statements contained in Tyco's Current
Report on Form 8-K filed on December 10, 1998, incorporated herein by
reference. Prior to their respective
9
<PAGE>
mergers, ADT, Keystone and US Surgical had a December 31 fiscal year end and
Former Tyco had a June 30 fiscal year end. The historical results have been
combined using a December 31 fiscal year end for ADT, Keystone, Former Tyco
and US Surgical for the year ended December 31, 1996. For 1995 and 1994, the
results of operations and financial position reflect the combination of ADT,
Keystone and US Surgical with a December 31 fiscal year end and Former Tyco
with a June 30 fiscal year end. Net sales and net income for Former Tyco for
the period July 1, 1995 through December 31, 1995 (which results are not
included in the historical combined results) were $2.46 billion and $136.4
million, respectively.
(3) Operating income in the fiscal year ended September 30, 1998 includes
certain charges of $80.5 million, including $9.6 million of merger costs and
$70.9 million of costs to exit certain businesses in US Surgical's
operations, and restructuring charges of $12.0 million related to severance
costs, facility disposals and asset write-downs as part of US Surgical's
cost cutting objectives. See Note 15 to the Supplemental Consolidated
Financial Statements contained in Tyco's Form 8-K filed on December 10,
1998.
(4) Operating loss in the nine months ended September 30, 1997 includes charges
related to merger, restructuring and other non-recurring costs of $917.8
million and impairment of long-lived assets of $148.4 million primarily
related to the mergers and integration of ADT, Former Tyco, Keystone and
INBRAND and charges of $24.3 million for litigation and other related costs
and $5.8 million for restructuring charges in US Surgical's operations. See
Notes 11 and 15 to the Supplemental Consolidated Financial Statements
contained in Tyco's Form 8-K filed on December 10, 1998. The results for the
nine months ended September 30, 1997 also include a charge of $361.0 million
for the write-off of purchased in-process research and development related
to the acquisition of the submarine systems business of AT&T Corp.
(5) Operating loss in 1996 includes non-recurring charges of $744.7 million
related to the adoption of Statement of Financial Accounting Standards No.
121, $237.3 million related principally to the restructuring of ADT's
electronic security services business in the United States and United
Kingdom and $8.8 million of fees and expenses related to ADT's acquisition
of Automated Security (Holdings) plc, a United Kingdom company. See Notes 11
and 15 to the Supplemental Consolidated Financial Statements contained in
Tyco's Form 8-K filed on December 10, 1998.
(6) Operating income in 1995 includes a loss of $65.8 million on the disposal of
the European auto auction business and a gain of $31.4 million from the
disposal of the European electronic article surveillance business. Operating
income also includes non-recurring charges of $97.1 million for
restructuring charges at ADT and Keystone and for the fees and expenses
related to the 1994 merger of Kendall International, Inc. and Former Tyco,
as well as a charge of $8.2 million relating to the divestiture of certain
assets by Keystone.
(7) Per share amounts for all periods presented have been restated to give
effect to the mergers with Former Tyco, Keystone, INBRAND and US Surgical, a
0.48133 reverse stock split effected on July 2, 1997, and a two-for-one
stock split distributed on October 22, 1997, effected in the form of a stock
dividend.
(8) Tyco has paid a quarterly dividend of $0.025 per common share since July 2,
1997, the date of the Former Tyco/ADT merger. ADT had not paid any dividends
on its common shares since 1992. Prior to the merger with ADT, Former Tyco
paid a quarterly cash dividend of $0.025 per share of common stock since
January 1992. Prior to its merger with Tyco, Keystone paid quarterly
dividends of $0.19 per share since January 1994. US Surgical paid quarterly
dividends of $0.04 per share in the year ended September 30, 1998 and the
nine months ended September 30, 1997 and aggregate dividends of $0.08 per
share in 1996, 1995 and 1994. The payment of dividends by Tyco in the future
will be determined by Tyco's Board of Directors and will depend on business
conditions, Tyco's financial condition and earnings and other factors.
10
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF AMP
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998(1) 1997 1997(2) 1996(2) 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales....................... $ 4,084.9 $ 4,293.5 $ 5,745.2 $ 5,468.0 $ 5,227.2 $ 4,369.1 $ 3,790.5
Operating income................ 198.0 543.8 767.1 502.7 718.0 660.0 504.6
Income from continuing
operations.................... 81.0 330.2 457.6 287.0 427.3 373.8 284.4
Income from continuing
operations per common
share(3)(4):
Basic......................... 0.37 1.50 2.08 1.31 1.97 1.72 1.31
Diluted....................... 0.37 1.50 2.08 1.31 1.96 1.72 1.31
Cash dividends per common
share(3)...................... 0.81 0.78 1.04 1.00 0.92 0.84 0.80
CONSOLIDATED BALANCE SHEET DATA:
Total assets.................... $ 4,718.3 $ 4,808.0 $ 4,848.1 $ 4,685.7 $ 4,504.7 $ 4,092.6 $ 3,448.9
Long-term debt.................. 170.4 172.7 159.7 181.6 212.5 278.8 199.3
Shareholders' equity............ 2,817.9 2,898.0 2,951.5 2,789.9 2,768.0 2,495.8 2,206.5
</TABLE>
- ------------------------
(1) Restructuring and one-time charges on a pre-tax basis of $185.8 million were
recorded in the nine months ended September 30, 1998 in connection with
AMP's profit improvement plan.
(2) Restructuring and other one-time charges on a pretax basis of $195 million
were recorded in 1996 primarily in connection with AMP's decision to exit
certain product lines, manufacturing operations and investments. These
charges were adjusted in the fourth quarter of 1997, resulting in a credit
of $25.9 million to the charges established in 1996. Of the $195 million
charge and the $25.9 million adjustment, $98 million and $21.4 million,
respectively, were related to restructuring charges.
(3) Share data has been adjusted for the 2-for-1 stock split in 1995.
(4) Appropriate per share data in all periods has been restated for the effects
of the adoption of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" in the fourth quarter of 1997.
11
<PAGE>
SELECTED TYCO AND AMP UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER ----------------------------------
1998(1) 30, 1997(1) 1996 1995 1994
------------- ------------ ---------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales................................... $ 19,073.8 $ 12,751.3 $ 14,684.4 $ 13,165.1 $ 11,528.7
Operating income............................ 2,046.5 167.8 634.6 1,478.1 1,364.5
Income (loss) from continuing
operations(2)............................. 1,173.5 (367.5) 99.4 774.0 697.8
Income (loss) from continuing operations per
common share(2)(3):
Basic..................................... 1.48 (0.50) 0.12 1.13 1.02
Diluted................................... 1.45 (0.50) 0.11 1.11 1.00
Cash dividends per common share(4).......... See (4) below.
CONSOLIDATED BALANCE SHEET DATA:
Total assets................................ $ 23,440.9 $ 16,949.6 $ 14,671.8 $ 13,128.0 $ 12,249.3
Long-term debt.............................. 5,424.7 2,785.9 2,202.4 2,229.7 2,282.6
Total shareholders' equity.................. 9,717.5 7,557.3 7,132.3 6,851.8 6,187.8
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. AMP has a calendar year end. For purposes of the pro forma
combined financial information, the historical results for the fiscal year
ended September 30, 1998 and the nine months ended September 30, 1997 have
been combined using the results of Tyco and AMP for those periods.
(2) See Notes (3), (4) and (5) to "Selected Consolidated Historical Financial
Data of Tyco" and Notes (1) and (2) to "Selected Consolidated Historical
Financial Data of AMP" for information on certain non-recurring items. On a
pro forma combined basis, diluted income per common share for the fiscal
year ended September 30, 1998, the nine months ended September 30, 1997 and
the year ended December 31, 1996 before these non-recurring items is $1.68,
$1.26 and $1.37, respectively.
(3) The unaudited pro forma combined per share data are based on AMP
shareholders receiving 0.7612 of a Tyco common share for each share of AMP
common stock held. The actual exchange ratio may be more or less than
0.7612. For example, based on the Average Stock Price calculated assuming
December , 1998 was the date of the AMP special meeting of $ , the
exchange ratio would be . Assuming this ratio, pro forma combined
income (loss) per common share on a diluted basis would be $ for the
fiscal year ended September 30, 1998, for the nine months ended
September 30, 1997 and $ , $ and $ for the years ended December 31,
1996, 1995 and 1994, respectively.
(4) Tyco has paid a quarterly dividend of $0.025 per common share since July 2,
1997, the date of the Former Tyco/ ADT Merger. ADT had not paid any
dividends on its common shares since 1992. Prior to the merger with ADT,
Former Tyco paid a quarterly cash dividend of $0.025 per share since January
1992. AMP paid dividends of $0.27 per share in each of the three quarters in
the nine months ended September 30, 1998, $0.26 per share in each of the
four quarters during calendar 1997, and aggregate dividends of $1.00 per
share in 1996, $0.92 per share in 1995 and $0.84 per share in 1994. The
payment of dividends by Tyco in the future will be determined by Tyco's
Board and will depend on business conditions, Tyco's financial condition and
earnings and other factors.
12
<PAGE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
TYCO AND
AMP AMP
UNAUDITED EQUIVALENT
TYCO AMP PRO FORMA PRO FORMA
HISTORICAL PER HISTORICAL COMBINED PER SHARE
SHARE DATA PER SHARE DATA PER SHARE DATA(1) DATA(1)
--------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998
Income from continuing operations per common
share(2):
Basic............................................ $ 1.54 $ 0.95 $ 1.48 $ 1.13
Diluted.......................................... 1.50 0.95 1.45 1.10
Cash dividends per common share(3)................. 0.10 1.07
Book value per common share........................ 11.15 12.88 11.96 9.11
NINE MONTHS ENDED SEPTEMBER 30, 1997
(Loss) income from continuing operations per common
share(2):
Basic............................................ (1.23) 1.50 (0.50) (0.38)
Diluted.......................................... (1.23) 1.50 (0.50) (0.38)
Cash dividends per common share(3)................. 0.78
Book value per common share........................ 7.84 13.17 9.93 7.56
YEAR ENDED DECEMBER 31, 1996
(Loss) income from continuing operations per common
share(2):
Basic............................................ (0.40) 1.31 0.12 0.09
Diluted.......................................... (0.40) 1.31 0.11 0.09
Cash dividends per common share(3)................. 1.00
Book value per common share(4)..................... 7.83 12.70 9.96 7.58
</TABLE>
- --------------------------
(1) The unaudited pro forma income (loss) and book value per common share are
based on AMP shareholders receiving 0.7612 of a Tyco common share for each
share of AMP common stock held. The AMP equivalent pro forma per share data
are calculated by multiplying the unaudited pro forma combined per share
data by 0.7612.
(2) See Notes (3), (4) and (5) to "Selected Consolidated Historical Financial
Data of Tyco" and Notes (1) and (2) to "Selected Consolidated Historical
Financial Data of AMP" for information on certain non-recurring items. On a
pro forma combined basis, diluted income per common share for the fiscal
year ended September 30, 1998 before these non-recurring items is $1.68. On
an equivalent pro forma basis, diluted income per common share for the
fiscal year ended September 30, 1998 before these non-recurring items is
$1.28. On a pro forma combined basis, diluted income per common share for
the nine months ended September 30, 1997 and the year ended December 31,
1996 before these non-recurring items is $1.26 and $1.37, respectively. On
an equivalent pro forma basis, diluted income per common share for the nine
months ended September 30, 1997 and the year ended December 31, 1996 before
these non-recurring items is $0.96 and $1.04, respectively.
(3) See Note (4) to "Selected Tyco and AMP Unaudited Pro Forma Combined
Financial Information" for information on cash dividends per common share.
(4) Book value per common share excludes the $200.0 liquidation value of Tyco's
redeemable preferred stock, included in shareholders' equity as of December
31, 1996. The preferred stock was redeemed and converted into common shares
on April 1, 1997.
13
<PAGE>
AMP SPECIAL MEETING
PURPOSE OF THE AMP SPECIAL MEETING
At the AMP special meeting, AMP shareholders will consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
November 22, 1998, by and among Tyco (PA), Merger Sub and AMP providing for the
merger.
THE BOARD OF DIRECTORS OF AMP HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND RECOMMENDS THAT AMP SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "RECOMMENDATION OF THE BOARD OF DIRECTORS
OF AMP; REASONS OF AMP FOR THE MERGER" AND "INTERESTS OF CERTAIN PERSONS IN THE
MERGER."
SOLICITATION OF PROXIES
The solicitation of the enclosed proxies from AMP shareholders is made on
behalf of the Board of Directors of AMP. The expenses of the solicitation of
proxies, including preparing, handling, printing and mailing the proxy
soliciting material, will be borne by AMP. Solicitation will be made by mail, by
electronic telecommunications or in person. AMP has retained the services of
Innisfree M&A Incorporated to assist in the solicitation of proxies for a fee
estimated at $ plus out-of-pocket expenses. Management of AMP may also
use the services of its directors, officers and employees in soliciting proxies,
who will not receive any additional compensation therefor, but who will be
reimbursed for their out-of-pocket expenses. AMP will reimburse banks, brokers,
nominees, custodians and fiduciaries for their expenses in forwarding copies of
the proxy soliciting material to the beneficial owners of the stock held by such
persons and in requesting authority for the execution of proxies.
RECORD DATE; VOTING RIGHTS; PROXIES; REQUIRED VOTE
Only holders of record of shares of AMP common stock on December , 1998
are entitled to notice of and to vote at the AMP special meeting.
As of December , 1998, there were issued and outstanding shares
of AMP common stock held by approximately holders of record, each of which is
entitled to one vote per share on any matter that properly comes before the AMP
special meeting. However, based on a recent decision of the Federal District
Court for the Eastern District of Pennsylvania, the 20,000,100 shares of AMP
common stock owned by AlliedSignal are "control shares" under Pennsylvania law
and, as such, these shares do not have voting rights. Accordingly, absent such
decision being reversed on appeal, as of December , 1998, there were
shares of AMP common stock outstanding and entitled to vote. All shares of AMP
common stock represented by properly executed proxies will be voted in
accordance with the instructions indicated in such proxies, unless such proxies
have been previously revoked. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF
AMP COMMON STOCK WILL BE VOTED IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. AMP is not proposing any matters other than approval and adoption of
the merger agreement to come before the AMP special meeting and AMP has not
received notice of other proposals to be considered at the meeting. Moreover,
neither Pennsylvania law nor AMP's Bylaws permit shareholder proposals to be
considered at a special meeting unless the Board of Directors wishes to include
them. However, if any other matter or matters are properly presented for action
at the AMP special meeting, the persons named in the enclosed form of proxy will
have the discretion to vote on such matters in accordance with their best
judgment, unless such authorization is withheld by notation on the proxy. A
shareholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of revocation to the Secretary of AMP, by
signing and returning a later dated proxy, or by voting in person at the AMP
special meeting. However, mere attendance at the AMP special meeting will not,
in and of itself, have the effect of revoking the proxy.
14
<PAGE>
For approval and adoption of the merger agreement, AMP's Restated Articles
of Incorporation require the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the votes cast by all shareholders
entitled to vote thereon. The judges of election appointed for the meeting, who
will determine whether or not a quorum is present, will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the AMP shareholders for a vote. Without instruction
from the beneficial owner, brokers will not have authority to vote shares held
in "street name" at the AMP special meeting, although such shares will be
counted for purposes of determining the presence of a quorum. Votes cast by
proxy or in person at the AMP special meeting will be tabulated by the judges of
election.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of AMP common stock entitled to
vote is necessary to constitute a quorum at the AMP special meeting.
OTHER INFORMATION
On December , 1998, the executive officers and directors of AMP, including
their affiliates, had voting power with respect to an aggregate of shares
of AMP common stock or approximately % of the shares of AMP common stock
then outstanding. AMP currently expects that these directors and officers will
vote all of such shares in favor of the approval and adoption of the merger
agreement. On December , 1998, neither Tyco nor any of its directors or
executive officers beneficially owned any shares of AMP common stock.
In certain circumstances, including if AMP shareholders fail to approve the
merger and certain other conditions are met, AMP will be obligated to pay to
Tyco a termination fee of $300 million, and pay up to $30 million of Tyco's and
Tyco (PA)'s reasonable out-of-pocket expenses. See "Termination--Fees and
Expenses."
ATTENDANCE AT THE MEETING
All shareholders are invited to attend the meeting. If your shares are
registered in your own name and you plan to attend the meeting, you must request
in advance that an admission card be sent to you for admittance to the meeting.
If you are a shareholder but do not own shares in your name, you must bring
proof of ownership (e.g., a current broker's statement) in order to be admitted
to the meeting.
THE MATTERS TO BE CONSIDERED AT THE AMP SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF AMP. ACCORDINGLY, YOU ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND TO SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
15
<PAGE>
TYCO SPECIAL GENERAL MEETING
PURPOSE OF THE TYCO SPECIAL GENERAL MEETING
At the Tyco special general meeting, Tyco shareholders will be asked to
consider and vote upon the following proposals:
(i) to approve the issuance of common shares of Tyco to be delivered in
connection with the merger;
and, conditioned upon consummation of the merger,
(ii) to increase the size of the Tyco Board from 11 to 12 directors and to
elect Robert Ripp, presently the Chairman and Chief Executive Officer of
AMP, as a director of Tyco;
(iii) to increase the number of authorized Tyco common shares from
1,503,750,000 to 2,500,000,000, and to authorize the issue or other
disposal by the Tyco Board of such shares and to amend consequentially
the Bye-Laws of Tyco; and
(iv) to authorize an increase in the number of common shares in respect of
which grants may be made under the Tyco International Ltd. Long Term
Incentive Plan from 44 million to .
The merger is not conditioned on the approval by the Tyco shareholders of
proposals (ii), (iii) and (iv).
THE BOARD OF DIRECTORS OF TYCO HAS DETERMINED THAT EACH OF THESE PROPOSALS
IS IN THE BEST INTERESTS OF TYCO AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT TYCO SHAREHOLDERS VOTE "FOR" APPROVAL OF EACH OF THE PROPOSALS. SEE
"BACKGROUND OF THE MERGER," "RECOMMENDATION OF THE BOARD OF DIRECTORS OF TYCO;
REASONS OF TYCO FOR THE MERGER" AND "INTERESTS OF CERTAIN PERSONS IN THE MERGER"
FOR ADDITIONAL INFORMATION ON THE TYCO BOARD'S RECOMMENDATION OF PROPOSAL (I);
AND "EXPANSION OF TYCO BOARD AND ELECTION OF TYCO DIRECTOR PROPOSAL," "TYCO
CAPITAL INCREASE PROPOSAL" AND "TYCO LTIP SHARE INCREASE PROPOSAL" FOR
ADDITIONAL INFORMATION ON THEIR RECOMMENDATION OF PROPOSALS (II), (III) AND
(IV).
SOLICITATION OF PROXIES
The Tyco Board is soliciting proxies for the Tyco special general meeting in
favor of the proposals submitted to Tyco shareholders. A [blue] proxy card is
enclosed with this document. You are requested to complete and return this blue
form of proxy as soon as possible. In order to be valid, the [blue] proxy card
for the Tyco special general meeting must be completed in accordance with the
instructions on it and received by the times and dates set forth below at any of
the offices of Tyco's agents or AS&K Services Limited, Tyco's Registrar, whose
names and addresses are set out below:
IN THE UNITED STATES:
by 10:00 a.m. on , 1999 (Eastern Daylight Time):
by hand delivery at:
[to come]
by mail to:
[to come]
IN THE UNITED KINGDOM:
16
<PAGE>
by 10:00 a.m. on , 1999 (Greenwich Mean Time)
by hand or mail at:
[to come]
IN BERMUDA:
to the Registrar by 10:00 a.m. on , 1999 (Bermuda time)
by hand or mail at:
AS&K Services Limited
[to come]
As an alternative to appointing a proxy, a Tyco shareholder which is a
corporation may appoint any person to act as its representative by delivering
written evidence of the appointment of the representative, by hand or mail, at
any of the offices of Tyco's agents or Registrar, whose names and addresses are
set forth above, up to one hour before the time fixed for the commencement of
the Tyco special general meeting. A representative so authorized may exercise
the same powers, including voting rights, as the appointing corporation could
exercise if it were an individual shareholder.
The expenses of the solicitation of proxies, including preparing, handling,
printing and mailing the proxy soliciting material, will be borne by Tyco.
Solicitation will be made primarily through the mail but may also be made, if
necessary, by advertising, electronic telecommunications and personal interview.
Tyco has retained the services of to assist with the soliciting of
proxies for a fee estimated at $ plus out-of-pocket expenses. Tyco
management may also use the services of its directors, officers and employees in
soliciting proxies, who will not receive any additional compensation therefor,
but who will be reimbursed for their out-of-pocket expenses. Tyco will reimburse
banks, brokers, nominees, custodians and fiduciaries for their expenses in
forwarding copies of the proxy soliciting material to the beneficial owners of
the shares held by such persons and in requesting authority for the execution of
proxies.
VOTING RIGHTS; PROXIES
Notice of the Tyco special general meeting is being sent to all holders of
record of Tyco common shares on December , 1998.
As of December , 1998, there were issued and outstanding Tyco
common shares held by approximately holders of record. Holders of record of
Tyco common shares on the date of the Tyco special general meeting will be
entitled to attend and vote at the meeting and, on a poll, each such share will
be entitled to one vote per share. All Tyco common shares represented by
properly executed proxies will be voted on a poll in accordance with the
instructions indicated in such proxies, unless such proxies have been previously
revoked, or the Secretary of Tyco has received written instructions altering the
way in which the proxy is to vote, in which case the proxy will vote in
accordance with the instructions as altered. IF NO INSTRUCTIONS ARE GIVEN, SUCH
TYCO COMMON SHARES WILL BE VOTED IN FAVOR OF THE PROPOSALS SUBMITTED TO THE TYCO
SPECIAL GENERAL MEETING. Tyco does not know of any matters other than the
matters set forth in this Joint Proxy Statement/Prospectus that are to come
before the Tyco special general meeting. If any other matter or matters are
properly presented for action at the Tyco special general meeting, the persons
named in the enclosed form of proxy will have the discretion to vote on such
matters in accordance with their best
17
<PAGE>
judgment, unless such authorization is withheld. A shareholder who has given a
proxy may revoke it at any time prior to its exercise by giving written notice
of revocation to [ ] in the United States, [ ] in the United Kingdom
or Tyco's Registrar in Bermuda, by signing and returning a later dated proxy, or
by voting in person at the Tyco special general meeting. However, mere
attendance at the Tyco special general meeting will not, in and of itself, have
the effect of revoking a proxy.
Shares represented by "broker non-votes" (i.e., shares held by brokers or
nominees which are represented at a meeting but with respect to which the broker
or nominee is not empowered to vote on a particular proposal) will be counted
for purposes of determining whether there is a quorum at the special general
meeting, but will be considered to be voted only as to those matters actually
voted on. In accordance with NYSE rules, brokers and nominees are precluded from
exercising their voting discretion with respect to the approval and adoption of
non-routine matters such as the proposal to approve the issuance of Tyco common
shares to be exchanged in the merger.
QUORUM
At the Tyco special general meeting not less than two holders of Tyco common
shares present in person or by proxy shall form a quorum for the transaction of
business, and if a quorum does not assemble within half an hour after the time
appointed for the Tyco special general meeting, the Tyco special general meeting
shall be adjourned to a future date as determined by the directors of Tyco. A
properly executed proxy for the Tyco special general meeting marked "ABSTAIN"
and broker non-votes on any matter will be counted for purposes of determining
whether there is a quorum but will not otherwise be voted on such matter.
REQUIRED VOTE
The approval of the proposals set forth in this Joint Proxy
Statement/Prospectus to be voted on at the Tyco special general meeting requires
the affirmative vote of the holders of a majority of the outstanding Tyco common
shares voting on such proposal, provided that with respect to approval of the
issuance of the Tyco common shares to be delivered in connection with the
merger, the NYSE generally requires that at least a majority of the outstanding
Tyco common shares vote on such proposal.
On December , 1998, the executive officers and directors of Tyco,
including their affiliates, had voting power with respect to an aggregate of
Tyco common shares or approximately % of the Tyco common shares then
outstanding. Tyco currently expects that such directors and officers will vote
all of such shares in favor of the proposals set forth in this Joint Proxy
Statement/Prospectus to be voted on at the Tyco special general meeting.
THE MATTERS TO BE CONSIDERED AT THE TYCO SPECIAL GENERAL MEETING ARE OF
GREAT IMPORTANCE TO THE SHAREHOLDERS OF TYCO. ACCORDINGLY, YOU ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND TO SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
18
<PAGE>
THE MERGER
This section of the Joint Proxy Statement/Prospectus as well as the next
sections entitled "The Exchange Ratio and its Effect on AMP Securities and
Equity Based Benefit Plans" and "Certain Provisions of the Merger Agreement and
Related Agreements" describe certain aspects of the proposed merger. These
discussions are qualified in their entirety by reference to the merger
agreement, the stock option agreement and the related Tyco guarantees which are
attached as Annexes to this Joint Proxy Statement/Prospectus, and to the other
agreements and documents that are discussed in this Joint Proxy
Statement/Prospectus and that are filed as exhibits to the Registration
Statement of which this Joint Proxy Statement/Prospectus forms a part. YOU
SHOULD READ THE MERGER AGREEMENT IN ITS ENTIRETY AS IT IS THE LEGAL DOCUMENT
THAT GOVERNS THE MERGER.
BACKGROUND OF THE MERGER
In mid-1997, Mr. Lawrence A. Bossidy, Chairman of the Board and Chief
Executive Officer of AlliedSignal, telephoned a director of AMP to inquire
whether AMP had an interest in exploring a possible combination of the two
companies. The inquiry was referred to the Finance Committee of the AMP Board
for consideration. Upon consideration, it was the conclusion of the Finance
Committee that such a combination did not offer any benefits to AMP's businesses
and, accordingly, that there was no interest in pursuing a combination with
AlliedSignal. The Finance Committee's determination was communicated through the
director by telephone to Mr. Bossidy. Prior to the summer of 1998, there were no
further communications from Mr. Bossidy with respect to a potential business
combination.
On August 4, 1998, AlliedSignal announced its intention to commence an
unsolicited tender offer to acquire all of the outstanding shares of AMP common
stock for $44.50 per share in cash, and on August 10, 1998, AlliedSignal
commenced such tender offer. Also, on August 10, 1998, Mr. Bossidy sent a letter
to Mr. William J. Hudson, who was then Chief Executive Officer and President of
AMP, to request a meeting to discuss a possible business combination. Mr.
Bossidy also advised AMP of AlliedSignal's intention to file materials shortly
with the SEC for use by AlliedSignal to solicit consents from AMP's shareholders
with respect to a series of proposals. These proposals were principally intended
to increase the size of AMP's Board of Directors from 11 to 28 members and add
17 AlliedSignal nominees, all of whom were directors and/or executive officers
of AlliedSignal. By letter dated August 11, 1998, Mr. Hudson indicated to Mr.
Bossidy that since the Board had not yet reviewed AlliedSignal's offer or Mr.
Bossidy's request for a meeting, it was premature for such a meeting. Mr.
Bossidy, nonetheless, called Mr. Hudson later on August 11, at which time Mr.
Hudson reiterated the essence of his letter.
On August 5, August 12 and August 20, 1998, the AMP Board held meetings at
which the Board discussed AlliedSignal's offer with AMP's financial advisor,
Credit Suisse First Boston Corporation ("CSFB"), and AMP's legal advisors. At
the August 12 and August 20 meetings, CSFB reviewed with the AMP Board certain
financial aspects of the AlliedSignal offer and various alternatives available
to AMP. AMP's senior management also reviewed the potential impact of the
AlliedSignal offer on AMP's various constituencies including its shareholders,
employees, customers, suppliers and the communities served by it. After lengthy
discussions, and presentations from AMP's senior management and financial and
legal advisors, the AMP Board determined at the August 20 meeting, based in part
on the recommendation of all of the independent directors present, that the best
course of action under all prevailing circumstances was for AMP to continue
aggressively to pursue its strategic initiatives and business plans. The AMP
Board concluded that, given the values inherent in AMP's businesses and the
steps being taken to improve the profitability of these businesses, the
AlliedSignal offer was not in the best interests of AMP and its relevant
constituencies. In particular, the AMP Board determined that AMP's current
strategic initiatives and business plans offered the potential for greater
benefits for AMP's various constituencies, including its shareholders, than did
the AlliedSignal offer.
Also, following the recommendation, reached prior to the commencement of
AlliedSignal's offer, of a committee of the AMP Board formed several months
earlier, effective as of August 20, 1998, the AMP
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Board appointed Robert Ripp as Chairman and Chief Executive Officer to lead AMP
in its efforts aggressively to implement its profit improvement plan on a timely
and successful basis. The Board also appointed Herbert Cole, formerly Corporate
Vice President and President, Global Terminal and Connector Operations, as
Senior Vice President for Operations and Dr. Juergen Gromer, formerly Corporate
Vice President, Global Automotive Division, as Senior Vice President, Global
Industry Businesses. James E. Marley retired as Chairman, and William J. Hudson
assumed the position of Vice Chairman.
At the meeting held on August 20, 1998, the AMP Board also fixed October 15,
1998 as the record date for determining those shareholders of AMP entitled to
consent or withhold their consent in connection with AlliedSignal's consent
solicitation. The AMP Board also authorized an amendment to the AMP Rights
Agreement dated as of October 25, 1989, as amended, which, among other things,
provided that the rights would become nonredeemable if there were a change in
the AMP Board following the announcement of an Unsolicited Acquisition Proposal
(as defined in such amendment) such that disinterested directors (as defined
under Pennsylvania law) then in office, and persons appointed by the board of
directors, no longer constituted a majority of the AMP Board.
On August 26, 1998, AMP retained Donaldson, Lufkin & Jenrette Securities
Corporation to assist in AMP's evaluation of AlliedSignal's offer and various
alternatives thereto.
On September 14, 1998, AlliedSignal amended its offer to reduce the number
of shares of AMP common stock sought to be purchased from all outstanding shares
of AMP common stock to up to 40,000,000 shares at a price of $44.50 in cash per
share. At the time of such amendment, AlliedSignal stated that it would commence
another offer to acquire the remaining shares of AMP common stock at a price of
$44.50 in cash following consummation of its offer to purchase up to 40,000,000
shares. At the same time, AlliedSignal also announced its intention to solicit
consents for a new proposal which would purport to amend AMP's Bylaws to strip
the AMP Board of all authority, rights and duties with respect to the AMP Rights
Agreement or any similar agreement, and to vest such authority, rights and
duties in three individuals (who were never identified) selected by
AlliedSignal. At a meeting of the AMP Board held on September 22, 1998, the AMP
Board fixed a record date of November 16, 1998 for AlliedSignal's new proposal.
At a meeting held on September 17, 1998, the AMP Board, by unanimous vote of
the directors present, determined that the amended offer from AlliedSignal was
not in the best interests of AMP and its relevant constituencies, including its
shareholders. At the same meeting, the AMP Board approved another amendment to
the AMP Rights Agreement which, among other things, amended the definition of
the term "Acquiring Person" to reduce from 20% to 10% the threshold at which a
person who has made an unsolicited acquisition proposal may become an Acquiring
Person and thereby trigger a number of provisions of the AMP Rights Agreement.
On September 21, 1998, AlliedSignal further modified its offer to reduce
from up to 40,000,000 to 20,000,000 the number of shares of AMP common stock
sought to be purchased for $44.50 per share in cash.
On September 28, 1998, AMP announced that it intended to commence a
self-tender offer to purchase up to 30,000,000 shares of AMP common stock at a
price of $55 per share in cash. The AMP self-tender offer, which commenced on
October 9, 1998, and was scheduled to expire on November 20, 1998, was
subsequently extended to November 25, 1998. The AMP self-tender offer was
intended to provide AMP shareholders with an opportunity to sell a portion of
their shares of common stock at a price in excess of AlliedSignal's $44.50 per
share offer. Also on September 28, 1998, AMP stated its intention to create a
new Flexitrust that would hold 25 million shares of AMP common stock to fund,
among other things, future AMP benefit and compensation requirements.
On October 9, 1998, AlliedSignal announced that it had purchased 20,000,000
shares of AMP common stock, at a price of $44.50 per share, pursuant to its
offer. Following the commencement of the AMP self-tender offer, AlliedSignal
indicated that, if the AMP self-tender offer were consummated, it would reduce
the consideration to be paid in any further offer commenced by AlliedSignal to
$42.64 per
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share, and possibly lower to take into account expenses incurred by AMP in
connection with the AMP self-tender offer. AlliedSignal has not commenced
another tender offer for the shares of AMP common stock not purchased by it
pursuant to its original offer.
Beginning in August 1998, following commencement of the original
AlliedSignal offer, Tyco was approached by a number of investment banking firms
concerning its possible interest in a business combination transaction with AMP.
Management of Tyco reviewed publicly available information concerning AMP and
the industry in which AMP operates, and made certain analyses based upon that
information. Tyco did not, however, express any interest at that time in
participating in a business combination transaction with AMP.
On October 18, 1998, Mr. Ripp and outside counsel for AMP met with Mr.
Bossidy and AlliedSignal's general counsel. The meeting was an outgrowth of
contact initiated by AlliedSignal's outside counsel shortly beforehand, in which
such counsel indicated AlliedSignal would be prepared to offer a modest price
increase if AMP would be willing to negotiate a transaction. Prior to the
meeting, AMP indicated through its counsel that, while AMP's Board had publicly
stated it would give serious consideration to any offer providing reasonable
value for AMP, because AMP was not for sale AMP was not prepared to negotiate
based on a price already determined to be inadequate, but that Mr. Ripp was
prepared to meet with Mr. Bossidy. At the meeting, Mr. Ripp generally described
to Mr. Bossidy why he believed that AMP's value was significantly above $44.50
per share. No discussion of price occurred. However, both Mr. Ripp and Mr.
Bossidy each agreed that they should feel free to contact one another in the
future as events unfolded if either wished to do so.
In mid-October, representatives of CSFB, at AMP's request, informally
contacted a number of companies regarding their potential interest in exploring
a business combination transaction with AMP.
On November 3, 1998, representatives of CSFB met with L. Dennis Kozlowski,
Chairman, President and Chief Executive Officer of Tyco, regarding a number of
matters, including the status of AlliedSignal's efforts to acquire AMP, whether
Tyco might have an interest in exploring a business combination transaction with
AMP, and, if Tyco were so interested, the possibility of arranging a meeting for
Tyco with Mr. Ripp. Mr. Kozlowski indicated that Tyco would be interested in
such a meeting.
On November 10, 1998, Mr. Ripp and representatives of CSFB met with Mr.
Kozlowski and Mark Swartz, Executive Vice President and Chief Financial Officer
of Tyco. At the meeting, Mr. Ripp stated his belief that AMP was worth
significantly more than the $44.50 per share being offered by AlliedSignal.
Following the meeting, Tyco's management reviewed certain information provided
by AMP, including materials that had been presented at the meeting, as well as
certain information prepared in connection with the financing for AMP's
self-tender offer, and made a preliminary assessment of value.
On November 11, 1998, Mr. Kozlowski contacted representatives of CSFB to
express an interest in pursuing a business combination transaction with AMP.
Based on the information that Tyco had reviewed and its discussions with
representatives of AMP through that date, Tyco gave its preliminary indication
of a transaction value of $50.00 per share of AMP common stock. This value
assumed a stock for stock transaction, accounted for as a pooling of interests,
and was subject to the conduct of appropriate due diligence and agreement on
other transaction terms satisfactory to Tyco. Discussions concerning a potential
transaction continued on November 12-13, 1998. The parties scheduled a meeting
for November 16, 1998, and agreed that further due diligence would be conducted
during the week of November 16, 1998. Tyco and AMP executed reciprocal
confidentiality letters on November 16, 1998.
On November 16, 1998, Mr. Kozlowski, Mr. Swartz and other members of Tyco's
management met with Mr. Ripp, William S. Urkiel, AMP's Chief Financial Officer,
David F. Henschel, AMP's General Counsel and Corporate Secretary,
representatives of CSFB and AMP's outside counsel to discuss in detail AMP's
business and prospects, including its profit improvement plan. The following
day, Messrs. Kozlowski and Swartz met with Mr. Ripp and another AMP board
member, together with representatives of CSFB and AMP's outside counsel, to
discuss Tyco's business and prospects.
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Beginning on November 16, 1998, Tyco conducted an extensive due diligence
investigation of AMP. In the course of this investigation, Tyco personnel
reviewed documentation and conducted discussions with AMP, its accountants and
other AMP representatives concerning AMP's financial condition, facilities,
operations, profit improvement plan, human resources programs, intellectual
property, tax posture, environmental compliance and other business and legal
matters. As part of the due diligence process, Messrs. Kozlowski and Swartz and
various Tyco operating personnel toured certain AMP facilities. Also during this
period, the parties' legal counsel conducted negotiations concerning the terms
of the merger agreement and the related stock option agreement. Beginning on
November 16, 1998, AMP and its advisors conducted legal and financial due
diligence with respect to Tyco.
On November 17, 1998, Mr. Ripp and outside counsel for AMP met with Mr.
Bossidy and AlliedSignal's general counsel. The meeting was initiated the prior
week by a call from Mr. Bossidy to Mr. Ripp, during which Mr. Ripp indicated he
would be prepared to discuss the subject of price among other matters. At the
meeting, Mr. Ripp elaborated on his view regarding AMP's values as well as
considerations relating to various AMP constituencies. Mr. Bossidy addressed
certain constituency matters, and indicated that AlliedSignal would be prepared
to increase its proposed acquisition price for AMP by a modest amount and to
include an equity component for a limited portion of the total consideration
(with downside price protection and upside participation), intended to offer
tax-free treatment to certain low-basis AMP shareholders. Mr. Ripp indicated
that the value expectations of AMP's Board were at levels above $50.00 per
share, to which Mr. Bossidy indicated that AlliedSignal would not go to such
levels. Mr. Ripp asked if AlliedSignal would be prepared to offer more than the
modest amount contemplated and Mr. Bossidy indicated that a small amount more
could be available to reach an agreement. Mr. Ripp indicated that he would
report the discussion with Mr. Bossidy to AMP's directors within the next few
days and call Mr. Bossidy thereafter. Mr. Ripp informed AMP's directors of these
discussions during a telephonic Board meeting on November 19, 1998, and advised
Mr. Bossidy by telephone shortly thereafter that AMP's Board felt that
AlliedSignal's enhanced proposal was not satisfactory and that the AMP Board
would continue to review its alternatives and options.
On November 19, 1998, representatives of Tyco and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Tyco's financial advisor, met
with AMP's legal and financial advisors to review the key financial and
contractual terms of a business combination transaction, including the
transaction consideration. During these discussions, subject to satisfactory
conclusion of Tyco's due diligence investigation and agreement on all
contractual terms, Tyco indicated a willingness to consider an increase of the
transaction consideration to at least $51.00 worth of Tyco common shares for
each share of AMP common stock.
On November 20, 1998, the Board of Directors of Tyco met to consider a
business combination transaction with AMP on the terms that had been discussed
to date. At the meeting, Mr. Kozlowski reviewed with the Tyco Board his
discussions with representatives of AMP and the results of Tyco's due diligence
investigation. Mr. Swartz discussed with the Tyco Board pro forma financial
information reflecting a combination of Tyco and AMP, and Mark A. Belnick,
Tyco's Chief Corporate Counsel, reviewed the basic terms of the merger. Merrill
Lynch made a presentation regarding certain financial aspects of the merger and
provided its preliminary, oral opinion (which opinion was subsequently confirmed
by delivery of a written opinion dated November 22, 1998) to the effect that, as
of the date of such opinion, and based upon the assumptions made, matters
considered and limits of review set forth in its written opinion, the
consideration to be issued to AMP's shareholders in the merger was fair to Tyco
from a financial point of view. Following the presentations of Tyco's management
and advisors and Tyco Board discussion, the Tyco Board unanimously voted to
approve the terms of the merger. The Tyco Board also unanimously voted to
approve and adopt Tyco's guarantee of Tyco (PA)'s obligations under the merger
agreement on the terms presented and take other action required or deemed
advisable for Tyco and its subsidiaries to consummate the transactions
contemplated by the merger agreement. The Tyco Board authorized management to
conclude the necessary agreements for the merger. The Tyco Board also voted to
convene a special general meeting of Tyco shareholders to consider and act upon
the various matters
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that are proposed for action at the Tyco special general meeting in connection
with the merger and to recommend that Tyco shareholders vote in favor of each
such proposal. On November 21, 1998, the Board of Directors of Tyco (PA) and
Merger Sub convened to approve the terms of the merger and other actions
necessary for Tyco (PA) and Merger Sub to consummate the merger.
On November 21, 1998, the AMP Board of Directors met to review the terms of
the proposed business combination with Tyco. At the meeting, the AMP Board heard
presentations from Mr. Ripp and legal and financial advisors with respect to the
proposed terms of the merger. CSFB also made a presentation regarding certain
financial aspects of the merger. Presentations regarding Tyco's business,
financial matters, corporate structure, management approach, and AMP's position
within Tyco, were made by Mr. Kozlowski and Mr. Swartz, who had been invited to
attend a portion of the AMP Board meeting. The AMP Board held another meeting on
November 22, 1998, at which it reviewed the results of final negotiations on the
contractual terms of the merger and related matters. CSFB rendered to the AMP
Board an oral opinion (which opinion was subsequently confirmed by delivery of a
written opinion dated November 22, 1998) to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
exchange ratio was fair to holders of AMP common stock from a financial point of
view. Following discussion, the AMP Board of Directors voted unanimously to
approve the merger agreement and the related stock option agreement and the
transactions that they contemplate and to recommend approval of the merger and
adoption of the merger agreement to AMP's shareholders. The AMP Board also
resolved to terminate the AMP self-tender offer, to terminate the Flexitrust, to
terminate AMP's share repurchase plan and to amend the AMP Rights Agreement so
that the AMP Rights Agreement will be inapplicable to the merger agreement, the
stock option agreement and the transactions contemplated thereby.
Following conclusion of negotiations and approval of the merger agreement,
the stock option agreement and the transactions contemplated thereby by the AMP
Board of Directors on November 22, 1998, the parties executed the merger
agreement and the stock option agreement and Tyco executed the guarantees. The
transaction, as well as the termination of the AMP self-tender offer and the
Flexitrust, were announced before the opening of business on November 23, 1998.
Following the announcement of the transaction, AlliedSignal publicly
announced that the price being paid by Tyco, based on then current market prices
for the Tyco common shares, exceeded the value which AlliedSignal placed on AMP.
AlliedSignal also stated that it would defer commencement of its consent
solicitation pending clarification of certain legal issues described below with
respect to AlliedSignal's efforts to gain control of AMP and pending
verification that AMP shareholders will receive the value then being indicated.
CERTAIN LITIGATION. On August 4, 1998, AlliedSignal filed a complaint
against AMP in the United States District Court for the Eastern District of
Pennsylvania (ALLIEDSIGNAL CORPORATION V. AMP INCORPORATED, CIVIL ACTION NO.
98-CV-4058). In its initial complaint, AlliedSignal sought a declaratory
judgment as to, among other things, the applicability and/or validity of the
continuing director provisions contained at the time in the AMP Rights Agreement
and the constitutionality of certain anti-takeover provisions of Pennsylvania
law. AlliedSignal subsequently amended its complaint three times. On September
14, 1998, AlliedSignal moved to amend its complaint to add a claim for
declaratory and injunctive relief declaring the amendment to the AMP Rights
Agreement approved by the AMP Board of Directors on August 20, 1998, to be
invalid under Pennsylvania law. On September 22, 1998, AlliedSignal moved to
amend its complaint again to incorporate a challenge to the September 17, 1998
amendment to the AMP Rights Agreement. On September 25, 1998, AlliedSignal filed
a third amended complaint in which it challenged the November 16, 1998 record
date set by AMP's Board of Directors for the solicitation of consents regarding
AlliedSignal's proposal to strip the AMP Board of its authority with respect to
the AMP Rights Agreement. AMP did not oppose AlliedSignal's motions to amend its
complaint.
AMP shareholders filed four purported shareholder class action lawsuits
against AMP and its Board of Directors in the United States District Court for
the Eastern District of Pennsylvania on or about
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August 6 and 7, 1998. These complaints each alleged similar acts of supposed
misconduct, i.e., that AMP and its directors improperly refused to consider the
original AlliedSignal offer and wrongfully relied upon provisions of the AMP
Rights Agreement and Pennsylvania law to block the original AlliedSignal offer,
as well as challenges to the constitutionality of certain anti-takeover
provisions of Pennsylvania law. These shareholder actions were consolidated and
a consolidated amended complaint was filed on September 28, 1998. This complaint
omitted class action allegations asserted in the initial complaints, named a
number of additional officers of AMP as defendants and added claims brought
under the Williams Act alleging that AMP failed to disclose relevant information
in its Schedule 14D-9 consent revocation filing. No service has been made on the
additional defendants.
On August 21, 1998, AMP filed a complaint in the United States District
court for the Eastern District of Pennsylvania against AlliedSignal seeking
declaratory and injunctive relief to prevent AlliedSignal from pursuing its
attempt to pack the AMP Board of Directors with AlliedSignal executive officers
and directors who would have an irreconcilable conflict of interest were they to
serve as directors of AMP. (AMP INCORPORATED V. ALLIEDSIGNAL INC. AND PMA
ACQUISITION CORPORATION, CIVIL ACTION NO. 98-CV-04405.) The complaint also
alleged that the Schedule 14D-1 filed by AlliedSignal and its subsidiary PMA
Acquisition Corp. with the SEC was false and misleading because it failed to
disclose that those AlliedSignal representatives would have such conflicts of
interest or how AlliedSignal would propose to deal with such conflicts, and that
AlliedSignal's attempt to pack the Board of Directors would prevent the current
members of the Board of Directors from fulfilling their fiduciary duties to AMP
under Pennsylvania law. On September 22, 1998, AMP amended its complaint to add
several claims against AlliedSignal. The amended complaint sought, among other
things, (i) an order declaring that the Pennsylvania Control-Share Acquisition
Statute bars AlliedSignal from voting AMP shares acquired pursuant to its tender
offer and (ii) a declaratory judgment that AlliedSignal's consent proposal with
respect to the AMP Rights Agreement violates Pennsylvania law.
On September 11, 1998, AMP filed a motion for summary judgment on its claim
that AlliedSignal's attempt to pack AMP's Board of Directors with AlliedSignal's
directors and senior management would create extensive, irreconcilable conflicts
of interest. AMP's motion sought an order declaring that the AlliedSignal
consent solicitation proposals violate Pennsylvania law. On September 18, 1998,
AlliedSignal filed a cross-motion for summary judgment seeking the dismissal of
this claim.
On September 14, 1998, AlliedSignal filed a motion for summary judgment,
declaratory judgment and a preliminary injunction, seeking a declaration that
the August 20, 1998 amendment to the AMP Rights Agreement is invalid under
Pennsylvania law or that AMP should be enjoined from enforcing it. AlliedSignal
filed a supplemental motion on September 21, 1998 to challenge to the September
17, 1998 amendment to AMP's Rights Agreement. AlliedSignal also challenged the
November 16, 1998 record date set by the AMP Board of Directors for
AlliedSignal's proposal with respect to the AMP Rights Agreement. On September
23, 1998, AMP filed a cross motion for summary judgment, seeking dismissal of
AlliedSignal's claims regarding the validity to the AMP Rights Agreement. The
Court heard arguments on AMP's and AlliedSignal's motions on September 28, 1998.
On October 8, 1998, the Court entered an Order and Memorandum Opinion in the
above-referenced actions. The Court granted in part AMP's motion for partial
summary judgment in the nature of a declaratory judgment regarding the claim
that AlliedSignal's consent solicitation plan is unlawful. The Court enjoined
AlliedSignal's board-packing consent proposals "until [AlliedSignal] states
unequivocally that its director nominees have a fiduciary duty solely to AMP
under Pennsylvania law and includes a statement from each nominee affirmatively
committing personally to that duty." The Court denied in part AMP's motion to
the extent it sought additional relief.
The Court also denied AlliedSignal's motions for summary judgment,
preliminary injunction and declaratory judgment with respect to the AMP Rights
Agreement in their entirety. The Court held that "AMP's actions in amending its
shareholder rights plan cannot be enjoined as ultra vires acts or breaches of
fiduciary duty." In addition, the Court declared that AlliedSignal's consent
proposal to amend AMP's
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Bylaws in order to shift the Board of Directors' authority over the AMP Rights
Agreement to persons not on the Board was unlawful. The Court denied
AlliedSignal's motion challenging the November 16, 1998 record date for the
consent proposal with respect to the AMP Rights Agreement.
The Court further held that shareholders participating in the shareholders'
litigation against AMP, IN RE AMP SHAREHOLDER LITIGATION, do not have standing
to seek an injunction against the actions of the AMP Board for not agreeing to
AlliedSignal's merger proposal.
On October 9, 1998, AlliedSignal filed appeals in ALLIEDSIGNAL V. AMP and in
AMP V. ALLIEDSIGNAL, ET AL. in the United States Court of Appeals for the Third
Circuit. On October 22, 1998, AlliedSignal filed with the Third Circuit Court of
Appeals an Emergency Motion for A Stay of Injunction Pending Appeal or, in the
alternative, For An Emergency Hearing On A Limited Merits Issue. This motion was
subsequently denied.
After the issuance of the October 8, 1998 Order, the Court held a number of
conferences and an evidentiary hearing regarding the injunction relating to
AlliedSignal's consent solicitation. Following expedited discovery, at the
evidentiary hearing on November 4, 1998, the Court indicated that it was
inclined to find that AlliedSignal had complied with the portion of the October
8, 1998 Order which required statements by AlliedSignal and its nominees
regarding the fiduciary duty to AMP that the AlliedSignal nominees would have if
elected to AMP's Board.
Several more conferences among the Court and the parties occurred thereafter
regarding the nominees' understanding of the conflicts of interest issue and
AlliedSignal's disclosure about that issue in its consent statement to be
distributed to AMP's shareholders. As a result of these conferences, the Court
required further disclosure. On November 20, 1998, the Court, having concluded
that the disclosure was adequate, dissolved the injunction of the consent
solicitation. At the same time, the Court ordered that while AlliedSignal could
proceed with the consent solicitation, the nominees would be enjoined from being
seated on the AMP Board until the Court of Appeals decides whether the conflicts
the nominees would face, if elected, are so pervasive that, as a matter of
Pennsylvania law, they should not be seated as directors of AMP. AMP filed a
notice of appeal with respect to the District Court's rulings regarding the
irreconcilable conflicts issue on November 23, 1998.
On October 15, 1998, AMP moved for summary judgment, a declaratory judgment
and injunctive relief with respect to its claim that the Pennsylvania
Control-Share Acquisition Statute bars AlliedSignal from voting the AMP shares
it acquired in its tender offer. AlliedSignal filed a cross motion for summary
judgment on October 29, 1998. On November 18, 1998, the District Court granted
AMP's motion for partial summary judgment. The District Court ruled that the
shares of AMP common stock acquired by AlliedSignal are "control shares" under
Pennsylvania law. As a result, the Court issued an order enjoining AlliedSignal
from voting any shares of AMP's common stock owned by AlliedSignal unless and
until AlliedSignal's voting rights are restored under Pennsylvania law. On
November 24, 1998, AlliedSignal appealed the November 18, 1998 Order.
It is anticipated that the two recent appeals will be consolidated with
AlliedSignal's earlier appeal regarding the amendments to the AMP Rights
Agreement, and that oral argument will be heard on all the matters on appeal in
January 1999.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF AMP; REASONS OF AMP FOR THE MERGER
At a meeting of the AMP Board held on November 22, 1998, after careful
consideration, the AMP Board unanimously (i) approved the merger and the merger
agreement, (ii) determined that the merger is in the best interests of AMP and
fair to its shareholders and (iii) recommended that holders of shares of AMP
common stock vote FOR approval and adoption of the merger agreement.
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In reaching its decision to approve the merger and the merger agreement and
to recommend approval and adoption of the merger agreement by the holders of
AMP's common stock, AMP's Board considered the following material factors:
1. information concerning the financial condition, results of operations,
prospects and businesses of AMP and Tyco, including the revenues of the
companies, their complementary businesses and the potential for
synergies, the recent stock price performance of AMP common stock and
Tyco common shares, and the percentage of the combined company AMP's
shareholders would own following the merger;
2. the fact that the merger will present the opportunity for the holders
of AMP common stock to receive a significant premium over the trading
value of AMP common stock on August 4, 1998 when AlliedSignal announced
its intention to seek to acquire AMP at $44.50 per share in cash, and
over the $44.50 per share price AlliedSignal proposed, while at the
same time allow such shareholders to participate in a larger and more
diversified company and, as shareholders of Tyco, benefit from the
implementation of AMP's recently announced profit improvement plan;
3. the fact that the exchange ratio represented, as of the signing of the
merger agreement, consideration having a value (based upon a price of
$65.0625 per Tyco common share) of $51.00 representing a premium of
13.02% over $45.125 (the closing price per share on November 20, 1998),
and that prior to the announcement of the AlliedSignal offer, AMP
shares had traded as low as $28.125 per share;
4. the AMP Board's determination that the unsolicited offer to purchase
all of the outstanding shares of AMP common stock at a price of $44.50
per share in cash by AlliedSignal was inadequate, did not reflect the
value or prospects of AMP and was not in the best interests of AMP and
its relevant constituencies, including its shareholders, and that the
merger proposal made by Tyco provided AMP and its shareholders with
significantly better value than the offer by AlliedSignal;
5. the result of efforts undertaken at the request of AMP by AMP's
financial advisor to canvass a number of companies regarding their
potential interest in discussing the possibility of a business
combination or other transaction and the fact that, given the duration
and visibility of AlliedSignal's unsolicited takeover bid for AMP, and
AMP's public statements that its Board of Directors would give serious
consideration to any proposal offering reasonable value for AMP, there
was general awareness in the business and financial communities of the
possibility that AMP would consider a possible business combination
with a third party;
6. the review of, and discussions with, AMP senior management, legal and
financial advisors and accountants, regarding certain business,
financial, legal and accounting aspects of the merger, the results of
legal and financial due diligence and a review of the terms of and
conditions to the merger agreement and the stock option agreement;
7. the financial presentation of CSFB, including the oral opinion of CSFB
(subsequently confirmed by delivery of a written opinion dated November
22, 1998) to the effect that, as of the date of such opinion and based
upon and subject to certain matters stated therein, the exchange ratio
was fair to the holders of AMP common stock from a financial point of
view (see "Opinion of AMP's Financial Advisor");
8. the recommendation of AMP's management that the merger be approved; and
9. the recognition by AMP's Board that Robert Ripp and certain members of
AMP's management have interests in the merger that are in addition to
or different from their interests as holders of AMP common stock. See
"Interests of Certain Persons in the Merger and Related Matters."
AMP's Board of Directors also considered (i) the risk that the merger would
not be consummated, (ii) the substantial management time and effort that will be
required to consummate the merger and integrate the operations of the two
companies, (iii) the possibility that certain provisions of the merger
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agreement (including the stock option agreement and the no solicitation and
certain other provisions in the merger agreement) might have the effect of
discouraging other persons potentially interested in merging with or acquiring
AMP from pursuing such an opportunity or, if pursued, from consummating such a
transaction prior to November 6, 1999, (iv) the fact that AMP common stock had
traded as high as $56 11/16 during the twelve month period preceding the
commencement of the original offer by AlliedSignal, and (v) other matters
described under "Risk Factors." In the judgment of AMP's Board, the potential
benefits of the merger outweighed these considerations.
This discussion of the information and factors considered by AMP's Board is
not intended to be exhaustive. In view of the variety of factors considered in
connection with its evaluation of the merger, AMP's Board did not find it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination. In addition,
individual members of AMP's Board of Directors may have given different weights
to different factors.
THE AMP BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF AMP
COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF AMP'S FINANCIAL ADVISOR
CSFB has acted as financial advisor to AMP in connection with the merger.
CSFB was selected by AMP based on CSFB's experience, expertise and familiarity
with AMP and its business. CSFB is an internationally recognized investment
banking firm and is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
In connection with CSFB's engagement, AMP requested that CSFB evaluate the
fairness of the exchange ratio from a financial point of view. On November 22,
1998, at a meeting of the Board of Directors of AMP held to evaluate the
proposed merger, CSFB rendered to the AMP Board an oral opinion (which opinion
was subsequently confirmed by delivery of a written opinion dated November 22,
1998), to the effect that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the exchange ratio was fair to the
holders of AMP common stock from a financial point of view.
THE FULL TEXT OF CSFB'S WRITTEN OPINION TO THE AMP BOARD, WHICH SETS FORTH
THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF AMP
COMMON STOCK ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. CSFB'S
OPINION IS ADDRESSED TO THE BOARD OF DIRECTORS OF AMP AND RELATES ONLY TO THE
FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS
ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT THE AMP SPECIAL MEETING. THE SUMMARY OF THE OPINION OF CSFB SET FORTH IN
THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, CSFB reviewed the merger agreement and certain
publicly available business and financial information relating to AMP and Tyco.
CSFB also reviewed certain other information relating to AMP and Tyco, including
financial forecasts, provided to or discussed with CSFB by AMP and Tyco, and met
with the managements of AMP and Tyco to discuss the businesses and prospects of
AMP and Tyco. CSFB also considered certain financial and stock market data of
AMP and Tyco, and compared those data with similar data for other publicly held
companies in businesses similar to AMP and Tyco and considered, to the extent
publicly available, the financial terms of certain other business combinations
and other transactions recently effected. CSFB also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which CSFB deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by CSFB and relied on such information being
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complete and accurate in all material respects. With respect to financial
forecasts, CSFB was advised, and assumed, that such forecasts were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of AMP and Tyco as to the future financial
performance of AMP and Tyco and the best currently available estimates and
judgments of the management of AMP as to the operating cost savings (including
the amount, timing and achievability thereof) projected to be realized through
AMP's various cost reduction plans. CSFB assumed that the merger will be treated
as a pooling of interests in accordance with generally accepted accounting
principles and as a tax-free reorganization for federal income tax purposes. In
addition, CSFB was not requested to make and did not make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of AMP or Tyco, nor was CSFB furnished with any such evaluations or appraisals.
CSFB's opinion was necessarily based upon information available to, and
financial, economic, market and other conditions as they existed and could be
evaluated by, CSFB on the date of its opinion. CSFB did not express any opinion
as to the actual value of the Tyco common shares when issued pursuant to the
merger or the prices at which the Tyco common shares will trade subsequent to
the merger. In connection with its engagement, CSFB was requested to approach,
and held discussions with, certain third parties to solicit indications of
interest in a possible business combination with AMP. Although CSFB evaluated
the exchange ratio from a financial point of view, CSFB was not requested to,
and did not, recommend the specific consideration payable in the merger, which
consideration was determined between AMP and Tyco. No other limitations were
imposed on CSFB with respect to the investigations made or procedures followed
by CSFB in rendering its opinion.
In preparing its opinion to the AMP Board, CSFB performed a variety of
financial and comparative analyses, including those described below. The summary
of CSFB's analyses set forth below does not purport to be a complete description
of the analyses underlying CSFB's opinion. The preparation of a fairness opinion
is a complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. In arriving at its opinion, CSFB
made qualitative judgments as to the significance and relevance of each analysis
and factor considered by it. Accordingly, CSFB believes that its analyses must
be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a misleading
or incomplete view of the processes underlying such analyses and its opinion. In
its analyses, CSFB made numerous assumptions with respect to AMP, Tyco, industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of AMP and
Tyco. No company, transaction or business used in such analysis as a comparison
is identical to AMP or Tyco or the proposed merger, nor is an evaluation of the
results of such analyses entirely mathematical; rather such analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in such analyses and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by such analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. CSFB's opinion and financial
analyses were only one of many factors considered by the Board of Directors of
AMP in its evaluation of the proposed merger and should not be viewed as
determinative of the views of the AMP Board or management with respect to the
merger or the exchange ratio.
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The following is a summary of the material analyses underlying CSFB's
opinion rendered to the AMP Board in connection with the merger:
DISCOUNTED CASH FLOW ANALYSIS. CSFB estimated the present value of the
stand-alone, unlevered, after-tax free cash flows that AMP could produce
over the calendar years 1999 through 2008 based on three scenarios: (i) a
scenario based on estimates of the management of AMP, including estimates as
to the potential operating cost savings anticipated to be realized from
AMP's various cost reduction plans ("Case I"), (ii) a scenario based on
certain adjustments to the Case I estimates prepared by the management of
AMP for calendar years 1999 to 2001 and extrapolated for calendar years 2002
to 2008 in conjunction with the management of AMP which assumed, among other
things, accelerated revenue growth in certain markets ("Case II") and (iii)
a scenario based on the First Call Corporation ("First Call") consensus
earnings estimates for AMP for calendar year 1999 and growth rates
thereafter consistent with estimates of research analysts and industry
reports which assumed, among other things, lower operating cost savings from
AMP's cost reduction plans ("Case III"). Ranges of estimated terminal values
were calculated using terminal multiples of estimated calendar year 2008
earnings before interest, taxes, depreciation and amortization ("EBITDA") of
7.5x to 8.5x. The free cash flow streams and estimated terminal values were
then discounted to present value using discount rates of 10.5% to 11.5%.
This analysis indicated a selected equity reference range for AMP of
approximately $45.00 to $56.00 per share, as compared to the equity value
implied in the merger of approximately $51.00 per share, and an exchange
ratio reference range of 0.67x to 0.84x, as compared to the exchange ratio
in the merger of 0.7612x, based on closing stock prices of AMP common stock
and Tyco common shares on November 19, 1998.
SELECTED COMPANIES ANALYSIS. CSFB compared certain financial, operating
and stock market data of AMP to corresponding data of selected publicly
traded companies in the electrical and electronic connectors industry. Such
companies included Amphenol Corporation, Hubbel Incorporated, Methode
Electronics, Inc., Molex Incorporated, and Thomas & Betts Corporation
(collectively, the "AMP Selected Companies"). CSFB calculated equity values
for the AMP Selected Companies as a multiple of estimated calendar years
1998 and 1999 net income and enterprise values (equity value, plus debt,
less cash) as multiples of estimated calendar years 1998 and 1999 sales,
EBITDA and earnings before interest and taxes ("EBIT"). Estimated financial
data for the AMP Selected Companies were based on estimates of selected
investment banking firms and estimated financial data for AMP were based on
AMP management's Case I estimates. Applying a range of multiples of
estimated calendar years 1998 and 1999 net income, sales, EBITDA and EBIT of
the AMP Selected Companies to corresponding financial data of AMP indicated
a selected equity reference range for AMP of approximately $45.00 to $51.00
per share, as compared to the equity value implied in the merger of
approximately $51.00 per share, and an exchange ratio reference range of
0.67x to 0.76x, as compared to the exchange ratio in the merger of 0.7612x,
based on closing stock prices of AMP common stock and Tyco common shares on
November 19, 1998.
CSFB also compared certain financial, operating and stock market
information for Tyco and the following selected publicly held manufacturing
conglomerates: Danaher Corporation, Emerson Electric Co., General Electric
Company, Dover Corporation, AlliedSignal Inc., Illinois Tool Works Inc.,
Minnesota Mining and Manufacturing Company, and United Technologies
Corporation (collectively, the "Tyco Selected Companies"). CSFB calculated
equity values for the Tyco Selected Companies as a multiple of estimated
calendar 1999 earnings per share ("EPS") and enterprise values as multiples
of estimated calendar year 1999 sales, EBITDA and EBIT and also compared
price-to-earnings ("P/E") ratios to long-term EPS growth rates. Estimated
financial data for the Tyco Selected Companies and Tyco were based on
estimates of selected investment banking firms. This analysis indicated for
the Tyco Selected Companies a range of implied multiples of estimated
calendar 1999 EPS, sales, EBITDA and EBIT of 16.1x to 28.8x, 1.0x to 5.6x,
7.2x to 16.4x and 9.5x to 18.1x, respectively, and a range of P/E ratios to
long-term EPS growth rates of 115.9 to 209.1. The multiples of estimated
calendar 1999 EPS, sales, EBITDA and EBIT of Tyco were 22.9x, 2.8x, 12.1x
and 15.8x, respectively, and the P/E ratio to long-term EPS growth rate for
Tyco was 120.5.
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SELECTED ACQUISITIONS ANALYSIS. CSFB analyzed, among other things, the
implied purchase price and transaction multiples paid or proposed to be paid
in the following selected merger and acquisition transactions in the
electrical and electronic components industries (acquiror/target): Framatome
Connectors International S.A./Berg Electronics Corp., Siebe PLC/Eurotherm
PLC, Kohlberg Kravis Roberts & Co./Amphenol Corporation, Thomas & Betts
Corporation/Augat Inc., Vishay Intertechnology, Inc./Vitramon, Inc., and
Hicks, Muse/Berg Electronics Corp. (collectively, the "Selected
Transactions"). CSFB compared equity values in the Selected Transactions as
multiples of latest 12 months net income and enterprise values as multiples
of latest 12 months sales, EBITDA and EBIT. Applying a range of multiples
for the Selected Transactions to corresponding financial data of AMP
(utilizing AMP management's Case I estimates), both after and before giving
effect to certain potential operating cost savings anticipated to be
realized by AMP from its various cost reduction plans, indicated a selected
equity reference range for AMP of approximately $50.00 to $59.00 per share
(after giving effect to certain cost reductions) and approximately $42.00 to
$51.00 per share (before giving effect to certain cost reductions), as
compared to the equity value implied in the merger of approximately $51.00
per share, and exchange ratio reference ranges of 0.75x to 0.88x (assuming
cost reductions) and 0.63x to 0.76x (assuming no cost reductions), as
compared to the exchange ratio in the merger of 0.7612x, based on closing
stock prices of AMP common stock and Tyco common shares on November 19,
1998.
EXCHANGE RATIO ANALYSES. CSFB also conducted the following relative
analyses and compared the exchange ratio in the merger, based on closing
stock prices of AMP common stock and Tyco common shares on November 19,
1998, of 0.7612x with the exchange ratios implied by such analyses:
HISTORICAL STOCK TRADING EXCHANGE RATIO ANALYSIS. CSFB performed an
exchange ratio analysis comparing the average daily closing stock prices
for AMP and Tyco during the one-month, three-month, six-month and
one-year periods preceding November 18, 1998. This comparison indicated
exchange ratios ranging from 0.6502x to 0.7614x.
RELATIVE CONTRIBUTION EXCHANGE RATIO ANALYSIS. Based on AMP
management's Case I estimates and estimates of the management of Tyco,
CSFB performed an exchange ratio analysis comparing the relative
contributions of AMP and Tyco to the estimated net income, EBITDA and
EBIT of the combined company in calendar years 1998 and 1999. This
analysis yielded selected exchange ratios ranging from 0.77x to 0.96x.
PRO FORMA MERGER ANALYSIS. CSFB analyzed the potential pro forma effect
of the merger on Tyco's EPS for fiscal years ended September 1999 through
2001, based on AMP management's Case I estimates (adjusted to Tyco's
September fiscal year end) and estimates of the management of Tyco. Based on
an exchange ratio of 0.7612x, this analysis indicated that the proposed
merger would be accretive to Tyco's EPS in each of the years analyzed. The
actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS. In the course of preparing its opinion, CSFB also
reviewed, and considered, among other things, (i) historical market prices
for Tyco common shares and the relationship between movements in Tyco common
shares and movements in the S&P 500 Index, (ii) the pro forma capitalization
and shareholder profile of AMP and Tyco, and (iii) selected analysts'
reports on Tyco, including EPS and stock price estimates of such analysts.
MISCELLANEOUS. Pursuant to the terms of CSFB's engagement, AMP has
agreed to pay CSFB for its financial advisory services in connection with
the merger a transaction fee equal to 0.30% of the aggregate consideration
(including liabilities assumed) payable in the merger, as calculated and
payable upon the closing of the merger. AMP also has agreed to reimburse
CSFB for out-of-pocket expenses incurred by CSFB in performing its services,
including fees and expenses for legal counsel and any other advisor retained
by CSFB, and to indemnify CSFB and certain related persons and entities
against certain liabilities under the federal securities laws, arising out
of CSFB's engagement.
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CSFB and its affiliates have in the past provided financial services to AMP
and Tyco unrelated to the proposed merger, for which services CSFB and its
affiliates have received compensation. In the ordinary course of business, CSFB
and its affiliates may actively trade the debt and equity securities of both AMP
and Tyco for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF TYCO; REASONS OF TYCO FOR THE
MERGER
At a meeting of the Tyco Board held on November 20, 1998, after careful
consideration, the Tyco Board unanimously: (i) determined that the issuance of
Tyco common shares to be delivered to AMP's shareholders in the merger was fair
to and in the best interests of Tyco and its shareholders and (ii) recommended
that holders of Tyco common shares vote FOR approval of the issuance of Tyco
common shares to be delivered in connection with the merger.
In reaching its decision to approve, and to recommend that Tyco's
shareholders approve, the issuance of Tyco common shares to be delivered in
connection with the merger, Tyco's Board considered the following material
factors:
1. the terms and structure of the merger, including the provisions
governing the exchange ratio which effectively place a maximum limit on
the exchange ratio by allowing Tyco to terminate the merger agreement if
the exchange ratio would be greater than 0.8500;
2. the results of Tyco's due diligence investigation of AMP and other
information concerning the business, assets, capital structure, financial
performance and prospects of Tyco and AMP;
3. current and historical market prices and trading information with
respect to the Tyco common shares and the AMP common stock;
4. Tyco's corporate strategy of complementing its internal growth with
acquisitions that are likely to benefit from cost reductions and
synergies when combined with Tyco's existing operations and that are
expected to be accretive to earnings per share;
5. Tyco's history of growth through acquisitions, including its substantial
experience integrating acquired businesses with existing operations and
thereby achieving synergies and cost savings;
6. the expectation that the merger (before restructuring and similar
charges) would in fact be immediately accretive to Tyco's earnings per
share;
7. the combination of the product lines manufactured by AMP with
complementary products manufactured by Tyco, enabling Tyco to broaden
substantially the line of electrical and electronic products offered to
its customers;
8. the combination may provide Tyco with access to AMP's worldwide
distribution network for electrical interconnection products and devices
to complement Tyco's existing distribution channels for its electrical
and electronic component products;
9. the prospect of utilization of AMP as a platform for further growth in
the markets served by AMP;
10. AMP's implementation of its profit improvement plan and the belief of
Tyco's management that the plan can be enhanced and accelerated;
11. the belief of Tyco's management that there are other prospects for
reduction of AMP corporate costs, possible elimination of excess
facilities and potential cost reduction for purchased materials and
services;
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12. the difficulties in integrating an acquisition of the size of AMP and
the risks that anticipated cost savings and synergies, and the expected
accretive effect of the merger, might not be realized (see "Risk
Factors");
13. the preliminary, oral opinion of Merrill Lynch rendered on November 20,
1998 (which opinion was subsequently confirmed by delivery of a written
opinion on November 22, 1998) to the Tyco Board to the effect that, as of
the date of such opinion and based upon the assumptions made, matters
considered and limits of review set forth in its written opinion, the
consideration to be issued to the shareholders of AMP in the merger was
fair to Tyco from a financial point of view (see "Opinion of Tyco's
Financial Advisor");
14. the fact that the merger will generally be tax free to both Tyco and AMP
shareholders under the tax laws of the United States and other relevant
jurisdictions; and
15. the anticipated treatment of the merger as a pooling of interests for
financial accounting purposes.
This discussion of the information and factors considered and weight given
to such factors by Tyco's Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the merger, Tyco's Board did not find it practicable to and did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of Tyco's Board may
have given different weights to different factors.
THE TYCO BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE ISSUANCE OF
TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF TYCO AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER AND
THE MERGER AGREEMENT, AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF TYCO COMMON
SHARES VOTE FOR APPROVAL OF THE ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED
IN CONNECTION WITH THE MERGER.
OPINION OF TYCO'S FINANCIAL ADVISOR
GENERAL.
Merrill Lynch acted as financial advisor to Tyco in connection with the
merger. At the meeting of the Tyco Board held on November 20, 1998, Merrill
Lynch rendered its preliminary, oral opinion to the Tyco Board to the effect
that, as of such date, and based upon the assumptions made, matters considered
and limits of review set forth in Merrill Lynch's written opinion, the
consideration to be issued to the shareholders of AMP in the merger was fair to
Tyco from a financial point of view. Merrill Lynch subsequently confirmed its
preliminary, oral opinion by delivery of its written opinion dated November 22,
1998 (the "Merrill Lynch Opinion").
THE FULL TEXT OF THE MERRILL LYNCH OPINION IS INCLUDED IN ANNEX D TO THIS
JOINT PROXY STATEMENT/ PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
MERRILL LYNCH OPINION IS ADDRESSED TO THE TYCO BOARD AND DOES NOT ADDRESS THE
MERITS OF THE UNDERLYING DECISION OF TYCO TO ENGAGE IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF TYCO AS TO HOW SUCH HOLDER
SHOULD VOTE ON THE ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION
WITH THE MERGER OR THE OTHER MATTERS BEING PRESENTED TO A VOTE OF TYCO
SHAREHOLDERS. THE SUMMARY OF THE MERRILL LYNCH OPINION SET FORTH IN THIS JOINT
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE MERRILL LYNCH OPINION. HOLDERS OF TYCO COMMON SHARES ARE URGED TO,
AND SHOULD, READ THE MERRILL LYNCH OPINION IN ITS ENTIRETY FOR THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND
LIMITATIONS OF THE REVIEW UNDERTAKEN BY MERRILL LYNCH IN CONNECTION THEREWITH.
Merrill Lynch is an internationally recognized investment banking firm and,
as part of its investment banking business, is continually engaged in the
valuation of businesses and their securities in connection
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with mergers and acquisitions, underwritings, distributions of securities and
similar activities. Merrill Lynch was retained by the Tyco Board on the basis of
its qualifications, reputation and experience and its familiarity with Tyco and
its businesses.
Merrill Lynch did not express any opinion as to the prices at which Tyco
common shares would trade following the announcement or consummation of the
merger.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on, and on the information
made available to Merrill Lynch as of, the date of such opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the merger.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other things:
(1) reviewed certain publicly available business and financial information
relating to Tyco and AMP that Merrill Lynch deemed to be relevant; (2) reviewed
certain information, including financial forecasts, relating to the business,
earnings, cash flow, assets, liabilities and prospects of Tyco and AMP, as well
as the amount and timing of the cost savings and related expenses and synergies
expected to result from the merger (the "Expected Synergies"), furnished to
Merrill Lynch by Tyco and AMP; (3) conducted discussions with members of senior
management and representatives of Tyco and AMP concerning the matters described
in clauses (1) and (2) above, as well as their respective businesses and
prospects before and after giving effect to the merger and the Expected
Synergies; (4) reviewed the market prices and valuation multiples for shares of
AMP common stock and Tyco common shares and compared them with those of certain
publicly traded companies that Merrill Lynch deemed to be relevant; (5) reviewed
the results of operations of Tyco and AMP and compared them with those of
certain publicly traded companies that Merrill Lynch deemed to be relevant; (6)
compared the proposed financial terms of the merger with the financial terms of
certain other transactions that Merrill Lynch deemed to be relevant; (7)
participated in certain discussions and negotiations among representatives of
Tyco and AMP and their financial and legal advisors; (8) reviewed the potential
pro forma impact of the merger; (9) reviewed the merger agreement, the stock
option agreement and the Tyco guarantees; and (10) reviewed such other financial
studies and analyses and took into account such other matters as Merrill Lynch
deemed necessary, including Merrill Lynch's assessment of general economic,
market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available, and did not
assume any responsibility for independently verifying such information or
undertake an independent evaluation or appraisal of any of the assets or
liabilities of Tyco or AMP, and was not furnished with any such evaluation or
appraisal. In addition, Merrill Lynch did not assume any obligation to conduct
any physical inspection of the properties or facilities of Tyco or AMP. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with Merrill Lynch by Tyco or AMP, Merrill Lynch
assumed that such financial forecast information and the Expected Synergies had
been reasonably prepared and reflected the best currently available estimates
and judgment of the management of Tyco or AMP, as to the expected future
financial performance of Tyco or AMP, as the case may be, and the Expected
Synergies. Merrill Lynch also assumed that the merger would be accounted for as
a pooling of interests under generally accepted accounting principles and that
it would qualify as a tax-free reorganization for U.S. federal income tax
purposes.
SUMMARY OF MATERIAL ANALYSES. Set forth below is a brief summary of the
material analyses performed by Merrill Lynch in connection with its preparation
of the Merrill Lynch Opinion.
HISTORICAL TRADING ANALYSIS. Merrill Lynch reviewed the historical stock
market performance of AMP common stock and Tyco common shares. This analysis
indicated that the 52-week closing price of a share of AMP common stock ranged
between $28.625 and $45.750, with a closing price on November 20, 1998 of
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$45.125, as compared to the range of consideration implied in the merger of
$51.00 to $55.95 per share. This analysis also indicated that the 52-week
closing price of a Tyco common share ranged between $39.000 and $68.563, with a
closing price on November 20, 1998 of $65.063.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis of the projected after-tax unlevered free cash flows of AMP
(defined as operating cash flow available after working capital, capital
spending, tax and other operating requirements) for the period 1999 through 2003
based upon (i) projections provided by AMP management through 2001 and
extrapolated for 2002 and 2003 based on discussions with AMP and Tyco management
(the "AMP Plan"), and (ii) projections developed using 1999 and 2000 earnings
per share ("EPS") as estimated by First Call and publicly available equity
research on AMP (the "Street Case"). Utilizing such financial forecasts, Merrill
Lynch calculated a range of present values for AMP based upon the discounted
present value of the sum of (i) the projected stream of after-tax unlevered free
cash flows of AMP from 1999 through 2003 and (ii) the projected terminal value
of AMP in 2003 based upon a range of multiples of AMP's projected EBITDA in such
year. Applying discount rates ranging from 10.5% to 11.5% and terminal value
multiples of estimated EBITDA in 2003 ranging from 9.0x to 10.0x, Merrill Lynch
calculated implied equity values per share of AMP common stock, before giving
effect to the Expected Synergies, ranging from $53.50 to $60.75 based upon the
AMP Plan, and $47.75 to $54.50 based upon the Street Case. After giving effect
to the Expected Synergies, Merrill Lynch calculated implied equity values per
share of AMP common stock ranging from $72.50 to $79.75 based upon the AMP Plan,
and $66.75 to $73.50 based upon the Street Case, as compared to the range of
consideration implied in the merger of $51.00 to $55.95 per share.
SELECTED ACQUISITION TRANSACTIONS ANALYSIS. Using publicly available
information, Merrill Lynch reviewed the purchase prices and multiples paid in
selected mergers and acquisitions involving companies which Merrill Lynch deemed
relevant in evaluating the merger. Merrill Lynch reviewed the acquisition of
Berg Electronics Corp. by Framatome Connectors International S.A.; the
acquisition of Reliance Electric Company by Rockwell International Corporation;
the acquisition of CBS Corporation's Distribution and Control Business Unit by
Eaton Corporation; and the acquisition of Square D Company by Groupe Schneider
S.A. (collectively, the "Acquisition Comparables").
Merrill Lynch calculated the multiple of net offer values for the
Acquisition Comparables (calculated as the consideration offered for the common
equity (including the net cost of "in-the-money" options)) to the net income
("Net Income") of the acquired businesses for the 12 months preceding the
acquisition announcements ("LTM Period"). Merrill Lynch also calculated the
multiple of transaction values for the Acquisition Comparables (calculated as
the consideration offered for the common equity (including the net cost of
"in-the-money" options) plus liquidation value of preferred equity and the value
of debt and minority interests less cash and marketable securities) to the
EBITDA of the acquired businesses for the LTM Period. By applying multiples of
28.0x to 33.0x and 11.0x to 11.5x (which multiples were based on the foregoing
analysis), respectively, to AMP's Net Income and EBITDA for the LTM Period, both
before and after adjusting for the full twelve-month effect of certain operating
cost savings already realized by AMP, Merrill Lynch calculated implied equity
values per share of AMP common stock ranging from $45.75 to $64.00 and $48.00 to
$55.25, respectively, as compared to the range of consideration implied in the
merger of $51.00 to $55.95 per share.
SELECTED PUBLICLY-TRADED COMPARABLE COMPANIES ANALYSIS. Using publicly
available information, Merrill Lynch compared certain financial, operating and
stock market data for AMP with the following four publicly-traded companies in
the electrical and electronic connectors industry considered by Merrill Lynch to
be reasonably comparable to AMP for purposes of this analysis: Amphenol
Corporation, Methode Electronics, Inc., Molex Incorporated and Thomas & Betts
Corporation (the "AMP Public Comparables"). Merrill Lynch analyzed, among other
things, the market price per share of common stock of each of the AMP Public
Comparables and AMP as of November 20, 1998, as a multiple of 1999 calendar year
EPS as estimated by First Call. By applying multiples of 18.0x to 20.0x (which
multiples were based on the
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foregoing analysis) to AMP's estimated 1999 EPS based upon (i) the Street Case
and (ii) the AMP Plan, Merrill Lynch calculated implied equity values per share
of AMP common stock ranging from $40.00 to $44.50 and $43.75 to $48.50,
respectively, as compared to the range of consideration implied in the merger of
$51.00 to $55.95 per share.
Using publicly available information, Merrill Lynch also compared certain
financial, operating and stock market data for Tyco with the following six
publicly-traded manufacturing conglomerates considered by Merrill Lynch to be
reasonably comparable to Tyco for purposes of this analysis: AlliedSignal Inc.,
Dover Corporation, Emerson Electric Co., General Electric Company, Textron Inc.
and United Technologies Corporation (the "Tyco Public Comparables"). Merrill
Lynch analyzed, among other things, (i) the market price per share of common
stock of each of the Tyco Public Comparables and Tyco as of November 20, 1998,
as a multiple of 1999 calendar year EPS as estimated by First Call ("Calendar
1999 P/E") and (ii) Calendar 1999 P/E as a percent of projected long term EPS
growth plus current dividend yield ("Calendar 1999 P/E to Total Return"). This
analysis indicated Calendar 1999 P/E multiples for the Tyco Public Comparables
ranging from 15.8x to 29.1x, and Calendar 1999 P/E to Total Returns ranging from
96.4% to 190.0%. The Calendar 1999 P/E and Calendar 1999 P/E to Total Return for
Tyco were 22.4x and 110.9%, respectively.
PRO FORMA MERGER ANALYSIS. Merrill Lynch reviewed certain pro forma effects
of the merger, which included, among other things, the accretion to Tyco's
standalone EPS for 1999 through 2001 inclusive, incorporating the Expected
Synergies and utilizing financial forecasts for AMP based upon the AMP Plan
(adjusted to reflect a September year-end) and for Tyco as provided by Tyco
management. Merrill Lynch determined that, based upon exchange ratios of 0.7612
and 0.8500, the merger would be accretive to Tyco's EPS in each of the years
analyzed.
The information above summarizes the material analyses performed by Merrill
Lynch in connection with its opinion. This summary does not purport to be a
complete description of the analyses performed by Merrill Lynch in connection
with the rendering of its fairness opinion. The preparation of a fairness
opinion is a complex process and is not susceptible to partial analysis or
summary description. Merrill Lynch believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting part or all of the
above summary, without considering all factors and analyses, would create an
incomplete view of the process underlying the Merrill Lynch Opinion. In
addition, Merrill Lynch considered the results of every portion of its analysis
and did not assign relative weights to any portion of its analysis, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Merrill Lynch's view of the actual value of Tyco or
AMP, which may be significantly more or less favorable than as set forth herein.
The fact that any specific analysis has been referred to in the summary above is
not meant to indicate that such analysis was given more weight than any other
analyses.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of Tyco or AMP. The analysis
performed by Merrill Lynch is not necessarily indicative of actual values,
trading values or actual future results that might be achieved, all of which may
be significantly more or less favorable than suggested by such analysis. No
company in the AMP Public Comparables or Tyco Public Comparables is identical to
AMP or Tyco, as the case may be, and none of the Acquisition Comparables or
other business combinations utilized as a comparison is identical to the
transactions contemplated by the merger agreement. Accordingly, an analysis of
publicly traded comparable companies and comparable business combinations is not
mathematical; rather, such analysis involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies or the company, or transaction, and other factors that
could affect the public trading values of such comparable companies or company
to which they are being compared. In connection with its analyses, Merrill Lynch
utilized estimates and forecasts of future operating results and Estimated
Synergies provided by the respective managements of Tyco and AMP. Analyses based
upon forecasts of
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future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of Tyco and AMP, none of Merrill
Lynch, Tyco or AMP assumes responsibility if future results or actual values are
materially different from these forecasts or assumptions. Such analyses were
prepared solely as part of Merrill Lynch's analysis of the fairness to Tyco from
a financial point of view, of the consideration to be issued to the shareholders
of AMP in the merger, and were provided to the Tyco Board in connection with the
delivery of the Merrill Lynch Opinion. Merrill Lynch's analysis does not purport
to be an appraisal or to reflect the prices at which a company might actually be
sold or the prices at which any securities may be traded in the future. In
addition, as described above, the Merrill Lynch Opinion was one of many factors
taken into consideration by the Tyco Board in making its determination to
approve the merger. Consequently, the analysis described above should not be
viewed as determinative of the opinion of either the Tyco Board or management of
Tyco with respect to the value of AMP or a combination of Tyco with AMP or
whether either the Tyco Board or management of Tyco would have been willing to
agree to different merger consideration.
Pursuant to a letter agreement dated November 20, 1998, Tyco has agreed that
if, during the period Merrill Lynch is retained by Tyco or within 18 months
thereafter, (a) a merger or business combination whereby the business of AMP is
combined with Tyco is consummated or Tyco otherwise acquires a majority of the
capital stock of AMP or a substantial portion of its assets or revenues (such
combination or acquisition being referred to as an "Acquisition Transaction") or
(b) Tyco enters into an agreement that subsequently results in an Acquisition
Transaction, Tyco will pay Merrill Lynch a fee ranging from $12,000,000 to
$20,000,000, payable in cash upon the closing of such Acquisition Transaction.
If an Acquisition Transaction is not consummated and Tyco receives the
termination fees set forth in the merger agreement or otherwise, Tyco will pay
Merrill Lynch a fee of $10,000,000 in cash when such termination fees are
received. Tyco has also agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses, including, without limitation, reasonable attorneys'
fees and disbursements, and to indemnify Merrill Lynch and certain related
parties from and against certain liabilities, including certain liabilities
under the federal securities laws arising out of their engagement.
Merrill Lynch has, in the past, provided financial advisory and financing
services to Tyco and may continue to do so, and has received, and may receive,
fees for the rendering of such services. Merrill Lynch has advised Tyco that in
the ordinary course of its business it may actively trade shares of AMP common
stock and other securities of AMP, as well as Tyco common shares and other
securities of Tyco, for Merrill Lynch's own account and for the accounts of its
customers. Accordingly, Merrill Lynch may at any time hold a long or short
position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain AMP executive officers and certain members of the AMP
Board, in their capacities as such, may be deemed to have interests in the
merger that are in addition to or different from their interests as shareholders
of AMP generally. These include, among other things, provisions in the merger
agreement relating to indemnification and the acceleration and/or payout of
benefits under certain agreements and employee benefit plans. The AMP Board was
aware of these interests and considered them, among other matters, in approving
the merger agreement and the transactions contemplated thereby.
The merger agreement provides that Tyco (PA) will, and following the merger
will cause AMP to, assume, honor, maintain and perform in accordance with their
respective terms AMP's employee severance plan and all other employment and
severance agreements and arrangements with respect to employees, former
employees, directors and former directors of AMP, as amended to the date of the
merger agreement or as contemplated by the terms of the merger agreement,
including those that provide for payment or acceleration of benefits upon or in
connection with a change of control of AMP. The
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merger agreement provides, however, that there are no intended third party
beneficiaries who may enforce the merger agreement in this regard.
SEVERANCE AGREEMENTS. AMP has entered into severance agreements with 14 of
its current or former executive officers, including Messrs. Robert Ripp, James
E. Marley, William J. Hudson, Herbert M. Cole, Juergen W. Gromer and John E.
Gurski. Each of these severance agreements provides generally that, in the event
that the executive's employment with AMP is terminated either (i) by AMP other
than for Cause (as defined in the severance agreements) or (ii) by the executive
with Good Reason (as defined in the severance agreements), in either case within
two years following a change of control, AMP will pay to the executive the
severance payments, and will provide to the executive the severance benefits, as
follows:
(1) a lump sum cash payment in an amount equal to the product of one,
two or three times, as the case may be, the sum of
(i) such executive's highest annual base salary rate in effect during
the 12 months prior to termination ("Base Salary") plus;
(ii) the highest amount of annual cash incentive compensation earned
in respect of the 3 years prior to termination of employment or the
occurrence of a change of control, whichever is greater (the "Annual
Bonus");
(2) the continuation following the executive's termination of
employment, of all hospital, major medical, medical, dental and other
insurance or benefits in substantially the same manner and amount to which
such executive is entitled at the time of employment, at the sole cost of
AMP, until the later of
(i) one, two or three years following termination of employment
(depending on the multiplier used to calculate the severance benefits
described in clause (1) above) or
(ii) until the time at which the executive would have been
discontinued from such plans providing post-termination insurance or
benefits;
any such benefits are subject to reduction to the extent any comparable
benefits are actually received by the executive from a new employer without
cost to the executive; and
(3) immediate vesting of benefits under AMP's tax-qualified pension plan
(the "Pension Plan") and supplemental nonqualified defined benefit pension
plan (the "Pension Restoration Plan"), together with an additional pension
benefit derived from using the executive's Base Salary as the high
consecutive three-year compensation amount under the Pension Plan and from
using the executive's Base Salary and Annual Bonus as the high consecutive
three-year compensation amount under the Pension Restoration Plan (such
additional benefits to be paid in accordance with the terms of the plans).
The multiplier in effect with respect to paragraph (1) above for Messrs.
Ripp, Marley and Hudson is three; and for Messrs. Cole, Gromer and Gurski is
two. In connection with their elections to retire pursuant to AMP's Voluntary
Early Retirement Program, Messrs. Cole, Gurski and one additional executive
officer elected to relinquish their rights to receive the foregoing severance
payments and benefits, but otherwise retain their rights under their respective
severance agreements. It is presently estimated (based upon information
currently available) that if an executive's employment is terminated immediately
following the merger under circumstances entitling the executive to severance
thereunder, the executives will be entitled to a lump sum cash severance payment
(excluding the continuation of welfare type benefits, the vesting of equity
awards, the pension benefits described above and any additional amounts (as
discussed below)) approximately in the following amounts: Mr. Ripp, $ , Mr.
Marley, $ , Mr. Hudson, $ , Mr. Cole, $ , Mr. Gromer, $ ,
Mr. Gurski, $ ; and all other executive officers as a group, $ .
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Each of the severance agreements also provides that, upon the occurrence of
a change of control:
(1) all outstanding bonus units, whether granted under AMP's 1993 Long
Term Equity Incentive Plan or Bonus Plan (Stock Plus Cash), held by the
executive (and including any supplemental cash bonus related to such bonus
units) will immediately be vested and payable, using a Fair Market Value
based upon
(i) the highest price paid for a share of AMP common stock in the
change of control transaction, if applicable, or
(ii) the highest trading price per share of AMP common stock during
the 30-day period immediately preceding a change of control.
Such bonus units will, in accordance with their terms and the terms of
the severance agreements, be settled in Tyco common shares, as more
fully described under "Treatment of AMP Equity Based Awards--Bonus
Units;"
(2) all outstanding AMP stock options pursuant to AMP's 1993 Long Term
Equity Incentive Plan held by the executive will become immediately vested
and exercisable for the remainder of their respective terms;
(3) all outstanding Performance Restricted Shares (as defined under the
AMP 1993 Long Term Equity Incentive Plan) held by the executive, together
with phantom shares credited to the executive's Dividend Reinvestment
Account, will become immediately vested and payable in Tyco common shares at
200% of the original award;
(4) all unvested restricted shares of AMP common stock held by the
executive that were not granted pursuant to the 1993 Long Term Equity
Incentive Plan will be cancelled, and Tyco will be required to issue a
number of unrestricted Tyco common shares appropriately adjusted to reflect
such transaction, such issuance to take place on the date or dates such
shares would otherwise have become vested under the terms of such agreement;
(5) the executive's interest in matching accounts under the AMP Deferred
Compensation Plan will become immediately vested; and
(6) if the executive is participating in AMP's split dollar life
insurance program, AMP is obligated to deposit in an irrevocable grantor
trust (which AMP has previously done) an amount sufficient to pay AMP's
premiums for the period ending on the policy anniversary following the
executive's 65th birthday or the 15th anniversary of the policy, whichever
is later.
In addition, the severance agreements provide that AMP is obligated to pay
an additional amount sufficient to make such executive whole with respect to the
excise tax imposed by Section 4999 of the Internal Revenue Code and any taxes
imposed on such additional amounts. Consummation of the merger will constitute a
change of control for purposes of the severance agreements.
AMP EQUITY-BASED INCENTIVE AWARDS. The conversion of AMP stock options and
other equity-based awards into Tyco stock options and other equity based awards
of Tyco pursuant to the merger agreement is described below in "Treatment of AMP
Equity Based Awards." Pursuant to the terms of the 1993 Long Term Equity
Incentive Plan, upon consummation of the merger, all bonus units, stock options
and performance restricted shares granted under such plan will become
immediately vested and exercisable and/or payable. The Bonus Plan (Stock Plus
Cash) does not provide for change of control acceleration, but the one remaining
grant of bonus units thereunder is held by Mr. Hudson, who is party to a
severance agreement, pursuant to which such award will become fully vested and
payable as of the consummation of the merger. AMP's Stock Option Plan for
Outside Directors provides that each AMP stock option granted to a director of
AMP under such plan becomes fully exercisable upon the occurrence of a change of
control of AMP (as defined in such plan). Consummation of the merger will
constitute a change of control of
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AMP for purposes of the 1993 Long Term Equity Incentive Plan and the Stock
Option Plan for Outside Directors.
AMP's executive officers hold, as of the date hereof, unvested AMP stock
options in the following aggregate amounts and at the following weighted average
per share exercise prices: Mr. Ripp, shares at $ ; Mr. Marley, shares
at $ ; Mr. Hudson, shares at $ ; Mr. Cole, shares at $ ; Mr.
Gromer, shares at $ ; Mr. Gurski, shares at $ ; and AMP's other
executive officers as a group, shares at $ . AMP's executive officers
hold, as of the date hereof, the following number of Performance Restricted
Shares: (including phantom shares credited to their Dividend Reinvestment
Accounts): Mr. Ripp, shares; Mr. Marley, shares; Mr. Hudson, shares;
Mr. Cole, shares; Mr. Gromer, shares; Mr. Gurski, shares; and
AMP's other executive officers as a group, shares. The following executive
officers of AMP hold, as of the date hereof, awards of restricted shares of AMP
common stock pursuant to individual agreements entered into with AMP but not
granted under an AMP incentive plan: Mr. Ripp, 49,000 shares; and AMP's other
executive officers as a group, 14,000 shares. AMP's executive officers hold, as
of the date hereof, awards of the following number of bonus units at the
following weighted average per share Designated Values (as defined under the
1993 Long Term Equity Incentive Plan and the Bonus Plan (Stock Plus Cash): Mr.
Ripp, units at $ ; Mr. Marley, units at $ ; Mr. Hudson, units
at $ ; Mr. Cole, units at $ ; Mr. Gromer, units at $ ; Mr.
Gurski, units at $ ; and AMP's other executive officers as a group,
units at $ .
SUPPLEMENTAL RETIREMENT PLANS. AMP's Supplemental Executive Pension Plan
and Pension Restoration Plan are non-qualified defined benefit pension plans
that provide benefits in excess of limitations imposed by the Code upon benefits
payable under tax-qualified plans. The terms of each such Plan provide that,
upon a change of control, all accrued rights of the participants will become
fully vested. Consummation of the merger will constitute a change of control of
AMP for purposes of the plans described above.
DEFERRAL PLANS. The terms of AMP's Deferred Compensation Plan provide for
deferral of a portion of a participant's salary and bonus and matching
contributions provided by AMP which are based on the matching percentage in
effect from time to time under AMP's Employee Savings and Thrift Plan. Deferrals
may be credited to an account earning an Investment Return Rate (as defined in
such Plan) equal to a fixed return or an equivalent investment in AMP common
stock (including dividend reinvestment). Upon a change of control of AMP,
matching amounts under the Deferred Compensation Plan become fully vested. The
terms of AMP's Deferred Compensation Plan for Non-Employee Directors provide for
the deferral of a director participant's fees. Deferrals may be credited to an
account earning an Investment Return Rate (as defined in such Plan) equal to a
fixed return or an equivalent investment in AMP common stock (including payments
of dividends). Upon a change of control of AMP, accounts under the Deferred
Compensation Plan for Non-Employee Directors become immediately due and payable
to the participants. The terms of AMP's Deferred Stock Accumulation Plan for
Outside Directors provides for an annual grant of 300 phantom shares of AMP
common stock credited to the participant's account (subject to an overall
limitation of ten 300-share allocations). Accounts under such Plan vest on the
earlier to occur of the participant's fifth anniversary of continuous service on
AMP's board of directors, the participant's 72nd birthday or the date of the
participant's death while serving on AMP's board of directors. In the event of a
change of control of AMP followed by cessation of a participant's service, the
entire balance of such participant's account becomes immediately due and payable
in a single lump sum. In lieu of participating in the Deferred Stock
Accumulation Plan for Outside Directors, one AMP director continued to
participate in the AMP Incorporated Retirement Plan for Outside Directors. Under
this plan, upon the participant's cessation of service following a change of
control, the participant becomes vested in a pension benefit for life equal to
80% of the current base annual retainer payable to AMP directors. Consummation
of the merger will constitute a change of control of AMP for purposes of the
plans described above.
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DIRECTOR APPOINTMENT. Tyco (PA) has agreed to use its best efforts, subject
to the exercise of the Tyco Board's fiduciary duties, to have the Tyco Board
propose at the Tyco special general meeting that the Tyco Board be increased
from eleven to twelve members; nominate Robert Ripp, Chairman and Chief
Executive Officer of AMP, to fill the newly created vacancy; and recommend to
Tyco's shareholders that they elect Mr. Ripp to the Tyco Board.
EMPLOYMENT OF ROBERT RIPP. If the merger is consummated, Mr. Ripp will serve
in the capacity as President of AMP reporting to L. Dennis Kozlowski, Tyco's
Chairman, President and Chief Executive Officer. As President of AMP, Mr. Ripp
will be eligible to receive, among other things, the following compensation and
benefits: annual base salary of $1,000,000; a grant, effective as of the
consummation of the merger, of 1,000,000 options to purchase Tyco common shares,
which will vest pro rata over three years, and will generally be subject to the
terms and conditions of the Tyco International Ltd. Long Term Incentive Plan
(provided that in the event of Mr. Ripp's termination of employment, any vested
options will remain outstanding for the remainder of their full 10-year term);
70,000 restricted Tyco common shares which will vest over two years (provided
certain performance-based criteria are achieved) or upon certain earlier
terminations of Mr. Ripp's employment; and continuation of Mr. Ripp's
nonqualified retirement benefits. Mr. Ripp will also be eligible for annual
bonus payments determined on a basis consistent with the determination of
bonuses for other Tyco executives and will be entitled to other benefits no less
favorable than those provided to other Tyco executives. During the two-year
period following the merger, if Mr. Ripp's employment is terminated under
certain circumstances, he will be entitled to receive certain payments and
benefits, including three years of severance pay based on the sum of his annual
base salary in effect at the time of the merger plus the highest annual cash
bonus earned by Mr. Ripp in the three years preceding the merger, as well as the
value of enhanced pension benefits based upon his compensation with AMP (whether
before or after the merger). The enhanced pension benefits will be reduced,
however, to reflect the value of certain amounts previously paid or awarded to
Mr. Ripp. In addition, Mr. Ripp will be entitled to an additional payment to
make him whole for any excise taxes that may be imposed under section 4999 of
the U.S. Internal Revenue Code of 1986, as amended, with respect to any payments
and benefits provided to Mr. Ripp by Tyco or AMP. Mr. Ripp's employment
arrangements will contain certain other elements, which are currently being
finalized by the parties.
CERTAIN U.S. FEDERAL INCOME TAX AND BERMUDA TAX CONSEQUENCES
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences of the exchange of AMP common stock for Tyco common shares in
the merger and the ownership of Tyco common shares. The discussion which follows
is based on the U.S. Internal Revenue Code, Treasury Regulations promulgated
thereunder, administrative rulings and pronouncements and judicial decisions as
of the date hereof, all of which are subject to change, possibly with
retroactive effect.
The discussion below is for general information only and, except where
specifically noted, does not address the effects of any state, local or
non-United States tax laws. In addition, the discussion below relates to persons
who hold AMP common stock and will hold Tyco common shares as capital assets.
The tax treatment of an AMP shareholder may vary depending upon such
shareholder's particular situation, and certain shareholders (including, for
example, insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, and individuals who received AMP common stock pursuant to the
exercise of employee stock options or otherwise as compensation) may be subject
to special rules not discussed below. In addition, this discussion does not
address the tax consequences to any AMP shareholder who will own 5% or more of
either the total voting power or the total value of the outstanding Tyco common
shares after the merger (determined after there is taken into account ownership
under the applicable attribution rules of the U.S. Internal Revenue Code) ("5%
transferee shareholders") or non-U.S. Holders (defined below) who have held more
than 5% of the AMP common stock at any time within the five-year period ending
at the consummation of the merger.
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As used in this section, a "U.S. Holder" means a holder of AMP common stock
who exchanges AMP common stock for Tyco common shares and who is, for U.S.
federal income tax purposes:
- a citizen or resident of the U.S.;
- a corporation, partnership or other entity (other than a trust) created or
organized in or under the laws of the U.S. or any political subdivision
thereof;
- an estate whose income is subject to U.S. federal income tax regardless of
its source; or
- a trust if, in general, a court within the U.S. is able to exercise
primary supervision over its administration and one or more U.S. persons
have authority to control all of its substantial decisions.
As used in this section, a non-U.S. Holder is a holder of AMP common stock
who exchanges AMP common stock for Tyco common shares and who is not a U.S.
Holder.
1. CONSEQUENCES OF THE MERGER.
Consummation of the merger is conditioned upon the receipt by Tyco (PA) of
an opinion from PricewaterhouseCoopers LLP, and by AMP of an opinion from
Skadden, Arps, Slate, Meagher & Flom LLP, each to the effect that (i) the merger
will constitute a reorganization within the meaning of Section 368 of the U.S.
Internal Revenue Code, and (ii) the transfer of AMP common stock by AMP
shareholders pursuant to the merger, other than AMP shareholders who will be "5%
transferee shareholders" within the meaning of U.S. Treasury Regulation Section
1.367(a)-3(c)(5)(ii), will qualify for an exception from gain or loss
recognition under U.S. Treasury Regulation Section 1.367(a)-3. Such opinions
will be based on facts existing as of the consummation of the merger and on
certain representations as to factual matters made by Tyco (PA), Tyco and AMP.
Such representations, if incorrect in certain material respects, could
jeopardize the conclusions reached in the opinions. Neither Tyco (PA), Tyco nor
AMP is currently aware of any facts or circumstances which would cause any such
representations to be untrue or incorrect in any material respect. Such opinions
are not binding on the Internal Revenue Service or the courts.
Based on the opinions discussed above, the material U.S. federal income tax
consequences that will result from the merger are as follows:
a. An AMP shareholder will not recognize any income, gain or loss as a
result of the receipt of Tyco common shares in exchange for AMP common stock
pursuant to the merger, except for cash received in lieu of a fractional Tyco
common share.
b. The tax basis to an AMP shareholder of the Tyco common shares received
in exchange for AMP common stock pursuant to the merger, including any
fractional share interest in Tyco common shares for which cash is received, will
equal such AMP shareholder's tax basis in the AMP common stock surrendered in
exchange therefor.
c. The holding period of an AMP shareholder for the Tyco common shares
received pursuant to the merger will include the holding period of the AMP
common stock surrendered in exchange therefor.
d. An AMP shareholder who is a U.S. Holder and who receives cash in lieu of
a fractional share interest in Tyco common shares pursuant to the merger will be
treated as having received such cash in exchange for such fractional share
interest and generally will recognize capital gain or loss on such deemed
exchange in an amount equal to the difference between the amount of cash
received and the basis of the AMP stock allocable to such fractional share.
Non-U.S. Holders who receive cash in lieu of a fractional share interest in Tyco
common shares will not be subject to United States income or withholding tax
except as set forth in paragraph 3.b below.
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e. No income, gain or loss will be recognized by Tyco, Tyco (PA), AMP or
Merger Sub as a result of the transfer to AMP shareholders of the Tyco common
shares provided by Tyco to Tyco (PA) pursuant to the merger.
2. TRANSFER TAXES
In the event that any state or local transfer taxes are imposed on AMP
shareholders as a result of the merger, AMP will pay all such transfer taxes, if
any, directly to state and local taxing authorities on behalf of all AMP
shareholders. Any such payments by AMP made on behalf of the AMP shareholders
may result in dividend income to each AMP shareholder on behalf of whom such
payment is made. The amount of such dividend income attributable to each share
of AMP common stock cannot be calculated at this time, but is not expected to be
material.
3. OWNERSHIP OF TYCO COMMON SHARES
a. U.S. Holders
DISTRIBUTIONS. Distributions made to U.S. Holders of Tyco common shares
will be treated as dividends and taxable as ordinary income to the extent that
such distributions are made out of Tyco's current or accumulated earnings and
profits as determined for U.S. federal income tax purposes (whether or not such
distributions are treated as a return of capital for non-tax purposes), with any
excess being treated as a tax-free return of capital which reduces such U.S.
Holder's tax basis in the Tyco common shares to the extent thereof, and
thereafter as capital gain from the sale or exchange of property. Amounts
taxable as dividends generally will be treated as foreign source "passive"
income for foreign tax credit purposes. The amount of any distribution of
property other than cash will be the fair market value of such property on the
date of distribution by Tyco. U.S. Holders of Tyco common shares that are
corporations generally will not be entitled to claim a dividends received
deduction with respect to distributions by Tyco, because Tyco is a foreign
corporation.
DISPOSITION. Gain or loss realized by a U.S. Holder of Tyco common shares
on the sale, exchange or other taxable disposition of Tyco common shares will be
subject to U.S. federal income taxation as capital gain or loss (which will be
long term capital gain or loss if the Tyco common shares have a holding period
of more than one year) in an amount equal to the difference between the amount
realized on such sale, exchange or other disposition and such U.S. Holder's
adjusted tax basis in the Tyco common shares surrendered. Any gain so realized
generally will be United States source income, but any loss so realized may be
foreign source.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Certain U.S. Holders may be
subject to information reporting with respect to payments of dividends on, and
the proceeds of the disposition of, Tyco common shares. U.S. Holders who are
subject to information reporting and who do not provide appropriate information
when requested may be subject to backup withholding at a 31% rate. U.S. Holders
should consult their tax advisors regarding the imposition of backup withholding
and information reporting with respect to distributions on, and dispositions of,
Tyco common shares.
b. Non-U.S. Holders
DISTRIBUTIONS AND DISPOSITION. In general (and subject to the discussion
below under "INFORMATION REPORTING AND BACKUP WITHHOLDING"), a non-U.S. Holder
will not be subject to U.S. federal income or withholding tax on income from
distributions with respect to, or gain upon the disposition of, Tyco common
shares, unless either (i) the income or gain is effectively connected with the
conduct by the non-U.S. Holder of a trade or business in the U.S. or (ii) in the
case of gain realized by an individual non-U.S. Holder upon a disposition of
Tyco common shares, the non-U.S. Holder is present in the U.S. for 183 days or
more in the taxable year of the sale and certain other conditions are met.
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In the event that clause (i) in the preceding paragraph applies, such income
or gain generally will be subject to regular U.S. income tax in the same manner
as if such income or gain, as the case may be, were realized by a U.S. Holder.
In addition, if such non-U.S. Holder is a non-U.S. corporation, such income or
gain may be subject to a branch profits tax at a rate of 30% (or such lower rate
provided by an applicable income tax treaty). In the event that clause (ii) (but
not clause (i)) in the preceding paragraph applies, the gain generally will be
subject to tax at a rate of 30% (or such lower rate provided by an applicable
income tax treaty).
INFORMATION REPORTING AND BACKUP WITHHOLDING. If the Tyco common shares are
held by a non-U.S. Holder through a non-U.S. (and non-U.S. related) broker or
financial institution, information reporting and backup withholding generally
would not be required with respect to distributions on and dispositions of Tyco
common shares. Information reporting, and possibly backup withholding, may apply
if the Tyco common shares are held by a non-U.S. Holder through a U.S. (or U.S.
related) broker or financial institution and the non-U.S.Holder fails to provide
appropriate information. Non-U.S. holders should consult their tax advisors
regarding the imposition of backup withholding and information reporting with
respect to distributions on and dispositions of Tyco common shares.
BERMUDA TAX CONSEQUENCES
In the opinion of Appleby, Spurling & Kempe, attorneys in Bermuda for Tyco,
there will be no Bermuda income, corporation or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty or inheritance tax payable
in respect of an exchange of Tyco common shares for AMP common stock pursuant to
the merger. In addition, as of the date hereof, there is no Bermuda income,
corporation or profits tax, withholding tax, capital gains tax, capital transfer
tax, estate duty or inheritance tax payable in respect of capital gains realized
on a disposition of Tyco common shares or in respect of distributions by Tyco
with respect to Tyco common shares. Furthermore, Tyco has received from the
Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection
Act of 1966, as amended, an undertaking that, in the event of there being
enacted in Bermuda any legislation imposing any tax computed on profits or
income, including any dividend or capital gains withholding tax, or computed on
any capital assets, gain or appreciation or any tax in the nature of an estate
or inheritance tax or duty, the imposition of such tax shall not be applicable
to Tyco or any of its operations, nor to its common shares nor to obligations of
Tyco until the year 2016. This undertaking applies to Tyco common shares. It
does not, however, prevent the application of Bermuda taxes to persons
ordinarily resident in Bermuda.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A
DECISION WHETHER TO VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. AMP SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING
THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX CONSEQUENCES
OF THE MERGER TO THEM.
ANTICIPATED ACCOUNTING TREATMENT
The merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of Tyco and AMP will be carried forward to the combined
company at their recorded amounts, subject to any adjustments required to
conform the accounting policies of the companies; income of the combined
corporation will include income of Tyco and AMP for the entire fiscal year in
which the merger occurs; and the reported income of the separate corporations
for prior periods will be combined and restated as income of the combined
company.
Each of Tyco (PA) and AMP has agreed to use its reasonable best efforts to
cause its "affiliates" (as defined for purposes of the rules and regulations of
the SEC relating to pooling of interests accounting
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treatment for merger transactions) to agree in writing that they will comply
with the applicable restrictions on the sale of AMP common stock and Tyco common
shares contained in such rules and regulations.
The merger agreement provides that a condition to the consummation of the
merger is the receipt by Tyco (PA) of an opinion from PricewaterhouseCoopers,
independent public accountants of Tyco, regarding the qualification of the
merger as a pooling of interests for accounting purposes.
CERTAIN LEGAL MATTERS
Tyco (PA) and AMP have given each other a commitment to use their reasonable
best efforts to take whatever actions are required to obtain necessary
regulatory approvals.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits Tyco (PA) and AMP from completing the merger until certain information
and materials have been furnished to the Federal Trade Commission and the
Antitrust Division of the U.S. Department of Justice and a required waiting
period has expired. Even after a waiting period expires or terminates, the FTC
or the Antitrust Division could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking
divestiture of substantial assets of Tyco or AMP. The merger is also subject to
notification to, and the approval by, the Commission of the European Communities
under Council Regulation (EEC) No. 4064/89 of 21 December, 1989 on the control
of concentrations, as amended. Neither Tyco nor AMP believes that consummation
of the merger will result in a violation of any applicable antitrust laws.
However, there is no assurance that a challenge to the merger on antitrust
grounds will not be made or, if such a challenge is made, of the result.
Tyco and AMP do not believe that any additional material governmental
filings in the United States or the European Economic Area, other than the
Articles of Merger, are required with respect to the merger. In addition to the
United States and the European Economic Area, Tyco and AMP conduct operations in
a number of countries where regulatory filings or approvals may be required in
connection with the consummation of the merger. Tyco and AMP believe that all
such material filings and approvals have been made or obtained, or will be made
or obtained, as the case may be.
U.S. FEDERAL SECURITIES LAW CONSEQUENCES
Recipients of Tyco common shares issued in connection with the merger can
freely transfer such shares under the U.S. Securities Act of 1933, as amended,
except that persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of AMP prior to the merger may only sell shares they
receive in the merger in transactions permitted by the resale provisions of Rule
145 under the Securities Act, or as otherwise permitted under the Securities
Act. Individuals or entities that control, are controlled by, or are under
common control with, AMP, including directors and certain officers of AMP, are
typically considered to be affiliates.
In general, under Rule 145, for one year following the consummation of the
merger, an AMP affiliate (together with certain related persons) could sell
publicly Tyco common shares acquired in connection with the merger only through
unsolicited "broker transactions" or in transactions directly with a "market
maker," as such terms are defined in Rule 144 under the Securities Act.
Additionally, the number of shares an affiliate may sell (together with certain
related persons and certain persons acting in concert) within any three-month
period for purposes of Rule 145 may not exceed the greater of 1% of the
outstanding Tyco common shares or the average weekly trading volume of such
stock during the four calendar weeks preceding such sale. An affiliate could
only avail himself of Rule 145, however, if Tyco remained current with its
informational filings with the SEC under the Exchange Act. After the end of one
year from the consummation of the merger, an AMP affiliate may sell Tyco common
shares received in the merger without such manner of sale or volume limitations
provided that Tyco was current with its Exchange Act informational filings and
such affiliate was not then an affiliate of Tyco. Two years after the
consummation of the merger, an affiliate of AMP may sell such Tyco common shares
without any restrictions so long as such affiliate had not been an affiliate of
Tyco for at least three months prior thereto.
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DIVIDENDS
Although the payment of dividends by Tyco in the future will depend on
business conditions, Tyco's financial condition and earnings and other factors,
Tyco expects to declare regularly scheduled dividends consistent with the
practices of Tyco prior to the merger and of Former Tyco prior to Former Tyco's
merger with ADT. The merger agreement restricts each of AMP and Tyco from
declaring, setting aside, making or paying any dividend or other distribution in
respect of its capital stock, other than its regularly scheduled dividend
consistent with past practices, during the period from the date of the merger
agreement until the earlier of the termination of the merger agreement or the
consummation of the merger.
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THE EXCHANGE RATIO AND ITS EFFECT ON AMP SECURITIES AND
EQUITY BASED BENEFIT PLANS
GENERAL
As a result of the merger, all outstanding shares of AMP common stock will
be converted into Tyco common shares in accordance with the terms of the merger
agreement, and all outstanding equity based awards under AMP's benefit plans
will be assumed by Tyco and appropriately adjusted to reflect the merger in
accordance with the merger agreement. The following is a summary of these
effects of the merger and is qualified in its entirety by the full description
set forth in Section 1.06 of the merger agreement attached as Annex A to this
Joint Proxy Statement/Prospectus.
THE EXCHANGE RATIO
The exchange ratio is the fraction of a Tyco common share that AMP
shareholders will receive in the merger for each share of AMP common stock. It
has been designed to give AMP shareholders between $51.00 and $55.95 in value of
Tyco common shares for each of their AMP shares. Because the market value of a
Tyco common share will fluctuate for any number of reasons, including those
specific to Tyco and those that influence the trading prices of equity
securities generally, Tyco (PA) and AMP have agreed to calculate the exchange
ratio based upon the Average Stock Price of a Tyco common share over the 15
trading day period ending four trading days before the date of the AMP special
meeting. Assuming the AMP special meeting is held on January , 1999, the
period over which the Average Stock Price is calculated will be through
. The actual market value of the Tyco common shares received by AMP
shareholders when the merger is consummated may be higher or lower than the
value calculated based upon the exchange ratio and the Average Stock Price of
Tyco common shares. Shareholders may call toll free from the United States
1-888-750-5835 at any time after for current information on the
15 trading day weighted average price of Tyco common shares and the exchange
ratio based upon such average. After , 1999 (assuming the meeting is
held on January , 1999), shareholders may call this number for the actual
Average Stock Price of a Tyco common share and the actual exchange ratio.
The following summarizes how the exchange ratio will be determined. You can
find below a table that sets forth the applicable exchange ratios, illustrative
values of Tyco common shares to be received by AMP shareholders and the
percentage of the outstanding Tyco common shares that will be owned by the
former AMP shareholders following the merger, all based upon various
illustrative values of the Average Stock Price.
- If the Average Stock Price is equal to or greater than $67.00 but less
than or equal to $73.50, the exchange ratio will be 0.7612 Tyco common
shares for each share of AMP common stock, corresponding to a value of
between $51.00 (0.7612 X $67.00) and $55.95 (0.7612 X $73.50).
- If the Average Stock Price is greater than $73.50, the exchange ratio will
be reduced, so that the product of the exchange ratio and the Average
Stock Price is $55.95 (i.e., AMP shareholders will receive $55.95 in value
(based upon the Average Stock Price) of Tyco common shares for each share
of AMP common stock).
- If the Average Stock Price is equal to or greater than $60.00 but less
than $67.00, the exchange ratio will be increased, so that the product of
the exchange ratio and the Average Stock Price is $51.00 (i.e., AMP
shareholders will receive $51.00 in value (based upon the Average Stock
Price) of Tyco common shares for each share of AMP common stock).
- If the Average Stock Price is less than $60.00, the exchange ratio will be
correspondingly increased, so that the product of the exchange ratio and
the Average Stock Price is $51.00 (i.e., AMP shareholders will receive
$51.00 in value (based upon the Average Stock Price) of Tyco common shares
for each share of AMP common stock). In this case, Tyco may call off the
merger prior to the time of the AMP special meeting, unless on or before
the second trading day prior to the date of the AMP special meeting, AMP
has agreed to an exchange ratio equal to 0.8500. If AMP agrees to fix the
exchange ratio at 0.8500, then Tyco will not have the right to call off
the merger and the exchange ratio will be 0.8500. In this case AMP
shareholders will receive Tyco shares with a value (based on the Average
Stock Price) of less than $51.00.
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FRACTIONAL SHARES
In the merger, AMP shareholders will be entitled to receive only whole
numbers of Tyco common shares for their shares of AMP common stock. If applying
the exchange ratio would entitle a shareholder to receive a fraction of a Tyco
common share, such shareholder will be paid cash (without interest) in an amount
equal to the fraction of a Tyco common share that he or she is entitled
multiplied by the closing price of a Tyco common share on the date of the
consummation of the merger. FOR EXAMPLE, ASSUMING AN EXCHANGE RATIO OF AND
THAT THE CLOSING PRICE FOR A TYCO COMMON SHARE ON THE LAST TRADING DAY PRIOR TO
THE CONSUMMATION OF THE MERGER IS $ , AN AMP SHAREHOLDER THAT OWNED 100
SHARES OF AMP COMMON STOCK IMMEDIATELY BEFORE THE MERGER WILL OWN TYCO COMMON
SHARES IMMEDIATELY AFTER THE MERGER AND RECEIVE A CHECK FOR $ .
TREATMENT OF AMP EQUITY-BASED AWARDS
The merger agreement provides that outstanding awards under AMP's 1993 Long
Term Equity Incentive Plan, Bonus Plan (Stock Plus Cash), Stock Option Plan for
Outside Directors, Deferred Compensation Plan, Deferred Compensation for
Non-Employee Directors Plan, Deferred Stock Accumulation Plan for Outside
Directors and any other individual agreement evidencing an equity-based
incentive award will be assumed by Tyco and appropriately adjusted to reflect
the conversion of the AMP common stock into Tyco common shares based on the
exchange ratio. The following summarizes the effect of the merger on these
awards.
STOCK OPTIONS. Each AMP stock option outstanding at the time the merger is
consummated will constitute an option to acquire the number of Tyco common
shares (rounded to the nearest whole Tyco common share) as the holder of such
stock option would have been entitled to receive pursuant to the merger had such
holder exercised his or her AMP stock option in full immediately prior to the
consummation of the merger. The per Tyco common share exercise price of these
options after the merger will be equal to (x) the aggregate exercise price for
the shares of AMP common stock purchasable pursuant to such AMP stock option
immediately before the merger divided by (y) the number of Tyco common shares
deemed purchasable pursuant to such option after the merger. FOR EXAMPLE,
ASSUMING AN EXCHANGE RATIO OF 0.7612, IF SOMEONE OWNS AN OPTION TO PURCHASE 100
SHARES OF AMP COMMON STOCK AT AN EXERCISE PRICE OF $30.00 PER SHARE, AFTER THE
MERGER THAT PERSON WILL OWN AN OPTION TO PURCHASE 76 TYCO COMMON SHARES AT A PER
SHARE EXERCISE PRICE OF $39.47.
The other terms of each AMP stock option, and the plans under which they
were issued, will continue to apply in accordance with their terms, including,
if so provided, the acceleration of vesting of such stock options as a result of
the merger. As soon as practicable after the merger is consummated, Tyco will
deliver to all holders of an outstanding AMP stock options an appropriate notice
which will explain how their stock options are affected by the merger.
RESTRICTED STOCK AWARDS/DIVIDEND REINVESTMENT ACCOUNT. In general,
restricted shares of AMP common stock outstanding before the merger, and in the
case of Performance Restricted Shares awarded under AMP's 1993 Long Term Equity
Incentive Plan, the related phantom shares credited to the Dividend Reinvestment
Account of the awardee, will, as a result of the merger, be converted into Tyco
common shares in accordance with the exchange ratio. The other terms of the
restricted stock awards, and their governing plans or agreements (including, as
applicable, any severance agreement in effect with an AMP executive), will
continue to apply in accordance with their terms, including, if so provided, the
acceleration of vesting of, or increase in the number of, such restricted shares
as a result of the merger. FOR EXAMPLE, ASSUMING AN EXCHANGE RATIO OF 0.7612, IF
SOMEONE OWNS [ ]RESTRICTED SHARES OF AMP COMMON STOCK AND [ ] PHANTOM
SHARES OF AMP COMMON STOCK ARE CREDITED TO HIS OR HER DIVIDEND REINVESTMENT
ACCOUNT, AFTER THE MERGER THAT PERSON WILL OWN TYCO COMMON SHARES AND WILL
RECEIVE CASH IN LIEU OF ANY FRACTIONAL SHARES.
PHANTOM SHARES. Upon consummation of the merger, phantom shares of AMP
common stock credited to a participant's account under AMP's Deferred
Compensation Plan, Deferred Compensation Plan for Non-Employee Directors and
Deferred Stock Accumulation Plan for Outside Directors, in accordance with the
terms of the applicable plan, will be adjusted by multiplying such number of
phantom shares by the exchange ratio. These accounts will otherwise be subject
to the terms of such plans. FOR
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EXAMPLE, USING AN EXCHANGE RATIO OF 0.7612, IF AN ACCOUNT UNDER THESE PLANS HAS
BEEN CREDITED WITH 100 PHANTOM SHARES OF AMP COMMON STOCK, AFTER THE MERGER THE
ACCOUNT WILL BE CREDITED WITH 76.12 PHANTOM TYCO COMMON SHARES.
BONUS UNITS. Bonus Units awarded under AMP's 1993 Long Term Equity
Incentive Plan or Bonus Plan (Stock Plus Cash Plan) in accordance with the terms
of such plan or other governing agreements (including, as applicable, any
severance agreement in effect with an AMP executive) will, upon consummation of
the merger, be settled in Tyco common shares. The number of Tyco common shares
to be issued for each Bonus Unit will be determined by multiplying the number of
shares of AMP common stock that the award holder would have been entitled to
receive with respect to such Bonus Unit (considering the date the merger is
consummated as a "Bonus Computation Date" under such plans) by the exchange
ratio. In addition, the Cash Bonus (as defined in the governing plan or
agreement) related to the Bonus Unit will be paid in accordance with the terms
of such plan or agreement. The other terms of the Bonus Units, and the plan or
agreements under which they were issued, will continue to apply in accordance
with their terms.
REGISTRATION OF TYCO COMMON SHARES. Tyco has guaranteed that it will
reserve for issuance enough Tyco common shares for delivery upon exercise of the
outstanding AMP stock options and distributions in respect to bonus units and
restricted stock awards in accordance with the merger agreement. As soon as
practicable following consummation of the merger, Tyco has guaranteed that it
will register the Tyco common shares subject to the AMP stock options with the
SEC to the extent such registration is required. Tyco has guaranteed that it
will use at least such efforts as are applied to Tyco's other stock options
generally to cause the effectiveness of such registration statement or
registration statements (and the current status of the prospectus or
prospectuses included in such registration statements) to be maintained for so
long as the AMP stock options remain outstanding.
ILLUSTRATIVE TABLE OF EXCHANGE RATIOS AND VALUE OF TYCO COMMON SHARES TO BE
DELIVERED IN CONNECTION WITH THE MERGER.
The columns in the following table present (a) illustrative values of the
Average Stock Price of Tyco common shares within a range from $ to $ , (b)
the exchange ratio illustrating the number of Tyco common shares that would be
issued for one share of AMP common stock at each of the Average Stock Prices
presented in the table, (c) the illustrative values of such Tyco common shares
that would be issued in connection with the merger for one share of AMP common
stock, which illustrative values are determined by multiplying each of the
Average Stock Prices presented in the table by the corresponding exchange ratio,
(d) the percentage of the outstanding shares of the combined entity that AMP
shareholders would own after consummation of the merger assuming that none of
the stock options and other rights to acquire AMP common stock outstanding as of
December , 1998 will be exercised prior to consummation of the merger, and
(e) the percentage of the outstanding shares of the combined entity that AMP
shareholders would own after consummation of the merger assuming that all of the
stock options and other rights to acquire AMP common stock outstanding as of
December , 1998 will be exercised prior to consummation of the merger. As of
December , 1998, there were outstanding stock options and other rights to
acquire shares of AMP common stock. The percentages in columns (d) and (e)
do not take into account the fact that cash will be paid instead of fractional
shares in connection with the merger and are based upon Tyco common shares
and shares of AMP common stock outstanding. THE VALUES OF TYCO COMMON
SHARES ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT THE ACTUAL AMOUNTS PER SHARE
OF AMP COMMON STOCK THAT MIGHT BE REALIZED BY ANY AMP SHAREHOLDER ON OR AFTER
CONSUMMATION OF THE MERGER. THE AMOUNT ANY AMP SHAREHOLDER MIGHT REALIZE UPON
THE SALE IN THE MARKET OF THE TYCO COMMON SHARES RECEIVED BY SUCH AMP
SHAREHOLDER IN THE MERGER WILL DEPEND UPON THE MARKET PRICE PER SHARE OF TYCO
COMMON SHARES AT THE TIME OF THE SALE, WHICH WILL FLUCTUATE DEPENDING UPON ANY
NUMBER OF REASONS, INCLUDING THOSE SPECIFIC TO TYCO AND THOSE THAT INFLUENCE THE
TRADING PRICES OF EQUITY SECURITIES GENERALLY.
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TABLE OF ILLUSTRATIVE VALUES
<TABLE>
<CAPTION>
(E)
PERCENTAGE OF
COMBINED ENTITY
TO BE OWNED BY
AMP
(C) (D) SHAREHOLDERS
MERGER PERCENTAGE OF (ASSUMING
(A) CONSIDERATION COMBINED EXERCISE OF ALL
TYCO (B) PER SHARE OF ENTITY TO BE AMP STOCK
AVERAGE EXCHANGE AMP COMMON OWNED BY AMP OPTIONS AND
STOCK PRICE RATIO STOCK SHAREHOLDERS OTHER RIGHTS)
- ----------- ----------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
76.00 0.7362 55.9500
75.00 0.7460 55.9500
74.00 0.7561 55.9500
73.51 0.7611 55.9500
----- ----------- ------- ------ ------
73.50 0.7612 55.9482
73.00 0.7612 55.5676
72.00 0.7612 54.8064
71.00 0.7612 54.0452
70.00 0.7612 53.2840
69.00 0.7612 52.5228
68.00 0.7612 51.7616
67.00 0.7612 51.0004
----- ----------- ------- ------ ------
66.99 0.7613 51.0000
66.00 0.7727 51.0000
65.00 0.7846 51.0000
64.00 0.7969 51.0000
63.00 0.8095 51.0000
62.00 0.8226 51.0000
61.00 0.8361 51.0000
60.00 0.8500 51.0000
----- ----------- ------- ------ ------
59.99* 0.8501 51.0000
59.00* 0.8644 51.0000
58.00* 0.8793 51.0000
57.00* 0.8947 51.0000
</TABLE>
- ------------------------
* If the Average Stock Price is less than $60.00, Tyco may call off the merger
prior to the time of the AMP special shareholders meeting unless, on or
before the second trading day prior to the date of the AMP special
shareholders meeting, AMP has agreed by notice in writing to Tyco, to an
exchange ratio equal to 0.8500. If AMP agrees to an exchange ratio of
0.8500, then Tyco will not have the right to call off the merger and the
exchange ratio will be 0.8500. In this case AMP shareholders will receive
Tyco shares with a value (based on the Average Stock Price) of less than
$51.00. FOR EXAMPLE, ASSUMING AN AVERAGE STOCK PRICE OF $57.00 AND AN
EXCHANGE RATIO OF 0.8500, THE MERGER CONSIDERATION PER SHARE OF AMP COMMON
STOCK WOULD BE $48.45.
STOCK EXCHANGE LISTING
It is a condition to the merger that the NYSE authorize for listing the Tyco
common shares to be delivered in connection with the merger. In addition, Tyco
expects to list such shares on the London Stock Exchange and the Bermuda Stock
Exchange in due course after the completion of the merger.
DISSENTERS RIGHTS
Neither AMP shareholders nor Tyco shareholders have dissenters' rights of
appraisal or other rights to demand fair value in cash by reason of the merger
or other transactions contemplated by the merger agreement.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT AND RELATED AGREEMENTS
GENERAL
This section of the Joint Proxy Statement/Prospectus describes certain
provisions of the merger agreement, the stock option agreement and Tyco's
guarantees of these agreements. This description is not intended to be complete
and is qualified in its entirety by the full texts of these agreements which are
annexed to this Joint Proxy Statement/Prospectus. (In these agreements, Tyco
(PA) is referred to by its former name of Beta Zeno Corp., and Merger Sub is
referred to by its former name of Alpha Zeno Corp.) In addition, important
information about the merger agreement and the merger is provided in the
previous sections entitled "The Merger" and "The Exchange Ratio and its Effect
on AMP Securities and Equity Based Benefit Plans."
THE MERGER AGREEMENT
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the conditions to the merger
set forth in the merger agreement, AMP will file Articles of Merger with the
Department of State of Pennsylvania, as prescribed by Pennsylvania law. The
effect of this filing is that Merger Sub will merge with and into AMP, and AMP
will become a direct wholly-owned subsidiary of Tyco (PA) and an indirect
wholly-owned subsidiary of Tyco.
DIRECTORS AND OFFICERS
The directors of Merger Sub immediately prior to the consummation of the
merger will serve as the initial directors of AMP following the merger, and the
officers of AMP immediately prior to the consummation of the merger will serve
as the officers of AMP after the merger.
EXCHANGE PROCEDURES
As soon as reasonably practicable after the consummation of the merger, Tyco
(PA) will instruct ChaseMellon Shareholder Services LLC, as exchange agent, to
mail to each holder of record of AMP common stock a letter of transmittal and
instructions as to how to surrender certificates of AMP common stock in exchange
for Tyco common shares and payment for any fractional shares. AMP SHAREHOLDERS
SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the consummation of the merger, each certificate or other authorized
evidence of ownership that previously represented shares of AMP common stock
will represent only the right to receive the Tyco common shares into which such
AMP shares were converted in the merger and the right to receive cash in lieu of
fractional shares as described above.
Holders of certificates previously representing AMP common stock will not be
paid dividends or distributions on the Tyco common shares and will not be paid
cash in lieu of a fractional Tyco common share until such certificates are
surrendered to ChaseMellon for exchange. When such certificates are surrendered,
any unpaid dividends declared by Tyco after the consummation of the merger and
any cash in lieu of a fractional Tyco common share will be paid without
interest.
In the event of a transfer of ownership of shares of AMP common stock which
is not registered in the transfer records of AMP as of the consummation of the
merger, Tyco common shares, cash in respect of fractional shares and any
dividends and distributions and may be paid to a transferee if the certificate
evidencing such shares is presented to the exchange agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Certificates that represented
shares of AMP common stock prior to the consummation of the merger will
represent from and after the consummation of the merger, for all corporate
purposes other than the
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payment of dividends or other distributions, evidence of ownership of the number
of Tyco common shares and cash in respect of fractional shares, into which such
shares of AMP common stock actually converted in the merger.
ChaseMellon will deliver Tyco common shares in exchange for lost, stolen or
destroyed certificates if the owner of such certificates signs an affidavit of
loss, theft or destruction, as appropriate. Tyco (PA) may also, in its
discretion, require the holder of such lost, stolen or destroyed certificates to
deliver a bond in a reasonable sum as indemnity against any claim that might be
made against Tyco (PA), Tyco or ChaseMellon with respect to alleged lost, stolen
or destroyed certificates.
Tyco (PA) will mail detailed instructions, including a transmittal letter,
to AMP shareholders soon after the consummation of the merger as to the method
of exchanging certificates formerly representing shares of AMP common stock. AMP
SHAREHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO THE
EXCHANGE AGENT UNTIL THEY RECEIVE THE TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
Tyco (PA) and AMP have made various customary mutual representations and
warranties in the merger agreement about themselves and their subsidiaries (as
well as, in the case of Tyco (PA), Tyco and its other subsidiaries). Tyco (PA)'s
representations and warranties have been unconditionally guaranteed by Tyco.
In addition, AMP represented that the AMP Board of Directors, prior to the
execution of the merger agreement, authorized the termination of its outstanding
self tender offer and an amendment to the AMP Rights Agreement to render the AMP
Rights Agreement inapplicable to the merger agreement, the stock option
agreement and the transactions contemplated thereby. AMP announced the
termination of the self tender and appropriately amended the AMP Rights
Agreement on November 23, 1998.
CONDUCT OF BUSINESS BY AMP
AMP has agreed that, prior to the consummation of the merger, AMP will
conduct its business (and that of its subsidiaries) only in the ordinary course
of business and in a manner consistent with past practice; and AMP will use
reasonable commercial efforts to preserve substantially intact the business
organization of AMP and its subsidiaries, to keep available the services of the
present officers, employees and consultants of AMP and its subsidiaries and to
preserve the present relationships of AMP and its subsidiaries with customers,
suppliers and other persons with which AMP or any of its subsidiaries has
significant business relations. In particular, unless the merger agreement
provides otherwise or as previously disclosed to Tyco (PA) by AMP, AMP has
agreed that neither it nor any of its subsidiaries, without the prior written
consent of Tyco (PA), will (subject, in certain cases, to specified exceptions):
(i) amend or otherwise change AMP's Restated Articles of Incorporation or
Bylaws;
(ii) issue, dispose or encumber any shares of capital stock of any class, or
any options, warrants, convertible securities or other rights of any kind to
acquire any ownership interest in AMP, any of its subsidiaries or affiliates;
(iii) dispose of or encumber any assets of AMP or any of its subsidiaries out
of the ordinary course of business;
(iv) (1) declare or pay any dividend or other distribution on any of its
capital stock (other than regular quarterly dividends), (2) split, combine or
reclassify any of its capital stock or permit or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, (3) amend the terms or change the period of exercisability of,
acquire, or permit any subsidiary to amend the terms of or to acquire, any of
its or its subsidiaries securities, or (4) settle or discharge any action
brought or threatened against AMP arising out of a shareholder equity interest
in AMP;
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(v) (1) make any acquisitions; (2) incur any indebtedness; (3) authorize
capital expenditures or purchases of fixed assets which are, in the aggregate,
in excess of $500 million over the next 12 months; or (4) enter into or amend
any contract, agreement, commitment or arrangement to do any of (1)-(3) above;
(vi) increase the compensation payable or to become payable to its officers
or employees, or grant severance or termination pay to or enter into any
employment or severance agreement with any new employee of AMP or any of its
subsidiaries which provides for annual base and bonus compensation in excess of
$200,000, or establish, adopt, enter into or amend any collective bargaining,
employment, termination, severance or benefit plan, agreement, trust, fund,
policy or arrangement for any current or former directors, officers or
employees;
(vii) change accounting policies or procedures;
(viii) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax liability
other than settlements that have been reserved for or that do not exceed
$10,000,000 in the aggregate;
(ix) satisfy any claims, liabilities or obligations out of the ordinary
course of business in excess of $10,000,000 in the aggregate; or
(x) take, or agree to take, any of the above actions or take or agree to
take, any action which would make any of the representations or warranties of
AMP contained in the merger agreement untrue or incorrect or prevent AMP from
performing its covenants under the merger agreement or the stock option
agreement.
CONDUCT OF BUSINESS BY TYCO
Tyco has guaranteed that, prior to the consummation of the merger, it will
conduct its business (and that of its subsidiaries) in the ordinary course of
business and consistent with past practice, other than actions taken by Tyco or
its subsidiaries in contemplation of the merger, and will not, without the prior
written consent of AMP:
(i) amend or otherwise change Tyco's Memorandum of Association or Bye-Laws;
(ii) make or agree to make any acquisition or disposition which would
materially delay or prevent the consummation of the transactions contemplated by
the merger agreement;
(iii) declare or pay any dividend or other distribution on any of its capital
stock (other than regular quarterly dividends);
(iv) change accounting policies or procedures; or
(v) take or agree to take, any action which would make any of the
representations or warranties of Tyco (PA) contained in the merger agreement
untrue or incorrect or prevent Tyco (PA) from performing its covenants under the
merger agreement.
NO SOLICITATION
AMP has agreed that it will not solicit or encourage the initiation of any
inquiries or proposals regarding any other consolidation, business combination,
recapitalization or similar transaction, including any transaction with a third
party in which such party would acquire more than a 20% interest in any class of
AMP's equity securities or in the outstanding equity of the surviving entity in
a merger with AMP or would acquire more than 20% of the fair market value of
AMP's assets. Any of the foregoing transactions are referred to in this Joint
Proxy Statement/Prospectus as an "Alternative Transaction" and any proposal from
a third party to effect an Alternative Transaction is referred to as an
"Acquisition Proposal."
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Until the AMP shareholders approve and adopt the merger agreement and if the
AMP Board, following consultation with counsel, determines that such action is
reasonably likely to be required to discharge properly its fiduciary duties, the
AMP Board is permitted to (after notice to Tyco):
1. furnish information to a third party which has made (and was not
solicited to make in violation of the merger agreement) a "Superior Proposal"
defined as a BONA FIDE Acquisition Proposal to acquire for cash and/or
securities, all of the voting equity securities of AMP or all or substantially
all of AMP's assets, on terms which the Board of Directors reasonably believes
are more favorable than the merger
- from a financial point of view to AMP shareholders (after consultation
with a nationally recognized financial advisor), taking into account at
the time of determination any changes to the financial terms of the merger
proposed by Tyco, and
- to AMP, taking into account all pertinent factors deemed relevant by the
AMP Board under the laws of Pennsylvania; and
2. consider and negotiate such Superior Proposal.
Notwithstanding the foregoing, AMP and the AMP Board of Directors may not in
any circumstance
- withdraw or modify in a manner adverse to Tyco (PA) the AMP Board's
approval of the merger unless the merger agreement has been terminated in
accordance with its terms,
- prior to November 6, 1999, unless the merger agreement is terminated in
certain specified circumstances, redeem the rights issued under the AMP
Rights Agreement or otherwise amend or waive any provision of the AMP
Rights Agreement that would facilitate the consummation of an Alternative
Transaction, or
- prior to November 6, 1999, and unless the merger agreement is terminated
in certain specified circumstances, enter into an agreement with respect
to, or otherwise approve or recommend, any Alternative Transaction.
The merger agreement expressly provides that the foregoing restrictions
shall not prohibit AMP from taking or disclosing to its shareholders a position
regarding an Alternative Transaction or Acquisition Proposal or from making any
disclosure to its shareholders required by law.
AMP has agreed to cease any discussions or negotiations with any third party
that were ongoing at the time of the execution of the merger agreement. AMP has
also agreed not to release any third party from the confidentiality and
standstill provisions of any agreement to which AMP is a party.
AMP will ensure that the officers and directors of AMP and its subsidiaries
and any investment banker or other advisor or representative retained by AMP are
aware of the no-solicitation restrictions described in the merger agreement.
CERTAIN OTHER COVENANTS
CONSENTS; APPROVALS. Tyco (PA) and AMP will each use its reasonable best
efforts to obtain all consents, waivers, approvals, authorizations or orders,
and Tyco (PA) and AMP will make all filings required in connection with the
authorization, execution and delivery of the merger agreement and the
consummation by each of them of the transactions contemplated thereby.
INDEMNIFICATION AND INSURANCE. Tyco (PA) and AMP have agreed that for six
years following consummation of the merger, the Restated Articles of
Incorporation and Bylaws of AMP will contain the same indemnification provisions
as currently in the Restated Articles of Incorporation and Bylaws of AMP and
such provisions will not be modified in any manner adverse to those individuals
who were directors, officers or employees of AMP at the consummation of the
merger.
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After consummation of the merger, AMP will, to the fullest extent permitted
under applicable law or under its Restated Articles of Incorporation or Bylaws,
indemnify and hold harmless each present and former director, officer or
employee of AMP or any of its subsidiaries against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, 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 AMP's Restated Articles of Incorporation or Bylaws or any applicable
contract or agreement as in effect on the date of the merger agreement, in each
case for a period of six years after the date of the merger agreement.
Following the merger, AMP will continue to honor in all respects its
obligations under the employment agreements and indemnification agreements with
AMP's officers and directors existing at or before consummation of the merger.
Tyco (PA) will provide, or cause AMP to provide, for a period of not less
than six years after consummation of the merger, AMP's current directors and
officers an insurance and indemnification policy for events occurring at or
prior to consummation of the merger that is no less favorable than AMP's
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Tyco (PA) and
AMP will not be required to pay an annual insurance premium in excess of 200% of
the annual premium currently paid by AMP for such insurance, but in such case
will purchase as much coverage as possible for such amount.
NOTIFICATION OF CERTAIN MATTERS. Tyco (PA) and AMP will each give each
other prompt notice of the occurrence or nonoccurrence of any event which would
be reasonably expected to cause any representation or warranty of the notifying
party contained in the merger agreement to be materially untrue or inaccurate,
or any failure of the notifying party materially to comply with any covenant,
condition or agreement in the merger agreement.
FURTHER ACTION/TAX TREATMENT. Tyco (PA) and AMP agreed to use all
reasonable efforts to take, or cause to be taken, all actions and do other
things necessary, proper or advisable to consummate 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.
However, Tyco (PA) is under no obligation to agree to divest, abandon, license
or take similar action with respect to any assets of Tyco or AMP. In addition,
Tyco (PA) and AMP have each agreed to use their reasonable best efforts to cause
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 (both before and after consummation of the merger) take any actions which to
their knowledge could reasonably be expected to prevent the merger from so
qualifying.
PUBLIC ANNOUNCEMENTS. Tyco (PA) and AMP will not issue any press release or
make any public written 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 regulations of the
NYSE.
TYCO COMMON SHARES. Tyco has guaranteed to take all action necessary so
that Tyco (PA) will obtain, prior to consummating the merger, the Tyco common
shares to be delivered to the AMP shareholders in the merger. Tyco has also
guaranteed to use its best efforts to list on the NYSE the Tyco common shares to
be delivered in the merger.
OPTION PLAN AND BENEFITS. Tyco (PA) and AMP have each agreed to take all
actions necessary to effectuate the provisions of the merger agreement regarding
the conversion and assumption of AMP's outstanding stock options and other
equity based benefit awards. In addition, AMP has agreed to
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terminate its stock purchase plan as of the consummation of the merger.
Furthermore, Tyco (PA) has agreed that, following the consummation of the merger
and through December 31, 1999, AMP will provide to those persons who,
immediately prior to the merger, were employees of AMP or its subsidiaries, and
who continue their employment with AMP following the merger, employee welfare
and retirement plans and programs with substantially similar benefits to those
provided immediately prior to the execution of the merger agreement. For this
purpose, service accrued by these employees with AMP or its subsidiaries prior
to the merger will be recognized except to the extent necessary to prevent
duplication of benefits. Tyco (PA) has also agreed to provide to any person who,
immediately prior to the merger is a retiree under an AMP retiree medical
program with retiree medical benefits in accordance with AMP's current practice.
Tyco (PA) has also agreed to honor the terms of AMP's employee severance plan
and any other severance agreement or other plan or arrangement which provides
for the payment or acceleration of benefits in connection with a change of
control of AMP.
The continuation of welfare, retirement and severance plans, programs or
agreements are subject to the limitations contained in the merger agreement
including Tyco (PA)'s right to amend or modify such plans, programs or
agreements in any respect and to terminate or modify the terms of employment of
any AMP employee subsequent to the merger.
The merger agreement provides that the foregoing provisions are not
enforceable by persons not parties to the merger agreement.
RIGHTS AGREEMENT. The AMP Board has agreed to take all necessary action to
render the rights under the AMP Rights Agreement inapplicable to the merger
agreement, the stock option agreement and the transactions contemplated thereby,
including the merger.
POOLING ACCOUNTING TREATMENT. Tyco (PA) and AMP have each agreed not to do
anything that would reasonably be expected to adversely affect the ability of
Tyco to treat the merger as a pooling of interests, and Tyco (PA) and AMP have
agreed to use their best efforts to take such action as may be reasonably
required to negate the impact of any past actions which, to either of Tyco (PA)
or AMP's knowledge, could reasonably be expected to adversely impact the ability
of Tyco to treat the merger as a pooling of interests. Tyco (PA) has agreed to
use their best efforts to obtain from its independent public accountant an
opinion with respect to the qualification of the merger for pooling of interests
accounting treatment. AMP has agreed to use its best efforts to obtain from its
independent public accountant an opinion with respect to AMP's ability to be a
party to a pooling of interest transaction.
DIRECTOR APPOINTMENT. Tyco has guaranteed Tyco (PA)'s covenant to use its
best efforts, subject to applicable fiduciary obligations of the Tyco Board, to
propose at the Tyco special general meeting to increase the size of the Tyco
Board from eleven to twelve members and to nominate, and recommend that the Tyco
shareholders elect, Robert Ripp, AMP's Chairman and Chief Executive Officer, to
the Tyco Board.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. Each of Tyco
(PA)'s and AMP's respective obligations to complete the merger are subject to
the satisfaction at or prior to the consummation of the merger of the following
conditions:
(i) EFFECTIVENESS OF REGISTRATION STATEMENT. The SEC shall not have issued
any stop order suspending the effectiveness of the Registration Statement of
which this Joint Proxy Statement/Prospectus is a part, nor shall it have started
or threatened any proceedings for that purpose or in respect of this Joint Proxy
Statement/Prospectus;
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(ii) SHAREHOLDER APPROVAL. The AMP shareholders shall have approved and
adopted the merger agreement and Tyco shareholders shall have approved the
issuance of the Tyco common shares to be delivered in connection with the
merger;
(iii) ANTITRUST. All waiting periods applicable to the consummation of the
merger under HSR Act have expired or terminated, and all necessary clearances
and approvals for the merger under any non-U.S. anti-trust laws have been
obtained (other than for clearances and approvals under any non-U.S. antitrust
laws the failure to obtain would not be reasonably expected to have a material
adverse effect on AMP, Tyco or Tyco's electrical and electronic component
business);
(iv) GOVERNMENTAL ACTIONS. No action or proceeding shall have been
instituted, pending or threatened (or any investigation or other inquiry that is
reasonably likely to result in such an action or proceeding) by any governmental
authority or administrative agency before any governmental authority,
administrative agency or court of competent jurisdiction, domestic or foreign
that is reasonably likely to result in an order, nor is any judgment, decree or
order of any governmental authority, administrative agency or court of competent
jurisdiction or other legal restraint in effect, which, in either case, prevents
or seeks to prevent or limits or seeks to limit Tyco from exercising all
material rights and privileges pertaining to its ownership of AMP following the
merger or the ownership or operation by Tyco or any of its subsidiaries of all
or a material portion of the business or assets of AMP or any of its
subsidiaries following the merger, or compels or seeks to compel Tyco or any of
its subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Tyco or any of its subsidiaries, as a result of the
merger or the transactions contemplated by the merger agreement;
(v) 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;
(vi) TAX OPINIONS. AMP and Tyco (PA) receive written opinions of Skadden,
Arps, Slate, Meagher & Flom LLP and PricewaterhouseCoopers LLP (Tyco's U.S.
accountants), respectively, in form and substance reasonably satisfactory to
them, with respect to the tax-free nature of the merger, as specified in the
merger agreement; and
(vii) OPINION OF ACCOUNTANT. Tyco (PA) receives the opinion of
PricewaterhouseCoopers (Tyco's Bermuda accountants) to the effect that the
merger qualifies for pooling of interests accounting treatment.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF TYCO (PA) AND MERGER SUB. The
obligations of Tyco (PA) and Merger Sub to complete the merger are also subject
to the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. Except as would not reasonably be
expected to have a material adverse effect on AMP, the representations and
warranties of AMP in the merger agreement shall be true and correct in all
material respects on and as of the date of the consummation of the merger, with
the same force and effect as if made on and as of the date of the consummation
of the merger, and Tyco (PA) shall have received a certificate to such effect
signed by the Chief Executive Officer or Chief Financial Officer of AMP;
(ii) AGREEMENTS AND COVENANTS. AMP has performed or complied in all material
respects with all agreements and covenants required by the merger agreement, and
Tyco (PA) and Merger Sub have received a certificate to such effect signed by
the Chief Executive Officer or Chief Financial Officer of AMP;
(iii) CONSENTS OBTAINED. AMP has obtained all material consents, waivers,
approvals, authorizations or orders required to be obtained, and shall have made
all filings required by AMP for the authorization, execution and delivery of the
merger agreement and the consummation by it of the merger except as would not
reasonably be expected to have a material adverse effect on AMP;
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(iv) AFFILIATE AGREEMENTS. Tyco (PA) has received from each person who is
identified as an "affiliate" of AMP an agreement to comply with restrictions on
such affiliates pursuant to Rule 145 under the Securities Act and under the
pooling of interests accounting treatment rules; and
(v) RIGHTS AGREEMENT. A Distribution Date (as defined in the AMP Rights
Agreement) shall not have occurred under the AMP Rights Agreement.
ADDITIONAL CONDITIONS TO OBLIGATION OF AMP. The obligation of AMP to
complete the merger is also subject to the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. Except as would not reasonably be
expected to have a material adverse effect on Tyco (PA), the representations and
warranties of Tyco (PA) contained in the merger agreement shall be true and
correct in all material respects at and as of the consummation of the merger,
with the same force and effect as if made on and as of the consummation of the
merger, and AMP shall have received a certificate to such effect signed by the
President or Chief Financial Officer of Tyco (PA);
(ii) AGREEMENTS AND COVENANTS. Tyco (PA) and Merger Sub have performed or
complied in all material respects with all agreements and covenants required by
the merger agreement, and AMP has received a certificate to such effect signed
by the President or Chief Financial Officer of Tyco (PA);
(iii) CONSENTS OBTAINED. Subject to certain exceptions, Tyco (PA) has
obtained all material consents, waivers, approvals, authorizations or orders
required to be obtained, and shall have made all filings required for the
authorization, execution and delivery of the merger agreement and the
consummation by them of the transactions contemplated except as would not
reasonably be expected to have a material adverse effect on Tyco (PA);
(iv) LISTING. The NYSE authorizes for listing the Tyco common shares
issuable in connection with the merger; and
(v) TYCO SHAREHOLDERS RIGHTS PLAN. A Distribution Date (as defined in the
Tyco Shareholders Rights Plan) shall not have occurred under Tyco's Shareholders
Rights Plan.
TERMINATION
CONDITIONS TO TERMINATION. The merger agreement may be terminated at any
time prior to the consummation of the merger, notwithstanding the approval and
adoption by the AMP shareholders of the merger agreement and the approval of the
Tyco shareholders of the issuance of the Tyco common shares to be delivered in
connection with the merger:
(i) by mutual written consent duly authorized by the Boards of Directors of
both AMP and Tyco (PA); or
(ii) by either of Tyco (PA) or AMP, if the merger has not been consummated
by July 31, 1999 (other than for reasons set forth in (iv) below), PROVIDED,
HOWEVER, that this right to terminate is not available to the party whose
failure to fulfill its obligation under the merger agreement caused the merger
not to be consummated before July 31, 1999; or
(iii) by either of Tyco (PA) or AMP, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission issues a
nonappealable final order, decree or ruling or takes any other action which
permanently prohibits the merger; or
(iv) by either of Tyco (PA) or AMP, if (1) the requisite vote of the
shareholders of AMP shall not have been obtained by July 31, 1999 or if the AMP
shareholders do not approve and adopt the merger agreement at the AMP special
meeting; or (2) the requisite vote of the shareholders of Tyco shall not have
been obtained by July 31, 1999 or the shareholders of Tyco do not approve the
issuance of the Tyco common shares to be delivered in connection with the merger
at the Tyco special general meeting; or
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(v) by Tyco (PA), if, whether or not permitted to do so by the merger
agreement, AMP or the AMP Board (1) withdraws or changes its approval or
recommendation of the merger agreement or the merger in a manner adverse to Tyco
(PA); (2) approves or recommends to the shareholders of AMP an Acquisition
Proposal or Alternative Transaction; (3) approves or recommends that the AMP
shareholders tender their shares in any tender offer or exchange offer that is
an Alternative Transaction; or (4) takes any position or makes any disclosures
required by law that has the effect of any of (1), (2) or (3); or
(vi) by either of Tyco (PA) or AMP, (1) if any representation or warranty of
the other party set forth in the merger agreement shall be untrue when made, or
(2) upon a breach of any covenant or agreement set forth in the merger agreement
by the other party, such that in either (1) or (2) the conditions to the
terminating party's obligation to complete the merger would not be satisfied,
PROVIDED THAT, if such misrepresentation or breach is curable prior to July 31,
1999 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; or
(vii) by Tyco (PA), if any representation or warranty of AMP shall have
become untrue such that Tyco (PA)'s condition to its obligation to complete the
merger would not be satisfied, or by AMP, if any representation or warranty of
Tyco (PA) shall have become untrue such that AMP's condition to its obligation
to complete the merger would not be satisfied, in either case other than by
reason of a breach of a covenant or agreement by the breaching party; PROVIDED
THAT, if such representation or warranty is curable prior to July 31, 1999 and
the breaching party exercises its reasonable best efforts or continues to
exercise its reasonable best efforts to cure such representation or warranty,
the merger agreement may not be terminated under this clause; or
(viii) by Tyco (PA) prior to the time of the AMP special meeting if (x) the
average stock price of Tyco common shares used to calculate the exchange ratio
is less than $60.00 and (y) on or before the second trading day prior to the AMP
special meeting, AMP has not agreed to an exchange ratio equal to 0.8500.
FEES AND EXPENSES. Except as set forth below, each of Tyco (PA) or AMP will
pay its own fees and expenses incurred in connection with the merger agreement
and the merger, whether or not the merger is completed, provided that Tyco (PA)
and AMP will share equally all filing fees and printing expenses incurred in
connection with the printing and filing of this Joint Proxy Statement/Prospectus
and the related Registration Statement.
AMP will pay Tyco a fee of $300 million, and will pay Tyco's and Tyco (PA)'s
actual, documented and reasonable out-of-pocket expenses relating to the merger
of up to $30 million, upon the first to occur of any of the following events:
(i) the termination of the merger agreement for any reason, if at the time
of such termination Tyco (PA) was entitled to terminate the merger agreement due
to the failure of AMP to obtain by July 31, 1999 the requisite shareholder vote
to approve the merger, or due to the failure of the AMP shareholders to approve
and adopt the merger agreement at the AMP special meeting; PROVIDED, that such
fee and expenses shall only be payable if prior to or during the AMP special
meeting an Acquisition Proposal (other than the AlliedSignal proposal as it
currently exists) is made directly to the AMP shareholders or otherwise becomes
publicly known or a credible third party has announced a bona fide intention to
make such an Acquisition Proposal;
(ii) the termination of the merger agreement for any reason, if at the time
of such termination Tyco (PA) was entitled to terminate the merger agreement due
to the AMP Board's withdrawal or change of its approval or recommendation of the
merger, approval or recommendation of an Acquisition Proposal or Alternative
Transaction or approval or recommendation to AMP shareholders to tender their
shares in an Alternative Transaction; or
(iii) the termination of the merger agreement for any reason, if at the time
of such termination Tyco (PA) was entitled to terminate the merger agreement due
to AMP's breach of a covenant or agreement or
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a representation or warranty of AMP becoming untrue; PROVIDED, that such fee and
expenses shall only be payable if prior to such termination an Acquisition
Proposal (other than the AlliedSignal proposal as it currently exists) is made
directly to the AMP shareholders or otherwise becomes publicly known or a
credible third party has announced a bona fide intention to make such an
Acquisition Proposal; or
(iv) during the one year period following termination of the merger
agreement, AMP approves or recommends, or proposes to approve or recommend, an
Acquisition Proposal, or redeem the rights under AMP's Rights Agreement or amend
or waive any provision of AMP's Rights Agreement to facilitate the consummation
of any Acquisition Proposal or Alternative Transaction, or an Alternative
Transaction shall be consummated, provided that at the time of such termination:
- there was no material breach by Tyco (PA) of a covenant or agreement under
the merger agreement,
- if the Tyco special general meeting occurred prior to such termination,
the Tyco shareholders had not declined to approve the issuance of the Tyco
common shares, and
- the merger agreement had not been terminated as a result of (1) a legal
action permanently prohibiting the merger, (2) the failure of Tyco to
obtain by July 31, 1999 the requisite shareholder vote to approve the
issuance of the Tyco common shares to be delivered in connection with the
merger, (3) the failure of the Tyco shareholders to approve such issuance
at the Tyco special general meeting, (4) the Average Stock Price of Tyco
common shares being less than $60.00 or (5) a Tyco (PA) breach of a
representation, warranty, covenant or agreement under the merger
agreement; or
(v) the merger agreement is terminated (other than as a result of (1) a
legal action permanently prohibiting the merger, (2) the failure of Tyco to
obtain by July 31, 1999 the requisite shareholder vote to approve the issuance
of the Tyco common shares to be delivered in connection with the merger, (3) the
failure of the Tyco shareholders to approve such issuance at the Tyco special
general meeting, (4) the Average Stock Price of Tyco common shares being less
than $60.00 or (5) a Tyco (PA) breach of a representation, warranty, covenant or
agreement under the merger agreement) and, prior to such termination, the AMP
shareholders elect as a majority of the AMP Board persons who:
- are not Continuing Directors, as defined in the AMP Rights Agreement, or
- were not initially nominated by the incumbent directors, or
- even if nominated by the incumbent directors, were proposed by or are
affiliated with any third party that has made an Acquisition Proposal or
who at the time of the AMP Board election publicly supported any
Acquisition Proposal or Alternative Transaction.
Upon a termination of the merger agreement by either party
1. by mutual written consent,
2. due to the merger not being consummated by July 31, 1999 (provided
that, at the time of termination, Tyco (PA) was entitled to terminate
the merger agreement under such clause), or
3. as a result of a legal action permanently prohibiting the merger,
or a termination of the merger agreement by Tyco (PA)
4. due to the failure of AMP to obtain by July 31, 1999 the requisite
shareholder vote to approve and adopt the merger agreement,
5. due to the failure of the AMP shareholders to approve and adopt the
merger agreement at the AMP special meeting, or
6. as a result of a material breach by AMP of a covenant or agreement
under the merger agreement,
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under circumstances where the $300 million fee is not payable, AMP is required
to pay to Tyco and Tyco (PA) their respective expenses relating to the merger,
but in no event more than $30 million.
Upon termination of the merger agreement by AMP
1. due to the failure of Tyco to obtain by July 31, 1999 the requisite
shareholder vote to approve the issuance of the Tyco common shares to
be delivered in connection with the merger,
2. due to the failure of the Tyco shareholders to approve such issuance
at the special general meeting, or
3. as a result of a material breach of a representation or warranty by
Tyco (PA), Tyco (PA) shall pay to AMP the expenses of AMP relating to the
merger, but in no event more than $30 million.
The fee and/or expenses 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 a party be required to pay such fee and/or
expenses to the other if, immediately prior to the termination of the merger
agreement, the party to receive the fee and/or expenses was in material breach
of its obligations under the merger agreement or, in the case of Tyco, its
guarantee of Tyco (PA)'s obligations under the merger agreement.
The fee payable under certain circumstances by AMP to Tyco, as well as the
stock option agreement described below, is intended, among other things, to
compensate Tyco for its costs, including lost opportunity costs, if certain
actions or inactions by AMP or its shareholders lead to the abandonment of the
merger. This may have the effect of increasing the likelihood of consummation of
the merger 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 AMP by increasing the cost of any such
acquisition.
AMENDMENT AND WAIVER; PARTIES IN INTEREST
Tyco (PA) and AMP 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
consummation of the merger, PROVIDED, HOWEVER, that after approval of the merger
by the shareholders of AMP, the merger agreement cannot be amended without
shareholder approval if shareholder approval of such amendment is required by
law.
At any time prior to consummation of the merger, either of Tyco (PA) and AMP
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, to the extent allowed by law, 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 confers upon any other
person any right, benefit or remedy, other than certain indemnification and
insurance obligations of Tyco (PA) and AMP following consummation of the merger
which are intended for the benefit of certain specified officers, directors and
employees of AMP and may be enforced by such individuals, and other than AMP's
obligation to pay fees and expenses to Tyco in certain circumstances.
STOCK OPTION AGREEMENT
As an inducement to Tyco (PA) to enter into the merger agreement, AMP (as
issuer) and Tyco (PA) (as grantee) entered into a stock option agreement,
pursuant to which AMP granted Tyco (PA) an
60
<PAGE>
irrevocable option to purchase from AMP at any one time up to 43,500,000 shares
of AMP common stock or a lesser amount of shares that is 19.9% of the
outstanding AMP common stock at the time the option is exercised, subject to
certain adjustments. (43,500,000 AMP shares represents approximately 19.9% of
the shares of AMP common stock outstanding on the date of the stock option
agreement.) The exercise price of the option is $51.00 per share, subject to
certain adjustments. The closing sale price of AMP common stock on the last
trading day preceding the execution of the stock option agreement was $45.125
per share. Tyco (PA) may exercise the option only upon the occurrence of an
event as a result of which Tyco becomes entitled under the merger agreement to
the termination fee. The stock option agreement permits Tyco (PA) to pay the
exercise price in cash or with Tyco common shares.
The option will terminate upon the earliest to occur of (a) the consummation
of the merger, (b) the termination of the merger agreement as a result of a
legal action permanently prohibiting the merger, the failure of Tyco to obtain
by July 31, 1999 the requisite shareholder vote to approve the issuance of the
Tyco common shares to be delivered in connection with the merger, the failure of
the Tyco shareholders to approve such issuance at the Tyco special general
meeting, the Average Stock Price of Tyco common shares being less than $60.00,
or a breach by Tyco of a representation, warranty, covenant or agreement under
the merger agreement, and (c) the earlier of (1) twelve months after the date on
which the option becomes exercisable and (2) the third business day following
the first anniversary of termination of the merger agreement, but in no event,
in the case of clause (c), sooner than May 26, 2000.
The option agreement provides Tyco (PA) with a cash-out-right which would
allow Tyco (PA) to receive cash in exchange for the cancellation of the option
in an amount equal to the number of option shares specified by Tyco (PA) for
cancellation, multiplied by the difference between (i) the average closing price
per share of AMP common stock as reported on the NYSE Composite Transactions
Tape for the ten NYSE trading days commencing on the NYSE trading day
immediately preceding the date of Tyco (PA)'s election to exercise the cash-out
right and (ii) the exercise price of the option. This right is subject to the
limitation that in no event can Tyco (PA) receive under the stock option
agreement more than $301 million minus any amount of the termination fee
actually received by Tyco pursuant to the terms of the merger agreement.
The stock option agreement also contains provisions governing the procedure
for exercise of the option and payment for the shares purchased upon such
exercise and other provisions that adjust the number of shares and the exercise
price therefor upon the occurrence of certain changes to the capital structure
of AMP or certain other events or transactions.
Finally, the stock option agreement contains provisions granting Tyco (PA)
demand registration rights with respect to the shares of AMP common stock
received upon exercise of the option, and granting AMP demand registration
rights with respect to the Tyco common shares, if any, received from Tyco (PA)
as payment of the exercise price of the option.
GUARANTEES
Tyco has fully and unconditionally guaranteed (including as applicable, the
full and timely performance of) each and every representation, warranty,
covenant, agreement or other obligation of Tyco (PA) and Merger Sub under the
merger agreement.
61
<PAGE>
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
TYCO
Tyco common shares are listed and traded on the NYSE, the London Stock
Exchange and the Bermuda Stock Exchange. The following table sets forth the high
and low sales prices per Tyco common share, as reported in the NYSE Composite
Transaction Tape, and the dividends paid on such shares, for the quarterly
periods presented below. THE PRICES PER TYCO COMMON SHARE LISTED IN THE TABLE
FOR PERIODS PRIOR TO JULY 2, 1997, THE DATE OF FORMER TYCO'S MERGER WITH ADT,
ARE FOR COMMON SHARES OF ADT. The price and dividends for the Tyco common shares
have been restated to reflect the 0.48133 reverse stock split related to the ADT
merger and a two-for-one stock split effected in the form of a stock dividend
which was distributed October 22, 1997. Although Tyco's fiscal year end is
September 30, the information is presented on a calendar year basis.
<TABLE>
<CAPTION>
TYCO COMMON SHARES
----------------------
<S> <C> <C> <C>
DIVIDENDS
HIGH LOW PER SHARE(1)
---------- ---------- -------------
1996:
First quarter......................................... $ 18.6982 $ 14.5430 --
Second quarter........................................ 20.2564 16.8803 --
Third quarter......................................... 25.7100 16.4908 --
Fourth quarter........................................ 24.3466 19.0877 --
1997(1):
First quarter......................................... $ 28.6965 $ 22.0743 --
Second quarter........................................ 35.4487 25.4503 --
Third quarter......................................... 43.0000 34.4099 $ 0.025
Fourth quarter........................................ 45.5000 34.0000 0.025
1998:
First quarter......................................... $ 57.4375 $ 42.3750 $ 0.025
Second quarter........................................ 63.0625 51.4375 0.025
Third quarter......................................... 69.0000 50.0000 0.025
Fourth quarter (through December , 1998)...........
</TABLE>
- ------------------------
(1) Tyco has paid a quarterly cash dividend of $0.025 per common share since
July 2, 1997, the date of the Former Tyco/ADT merger. ADT had not paid any
dividends on its common shares since 1992. Prior to the merger with ADT,
Former Tyco paid a quarterly cash dividend of $0.025 per share of common
stock since January 1992.
On November 20, 1998, the last trading day prior to announcement of the
execution of the merger agreement, the closing price per Tyco common share, as
reported in the NYSE Composite Transaction Tape, was $65.0625. On December ,
1998, the most recent date for which prices were available prior to printing
this Joint Proxy Statement/Prospectus, the closing price per Tyco common share,
as reported in the NYSE Composite Transaction Tape, was $ . Shareholders
are urged to obtain current market quotations. See also "Risk
Factors--Adjustable Exchange Ratio."
Under the terms of the merger agreement, other than in respect of its
regularly scheduled quarterly dividend of $0.025 per Tyco common share, Tyco is
not permitted to declare, set aside, make or pay any dividend or distribution in
respect of its capital stock from the date of the merger agreement until the
earlier of the termination of the merger agreement and the consummation of the
merger. The payment of dividends by Tyco in the future will be determined by the
Tyco Board and will depend on business conditions, Tyco's financial condition
and earnings and other factors.
62
<PAGE>
AMP
AMP common stock is listed and traded on the NYSE. The following table sets
forth the high and low sales prices per share of AMP common stock as reported in
the NYSE Composite Transaction Tape, and the dividends paid on such AMP common
stock, for the quarterly calendar periods presented below.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---------- ---------- ------------
<S> <C> <C> <C>
AMP COMMON STOCK
------------------------------------
1996:
First quarter......................................... $ 44.7500 $ 36.3750 $ 0.2500
Second quarter........................................ 46.1250 39.0000 0.2500
Third quarter......................................... 41.7500 36.1250 0.2500
Fourth quarter........................................ 39.8750 32.8750 0.2500
1997:
First quarter......................................... $ 43.0000 $ 33.8750 $ 0.2600
Second quarter........................................ 43.1250 33.1250 0.2600
Third quarter......................................... 56.6875 41.7500 0.2600
Fourth quarter........................................ 54.2500 39.0625 0.2600
1998:
First quarter......................................... $ 44.6875 $ 36.6250 $ 0.2700
Second quarter........................................ 44.1875 33.5000 0.2700
Third quarter......................................... 43.0000 28.1250 0.2700
Fourth quarter (through December , 1998)...........
</TABLE>
On November 20, 1998, the last trading day prior to announcement of the
execution of the merger agreement, the closing price per share of AMP common
stock, as reported in the NYSE Composite Transaction Tape, was $45.125. On
December , 1998, the most recent date for which prices were available prior to
printing this Joint Proxy Statement/Prospectus, the closing price per share of
AMP common stock, as reported in the NYSE Composite Transaction Tape, was
$ . Shareholders are urged to obtain current market quotations.
Under the terms of the merger agreement, other than in respect of regular
quarterly dividends of $0.27 per share of AMP common stock, AMP is not permitted
to declare, set aside, make or pay any dividend or distribution in respect of
its capital stock from the date of the merger agreement until the earlier of the
termination of the merger agreement and the consummation of the merger.
63
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The merger is to be accounted for in accordance with the pooling of
interests method of accounting pursuant to APB Opinion No. 16. Accordingly, the
accompanying unaudited pro forma combined condensed financial information gives
effect to the transaction in accordance with the pooling of interests method of
accounting. Pursuant to Rule 11-02 of Regulation S-X, the unaudited pro forma
combined condensed financial information excludes the results of extraordinary
items.
The unaudited pro forma combined condensed financial information should be
read in conjunction with (i) Tyco's audited consolidated financial statements,
including the accounting policies and notes thereto, included in Tyco's 1998
Form 10-K, as supplemented by Tyco's Current Report on Form 8-K filed on
December 10, 1998, (ii) AMP's audited consolidated financial statements,
including the accounting policies and notes thereto, included in its annual
report on Form 10-K for the year ended December 31, 1997, and (iii) AMP's
unaudited consolidated financial statements and notes thereto included in its
quarterly reports on Form 10-Q for the quarterly periods ended March 31, 1998,
June 30, 1998 and September 30, 1998. In September 1997, Tyco changed its fiscal
year end from December 31 to September 30. AMP has a calendar year end. The
historical results for the year ended September 30, 1998, the twelve months
ended September 30, 1997 and the nine months ended September 30, 1997 have been
combined using the actual results of Tyco and AMP for those periods. See "Where
To Find More Information."
The unaudited pro forma combined condensed financial information has been
prepared in accordance with generally accepted accounting principles in the
United States. These principles require management to make extensive use of
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The unaudited pro forma combined condensed results of operations are
not necessarily indicative of future operating results.
The unaudited pro forma combined condensed balance sheet gives effect to the
merger as if it had occurred on September 30, 1998, combining the balance sheets
of Tyco and AMP at September 30, 1998. The unaudited pro forma combined
condensed statements of continuing operations give effect to the merger as if it
had occurred on January 1, 1996.
64
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 13,537.2 $ 5,536.6 $ $ 19,073.8
Cost of sales................................................ (8,621.1) (3,853.2) (12,474.3)
Selling, general and administrative expenses................. (3,198.4) (1,097.7) (4,296.1)
Restructuring and other non-recurring charges(8)............. (92.5) (164.4) (256.9)
---------- ---------- ----------- -----------
Operating income............................................. 1,625.2 421.3 2,046.5
Interest income(3)........................................... 38.9 -- 23.7 62.6
Interest expense............................................. (270.1) (37.8) (307.9)
Other expenses, net(3)....................................... -- (74.7) (23.7) (98.4)
---------- ---------- ----------- -----------
Income from continuing operations before income taxes........ 1,394.0 308.8 -- 1,702.8
Income taxes................................................. (428.9) (100.4) (529.3)
---------- ---------- ----------- -----------
Income from continuing operations............................ $ 965.1 $ 208.4 $ -- $ 1,173.5
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Income per common share from continuing
operations(2)(4):
Basic...................................................... $ 1.54 $ 0.95 $ 1.48
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... $ 1.50 $ 0.95 $ 1.45
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of common shares(2)(4):
Basic...................................................... 627.0 219.4 794.0
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... 647.0 220.3 814.7
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
65
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE COMPARATIVE TWELVE MONTHS ENDED SEPTEMBER 30, 1997(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 10,973.0 $ 5,696.8 $ $ 16,669.8
Cost of sales................................................ (7,099.5) (3,979.6) (11,079.1)
Selling, general and administrative expenses................. (2,491.7) (1,088.4) (3,580.1)
Merger, restructuring and other non-recurring charges(9)..... (1,185.2) (98.0) (1,283.2)
Charge for the impairment of long-lived assets(9)............ (148.4) -- (148.4)
Write-off of purchased in-process research and
development(9)............................................. (361.0) -- (361.0)
---------- ---------- ----------- -----------
Operating (loss) income...................................... (312.8) 530.8 218.0
Interest income(3)........................................... 43.8 -- 17.1 60.9
Interest expense............................................. (199.1) (32.2) (231.3)
Other income (expenses), net(3).............................. 118.4 (69.9) (17.1) 31.4
---------- ---------- ----------- -----------
(Loss) income from continuing operations before income
taxes...................................................... (349.7) 428.7 -- 79.0
Income taxes................................................. (248.1) (138.4) (386.5)
---------- ---------- ----------- -----------
(Loss) income from continuing operations..................... $ (597.8) $ 290.3 $ -- $ (307.5)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
(Loss) income per common share from continuing
operations(2)(4):
Basic...................................................... $ (1.08) $ 1.32 $ (0.43)
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... $ (1.08) $ 1.32 $ (0.43)
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of common shares(2)(4):
Basic...................................................... 562.3 219.7 729.5
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... 562.3 220.3 729.5
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
66
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE TRANSITIONAL NINE MONTH FISCAL YEAR ENDED SEPTEMBER 30, 1997(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales..................................................... $ 8,457.8 $ 4,293.5 $ $ 12,751.3
Cost of sales................................................. (5,455.2) (2,921.1) (8,376.3)
Selling, general and administrative expenses.................. (1,921.3) (828.6) (2,749.9)
Merger, restructuring and other non-recurring
charges(9).................................................. (947.9) -- (947.9)
Charge for the impairment of long-lived assets(9)............. (148.4) -- (148.4)
Write-off of purchased in-process research and
development(9).............................................. (361.0) -- (361.0)
---------- ---------- ------ ----------
Operating (loss) income....................................... (376.0) 543.8 167.8
Interest income(3)............................................ 31.2 -- 12.6 43.8
Interest expense.............................................. (144.8) (25.2) (170.0)
Other expenses, net(3)........................................ -- (29.4) (12.6) (42.0)
---------- ---------- ------ ----------
(Loss) income from continuing operations before
income taxes................................................ (489.6) 489.2 -- (0.4)
Income taxes.................................................. (208.1) (159.0) (367.1)
---------- ---------- ------ ----------
(Loss) income from continuing operations...................... $ (697.7) $ 330.2 $ -- $ (367.5)
---------- ---------- ------ ----------
---------- ---------- ------ ----------
(Loss) income per common share from continuing
operations(2)(4):
Basic....................................................... $ (1.23) $ 1.50 $ (0.50)
---------- ---------- ----------
---------- ---------- ----------
Diluted..................................................... $ (1.23) $ 1.50 $ (0.50)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares(2)(4):
Basic....................................................... 573.4 219.7 740.6
---------- ---------- ----------
---------- ---------- ----------
Diluted..................................................... 573.4 220.3 740.6
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
67
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF
CONTINUING OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales...................................................... $ 9,216.4 $ 5,468.0 $ $ 14,684.4
Cost of sales.................................................. (5,935.8) (3,834.3) (9,770.1)
Selling, general and administrative expenses................... (2,157.9) (1,033.0) (3,190.9)
Merger, restructuring and other non-recurring
charges(10).................................................. (246.1) (98.0) (344.1)
Charge for the impairment of long-lived assets(10)............. (744.7) -- (744.7)
---------- ---------- ----------- -----------
Operating income............................................... 131.9 502.7 634.6
Interest income(3)............................................. 36.5 -- 14.0 50.5
Interest expense............................................... (207.3) (31.2) (238.5)
Other income (expenses), net(3)................................ 119.4 (33.2) (14.0) 72.2
---------- ---------- ----------- -----------
Income from continuing operations before
income taxes................................................. 80.5 438.3 -- 518.8
Income taxes................................................... (268.1) (151.3) (419.4)
---------- ---------- ----------- -----------
(Loss) income from continuing operations....................... $ (187.6) $ 287.0 $ -- $ 99.4
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
(Loss) income per common share from continuing
operations(2)(4):
Basic........................................................ $ (0.40) $ 1.31 $ 0.12
---------- ---------- -----------
---------- ---------- -----------
Diluted...................................................... $ (0.40) $ 1.31 $ 0.11
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of common shares(2)(4):
Basic........................................................ 521.6 219.2 688.5
---------- ---------- -----------
---------- ---------- -----------
Diluted...................................................... 521.6 219.6 700.4
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
68
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AT SEPTEMBER 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 836.9 $ 236.0 $ $ 1,072.9
Securities available for sale.............................. -- 8.2 8.2
Accounts receivable, net................................... 2,418.5 1,059.9 3,478.4
Contracts in process....................................... 565.3 -- 565.3
Inventories................................................ 1,706.6 903.4 2,610.0
Deferred income taxes(3)................................... 646.3 -- 148.7 795.0
Prepaid expenses and other current assets(3)............... 316.3 254.9 (148.7) 422.5
---------- ---------- ------------ ----------
Total current assets................................... 6,489.9 2,462.4 -- 8,952.3
---------- ---------- ------------ ----------
Property, plant and equipment, net......................... 4,159.4 1,944.9 6,104.3
Goodwill and other intangibles, net(3)..................... 7,006.5 -- 99.0 7,105.5
Long-term investments(3)................................... 141.6 -- 86.8 228.4
Deferred income taxes...................................... 296.7 -- 296.7
Other assets(3)............................................ 628.5 311.0 (185.8) 753.7
---------- ---------- ------------ ----------
Total assets........................................... $ 18,722.6 $ 4,718.3 $ -- $ 23,440.9
---------- ---------- ------------ ----------
---------- ---------- ------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable and current portion of long-term debt........ $ 355.9 $ 459.1 $ $ 815.0
Accounts payable........................................... 1,340.4 393.0 1,733.4
Accrued expenses and other current liabilities(3)(6)....... 2,660.7 514.9 193.7 3,369.3
Contracts in process-billings in excess of cost............ 332.9 -- 332.9
Deferred revenue........................................... 260.6 -- 260.6
Income taxes payable(3).................................... 591.5 -- 106.3 697.8
Deferred income taxes...................................... 12.5 -- 12.5
---------- ---------- ------------ ----------
Total current liabilities.............................. 5,554.5 1,367.0 300.0 7,221.5
---------- ---------- ------------ ----------
Long-term debt............................................. 5,254.3 170.4 5,424.7
Other long-term liabilities(3)............................. 631.8 363.0 (22.5) 972.3
Deferred income taxes(3)................................... 82.4 -- 22.5 104.9
---------- ---------- ------------ ----------
Total liabilities...................................... 11,523.0 1,900.4 300.0 13,723.4
---------- ---------- ------------ ----------
Retained earnings(6)....................................... 400.0 2,844.3 (300.0) 2,944.3
Other shareholders' equity................................. 6,799.6 (26.4) 6,773.2
---------- ---------- ------------ ----------
Total shareholders' equity............................. 7,199.6 2,817.9 (300.0) 9,717.5
---------- ---------- ------------ ----------
Total liabilities and shareholders' equity........... $ 18,722.6 $ 4,718.3 $ -- $ 23,440.9
---------- ---------- ------------ ----------
---------- ---------- ------------ ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
69
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. AMP has a calendar year end. The historical results for the
fiscal year ended September 30, 1998, the twelve months ended September 30,
1997 and the nine months ended September 30, 1997 have been combined using
the actual results of Tyco and AMP for those periods.
(2) The pro forma combined per share amounts are based on the combined weighted
average number of Tyco common shares and AMP common stock outstanding for
all periods presented based on AMP shareholders receiving 0.7612 of a Tyco
common share for each share of AMP common stock held.
(3) Certain reclassifications, none of which affects income (loss) from
continuing operations, have been made to the AMP statements of operations
in the pro forma combined condensed statements of continuing operations to
classify interest income on a consistent basis. The pro forma adjustments
to the balance sheet were required to classify on a consistent basis
goodwill and other intangibles, long-term investments, deferred income
taxes and income taxes payable.
(4) Basic loss per common share from continuing operations for Tyco, after
deducting dividends on Tyco convertible preference shares, was based on
adjusted loss from continuing operations available to common shareholders
of $(607.5) million for the twelve months ended September 30, 1997,
$(702.4) million for the nine months ended September 30, 1997, and ($207.4)
million for the year ended December 31, 1996. There were no dividends on
Tyco convertible preference shares in the fiscal year ended September 30,
1998.
Diluted income per common share from continuing operations for Tyco, after
adding Liquid Yield Option Notes ("LYONS") discount amortization, was based
on adjusted income from continuing operations available to common
shareholders of $972.3 million for the year ended September 30, 1998. The
effects on diluted income per common share resulting from the assumed
exchange of LYONS debt are anti-dilutive in 1997, 1996 and 1995.
(5) There were no material transactions between Tyco and AMP during any of the
periods presented.
(6) Total transaction costs to be incurred by Tyco and AMP in connection with
the merger are estimated to be approximately $300.0 million. These costs,
related to legal, printing, accounting, financial advisory services and
other expenses, will be charged against income upon consummation of the
merger. These charges were not considered in the pro forma combined
condensed statements of continuing operations.
(7) A restructuring charge to operations is expected to be recognized in
connection with the merger to reflect the combination of the two companies.
Such charges, which have not yet been estimated, may include amounts with
respect to the elimination of excess facilities, the write-off of certain
goodwill and fixed assets, severance costs and the satisfaction of certain
liabilities. The effects of these costs have not been reflected in the pro
forma combined condensed financial information.
(8) During the fiscal year ended September 30, 1998, Tyco recorded certain
charges of $80.5 million and restructuring charges of $12.0 million related
to the operations of US Surgical. During the year ended September 30, 1998,
AMP recorded restructuring charges of $185.8 million in connection with its
profit improvement plan. In addition, AMP recorded a credit of $21.4
million to restructuring charges during the year ended September 30, 1998,
related to the execution of its 1996 restructuring plans. On a pro forma
combined basis, income from continuing operations for the fiscal year ended
September 30, 1998 before these non-recurring items was $1,365.5 million,
or $1.68 per common share on a diluted basis.
70
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION (CONTINUED)
(9) During the twelve months ended September 30, 1997, Tyco recorded $917.8
million of merger and transaction costs, restructuring and integration
costs related to the mergers with Former Tyco, Keystone and INBRAND, $148.4
related to the impairment of long-lived assets, $361.0 million for the
write-off of purchased in-process research and development related to the
acquisition of the submarine systems business of AT&T Corp., $237.3 million
related to restructuring charges in ADT's electronic security services
business and $30.1 million of restructuring and other non-recurring charges
related to the operations of US Surgical. During the twelve months ended
September 30, 1997, AMP recorded restructuring charges of $98.0 million in
connection with its decision to exit certain product lines, manufacturing
operations and investments. On a pro forma combined basis, income from
continuing operations for the twelve months ended September 30, 1997 before
these non-recurring items, was $1,178.0 million, or $1.55 per common share
on a diluted basis. On a pro forma combined basis, income from continuing
operations for the nine months ended September 30, 1997 before
non-recurring items was $973.4 million, or $1.26 per common share on a
diluted basis.
(10) During the year ended December 31, 1996, Tyco recorded charges of $744.7
million related to the impairment of long-lived assets, $237.3 million
related to restructuring and other non-recurring items in ADT's electronic
security services operations and $8.8 million of transaction costs in
connection with ADT's acquisition of Automated Security (Holdings) plc.
During the year ended December 31, 1996, AMP recorded $98.0 million of
restructuring charges (see (9) above). On a pro forma combined basis,
income from continuing operations for the year ended December 31, 1996
before these non-recurring items was $999.1 million, or $1.37 per common
share on a diluted basis.
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BUSINESSES OF TYCO
Tyco is a diversified manufacturing and service company that, through its
subsidiaries:
- designs, manufactures and distributes electrical and electronic
components, and designs, manufactures, installs and services undersea
cable communication systems;
- designs, manufactures and distributes disposable medical supplies and
other specialty products, and conducts vehicle auctions and related
services;
- designs, manufactures, installs and services fire detection and
suppression systems, and installs, monitors and maintains electronic
security systems; and
- designs, manufactures and distributes flow control products;
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
Tyco reviews acquisition opportunities in the ordinary course of its
business, some of which may be material and some of which are currently under
investigation, discussion or negotiation. There can be no assurance that any of
such acquisitions will be consummated.
ELECTRICAL AND ELECTRONIC COMPONENTS
The principal divisions of the Electrical and Electronic Components group
and their businesses are:
<TABLE>
<CAPTION>
<S> <C>
TYCO SUBMARINE SYSTEMS -- designs, manufactures, installs and services undersea
communications cable systems.
ALLIED ELECTRICAL CONDUIT -- manufactures and distributes electrical conduit and related
components used in commercial electrical installations.
TYCO PRINTED CIRCUIT GROUP -- manufactures printed circuit boards and assembles backplanes for
the electronics industry.
</TABLE>
TYCO SUBMARINE SYSTEMS
Tyco Submarine Systems Ltd. ("TSSL"), which includes Tyco's Simplex
Technologies business and the submarine systems business acquired from AT&T
Corp. in July 1997, is the world's only fully-integrated source for the design,
engineering, manufacturing, installation and servicing of undersea cable
communication systems. TSSL designs and builds both repeatered and
non-repeatered cable systems. Repeatered cable systems, which use Wave Division
Multiplexing, can provide 20 gigabytes per second of capacity over 10,000
kilometers. Non-repeatered systems, which allow for even greater circuit
capacity and reduced transmission costs, support short haul systems of several
hundred kilometers. TSSL has designed, manufactured and installed approximately
265,000 kilometers of undersea optical cable.
TSSL also operates one of the world's largest fleet of ships designed to
install and service undersea fiber optic transmission systems. These ships lay
cable, perform upgrades and repairs, monitor transmission quality and perform
system tests. TSSL also uses a variety of other undersea tools, including
robotic vehicles for undersea cable burial and retrieval operations.
Simplex Technologies has been the primary supplier of cable and cable
assemblies to the United States Navy for use in data-gathering systems for more
than thirty years. It also manufactures underwater electric power cable and
optical ground wire for use by power authorities and utilities, and
electro-mechanical
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cable for unique field operations. In September 1996, Tyco acquired the
Rochester Corporation which manufactures wire rope, wirelines, electro-optical
products and subsea products.
TSSL competes on a worldwide basis primarily against two other entities:
Alcatel-Alsthom, headquartered in France, and KDD, located in Japan. Alcatel,
like TSSL, is vertically integrated and produces its own cable, whereas KDD
utilizes a Japanese cable manufacturer.
ALLIED ELECTRICAL CONDUIT
Allied's Electrical Conduit division is one of the leading producers of
steel electrical conduit in the United States. Electrical conduit is galvanized
steel tubing designed to contain current-carrying electrical wires both inside
and outside building structures. The conduit also serves as an electrical
ground, which ensures proper operation of circuit interrupters, and provides a
channel into which additional wires can be inserted as requirements change. The
division manufactures a full line of electrical conduit as well as metal framing
and other products.
The division's electrical conduit and related products are sold to wholesale
electrical distributors through Allied's distribution facilities by an internal
sales force and a network of commissioned sales agents. The division competes
for the sale of electrical products primarily with several other large United
States manufacturers. Competition in the electrical conduit industry is
primarily based upon price, quality, delivery and breadth of product line.
TYCO PRINTED CIRCUIT GROUP
Tyco Printed Circuit Group ("TPCG") is one of the largest independent
manufacturers of complex multi-layered printed circuit boards and backplane
assemblers in the United States. Printed circuit boards are used in the
electronics industry to mount and interconnect components to create electronic
systems. They are categorized by the number of layers and can be single-sided,
double-sided or multi-layer. In general, single and double-sided boards are less
advanced. Multi-layer boards provide greater interconnection density while
decreasing the number of separate printed circuit boards which are required to
accommodate powerful and sophisticated components. Backplanes assemblies are
comprised of printed circuit boards, connectors and other electronic components,
and they serve as an electrical and mechanical interconnect device.
TPCG manufactures double-sided and multi-layer boards, including highly
sophisticated precision tooled, custom laminated boards with layer counts up to
68. TPCG also produces sophisticated flexible-rigid circuit boards for use in
commercial, aerospace and military applications. TPCG's backplane facilities
produce soldered, press-fit and surface mount backplane assemblies. In addition,
these facilities also provide turnkey manufacturing services including full "box
build" products. Printed circuit boards and backplane products are manufactured
on a job order basis to the customers' design specifications. The majority of
sales are derived from high-density multi-layer boards.
TPCG markets its products mainly through a direct sales force, and to a
lesser extent, through a network of independent manufacturers' representatives.
Customers are generally original equipment manufacturers and contract
manufacturers in the communications, computer, aircraft, military and other
industrial and consumer electronics industries. Tyco competes with several large
independent and captive companies that manufacture printed circuit board
products primarily in the United States. Competition is on the basis of quality,
reliability, price and timeliness of delivery. Tyco believes that fewer
competitors manufacture the more complex, high-density double-sided and
multi-layer printed circuit board products.
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DISPOSABLE AND SPECIALTY PRODUCTS
The principal divisions in the Disposable and Specialty Products group and
their businesses are:
<TABLE>
<CAPTION>
<S> <C>
TYCO HEALTHCARE GROUP -- manufactures and distributes medical supplies, disposable
medical products, personal absorbent products and other
products.
ADT AUTOMOTIVE -- is the second largest provider of vehicle auction services in
the United States.
TYCO PLASTICS AND ADHESIVES manufactures polyethylene films and packaging, industrial and
consumer plastic products, molded plastic garment hangers,
laminated and coated products and adhesive products and
tapes.
</TABLE>
TYCO HEALTHCARE GROUP
Prior to the October 1998 acquisition of US Surgical, the Tyco Healthcare
Group was called Kendall International and was comprised of four business units:
Kendall Healthcare, Kendall International, Sherwood-Davis & Geck and Ludlow
Technical Products. The Tyco Healthcare Group is now comprised of three primary
units: The Kendall Company (which includes Kendall Healthcare, Kendall
International and Ludlow), Sherwood-Davis & Geck and the newly acquired US
Surgical. In each of its business units, Tyco Healthcare competes with numerous
companies, including a number of larger, well-established companies. Tyco
Healthcare relies on its reputation for quality and dependable service, together
with its low-cost manufacturing and innovative products, to compete in its
markets.
THE KENDALL COMPANY
The Kendall Company manufactures and markets worldwide a broad range of
wound care, needles, syringes, electrodes, specialized paper and film, vascular
therapy, urological care, incontinence care, anaesthetic care and other nursing
care products to hospitals and to alternate site healthcare customers. Its
Kendall Healthcare division, which operates throughout the United States and
Canada, is the industry leader in gauze products with its
Kerlix-Registered Trademark- and Curity-Registered Trademark- brand dressings.
Kendall Healthcare's other core product category consists of its vascular
therapy products, principally anti-embolism stockings, marketed under the
T.E.D.-Registered Trademark- brand name, sequential pneumatic compression
devices sold under the SCD-Registered Trademark- brand name and a venous plexus
foot pump. Kendall Healthcare pioneered the pneumatic compression form of
treatment and continues to be the dominant participant in the pneumatic
compression and elastic stocking segments of the vascular therapy market.
Kendall Healthcare is also an industry leader in the adult incontinence
market serving the acute care, long-term care and retail markets. It offers a
complete line of disposable adult briefs, underpads, baby diapers and other
related products.
Through Ludlow, The Kendall Company manufactures and sells a variety of
disposable medical products, specialized paper and film products. Ludlow's
products include medical electrodes and gels for monitoring and diagnostic tests
and hydrogel wound care products. These products are used primarily in critical
care, physical therapy and rehabilitative departments in hospitals. Ludlow also
produces adhesive tapes used for business forms and in printing applications,
high quality facsimile paper and recording chart papers for medical and
industrial instrumentation.
The Kendall Company distributes its products in the United States and Canada
through its own sales force and through a network of more than 250 independent
distributors. The sales force is divided into five groups: vascular therapy
products, medical and surgical products, alternate site markets, Ludlow and
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Confab, which markets incontinence and feminine hygiene products through food
and drug chains throughout North America.
The Kendall Company's Kendall International division is responsible for the
manufacturing, marketing, distribution and export of Kendall products worldwide.
Kendall International markets directly to hospitals and medical professionals,
as well as through independent distributors. Its operations are organized
primarily into three geographic regions: Europe, Latin America and the Far East,
although the mix of product lines offered varies from country to country.
SHERWOOD-DAVIS & GECK
The acquisition of Sherwood-Davis & Geck in February 1998 has made the Tyco
Healthcare Group one of the largest manufacturers of disposable medical products
in the world. The Sherwood-Davis unit manufactures and distributes medical and
surgical devices such as catheters, needles and syringes, sutures, thermometers
and other specialized disposable medical products. Its core brands of
Monject-Registered Trademark- syringes and Kangaroo-Registered Trademark-
feeding pumps are recognized throughout the industry. Sherwood-Davis & Geck
distributes its products worldwide through its own sales force and independent
distributors.
UNITED STATES SURGICAL CORPORATION
On October 1, 1998, Tyco completed its acquisition of US Surgical. US
Surgical, develops, manufactures and markets a line of surgical wound closure
products and other advanced surgical products to hospitals throughout the world.
Its products include surgical staplers, sutures, disposable laparoscopic
instrumentation and numerous other products in various surgical and medical
specialties including spine surgery; vascular and cardiovascular surgery;
interventional cardiology; urology; and breastcare. Through its Valleylab
division, US Surgical is a leading manufacturer and marketer of electrosurgical
and ultrasound surgical products.
ADT AUTOMOTIVE
ADT Automotive operates a network of 28 large modern auction centers in the
United States, providing an organized wholesale marketplace for the sale and
purchase of used vehicles. A substantial majority of the vehicles sold at ADT
Automotive auctions are passenger cars and light trucks. Other vehicles sold
consist of heavy trucks and industrial vehicles. Sales of vehicles from specific
market sources are held on a regularly scheduled basis and additional
specialized sales are scheduled as necessary. ADT Automotive operates almost
exclusively in the wholesale marketplace and, in general, the public is not
permitted to attend its auctions. It acts solely as an agent in auction
transactions and does not purchase vehicles for its own account.
The principal sources of vehicles for sale at auction are consignments by
new and used vehicle dealers, vehicle manufacturers, corporate owners of
vehicles such as fleet operators, rental companies, leasing companies, banks and
other financial institutions, manufacturers' credit subsidiaries and government
agencies. The vehicles consigned by dealers consist of vehicles of all types and
ages and include vehicles that have been traded in against new car sales.
Vehicles consigned by corporate and financial owners include both repossessed
and off-lease vehicles and, as a result, are normally in the range of one to
four years old. The principal purchasers of vehicles at auction are new and used
vehicle dealers and distributors.
In addition to the sale process, ADT Automotive provides a comprehensive
range of vehicle redistribution services including transportation,
reconditioning, title transfer assistance, vehicle repossession and fleet
management services. Vehicle reconditioning is carried out on-site and
principally consists of appearance reconditioning and paint and body work to
bring vehicles up to retail ready condition. ADT Automotive also performs more
extensive body work services including body panel painting and repair of minor
collision damage. In addition, ADT Automotive provides reconditioning services
for vehicles other than those going through the auction process, principally for
fleet owners and insurance companies.
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ADT Automotive competes with two other significant auction chains and a
large number of independently owned local auctions which are members of the
National Auto Auction Association. Competition is based primarily on price in
relation to the quality and range of services offered to sellers and buyers of
vehicles and on ease of accessibility of auction locations.
TYCO PLASTICS AND ADHESIVES
Tyco Plastics and Adhesives consists of Armin Plastics, Carlisle Plastics,
A&E Products, Tyco Adhesives and Ludlow Coated Products.
ARMIN
Armin manufactures polyethylene film and packaging products in a wide range
of size, gauge, construction strength, stretch capacity, clarity and color. In
the process, Armin extrudes low density, high density and linear low density
polyethylene film from resin purchased in pellet form, incorporating such
additives as coloring, slip and anti-block chemicals. Armin's products include
plastic supermarket packaging, greenhouse sheeting, shipping covers and liners
and a variety of other packaging configurations for the aerospace, agricultural,
automotive, construction, cosmetics, electronics, food processing, healthcare,
pharmaceutical and shipping industries. Armin also manufactures a number of
other polyethylene products such as reusable plastic pallets, transformer pads
for electric utilities and a large variety of disposable gloves for the
cosmetic, medical, food handling and pharmaceutical industries. Armin generates
the majority of its sales through its own internal sales force and services more
than 6,000 customers in the United States.
Armin competes with a wide range of manufacturers, including some vertically
integrated companies and companies that manufacture polyethylene resins for
their own use. Armin competes in many market segments by emphasizing product
innovation, specialization and customer service.
CARLISLE
Carlisle is a leading producer of industrial and consumer plastic products,
including trash bags, flexible packaging and sheeting. Carlisle supplies plastic
trash bags to mass merchants, grocery chains, and institutional customers
primarily in North America. Carlisle manufactures Ruffies-Registered Trademark-,
a national brand consumer trash bag, for mass merchants and other retail stores.
Carlisle also provides heavy duty trash can liners for institutional customers,
such as food service distributors, janitorial supply houses, restaurants, hotels
and hospitals. In the consumer trash bag market, Carlisle competes primarily
with two nationally advertised brands. Carlisle has historically concentrated on
mass merchants as the primary market for its branded
Ruffies-Registered Trademark- trash bags, while the other major national brands
are marketed primarily through food retailers.
Film-Gard-Registered Trademark-, Carlisle's leading plastic sheeting
product, is sold to consumers and professional contractors through
do-it-yourself outlets, home improvement centers and hardware stores. A wide
range of Film-Gard-Registered Trademark- products are sold for various uses,
including painting, renovation, construction, landscaping and agriculture.
A&E PRODUCTS
A&E Products sells molded plastic garment hangers to garment manufacturers,
national, regional and local retailers and mass merchants. Garment manufacturers
put their products on A&E Products hangers before shipping to retail outlets.
National retailers purchase customized hanger designs created and manufactured
by A&E Products. Regional and local retailers buy standard A&E Products hanger
lines for retail clothing displays. A&E Products also supplies mass merchants
with consumer plastic hangers for sale to the general public.
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Carlisle and A&E Products operate in a competitive marketplace where success
is dependent upon price, service and quality.
TYCO ADHESIVES
The Tyco Adhesives division, formerly known as Kendall-Polyken, manufactures
and markets specialty adhesive products and tapes for industrial applications,
including external corrosion protection tape products for oil, gas and water
pipelines. Other industrial applications include tapes used in the automotive
industry for wire harness wraps, sealing and other purposes, and tapes used in
the aerospace and heating, ventilation and air conditioning (HVAC) industries.
Tyco Adhesives also produces duct, foil, strapping, packaging and electrical
tapes and spray adhesives for industrial and consumer markets worldwide and
manufactures cloth and medical tapes for Kendall Healthcare and others. Tyco
Adhesive's Betham division develops and markets pressure sensitive adhesives and
coatings, principally for the automotive, medical and specialty markets.
Tyco Adhesives generally markets its pipeline products directly, working
with local manufacturers' representatives, international engineering and
construction companies and the owners and operators of pipeline transportation
facilities. Tyco Adhesives sells its other industrial products either directly
to major end users or through diverse distribution channels, depending upon the
industry being supplied.
LUDLOW COATED PRODUCTS
Ludlow Coated Products produces protective packaging and other materials
made of coated or laminated combinations of paper, polyethylene and foil. Coated
packaging materials provide barriers against grease, oil, light, heat, moisture,
oxygen and other contaminants. The division produces structural coated and
laminated products such as plastic coated kraft, linerboard and bleached boards
for rigid urethane insulation panels, automotive components and wallboard
panels. Other product applications include packaging for photographic film,
frozen foods, health care products, electrical and metallic components,
agricultural chemicals, cement and specialty resins.
Ludlow markets its laminated and coated products through its own sales force
and through independent manufacturers' representatives. Ludlow competes with
many large manufacturers of laminated and coated products on the basis of price,
service, marketing coverage and custom application engineering. There are
various specialized competitors in different markets.
FIRE AND SECURITY SERVICES
Tyco, through its subsidiaries, is the largest company in the world for the
design, manufacture, installation and service of fire detection, suppression and
sprinkler systems and is the world's largest provider of electronic security
services.
FIRE PROTECTION CONTRACTING AND SERVICES
Operating under several trade names including Grinnell, Wormald, Mather &
Platt, Total Walther, O'Donnell Griffin and Tyco, Tyco designs, fabricates,
installs and services automatic fire sprinkler systems, fire alarm and detection
systems, special hazard suppression systems and security systems in buildings
and other installations.
Tyco's fire protection contracting and service business in North America
operates through a network of offices in the United States, Canada, Mexico,
Latin America and Puerto Rico. Tyco also operates worldwide through a network of
offices in the United Kingdom, continental Europe, Saudi Arabia, the United Arab
Emirates, Australia, New Zealand, Asia and South America.
Tyco installs fire protection systems in both new and existing structures.
Typically, the contracting businesses bid on contracts for fire protection
installation which are let by owners, architects, construction
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engineers and mechanical or general contractors. In recent years, the business
of retrofitting existing buildings has grown as a result of legislation
mandating the installation of fire protection systems and also as a result of
lower insurance premiums available in respect of structures with automatic
sprinkler systems.
The majority of the fire suppression systems installed by Tyco are
water-based. However, Tyco is also the world's leading provider of custom
designed special hazard fire protection systems which incorporate various
specialized non-water agents such as foams, dry chemicals and gases. Systems
using agents other than water are especially suited to fire protection in
certain manufacturing, power generation, petrochemical, offshore oil
exploration, transportation, telecommunications, mining and marine applications.
Tyco holds exclusive manufacturing and distribution rights in several regions of
the world for INERGEN-Registered Trademark- fire suppression products.
INERGEN-Registered Trademark- is an alternative to the ozone depleting agent
known as halon and consists of a mixture of three inert gases designed to
effectively extinguish fires without polluting the environment or damaging
costly equipment.
In Australia, New Zealand and Asia, Tyco also installs electrical wire and
related electrical equipment and provides specialized electrical contracting
services, including applications for railroad and bridge construction, primarily
through its O'Donnell Griffin division.
Substantially all of the mechanical components (and, in North America, a
high proportion of the pipe) used in the fire protection systems installed by
Tyco are manufactured by Tyco. Tyco also has fabrication plants worldwide that
cut, thread and weld pipe, which is then shipped with other prefabricated
components to job sites for installation. Tyco has developed its own
computer-aided design technology that reduces the time required to design
systems for specific applications and coordinates the fabrication and delivery
of system components.
Tyco's fire protection contracting business employs both non-union and union
employees in North America, Europe and Asia-Pacific. Many of the union employees
are employed on an hourly basis for particular jobs. In North America, the
largest number of union employees is represented by a number of local unions
affiliated with the United Association of Plumbers and Pipefitters. In April
1994, following lengthy negotiations, contracts between Tyco's Grinnell
Corporation subsidiary and a number of locals of the United Association were not
renewed. Employees in those locations, representing 64 percent of those
employees represented by the United Association unions, went on strike. Grinnell
has continued to operate with former union members who have crossed over and
with replacement workers. The labor action has not had, and is not expected to
have, any material adverse effect on Tyco's business or results of operations.
Generally, competition in the fire protection business varies by geographic
location. In North America, Tyco competes with hundreds of smaller contractors
on a regional or local basis for the installation of fire suppression and fire
alarm and detection systems. Many of the regional and local competitors employ
non-union labor. In Europe, Tyco competes with many regional or local
contractors on a country by country basis. In Australia, New Zealand and Asia,
Tyco competes with a few large fire protection contractors as well as with many
smaller regional or local companies. Tyco competes for fire protection contracts
primarily on the basis of price, service and quality.
ELECTRONIC SECURITY SERVICES
Tyco provides electronic security services principally under the ADT trade
name and also under other trade names including Modern, Thorn Security, Holmes
Protection, CIPE, Zettler, Sonitrol, Securesys, Securiville and Armourguard
Security. Services are provided in the United States, Canada, the United
Kingdom, Spain, France, Belgium, Greece, The Netherlands, Germany, The Republic
of Ireland, Malaysia, Singapore, Hong Kong, New Zealand and Australia.
Electronically monitored security systems involve the installation and use
on a customer's premises of devices designed to detect or react to various
occurrences or conditions, such as intrusion, movement, fire,
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smoke, flooding, environmental conditions (including temperature or humidity
variations), industrial operations (such as water, gas or steam pressure and
process flow controls) or other hazards. These detection devices are connected
to a microprocessor-based control panel which communicates through telephone
lines to a monitoring center, often located at remote distances from the
customer's premises, where alarm and supervisory signals are received and
recorded. In most systems, control panels can identify the nature of the alarm
and the areas within a building where the sensor was activated. Depending upon
the type of service for which the subscriber has contracted, monitoring center
personnel respond to alarms by relaying appropriate information to the local
fire or police departments, notifying the customer or taking other appropriate
action, such as dispatching employees to the customer's premises. In some
instances, the customer may monitor the system at its own premises or the system
may be connected to local fire or police departments.
Thorn Security manufactures certain alarm, detection and activation devices
and central monitoring station equipment which is both installed by Tyco's own
units and sold to other installers of alarm and detection devices. Otherwise,
Tyco does not manufacture the electronic security system components which it
installs, although it does provide its own specifications to manufacturers for
certain security system components and undertakes some final assembly work in
respect of more sophisticated systems.
Tyco provides electronic security services to both commercial and
residential customers. Commercial customers include financial institutions,
industrial and commercial businesses, facilities of federal, state and local
government departments, defense installations, and health care and educational
facilities. Residential electronic security services are provided primarily in
North America. Customers are often prompted to purchase security systems by
their insurance carriers, which may offer lower insurance premium rates if a
security system is installed or require that a system be installed as a
condition to coverage.
Tyco's systems and products are tailored to customers' specific needs and
include electronic monitoring services that provide intrusion and fire
detection, as well as card or keypad activated access control systems and closed
circuit television systems. Systems may be monitored by the customer at its
premises or connected to one of Tyco's monitoring centers. In either case, Tyco
usually provides support and maintenance through service contracts. Commercial
and residential contracts are generally renewed after their initial terms.
Contract discontinuances occur principally as a result of customer relocation or
closure. Systems installed at commercial customers' premises may be owned by
Tyco or by the customer. Tyco usually retains ownership of standard residential
systems, but more sophisticated residential systems are usually purchased by the
customer.
Tyco markets its electronic security services to commercial and residential
customers through a direct sales force and an authorized dealer network.
Commercial customers which have multiple locations in North America are serviced
by a separate national accounts sales force. Tyco also utilizes advertising,
telemarketing and direct mail to market its services.
The electronic security services business in North America is highly
competitive, with a number of major firms and approximately 12,000 smaller
regional and local companies. Tyco also competes with several national companies
and several thousand regional and local companies in the United Kingdom,
continental Europe, Asia, New Zealand and Australia. Competition is based
primarily on price in relation to quality of service. Tyco believes that the
quality of its services is higher than that of many of its competitors and,
therefore, Tyco's prices may be higher than those charged by its competitors.
MANUFACTURING
Tyco manufactures most of the components which are used in its own fire
protection contracting business, as well as a variety of products for sale to
other fire protection contractors. In North America, Tyco manufactures pipe and
pipe fittings, fire hydrants, sprinkler heads and substantially all of the
mechanical sprinkler components used in automatic fire suppression systems. In
the United Kingdom,
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France, Germany and the Asia-Pacific region, Tyco manufactures and sells
sprinkler heads, specialty valves, fire doors and electronic panels for use in
fire detection systems. In Mexico, Tyco manufactures fire extinguishers, fire
hose and related equipment.
Tyco's Ansul subsidiary manufactures and sells various lines of dry
chemical, liquid and gaseous portable fire extinguishers and related agents for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry, confined industrial spaces and commercial spaces housing electronic
and other delicate equipment. Ansul also manufactures spill control products
designed to absorb, neutralize and solidify spills of various hazardous
materials.
Fire protection products are sold through Tyco's flow control products
distribution network, discussed under "Flow Control Products" below, and through
independent distributors.
FLOW CONTROL PRODUCTS
Tyco, through its subsidiaries, manufactures and distributes flow control
products in North America, Latin America, Europe, Asia and the Pacific region.
Flow control products include pipe, fittings, valves, meters and related
products which are used to transport, control and measure the flow of liquids
and gases. The principal subsidiaries in the Flow Control Products group are
Grinnell, Allied Tube & Conduit, Mueller Co. and Keystone. The group also
includes a number of other specialized manufacturers of valves, fittings and
couplings.
MANUFACTURING
Tyco manufactures and distributes a wide range of flow control products,
including pipe and pipe fittings, tubing, valves, meters, couplings, pipe
hangers, strut and related components. These products are used in plumbing,
heating, ventilation and air conditioning (HVAC) systems, mechanical
contracting, power generation, manufacture of food and beverage products, water
and gas utilities, wastewater treatment, oil and gas exploration, pulp and
paper, petrochemical and numerous other industrial applications. Tyco also
manufactures certain related products such as steel tubing, custom iron
castings, malleable iron pipe fittings and fencing materials.
Allied is the leading North American manufacturer of pipe and other tubular
products. Allied manufactures a full line of steel pipe for the fire protection
and construction industries and for commercial, residential and institutional
markets. Its mechanical tube division offers steel tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications.
Allied's fence division is a leader in the manufacture of products for the
residential, industrial and commercial fence markets. Allied also manufactures
metal framing systems used in the construction, industrial and original
equipment manufacturer markets. In November 1996, Tyco acquired Unistrut Europe,
a manufacturer and distributor of metal framing, cable ladder and safety systems
and, in January 1997, it acquired American Tube and Pipe Co., Inc., a
manufacturer and distributor of steel pipe for the fire protection and fence
markets and steel products for the housing market.
Mueller, a manufacturer of water and gas distribution products, manufactures
fire hydrants, iron butterfly and gate valves, service-line brass valves and
fittings, gas valves and meter bars, water meters, backflow preventers and
related products for sale to independent distributors and, to a lesser extent,
directly to waterworks contractors, municipalities and gas companies throughout
the United States and Canada.
In August 1997, Tyco acquired Keystone, one of the world's leading
manufacturers of valves and flow control products. Keystone operates on a
worldwide basis through two groups, Industrial Valves and Controls and
Engineered Products, manufacturing valves and other industrial products that
control the flow of liquids, gases and fibrous and slurry materials.
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The Flow Control Products group, operating under several trade names
including Grinnell, Mueller, Hersey, Keystone, Anderson-Greenwood, Yarway,
Crosby Valve, Gimpel, Henry Pratt Co., James Jones Company, Edward Barber & Co.,
Neotecha, Belgicast, Hindle Cockburns, Charles Winn (Valves) Ltd., Sempell,
Smith Valve, Anvil, Canvil and others, supplies a wide range of valves and flow
control devices to the chemical, power, food and beverage, oil and gas,
processing, water utility, wastewater treatment, power generation and other
industries. Products are manufactured and assembled at facilities in the United
States, Canada, The United Kingdom, France, Italy, Spain, Germany, The
Netherlands, Switzerland, South Korea, China, India, Malaysia, Australia, New
Zealand, Mexico, Brazil and Argentina.
DISTRIBUTION
Tyco's Grinnell subsidiary sells flow control and fire protection products
in North America through a distribution network of five regional distribution
centers, strategically located in Georgia, Illinois, California, Pennsylvania
and Texas, which support local branches' product needs and ship directly to
customers. Each center stocks more than 8,500 products. Tyco's worldwide flow
control operations stock and sell products through distribution centers in
Europe, Australia, New Zealand, the Middle East and Asia. In Europe, Tyco
distributes fire protection products, industrial valves and products for
mechanical markets through warehouses located in The Netherlands, the United
Kingdom, Germany, France, Italy, Spain and Scandinavia. Products are sold
principally to fire protection contractors and in some instances to mechanical
and industrial contractors and original equipment manufacturers. In Asia, the
Pacific region and the Middle East, Tyco distributes fire protection and flow
control products through warehouses located in Australia, New Zealand, Dubai and
Singapore. Products are sold directly to fire protection and other contractors
as well as to mechanical and industrial contractors and independent
distributors. While distribution patterns vary, most centers stock an extensive
line of valves, fittings, pipe and other products for fire protection systems,
components for HVAC installations and water and gas distribution and specialized
valves and piping for the chemical, food, power and beverage processing
industries.
Grinnell's North American distribution network competes with independent
manufacturers' representatives and other manufacturers and, to a lesser extent,
with local and regional supply houses all of which carry lines from other United
States and non-United States manufacturers. Grinnell competes on the basis of
price, the breadth of its product line, service and quality. Grinnell competes
for the sale of gray iron pipe fittings, malleable and ductile iron fittings and
other flow control products and fire protection sprinklers and devices
principally with other United States producers as well as with non-United States
manufacturers of fittings. Grinnell uses an internal sales force for the sale of
certain other iron castings sold direct to original equipment manufacturers and
other end users.
Allied competes for the sale of steel pipe, which is sold through Grinnell's
distribution network, with pipe from other United States and non-United States
producers. Competition for the sale of pipe is based on price, service and
breadth of product line. Fence and other specialized industrial tubing is sold
to wholesalers, original equipment manufacturers and other distributors.
Competition for the sale of fence products is principally from national and
regional United States producers and to a lesser extent from non-United States
companies on the basis of price, service and distribution. Allied competes with
many small regional manufacturers for sales of specialized industrial tubing on
the basis of price and breadth of product line.
Mueller's water and natural gas distribution flow control products are sold
through independent distributors, and, to a lesser extent, directly to
utilities, municipalities and gas distribution companies. Certain of its gas
distribution products are also sold through the Grinnell distribution network.
Mueller competes for the sale of these products on the basis of product quality,
service, price, breadth of product line and conformity with municipal codes and
other engineering standards. Muller competes with several other manufacturers in
the United States and Canada for the sale of iron and brass flow control devices
for water and natural gas distribution systems.
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Keystone's products are sold both in the United States and internationally.
Keystone has numerous competitors in these markets, which, in some instances,
are divisions of larger corporations and, in some instances, are companies with
limited product lines. Advanced technology, global presence, experienced
personnel and price are the primary factors in competition.
ENVIRONMENTAL SERVICES
Through its Earth Technology Corporation subsidiary, Tyco provides a broad
range of environmental, consulting and engineering services. Earth Tech's
principal services consist of full-spectrum environmental and hazardous waste
management services. These include infrastructure design and construction
services, facilities engineering and construction management services for
institutional, civic, commercial and industrial clients, and contract operations
and management services for water and wastewater treatment facilities operated
by municipal and industrial clients.
Earth Tech has a network of 40 offices located throughout North America. It
competes with a number of national, regional and local companies on the basis of
price and breadth and quality of services.
In September 1998, Tyco acquired Rust Environmental and Infrastructure, Inc.
from Waste Management, Inc. The operations of Rust Environmental are in the
process of being combined with Earth Tech.
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BUSINESS OF AMP
AMP designs, manufactures and markets a broad range of electronic,
electrical and electro-optic connection devices and an expanding number of
interconnection systems and connector-intensive assemblies. AMP's products have
potential uses wherever an electronic, electrical, computer or
telecommunications system is involved, and are becoming increasingly critical as
system speeds increase and devices are miniaturized. AMP's customers are as
diverse as the products themselves, and include such differing types of accounts
as original equipment manufacturers and their subcontractors, utilities,
government agencies, distributors, value-added resellers, and customers who
install, maintain and repair equipment. The industries covered by these accounts
include automotive, power technology, personal computer, communications, and
consumer/industrial. AMP markets its products worldwide primarily through its
own direct sales force, but also through distributors and value-added resellers
to respond to customer buying preferences. AMP has established more than 330
facilities located in 53 countries to serve customers in the current and
emerging markets throughout the world. AMP is positioning itself to be a
market-driven, "GLOBE-ABLE" organization.
AMP was incorporated in 1941 as a New Jersey corporation under the name
Aircraft-Marine Products, Inc. At that time the focus of AMP's operations was
the terminal business. In 1952 AMP established its first international
operations, located in Canada and France. In 1956 AMP changed its name to AMP
Incorporated and became publicly owned. During the 1960s and 1970s AMP expanded
its focus to varying types of connectors, including those required in the
computer industry. AMP reincorporated in Pennsylvania in 1989. The world leader
in electronic/electrical connection devices and associated application tools and
machines, over the past five years AMP has been diversifying into total
interconnection systems, related components, and connector-intensive assemblies.
MARKETS
AMP serves over 90,000 customers located in over 143 countries, covering
many diverse markets.The business in which AMP is engaged is highly competitive.
The number of competitors is estimated at over 1,600 worldwide, and AMP faces
aggressive direct and indirect competition for all its products. The markets
served by AMP have generally been growing as a whole in spite of increasing
price erosion. Most of AMP's products involve technical competence in their
development and manufacture. Generally speaking, AMP competes primarily by
offering high-quality, technical products and associated application tooling,
with an emphasis on product performance, timely delivery and service. AMP has
experienced price pressures in its markets, particularly in the personal
computer and cellular/mobile phone markets. AMP's broad range of products,
worldwide sales and marketing presence, and service innovations serve to
differentiate AMP from its competitors and position AMP to become a supplier of
choice to many customers as they reduce their supplier lists and seek global
sourcing contracts.
PRODUCTS
AMP manufactures and sells more than 800,000 parts in over 450 global
product lines, including terminals; fiber-optic, printed circuit board and cable
connectors and assemblies; connectorized printed circuit boards; cable and
cabling systems; and related application tools and machines. Nearly 77% of AMP's
business is in terminal and connector competency that encompasses
electronic/electrical connection, switching and programming devices and
associated application tools and machines. Included within this competency is a
great variety of types and sizes. These product families generally involve the
same or very similar basic technology, materials, production processes and
marketing approaches. The common manufacturing capabilities, which have become
core competencies of AMP, include connectivity technology, high speed precision
metal stamping, precision metal plating, plastic molding and automated assembly
of small metal and plastic parts. AMP sells some of its products in strip form
or on reels which are applied
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by customers with special application machines and special tools. The balance of
products and competencies include AMP's value-added and wireless businesses and
pre-assembled devices and other products that do not require application tools
or machines.
Application tooling has been and remains an integral part of AMP's sales
strategy and growth for many of AMP's products. AMP has provided thousands of
application machines to customers on either a lease or purchase basis, and has
sold millions of manual and power tools to customers, to apply AMP's products to
wires, cables, printed circuit boards and flexible circuitry. In the past decade
AMP has introduced more than 160 new types of machines and tools, ranging from
hand tools for maintenance and repair to computer-controlled machines that make
thousands of connections per hour and continuously monitor the quality of the
connections as they are being made. AMP has always marketed products on the
basis of total installed cost--not product price alone--and AMP's concentration
on providing fast and reliable application methods should give AMP an advantage
as concerns for productivity, quality and system performance continue to rise.
Hundreds of field service engineers throughout the world install this
applicating equipment, train customer personnel to operate, maintain and service
it, and provide emergency service.
In addition to the total installed cost approach to marketing product, a
fundamental concept of AMP marketing is to seek early involvement in customer
design activities. AMP has enhanced its capabilities in this approach in recent
years by a unique consulting service through which AMP can computer simulate
interconnection systems, thus reducing the time and costs associated with the
design phase.
While AMP seeks to widen its leadership in the terminal and connector
product area, it is also steadily diversifying into total interconnection
systems and higher value assemblies. This is increasing the potential markets
being addressed by AMP from approximately $28 billion to around $78 billion.
Part of this new breadth of potential business will come from cables,
fiber-optic and electro-optical networking, and flexible circuitry based
connectors that expand AMP's connector and interconnection technology. Another
source for expansion is interconnection solutions, such as cable, board and
panel assemblies, that are logically related to those connector and
interconnection competencies. The final thrust toward new opportunities for
growth addresses needs for home automation, microwave technologies, wireless
communication, and networking/premise wiring hardware and related services.
AMP is accomplishing this growth by new product development as well as by
numerous small, strategic acquisitions, minority interest investments, joint
ventures and other strategic alliances. Acquisitions provide technologies that
are key to entering or enhancing AMP's participation in the respective markets
and will form a cornerstone for AMP's expansion of its potential business. New
products (representing products and product extensions introduced during the
last five years) now comprise over 25% of current sales. Much of this growth,
whether by new product development or acquisitions and alliances, focuses on the
fastest growing sectors and major trends in the electronic and electrical
markets-- such as miniaturization, high speed circuitry, networking, wireless
transmission, electro-optics, conversion to digital, software integration with
hardware, and the convergence of computer and communications technologies.
OPERATIONS
AMP is a global marketing, sales, engineering and manufacturing
interconnection systems company with principal offices located in Pennsylvania.
AMP maintains a strong local presence in the principal countries in which it
operates through its traditional geographic organizations: the Americas;
Asia/Pacific; and Europe/Middle East/Africa (EMEA). The geographic organizations
manage the daily activities of terminal and connector manufacturing and regional
and local sales and customer logistics.
Strategic marketing and major sales efforts are performed centrally for
AMP's global industry segments, consisting of automotive, communications,
personal computer and consumer electronics industry markets, through the global
industry business organization. Strategic marketing for AMP's regional
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industry businesses, consisting of the appliance, industrial machinery and
instrumentation, power technology, aerospace, networking and building systems
market segments, are also performed centrally through the regional business
development organization, while sales activities for these market segments are
executed by the geographic sales organizations.
Manufacturing responsibilities for the non-terminal and connector parts of
the business, namely fiber and optoelectronics, wireless and cable and
value-added assemblies, are managed by the global industry business
organization. AMP has been aggressively locating manufacturing and sales
operations where customers' operations and local market opportunities coincide
to make it a positive investment climate. Since 1990, AMP has either finalized
plans for or actually started sales or manufacturing operations in India, Chile,
China, Colombia, Greece, Hungary, the Philippines, Thailand, The Czech Republic,
Poland, Turkey, Ireland, Israel, Russia, South Africa and Slovenia, and
marketing activities have been extended into Indonesia, Vietnam, Pakistan,
Croatia, Eastern Europe, Egypt, and the Middle East.
PRODUCT DEVELOPMENT
AMP is committed to an ongoing program of new product development and a
continual expansion of its technical capabilities. This broadening of products
and capabilities is made possible through both internal development efforts and
external strategic relationships such as acquisitions, minority equity
investment positions, joint ventures, alliances, research contracts, teaming
arrangements, licensing and the like with dozens of customers, suppliers,
consortiums, universities and research institutes. In recent years an advanced
development center has been established in Europe in addition to those already
existing in the U.S. The global technology office works closely with the global
business units and competencies and unifies AMP's technology resources,
including over 6,000 engineers, scientists and technicians and support
personnel.
For additional information regarding the business of AMP, including other
information on legal proceedings, refer to AMP's Form 10-K and the other filings
of AMP with the Commission incorporated by reference. See "Where to Find More
Information."
PROFIT IMPROVEMENT PLAN
AMP's profit improvement plan, the first elements of which were announced in
June 1998, reflects AMP's commitment to improve significantly its operating
margins and financial performance. In particular, AMP expects the profit
improvement plan to result in the elimination of costs and expenses of more than
$350 million per year beginning in the year 2000 and generate an operating
margin of at least 13.5% in 1999 and an operating margin of at least 16.5% in
the year 2000. Following the merger, shareholders of Tyco, including AMP
shareholders at the time of the merger, should benefit from implementation of
the profit improvement plan.
Key elements of the profit improvement plan include:
- REDUCING COSTS THROUGH REDUCTIONS IN SUPPORT STAFF AND SUPPORT FUNCTIONS
AMP has announced that it will reduce its support staff on a net basis
(gross reductions less new hires) by at least 3,500 worldwide through a
combination of early retirement, attrition and layoffs. As part of this
program, AMP will outsource certain support activities to allow AMP to
focus resources on core businesses and provide flexibility to respond to
fluctuations in product demand. As of October 1, 1998, AMP has exceeded
its objectives and identified in excess of 3,800 support staff reductions
worldwide. Approximately 1,500 of the support staff reductions are from
international subsidiaries. In addition, AMP has reduced the number of its
temporary and contract employees.
- RESHAPING AMP'S MANUFACTURING INTO A "GLOBAL MANUFACTURING COMPETENCY"
THROUGH PLANT CLOSINGS, CONSOLIDATIONS AND OTHER ACTIVITIES
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The streamlining and consolidation of the Terminal and Connector
operation, which represents the majority of AMP's sales, have resulted in
the closing of five plants in 1998. Additional sites have been announced
for consolidation and/or closing, including AMP's manufacturing facilities
in Harlow, Great Britain and in Hsin-Chu, Taiwan. Additionally, AMP is
stepping up activities to support the fast growing marketplace outside the
United States by shifting production closer to customers, thereby reducing
transportation and other costs, and relying on simpler, manual operations
in each region for high-volume, quick turnaround orders.
During the fourth quarter of 1998, AMP will take a restructuring
charge to complete the implementation of its profit improvement plan. This
charge will be taken upon the identification of additional head count
reductions, facility consolidations and the elimination of under
performing businesses. It is not possible to estimate the amount of these
charges at this time.
- SIMPLIFYING AMP'S OPERATING STRUCTURE AND PROVIDING FOR GREATER
ACCOUNTABILITY
In August 1998, Robert Ripp was appointed Chairman and CEO of AMP with
overall responsibility for implementing the profit improvement plan.
Direct reports have been cut in half from 22 to 11, and each of a limited
number of executives has been charged with the responsibility of achieving
a specified portion of the expected cost savings.
- AMP'S FOCUS ON CUSTOMER SERVICE AND PRICING POLICIES TO ENHANCE ITS
COMPETITIVENESS IN THE MARKETPLACE AND RESPONSIVENESS TO CUSTOMER DEMANDS
AMP has launched new customer-focused programs to make the ordering,
pricing and delivery systems simpler and more responsive to customers. AMP
will replicate these programs, which have begun in the United States, in
other regions of the world. These include 24-hour customer service and
shipment on more than 10,000 widely used part numbers, simplified pricing
and a larger sales force to improve account coverage and presence at
customer facilities.
The profit improvement plan is designed to provide AMP with a more
simplified, results-oriented structure focused on enhancing performance and
creating value. AMP is committed to accelerating the implementation of, and
enhancing the steps being taken in connection with, the profit improvement plan.
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DESCRIPTION OF SHARE CAPITAL OF TYCO
The summary of the terms of the share capital of Tyco set forth below does
not purport to be complete and is qualified by reference to Tyco's Memorandum of
Association and the Tyco Bye-Laws, which are incorporated by reference in this
Joint Proxy Statement/Prospectus and copies of will be sent to holders of AMP
and Tyco shareholders upon request. See "Where To Find More Information."
AUTHORIZED SHARE CAPITAL
Tyco's authorized share capital consists of 1,503,750,000 Tyco common shares
and 125,000,000 preference shares. 15,000,000 preference shares have been
designated as Series A Preference Shares and are reserved for issue upon
exercise of rights under Tyco's Shareholder Rights Plan. As of December ,
1998, there were Tyco common shares outstanding and no preference shares
outstanding. See "Tyco Capital Increase Proposal" for a discussion of the
proposal to increase Tyco's authorized share capital.
TYCO COMMON SHARES
DIVIDENDS. The Tyco Board may declare dividends out of profits of Tyco
available for that purpose as long as there are no reasonable grounds for
believing that Tyco is, or after such dividend would be, unable to pay its
liabilities as they become due or if the realizable value of Tyco's assets would
thereby be less than the aggregate of its liabilities and its issued share
capital and share premium accounts. Subject to such special rights as may be
attached to any other shares in Tyco, all dividends are payable according to the
amounts paid or credited as paid on Tyco common shares. Dividends are normally
payable in U.S. dollars, but holders with a registered address in the United
Kingdom and other countries outside the United States may receive payment in
another currency. Any dividend which is unclaimed may be invested or otherwise
made use of by the Tyco Board and after a period of 12 years is forfeited and
reverts to Tyco.
VOTING RIGHTS. At any general meeting of Tyco, votes may be given in person
or by proxy and each holder of Tyco common shares is entitled, on a show of
hands, to one vote and, on a poll, to one vote for each Tyco common share held
by him. The Tyco Bye-Laws require that any proxy must be a shareholder of Tyco.
Under the Tyco Bye-Laws, two holders of Tyco common shares present, in person or
by proxy, constitute a quorum at a general meeting.
LIQUIDATION. On a liquidation of Tyco, holders of Tyco common shares are
entitled to receive any assets remaining after the payment of Tyco's debts and
the expenses of the liquidation, subject to such special rights as may be
attached to any other class of shares.
SUSPENSION OF RIGHTS. In certain circumstances, the rights of a shareholder
to vote and to receive any payment or income or capital in respect of a Tyco
common share may be suspended. Those circumstances include failure to provide
information about ownership of and other interests in Tyco common shares, if so
required in accordance with the Tyco Bye-Laws. See "Comparison of Shareholder
Rights."
VARIATION OF RIGHTS. If at any time the share capital of Tyco is divided
into different classes of shares, the rights attached to any class (unless
otherwise provided by the terms of the issue of the shares of that class) may be
varied with the consent in writing of the holders of three-fourths of the issued
shares of that class or with the sanction of a resolution passed at a separate
general meeting of the holders of the shares of that class by a majority of
three-fourths of such holders voting in person or by proxy.
TRANSFERS. A Tyco common share may be transferred in any manner the Tyco
Board may approve. The Tyco Board may require the transfer to be by an
instrument signed by the transferor and, in the case of a partly paid share,
also by the transferee. The instrument must be in writing in the usual common
form or in any other form which the Tyco Board may approve and must be lodged at
the office of the registrar of
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Tyco for registration. The Tyco Board may decline to register any transfer of
shares on which Tyco has a lien, any transfer of shares not fully paid up to a
transferee of whom they do not approve and any transfer of shares by a
transferor or to a transferee on whom Tyco has duly served a notice under the
provisions of the Tyco Bye-Laws referred to under "--Suspension of Rights" above
during a period of suspension of voting rights pursuant to those provisions.
GENERAL. The Tyco common shares to be issued pursuant to the merger will be
duly authorized, validly issued, fully paid and non-assessable. All such shares
will be in registered form.
REGISTRAR AND TRANSFER AGENT. AS&K Services Limited is Tyco's Registrar.
ChaseMellon Shareholder Services LLC is the transfer agent for Tyco common
shares.
TYCO PREFERENCE SHARES
Under the Tyco Bye-Laws, the Tyco Board, in its sole discretion, may
designate, allot and issue one or more series of preference shares from the
authorized and unissued preference shares. Subject to limitations imposed by
law, Tyco's Memorandum of Association or Bye-Laws, the Tyco Board is empowered
to determine the designation of, and the number of shares constituting, each
series of preference shares, the dividend rate for each series, the terms and
conditions of any voting and conversion rights for each series, the amounts
payable on each series on redemption or return of capital and the preference and
relative rights among each series of preference shares. At present, 15,000,000
preference shares have been designated as Series A Preference Shares and are
reserved for issue upon exercise of the Rights under the Shareholder Rights
Plan. For a description of the Shareholder Rights Plan, see "Comparison of
Shareholder Rights--Shareholder Rights Plan."
STOCK EXCHANGE LISTING
The Tyco common shares are listed on the NYSE, the London Stock Exchange and
the Bermuda Stock Exchange. It is a condition to the merger that the Tyco common
shares to be delivered in connection with the merger are authorized for listing
on the NYSE at or prior to the Effective Time, subject upon official notice of
issuance. Application will be made in due course to list such shares on the
London Stock Exchange and the Bermuda Stock Exchange.
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EXPANSION OF TYCO BOARD AND ELECTION OF TYCO DIRECTOR PROPOSAL
The merger agreement provides that Tyco shareholders will be asked at the
Tyco special general meeting to vote to increase the number of directors on the
Tyco Board from eleven to twelve and elect Robert Ripp as a director of Tyco
effective upon consummation of the merger.
Unless otherwise specified in the form of proxy, the persons named in the
form of proxy will vote the shares represented by each properly executed form of
proxy to increase the size of the Tyco Board from 11 to 12 and to elect Robert
Ripp as a director of Tyco, to serve until the next annual general meeting of
Tyco. Mr. Ripp has agreed to stand for election and to serve as a director if
elected.
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE FOR THE
EXPANSION OF TYCO BOARD AND ELECTION OF TYCO DIRECTOR PROPOSAL.
INFORMATION CONCERNING NOMINEE
Robert Ripp is 57 years of age and is currently a director of AMP. Mr. Ripp
has been Chairman and Chief Executive Officer of AMP since August 1998, after
serving as Executive Vice President, Global Businesses since January 1998. Mr.
Ripp was Corporate Vice President and Chief Financial Officer of AMP from
January 1995 to January 1998, after serving as Corporate Vice President, Finance
since August 1994. Prior to this, Mr. Ripp held various positions at IBM
Corporation from 1964 to 1993. He is also a director of ACE Limited, an
insurance company.
TYCO DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS. Set forth below are the names, ages, positions and certain other
information concerning the current directors of Tyco.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- ------------------------------------------ --- ----------- -----------------------------------------------------
<S> <C> <C> <C>
L. Dennis Kozlowski....................... 52 1997 Chairman of the Board, President and Chief Executive
Officer, Tyco (July 1997-present), Chairman of the
Board, Former Tyco (January 1993-July 1997); Chief
Executive Officer, Former Tyco (July 1992-present);
President, Former Tyco (1989-present); Chief
Operating Officer, Former Tyco (1989-1995);
President, Grinnell Corporation (January
1984-February 1997); Director, Applied Power Inc.
(control products) (July 1994-present); Director,
Raytheon Company (electronic systems and equip-
ment) (June 1995-present); Director, Dynatech
Corporation (voice, video and data products)
(September 1995-present) Director, RJR Nabisco
Holdings Corp. (consumer products) (June
1996-present)
Michael A. Ashcroft....................... 52 1984 Non-Executive Chairman, BHI Corporation (services
company) (1987-present); Chairman, Carlisle
Holdings Limited (services company) (1998-present);
Chairman of the Board and Chief Executive Officer
of ADT (1984-July 1997); Chairman of the Board and
Chief Executive Officer, Hawley Group PLC
(predecessor to ADT) (1977-1984)
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- ------------------------------------------ --- ----------- -----------------------------------------------------
<S> <C> <C> <C>
Joshua M. Berman.......................... 60 1997 Counsel to Kramer Levin Naftalis & Frankel LLP
(counselors at law) (1985-present); Vice President,
Tyco (July 1997-present); Director, Former Tyco
(1967-November 1997)
Richard S. Bodman*+....................... 60 1997 Managing General Partner, AT&T Ventures LLC (venture
capital) (May 1996-present); Senior Vice President,
Corporate Strategy and Development, AT&T
Corporation (communications) (1990-May 1996);
Director, Reed Elsevier, plc (publishing) (June
1996-present); Director, Lin Television
(broadcasting) (May 1996-present); Director,
National Housing Partnerships Inc. (real estate)
(August 1995-present); Director, Former Tyco
(1992-November 1997)
John F. Fort, III*+....................... 57 1997 Chairman of the Board, Former Tyco (1982-December
1992); Chief Executive Officer, Former Tyco
(1982-June 1992); Director, Dover Corporation
(diversified manufacturer) (1989-present);
Director, Roper Industries (diversified products)
(December 1995-present); Director, Former Tyco
(1982-November 1997)
Stephen W. Foss**......................... 56 1997 Chairman, President and Chief Executive Officer, Foss
Manufacturing Company, Inc. (manufacturer of
synthetic fibers and non-woven fabrics)
(1969-present); Director, Ameron International
(diversified manufacturer) (1994-present);
Director, Former Tyco (1983-November 1997)
Richard A. Gilleland...................... 54 1997 President of Tyco Healthcare Group (October
1998-present); Chairman, President and Chief
Executive Officer of Physician's Resource Group,
Inc. (December 1997-September 1998); President and
Chief Executive Officer, AMSCO International, Inc.
(healthcare) (July 1995-July 1996); Senior Vice
President, Former Tyco (October 1994-July 1995);
Chairman, President and Chief Executive Officer,
The Kendall Company (July 1990-July 1995);
Director, DePuy International (medical products)
(July 1996-present); Director, Physician's Resource
Group, Inc. (physician practice management
services) (June 1995-September 1998); Director,
Remington Arms Company, Inc. (firearms and
ammunition) (March 1994-present); Director, Former
Tyco (1994-November 1997)
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- ------------------------------------------ --- ----------- -----------------------------------------------------
<S> <C> <C> <C>
Philip M. Hampton**++..................... 66 1997 Co-Managing Director, R. H. Arnold & Co. (investment
bank) (April 1997-present); Chairman of the Board,
Metzler Corporation (investment bank) (1989-March
1997); Director and Vice Chairman, Bankers Trust
New York Corporation (banking) (1986-1989);
Director, Former Tyco (1985-November 1997)
James S. Pasman, Jr.*..................... 68 1992 President and Chief Operating Officer, National
Intergroup, Inc. (industrial holding company)
(1989-1991); Chairman and Chief Executive Officer,
Kaiser Aluminum and Chemical Corp. (aluminum and
chemicals) (1987-1989); Director, BEA Income Fund,
Inc., BEA Strategic Income Fund, Inc., BT Insurance
Funds Trust and Education Management Corp.
W. Peter Slusser**........................ 69 1992 President, Slusser Associates, Inc. (investment firm)
(1988-present); Managing Director and Head of
Merger and Acquisitions, PaineWebber Incorporated
(1976-1988); Director, Ampex Corporation (high
performance television and data storage recording
systems) (1992-present); Director, Sparton
Corporation (anti-submarine warfare products and
electronics) (1997-present)
Frank E. Walsh, Jr.**..................... 57 1997 Chairman, Sandyhill Foundation (charitable
organization) (August 1996-present); Chairman,
Wesray Capital Corporation (investment firm)
(1989-1996); Director, Former Tyco (1992-November
1997)
</TABLE>
- ------------------------
* Member of Audit Committee
** Member of Compensation Committee
+ Member of Corporate Governance and Nominating Committee
+ Lead Director
MEETINGS AND COMMITTEES OF THE TYCO BOARD. The Tyco Board of Directors held
7 meetings during the fiscal year ended September 30, 1998. Each Tyco director
who served during fiscal 1998 attended at least 75% of the meetings of the Tyco
Board and the meetings of each committee on which he served.
The Tyco Board has an Audit Committee which reviews the internal controls of
Tyco. It meets with appropriate Tyco financial personnel as well as Tyco's
independent auditors. The Audit Committee reviews the scope and results of the
professional services provided by Tyco's independent auditors and the fees
charged for such services and makes such recommendations to the Tyco Board as it
deems appropriate, including recommendations as to the appointment of
independent auditors. The Audit Committee met two times in fiscal 1998.
The Tyco Board has a Compensation Committee, which sets the compensation and
benefits of executive officers and key managers of Tyco. The Compensation
Committee met three times in fiscal 1998.
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The Tyco Board has a Corporate Governance and Nominating Committee, which is
responsible for evaluating the Tyco Board's structure, personnel and processes
and makes recommendations to the full Tyco Board regarding nominations of
individuals for election to the Tyco Board of Directors. The Committee will
consider nominations submitted by shareholders. To recommend a nominee, a
shareholder should write to the Secretary of Tyco at Tyco's principal executive
offices in Hamilton, Bermuda. Any such recommendation must include the name and
address of the candidate, a brief biographical description or statement of the
qualifications of the candidate and the candidate's signed consent to being
named as a nominee in Tyco's proxy statement, if nominated, and to serve as a
director if elected. Under Tyco's Bye-Laws, generally no person is eligible for
election to the office of director at any general meeting unless, not less than
six and not more than twenty-eight calendar days before the day appointed for
the meeting, there has been given to the Secretary notice in writing by a
shareholder (not being the person to be proposed) entitled to attend and vote at
the meeting and the signed consent of the nominee to serve as a director.
Corporate Governance and Nominating Committee members communicated with one
another informally, but did not hold a formal meeting in fiscal 1998.
Mr. Hampton, as the Lead Director, is responsible for coordinating with the
Chairman to establish the Board's agenda and the nomination of new directors and
their committee assignments, coordinating the evaluation of the Tyco Chairman
and all Tyco directors, and acting as the lead non-employee director.
EXECUTIVE OFFICERS. The executive officers of Tyco and executive officers
of certain of Tyco's subsidiaries are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH TYCO
- ---------------------------- --- ---------------------------------------------------------
<S> <C> <C>
L. Dennis Kozlowski......... 52 Chairman of the Board and Chief Executive Officer
Mark A. Belnick............. 52 Executive Vice President and Chief Corporate Counsel
Jerry R. Boggess............ 54 President of Fire and Security Services
Neil R. Garvey.............. 43 President of Tyco Submarine Systems Ltd.
Richard A. Gilleland........ 54 President of Tyco Healthcare Group
Robert P. Mead.............. 48 President of Flow Control Products
Mark H. Swartz.............. 38 Executive Vice President and Chief Financial Officer
</TABLE>
SUMMARY OF DIRECTORS' COMPENSATION
Directors receive an annual cash fee in the amount of $65,000. In addition,
all non-employee directors receive stock options valued at $35,000 (utilizing
the Black-Scholes option pricing model). Directors may make an irrevocable
election each year to receive some or all of their annual cash fee in one or
more of the following forms: (i) phantom Tyco common shares under a deferred
compensation plan, (ii) a director's trust that is invested in Tyco common
shares, or (iii) stock options (valued utilizing the Black-Scholes option
pricing model). Under the deferred compensation plan, each account is credited
with an amount equal to the dividends that would have been earned on the shares
if owned. Participants receive payments from their account in cash, in either a
lump sum or up to ten annual installments. The lump sum is payable, at the prior
election of the director, a minimum of 5 years after deferral while a director
remains a member of the Tyco Board. For a director who has ceased to be a member
of the Tyco Board, the lump sum is payable, or the annual installments will
commence, at the election of a director, at any time after termination of
service (or upon termination of service if a director is age 70 or older).
Shares held in a director's account of the director's trust are owned by the
director, may be voted by him and may be withdrawn or sold at any time. Any
shares remaining in the account at the time the director terminates his service
on the Tyco Board will be distributed to him at that time.
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<PAGE>
Pursuant to such arrangements, in July 1997, all directors other than Mr.
Kozlowski were granted options (valued at $35,000) to purchase 3,500 Tyco common
shares at an exercise price of $38.3125 per share, one quarter of which was
attributable to compensation in fiscal 1997, and three quarters of which was
attributable to compensation for the 1998 fiscal year. In October 1997, all
directors other than Mr. Kozlowski were granted options (valued at $8,750) to
purchase 876 Tyco common shares at an exercise price of $41.625, all of which
were granted in respect of compensation for the 1998 fiscal year.
In October 1998, each director other than Messrs. Kozlowski and Gilleland
was granted a stock option (valued at $35,000), in respect of compensation for
fiscal 1999, consisting of an option to purchase 2,000 Tyco common shares at an
exercise price of $44.87735. Messrs. Berman, Bodman, Foss, Pasman, Slusser and
Walsh elected to receive all or a portion of their cash fees for fiscal 1999 in
stock options, and were granted options to purchase 3,714, 3,714, 3,714, 1,857,
600 and 3,714 Tyco common shares, respectively, at an exercise price of
$44.87735. Options are granted under the Tyco International Ltd. Long Term
Incentive Plan and have a term of ten years from date of grant. The options
valued at $35,000 that all non employee directors receive each year vest and
become exercisable one year from the date of grant; the options that directors
elect to receive in lieu of cash fees are immediately vested and exercisable.
The exercise price of all such options is equal to the average market price of
Tyco common shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF TYCO AND TYCO MANAGEMENT
The following table sets forth, as of November 30, 1998 (except as otherwise
indicated), the beneficial ownership of Tyco common shares by (i) those person
known by Tyco to own beneficially more than 5% of Tyco's outstanding common
shares; (ii) each of the current directors of Tyco; (iii) each of the executive
officers named under "Executive Compensation" below; and (iv) all directors and
executive officers of Tyco as a group.
<TABLE>
<CAPTION>
NUMBER OF TYCO COMMON
SHARES BENEFICIALLY % OF CLASS
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNED(1) BENEFICIALLY OWNED
- -------------------------------------------------------------- ------------------------- -------------------
<S> <C> <C>
FMR Corp.(2)..................................................
82 Devonshire Street
Boston, Massachusetts 02109 72,852,000 12.4%
Equitable Companies, Inc.(3)..................................
1345 Avenue of the Americas, 39th Floor
New York, New York 10105 46,938,000 8.0%
Massachusetts Financial Services Co.(4).......................
500 Boylston Street
Boston, Massachusetts 02116 33,439,000 5.7%
L. Dennis Kozlowski........................................... 3,170,954(5) *
Michael A. Ashcroft........................................... 4,141,666(6) *
Joshua M. Berman.............................................. 72,090(7) *
Richard S. Bodman............................................. 35,056(8) *
John F. Fort III.............................................. 123,860(9) *
Stephen W. Foss............................................... 66,792(10) *
Richard A. Gilleland.......................................... 29,682(11) *
Philip M. Hampton............................................. 54,376(12) *
James S. Pasman, Jr........................................... 8,157(13) *
W. Peter Slusser.............................................. 8,741(14) *
Frank E. Walsh, Jr............................................ 113,231(15) *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF TYCO COMMON
SHARES BENEFICIALLY % OF CLASS
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNED(1) BENEFICIALLY OWNED
- -------------------------------------------------------------- ------------------------- -------------------
<S> <C> <C>
Jerry R. Boggess.............................................. 198,771(16) *
Mark H. Swartz................................................ 1,296,001(17) *
Neil R. Garvey................................................ 178,961(18) *
Robert P. Mead................................................ 297,587(19) *
Mark A. Belnick............................................... 100,000(20) *
Richard Meelia................................................ 221,797(21) *
Robert Ripp (director nominee)................................
All directors and executive officers as a group ( persons)...
</TABLE>
- ------------------------
* Less than one percent.
(1) The amounts and percentages shown are amounts and percentages owned
beneficially as of November 30, 1998 (except for FMR, Equitable Companies
and Massachusetts Financial Services, where the amounts and percentages as
of September 30, 1998), based on information furnished or publicly disclosed
by the persons named. For purposes hereof, a person is deemed to be the
beneficial owner of shares if such person, either alone or with others, had
the power to vote or to dispose of such shares. There were Tyco common
shares outstanding as of , 1998.
(2) In a Form 13F, with information as of September 30, 1998, FMR Corp., the
parent company of the Fidelity Investments organization, reported that it
has sole dispositive power over 72,282,042 shares, and sole voting power
over 1,845,396 shares.
(3) In a Form 13F, with information as of September 30, 1998, Equitable
Companies, Inc. reported that it has sole dispositive power over 46,568,467
shares, sole voting power over 25,102,295 shares, and shared voting power
over 9,833,007 shares, all of which shares are held for the benefit of its
separate accounts.
(4) In a Form 13F, with information as of September 30, 1998, Massachusetts
Financial Services Co. reported that it has sole dispositive power over
33,045,915 shares and sole voting power over 32,918,183 shares.
(5) The amount shown includes 500,000 shares which are held by a family
partnership of which Mr. Kozlowski is the sole general partner and 2,096,000
shares that Mr. Kozlowski has the right to acquire within 60 days of
November 30, 1998 through the exercise of stock options. The amount shown
excludes 2,000,000 options awarded to Mr. Kozlowski under the Tyco
International Ltd. Long Term Incentive Plan, which will become exercisable
over a two year period beginning on July 17, 1999, and 401,200 shares held
in a charitable remainder trust, as to which Mr. Kozlowski disclaims
ownership.
(6) The amount shown consists of 4,137,290 shares held by or on behalf of the
trustees of an irrevocable trust in which Mr. Ashcroft is beneficially
interested and 4,376 shares that Mr. Ashcroft has the right to acquire
within 60 days of November 30, 1998 through the exercise of stock options.
The amount shown excludes 2,000 options awarded to Mr. Ashcroft under the
Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999.
(7) The amount shown includes 64,000 shares held in two charitable remainder
trusts of which Mr. Berman is co-trustee and Mr. Berman and members of his
immediate family are life beneficiaries. The amount shown also includes
8,090 shares that Mr. Berman has the right to acquire within 60 days of
November 30, 1998 through the exercise of stock options. The amount shown
excludes 2,000 options awarded to Mr. Berman under the Tyco International
Ltd. Long Term Incentive Plan, which will become exercisable on October 1,
1999. The law firm of Kramer Levin Naftalis & Frankel LLP has performed and
will perform legal services for Tyco during the current fiscal year.
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<PAGE>
(8) The amount shown includes 8,090 shares that Mr. Bodman has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Bodman under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999.
(9) The amount shown includes 4,376 shares that Mr. Fort has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Fort under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999. The amount shown also includes 1,080 shares
which are held by Mr. Fort as custodian for his child.
(10) The amount shown includes 8,090 shares that Mr. Foss has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Foss under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999. The amount shown also includes 21,428 shares
which are held by the Foss Manufacturing Company Pension Plan and 7,500
shares which are held by the A.S. Foss Foundation.
(11) The amount shown includes 4,376 shares that Mr. Gilleland has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 1,000,000 options awarded to Mr.
Gilleland under the Tyco International Ltd. Long Term Incentive Plan, which
will become exercisable over a period ending on October 1, 2000. The amount
shown also includes 628 shares which are held in accounts for the benefit of
Mr. Gilleland's immediate family.
(12) The amount shown includes 4,376 shares that Mr. Hampton has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Hampton
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable on October 1, 1999.
(13) The amount shown includes 6,233 shares that Mr. Pasman has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Pasman under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999.
(14) The amount shown includes 4,976 shares that Mr. Slusser has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Slusser
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable on October 1, 1999.
(15) The amount shown includes 8,090 shares that Mr. Walsh has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Walsh under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999.
(16) The amount shown includes 90,785 shares that Mr. Boggess has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 208,333 options awarded to Mr. Boggess
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending on October 1, 2001.
(17) The amount shown includes 1,043,001 shares that Mr. Swartz has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 999,999 options awarded to Mr. Swartz
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending on October 28, 2000.
(18) The amount shown includes 64,250 shares that Mr. Garvey has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 175,000 options awarded to Mr. Garvey
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending on October 1, 2001.
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<PAGE>
(19) The amount shown includes 84,917 shares that Mr. Mead has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 208,333 options awarded to Mr. Mead under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable over a period ending on October 1, 2001.
(20) The amount shown excludes 500,000 options awarded to Mr. Belnick under the
Tyco International Ltd. Long Term Incentive Plan, which will be exercisable
over a period ending September 15, 2001.
(21) The amount shown includes 86,949 shares that Mr. Meelia has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 208,333 options awarded to Mr. Meelia
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending October 1, 2001.
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<PAGE>
TYCO EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below presents the annual and long-term compensation for services
in all capacities to Tyco and its subsidiaries for the Chief Executive Officer
and the other four most highly compensated executive officers of Tyco (the "Tyco
Named Executive Officers") during fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION SHARES
---------------------------------- RESTRICTED UNDERLYING LONG-TERM
CASH STOCK STOCK STOCK INCENTIVE
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS ($) BONUS AWARD(S) ($) OPTIONS ($) PAYOUTS ($)
- ----------------------------- --------- --------- ------------ --------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$
$
L. Dennis Kozlowski.......... 1998
Chairman & CEO, 1997
Tyco International Ltd.
Jerry Boggess................ 1998 $
President, Tyco Fire and
Security Services
Mark H. Swartz............... 1998 $
EVP & CFO Tyco 1997 $
International Ltd.
Neil Garvey.................. 1998 $
President, Tyco Submarine
Systems Ltd.
Richard Meelia............... 1998 $
President, The Kendall
Company
<CAPTION>
ALL
OTHER
NAME & PRINCIPAL POSITION COMPENSATION
- ----------------------------- ----------------
<S> <C>
L. Dennis Kozlowski..........
Chairman & CEO,
Tyco International Ltd.
Jerry Boggess................
President, Tyco Fire and
Security Services
Mark H. Swartz...............
EVP & CFO Tyco
International Ltd.
Neil Garvey..................
President, Tyco Submarine
Systems Ltd.
Richard Meelia...............
President, The Kendall
Company
</TABLE>
- ------------------------------
OPTION GRANTS
The following table shows all grants of stock options to the Tyco Named
Executive Officers during fiscal 1998 under the Tyco International Ltd.
Long-Term Incentive Plan.
OPTIONS GRANTED IN THE LAST FISCAL YEAR (1998)
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/ SHARE) DATE VALUE
- ----------------------------------------- ------------------- ----------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
L. Dennis Kozlowski......................
Jerry Boggess............................
Mark H. Swartz...........................
Neil R. Garvey...........................
Richard Meelia...........................
</TABLE>
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<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
Shown below is information with respect to aggregate option exercises by the
Tyco Named Executive Officers in the fiscal year ended September 30, 1998 and
with respect to unexercised stock options held by them at September 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUE (1998)
<TABLE>
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS AT IN-THE-MONEY OPTIONS HELD
SHARES FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE ($) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- -------------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. Dennis Kozlowski.......
Jerry Boggess.............
Mark H. Swartz............
Neil R. Garvey............
Richard Meelia............
</TABLE>
CERTAIN DEFINED BENEFIT PLANS
Except for Messrs. Kozlowski and Swartz, Tyco and its subsidiaries do not
maintain any defined benefit or actuarial retirement plans in which the Tyco
Named Executive Officers participate. Messrs. Kozlowski and Swartz participate
in individual Executive Retirement Arrangements maintained by Tyco (the "ERA").
Under the ERA, Mr. Kozlowski has a present value fixed lifetime monthly benefit
of $ , payable at his normal retirement age of 65. Mr. Swartz's present
value fixed lifetime benefit at his normal retirement age of 65 is $ .
Retirement benefits are available at earlier ages and alternative forms of
benefits can be elected. Any such variations would be actuarially equivalent to
the fixed lifetime benefit starting at age 65.
EMPLOYMENT CONTRACTS, TERMINATION AGREEMENTS, CHANGE OF CONTROL ARRANGEMENTS
None of the Tyco Named Officers has an employment contract, termination
agreement, or change of control arrangement.
KEY EMPLOYEE CORPORATE LOAN PROGRAM
Former Tyco established the Former Tyco 1983 Key Employee Corporate Loan
Program, as amended, to encourage ownership of Tyco common shares on favorable
terms. Loans made by subsidiaries of Tyco are primarily used for the payment of
taxes due as a result of the vesting of ownership of shares granted under Former
Tyco's restricted stock ownership plans.
The Compensation Committee administers the loan program and authorizes
loans, which may not exceed the amount allowable as provided by any regulation
of the United States Treasury or other state or federal statute. Loans may be
required to be secured by Tyco common shares owned by the employee or may be
unsecured. Loans under the loan program generally bear interest at Tyco's
incremental short-term borrowing rate (5.75% for 1998). Loans are generally
repayable in ten years or when the participant reaches age 69, whichever occurs
first, except that earlier payments must be made in the event that the
participant's employment with Tyco or its subsidiaries terminates. The
participant is also required to make loan payments upon the sale or other
disposition of Tyco common shares (other than gifts to certain family members)
with respect to which loans have been granted.
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<PAGE>
At September 30, 1998, the amount of loans outstanding under the Loan
Program totaled:
COMPLIANCE WITH REPORTING REQUIREMENTS. Tyco believes that, during fiscal
1998, all filing requirements under Section 16(a) of the Exchange Act applicable
to its officers, directors and beneficial owners of more than 10 percent of
equity securities were complied with on timely basis.
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<PAGE>
TYCO CAPITAL INCREASE PROPOSAL
At the Tyco special general meeting, Tyco shareholders will be asked to
approve an increase in the authorized share capital of Tyco to $625,000,000 by
creating an additional 996,250,000 Tyco common shares of the nominal value of
US$0.20 each, thus increasing the number of authorized Tyco common shares from
1,503,750,000 to 2,500,000,000 to authorize the issue or other disposal by the
Tyco Board of such shares and to amend consequentially the Bye-Laws of Tyco. The
Tyco capital increase proposal is conditioned on the consummation of the merger.
The merger is not conditioned on approval for the Tyco capital increase
proposal, and Tyco has sufficient authorized but unissued shares for delivery in
connection with the merger even if the Tyco capital increase proposal is not
approved.
The Tyco capital increase proposal contemplates the creation of an
additional 996,250,000 Tyco common shares. The Tyco Board believes that as, a
result of the large number of shares to be issued in connection with the merger,
it is desirable to have available additional authorized Tyco common shares for
future stock dividends, employee benefit plans, financings, acquisitions and
other corporate purposes. The Tyco Board would have the discretion to issue the
additional Tyco common shares from time to time for any corporate purpose
without further action by shareholders, except as may be required by stock
exchange rules, and without first offering such shares to shareholders. Tyco has
no present plan to issue the new shares to be authorized.
A schedule to Tyco's Bye-Laws currently sets forth particulars of Tyco's
authorized share capital. As part of the capital increase proposal this schedule
will be revised to reflect the increase in common shares, as set forth above.
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE FOR THE
TYCO CAPITAL INCREASE PROPOSAL.
TYCO LTIP SHARE INCREASE PROPOSAL
At the Tyco special general meeting, Tyco shareholders will also be asked to
approve an increase in the number of Tyco common shares in respect of which
grants may be made under the Tyco International Ltd. Long Term Incentive Plan
from 44 million to . Presently, only shares remain available for
grant under the plan. Tyco believes that the anticipated increase in the number
of employees who may be eligible for grants under the plan as a result of the
merger and other recent acquisitions makes it advisable to increase the number
of Tyco common shares in respect of which awards may be made under the plan. If
the merger does not occur, the increase will not become effective.
The following summary of the plan assumes the proposed increase in the
shares under the plan becomes effective. The summary is qualified in its
entirety by reference to the full text of the plan, a copy of which is attached
as Annex E to this Joint Proxy Statement/Prospectus.
GENERAL. The plan provides for the grant of options, stock appreciation
rights and other stock-based awards to officers, key employees and directors of
Tyco and its subsidiaries. The plan is a discretionary plan, and, accordingly,
it is not possible to presently determine the amount or form of any award which
will be available for grant to any individual during the term of the plan. The
maximum number of shares in respect of all awards which may be granted under the
plan during its term is million shares. Options granted by companies
acquired by Tyco or its subsidiaries and assumed by Tyco may be administered
under the plan but do not count toward the total number of Tyco common shares in
respect of which grants may be made under the plan.
The maximum number of Tyco common shares available for awards under the plan
may be adjusted in the event of certain capital changes. Shares related to
grants that are forfeited, terminated or cancelled become eligible for re-grant
under the plan. No awards may be issued under the plan after June 30, 2007. The
maximum number of Tyco common shares in respect of which awards may be made
under the plan to any individual in a single year is six million shares.
100
<PAGE>
Stock options with respect to Tyco common shares have previously been
made under the plan (excluding grants that have been forfeited, terminated or
cancelled), stock options with respect to Tyco common shares remain
outstanding and awards with respect to Tyco common shares remain
available for grant under the plan (assuming approval of the increase proposal).
In addition, outstanding stock options with respect to Tyco common
shares have been previously assumed by Tyco from acquired companies and are
administered under the plan, and, upon consummation of the merger, AMP stock
options with respect to an additional Tyco common shares are expected to
be assumed by Tyco and administered under the plan. Accordingly, the total
number of Tyco common shares issuable under stock options which will be
outstanding under the plan following the merger is , representing
approximately percent of the Tyco common shares that will be outstanding
following the merger. These numbers do not include Tyco common shares in
respect of awards which have been granted under the Tyco International Ltd. Long
Term Incentive Plan II or Tyco common shares in respect of awards which
are available for grant under this second long term incentive plan. The terms of
the second plan are substantially similar to the terms of the original plan,
except that it does not provide for incentive stock options and executive
officers and directors are not eligible to participate in such plan. Shareholder
approval of grants under the second plan is not required under NYSE rules. Tyco
may determine to administer some or all of the AMP stock options assumed as a
result of the merger under the second plan.
PLAN ADMINISTRATION. The plan is administered by the Compensation Committee
of the Tyco Board. Each member of the Tyco Compensation Committee is a
"non-employee director," within the meaning of Rule 16b-3 promulgated under the
Exchange Act, to the extent necessary to comply with that Rule. Under the terms
of the plan, the Tyco Compensation Committee in its sole discretion may grant
awards in such amounts and in such of the forms permitted by the plan as it
deems appropriate. The permissible forms of awards under the plan are: stock
options (both incentive stock options and other stock options); stock
appreciation rights; performance awards; dividend equivalent rights; and other
stock-based grants. The material terms and features of the various forms of
awards are set forth below.
INCENTIVE STOCK OPTIONS. These are stock options that are granted pursuant
to the restrictions of Section 422 of the U.S. Internal Revenue Code. Generally,
incentive stock options may not be exercised more than ten years after the date
they are granted and may not have an option price less than 100% of the fair
market value of a Tyco common share on the date they are granted. Payment of the
option price may be made in cash, Tyco common shares, other property or any
combination thereof, as determined by the Tyco Compensation Committee.
OTHER STOCK OPTIONS. These are options to purchase Tyco common shares under
terms other than those applicable to incentive stock options. Such options shall
have such terms and conditions as are established by the Tyco Compensation
Committee, except that the exercise price for such options generally may not be
less than the fair market value of a Tyco common share on the date of grant. If
the award requires that the option be paid for by the recipient, or if a
discounted exercise price is expressly granted in lieu of a reasonable amount of
salary or bonus, the exercise price may be lower than the fair market value of a
Tyco common share on the date of grant, but may in no event be less than 85% of
such fair market value. Payment of the option price may be made in cash, Tyco
common shares or any combination thereof, as determined by the Tyco Compensation
Committee.
STOCK APPRECIATION RIGHTS. These are rights to receive an amount equal to
the appreciation of Tyco common shares over a grant price established at the
time of award. The grant price generally may not be less than the fair market
value of a Tyco common share on the date of grant, except that if the award
requires that the stock appreciation right be paid for by the recipient, or if a
discounted grant price is expressly granted in lieu of a reasonable amount of
salary or bonus, the grant price may be established at not less than 85% of the
fair market value of a Tyco common share on the date of grant. Stock
appreciation rights shall have such other terms and conditions as are
established by the Tyco Compensation Committee,
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may be granted in tandem with options or separately and may be terminated by the
Tyco Compensation Committee.
PERFORMANCE AWARDS. These are rights to receive amounts at a future date
based upon the Tyco's performance during the period between the date of grant
and such future date. Performance criteria with respect to which awards may be
issued under the plan include stock price, market share, sales, earnings,
earnings per share, earnings before income taxes, cash flow and return on
equity. The amount of a performance award may be denominated or payable in cash,
Tyco common shares or other securities or property.
DIVIDEND EQUIVALENT RIGHTS. These are rights to receive payments equal to
dividends paid on a number of Tyco common shares determined by the Tyco
Compensation Committee. The Tyco Compensation Committee may provide that such
payments will be deemed to have been reinvested in additional Tyco common shares
or otherwise reinvested.
OTHER STOCK-BASED GRANTS. These are awards based on, or related to, Tyco
common shares that do not constitute any of the awards described above. Such
awards shall have such terms and conditions as are established by the Tyco
Compensation Committee.
The number and type of shares with respect to which awards may be made under
the plan, the number of Tyco common shares subject to outstanding options, the
exercise price of options, and the grant price of stock appreciation rights may
be adjusted by the Tyco Compensation Committee in the event of certain corporate
transactions or events, including a stock dividend, recapitalization,
subdivision, consolidation or reduction of capital, reorganization, merger,
amalgamation, scheme of arrangement, split-up, spin-off or combination involving
Tyco or a repurchase or exchange of Tyco shares or similar event. The Tyco
Compensation Committee is also authorized to make certain adjustments (i) to
ensure comparability with the terms of any awards assumed in connection with a
corporate acquisition, (ii) to reflect certain unusual events such as changes in
applicable law or accounting principles, or (iii) in the event of a "change in
control" of Tyco, as defined in the plan (including, in such event, accelerating
the time of exercise or payment of awards under the plan).
The Board may terminate or amend the plan, except that any such amendment
shall require shareholder approval if (i) the amendment would increase the
number of Tyco shares available for awards under the plan, or (ii) such
shareholder approval is necessary to comply with applicable laws or regulatory
requirements.
TAX TREATMENT. The following is a brief summary of the U.S. federal income
tax rules currently generally applicable to stock options granted under the
plan. The grant of an incentive stock option will have no immediate tax
consequences to the optionee or to Tyco. The exercise of an incentive stock
option by the payment of cash to Tyco will generally have no immediate tax
consequences to the optionee (except to the extent it is an adjustment in
computing alternative minimum taxable income) or to Tyco. If an optionee holds
the shares acquired pursuant to the exercise of an incentive stock option for
the required holding period, the optionee generally will realize long-term
capital gain or long-term capital loss upon a subsequent sale of the shares in
the amount of the difference between the amount realized upon the sale and the
purchase price of the shares (i.e., the exercise price). In such a case, no
deduction will be allowable to Tyco in connection with the grant or exercise of
the incentive stock option or the sale of Tyco common shares acquired pursuant
to such exercise.
If, however, an optionee disposes of the shares prior to the expiration of
the required holding period (a "disqualifying disposition"), the optionee will
recognize ordinary income (and Tyco will be entitled to a deduction) equal to
the excess of the fair market value of the shares on the date of exercise (or
the proceeds of the disposition, if less) over the exercise price. Special rules
apply in the event all or a portion of the exercise price is paid in the form of
stock.
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The grant of a stock option other than an incentive stock option (a
"non-qualified stock option") will have no immediate tax consequences to the
optionee or to Tyco. Upon the exercise of a non-qualified stock option, the
optionee will recognize ordinary income (and Tyco will be entitled to a
deduction) in an amount equal to the excess of the fair market value of Tyco
common shares on the date of the exercise of the option over the exercise price.
The optionee's tax basis in the shares will be the exercise price plus the
amount of ordinary income recognized by the optionee, and the optionee's holding
period will commence on the date of exercise. Special rules apply in the event
all or a portion of the exercise price is paid in the form of stock. Other
special rules may also apply to a participant who is subject to Section 16 of
the Securities Exchange Act of 1934, as amended.
Upon a subsequent sale of shares acquired pursuant to the exercise of a
non-qualified stock option, any difference between the optionee's tax basis in
the shares and the amount realized on the sale will be treated as long-term or
short-term capital gain or loss, depending on the holding period of the shares.
Certain limitations apply to Tyco's deduction of compensation payable to the
person serving as its Chief Executive Officer or to any of its four other most
highly compensated executives in office as of the end of the year in which such
compensation would otherwise be deductible. In general, Tyco may not deduct
compensation, other than "performance-based" compensation, payable to such an
executive in excess of $1 million for any year. It is expected that most awards
granted under the plan will qualify as performance-based compensation and hence
will be fully deductible. Nonetheless, Tyco will weigh the benefits of
compliance with Section 162(m) of the U.S. Internal Revenue Code against the
burdens thereof, and reserves the right to pay compensation that may not be
fully deductible if it is determined to be in Tyco's interest to do so.
The following tables summarize the stock options currently outstanding under
Tyco's long term incentive plans, showing the number of options and the range of
exercise prices. Each such option will continue to vest according to the
schedule applicable upon grant. (Most of the options vest in three equal
installments commencing on the first anniversary of the date of grant.) The data
shown for options outstanding reflect the number of Tyco common shares with
respect to which options have been granted, without giving effect to the merger.
<TABLE>
<CAPTION>
OPTIONS RANGE OF EXERCISE
OUTSTANDING (1) PRICES
--------------- ----------------------
<S> <C> <C>
L. Dennis Kozlowski......................................................
Jerry Boggess............................................................
Mark H. Swartz...........................................................
Neil R. Garvey...........................................................
Richard Meelia...........................................................
All Executive Officers...................................................
All employees other than Executive Officers..............................
Total options outstanding................................................
</TABLE>
- ------------------------
(1) As of .
Approval of the option shares increase proposal by Tyco shareholders is not
required under the merger agreement and is not a condition to the merger.
Whether or not the LTIP share increase proposal is approved or the merger is
consummated, the existing Tyco stock options will remain outstanding in
accordance with their terms.
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE FOR THE
TYCO OPTION SHARES INCREASE PROPOSAL.
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COMPARISON OF SHAREHOLDER RIGHTS
The rights of Tyco shareholders are governed by Bermuda law, the Tyco's
Memorandum of Association and the Tyco Bye-Laws. The rights of AMP shareholders
are governed by Pennsylvania law, the AMP Restated Articles of Incorporation and
the AMP Bylaws. Upon consummation of the merger, Bermuda law, the Tyco
Memorandum of Association and the Tyco Bye-Laws will govern the rights of AMP
shareholders who become Tyco shareholders. The following is a summary of certain
of the principal differences between the current rights of AMP shareholders and
those of Tyco shareholders following the merger.
The following summary of shareholder rights is not intended to be complete,
and it is qualified by reference to Bermuda law, Pennsylvania law, the Tyco
Memorandum, the Tyco Bye-Laws, the AMP Restated Articles of Incorporation and
the AMP Bylaws. Copies of the Tyco Memorandum of Association, the Tyco Bye-Laws,
the AMP Restated Articles of Incorporation and the AMP Bylaws have been filed
with the SEC and will be sent to holders of Tyco common shares and AMP common
stock upon request. See "Where You Can Find More Information."
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION BY CONSENT. The AMP Bylaws provide
that special meetings of the shareholders may be called at any time by the
Chairman of the Board, the Chief Executive Officer, or by resolution of the
Board of Directors. Pennsylvania law generally does not permit shareholders of a
corporation such as AMP to call a special meeting. However, the AMP Restated
Articles of Incorporation do provide that any action which might have been taken
by a vote of the shareholders at a shareholder meeting may be taken without a
meeting, upon the written consent of shareholders who would have been entitled
to cast the minimum number of votes necessary to authorize such action at a
meeting at which all shareholders entitled to vote were present and voting.
The Tyco Bye-Laws provide that the directors of Tyco may call a special
general meeting at any time on not less than five days' notice. Bermuda law and
the Tyco Bye-Laws also require the Tyco Board, on the written request of Tyco
shareholders holding at least 10% of the paid-up capital of Tyco entitled to
vote at a general meeting, to convene a special general meeting of Tyco. If the
directors do not convene a meeting within twenty-one days from the date of the
request, the requesting shareholders, or any of them representing more than
one-half of the total voting rights of all of them, may themselves convene a
meeting, but any meeting so convened may not be held later than three months
from the date of the request. Pursuant to Bermuda law, action by written consent
of shareholders is permitted (with certain exceptions) only where the written
resolution is signed by ALL of the shareholders who would be entitled to attend
and vote at a meeting.
QUORUM. The AMP Bylaws provide that the presence, in person or by proxy, of
the holders of shares entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter to be acted upon at a
meeting constitutes a quorum at such meeting for purposes of acting on such
matter.
The Tyco Bye-Laws provide that the presence, either in person or by proxy,
of two holders of Tyco common shares constitutes a quorum for the transaction of
business at any general meeting.
VOTING RIGHTS. Pursuant to the AMP Bylaws, shareholders are entitled to one
vote for each share of common stock held by such shareholder on all matters on
which shareholders generally are entitled to vote. Under the AMP Bylaws, except
as otherwise provided by the AMP Restated Articles of Incorporation or by law,
all actions to be taken by a vote of the shareholders are determined by a
majority of the votes cast on such action. Pursuant to the AMP Restated Articles
of Incorporation, no (i) merger, consolidation or share exchange to which AMP is
a party; (ii) sale, lease, exchange or other disposition of all or substantially
all of the properties or assets of AMP; (iii) voluntary dissolution of AMP; (iv)
amendment of the AMP Restated Articles of Incorporation; or (v) agreement, plan
or resolutions providing for actions described in (i) through (iv) above shall
be valid or binding upon AMP unless such corporate action shall have been
approved in compliance with Pennsylvania law and the AMP Restated
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Articles of Incorporation and shall have been authorized by the affirmative vote
of at least sixty-six and two-thirds percent (66 2/3%) of the votes cast by all
shareholders entitled to vote thereon. The above-described voting requirements
shall not apply to any transaction listed in (i) though (v) above if either of
the following apply with respect to such transaction: (i) the Pennsylvania law
permits corporate action with respect to any such transaction to be taken by the
Board of Directors, or any committee thereof, and does not require a vote of
shareholders; or (ii) the transaction shall be a "business combination" with an
"interested shareholder" as such terms are defined in the Pennsylvania law and
shall be subject to a vote of shareholders in the manner prescribed by
Pennsylvania law. Pennsylvania law provides that unless otherwise restricted in
a company's articles of incorporation or bylaws, in the election of directors,
voting need not be by ballot unless required by vote of the shareholders before
the voting for election of directors begins. There are no other provisions under
Pennsylvania law requiring ballots at shareholders meetings. The AMP Bylaws
provide that election of directors must be by ballot.
Under Bermuda law questions proposed for consideration at a company's
general meeting are decided by a simple majority vote or by such majority as the
bye-laws of the company may prescribe except where a larger majority is required
by law. Any question proposed for consideration at a general meeting may be
decided on a show of hands, in which each shareholder present in person or by
proxy is entitled to one vote and casts such vote by raising his or her hand,
unless, before or on the declaration of the result of a show of hands, a poll is
demanded by (i) the Chairman of the meeting; (ii) at least three shareholders
present in person or represented by proxy; (iii) any shareholder or shareholders
present in person or represented by proxy holding between them at least 10% of
the total voting rights of all shareholders having the right to vote at the
meeting; or (iv) a shareholder or shareholders present in person or by proxy
holding shares in such company conferring the right to vote at such meeting and
on which an aggregate sum has been paid up equal to at least 10% of the total
sum paid up on all such shares entitled to vote. Where a poll has been demanded,
each shareholder present in person or represented by proxy at the meeting is
entitled to one vote for each share held by him or her.
The Tyco Bye-Laws provide that a Tyco shareholder is not entitled (except as
proxy for another shareholder) to be present or vote at any meeting, either
personally or by proxy, in respect of any share held by the shareholder (whether
alone or jointly with any other person) on which there shall not have been paid
all calls for the time being due and payable, together with interest and
expenses. The Tyco Bye-Laws also provide that any person who is known or
believed by Tyco to be interested in Tyco common shares, and who has failed to
comply with a notice from Tyco requesting specified information regarding such
person's interest in Tyco common shares, will lose voting rights for the period
such person fails to comply with the notice, plus an additional ninety days. In
addition, a shareholder loses voting rights if such shareholder has failed to
comply with a notice under the Tyco Bye-Laws requiring the shareholder to make
an offer in accordance with the City Code on Takeovers and Mergers of the United
Kingdom (the "City Code"), as applied by the Tyco Bye-Laws, or, as the case may
be, in accordance with the Tyco Bye-Laws. A Tyco shareholder also loses the
right to vote for a period of 180 days if such shareholder acquires three
percent or more of the issued share capital of any class of Tyco common shares,
either alone or in concert with others, and fails to notify Tyco of such
acquisition within two days or, already possessing three percent or more, the
shareholder fails to notify Tyco of a change in the shareholder's interests
amounting to one percent or more of the share capital of any class, and such
shareholder is so notified by the Tyco Board of such loss of right.
Both Pennsylvania and Bermuda permit but do not mandate cumulative voting,
but neither AMP nor Tyco shareholders have cumulative voting rights in the
election of directors.
SHAREHOLDER PROPOSALS. The AMP Bylaws provide that a notice (containing
certain information specified in the Bylaws) of any nominations of persons for
election to the Board of Directors or of any other business to be brought before
an annual meeting of shareholders by a shareholder must be provided in writing
to the Secretary at the principal executive offices of AMP generally at least 45
days in advance of
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the date in the then-current year that corresponds to the date on which AMP
first mailed its Notice of Annual Meeting, Proxy Statement and proxy card for
the prior year's annual meeting.
Under Bermuda law, a shareholder wishing to move a resolution at an annual
general meeting of a company must give notice to the company of the resolution
at least six weeks before the meeting. If after notice has been given an annual
general meeting is called for a date less than six weeks after the giving of
that notice, the notice shall be deemed to have been given in time. Only
shareholders who represent not less than one-twentieth of the total voting
rights of shareholders having a right to vote at the meeting or who are one
hundred or more in number may requisition a resolution at an annual general
meeting. The Tyco Bye-Laws provide that advance written notice to the Secretary
of Tyco of shareholder nominations of persons for election to the Tyco Board is
required. Such notice must be received by the Secretary of Tyco not less than
six and not more than twenty-eight clear days before the day appointed for the
meeting at which such election is to be held. Such notice must be given by a
shareholder (not being the person to be proposed) entitled to attend and vote at
the meeting for which such notice is given, and must also include notice in
writing, signed by the person to be proposed, of such person's willingness to be
elected.
INSPECTION RIGHTS. Under Pennsylvania law, every shareholder, upon written
verified demand stating the proper purpose for the requested inspection, has a
right to examine a company's share register, books and records of account, and
records of the proceedings of the incorporators, shareholders and directors and
to make copies or extracts therefrom for any purpose reasonably related to the
interest of the person as a shareholder. If the company refuses to permit such
an inspection or does not reply to the shareholder's inspection demand within
five business days after the demand has been made, then the shareholder may
apply to an appropriate court of Pennsylvania for an order to compel such
inspection.
Bermuda law provides the general public with a right of inspection of a
Bermuda company's public documents at the office of the Registrar of Companies
in Bermuda, and provides a Bermuda company's shareholders with a right of
inspection of such company's bye-laws, minutes of general (shareholder)
meetings, and audited financial statements. The register of shareholders is also
open to inspection by shareholders free of charge and, upon payment of a small
fee, by any other person. A Bermuda company is required to keep at its
registered office a register of its directors and officers, which is open for
inspection by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records.
DISTRIBUTIONS/DIVIDENDS. Under Pennsylvania law, AMP may pay dividends and
purchase, redeem, or otherwise acquire its own shares unless, after giving
effect thereto, it would be unable to pay its debts as they become due in the
usual course of business, or its total assets would be less than the sum of its
total liabilities plus (unless otherwise provided in the company's articles of
incorporation) the amount that would be needed to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distributions.
Bermuda law provides that a dividend may not be declared if there are
reasonable grounds for believing that the company is, or after such payment
would be, unable to pay its liabilities as they become due, or if the realizable
value of the company's assets would thereby be less than the aggregate of its
liabilities and its issued share capital and share premium accounts. Under the
Tyco Bye-Laws, dividends may only be paid out of profits available for the
purpose, and a shareholder's right to receive dividends is suspended during such
time as the shareholder is disqualified from voting, as stated above under
"Voting Rights."
DERIVATIVE ACTIONS. Pursuant to Pennsylvania law, upon compliance with
certain requirements, a shareholder may institute a derivative suit in the right
of the corporation against the present or former officers or directors of a
corporation because the corporation refused to enforce rights that could be
asserted by the corporation, if he or she was a shareholder at the time of the
transaction complained of, or if his or her stock thereafter devolved upon him
or her by operation of law from a person who was a shareholder at that time.
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The Bermuda courts ordinarily would be expected to follow English precedent,
which would permit a shareholder to commence a derivative action in the name of
the company to remedy a wrong done to the company only (a) where the act
complained of is alleged to be beyond the corporate power of the company or
illegal; (b) where the act complained of is alleged to constitute a fraud
against the minority shareholders by those controlling the company, provided
that the majority shareholders have used their controlling position to prevent
the company from taking action against the wrongdoers; (c) where an act requires
approval by a greater percentage of the company's shareholders than actually
approved it; or (d) where there is an absolute necessity to waive the general
rule that a shareholder may not bring such an action in order that there not be
a violation of the company's memorandum of association or bye-laws. The actions
summarized above are generally recognized as exceptions to the rule in Foss v.
Harbottle, under which only the company could initiate an action for a wrong
done to the company.
There is a statutory remedy under Bermuda law which enables a shareholder
who complains that the affairs of a company are being or have been conducted in
a manner oppressive or prejudicial to some part of the shareholders, including
himself or herself, to petition the court, which may, if it is of the opinion
that to wind up a company would unfairly prejudice those shareholders, but that
otherwise the facts would justify a winding up order on just and equitable
grounds, make such order as it thinks fit. Bermuda law also provides that a
company may be wound up by the court if the court is of the opinion that it is
just and equitable to do so. The latter provision is also available to minority
shareholders seeking relief from the oppressive conduct of the majority.
Traditionally, such relief has been granted in relatively limited circumstances.
BOARD OF DIRECTORS. Under Pennsylvania law, the board of directors of a
company shall consist of one or more members. The AMP Bylaws provide that the
number of directors which shall constitute the Board of Directors shall be at
least three, with the actual number to be determined from time to time by the
Board. As discussed below under "Amendments to Bye-Laws," shareholders of AMP
have the power to amend such bylaws and increase the size of the AMP Board. Such
amendment could be adopted by written consent as discussed above under "Special
Meetings of Shareholders; Action by Consent." The AMP Bylaws provide that
election of directors must be by ballot.
The Tyco Bye-Laws provide that the number of directors shall be such number,
not less than two, as the shareholders at a general meeting may from time to
time determine. The Tyco Bye-Laws require a director to be a shareholder.
CLASSIFICATION OF THE BOARD OF DIRECTORS. Both Pennsylvania and Bermuda
permit but do not mandate a classified board of directors, but neither AMP's nor
Tyco's constitutional documents provide for a classified board.
REMOVAL OF DIRECTORS; VACANCIES ON THE BOARD OF DIRECTORS. Under
Pennsylvania law, unless otherwise provided in the articles of incorporation or
a bylaw adopted by the shareholders, any director, class of directors or the
entire board of directors may be removed, with or without cause, by a vote of
shareholders entitled to elect such director or directors. Shareholder removal
of directors is restricted if the board of directors is classified, if
shareholders vote cumulatively when electing directors, or if the bylaws contain
provisions addressing shareholder removal of directors. The AMP Bylaws provide
that a director may be removed only for cause by the shareholders by the
affirmative vote of the shareholders entitled to cast at least a majority of the
votes entitled to be cast at any annual election of directors. The AMP Bylaws
also provide that any member of the AMP Board of Directors may be removed at any
time with or without cause by the unanimous vote or consent of shareholders
entitled to vote thereon. Directors may, by the affirmative vote of the majority
of the directors in office, remove a fellow director if he or she has been
judicially declared of unsound mind, has been convicted of an offense punishable
by imprisonment for more than one year or any other proper cause, or has failed
to accept the office. The court may remove a director upon application in a
derivative suit in case of fraudulent or dishonest acts, gross abuse of
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authority or discretion with reference to the company, or for any other proper
cause. Under Pennsylvania law, the board of directors may fill any vacancy on
the board of directors.
Bermuda law provides that, subject to a company's bye-laws, the shareholders
of a company may, at a special general meeting called for the purpose, remove a
director or the entire board of directors, with or without cause, by a majority
of the votes cast, subject to statutory due process requirements. The Tyco Bye-
Laws provide that any director may at any time be removed from office by a
written resolution signed by all the other directors. The remaining Tyco
directors have the power to appoint any qualified person to fill a casual
vacancy in the Board to hold office until the next following annual general
meeting, and the existing directors may act notwithstanding any vacancy in the
board of directors.
EXCULPATION OF DIRECTORS. The shareholders of a Pennsylvania corporation
may adopt a bylaw which eliminates, with certain exceptions, the personal
liability of a director, except when the director breaches or fails to perform
the duties of his or her office under Subchapter 17B of the Pennsylvania
Business Corporation Law of 1988, as amended, and the breach or failure to
perform constitutes self-dealing, willful misconduct, or recklessness. AMP has
adopted such a Bylaw.
Bermuda law permits a company to exempt a director from liability with
respect to any negligence, default, breach of duty, or breach of trust of which
a director may be guilty in relation to the company or any of its subsidiaries,
except for any liability resulting from fraud or dishonesty. The Tyco Bye-Laws
provide for such exculpation for directors except in relation to the director's
own willful negligence, willful default, fraud or dishonesty.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS. Pennsylvania law
provides that, unless otherwise restricted in its articles of incorporation or
bylaws, a company may indemnify persons against liability incurred by them by
reason of their position with the company if such person acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the company, and, with respect to any criminal action or
proceeding, the person had no reasonable cause to believe his or her conduct was
unlawful. Indemnification is mandatory if the person has been successful, on the
merits or otherwise, in defense of certain actions or proceedings against such
person.
The AMP Bylaws provide that the company shall indemnify, to the extent
permitted by applicable law and the provisions of the Bylaws, any person who is,
was or becomes a director, officer, employee or agent of the company and who is,
was or becomes a party to, or is threatened to be made a party to, any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action, suit or proceeding by or in the right of AMP to procure judgment in
its favor) and whether formal or informal, and any appeal therein in which such
person may be involved by reason of the fact that such person is or was a
director, officer, employee or agent of the company. In addition the AMP Bylaws
provide for indemnification against all expenses (including attorneys' fees and
disbursements), judgments, fines, and amounts paid in settlement actually or
reasonably incurred by such person in connection with such proceeding by reason
of the fact that such person is or was a director, officer, employee or agent of
the company. As permitted by Pennsylvania law, AMP's Bylaws provide that under
certain circumstances AMP shall advance the expenses of an indemnitee, subject
to AMP's right to recover the advances if ultimately it is determined that the
indemnitee is not entitled to be indemnified.
Unless otherwise restricted in its articles of incorporation or bylaws,
Pennsylvania law permits a company to purchase and maintain insurance on behalf
of any person who is or was a representative of the company against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not AMP would have the power to indemnify him or her
against such liability under the provisions of Subchapter 17D of the
Pennsylvania Business Corporation Law of 1988, as amended. The AMP Bylaws
provide that the company may, to the full extent permitted by law, purchase and
maintain insurance for directors, officers, employees or agents of the
corporation on behalf of any such person against any liability which may be
asserted against such person.
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Bermuda law permits a company to indemnify its officers and employees with
respect to any loss arising or liability attaching to such person by virtue of
any rule of law concerning any negligence, default, breach of duty, or breach of
trust of which the officer or employee may be guilty in relation to the company
or any subsidiary thereof, provided that the company shall not indemnify an
officer or employee against any liability arising out of that person's fraud or
dishonesty. The Tyco Bye-Laws provide that every director, secretary and other
officer of Tyco shall be indemnified by Tyco by reason of any contract entered
into, or any act or thing done by, such officer in the discharge of such
officer's duties, provided that the indemnity contained in the Tyco Bye-Laws
shall not extend to any matter which would render such indemnification void
under applicable Bermuda law.
Bermuda law provides that a company may purchase insurance for the benefit
of any officer of the company against any liability incurred by him or her as a
result of failure to exercise reasonable care, diligence or skill in discharging
his or her duties. The company may also purchase insurance indemnifying such
officer in respect of any loss arising or liability attaching to him or her by
virtue of any rule of law in respect of any negligence, default, breach of duty
or breach of trust in relation to the company.
AMENDMENTS TO CHARTER DOCUMENTS. Pennsylvania law provides that amendments
to the articles of incorporation of publicly owned companies may only be
proposed by its board of directors. Except for certain amendments which do not
require shareholder approval and unless a greater vote is required by its
articles of incorporation, amendments of the articles of incorporation of a
Pennsylvania company are to be approved by the affirmative vote of a majority of
the votes cast by all shareholders entitled to vote thereon and, if any class or
series of capital stock is entitled to vote as a class, the affirmative vote of
a majority of the votes cast in each such separate vote. Under the AMP Restated
Articles of Incorporation, any amendment of the Articles of Incorporation shall
be approved by the affirmative vote of at least sixty-six and two-thirds percent
(66 2/3%) of the votes cast by all shareholders entitled to vote thereon.
Bermuda law provides that a company may alter the provisions of its
memorandum of association by resolution passed at a general meeting of
shareholders of which due notice has been given and with the consent of the
Minister of Finance. Holders of at least 20% of any class of the company's share
capital may apply to the Bermuda Supreme Court to annul an alteration and, if
such application is made, the alteration shall not have effect except insofar as
it is confirmed by the Court. In addition, under Bermuda law a company may alter
the conditions of its memorandum of association so as to increase its share
capital, divide its shares into several classes, consolidate and divide its
share capital into shares of a larger par value, sub-divide its shares into
shares of a smaller par value, change the currency denomination of its share
capital, and cancel any shares which have not been taken or agreed to be taken
by any person and diminish the amount of its share capital by the amount so
canceled, if so authorized by a general meeting and by the company's bye-laws.
The Tyco Bye-Laws include such authority (except as to changing the currency
denomination of its share capital).
The Tyco Bye-Laws provide that the rights attached to any class of shares
(unless otherwise provided by the terms of such class) may be varied either by
the consent in writing of the holders of three-fourths of the shares of the
class, or by a resolution passed at a separate meeting of the holders of such
class of shares by holders of three-fourths of the shares of such class voting
at such separate meeting. The rules of a Tyco general meeting shall apply,
MUTATIS MUTANDIS, to such separate meeting, except that (i) the quorum required
shall be three or more persons holding or representing by proxy not less than
one-third of the issued shares of the class, except that at any adjourned
meeting two holders of the shares of the class present in person or by proxy
(whatever the number of shares held by them) shall constitute a quorum; (ii)
every holder of shares of the class shall be entitled on a poll to one vote for
every share of such class held; and (iii) any holder of shares of the class
present in person or by proxy may demand a poll. Pursuant to Bermuda law,
holders of at least 10% of a class of shares in a company in which the share
capital is divided into different classes may apply to the Bermuda Supreme Court
to cancel a variation otherwise approved by the requisite vote. Upon such
application, the variation shall not have effect unless and until it is
confirmed by the Court.
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AMENDMENTS TO BYE-LAWS. Under Pennsylvania law, the shareholders who are
entitled to vote have the power to adopt, amend and repeal its bylaws. The
authority to adopt, amend and repeal bylaws of a Pennsylvania company may be
expressly vested by the bylaws in the board of directors, subject to the power
of the shareholders to override such action and except that a board of directors
may not have the authority to adopt or change a bylaw on any subject that is
committed expressly to the shareholders under Pennsylvania law, unless the
articles of incorporation of that company give the board that authority. The AMP
Bylaws provide that all bylaws of the company may be amended or repealed by the
board, and new bylaws may be adopted by the shareholders or the board, except
that the board may not adopt, alter or repeal any bylaw that Pennsylvania law
specifies may be adopted only by shareholders, and the board may not alter or
repeal any bylaw adopted by shareholders which prescribes that such bylaw shall
not be altered or repealed by the board.
Pursuant to Bermuda law and the Tyco Bye-Laws, only the Tyco Board may amend
the Tyco Bye-Laws, provided that no such amendment will be operative unless and
until it is confirmed by the Tyco shareholders at a general meeting.
SHARE PURCHASES. Pennsylvania law permits a company or any of its
subsidiaries to purchase its own shares. Shares of a company owned, directly or
indirectly, by it and controlled, directly or indirectly, by the board of
directors of the company, as such shall not be voted. Generally, funds may be
used for this purpose if such funds could be used for payment of a dividend.
Bermuda law also permits a company or any of its subsidiaries to purchase
its own shares, but such purchases by the company itself may only be made if the
company is so authorized by its memorandum of association or bye-laws, and if
its issued share capital is not thereby reduced below the minimum capital
specified in its memorandum. Under Bermuda law, shares of a company owned by any
of the company's subsidiaries may be voted on all matters as to which
shareholders are entitled to vote.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS. Except as provided for in a
company's articles of incorporation or bylaws, Pennsylvania law provides that
the merger, consolidation or the sale, lease or exchange of all or substantially
all of a company's property and assets must be approved by the affirmative vote
of a majority of the votes cast by all shareholders entitled to vote thereon of
each of the companies that is a party to the merger, consolidation or asset sale
and, if any class of series of shares is entitled to vote thereon as a class,
the affirmative vote of a majority of the votes cast in each class vote.
However, no shareholder approval or consent is required under Pennsylvania law
for the sale, lease, or exchange of all or substantially all of a company's
property and assets, when made in the usual and regular course of the business
of the company, or for the purpose of relocating all, or substantially all, of
the business of the company. There are certain other exceptions including
transfers between parent and subsidiary corporations and sale and lease-back
transactions. Except as otherwise restricted by a company's bylaws, such
voluntary transfer of a company's property and assets shall be authorized by its
board of directors. Subject to certain exceptions described under the caption
"Voting Rights" above, the AMP Restated Articles of Incorporation requires the
affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the
votes cast by all shareholders entitled to vote thereon for any (i) merger,
consolidation or share exchange to which the company is a party and (ii) sale,
lease, exchange or other disposition of all or substantially all of the
properties or assets of the company.
Under Pennsylvania law, there is a procedure, which operates in a manner
very similar to the merger procedure, by which shareholders may be required to
exchange their shares for other securities, cash or other forms of
consideration.
Under Bermuda law, there is no requirement for a company's shareholders to
approve a sale, lease or exchange of all or substantially all of a company's
property and assets. Bermuda law provides that a company may enter into a
compromise or arrangement in connection with a scheme for the reconstruction of
the company on terms which include, among other things, the transfer of all or
part of the undertaking or the property of the company to another company. Any
such compromise or arrangement requires the
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approval of a majority in number representing three-fourths in value of the
creditors or shareholders or class of shareholders, as the case may be, present
and voting either in person or by proxy at the meeting, and the sanction of the
Bermuda Supreme Court.
Pursuant to Bermuda law, unless the company's bye-laws provide otherwise, an
amalgamation requires the approval of the holders of at least three-fourths of
those voting at a meeting of shareholders at which a requisite quorum is
present. The Tyco Bye-Laws do not contain any contrary provisions. For purposes
of approval of an amalgamation, all shares, whether or not otherwise entitled to
vote, carry the right to vote. A separate vote of a class of shares is required
if the rights of such class would be altered by virtue of the amalgamation.
SHARE ACQUISITIONS, BUSINESS COMBINATIONS AND RELATED PROVISIONS. The
following provisions describe certain Subchapters of Chapter 25 of the
Pennsylvania Business Corporation Law of 1988, as amended, which apply to most
publicly owned Pennsylvania corporations that have not opted out of their
application. A corporation may elect through a provision of its articles of
incorporation and in some cases by a timely bylaw amendment, to have these
subchapters become inapplicable to it, but AMP has not done so.
Subchapter D generally provides that certain transactions with an interested
shareholder, including mergers, consolidations, share exchanges, sales of
assets, division or voluntary dissolution and winding up, must be approved by at
least a majority of the votes entitled to be cast by all shareholders other than
the interested shareholder. These provisions do not apply to transactions
approved by a majority vote of the board of directors without counting the vote
of directors who are affiliated with, have a material equity interest in, or
were nominated within 24 months of the date of the transaction proposed by, the
interested shareholder, or in which the consideration to be received by the
shareholders is not less than the highest amount paid by the interested
shareholder in acquiring shares of the same class.
Subchapter E generally provides for certain shareholder rights upon the
occurrence of a control transaction, defined as the acquisition by a person or
group of persons acting in concert (a "control person") of voting power over
voting shares of a corporation which would entitle the holders thereof to cast
at least 20% of the votes that all shareholders would be entitled to cast in an
election of the corporation's directors. Following a control transaction, every
other holder of voting shares may require the control person to purchase such
shareholder's shares for "fair value." Fair value is defined as not less than
the highest price per share paid by the control person at any time during the
90-day period ending on the date of the control transaction plus any value paid
for the acquisition of control that may not be reflected in such price. Fair
value is determined in a procedure similar to the procedure applicable to
dissenters' rights.
Subchapter F places a five year moratorium on "business combinations" with a
registered corporation by an "interested shareholder" after the relevant "share
acquisition date." Following the expiration of the five-year moratorium, a
business combination with that interested shareholder must (1) either be
approved by a majority of the shares not held by the interested shareholder, or
(2) provide per share consideration that meets the highest price per share test
referred to below. "Business combination" includes (a) a merger or consolidation
of a registered corporation (i) with an interested shareholder, or (ii) with,
involving or resulting in any other corporation which is, or after such merger
or consolidation would be, an affiliate or associate of such interested
shareholder, (b) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with an interested shareholder or any affiliate or associate
thereof of assets having an aggregate market value equal to at least 10% of the
aggregate market value either of all of the assets or of all the outstanding
shares of such registered corporation, or representing at least 10% of the net
income on a consolidated basis, of such registered corporation, and (c) other
specified self-dealing transactions between such registered corporation and an
interested shareholder or any affiliate or associate thereof. An "interested
shareholder" is defined generally as any person that is the beneficial owner (as
defined broadly), directly or indirectly, of 20% or more of the outstanding
voting shares of a corporation. "Share acquisition date" is defined as the date
that a person first becomes an interested shareholder.
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Subchapter F does not apply to: (1) business combinations with persons who
became interested shareholders with the approval of the board; (2) business
combinations which were approved by the board prior to the date on which the
shareholder became "interested;" and (3) business combinations approved by a
majority of the votes which all shareholders are entitled to cast other than the
interested shareholder, at a meeting at least three months after the interested
shareholder acquires at least 80% of the outstanding voting stock if, among
other tests, the aggregate amount of per share consideration to be received by
the holders of outstanding common shares is at least the highest per share price
paid by the interested shareholder over the previous five years plus a specified
amount of interest. The AMP Board approved the merger as an approved business
combination prior to the date upon which Tyco or Tyco (PA) would become an
interested shareholder.
Subchapter G provides that "control shares" of registered corporations lose
their voting rights until those rights are restored by the affirmative vote of a
majority of both (1) the disinterested shares (generally shares held by persons
other than the acquiror, executive officers and directors of the corporation and
certain employee stock plans), and (2) all voting shares. "Control shares"
include (i) voting shares whose acquisition would result in a control-share
acquisition, (ii) voting shares over which beneficial ownership was acquired by
a person within 180 days of the date such person makes a "control-share
acquisition," or (iii) voting shares over which beneficial ownership was
acquired with the intention of making a "control-share acquisition." A "control
share acquisition" is the acquisition of voting power over 20% or more but less
than 33 1/3%, 33 1/3% or more but less than 50%, or 50% or more of the
outstanding voting shares of a corporation. Subchapter G contains safe harbors
for certain acquiring persons. Control shares do not include shares the voting
power over which was acquired through a revocable proxy that does not confer
discretionary voting authority and which was acquired without consideration in a
solicitation made in accordance with the Securities Exchange Act of 1934, as
amended, and without an intention to change or influence control of the
corporation. The board of directors is required to call a special meeting, at
the acquiror's request and expense, to consider the voting rights of control
shares within 50 days after the acquiror files certain prescribed information
with the corporation.
Unless prohibited by the articles of incorporation as in effect prior to the
acquisition, the corporation may redeem the control shares (at the average of
the high and low sales price on the date the corporation provides notice of
redemption to the acquiror) at any time within 24 months after the date of (1)
the consummation of a control share acquisition if the acquiring person does
not, within 30 days after consummation, request that the issue of voting rights
be presented to the shareholders, and (2) the date of the shareholder vote, if
voting rights are not accorded or are accorded and subsequently lapse.
Under Subchapter H any profits realized from the disposition of shares of a
registered corporation that occurs within 18 months after the shareholder has
acquired or expressed the intent to acquire 20% or more of the voting power or
otherwise disclosed an intention to acquire control of the corporation (a
shareholder who has done any of the foregoing is referred to as a "controlling
person or group") are recoverable by the corporation if the shares were acquired
within two years before or 18 months subsequent to the acquiror's becoming a
controlling person or group. Among other exceptions, Subchapter H does not apply
to transactions that have received approval by both directors and shareholders
prior to such acquisition or, as to dispositions, prior to such disposition if
the shares are beneficially owned by a person or group in actual control of the
corporation.
Subchapter I mandates severance compensation for employees whose employment
by a registered corporation is terminated (defined as being laid off for at
least six months or being involuntarily terminated), other than for willful
misconduct (1) within 90 days before a control share approval, if such
termination was pursuant to an agreement with the acquiring person, or (2)
within 24 months after the control share approval. "Control share approval"
means an approval of voting rights for control shares under Subchapter G.
Eligible employees are entitled to a one-time, lump-sum payment from the
employer equal to the weekly compensation of the employee multiplied by the
number of completed years of service (up to 26), less any payments made to the
employee by the employer due to termination of employment. To
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be eligible, an employee must have been employed by the corporation within
ninety days prior to the control share approval for at least two years, and must
perform all of his services within Pennsylvania except for incidental out of
state services.
Subchapter J provides that no business combination transaction following a
control share approval may result in the termination or impairment of the
provisions of any covered labor contract. A "covered labor contract" is one
relating to persons employed in Pennsylvania negotiated by a collective
bargaining representative with respect to a business operation owned by the
corporation or its subsidiary at the time of the control share approval.
Subchapter J does not apply to a business combination transaction occurring more
than five years after the control share approval. An affected employee or
collective bargaining agent may, in addition to other remedies, bring suit to
recover wages and benefits and to enjoin violation of Subchapter J.
Pursuant to Tyco Bye-Law 104(1)(A), if any person, whether as a result of
one transaction or a series of transactions, would be obligated to make an offer
to the Tyco security holders pursuant to the Rules of the City Code, the Tyco
Board may require such person to make such an offer as if the City Code applied
to Tyco. The City Code provides that, when any person (and persons acting in
concert with such person) acquires shares which carry 30% or more of the voting
rights of a company, such person must make an offer for all shares of any class
of equity share capital (whether voting or non-voting) and also any voting
non-equity share capital in which any such person or persons hold shares. The
offer must be for cash or offer a cash alternative, in each case at not less
than the highest price paid (in cash or otherwise) by the offeror, or anyone
acting in concert with the offeror, for shares of the same class during the
offer period and within the 12 months prior to commencement of the offer.
Tyco Bye-Law 104(3) further provides that, where any person is interested in
30% or more of Tyco's outstanding shares, the Tyco Board may serve a notice
requiring that person to make an offer for all of the outstanding securities of
Tyco if the Tyco Board determines that an offer pursuant to Tyco Bye-Law
104(1)(A) is not expedient, or if a person required to make such an offer fails
to do so. Such offer must be made within 30 days of the demand on terms that
payment in full therefor will be made within 21 days of such offer becoming
unconditional in all respects. If the Tyco Board serves a notice under this
provision, the directors may also require that the offeror offer to purchase
securities of Tyco convertible into voting or non-voting shares of Tyco on terms
considered "fair and reasonable" by the directors in their sole discretion.
Unless the Tyco Board otherwise agrees, such an offer must be for cash or must
offer a cash alternative at not less than the highest price paid by the offeror,
or any person acting in concert with the offeror, for shares of such class
within the preceding 12 months or, if such price is unavailable or
inappropriate, at a price fixed by the directors. Any such offer must remain
open for at least 14 days after the date on which it becomes unconditional as to
acceptance.
Tyco Bye-Law 104(1)(B) provides that when any person has acquired, is in the
process of acquiring, or appears to the Tyco Board likely to acquire an interest
in the capital stock of Tyco in circumstances in which such person would be
subject to the Rules Governing Substantial Acquisitions of Shares issued by the
Takeover Panel of the United Kingdom ("SARs"), the directors may give notice
requiring such person to comply with the SARs. If such person fails to comply,
the directors may give further notice requiring such person, within 28 days of
the date of such notice, to dispose, or to procure the disposal by any person
with whom such person has acted in concert, of any interest in shares acquired.
The SARs provide that a person may not, in any period of seven days, acquire
shares representing 10% or more of the voting rights in a company if such
shares, aggregated with shares already held by the purchaser, would carry 15% or
more, but less than 30%, of the voting rights of such company. The SARs do not
apply to an acquisition from a single shareholder if such acquisition is the
only acquisition within a seven-day period. The SARs also do not apply to a
person who acquires 30% or more of the voting rights in a company.
Under the Tyco Bye-Laws, any person who acquires an interest in three
percent or more of the issued share capital of any class of Tyco is required to
notify Tyco of that interest and of any change in that person's interest
amounting to one percent or more of the issued capital of any class. Any such
notification
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must be made within two days (Saturday and Sundays excluded) after the relevant
event. In determining the percentage interest of any person for these purposes
and for the purposes of Bye-Law 104, interests of persons acting in concert may
be aggregated.
REQUIRED PURCHASE AND SALE OF SHARES. Pursuant to Bermuda law, where the
transfer of shares or any class of shares in a company (the "transferor
company") to another company (the "transferee company") has, within four months
after the making of the offer in this regard by the transferee company, been
approved by the holders of not less than 90% in value of the shares or class of
shares for which the offer was made, subject to the satisfaction of certain
conditions, the transferee company may, within two months after the expiration
of the four month period, give notice to any dissenting shareholder that it
desires to acquire his or her shares. Such transferee company shall then be
entitled and bound to acquire such shares on the terms on which shareholders
that approved such scheme or contract transferred their shares, unless the
Bermuda Supreme Court orders otherwise upon application by the dissenting
shareholder. "Dissenting shareholder" includes a shareholder who has not
assented to a scheme or contract and any shareholder who has failed or refused
to transfer shares to the transferee company.
Within one month of the transfer of 90% in value of the transferor company's
shares or class of shares to the transferee company, or to its nominee, the
transferee company is required to notify the holders of the remaining shares of
such transfer. Within three months of the giving of notice, any such remaining
holder of shares may require the transferee company to acquire his or her shares
on the same terms as provided for in the scheme or contract, or upon such terms
as may be agreed, or upon such terms as the Bermuda Supreme Court may determine
upon application of the transferee company or the shareholder.
Under Bermuda law, a holder or holders of not less than 95% of the shares or
any class of shares in a Bermuda company may give notice to the remaining
shareholders or class of shareholders of the intention to acquire their shares,
on the terms set out in the notice. Bermuda law provides that when such notice
is given the acquiring holder or holders shall be entitled and bound to acquire
the shares of the remaining shareholders on the terms set out in the notice,
unless the remaining shareholders exercise statutory appraisal rights.
SHORT FORM MERGER. Under Pennsylvania law, a shareholders' vote is not
required to approve a merger or consolidation if (i) the plan does not alter the
company's status as a Pennsylvania company or, in a manner that would require
shareholder approval, its articles of incorporation; each share of its capital
stock is to continue as or be converted into an identical share of the surviving
company; and the company's shareholders are to hold in the aggregate shares of
the surviving company entitled to cast a majority of the votes entitled to be
cast generally in electing directors; or (ii) the merger or consolidation is
with another company which directly or indirectly owns 80% or more of shares of
each class of the company.
Bermuda law provides for short form amalgamations between companies and
their wholly-owned subsidiaries.
DISSENTERS' RIGHTS. Pursuant to Pennsylvania law, a shareholder of a
company has the right, under varying circumstances, to dissent from certain
corporate transactions (including mergers, share exchanges, the sale of all or
substantially all of the corporate assets and corporate divisions) and to obtain
payment in cash of the fair value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction. With
exceptions not relevant with respect to the merger, such dissenters rights are
not available where the shares held by the shareholder are either listed on a
national securities exchange or are held of record by more than 2,000
shareholders. Notwithstanding this limitation, Pennsylvania law provides that
the articles of incorporation, bylaws or a resolution of the board of directors
may direct that all or part of the shareholders shall have dissenters' rights in
connection with any corporate transaction that would not otherwise entitle such
shareholder to dissenters' rights. The AMP Restated Articles of Incorporation
and Bylaws do not include such a provision nor has the Board of Directors of AMP
adopted such a resolution.
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Under Bermuda law, a properly dissenting shareholder who did not vote in
favor of an amalgamation and who is not satisfied that he or she has been
offered fair value for his or her shares may apply to the court to appraise the
fair value of his or her shares. If the court appraised value is greater than
the value received or to be received in the amalgamation, the company must pay
the court appraised value to the dissenting shareholder within one month of the
appraisal. Bermuda law additionally provides a right of appraisal in respect of
the situation in which a holder of not less than 95% of the shares or any class
of shares in the company proposes to acquire the remaining shares.
SHAREHOLDER RIGHTS PLAN. Under Pennsylvania law, except as otherwise
provided in the articles of incorporation, every company may create and issue
rights or options entitling the holders thereof to purchase from the company any
shares of its capital stock of any class or classes.
In 1989, AMP adopted a Shareholder Rights Plan and distributed to its
shareholders, for each outstanding share of AMP common stock held, one right to
purchase one share of AMP common stock at a purchase price of $87.50, subject to
certain further adjustments. The Rights Agreement (the "AMP Rights Agreement")
dated as of October 25, 1989 and as amended, between AMP and ChaseMellon
Shareholder Services L.L.C., as Rights Agent, contains the terms and conditions
of the rights. The rights will remain attached to the AMP common stock until a
Distribution Date (as defined below) occurs or as otherwise set forth in the AMP
Rights Agreement. A Distribution Date will occur upon the earliest of:
- 10 business days following a public announcement that a person has
acquired or obtained the right to acquire ("an Acquiring Person")
beneficial ownership of 20% or more of the outstanding shares of AMP
common stock (or 10% or more of the outstanding shares of AMP common stock
if such person has made an unsolicited acquisition proposal); or
- 10 business days (or such later date determined by the AMP Board)
following commencement of a tender offer or exchange offer which if
completed would result in a person becoming an Acquiring Person; or
- a merger or other business combination involving AMP.
The commencement of the original AlliedSignal offer did not, in and of
itself, result in the occurrence of a Distribution Date.
Upon a Distribution Date, each right (except those held by an Acquiring
Person) will separate from the AMP common stock and become exercisable.
In the event that a person becomes an Acquiring Person, each holder of a
right (other than rights held by an Acquiring Person which are voided) will
thereafter have the right to receive, upon exercise, shares of AMP common stock
(and, in certain circumstances other consideration) having a value equal to two
times the exercise price of the right. In addition, in the event that, (i) AMP
is acquired in a merger or other business combination transaction in which AMP
is not the surviving corporation, (ii) AMP is a party to a merger in which AMP
is the surviving company, but all or part of its shares are exchanged for other
consideration (other than, with respect to clause (i) or (ii) , a merger which
follows a Qualifying Offer (as defined in the AMP Rights Agreement)), or (iii)
more than 50% of AMP's assets, cash flow or earning power is sold or
transferred, each holder of a right (except rights that previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the surviving company (or a related party in certain
cases) having a value equal to two times the exercise price of the right. A
Qualifying Offer (as defined in the AMP Rights Agreement) exception referred to
above is applicable unless and until the rights become non-redeemable.
- Until the rights separate from the AMP common stock, each new share of AMP
common stock issued will have a right attached.
- The rights do not have voting or dividend privileges and, until they
become exercisable, have no dilutive effect on the earnings of AMP.
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The rights may be redeemed until ten business days after the day on which
any person becomes an Acquiring Person, provided, however, that the AMP Board
cannot redeem the rights until November 6, 1999 (when the AMP Rights Agreement
will expire in accordance with its terms) if the composition of the AMP Board of
Directors changes at any time following receipt of an unsolicited acquisition
proposal such that the disinterested directors (as such term is defined under
Pennsylvania law) in office prior to the unsolicited acquisition proposal,
together with their Board approved successors, no longer constitute a majority
of the Board of Directors. In addition, upon the adoption of a Bylaw which
limits the authority of the AMP Board and/or confers authority on any person
other than the Board to take action with respect to the AMP Rights Agreement and
the rights issued thereunder, the AMP Rights Agreement cannot be amended, the
Rights cannot be redeemed and the AMP Board will not be entitled to exercise
certain discretionary authority otherwise available or take certain other
actions. Furthermore, pursuant to the merger agreement, AMP agreed not to redeem
the rights prior to November 6, 1999 or, in certain circumstances earlier,
following the termination of the merger agreement. The AMP Rights Agreement
generally may not be amended when the rights are not redeemable.
On November 22, 1998, the AMP Board further amended the AMP Rights Agreement
so that it would be inapplicable to the merger agreement, the stock option
agreement and the transactions contemplated thereby.
Prior to the merger of Former Tyco and ADT on July 2, 1997, ADT, adopted a
Shareholder Rights Plan which was, amended in March and July of 1997. Under the
Plan, each Right (as defined therein), other than those Rights owned by an
Acquiring Person (as defined therein), will become exercisable a specified
period of time after any person becomes the beneficial owner of 15% or more of
the Tyco common shares, or commences a tender offer or exchange offer which, if
consummated, would result in any person becoming the beneficial owner of 15% or
more of the Tyco common shares. Each Right entitles its holder, among other
things, to purchase Tyco common shares from Tyco at a 50% discount from the
market price of Tyco common shares on the Distribution Date (as defined therein)
in the event that a person becomes an Acquiring Person.
The Tyco Board may redeem the Rights prior to their becoming exercisable;
PROVIDED, HOWEVER, that the Tyco Board may not redeem the Rights if a majority
of the directors on the Tyco Board have been changed as a result of a proxy or
consent solicitation or other shareholder initiative by a person who has stated,
or Tyco has determined in good faith, that such person intends to take such
actions which would result in such person becoming an Acquiring Person, unless
such redemption has been authorized by a majority of the Continuing Directors
(as defined therein).
OTHER MATTERS
It is not expected that any matters other than those described in this Joint
Proxy Statement/Prospectus will be brought before the special meetings. If any
other matters are presented, however, it is the intention of the persons named
in the appropriate proxy to vote the proxy in accordance with the discretion of
the persons named in such proxy.
LEGAL MATTERS
The validity of the Tyco common shares to be issued to AMP shareholders
pursuant to the merger will be passed upon by Appleby, Spurling & Kempe,
Hamilton, Bermuda, special counsel to Tyco. Certain other legal matters in
connection with the merger will be passed upon for Tyco by Kramer Levin Naftalis
& Frankel LLP, New York, New York, and by Appleby, Spurling & Kempe. Joshua M.
Berman, a director and vice president of Tyco, is counsel to Kramer Levin
Naftalis & Frankel LLP and beneficially owns 72,090 Tyco common shares. Certain
legal matters in connection with the merger will be passed upon for AMP by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
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EXPERTS
The consolidated financial statements and financial statement schedule
included in Tyco's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 and incorporated by reference in this Joint Proxy
Statement/Prospectus have been audited by PricewaterhouseCoopers, independent
accountants, as set forth in their report included therein. In its report, that
firm states that with respect to certain subsidiaries its opinion is based upon
the report of other independent accountants, namely Arthur Andersen LLP. The
consolidated financial statements and financial statement schedule referred to
above have been incorporated herein in reliance upon said reports given upon the
authority of such firms as experts in accounting and auditing.
The supplemental consolidated financial statements of Tyco as of September
30, 1998 and 1997 and for the year ended September 30, 1998, the nine months
ended September 30, 1997 and the year ended December 31, 1996 included in Tyco's
Current Report on Form 8-K and incorporated by reference in this Joint Proxy
Statement/Prospectus give retroactive effect to the merger between Tyco
International Ltd. and United States Surgical Corporation and have been audited
by PricewaterhouseCoopers, independent accountants as set forth in their report
included therein. In its report, that firm states that with respect to certain
subsidiaries its opinion is based upon the reports of other independent
accountants, namely Arthur Andersen LLP and Deloitte & Touche LLP. The
supplemental consolidated financial statements referred to above have been
incorporated herein in reliance upon said reports given upon the authority of
such firms as experts in accounting and auditing.
The financial statements and the related financial statement schedule
incorporated in this Joint Proxy Statement/Prospectus by reference from the
Annual Report on Form 10-K of AMP for the year ended December 31, 1997 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, which are incorporated herein by reference,
and have been so incorporated in reliance upon the authority of said firm as
experts in accounting and auditing.
FUTURE SHAREHOLDER PROPOSALS
Due to the contemplated consummation of the merger, AMP does not currently
expect to hold a 1999 Annual Meeting of Shareholders because AMP will be a
wholly owned indirect subsidiary of Tyco following the merger. In the event the
merger is not consummated, proposals of AMP shareholders to be included in the
proxy statement to be mailed to all AMP shareholders entitled to vote at the
1999 Annual Meeting of AMP shareholders must have been received at AMP's
principal executive offices not later than November 16, 1998.
Any shareholder proposal intended for inclusion in Tyco's proxy statement
for Tyco's 1999 annual general meeting of shareholders must have been received
by Tyco no later than October 23, 1998.
Under the Companies Act, 1981 of Bermuda, any shareholders who represent not
less than 5 percent of the total voting rights of shareholders having the right
to vote at the meeting, or who are 100 or more in number, may requisition any
resolution which may properly be moved at an annual general meeting. A
shareholder wishing to move a resolution at an annual general meeting is
generally required to give notice to Tyco of the resolution at its registered
office at least six weeks before the meeting.
WHERE TO FIND MORE INFORMATION
Tyco and AMP file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information filed by Tyco and AMP at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The filings of Tyco and AMP with the SEC are also available to
the public from commercial document retrieval services and at the world wide web
site maintained by the SEC at "http://www.sec.gov."
117
<PAGE>
Tyco filed a Registration Statement on Form S-4 to register with the SEC the
Tyco common shares to be delivered in connection with the merger. This Joint
Proxy Statement/Prospectus is a part of that Registration Statement and
constitutes a prospectus of Tyco in addition to being a proxy statement of Tyco
and AMP for the special meetings. As allowed by SEC rules, this Joint Proxy
Statement/Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
The SEC allows Tyco and AMP to "incorporate by reference" information into
this Joint Proxy Statement/Prospectus, which means that they 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 Joint Proxy Statement/Prospectus, except for any information
superseded by information in this Joint Proxy Statement/Prospectus. This Joint
Proxy Statement/Prospectus incorporates by reference the documents set forth
below that Tyco and AMP have previously filed with the SEC. These documents
contain important information about Tyco and AMP and their finances.
<TABLE>
<CAPTION>
TYCO COMMISSION FILINGS (FILE NO. 0-16979) PERIOD
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended September 30, 1998
Current Reports on Form 8-K and 8-K/A Filed on December 10, 1998 and
December 11, 1998
</TABLE>
<TABLE>
<CAPTION>
AMP COMMISSION FILINGS (FILE NO. 001-04235) PERIOD
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year Ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters Ended March 31, 1998, June 30, 1998 and
September 30, 1998
Form 8-K Filed on November 25, 1998
Rule 13e-1 Statement Filed on October 9, 1998
Statement on Schedule 13E-4 Filed on October 9, 1998
Amendment No. 1 to the Statement on Schedule 13E-4 Filed on November 25, 1998
Amendment No. 2 to the Statement on Schedule 13E-4 Filed on November 3, 1998
Amendment No. 3 to the Statement on Schedule 13E-4 Filed on November 11, 1998
Amendment No. 4 to the Statement on Schedule 13E-4 Filed on November 18, 1998
Amendment No. 5 to the Statement on Schedule 13E-4 Filed on November 18, 1998
Amendment No. 6 to the Statement on Schedule 13E-4 Filed on November 18, 1998
Amendment No. 7 to the Statement on Schedule 13E-4 Filed on November 18, 1998
Amendment No. 8 to the Statement on Schedule 13E-4 Filed on November 24, 1998
Statement on Schedule 14D-9 Filed on August 21, 1998
Amendment No. 1 to the Statement on Schedule 14D-9 Filed on August 21, 1998
Amendment No. 2 to the Statement on Schedule 14D-9 Filed on August 24, 1998
Amendment No. 3 to the Statement on Schedule 14D-9 Filed on August 26, 1998
Amendment No. 4 to the Statement on Schedule 14D-9 Filed on August 27, 1998
Amendment No. 5 to the Statement on Schedule 14D-9 Filed on August 29, 1998
Amendment No. 6 to the Statement on Schedule 14D-9 Filed on September 1, 1998
Amendment No. 7 to the Statement on Schedule 14D-9 Filed on September 2, 1998
Amendment No. 8 to the Statement on Schedule 14D-9 Filed on September 4, 1998
Amendment No. 9 to the Statement on Schedule 14D-9 Filed on September 8, 1998
Amendment No. 10 to the Statement on Schedule 14D-9 Filed on September 10, 1998
Amendment No. 11 to the Statement on Schedule 14D-9 Filed on September 11, 1998
Amendment No. 12 to the Statement on Schedule 14D-9 Filed on September 14, 1998
</TABLE>
118
<PAGE>
<TABLE>
<CAPTION>
AMP COMMISSION FILINGS (FILE NO. 001-04235) PERIOD
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
Amendment No. 13 to the Statement on Schedule 14D-9 Filed on September 17, 1998
Amendment No. 14 to the Statement on Schedule 14D-9 Filed on September 17, 1998
Amendment No. 15 to the Statement on Schedule 14D-9 Filed on September 18, 1998
Amendment No. 16 to the Statement on Schedule 14D-9 Filed on September 21, 1998
Amendment No. 17 to the Statement on Schedule 14D-9 Filed on September 23, 1998
Amendment No. 18 to the Statement on Schedule 14D-9 Filed on September 24, 1998
Amendment No. 19 to the Statement on Schedule 14D-9 Filed on September 25, 1998
Amendment No. 20 to the Statement on Schedule 14D-9 Filed on September 28, 1998
Amendment No. 21 to the Statement on Schedule 14D-9 Filed on September 29, 1998
Amendment No. 22 to the Statement on Schedule 14D-9 Filed on September 30, 1998
Amendment No. 23 to the Statement on Schedule 14D-9 Filed on October 5, 1998
Amendment No. 24 to the Statement on Schedule 14D-9 Filed on October 6, 1998
Amendment No. 25 to the Statement on Schedule 14D-9 Filed on October 9, 1998
Form 8-A/A Filed on October 13, 1998
Form S-8 Filed on May 7, 1998
Proxy Statement Relating to AMP Incorporated's 1998 annual
meeting of shareholders. Filed on October 6, 1998
</TABLE>
Tyco and AMP are also incorporating by reference additional documents that
they file with the SEC between the date of this Joint Proxy Statement/Prospectus
and the date of the special meetings.
Tyco has supplied all information contained or incorporated by reference in
this Joint Proxy Statement/Prospectus relating to Tyco, and AMP has supplied all
such information relating to AMP.
If you are a shareholder, Tyco and AMP may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
Tyco, AMP or the SEC. Documents incorporated by reference are available from
Tyco and AMP without charge. Exhibits to the documents will not be sent,
however, unless those exhibits have specifically been incorporated by reference
as exhibits in this Joint Proxy Statement/Prospectus. Shareholders may obtain
documents incorporated by reference in this Joint Proxy Statement/Prospectus by
requesting them in writing or by telephone from the appropriate party at the
following address:
<TABLE>
<S> <C>
Tyco International Ltd. AMP Incorporated
The Gibbons Building P.O. Box 3608, M.S.176-48
10 Queen Street, Suite 301 Harrisburg, Pennsylvania
Hamilton HM 11 Bermuda 17105-3608
(441) 292-8674 (717) 592-4205
</TABLE>
If you would like to request documents from Tyco or AMP, please do so by
January , 1999 to receive them before the special meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MATTERS
SUBMITTED TO YOU. NEITHER TYCO NOR AMP HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT/ PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED DECEMBER
, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE JOINT
PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND
NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR
THE ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE MERGER
SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
119
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM
<S> <C>
5% transferee shareholders................................................................. A-38, 40, 41, A-41
Acquiring Person........................................................................... 20, A-20, 115
Acquisition Comparables.................................................................... 34
Acquisition Proposal....................................................................... A-33, 53
Alternative Transaction.................................................................... A-45, 53
AMP Plan................................................................................... 34
AMP Public Comparables..................................................................... 34
AMP Rights Agreement....................................................................... 115
AMP Selected Companies..................................................................... 29
Annual Bonus............................................................................... 37
Average Stock Price........................................................................ iii, A-3
Base Salary................................................................................ 37
Calendar 1999 P/E.......................................................................... 35
Calendar 1999 P/E to Total Return.......................................................... 35
Case I..................................................................................... 29
Case II.................................................................................... 29
Case III................................................................................... 29
City Code.................................................................................. 105
control share approval..................................................................... 112
control person............................................................................. 111
CSFB....................................................................................... A-18, 19
EBIT....................................................................................... 29
EBITDA..................................................................................... 29
EPS........................................................................................ 29, 34
ERA........................................................................................ 98
Expected Synergies......................................................................... D-1, 33
First Call................................................................................. 29
Former Tyco................................................................................ 1
LTM Period................................................................................. 34
merger agreement........................................................................... 50
Merger Sub................................................................................. A-1, D-1, C-1, B-1
Merrill Lynch.............................................................................. 22
Merrill Lynch Opinion...................................................................... 32
Net Income................................................................................. 34
P/E........................................................................................ 29
Pension Plan............................................................................... 37
</TABLE>
120
<PAGE>
<TABLE>
<S> <C>
Pension Restoration Plan................................................................... 37
SARs....................................................................................... 113
Selected Transactions...................................................................... 30
Street Case................................................................................ 34
Superior Proposal.......................................................................... A-33, 53
TPCG....................................................................................... 73
transferee company......................................................................... 114
transferor company......................................................................... 114
TSSL....................................................................................... 72
Tyco Named Executive Officers.............................................................. 97
Tyco (PA).................................................................................. B-13
Tyco Public Comparables.................................................................... 35
Tyco Selected Companies.................................................................... 29
U.S. Holder................................................................................ 41
</TABLE>
121
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TYCO INTERNATIONAL (PA) INC.
(FORMERLY KNOWN AS BETA ZENO CORP.),
AMP MERGER CORP.
(FORMERLY KNOWN AS
ALPHA ZENO CORP.)
AND
AMP INCORPORATED
INCLUDING
GUARANTEE
OF
TYCO INTERNATIONAL LTD.
Dated as of November 22, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
THE MERGER.............................................................. A-2
SECTION 1.01. The Merger............................................................. A-2
SECTION 1.02. Effective Time......................................................... A-2
SECTION 1.03. Effect of the Merger................................................... A-2
SECTION 1.04. Articles of Incorporation; Bylaws...................................... A-2
SECTION 1.05. Directors and Officers................................................. A-2
SECTION 1.06. Effect on Securities, Etc.............................................. A-2
SECTION 1.07. Exchange of Certificates............................................... A-5
SECTION 1.08. Stock Transfer Books................................................... A-7
SECTION 1.09. No Further Ownership Rights in Company Common Stock.................... A-7
SECTION 1.10. Lost, Stolen or Destroyed Certificates................................. A-7
SECTION 1.11. Tax and Accounting Consequences........................................ A-7
SECTION 1.12. Taking of Necessary Action; Further Action............................. A-7
SECTION 1.13. Material Adverse Effect................................................ A-7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... A-8
SECTION 2.01. Organization and Qualification; Subsidiaries........................... A-8
SECTION 2.02. Articles of Incorporation and Bylaws................................... A-8
SECTION 2.03. Capitalization......................................................... A-8
SECTION 2.04. Authority Relative to this Agreement and Stock Option Agreement........ A-9
SECTION 2.05. No Conflict; Required Filings and Consents............................. A-10
SECTION 2.06. Compliance; Permits.................................................... A-11
SECTION 2.07. SEC Filings; Financial Statements...................................... A-11
SECTION 2.08. Absence of Certain Changes or Events................................... A-11
SECTION 2.09. No Undisclosed Liabilities............................................. A-12
SECTION 2.10. Absence of Litigation.................................................. A-12
SECTION 2.11. Employee Benefit Plans; Employment Agreements.......................... A-12
SECTION 2.12. Labor Matters.......................................................... A-15
SECTION 2.13. Registration Statement; Joint Proxy Statement/Prospectus............... A-15
SECTION 2.14. Restrictions on Business Activities.................................... A-16
SECTION 2.15. Title to Property...................................................... A-16
SECTION 2.16. Taxes.................................................................. A-16
SECTION 2.17. Environmental Matters.................................................. A-17
SECTION 2.18. Brokers................................................................ A-18
SECTION 2.19. Intellectual Property.................................................. A-18
SECTION 2.20. Interested Party Transactions.......................................... A-19
SECTION 2.21. Insurance.............................................................. A-19
SECTION 2.22. Product Liability and Recalls.......................................... A-19
SECTION 2.23. Opinion of Financial Advisor........................................... A-20
SECTION 2.24. Pooling Matters........................................................ A-20
SECTION 2.25. Tax Matters............................................................ A-20
SECTION 2.26. Rights Agreement....................................................... A-20
SECTION 2.27. Supplemental Company Disclosure Schedule............................... A-20
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BETA AND MERGER SUB................... A-21
SECTION 3.01. Organization and Qualification; Subsidiaries........................... A-21
SECTION 3.02. Memorandum of Association and Bye-Laws................................. A-21
SECTION 3.03. Capitalization......................................................... A-21
SECTION 3.04. Authority Relative to this Agreement and the Stock Option Agreement.... A-22
SECTION 3.05. No Conflict; Required Filings and Consents............................. A-22
SECTION 3.06. Compliance; Permits.................................................... A-23
SECTION 3.07. SEC Filings; Financial Statements...................................... A-23
SECTION 3.08. Absence of Certain Changes or Events................................... A-24
SECTION 3.09. No Undisclosed Liabilities............................................. A-24
SECTION 3.10. Absence of Litigation.................................................. A-24
SECTION 3.11. Employee Benefit Plans; Employment Agreements.......................... A-24
SECTION 3.12. Labor Matters.......................................................... A-26
SECTION 3.13. Registration Statement; Joint Proxy Statement/Prospectus............... A-26
SECTION 3.14. Restrictions on Business Activities.................................... A-27
SECTION 3.15. Title to Property...................................................... A-27
SECTION 3.16. Taxes.................................................................. A-27
SECTION 3.17. Environmental Matters.................................................. A-28
SECTION 3.18. Brokers................................................................ A-28
SECTION 3.19. Intellectual Property.................................................. A-28
SECTION 3.20. Interested Party Transactions.......................................... A-29
SECTION 3.21. Insurance.............................................................. A-29
SECTION 3.22. Product Liability and Recalls.......................................... A-29
SECTION 3.23. Ownership of Beta and Merger Sub; No Prior Activities.................. A-30
SECTION 3.24. Pooling Matters........................................................ A-30
SECTION 3.25. Tax Matters............................................................ A-30
SECTION 3.26. PBCL Section 2538...................................................... A-30
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.................................. A-31
SECTION 4.01. Conduct of Business by the Company Pending the Merger.................. A-31
SECTION 4.02. No Solicitation........................................................ A-32
SECTION 4.03. Conduct of Business by Tyco Pending the Merger......................... A-34
ARTICLE V
ADDITIONAL AGREEMENTS................................................... A-35
SECTION 5.01. Joint Proxy Statement/Prospectus; Registration Statement............... A-35
SECTION 5.02. Company Shareholders Meeting........................................... A-35
SECTION 5.03. Tyco Shareholders Meeting.............................................. A-35
SECTION 5.04. Access to Information; Confidentiality................................. A-35
SECTION 5.05. Consents; Approvals.................................................... A-36
SECTION 5.06. Agreements with Respect to Affiliates.................................. A-36
SECTION 5.07. Indemnification and Insurance.......................................... A-36
SECTION 5.08. Notification of Certain Matters........................................ A-37
SECTION 5.09. Further Action/Tax Treatment........................................... A-37
SECTION 5.10. Public Announcements................................................... A-38
SECTION 5.11. Tyco Common Shares..................................................... A-38
SECTION 5.12. Conveyance Taxes....................................................... A-38
SECTION 5.13. Option Plans and Benefits, etc......................................... A-38
SECTION 5.14. Rights Agreement....................................................... A-39
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C>
SECTION 5.15. Accountant's Letters................................................... A-39
SECTION 5.16. Pooling Accounting Treatment........................................... A-39
SECTION 5.17. Compliance with State Property Transfer Statutes....................... A-40
SECTION 5.18. Director Appointment................................................... A-40
SECTION 5.19. Termination of Flexitrust.............................................. A-40
SECTION 5.20. Charities.............................................................. A-40
ARTICLE VI
CONDITIONS TO THE MERGER................................................ A-41
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger............ A-41
SECTION 6.02. Additional Conditions to Obligations of Beta and Merger Sub............ A-42
SECTION 6.03. Additional Conditions to Obligation of the Company..................... A-42
ARTICLE VII
TERMINATION............................................................. A-44
SECTION 7.01. Termination............................................................ A-44
SECTION 7.02. Effect of Termination.................................................. A-45
SECTION 7.03. Fees and Expenses...................................................... A-45
ARTICLE VIII
GENERAL PROVISIONS...................................................... A-48
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements............ A-48
SECTION 8.02. Notices................................................................ A-48
SECTION 8.03. Certain Definitions.................................................... A-49
SECTION 8.04. Amendment.............................................................. A-49
SECTION 8.05. Waiver................................................................. A-50
SECTION 8.06. Headings............................................................... A-50
SECTION 8.07. Severability........................................................... A-50
SECTION 8.08. Entire Agreement....................................................... A-50
SECTION 8.09. Assignment............................................................. A-50
SECTION 8.10. Parties in Interest.................................................... A-50
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative.................. A-50
SECTION 8.12. Governing Law; Jurisdiction............................................ A-51
SECTION 8.13. Counterparts........................................................... A-51
SECTION 8.14. WAIVER OF JURY TRIAL................................................... A-51
GUARANTEE.............................................................. A-52
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1998 (this
"Agreement"), among Beta Zeno Corp. ("Beta"), a Pennsylvania corporation and a
direct, wholly-owned subsidiary of Tyco International Ltd. ("Tyco"), Alpha Zeno
Corp., a Pennsylvania corporation and a direct, wholly-owned subsidiary of Beta
("Merger Sub"), and AMP Incorporated, a Pennsylvania corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Beta, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective shareholders, and consistent with and in furtherance of their
respective business strategies and goals, for Beta to acquire all of the
outstanding shares of the Company through the merger of Merger Sub with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of Beta
, Merger Sub and the Company have each approved the merger (the "Merger") of
Merger Sub with and into the Company in accordance with the applicable
provisions of the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania (the "PBCL"), and upon the terms and subject to the conditions set
forth herein;
WHEREAS, Beta, Merger Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder and that the
transactions contemplated by this Agreement be undertaken pursuant to such plan;
WHEREAS, Beta, Merger Sub and the Company intend that the Merger be
accounted for as a pooling of interests for financial reporting purposes;
WHEREAS, pursuant to the Merger, each outstanding share (together with the
common stock purchase right associated therewith, a "Share") of the Company's
Common Stock, without par value (the "Company Common Stock"), shall be converted
into the right to receive the Merger Consideration (as defined in Section
1.07(b)), upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition to the Company's willingness to enter into this Agreement, Tyco
has agreed fully and unconditionally to guarantee the representations,
warranties, covenants, agreements and other obligations of Beta and Merger Sub
in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition to Beta's and Merger Sub's entry into this Agreement, the Company
and Beta have entered into a Stock Option Agreement (the "Stock Option
Agreement") of even date herewith and attached hereto as Exhibit A;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, Beta,
Merger Sub and the Company hereby agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. (a) At the Effective Time (as defined in Section
1.02), and subject to and upon the terms and conditions of this Agreement and
the PBCL, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation").
SECTION 1.02. EFFECTIVE TIME. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01, as promptly as practicable (and in any event within
two business days) after the satisfaction or waiver of the conditions set forth
in Article VI, the parties hereto shall cause the Merger to be consummated by
filing articles of merger as contemplated by the PBCL (the "Articles of
Merger"), together with any required related certificates, with the Corporation
Bureau, Department of State of the Commonwealth of Pennsylvania, in such form as
required by, and executed in accordance with the relevant provisions of, the
PBCL. The Merger shall become effective at the time of such filing or at such
later time, which will be as soon as reasonably practicable, specified in the
Articles of Merger (the "Effective Time"). Prior to such filing, a closing shall
be held at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue,
New York, NY, unless another time or place is agreed to in writing by the
parties hereto, for the purpose of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Article VI.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the PBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION; BYLAWS. (a) ARTICLES OF
INCORPORATION. Unless otherwise determined by Beta prior to the Effective Time,
at the Effective Time, the Restated Articles of Incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the PBCL and such Articles of Incorporation; PROVIDED, HOWEVER, that Article
FOURTH of the Surviving Corporation's Articles of Incorporation shall be amended
and restated in the Merger to read in its entirety as follows: "FOURTH. The
aggregate number of shares authorized is 1,000 shares of common stock, par value
$0.01 per share."
(b) BYLAWS. The Bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by the PBCL, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. EFFECT ON SECURITIES, ETC. At the Effective Time, by virtue of
the Merger and without any action on the part of Beta, Merger Sub, the Company
or the holders of any securities of the Company:
(a) CONVERSION OF SECURITIES. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.06(b)) shall be converted, subject to Section 1.06(e) and Section
1.06(f), into the right to receive a fraction of a validly issued, fully paid
and nonassessable common share, par value $0.20 per share, of Tyco (a "Tyco
Common Share") such fraction
A-2
<PAGE>
to be in the ratio provided below (the "Exchange Ratio"). If the Average Stock
Price (as hereinafter defined) is:
(i) greater than $73.50, the Exchange Ratio shall be equal to $55.95 divided
by the Average Stock Price;
(ii) equal to or greater than $67.00 but less than or equal to $73.50, the
Exchange Ratio shall be fixed at 0.7612;
(iii) equal to or greater than $60.00 but less than $67.00, the Exchange
Ratio shall be equal to $51.00 divided by the Average Stock Price; or
(iv) less than $60.00, the Exchange Ratio shall be equal to $51.00 divided
by the Average Stock Price (provided that Beta will have the right to
terminate this Agreement by reason of such Average Stock Price pursuant
to Section 7.01(i)), EXCEPT THAT if the Company has given notice in
accordance with Section 7.01(i), the Exchange Ratio shall be fixed at
0.8500.
"Average Stock Price" means the average of the Daily Per Share Prices (as
hereinafter defined) for the fifteen consecutive trading days ending on the
fourth trading day prior to the Company Shareholders Meeting (as defined in
Section 2.13). The "Daily Per Share Price" for any trading day means the
weighted average of the per share selling prices on the New York Stock Exchange,
Inc. (the "NYSE") of Tyco Common Shares (as reported in the NYSE Composite
Transaction Tape) for that day.
(b) CANCELLATION. Each Share held in the treasury of the Company and each
Share owned by Beta, Merger Sub or any direct or indirect, wholly-owned
subsidiary of the Company or Tyco immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) COMPANY/EQUITY AWARDS. (i) STOCK OPTIONS. Each option outstanding at the
Effective Time to purchase shares of Company Common Stock (a "Stock Option")
granted under (A) the Company's Stock Option Plan for Outside Directors, as
amended, (B) the Company's 1993 Long-Term Equity Incentive Plan, as amended (the
"1993 Plan") or (C) any other stock option plan or agreement of the Company
(collectively, the "Company Stock Option Plans") shall constitute an option (an
"Adjusted Option") to acquire, on the same terms and conditions MUTATIS MUTANDIS
as were applicable under such Stock Option prior to the Effective Time (but
taking account of the Merger), the number of Tyco Common Shares (rounded to the
nearest whole Tyco Common Share) as the holder of such Stock Option would have
been entitled to receive pursuant to the Merger had such holder exercised such
Stock Option in full immediately prior to the Effective Time, at a price per
share (rounded to the nearest whole cent) equal to (x) the aggregate exercise
price for Company Common Stock otherwise purchasable pursuant to such Stock
Option divided by (y) the number of Tyco Common Shares deemed purchasable
pursuant to such Adjusted Option. The other terms of each such Stock Option, and
the plans under which they were issued, shall continue to apply in accordance
with their terms, including, to the extent provided therein, the acceleration of
vesting of such Stock Options in connection with the transactions contemplated
hereby. As soon as practicable after the Effective Time, Beta shall cause to be
delivered to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and that such Stock Option
shall continue in effect on the same terms and conditions (subject to the
adjustments as a result of the Merger described in this Section 1.06(c)).
(ii) RESTRICTED STOCK. Except as set forth on Section 1.06(c)(ii) of the
Company Disclosure Schedule (as defined in Section 2.01) and subject to the
immediately following sentence, all restricted Shares subject to awards granted
pursuant to the 1993 Plan or pursuant to any other plan or agreement of the
Company, including but not limited to "Performance Restricted Shares," in
accordance with the terms of such plans and agreements as in effect on the date
hereof, shall become immediately vested and free of restrictions as of the
Effective Time and each such award shall be converted into the number of Tyco
Common Shares
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calculated by multiplying (A) the sum of (1) the number of restricted Shares
subject to such award plus (2) the number of phantom Shares credited to the
awardee's "Dividend Reinvestment Account" by (B) the Exchange Ratio.
Notwithstanding the immediately preceding sentence, awards of Performance
Restricted Shares granted to an employee who is party to an "Executive Severance
Agreement" with the Company, in accordance with the terms of such Executive
Severance Agreement as in effect on the date hereof, shall, as of the Effective
Time, become immediately vested and free of restrictions as of consummation of
the Merger, and such award shall be converted into a number of Tyco Common
Shares equal to two times the product of (A) the sum of (1) the number of
restricted Shares subject to such award plus (2) the number of phantom Shares
credited to the awardee's Dividend Reinvestment Account and (B) the Exchange
Ratio.
(iii) BONUS UNITS. Bonus Units subject to awards granted under the Company's
Bonus Plan (Stock plus Cash) (the "Stock Plus Cash Plan"), in accordance with
the terms of such Plan as in effect on the date hereof (but subject to the terms
of any Executive Severance Agreement with the holder of such a Bonus Unit as in
effect on the date hereof), shall, as of the Effective Time, be converted into
Bonus Units relating to Tyco Common Shares. The number of Tyco Common Shares to
be issued in respect of each such award of Bonus Units shall be the result
obtained by (A) calculating the excess, if any, of (1) the "Market Value" (as
defined in the Stock Plus Cash Plan) or the "Fair Market Value" (as defined in
Section 2(a) of the Executive Severance Agreement with the Company), as
applicable to the particular holder (the applicable value being referred to as
the "Market Price") over (2) the per Bonus Unit Designated Value (as defined in
the Stock Plus Cash Plan) of such award; (B) multiplying the result obtained
pursuant to clause (A) by the number of Bonus Units subject to such award; (C)
dividing the product obtained pursuant to clause (B) by the Market Price; and
(D) multiplying the quotient obtained pursuant to clause (C) by the Exchange
Ratio. The Tyco Common Shares so determined shall be issued on the date or dates
set forth under the terms of the agreement evidencing the award of Bonus Units,
subject to the terms of the applicable Executive Severance Agreement as in
effect on the date hereof. In addition, the Cash Bonus (as defined in the Stock
Plus Cash Plan) in respect thereof shall be paid in accordance with the terms of
such Plan as in effect of the date hereof, subject to the terms of the
applicable Executive Severance Agreement as in effect on the date hereof.
Bonus Units subject to awards granted under the 1993 Plan shall be payable
as of the Effective Time in accordance with the terms of such Plan as in effect
on the date hereof, in a number of Tyco Common Shares calculated as follows: the
number of Tyco Common Shares to be issued as of such date shall be the result
obtained by (A) calculating the excess, if any, of (1) the "Fair Market Value"
(as defined in the 1993 Plan) or the "Fair Market Value" (as defined in Section
2(a)) of the Executive Severance Agreement with the Company), as applicable to
the particular holder (the applicable value being referred to as the "Market
Price") over (2) the per Bonus Unit Designated Value (as defined in the 1993
Plan) of such award; (B) multiplying the result obtained pursuant to clause (A)
by the number of Bonus Units subject to such award; (C) dividing the product
obtained pursuant to clause (B) by the Market Price; and (D) multiplying the
quotient obtained pursuant to clause (C) by the Exchange Ratio. In addition, the
Cash Bonus (as defined in such Plan) in respect of such distribution shall be
paid to each holder of such Bonus Units in accordance with the terms of such
Plan as in effect of the date hereof, subject to the terms of the applicable
Executive Severance Agreement as in effect on the date hereof.
(iv) PHANTOM SHARES. The number of phantom Shares credited to a
participant's account under the Company's Deferred Compensation Plan, Deferred
Compensation Plan for Non-Employee Directors and Deferred Stock Accumulation
Plan for Outside Directors, in accordance with the terms of such Plan as in
effect of the date hereof, shall be adjusted by multiplying such number of
phantom Shares by the Exchange Ratio. Such accounts shall otherwise be subject
to the terms of such Plans.
Beta shall take all action necessary such that Tyco will reserve for
issuance a sufficient number of Tyco Common Shares for delivery upon exercise of
Adjusted Options and distributions in respect to Bonus Units and restricted
stock awards in accordance with this Section 1.06(c). As soon as practicable
following the Effective Time, Beta shall take all action necessary such that
Tyco will register the Tyco Common
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Shares subject to the Adjusted Options under the Securities Act of 1933, as
amended, and the rules and regulations of the Securities and Exchange Commission
("SEC") thereunder (the "Securities Act") pursuant to a registration statement
on Form S-8 (or any successor or other appropriate form) to the extent such
registration is required under the Securities Act, and to use at least such
efforts as are applied to Tyco's other stock options generally to cause the
effectiveness of such registration statement or registration statements (and the
current status of the prospectus or prospectuses contained therein) to be
maintained for so long as the Adjusted Options remain outstanding (subject to
interruptions of such effectiveness or current status as may be reasonably
required from time to time, and are applicable to registration statements of
Tyco with respect to its option plans generally, because of developments
affecting Tyco or otherwise).
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, $0.01 par value
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be appropriately
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Tyco Common Shares or Company Common Stock), distribution, exercise or exchange
of Rights (as defined in Section 4.02(d)) or such Rights becoming exercisable,
reorganization, recapitalization, split up, combination or exchange of shares or
other like event with respect to Tyco Common Shares or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
(f) FRACTIONAL SHARES. No certificates or scrip representing less than one
Tyco Common Share shall be issued upon the surrender for exchange of a
certificate or certificates or other evidence for shares issued pursuant to the
Company's direct registration system which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates"). In lieu of any such
fractional share, each holder of Shares who would otherwise have been entitled
to a fraction of a Tyco Common Share upon surrender of Certificates for exchange
shall be paid upon such surrender cash (without interest) in an amount equal to
such fraction multiplied by the last reported sale price per Tyco Common Share
on the NYSE Composite Transaction Tape on the last trading day prior to the date
of the Effective Time.
SECTION 1.07. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. At or prior to
the Effective Time, Beta shall cause to be supplied to or for such bank or trust
company as shall be designated by Beta and shall be reasonably acceptable to the
Company (the "Exchange Agent"), in trust for the benefit of the holders of
Company Common Stock, for exchange in accordance with this Section 1.07 through
the Exchange Agent, certificates evidencing the Tyco Common Shares issuable
pursuant to Section 1.06(a) and the cash to be paid in lieu of fractional shares
in exchange for outstanding Shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Beta will cause the Exchange Agent to mail to each holder of
record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Beta may reasonably
specify), and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing Tyco Common Shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor solely (A) certificates evidencing that
number of whole Tyco Common Shares which such holder has the right to receive in
accordance with the Exchange Ratio in respect of the Shares formerly evidenced
by such Certificate and (B) cash in respect of fractional shares as provided in
Section 1.06(f) (the Tyco Common Shares and cash in respect of fractional shares
being, collectively, the "Merger Consideration"). The holder of such
Certificate, upon its exchange for Tyco
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Common Shares, shall also receive any dividends or other distributions to which
such holder is entitled pursuant to Section 1.07(c). Certificates surrendered
pursuant to this Section 1.07(b) shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of the Company as of the Effective Time, Merger Consideration, dividends or
distributions may be issued and paid in accordance with this Article I to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 1.07(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented Shares of
Company Common Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends or other distributions,
to evidence the ownership of the number of full Tyco Common Shares, and cash in
respect of fractional shares, into which such shares of the Company Common Stock
shall have been so converted. The provisions of this Section 1.07 shall be
appropriately adjusted to the extent necessary to preserve and implement the
intent of this section with respect to Certificates issued pursuant to the
direct registration system.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the Effective Time with respect to Tyco
Common Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Tyco Common Shares
he is entitled to receive until the holder of such Certificate shall surrender
such Certificate in accordance with the provisions of Section 1.07(b). Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole Tyco Common
Shares issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Tyco Common
Shares.
(d) TRANSFERS OF OWNERSHIP. If any certificate for Tyco Common Shares is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Beta or any agent designated by it any transfer or other taxes required
by reason of the issuance of a certificate for Tyco Common Shares in any name
other than that of the registered holder of the certificate surrendered, or
establish to the satisfaction of Beta or any agent designated by it that such
tax has been paid or is not payable.
(e) ESCHEAT. Neither Beta, Merger Sub nor the Company nor any of their
respective affiliates shall be liable to any holder of Company Common Stock for
any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. The Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock and from any cash dividends or
other distributions that the holder is entitled to receive under Section
1.07(c), such amounts as the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or non-United States tax law. To the extent that amounts are so
withheld by the Exchange Agent, such portion of the Merger Consideration and
other such amounts payable under Section 1.07(c) that are withheld shall be
treated for all purposes of this Agreement as having been received by the holder
of the Shares in respect of which such deduction and withholding was made by the
Exchange Agent.
(g) UNDISTRIBUTED CERTIFICATES. Any portion of the certificates evidencing
the Tyco Common Shares and the cash to be paid in lieu of fractional shares
supplied to the Exchange Agent which remains undistributed to the holders of the
Certificates for one year after the Effective Time shall be delivered to Beta,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Section 1.07 shall
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thereafter look only to Beta for payment of their claim for Merger Consideration
and any dividends or distributions with respect to Tyco Common Shares.
SECTION 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 1.09. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such Tyco Common
Shares as may be required pursuant to Section 1.06(a); PROVIDED, HOWEVER, that
Beta may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Tyco, Beta or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
SECTION 1.11. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and the regulations promulgated thereunder and (ii)
subject to applicable accounting standards, qualify for accounting treatment as
a pooling of interests. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
SECTION 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Beta,
Merger Sub and the Company will take all such reasonable and lawful actions as
may be necessary or appropriate in order to effectuate the Merger and the other
transactions contemplated by this Agreement in accordance with this Agreement as
promptly as possible. If, at any time after the Effective Time, any such further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company and
Merger Sub, the officers and directors of the Company and Merger Sub immediately
prior to the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
SECTION 1.13. MATERIAL ADVERSE EFFECT. When used in connection with the
Company or any of its subsidiaries or Tyco or any of its subsidiaries, as the
case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is or would reasonably be expected to be materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and its subsidiaries or Tyco and its
subsidiaries, as the case may be, in each case taken as a whole; provided,
however, that effects of changes that are applicable to (A) the United States
economy generally or (B) the United States securities markets generally shall be
excluded from the definition of "Material Adverse Effect" and from any
determination as to whether a Material Adverse Effect has occurred or may occur.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Beta and Merger Sub as
follows:
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power or authority
would not reasonably be expected to have a Material Adverse Effect. Each of the
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have a Material Adverse Effect. A true and complete
list of all of the Company's "significant" subsidiaries, as defined in
Regulation S-X, is included as an exhibit to the Company's 1997 Annual Report on
Form 10-K (the "Company Significant Subsidiaries"). The Company has furnished or
will furnish to Beta a list of all subsidiaries of the Company together with the
jurisdiction of incorporation of each such subsidiary and the percentage of each
such subsidiary's outstanding capital stock owned by the Company or another
subsidiary of the Company in Section 2.01of the written disclosure schedule
previously delivered by the Company to Beta (the "Company Disclosure Schedule")
or in Section 2.01 of the supplement to the Company Disclosure Schedule to be
delivered to Beta not later than 14 days from the date of this Agreement (the
"Supplemental Company Disclosure Schedule"). Except as set forth in Section 2.01
of the Company Disclosure Schedule or the Company SEC Reports (as defined in
Section 2.07 below), the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), with respect to which interest the Company has
invested (and currently owns) or is required to invest $10,000,000 or more,
excluding securities in any publicly-traded company held for investment by the
Company and comprising less than five percent of the outstanding stock of such
company.
SECTION 2.02. ARTICLES OF INCORPORATION AND BYLAWS. The Company has
heretofore made available to Beta a complete and correct copy of its Restated
Articles of Incorporation and Bylaws as amended to date (the "Company Charter
Documents"), and will make available to Beta , as promptly as practicable, the
Articles of Incorporation and Bylaws (or equivalent organizational documents) of
each of its subsidiaries reasonably requested by Beta (the "Subsidiary
Documents"). Such Company Charter Documents and Subsidiary Documents are in full
force and effect. Neither the Company nor any of the Company Significant
Subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents, except for
violations of the documents which do not and are not reasonably likely to
materially interfere with the operations of such entity. Neither the Company nor
any of its subsidiaries is in violation of any of the provisions of its Articles
of Incorporation or Bylaws or equivalent organizational documents, except for
violations of such documents which, individually or in the aggregate, do not and
would not reasonably be expected to have a Material Adverse Effect.
SECTION 2.03. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 700,000,000 shares of Company Common Stock. As of November
18, 1998, 218,789,869 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable
(excluding shares which are issued but not outstanding all of which are not
entitled to vote), (iii) no shares of Company Common Stock were held by
subsidiaries of the Company, (iv) 9,260,282 shares of Company Common Stock were
reserved for existing grants and 739,758 shares were reserved for future grants
pursuant to the Company Stock Option Plans, (v) 3,000,000 shares of Company
Common Stock were
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reserved and available for future issuance pursuant to the Company's 1998
Employee Stock Purchase Plan (the "Stock Purchase Plan"), and (vi) 25,000,000
shares of Company Common Stock were reserved and available for issuance pursuant
to the Company's proposed "Flexitrust Agreement" (the "Flexitrust") described in
Amendment No. 20 to the Company's 14D-9, filed with the SEC on September 28,
1998. Except as set forth in Section 2.03 of the Company Disclosure Schedule, no
change in such capitalization has occurred since November 18, 1998, except for
changes resulting from the exercise of Stock Options. Except as set forth in
Section 2.01, this Section 2.03 or Section 2.11 or in Section 2.03 or Section
2.11 of the Company Disclosure Schedule or the Company SEC Reports or as
contemplated by the Stock Option Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character binding
on the Company or any of its subsidiaries relating to the issued or unissued
capital stock of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, the Company or any of its subsidiaries. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully-paid and
nonassessable. Except as disclosed in Section 2.03 of the Company Disclosure
Schedule or the Company SEC Reports, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
subsidiary. Except as disclosed in Section 2.03 of the Company Disclosure
Schedule or the Company SEC Reports, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than guarantees of bank obligations of
subsidiaries entered into in the ordinary course of business and other than
obligations in amounts less than $3,000,000 individually and $25,000,000 in the
aggregate. Except as set forth in Sections 2.01 and 2.03 of the Company
Disclosure Schedule, all of the outstanding shares of capital stock (other than
directors' qualifying shares) of each of the Company's subsidiaries are duly
authorized, validly issued, fully-paid and nonassessable, and all such shares
(other than directors' qualifying shares and a de minimis number of shares owned
by employees of such subsidiaries) are owned by the Company or another
subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations in the Company's voting rights, charges or other
encumbrances of any nature whatsoever.
(b) The Company's Board of Directors has rescinded all authority of the
Company to repurchase any of its securities and has resolved to terminate the
Company's tender for shares of Company Common Stock pursuant to its Offer to
Purchase, dated October 9, 1998 (the "Company's Tender Offer"), immediately upon
the execution of this Agreement and without having purchased or accepted for
purchase any shares of Company Common Stock, and the Company has no obligation
to purchase or accept for purchase any such shares pursuant thereto or any other
securities of the Company. The Company will publicly announce such termination
by 9:00 a.m. E.S.T. on November 23, 1998.
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT AND STOCK OPTION
AGREEMENT. The Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement and to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Stock Option Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or the Stock Option Agreement or to consummate the transactions so contemplated
(other than the approval of the Merger and this Agreement by the Company's
shareholders in accordance with the PBCL and the Company's Charter Documents).
As of the date hereof, the Board of Directors of the Company has determined that
it is advisable and in the best interest of the Company's shareholders for the
Company to enter into this Agreement and the Stock Option Agreement and to
consummate the Merger upon the terms and subject to the conditions of this
Agreement and have adopted resolutions so that Subchapters 25F and Section 2538
of the PBCL are not applicable to Tyco or any of its affiliates or to the Merger
or
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the other transactions contemplated by this Agreement. This Agreement and the
Stock Option Agreement have been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Tyco,
Beta and Merger Sub of each such agreement and/or the guarantee thereof, as
applicable, each constitutes a legal, valid and binding obligation of the
Company.
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
2.05(a) of the Company Disclosure Schedule includes, as of the date hereof, a
list of (i) other than intercompany, all loan agreements, indentures, mortgages,
pledges, conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit, equipment leases
or lease purchase agreements, each in an amount equal to or exceeding
$15,000,000 to which the Company or any of its subsidiaries is a party or by
which any of them is bound; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which the Company or any of its subsidiaries
is a party or by which any of them or any of their respective properties or
assets are bound or affected, but excluding contracts, agreements, commitments
or other understandings or arrangements entered into in the ordinary course of
business and involving, in the case of any such contact, agreement, commitment,
or other understanding or arrangement, individual payments or receipts by the
Company or any of its subsidiaries of less than $15,000,000 over the term of
such contract, commitment, agreement, or other understanding or arrangement; and
(iii) all agreements which are required to be filed as "material contracts" with
the SEC pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, and the SEC's rules and regulations thereunder (the "Exchange Act") but
have not been so filed with the SEC.
(b) Except as set forth in Section 2.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement and the Stock Option
Agreement by the Company does not, and the performance of this Agreement and the
Stock Option Agreement by the Company will not, (i) conflict with or violate the
Restated Articles of Incorporation or Bylaws of the Company, (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default), or impair the Company's or any of its subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on (including a right to
purchase) any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
is bound or affected, except, in the case of clauses (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(c) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each, a
"Governmental Authority"), except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, state securities laws ("Blue Sky Laws"),
the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), filings under the Exon-Florio Act, filings and consents under
any applicable foreign laws intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade ("Foreign
Monopoly Laws"), filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and the filing and recordation of
appropriate merger or other documents as required by the PBCL, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay the
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Company from performing its material obligations under this Agreement or the
Stock Option Agreement, or would not otherwise reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, or (iii) as
to which any necessary consents, approvals, authorizations, permits, filings or
notifications have heretofore been obtained or filed, as the case may be, by the
Company.
SECTION 2.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
2.06(a) of the Company Disclosure Schedule or the Company SEC Reports, neither
the Company nor any of its subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which its or any of
their respective properties is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.06(b) of the Company Disclosure
Schedule or the Company SEC Reports, the Company and its subsidiaries hold all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company and its subsidiaries taken as a whole
as it is now being conducted (collectively, the "Company Permits"), except where
the failure to hold such Company Permits would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except as described in the Company SEC Reports or where the failure to so comply
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 2.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed
all forms, reports and documents required to be filed with the SEC since
December 31, 1995 (collectively, the "Company SEC Reports"). Except as disclosed
in Section 2.07 of the Company Disclosure Schedule, the Company SEC Reports (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or in the Company SEC Reports), and each fairly
presents in all material respects the consolidated financial position of the
Company and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.08 of the Company Disclosure Schedule or the Company SEC Reports or
actions (other than actions of the type prohibited by Section 4.01) relating to
the unsolicited efforts of AlliedSignal, Inc. ("AlliedSignal") to acquire the
Company, since September 30, 1998, the Company has conducted its business in the
ordinary course and there has not occurred: (i) any changes, effects or
circumstances constituting, individually or in the aggregate, a Material Adverse
Effect; (ii) any amendments or changes in the Restated Articles of Incorporation
or Bylaws of the Company; (iii) any damage to, destruction or loss of any asset
of the Company (whether or not covered by insurance) that would reasonably be
expected, individually or in the
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aggregate, to have a Material Adverse Effect; (iv) any material change by the
Company in its accounting methods, principles or practices; or (v) other than in
the ordinary course of business, any sale of a material amount of assets of the
Company.
SECTION 2.09. NO UNDISCLOSED LIABILITIES. Except as set forth in Section
2.09 of the Company Disclosure Schedule or the Company SEC Reports, neither the
Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) in the aggregate adequately
provided for in the Company's unaudited balance sheet (including any related
notes thereto) as of September 30, 1998 included in the Company's Quarterly
Report of Form 10-Q for the quarter ended September 30, 1998 (the "1998 Balance
Sheet"), (b) incurred in the ordinary course of business and not required under
GAAP to be reflected on the 1998 Balance Sheet, (c) incurred since September 30,
1998 in the ordinary course of business, (d) incurred in connection with this
Agreement or the Merger or the other transactions contemplated hereby, (e) for
fees and expenses relating to AlliedSignal's unsolicited efforts to acquire the
Company or with respect to the Company's Tender Offer, or (f) which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.10. ABSENCE OF LITIGATION. Except as set forth in Section 2.10 and
Section 2.19(c) of the Company Disclosure Schedule or the Company SEC Reports or
arising out of transactions contemplated by this Agreement, there are no claims,
actions, suits, proceedings or investigations pending or, to the knowledge of
the Company, overtly threatened against the Company or any of its subsidiaries,
or any properties or rights of the Company or any of its subsidiaries, before
any court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
2.11(a) of the Company Disclosure Schedule lists all employee pension benefit
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), all employee welfare benefit plans (as defined
in Section 3(1) of ERISA), and all other bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar fringe or employee benefit plans, programs or arrangements (including
those which contain change of control provisions or pending change of control
provisions), and any employment, executive compensation or severance agreements
(including those which contain change of control provisions or pending change of
control provisions), written or otherwise, as amended, modified or supplemented,
for the benefit of, or relating to, any former or current employee, officer,
director or consultant (or any of their beneficiaries) of the Company or any
other entity (whether or not incorporated) which is a member of a controlled
group including the Company or which is under common control with the Company
within the meaning of Sections 414(b), (c), (m) or (o) of the Code or Section
4001(a) (14) or (b) of ERISA (a "Company ERISA Affiliate"), or any subsidiary of
the Company, as well as each plan with respect to which the Company or a Company
ERISA Affiliate could incur liability under Title IV of ERISA or Section 412 of
the Code (together for the purposes of this Section 2.11, the "Company Employee
Plans"); provided, however, that a list of (i) all Company International Plans
(as defined in Section 2.11(g) hereof) not currently set forth on Section
2.11(a) of the Company Disclosure Schedule and (ii) all individual employment,
incentive or compensation arrangements with non-officers of the Company not
currently set forth on Section 2.11(a) of the Company Disclosure Schedule shall
be provided by the Company to Beta on Section 2.11(a) of the Supplemental
Company Disclosure Schedule. To the Company's knowledge, failure to satisfy its
obligations under the Company Employee Plans referred to in clauses (i) and (ii)
of the immediately preceding sentence would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The Company
has made available to Beta, prior to the date of this Agreement, or the Company
will make available not later than 30 days after the date of this Agreement,
copies of (i) each such written Company Employee Plan (or a written description
of any Company Employee Plan which is not written) and all related trust
agreements, insurance and other contracts (including policies), summary plan
descriptions, summaries of material modifications and communications distributed
to plan participants, (ii) the three
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most recent annual reports on Form 5500 series, with accompanying schedules and
attachments, filed with respect to each Company Employee Plan required to make
such a filing, (iii) the most recent actuarial valuation for each Company
Employee Plan subject to Title IV of ERISA, (iv) the latest reports which have
been filed with the Department of Labor with respect to each Company Employee
Plan required to make such filing and (v) the most recent favorable
determination letters issued for each Company Employee Plan and related trust
which is intended to be qualified under Section 401(a) of the Code (and, if an
application for such determination is pending, a copy of the application for
such determination). For purposes of this Section 2.11, the term "material,"
when used with respect to (i) any Company Employee Plan, shall mean that the
Company or a Company ERISA Affiliate has incurred or may incur obligations in an
amount exceeding $1,250,000 with respect to such Company Employee Plan, and (ii)
any liability, obligation, breach or non-compliance, shall mean that the Company
or a Company ERISA Affiliate has incurred or may incur obligations in an amount
exceeding $750,000, with respect to any one such or series of liabilities,
obligations, breaches, defaults, violations or instances of non-compliance.
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule or the Company SEC Reports, (i) none of the Company Employee Plans
promises or provides retiree medical or other retiree welfare benefits to any
person, and none of the Company Employee Plans is a "multiemployer plan" as such
term is defined in Section 3(37) of ERISA; (ii) no party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code) has at any time engaged in a transaction with respect to any Company
Employee Plan which could subject the Company or any Company ERISA Affiliate,
directly or indirectly, to a material tax, penalty or other material liability
for prohibited transactions under ERISA or Section 4975 of the Code; (iii) no
fiduciary of any Company Employee Plan has breached any of the responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA, which breach
would reasonably be expected to result in any material liability to the Company
or any Company ERISA Affiliate; (iv) all Company Employee Plans have been
established and maintained substantially in accordance with their terms and have
operated in compliance in all material respects with the requirements of
applicable law, and may by their terms be amended and/or terminated at any time
subject to applicable law and the terms of each Company Employee Plan, and the
Company and each of its subsidiaries have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any default or violation
by any other party to, any of the Company Employee Plans; (v) each Company
Employee Plan which is intended to be qualified under Section 401(a) of the Code
is the subject of a favorable determination letter from the IRS, and, to the
Company's knowledge, nothing has occurred which may reasonably be expected to
impair such determination; (vi) all contributions required to be made with
respect to any Company Employee Plan pursuant to Section 412 of the Code, or the
terms of the Company Employee Plan or any collective bargaining agreement, have
been made on or before their due dates (including any extensions thereof); (vii)
with respect to each Company Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30 day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) has occurred for which there is any material outstanding liability to the
Company or any Company ERISA Affiliate nor would the consummation of the
transactions contemplated hereby (including the execution of this Agreement)
constitute a reportable event for which the 30-day requirement has not been
waived; and (viii) neither the Company nor any Company ERISA Affiliate has
incurred or reasonably expects to incur any material liability under Title IV of
ERISA including, without limitation, with respect to an event described in
Section 4062, 4063 or 4041 of ERISA (other than liability for premium payments
to the Pension Benefit Guaranty Corporation (the "PBGC") arising in the ordinary
course).
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds (i) any option to purchase Company
Common Stock as of the date hereof, together with the number of shares of
Company Common Stock subject to such option, the option price of such option (to
the extent determined as of the date hereof), whether such option is intended to
qualify as an incentive stock option within the
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meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of
such option; (ii) any shares of Company Common Stock that are restricted; and
(iii) any other right, directly or indirectly, to receive Company Common Stock,
together with the number of shares of Company Common Stock subject to such
right.
(d) To the extent not already included and so labelled in Section 2.11(a) of
the Company Disclosure Schedule, Section 2.11(d) of the Company Disclosure
Schedule sets forth a true and complete list of (i) all employment agreements
with officers of the Company or any of its subsidiaries; (ii) all agreements
with consultants who are individuals obligating the Company or any of its
subsidiaries to make annual cash payments in an amount exceeding $375,000; (iii)
all agreements with respect to the services of independent contractors or leased
employees whether or not they participate in any of the Company Employee Plans
obligating the Company or any of its subsidiaries to make annual cash payments
in the aggregate exceeding $375,000; (iv) all officers of the Company or any of
its subsidiaries who have executed a non-competition agreement with the Company
or any of its subsidiaries; (v) all severance agreements, programs and policies
of the Company or any of its subsidiaries with or relating to its employees, in
each case with outstanding commitments exceeding $375,000, excluding programs
and policies required to be maintained by law; and (vi) all plans, programs,
agreements and other arrangements of the Company which contain change of control
provisions.
(e) Except as set forth in Section 2.11(e) of the Company Disclosure
Schedule: (i) the PBGC has not instituted proceedings to terminate any Company
Employee Plan that is subject to Title IV of ERISA (each, a "Company Defined
Benefit Plan"); (ii) the Company Defined Benefit Plans have no accumulated or
waived funding deficiencies within the meaning of Section 412 of the Code nor
have any extensions of any amortization period within the meaning of Section 412
of the Code or 302 of ERISA been applied for with respect thereto; (iii) as of
January 1, 1998, the present value of the benefit liabilities (within the
meaning of Section 4041 of ERISA) of the Company Defined Benefit Plans,
determined on an ongoing basis using the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan's most recently completed fiscal year, does not exceed
by more than $2,500,000 the value of the Company Defined Benefit Plans' assets
and to the knowledge of the Company, nothing has occurred since the end of the
most recently completed fiscal year that would adversely affect the funding
status of such plans; (iv) all applicable premiums required to be paid to the
PBGC with respect to the Company Defined Benefit Plans have been paid; (v) no
facts or circumstances exist with respect to any Company Defined Benefit Plan
which would give rise to a lien on the assets of the Company under Section 4068
of ERISA or otherwise; and (vi) as of the date hereof, substantially all of the
assets of the Company Defined Benefit Plans are readily marketable securities or
insurance contracts.
(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule or in the Company SEC Reports, (i) the Company has never maintained an
employee stock ownership plan (within the meaning of Section 4975(e)(7) of the
Code) or any other Company Employee Plan that invests in Company stock; (ii)
since December 31, 1997, the Company has not proposed nor agreed to any increase
in benefits under any Company Employee Plan (or the creation of new benefits) or
change in employee coverage which would materially increase the expense of
maintaining any Company Employee Plan; (iii) the consummation of the
transactions contemplated by this Agreement will not result in an increase in
the amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits or compensation payable in respect of any employee; and
(iv) no person will be entitled to any severance benefits under the terms of any
Company Employee Plan solely by reason of the consummation of the transactions
contemplated by this Agreement.
(g) Each Company Employee Plan covering non-U.S. employees (a "Company
International Plan") has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable laws
(including any special provisions relating to registered or qualified plans
where such Company International Plan was intended to so qualify) and has been
maintained in good standing with
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applicable regulatory authorities. Except as set forth on Section 2.11(g) of the
Company Disclosure Schedule, the fair market value of the assets of each funded
Company International Plan, if any, (or the liability of each funded Company
International Plan funded through insurance) is sufficient to procure or provide
for the benefits accrued thereunder through the Effective Time according to the
actuarial assumptions and valuations most recently used to determine employer
contributions to the Company International Plan.
(h) The Company has fiduciary liability insurance of at least $1,500,000 in
effect covering the fiduciaries of the Company Employee Plans (including the
Company) with respect to whom the Company may have liability.
SECTION 2.12. LABOR MATTERS. Except as set forth in Section 2.12 of the
Company Disclosure Schedule or the Company SEC Reports, (i) there are no
controversies pending or, to the knowledge of the Company, threatened, between
the Company or any of its subsidiaries and any of their respective employees,
which controversies have had, or would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect; (ii) neither the Company
nor any of its United States subsidiaries is in breach of any material
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its United States subsidiaries which would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, nor does the Company or any of its United States subsidiaries
know of any activities or proceedings of any labor union to organize any
significant number of such employees; and (iii) neither the Company nor any of
its subsidiaries is in breach of any material collective bargaining agreement or
other labor union contract, nor has any knowledge of any activities or
proceedings of any labor unions to organize employees, or of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or any of its subsidiaries which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
SECTION 2.13. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
Subject to the accuracy of the representations of Beta in Section 3.13, the
information supplied by the Company in writing specifically for inclusion in the
Registration Statement (as defined in Section 3.13) shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
information supplied by the Company for inclusion in the joint proxy
statement/prospectus to be sent to the shareholders of the Company in connection
with the meeting of the shareholders of the Company to consider the Merger (the
"Company Shareholders Meeting"), and to the shareholders of Tyco in connection
with the meeting of the shareholders of Tyco to consider the issuance of the
Tyco Common Shares in connection with the Merger (the "Tyco Shareholders
Meeting" and, together with the Company Shareholders Meeting, the "Shareholders
Meetings") (such proxy statement/prospectus as amended or supplemented is
referred to herein as the "Joint Proxy Statement/Prospectus") will not, on the
date the Joint Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to shareholders or at the time of the
Shareholders Meetings contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made therein not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Shareholders
Meetings which has become false or misleading. If at any time prior to the
Effective Time any event relating to the Company or any of its respective
affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, the Company shall promptly
inform Beta and Merger Sub. The Joint Proxy Statement/Prospectus shall comply in
all material respects with the requirements of the Securities Act and the
Exchange Act. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information supplied by Tyco, Beta
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or Merger Sub which is contained or incorporated by reference in, or furnished
in connection with the preparation of, the Joint Proxy Statement/Prospectus.
SECTION 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this Agreement
or as set forth in Section 2.14 of the Company Disclosure Schedule or the
Company SEC Reports, to the best of the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or would reasonably be expected to have the effect
of prohibiting or impairing the conduct of business by the Company or any of its
subsidiaries as currently conducted by the Company or such subsidiary, except
for any prohibition or impairment as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.15. TITLE TO PROPERTY. Except as set forth in Sections 2.15 and
2.19(b) of the Company Disclosure Schedule or the Supplemental Company
Disclosure Schedule, the Company and each of its subsidiaries have good title to
all of their real properties and other assets, free and clear of all liens,
charges and encumbrances, except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially
interfere with the present use of the property affected thereby or which would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, and except for liens which secure indebtedness reflected in the
1998 Balance Sheet; and, to the knowledge of the Company, all leases pursuant to
which the Company or any of its subsidiaries lease from others material amounts
of real or personal property, are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the knowledge of
the Company, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.16. TAXES. Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:
(a) The Company and each of its subsidiaries has timely and accurately
filed, or caused to be timely and accurately filed, all material Tax Returns (as
hereinafter defined) required to be filed by it, and has paid, collected or
withheld, or caused to be paid, collected or withheld, all material amounts of
Taxes (as hereinafter defined) required to be paid, collected or withheld, other
than such Taxes for which adequate reserves in the 1998 Balance Sheet have been
established or which are being contested in good faith. Except as set forth in
Section 2.16(a) of the Company Disclosure Schedule, there are no material claims
or assessments pending against the Company or any of its subsidiaries for any
alleged deficiency in any Tax, there are no pending or threatened audits or
investigations for or relating to any liability in respect of any Taxes, and the
Company has not been notified in writing of any proposed Tax claims or
assessments against the Company or any of its subsidiaries (other than in each
case, claims or assessments for which adequate reserves in the 1998 Balance
Sheet have been established or which are being contested in good faith or are
immaterial in amount). Neither the Company nor any of its subsidiaries has
executed any waivers or extensions of any applicable statute of limitations to
assess any material amount of Taxes. There are no outstanding requests by the
Company or any of its subsidiaries for any extension of time within which to
file any material Tax Return or within which to pay any material amounts of
Taxes shown to be due on any Tax Return. To the best knowledge of the Company,
there are no liens for material amounts of Taxes on the assets of the Company or
any of its subsidiaries except for statutory liens for current Taxes not yet due
and payable. Other than with respect to the Company and its subsidiaries,
neither the Company nor any of its subsidiaries is liable for Taxes of any other
Person, or is currently under any contractual obligation to indemnify any person
with respect to Taxes (except for customary agreements to indemnify lenders or
security holders in respect of taxes other than income taxes), or is a party to
any tax sharing agreement or any other agreement providing for payments by the
Company or any of its subsidiaries with respect to Taxes.
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(b) For purposes of this Agreement, the term "Tax" shall mean any United
States federal, state, local, non-United States or provincial income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
alternative or add-on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge imposed
by any Governmental Authority, together with any interest or penalty imposed
thereon. The term "Tax Return" shall mean a report, return or other information
(including any attached schedules or any amendments to such report, return or
other information) required to be supplied to or filed with a Governmental
Authority with respect to any Tax, including an information return, claim for
refund, amended return or declaration or estimated Tax.
SECTION 2.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
2.17(a) to the Company Disclosure Schedule or in the Company SEC Reports or as
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, the operations and properties of the Company and its
subsidiaries are in compliance with the Environmental Laws (as hereinafter
defined), which compliance includes the possession by the Company and its
subsidiaries of all permits and governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof.
(b) Except as set forth in Section 2.17(b) of the Company Disclosure
Schedule or the Company SEC Reports or as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, there are
no Environmental Claims (as hereinafter defined), including claims based on
"arranger liability," pending or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries or against any person
or entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed.
(c) Except as set forth on Section 2.17(c) of the Company Disclosure
Schedule or in the Company SEC Reports, there are no past or present actions,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Materials of Environmental Concern (as
hereinafter defined), that are reasonably likely to form the basis of any
Environmental Claim against the Company or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries have retained or assumed, except for such Environmental
Claims that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d)
of the Company Disclosure Schedule or the Company SEC Reports, (i) there are no
off-site locations where the Company or any of its subsidiaries has stored,
disposed or arranged for the disposal of Materials of Environmental Concern
which have been listed on the National Priority List, CERCLIS, or state
Superfund site list, and the Company and its subsidiaries have not been notified
that any of them is a potentially responsible party at any such location; (ii)
there are no underground storage tanks located on property owned or leased by
the Company or any of its subsidiaries; (iii) there is no friable asbestos
containing material contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries; and (iv) there are no polychlorinated biphenyls (PCBs)
or PCB-containing items contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries.
(e) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any person or entity alleging potential
liability (including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from the
presence, or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by the Company or any
of its subsidiaries.
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(ii) "Environmental Laws" means all United States federal, state, local and
non-United States laws, regulations, codes and ordinances, relating to pollution
or protection of human health and the environment (including ambient air,
surface water, ground water, land surface or sub-surface strata), including laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern, including, but not limited to CERCLA, RCRA, TSCA, OSHA,
the Clean Air Act, the Clean Water Act, each as amended or supplemented, and any
applicable transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous materials, hazardous substances and hazardous wastes,
medical waste, toxic substances, petroleum and petroleum products,
asbestos-containing materials, polychlorinated biphenyls, and any other
chemicals, pollutants or substances regulated under any Environmental Law.
SECTION 2.18. BROKERS. No broker, finder or investment banker (other than
Credit Suisse First Boston ("CSFB") and Donaldson, Lufkin & Jenrette ("DLJ"),
the fees and expenses of each of whom will be paid by the Company) is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Beta a
complete and correct copy of all agreements between the Company and CSFB and DLJ
pursuant to which such firms would be entitled to any payment relating to the
transactions contemplated hereunder.
SECTION 2.19. INTELLECTUAL PROPERTY. (a) As used herein, the term
"Intellectual Property Assets" shall mean all worldwide intellectual property
rights, including, without limitation, patents, trademarks, service marks and
copyrights, and registrations and applications therefor, trade names, know-how,
trade secrets, computer software programs and proprietary information. As used
herein, "Company Intellectual Property Assets" shall mean the Intellectual
Property Assets used or owned by the Company or any of its subsidiaries.
(b) Except as set forth in Section 2.19(b) of the Company Disclosure
Schedule or the Supplemental Company Disclosure Schedule, the Company and/or
each of its subsidiaries owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property Assets that are used in and
otherwise material to the business of the Company and its subsidiaries as
currently conducted, without conflict with the rights of others.
(c) Except as disclosed in Section 2.19(c) of the Company Disclosure
Schedule or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of the Company, are threatened by any person with
respect to the Company Intellectual Property Assets, or (ii) are, to the
knowledge of the Company, currently pending or threatened by any person with
respect to the Intellectual Property Assets of a third party (the "Third Party
Intellectual Property Assets") to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Assets by
or through the Company or any of its subsidiaries.
(d) Except as disclosed in Section 2.19(d) of the Company Disclosure
Schedule or as would not reasonably be expected to have a Material Adverse
Effect, neither the Company nor any of its subsidiaries knows of any valid
grounds for any bona fide claim to the effect that the manufacture, sale,
licensing or use of any product now used, sold or licensed or proposed for use,
sale, license by the Company or any of its subsidiaries infringes on any Third
Party Intellectual Property Assets.
(e) Section 2.19(e) of the Company Disclosure Schedule or the Supplemental
Company Disclosure Schedule sets forth or will set forth a list of (i) all
patents and patent applications owned by the Company and/or each of its
subsidiaries worldwide; (ii) all trademark and service mark registrations and
all trademark and service mark applications, material common law trademarks,
material trade dress and material slogans, and all trade names owned by the
Company and/or each of its subsidiaries worldwide;
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(iii) all copyright registrations and copyright applications owned by the
Company and/or each of its subsidiaries worldwide; and (iv) all licenses owned
by the Company and/or each of its subsidiaries in which the Company and/or each
of its subsidiaries is (A) a licensor with respect to any of the patents,
trademarks, service marks, trade names or copyrights listed in Section 2.19(e)
of the Company Disclosure Schedule or the Supplemental Company Disclosure
Schedule; or (B) a licensee of any other person's patents, trade names,
trademarks, service marks or copyrights material to the Company except for any
licenses of software programs that are commercially available "off the shelf."
Except as disclosed in Section 2.19(e)(v) of the Company Disclosure Schedule or
the Supplemental Company Disclosure Schedule, the Company and/or each of its
subsidiaries has made all necessary filings and recordations to protect and
maintain its interest in the patents, patent applications, trademark and service
mark registrations, trademark and service mark applications, copyright
registrations and copyright applications and licenses set forth in Section
2.19(e) of the Company Disclosure Schedule or the Supplemental Company
Disclosure Schedule, except where the failure to so protect or maintain would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(f) To the knowledge of the Company, except as set forth in Section
2.19(e)(v) or 2.19(f) of the Company Disclosure Schedule or the Supplemental
Company Disclosure Schedule or the Company SEC Reports: (i) each patent, patent
application, trademark or service mark registration, and trademark or service
mark application and copyright registration or copyright application of the
Company and/or each of its subsidiaries is valid and subsisting and (ii) each
material license of Company Intellectual Property Assets listed on Section
2.19(e) of the Company Disclosure Schedule or the Supplemental Company
Disclosure Schedule is valid, subsisting and enforceable.
(g) Except as set forth in Section 2.19(g) of the Company Disclosure
Schedule, to the Company's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Company's Intellectual Property
Assets by any third party, including any employee, former employee, independent
contractor or consultant of the Company or any of its subsidiaries which would
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(h) Except as set forth in Section 2.19(h) of the Company Disclosure
Schedule, the disclosure under the heading "YEAR 2000" contained in the
Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998
is accurate and in compliance with applicable law in all material respects.
SECTION 2.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
2.20 of the Company Disclosure Schedule or the Company SEC Reports or for events
as to which the amounts involved do not, in the aggregate, exceed $300,000,
since the Company's proxy statement dated March 16, 1998, no event has occurred
that would be required to be reported as a Certain Relationship or Related
Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 2.21. INSURANCE. Except as disclosed in Section 2.21 of the Company
Disclosure Schedule or the Company SEC Reports, all material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by the Company or any of its
subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of the Company and its
subsidiaries and their respective properties and assets and are in character and
amount appropriate for the businesses conducted by the Company, except as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.22. PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 2.22(a) of the Company Disclosure Schedule or the Company SEC Reports,
the Company is not aware of any claim, pending or threatened, against the
Company or any of its subsidiaries for injury to person or property of employees
or any third parties suffered as a result of the sale of any product or
performance of any service by the Company or any of its subsidiaries, including
claims arising out of the defective or unsafe nature of its products or
services, which would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
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(b) Except as disclosed in Section 2.22(b) of the Company Disclosure
Schedule or the Company SEC Reports, there is no pending or, to the knowledge of
the Company, overtly threatened recall or investigation of any product sold by
the Company, which recall or investigation would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.23. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has been advised by its financial advisor, CSFB, to the effect that in
its opinion, as of the date of this Agreement, the Exchange Ratio is fair to the
holders of Shares from a financial point of view.
SECTION 2.24. POOLING MATTERS. To the Company's knowledge and based upon
consultation with its independent accountants, the Company has provided to Beta
and its independent accountants all information concerning actions taken or
agreed to be taken by the Company or any of its affiliates on or before the date
of this Agreement that, if taken, might reasonably be expected to affect
adversely the ability of Tyco to account for the business combination to be
effected by the Merger as a pooling of interests, and the Company has no
knowledge that such business combination cannot be accounted for in that manner.
For purposes of this Section 2.24, references to "knowledge" mean to the actual
knowledge of the Company's Chairman and Chief Executive Officer, Chief Financial
Officer or Controller.
SECTION 2.25. TAX MATTERS. The representations, statements and covenants set
forth in paragraph 2 through 14 of Section 2.25 of the Company Disclosure
Schedule are true and correct in all material respects.
SECTION 2.26. RIGHTS AGREEMENT. The Board of the Directors of the Company
has authorized and approved an amendment to the Rights Agreement (as defined in
Section 4.02(d)) to the effect that (i) none of Beta, Merger Sub and their
affiliates, either individually or as a group, shall become an "Acquiring
Person" (as defined in the Rights Agreement), (ii) no Distribution Date, Section
11(a)(ii) Event, Section 13 Event, Stock Acquisition Date or Triggering Event
(as each such term is defined in the Rights Agreement) (each a "Rights Event")
shall occur, and (iii) an Unsolicited Acquisition Proposal (as defined in the
Rights Agreement) shall not be deemed to have been announced, with respect to
each of clauses (i), (ii) and (iii), by reason of the approval, execution or
delivery of this Agreement, the Stock Option Agreement, the consummation of the
transactions contemplated hereby and thereby or any announcement of the same.
The Company and the Rights Agent (as defined in the Rights Agreement) shall
execute such amendment to the Rights Agreement no later than the second business
day following the date hereof.
SECTION 2.27. SUPPLEMENTAL COMPANY DISCLOSURE SCHEDULE. No disclosure which
will be made on the Supplemental Company Disclosure Schedule will be of a matter
which would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BETA AND MERGER SUB
Beta and Merger Sub hereby, jointly and severally, represent and warrant to
the Company as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Tyco and
its subsidiaries is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized and existing or to
have such power or authority would not reasonably be expected to have a Material
Adverse Effect. Each of Tyco and its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not reasonably be expected to have a Material Adverse
Effect. A true and complete list of all of Tyco's subsidiaries, together with
the jurisdiction of incorporation of each subsidiary and the percentage of each
subsidiary's outstanding capital stock owned by Tyco or another subsidiary of
Tyco, is set forth in Section 3.01 of the written disclosure schedule previously
delivered by Beta to the Company (the "Beta Disclosure Schedule"). Except as set
forth in Section 3.01 of the Beta Disclosure Schedule or the Tyco SEC Reports
(as defined in Section 3.07 below), Tyco does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), with respect to which Tyco has invested and
currently owns or is required to invest $7,500,000 or more, excluding securities
in any publicly traded company held for investment by Tyco and comprising less
than five percent of the outstanding capital stock of such company.
SECTION 3.02. MEMORANDUM OF ASSOCIATION AND BYE-LAWS. Beta has heretofore
made available to the Company a complete and correct copy of Tyco's Memorandum
of Association and Bye-Laws, as amended to date (the "Tyco Charter Documents").
Such Tyco Charter Documents are in full force and effect. Neither Tyco, Beta nor
Merger Sub is in violation of any of the provisions of its Memorandum of
Association (or Articles of Incorporation) or bye-laws (or by-laws).
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of Tyco
consists of 1,503,750,000 Tyco Common Shares and 125,000,000 Preference Shares,
$1.00 par value per share ("Tyco Preferred Shares"). (i) As of November 6, 1998,
(I) 647,323,419 Tyco Common Shares were issued and outstanding, all of which are
validly issued, fully paid and non-assessable, (II) no Tyco Preferred Shares
were outstanding and (III) no more than 10,000,000 Tyco Common Shares and no
Tyco Preferred Shares were held by subsidiaries of Tyco (excluding such Tyco
Common Shares held or to be held by Beta for delivery to the shareholders of the
Company as Merger Consideration); (ii) as of September 30, 1998, warrants to
purchase 157,778 Tyco Common Shares were outstanding; and (iii) as of October
21, 1998, approximately 29,500,000 Common Shares were reserved for issuance upon
exercise of stock options issued under Tyco's stock option plans. No material
change in such capitalization has occurred since such dates, respectively, other
than as a result of the exercise of options or warrants outstanding as of such
dates. Except as set forth in Section 3.03 of the Beta Disclosure Schedule or
the Tyco SEC Reports or as contemplated by this Agreement, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character binding on Tyco or any of its subsidiaries relating to the issued or
unissued capital stock of Tyco or any of its subsidiaries or obligating Tyco or
any of its subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, Tyco or any of its subsidiaries. Except as set forth
in Section 3.01 or 3.03 of the Beta Disclosure Schedule, all of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Tyco's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and all such shares (other than directors' qualifying shares) are
owned by Tyco or
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another subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in Tyco's voting rights, charges or other
encumbrances of any nature whatsoever.
(b) The Tyco Common Shares to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid and nonassessable and shall be listed,
upon official notice of issuance, for trading on the NYSE.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT AND THE STOCK OPTION
AGREEMENT. Each of Tyco, Beta and Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement and the Stock Option
Agreement, as applicable, and the Tyco guarantees hereof and thereof, as
applicable, and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement, and the Tyco
guarantees thereof, by Tyco, Beta and Merger Sub, as applicable, and the
consummation by Tyco, Beta and Merger Sub of the transactions, contemplated
hereby and thereby, as applicable, have been duly and validly authorized by all
necessary corporate action on the part of Tyco, Beta and Merger Sub, as
applicable, and no other corporate proceedings on the part of Tyco, Beta or
Merger Sub are necessary to authorize this Agreement or the Stock Option
Agreement or to consummate the transactions so contemplated (other than the
approval of the issuance of the Tyco Common Shares in connection with the Merger
by a majority of the votes cast on a proposal to such effect, provided that the
total votes cast on such proposal represent over 50% of the interest of all
securities entitled to vote on such proposal, in accordance with the rules and
regulations of the NYSE, the Companies Act of 1981, as amended, and the Tyco
Charter Documents). The respective Boards of Directors of Tyco and Beta, as
applicable, have each determined that it is advisable and in the best interest
of Tyco's and Beta's shareholders, as applicable, for Beta to enter into this
Agreement and the Stock Option Agreement, for Tyco to guarantee Beta's
obligations hereunder and thereunder, and for Beta to consummate the Merger upon
the terms and subject to the conditions of this Agreement. This Agreement, the
Stock Option Agreement and/or the Tyco guarantees thereof have been duly and
validly executed and delivered by Tyco, Beta and Merger Sub, as applicable, and,
assuming due authorization, execution and delivery by the Company, constitute
the legal, valid and binding obligations of Tyco, Beta and Merger Sub, as
applicable.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
3.05(a) of the Beta Disclosure Schedule includes, as of the date hereof, a list
of (i) other than intercompany, all loan agreements, indentures, mortgages,
pledges, conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit, equipment leases
or lease purchase agreements to which Tyco or any of its subsidiaries is a party
or by which any of them is bound, each in an amount exceeding $25,000,000; (ii)
all contracts, agreements, commitments or other understandings or arrangements
to which Tyco or any of its subsidiaries is a party or by which any of them or
any of their respective properties or assets are bound or affected, but
excluding contracts, agreements, commitments or other understandings or
arrangements entered into in the ordinary course of business and involving, in
each case, payments or receipts by Tyco or any of its subsidiaries of less than
$20,000,000 in any single instance; and (iii) all agreements which, as of the
date hereof, are required to be filed with the SEC pursuant to the requirements
of the Exchange Act as "material contracts" but have not been so filed with the
SEC.
(b) Except as set forth in Section 3.05(b) of the Beta Disclosure Schedule,
the execution and delivery of this Agreement, the Stock Option Agreement and
guarantees thereof by Tyco, Beta and Merger Sub, as applicable, do not, and the
performance of this Agreement, the Stock Option Agreement and the guarantees
thereof by Tyco, Beta and Merger Sub, as applicable, will not, (i) conflict with
or violate the Memorandum of Association (or Articles of Incorporation) or
bye-laws (or by-laws) of Tyco, Beta or Merger Sub, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Tyco or any
of its subsidiaries or by which its or their respective properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
impair Tyco's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration
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or cancellation of, or result in the creation of a lien or encumbrance
(including a right to purchase) on any of the properties or assets of Tyco or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Tyco or any of its subsidiaries is a party or by which Tyco
or any of its subsidiaries or its or any of their respective properties are
bound or affected, except, in the case of clauses (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(c) The execution and delivery of this Agreement, the Stock Option Agreement
and the guarantees thereof by Tyco, Beta and Merger Sub, as applicable, do not,
and the performance of this Agreement, the Stock Option Agreement and the
guarantees thereof by Tyco, Beta and Merger Sub, as applicable, will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky
Laws, the pre-merger notification requirements of the HSR Act, filings under the
Exon-Florio Act, Foreign Monopoly Laws, and the filing and recordation of
appropriate merger or other documents as required by the PBCL, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay Tyco, Beta
or Merger Sub from performing their respective material obligations under this
Agreement, the Stock Option Agreement and the guarantees thereof, and would not
otherwise be reasonably expected, individually or in the aggregate, to have a
Material Adverse Effect or (iii) as to which any necessary consents, approvals,
authorizations, permits, filings or notifications have heretofore been obtained
or filed, as the case may be, by Tyco, Beta or Merger Sub.
SECTION 3.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
3.06(a) of the Beta Disclosure Schedule or the Tyco SEC Reports, neither Tyco
nor any of its subsidiaries is in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to Tyco or
any of its subsidiaries or by which its or any of their respective properties is
bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Tyco or any of its subsidiaries is a party or by which Tyco or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Except as disclosed in Section 3.06(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports, Tyco and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business of Tyco and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Tyco Permits") except where the failure to hold
such Tyco Permits would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Tyco and its subsidiaries are in
compliance with the terms of the Tyco Permits, except as described in the Tyco
SEC Reports or where the failure to so comply would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Tyco has filed all
forms, reports and documents required to be filed with the SEC since December
31, 1995 (collectively, the "Tyco SEC Reports"). The Tyco SEC Reports (i) were
prepared in all material respects in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Except as set
forth in Section 3.07(a) of the Beta Disclosure Schedule, none of Tyco's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Tyco SEC Reports has been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Tyco SEC
Reports), and each fairly presents in all material respects the consolidated
financial position of Tyco and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.08 of the Beta Disclosure Schedule or the Tyco SEC Reports, since June
30, 1998, Tyco has conducted its business in the ordinary course and there has
not occurred: (i) any changes, effects or changed circumstances constituting,
individually or in the aggregate, a Material Adverse Effect; (ii) any amendments
or changes in the Tyco Charter Documents; (iii) any damage to, destruction or
loss of any assets of Tyco (whether or not covered by insurance) that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; (iv) any material change by Tyco in its accounting methods; or
(v) any sale of a material amount of assets of Tyco, except in the ordinary
course of business.
SECTION 3.09. NO UNDISCLOSED LIABILITIES. Except as set forth in Section
3.09 of the Beta Disclosure Schedule or the Tyco SEC Reports, neither Tyco nor
any of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) in the aggregate adequately provided for in
Tyco's unaudited balance sheet (including any related notes thereto) as of June
30, 1998 included in Tyco's Quarterly Report on Form 10-Q for the fiscal period
ended June 30, 1998 (the "1998 Tyco Balance Sheet"), (b) incurred in the
ordinary course of business and not required under GAAP to be reflected on the
1998 Balance Sheet, (c) incurred since June 30, 1998 in the ordinary course of
business, (d) incurred in connection with this Agreement, or the Merger or the
other transactions contemplated hereby, or (e) which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth in Section 3.10 and
3.19(b) of the Beta Disclosure Schedule or the Tyco SEC Reports or arising out
of transactions contemplated by this Agreement, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Beta,
threatened against Tyco or any of its subsidiaries, or any properties or rights
of Tyco or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, that would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
3.11(a) of the Beta Disclosure Schedule lists all employee pension benefit plans
(as defined in Section 3(2) of ERISA), all employee welfare benefit plans (as
defined in Section 3(1) of ERISA), and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any employment, executive compensation or severance agreements, written or
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any former or current employee, officer, director or consultant (or any of
their beneficiaries) of Tyco or any entity (whether or not incorporated) which
is a member of a controlled group including Tyco or which is under common
control with Tyco within the meaning of Section 414(b), (c), (m) or (o) of the
Code or Section 4001(a) (14) or (b) of ERISA ("Tyco ERISA Affiliate"), or any
subsidiary of Tyco, as well as each plan with respect to which Tyco or a Tyco
ERISA Affiliate could incur liability under Title IV of ERISA or Section 412 of
the Code (together for the purposes of this Section 3.11, the "Tyco Employee
Plans"). For purposes of this Section 3.11, the term "material," when used with
respect to (i) any Tyco Employee Plan, shall mean that Tyco or a Tyco ERISA
Affiliate has incurred or may incur obligations in an amount exceeding
$5,000,000 with respect to such Tyco Employee Plan, and (ii) any liability,
obligation, breach or non-compliance, shall mean that Tyco or a Tyco ERISA
Affiliate has
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incurred or may incur obligations in an amount exceeding $3,000,000, with
respect to any one such or series of liabilities, obligations, breaches,
defaults, violations or instances of non-compliance.
(b) Except as set forth in Section 3.11(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports, (i) none of the Tyco Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, and
none of the Tyco Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (ii) no party in interest or disqualified
person (as defined in Section 3(14) of ERISA and Section 4975 of the Code) has
at any time engaged in a transaction with respect to any Tyco Employee Plan
which could subject Tyco or any Tyco ERISA Affiliate, directly or indirectly, to
a material tax, penalty or other material liability for prohibited transactions
under ERISA or Section 4975 of the Code; (iii) no fiduciary of any Tyco Employee
Plan has breached any of the responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA, which breach would reasonably be expected to
result in any material liability to Tyco or any Tyco ERISA Affiliate; (iv) all
Tyco Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance in all material
respects with the requirements of applicable law, and may by their terms be
amended and/or terminated at any time subject to applicable law and the terms of
each Tyco Employee Plan, and Tyco and each of its subsidiaries have performed
all material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
default or violation by any other party to, any of the Tyco Employee Plans; (v)
each Tyco Employee Plan which is intended to be qualified under Section 401(a)
of the Code is the subject of a favorable determination letter from the IRS,
and, to Beta's knowledge, nothing has occurred which may reasonably be expected
to impair such determination; (vi) all contributions required to be made with
respect to any Tyco Employee Plan pursuant to Section 412 of the Code, or the
terms of the Tyco Employee Plan or any collective bargaining agreement, have
been made on or before their due dates (including any extensions thereof); (vii)
with respect to each Tyco Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30 day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) has occurred for which there is any material outstanding liability to
Tyco or any Tyco ERISA Affiliate nor would the consummation of the transaction
contemplated hereby (including the execution of this agreement) constitute a
reportable event for which the 30-day requirement has not been waived; and
(viii) neither Tyco nor any Tyco ERISA Affiliate has incurred or reasonably
expects to incur any material liability under Title IV of ERISA including,
without limitation, with respect to an event described in Section 4062, 4063 or
4041 of ERISA (other than liability for premium payments to the PBGC arising in
the ordinary course).
(c) Section 3.11(c) of the Beta Disclosure Schedule sets forth a true and
complete list of the aggregate number of (i) options to purchase Tyco Common
Shares as of the date hereof, together with the number of Tyco Common Shares
subject to such options, the option prices of such options (to the extent
determined as of the date hereof), whether such options are intended to qualify
as ISOs, and the expiration date of such options; (ii) any Tyco Common Shares
that are restricted; and (iii) any other rights, directly or indirectly, to
receive Tyco Common Shares, together with the number of Tyco Common Shares
subject to such rights, held by each current or former employee, officer or
director of Tyco or any of its subsidiaries.
(d) To the extent not already included and so indicated in Section 3.11(a)
of the Company Disclosure Schedule, Section 3.11(d) of the Beta Disclosure
Schedule sets forth a true and complete list of (i) all employment agreements
with officers of Tyco or any of its subsidiaries; (ii) all agreements with
consultants who are individuals obligating Tyco or any of its subsidiaries to
make annual cash payments in an amount exceeding $1,500,000; (iii) all
agreements with respect to the services of independent contractors or leased
employees whether or not they participate in any of the Tyco Employee Plans
obligating Tyco or any of its subsidiaries to make annual cash payments in the
aggregate exceeding $1,500,000; (iv) all officers of Tyco or any of its
subsidiaries who have executed a non-competition agreement with Tyco or any of
its subsidiaries; (v) all severance agreements, programs and policies of Tyco or
any of its subsidiaries with or relating to its employees, in each case with
outstanding commitments exceeding $1,500,000, excluding
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programs and policies required to be maintained by law; and (vi) all plans,
programs, agreements and other arrangements of Company which contain change in
control provisions.
(e) Except as set forth in Section 3.11(e) of the Beta Disclosure Schedule:
(i) the PBGC has not instituted proceedings to terminate any Tyco Employee Plan
that is subject to Title IV of ERISA (each, a "Tyco Defined Benefit Plan"); (ii)
the Tyco Defined Benefit Plans have no accumulated or waived funding
deficiencies within the meaning of Section 412 of the Code nor have any
extensions of any amortization period within the meaning of Section 412 of the
Code or 302 of ERISA been applied for with respect thereto; (iii) as of January
1, 1998, the present value of the benefit liabilities (within the meaning of
Section 4041 of ERISA) of the Company Defined Benefit Plans, determined on an
ongoing basis using the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such plan's actuary with respect to
such plan's most recently completed fiscal year, does not exceed by more than
$10,000,000 the value of the Tyco Defined Benefit Plans' assets and to the
knowledge of Beta, nothing has occurred since the end of the most recently
completed fiscal year that would adversely affect the funding status of such
plans; (iv) all applicable premiums required to be paid to the PBGC with respect
to the Tyco Defined Benefit Plans have been paid; (v) no facts or circumstances
exist with respect to any Tyco Defined Benefit Plan which would give rise to a
lien on the assets of Tyco under Section 4068 of ERISA or otherwise; and (vi)
substantially all the assets of the Tyco Defined Benefit Plans are readily
marketable securities or insurance contracts.
(f) Except as set forth in Schedule 3.08 or 3.11(f) of the Beta Disclosure
Schedule, Tyco does not maintain an employee stock ownership plan (within the
meaning of Section 4975(e)(7) of the Code) or any other Tyco Employee Plan that
invests in Beta stock.
(g) Each Tyco Employee Plan covering non-U.S. employees (a "Tyco
International Plan") has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable laws
(including any special provisions relating to registered or qualified plans
where such Tyco International Plan was intended to so qualify) and has been
maintained in good standing with applicable regulatory authorities. The benefit
liabilities of the Tyco International Plans are adequately provided for on the
consolidated financial statements of Tyco.
(h) Tyco and its affiliates have, in the aggregate, fiduciary liability
insurance of at least $15,000,000 in effect covering the fiduciaries of the Tyco
Employee Plans (including Tyco) with respect to whom Tyco may have liability.
SECTION 3.12. LABOR MATTERS. Except as set forth in Section 3.12 of the Beta
Disclosure Schedule or the Tyco SEC Reports, (i) there are no controversies
pending or, to the knowledge of Tyco or any of its subsidiaries, threatened,
between Tyco or any of its subsidiaries and any of their respective employees,
which controversies have or would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; (ii) neither Tyco nor any of its
United States subsidiaries is in breach of any material collective bargaining
agreement or other labor union contract applicable to persons employed by Tyco
or its United States subsidiaries which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, nor does
Tyco or any of its United States subsidiaries know of any activities or
proceedings of any labor union to organize any significant number of such
employees; and (iii) neither Tyco nor any of its subsidiaries is in breach of
any material collective bargaining agreement or other labor union contract, nor
has any knowledge of any strikes, activities or proceedings of any labor union
to organize employees, or of any slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of Tyco or any of its subsidiaries,
which would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 3.13. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
Subject to the accuracy of the representations of the Company in Section 2.13,
the registration statement on Form S-4 (or on such other form as shall be
appropriate) (as it may be amended, the "Registration Statement") pursuant to
which the Tyco Common Shares to be issued in connection with the Merger will be
registered with the SEC shall not,
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at the time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements included therein, in light of the circumstances under which they were
made, not misleading. The information supplied by Tyco, Beta or Merger Sub in
writing specifically for inclusion in the Joint Proxy Statement/Prospectus will
not, on the date the Joint Proxy Statement/ Prospectus is first mailed to
shareholders or at the time of the Shareholders Meetings, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements therein not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Shareholders Meetings which has become false or misleading. If
at any time prior to the Effective Time any event relating to Tyco, Beta, Merger
Sub or any of their respective affiliates, officers or directors should be
discovered by Tyco, Beta or Merger Sub which should be set forth in an amendment
to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, Beta or Merger Sub will promptly inform the Company. The
Registration Statement and Joint Proxy Statement/Prospectus shall comply in all
material respects with the requirements of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Notwithstanding the foregoing, Beta
and Merger Sub make no representation or warranty with respect to any
information supplied by the Company which is contained or incorporated by
reference in, or furnished in connection with the preparation of, the
Registration Statement or the Joint Proxy Statement/Prospectus.
SECTION 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, to the best of Beta's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon Tyco or any of its subsidiaries which
has or would reasonably be expected to have the effect of prohibiting or
materially impairing the conduct of business by Tyco or any of its subsidiaries
as currently conducted by Tyco or such Subsidiary, except for any prohibition or
impairment as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 3.15. TITLE TO PROPERTY. Tyco and each of its subsidiaries have good
title to all of their real properties and other assets, free and clear of all
liens, charges and encumbrances, except liens for taxes not yet due and payable
and such liens or other imperfections of title, if any, as do not materially
interfere with the present use of the property affected thereby or which would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, and except for liens which secure indebtedness reflected in the
1998 Balance Sheet; and, to Beta's knowledge, all leases pursuant to which Tyco
or any of its subsidiaries lease from others material amounts of real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of Tyco, under any of
such leases, any existing material default or event of default (or event which
with notice or lapse of time, or both, would constitute a material default),
except where the lack of such good standing, validity and effectiveness, or the
existence of such default or event of default would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.16. TAXES. Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:
Tyco and each of its subsidiaries has timely and accurately filed, or caused
to be timely and accurately filed, all material Tax Returns required to be filed
by it, and has paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes required to be paid, collected or
withheld, other than such Taxes for which adequate reserves in the September
1998 Tyco Balance Sheet have been established or which are being contested in
good faith. There are no material claims or assessments pending against Tyco or
any of its subsidiaries for any alleged deficiency in any Tax, except as set
forth in Section 3.16 of the Beta Disclosure Schedule, there are no pending or
threatened audits or investigations for or relating to any liability in respect
of any Taxes, and Tyco has not been notified in writing of any proposed Tax
claims or assessments against Tyco or any of its subsidiaries (other than in
each case, claims
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or assessments for which adequate reserves in the 1998 Tyco Balance Sheet have
been established or which are being contested in good faith or are immaterial in
amount). Neither Tyco nor any of its subsidiaries has executed any waivers or
extensions of any applicable statute of limitations to assess any material
amount of Taxes. There are no outstanding requests by Tyco or any of its
subsidiaries for any extension of time within which to file any material Tax
Return or within which to pay any material amounts of Taxes shown to be due on
any Tax Return. To the best knowledge of Beta, there are no liens for material
amounts of Taxes on the assets of Tyco or any of its subsidiaries except for
statutory liens for current Taxes not yet due and payable. Other than with
respect to Tyco and its subsidiaries, neither Tyco nor any of its subsidiaries
is liable for Taxes of any other Person, or is currently under any contractual
obligation to indemnify any person with respect to Taxes (except for customary
agreements to indemnify lenders or security holders in respect of taxes other
than income taxes), or is a party to any tax sharing agreement or any other
agreement providing for payments by Tyco or any of its subsidiaries with respect
to Taxes.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
3.17(a) of the Beta Disclosure Schedule or the Tyco SEC Reports or as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, the operations and properties of Tyco and its subsidiaries are
in compliance with the Environmental Laws, which compliance includes the
possession by Tyco and its subsidiaries of all permits and governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof.
(b) Except as set forth in Section 3.17(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports or as would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, there are no Environmental
Claims, including claims based on "arranger liability," pending or, to the best
knowledge of Tyco, threatened against Tyco or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim Tyco or any of
its subsidiaries has retained or assumed.
(c) Except as set forth on Section 3.17(c) of the Beta Disclosure Schedule
or in the Tyco SEC Reports, there are no past or present actions, circumstances,
conditions, events or incidents, including the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern, that is
reasonably likely to form the basis of any Environmental Claim against Tyco or
any of its subsidiaries or against any person or entity whose liability for any
Environmental Claim Tyco or any of its subsidiaries have retained or assumed,
except for such Environmental Claims that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 3.17(d)
of the Beta Disclosure Schedule or the Tyco SEC Reports: (i) there are no
off-site locations where Tyco or any of its subsidiaries has stored, disposed or
arranged for the disposal of Materials of Environmental Concern which have been
listed on the National Priority List, CERCLIS, state Superfund site list, and
Tyco and its subsidiaries have not been notified that any of them is a
potentially responsible party at any such location; (ii) there are no
underground storage tanks located on property owned or leased by Tyco or any of
its subsidiaries; (iii) there is no friable asbestos containing material
contained in or forming part of any building, building component, structure or
office space owned, leased or operated by Tyco or any of its subsidiaries; and
(iv) there are no polychlorinated biphenyls (PCBs) or PCB-containing items
contained in or forming part of any building, building component, structure or
office space owned, leased or operated by Beta or any of its subsidiaries.
SECTION 3.18. BROKERS. No broker, finder or investment banker (other than
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman Brothers Inc., the
fees and expenses of whom will be paid by Beta) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Tyco.
SECTION 3.19. INTELLECTUAL PROPERTY. (a) Tyco and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use all Tyco Intellectual Property Assets that are used in the
business of Tyco and its subsidiaries as currently conducted without conflict
with the rights of others
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except as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. As used herein, "Tyco Intellectual Property
Assets" shall mean the Intellectual Property Assets used or owned by Tyco or any
of its subsidiaries.
(b) Except as disclosed in Section 3.19(b) of the Beta Disclosure Schedule
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, no claims (i) are currently pending or, to the
knowledge of Beta, threatened by any person with respect to the Tyco
Intellectual Property Assets, or (ii) are, to the knowledge of Beta, currently
pending or threatened by any person with respect to Third Party Intellectual
Property Assets to the extent arising out of any use, reproduction or
distribution of such Third Party Intellectual Property Assets by or through Tyco
or any of its subsidiaries.
(c) Except as set forth in Section 3.19(c) of the Beta Disclosure Schedule
or the Tyco SEC Reports or as could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, each patent, patent
application, trademark or service mark registration, and trademark or service
mark application and copyright registration or copyright application of Beta
and/or each of its subsidiaries is valid and subsisting.
(d) Except as set forth in Section 3.19(d) of the Beta Disclosure Schedule,
to Tyco's knowledge, there is no material unauthorized use, infringement or
misappropriation of any of Tyco's Intellectual Property Assets by any third
party, including any employee, former employee, independent contractor or
consultant of Tyco or any of its subsidiaries which would reasonably be
expected, individually or in the aggregate, to result in Material Adverse
Effect.
(e) The disclosure under the heading "Year 2000 Compliance" as set forth in
Section 3.19(e) of the Beta Disclosure Schedule is accurate and would comply in
all material respects with the legal requirements for disclosure of such matters
if included in Tyco's periodic reports filed with the SEC pursuant to the
Exchange Act.
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
3.20 of the Beta Disclosure Schedule or the Tyco SEC Reports, since Tyco's proxy
statement dated February 20, 1998, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction, pursuant to
Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.21. INSURANCE. Except as disclosed in Section 3.21 of the Beta
Disclosure Schedule or the Tyco SEC Reports, all material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by Tyco or any of its subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Tyco and its subsidiaries and their
respective properties and assets and are in character and amount appropriate for
the businesses conducted by Tyco, except as would not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.22. PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 3.22(a) of the Beta Disclosure Schedule or the Tyco SEC Reports, Tyco is
not aware of any claim, pending or threatened, against Tyco or any of its
subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or per-formance of any service
by Tyco or any of its subsidiaries, including claims arising out of the
defective or unsafe nature of its products or services, which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(b) Except as disclosed in Section 3.22(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports, there is no pending or, to the knowledge of Tyco,
overtly threatened, recall or investigation of any product sold by Tyco, which
recall or investigation would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
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SECTION 3.23. OWNERSHIP OF BETA AND MERGER SUB; NO PRIOR ACTIVITIES.
(a) Merger Sub is a direct, wholly-owned subsidiary of Beta and was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement.
(b) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by or undertaken in
connection with this Agreement, Merger Sub has not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
SECTION 3.24. POOLING MATTERS. To Beta's knowledge and based upon
consultation with its independent accountants, Tyco has provided to the Company
and its independent accountants all information concerning actions taken or
agreed to be taken by Tyco or any of its affiliates on or before the date of
this Agreement that, if taken, might reasonably be expected to affect adversely
the ability of Tyco to account for the business combination to be effected by
the Merger as a pooling of interests, and Beta has no knowledge that such
business combination cannot be accounted for in that manner. For purposes of
this Section 3.24, references to "knowledge" mean to the actual knowledge of L.
Dennis Kozlowski and Mark H. Swartz.
SECTION 3.25. TAX MATTERS. The representations, statements, and covenants
set forth in paragraph 2 through 26 of Section 3.25 of the Beta Disclosure
Schedule hereto are true and correct in all material respects.
SECTION 3.26. PBCL SECTION 2538. Other than by reason of this Agreement or
the transactions contemplated hereby, Beta is not an "interested shareholder" of
the Company, as that term is defined in Section 2538 of the PBCL.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Beta shall otherwise agree in writing, and except
as set forth in Section 4.01 of the Company Disclosure Schedule, the Company
shall conduct its business and shall cause the businesses of its subsidiaries to
be conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use reasonable commercial efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, neither the Company nor any of its subsidiaries
shall, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, and
except as set forth in Section 4.01 of the Company Disclosure Schedule, directly
or indirectly do, or propose to do, any of the following without the prior
written consent of Beta, which will not be unreasonably withheld or delayed:
(a) amend or otherwise change the Company's Restated Articles of
Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) in the Company, any of its subsidiaries or affiliates (except for
the issuance of shares of Company Common Stock issuable pursuant to Stock
Options under the Company Stock Option Plans, which options are outstanding
on the date hereof, or pursuant to the Company Stock Purchase Plan as in
effect on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $20,000,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly-owned
subsidiary of the Company may declare and pay a dividend to its parent,
except in no case may the aggregate of such intercompany cross-border
dividends exceed $10,000,000, and except that the Company may declare and
pay prior to the Effective Time quarterly cash dividends of $0.27 per share
consistent with past practice, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) except as required by the terms of any security as in
effect on the date hereof and set forth in Section 4.01(d) of the Company
Disclosure Schedule, amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any
subsidiary to amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire, any of its securities or
any securities of its subsidiaries, including, without limitation, shares of
Company Common Stock, or any option, warrant or right, directly or
indirectly, to acquire any such securities, or propose to do any of the
foregoing, or (iv) settle, pay or discharge any claim, suit or other action
brought or threatened against the Company with respect to or arising out of
a shareholder equity interest in the Company;
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(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof other than those listed on Section 4.01(e) of the Company
Disclosure Schedule; (ii) incur any indebtedness for borrowed money, except
for borrowings and reborrowing under the Company's existing credit
facilities or other borrowings not in excess of $15,000,000 plus the amount,
if any, used under such credit facilities as required to fund the Company's
Rabbi Trust in the aggregate or issue any debt securities or assume,
guarantee (other than guarantees of the Company's subsidiaries entered into
in the ordinary course of business) or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or make
any loans or advances, except in the ordinary course of business consistent
with past practice; or (iii) authorize any capital expenditures or purchases
of fixed assets which are, in the aggregate, in excess of $500,000,000 over
the next 12 month period; or (iv) enter into or materially amend any
contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.01(e);
(f) except as set forth in Section 4.01(f) of the Company Disclosure
Schedule, increase the compensation or severance payable or to become
payable to its directors, officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries in
accordance with past practices, or grant any severance or termination pay
(except to make payments required to be made under obligations existing on
the date hereof in accordance with the terms of such obligations) to, or
enter into any employment or severance agreement, with any new employee of
the Company or any of its subsidiaries, except for an agreement entered into
in the ordinary course of business and providing for annual base and bonus
compensation not to exceed $200,000, or establish, adopt, enter into or
amend any collective bargaining agreement, Company Employee Plan (within the
meaning of Section 2.11 of this Agreement), trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees or any of their beneficiaries, except, in each case, as may be
required by law or as would not result in a material increase in the cost of
maintaining such collective bargaining agreement, Company Employee Plan,
trust, fund, policy or arrangement.
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable) except as required by a change in GAAP occurring after the date
hereof;
(h) make any material tax election inconsistent with past practice or
settle or compromise any material United States federal, state, local or
non-United States tax liability, except to the extent the amount of any such
settlement has been reserved for in the financial statements contained in
the Company SEC Reports filed prior to the date of this Agreement or other
settlements not in excess of $10,000,000 in the aggregate;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $10,000,000 in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports filed prior to the date of
this Agreement or incurred in the ordinary course of business and consistent
with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (i) above, or any action which would
make any of the representations or warranties of the Company contained in
this Agreement or the Stock Option Agreement untrue or incorrect or prevent
the Company from performing or cause the Company not to perform its
covenants hereunder or under the Stock Option Agreement.
SECTION 4.02. NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of its subsidiaries, solicit or encourage the initiation of
(including by way of furnishing information) any inquiries or proposals
regarding any
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merger, sale of assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transactions involving the
Company or any subsidiaries of the Company that if consummated would constitute
an Alternative Transaction (as defined in Section 7.01) (any of the foregoing
inquiries or proposals being referred to herein as an "Acquisition Proposal").
Nothing contained in this Agreement shall prevent the Board of Directors of the
Company from (i) furnishing information to a third party which has made a BONA
FIDE Acquisition Proposal that is a Superior Proposal (as defined below) not
solicited in violation of this Agreement, provided that such third party has
executed an agreement with confidentiality provisions substantially similar to
those then in effect between the Company and Tyco or (ii) subject to compliance
with the other terms of this Section 4.02, including Sections 4.02(c) and (d),
considering and negotiating a bona fide Acquisition Proposal that is a Superior
Proposal not solicited in violation of this Agreement; provided that, as to each
of clauses (i) and (ii), (x) such actions occur at a time prior to approval of
the Merger and this Agreement at the Company Shareholders Meeting and (y) the
Board of Directors of the Company reasonably determines in good faith (after due
consultation with independent counsel, which may be Skadden, Arps, Slate,
Meagher & Flom LLP ("Skadden, Arps"), Pepper Hamilton LLP and/or Harkins
Cunningham), that it is or is reasonably likely to be required to do so in order
to discharge properly its fiduciary duties. For purposes of this Agreement, a
"SUPERIOR PROPOSAL" means any proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
all of the equity securities of the Company entitled to vote generally in the
election of directors or all or substantially all the assets of the Company, on
terms which the Board of Directors of the Company reasonably believes (i) (after
consultation with a financial advisor of nationally recognized reputation) to be
more favorable from a financial point of view to its shareholders than the
Merger and the transactions contemplated by this Agreement taking into account
at the time of determination any changes to the financial terms of this
Agreement proposed by Beta and (ii) to be more favorable to the Company than the
Merger and the transactions contemplated by this Agreement after taking into
account all pertinent factors deemed relevant by the Board of Directors of the
Company under the laws of the Commonwealth of Pennsylvania.
(b) The Company shall immediately notify Beta after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Beta shall be made orally and in writing, and shall indicate the
identity of the person making the Acquisition Proposal or intending to make an
Acquisition Proposal or requesting non-public information or access to the books
and records of the Company, the terms of any such Acquisition Proposal or
modification or amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the Company as provided in Section 4.02(a). The
Company shall also immediately notify Beta, orally and in writing, if it enters
into negotiations concerning any Acquisition Proposal.
(c) Unless this Agreement shall have been terminated in accordance with its
terms, neither the Company nor the Board of Directors of the Company shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Beta, the approval by such Board of Directors of this Agreement or the Merger.
(d) Prior to November 6, 1999, without the prior written consent of Beta,
the Company and the Board of Directors of the Company shall not (i) redeem the
rights (the "Rights") issued under the Rights Agreement, dated as of October 25,
1989, as amended, between the Company and ChaseMellon Shareholder Services
L.L.C., as Successor Rights Agents (the "Rights Agreement"), or waive or amend
any provision of the Rights Agreement, in any such case to permit or facilitate
the consummation of any Acquisition Proposal or Alternative Transaction, or (ii)
enter into any agreement with respect to, or otherwise approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or
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Alternative Transaction, unless the Merger Agreement is terminated prior to such
time pursuant to Sections 7.01(b), 7.01(c), 7.01(d)(ii) or 7.01(i) or is
terminated prior to such time by the Company pursuant to Sections 7.01(f),
7.01(g) or 7.01(h). It is understood and agreed that a deferral of the
distribution of Rights following the commencement of a tender offer or exchange
offer shall not be prohibited hereunder.
(e) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its shareholders a position required by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to its
shareholders required by applicable law, rule or regulation.
(f) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Beta and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality and
standstill provisions of any agreement to which the Company is a party.
(g) The Company shall ensure that the officers and directors of the Company
and the Company Significant Subsidiaries and any investment banker or other
advisor or representative retained by the Company are aware of the restrictions
described in this Section 4.02.
SECTION 4.03. CONDUCT OF BUSINESS BY TYCO PENDING THE MERGER. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Beta covenants and agrees
that, except as set forth in Section 4.03 of the Beta Disclosure Schedule or
unless the Company shall otherwise agree in writing, Beta shall take all action
necessary so that (i) Tyco shall conduct its business, and cause the businesses
of its subsidiaries to be conducted, in the ordinary course of business and
consistent with past practice, other than actions taken by Tyco or its
subsidiaries in contemplation of the Merger, and (ii) Tyco shall not directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise change Tyco's Charter Documents;
(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person, or dispose of any assets, which, in any
such case, would materially delay or prevent the consummation of the Merger and
the other transactions contemplated by this Agreement;
(c) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of Tyco may
declare and pay a dividend to its parent, and except that Tyco may declare and
pay quarterly cash dividends on the Tyco Common Shares of $0.025 per share
consistent with past practice;
(d) take any action to change its accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable) except as
required by a change in GAAP occurring after the date hereof; or
(e) take or agree in writing or otherwise to take any action that would make
any of the representations or warranties of Beta contained in this Agreement
untrue or incorrect or prevent Beta from performing or cause Beta not to perform
its covenants hereunder.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company shall
prepare and file, and Beta shall take all action necessary such that Tyco will
prepare and file, with the SEC preliminary proxy materials which shall
constitute the Joint Proxy Statement/Prospectus and, if the parties so agree at
the time, the Registration Statement. As promptly as practicable after comments
are received from the SEC thereon and after the furnishing by the Company and
Tyco of all information required to be contained therein, the Company shall
file, and Beta shall take all action necessary such that Tyco will file, with
the SEC the definitive Joint Proxy Statement/Prospectus and the Registration
Statement (or, if the Registration Statement has been previously filed, an
amendment thereto) relating to the adoption of this Agreement and approval of
the transactions contemplated hereby by the shareholders of the Company pursuant
to this Agreement, and the approval by the shareholders of Tyco of the issuance
of the Tyco Common Shares in connection with the Merger, and shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable.
SECTION 5.02. COMPANY SHAREHOLDERS MEETING. The Company shall call the
Company Shareholders Meeting as promptly as practicable for the purpose of
voting upon the approval of the Merger, and the Company shall use its reasonable
best efforts to hold the Company Shareholders Meeting as soon as practicable
after the date on which the Registration Statement becomes effective. The Joint
Proxy Statement/Prospectus shall include the recommendation of the Board of
Directors of the Company in favor of this Agreement and the Merger. The Company
shall solicit from its shareholders proxies in favor of approval of this
Agreement and the Merger and shall take all other reasonable action necessary or
advisable to secure the vote or consent of shareholders in favor of such
approval.
SECTION 5.03. TYCO SHAREHOLDERS MEETING. Beta shall take all action
necessary such that Tyco will call the Tyco Shareholders Meeting as promptly as
practicable for the purpose of voting upon the approval of the issuance of the
Tyco Common Shares in connection with the Merger, and Beta shall take all action
necessary such that Tyco will use its reasonable best efforts to hold the Tyco
Shareholders Meeting as soon as practicable after the date on which the
Registration Statement becomes effective. Unless otherwise required under the
applicable fiduciary duties of the directors of Tyco, as determined by such
directors in good faith after consultation with and based upon the advice of
independent legal counsel, (i) the Joint Proxy Statement/Prospectus shall
include the recommendation of the Board of Directors of Tyco in favor of the
issuance of Tyco Common Shares in connection with the Merger and the other
matters contemplated hereby requiring approval of the shareholders of Tyco; and
(ii) Beta shall take all action necessary such that Tyco will solicit from its
shareholders proxies in favor of approval of the issuance of Tyco Common Shares
in connection with the Merger and the other matters contemplated hereby
requiring approval of the shareholders of Tyco and take all other reasonable
action necessary or advisable to secure the vote or consent of shareholders in
favor of such approval.
SECTION 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use reasonable efforts to be
released), the Company shall (and shall cause its subsidiaries to) and Beta
shall take all action necessary such that Tyco shall (i) afford to the officers,
employees, accountants, counsel and other representatives of the other,
reasonable access, during the period after the execution and delivery of this
Agreement and prior to the Effective Time, to its properties, books, contracts,
commitments and records and, (ii) during such period, furnish promptly to the
other all information concerning its business, properties and personnel as such
other party may reasonably request, and each shall make available to the other
the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either Beta or the Company may reasonably request. Each party shall keep such
information confidential in accordance with
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the terms of the confidentiality letters, dated November 16, 1998 (the
"Confidentiality Letters"), between Tyco and the Company.
SECTION 5.05. CONSENTS; APPROVALS. The Company and Beta shall each use its
reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States and
non-United States governmental and regulatory rulings and approvals), and the
Company and Beta shall make (or Beta shall take all action necessary such that
Tyco will make) all filings (including, without limitation, all filings with
United States and non-United States governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Beta and the consummation by them of the
transactions contemplated hereby. The Company and Beta shall furnish (or Beta
shall take all action necessary such that Tyco will furnish) all information
required to be included in the Joint Proxy Statement/Prospectus and the
Registration Statement, or for any application or other filing to be made
pursuant to the rules and regulations of any United States or non-United States
governmental body in connection with the transactions contemplated by this
Agreement.
SECTION 5.06. AGREEMENTS WITH RESPECT TO AFFILIATES. (a) The Company shall
deliver to Beta, prior to the date the Registration Statement becomes effective
under the Securities Act, a letter (the "Company Affiliate Letter") identifying
all persons who are anticipated to be "affiliates" of the Company at the time of
the Company Shareholders Meeting for purposes of Rule 145 under the Securities
Act ("Rule 145"), or the rules and regulations of the SEC relating to pooling of
interests accounting treatment for merger transactions (the "Pooling Rules").
The Company shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Affiliate Letter to deliver to Beta, no less
than 35 days prior to the date of the Company Shareholders Meeting, a written
agreement (an "Affiliate Agreement") restricting the sales of securities by such
affiliates in accordance with the restrictions on affiliates under Rule 145 and
the Pooling Rules, in a form mutually agreeable to the Company and Beta.
(b) Beta shall deliver to the Company, prior to the date the Registration
Statement becomes effective under the Securities Act, a letter (the "Beta
Affiliate Letter") identifying all persons who are anticipated to be
"affiliates" of Tyco at the Effective Time for purposes of the Pooling Rules.
Beta shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Beta Affiliate Letter to deliver to Beta, no
less than 35 days prior to the date of the Effective Time, a written agreement
restricting the sales of securities by such affiliates in accordance with the
restrictions on affiliates under the Pooling Rules, in a form mutually agreeable
to the Company and Beta.
SECTION 5.07. INDEMNIFICATION AND INSURANCE. (a) The Articles of
Incorporation and Bylaws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the Restated Articles of
Incorporation and the Bylaws of the Company, which provisions shall not be
amended, modified or otherwise repealed for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
as of the Effective Time of individuals who at the Effective Time were
directors, officers, employees or agents of the Company, unless such
modification is required after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Articles of Incorporation or
Bylaws, indemnify and hold harmless, each present and former director, officer
or employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the Company's Restated
Articles of Incorporation or Bylaws or any applicable contract or agreement as
in effect on the date hereof, in each case for a period of six years after the
date hereof. In the event of any such claim,
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action, suit, proceeding or investigation (whether arising before or after the
Effective Time) and subject to the specific terms of any indemnification
contract, (i) any counsel retained by the Indemnified Parties for any period
after the Effective Time shall be reasonably satisfactory to the Surviving
Corporation, (ii) after the Effective Time, the Surviving Corporation shall pay
the reasonable fees and expenses of such counsel, promptly after statements
therefor are received and (iii) the Surviving Corporation will cooperate in the
defense of any such matter; PROVIDED, HOWEVER, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld); and PROVIDED, FURTHER, that,
in the event that any claim or claims for indemnification are asserted or made
within such six-year period, all rights to indemnification in respect of any
such claim or claims shall continue until the disposition of any and all such
claims. The Indemnified Parties as a group may retain only one law firm to
represent them in each applicable jurisdiction with respect to any single action
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties, in which case each Indemnified Person with respect to whom such a
conflict exists (or group of such Indemnified Persons who among them have no
such conflict) may retain one separate law firm in each applicable jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements and employment
agreements (the employee parties under such agreements being referred to as the
"Officer Employees") with the Company's directors and officers existing at or
before the Effective Time.
(d) In addition, Beta will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring at or prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; PROVIDED, HOWEVER, that Beta and the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 200% of
the annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much such coverage as possible for such amount.
(e) From and after the Effective Time, Beta shall unconditionally guarantee
the timely payment of all funds owing by, and the timely performance of all
other obligations of, the Surviving Corporation under this Section 5.07.
(f) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns of
the Surviving Corporation and shall be enforceable by the Indemnified Parties.
SECTION 5.08. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Beta, and Beta shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would reasonably be expected to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate, or (ii) any
failure of the Company, Beta or Merger Sub, as the case may be, materially to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and PROVIDED FURTHER
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 6.02(b) or 6.03(b) unless the failure to give such
notice results in material prejudice to the other party.
SECTION 5.09. FURTHER ACTION/TAX TREATMENT. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and
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otherwise to satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement. The foregoing covenant shall not include any
obligation by Tyco to agree to divest, abandon, license or take similar action
with respect to any assets (tangible or intangible) of Tyco or the Company or
any of their subsidiaries. Each of Beta, Merger Sub and the Company shall use
its reasonable best efforts to cause the Merger to qualify, and will not (either
before or after consummation of the Merger) take any actions, or fail to take
any action, that might reasonably be expected to prevent the Merger from
qualifying as a reorganization under the provisions of Section 368 of the Code
that is not subject to Section 367(a)(1) of the Code pursuant to Treasury
Regulation Section 1.367(a)-(3)(c) (other than with respect to Company
shareholders who are or will be "5% transferee shareholders" within the meaning
of Treasury Regulation Section 1.367(a)-3(c)(5)(ii)). Beta shall, and shall use
its reasonable best efforts to cause the Surviving Corporation and Tyco, to
report, to the extent required by the Code, the Merger for United States federal
income tax purposes as a reorganization within the meaning of Section 368 of the
Code.
SECTION 5.10. PUBLIC ANNOUNCEMENTS. Beta and the Company shall consult with
each other before issuing any press release or making any written public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which shall not be unreasonably withheld; PROVIDED, HOWEVER,
that either party may, without the prior consent of the other, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the rules and regulations of the NYSE if it has used all
reasonable efforts to consult with the other party.
SECTION 5.11. TYCO COMMON SHARES. (a) Prior to the Effective Time, Beta
shall obtain from Tyco, and shall take all action necessary so that Tyco shall
transfer to Beta, the Tyco Common Shares to be delivered by Beta to the holders
of Company Common Stock in the Merger.
(b) Beta will take all action necessary so that Tyco will use its best
efforts to cause the Tyco Common Shares to be delivered by Beta to the holders
of Company Common Stock in the Merger and upon exercise of the Adjusted Options
to be listed, upon official notice of issuance, on the NYSE prior to the
Effective Time.
SECTION 5.12. CONVEYANCE TAXES. Beta and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time, and the Company shall be
responsible for the payment of all such taxes and fees. In no event shall Beta
or any affiliate thereof (other than a subsidiary of the Company) reimburse the
Company for the payment of such taxes and fees.
SECTION 5.13. OPTION PLANS AND BENEFITS, ETC. (a) Prior to the Effective
Time, the parties to this Agreement shall take all such actions as shall be
necessary to effectuate the provisions of Section 1.06(c).
(b) The Company shall take such action as is necessary to cause the ending
date of the then current offering period under the Stock Purchase Plan to be
prior to the Effective Time and to terminate such plan as of the Effective Time.
(c) Beta agrees that, effective as of the Effective Time, and through
December 31, 1999, Beta shall, or shall cause the Surviving Corporation and its
subsidiaries and successors to, provide those persons who, immediately prior to
the Effective Time, were employees of the Company or its subsidiaries ("Retained
Employees") with employee welfare and retirement plans and programs which
provide benefits that are, in the aggregate, substantially similar to those
provided to such Retained Employees immediately prior to the date hereof. With
respect to such benefits, (i) service accrued by such Retained Employees during
employment with the Company and its subsidiaries prior to the Effective Time
shall be recognized for all
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purposes, except to the extent necessary to prevent duplication of benefits,
(ii) any and all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under the applicable
Company Employee Plan (as defined in Section 2.11(a)) and eligibility waiting
periods under any group health plan shall be waived with respect to such
Retained Employees and their eligible dependents, and (iii) Retained Employees
shall be given credit for amounts paid under any Company Employee Plan during
the same period for purposes of applying deductibles, co-payments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the employee welfare plans maintained by Tyco or its
subsidiaries. Without limiting the generality of the foregoing, Beta shall, or
shall cause the Surviving Corporation and its subsidiaries and successors to,
provide to any person who, immediately prior to the Effective Time, is a retiree
under the terms of the Company's retiree medical program retiree medical
benefits in accordance with the Company's current practice.
(d) Beta agrees to assume, honor, maintain and perform, and cause the
Surviving Corporation to assume, honor, maintain and perform in accordance with
their respective terms, without deductions, counterclaims, interruptions or
deferments (other than withholding under applicable law), the Company's employee
Severance Plan and all other employment and severance agreements and
arrangements, as amended through the date hereof or as contemplated hereby, with
respect to employees and former employees and directors and former directors of
the Company, including, but not limited to, those agreements and arrangements
set forth on Section 5.13 of the Company Disclosure Schedule (collectively, the
"Severance Agreements") and any other Company Benefit Plan, agreement or
arrangement which provides for the payment or acceleration of benefits to
employees, former employees or directors or former directors of the Company upon
or in connection with a change of control of the Company.
(e) It is expressly agreed that the provisions of this Section 5.13 are not
intended to be for the benefit of or otherwise be enforceable by any third
party, including, without limitation, any Retained Employee or any collective
bargaining unit or employee organization.
(f) Nothing herein shall prevent Beta or the Surviving Corporation from
amending or modifying any employee benefit plan, program or arrangement in any
respect or terminating or modifying the terms and conditions of employment of
any particular Retained Employee or any other person.
SECTION 5.14. RIGHTS AGREEMENT. The Board of Directors of the Company shall
take all further action (in addition to that referred to in Section 2.26), if
any, necessary in order to render the Rights inapplicable to the Merger and the
other transactions contemplated by this Agreement and the Stock Option
Agreement.
SECTION 5.15. ACCOUNTANT'S LETTERS. Upon reasonable notice from the other,
the Company shall use its best efforts to cause Arthur Andersen LLP to deliver
to Beta, and Beta shall use its best efforts to cause PricewaterhouseCoopers to
deliver to the Company, a letter covering such matters as are reasonably
requested by Beta or the Company, as the case may be, and as are customarily
addressed in accountants' "comfort letters."
SECTION 5.16. POOLING ACCOUNTING TREATMENT. (a) Beta and the Company each
agrees to use its best efforts not to take, and to cause their respective
affiliates not to take, any action that, if taken, might reasonably be expected
to affect adversely the ability of Tyco to account for the business combination
to be effected by the Merger as a pooling of interests, and Beta and the Company
each agrees to use its best efforts to take such action, and to cause their
respective affiliates to take such action, as may be reasonably required to
negate the impact of any past actions by Beta, the Company or their respective
affiliates which might reasonably be expected to impact adversely the ability of
Tyco to treat the Merger as a pooling of interests. The taking by Beta or the
Company or by their respective affiliates of any action prohibited by the
previous sentence, or the failure of Beta or the Company to use its best efforts
to take, or to cause to be taken, any action required by the previous sentence,
if the Merger is not able to be accounted for as a
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pooling of interests because of such action or failure to take action, shall
constitute a breach of this Agreement by such party for the purposes of Section
7.01(h).
(b) Beta shall use its best efforts to obtain an opinion of
PricewaterhouseCoopers, independent public accountants, to the effect that the
Merger, to the best of their knowledge after due inquiry, qualifies for pooling
of interests accounting treatment if consummated in accordance with this
Agreement, and the Company shall use its best efforts to obtain an opinion of
Arthur Andersen LLP, independent public accountants, to the effect that the
Company, to the best of their knowledge after due inquiry, qualifies as an
entity that may be party to a business combination for which pooling of
interests method of accounting would be available.
SECTION 5.17. COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES. The Company
agrees that it shall use its reasonable commercial efforts to comply promptly
with all requirements of applicable state property transfer laws as may be
required by the relevant state agency and shall take all action necessary to
cause the transactions contemplated hereby to be effected in compliance with
applicable state property transfer laws. The Company, after consultation with
Beta, shall determine which actions must be taken prior to or after the
Effective Time to comply with applicable state property transfer laws. The
Company agrees to provide Beta with any documents required to be submitted to
the relevant state agency prior to submission, and the Company shall not take
any action to comply with applicable state property transfer laws without Beta's
prior consent, which consent shall not be unreasonably withheld or delayed. Beta
shall provide, and shall take all action necessary such that Tyco shall provide,
to the Company any assistance reasonably requested by the Company with respect
to such compliance.
SECTION 5.18. DIRECTOR APPOINTMENT. Subject to the applicable fiduciary
obligations of Tyco's Board of Directors, Beta shall use its best efforts to
have the Board of Directors of Tyco (i) propose at Tyco's Shareholders Meeting
to increase the size of Tyco's Board of Directors from eleven to twelve members;
(ii) nominate Robert Ripp, the Company's current Chairman and Chief Executive
Officer, to fill such newly created vacancy; and (iii) recommend to Tyco's
Shareholders that they elect Mr. Ripp to Tyco's Board of Directors.
SECTION 5.19. TERMINATION OF FLEXITRUST. The Company will cause, at or prior
to the Effective Time, the termination of the Stock Purchase Agreement, dated
September 28, 1998, between the Company and Wachovia Bank N.A., as trustee (the
"Trustee"), relating to the creation of the Flexitrust, prior to the closing
thereunder and without the issuance or sale of any shares of Company Common
Stock pursuant thereto and without any material liability resulting from such
termination.
SECTION 5.20. CHARITIES. After the Effective Time, Beta shall cause the
Company to provide charitable contributions and community support within the
communities in which the Company and each of its commercial business units are
located and do business at levels substantially comparable to the levels of
charitable contributions and community support provided by the Company and its
commercial business units within such areas for the two-year period immediately
prior to the Effective Time. Section 5.20 of the Company Disclosure Schedule
sets forth all of such charitable contributions and community support provided
by the Company for the two-year period immediately prior to the Effective Date.
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose and no similar proceeding in respect of the Joint Proxy
Statement/Prospectus shall have been initiated or threatened by the SEC;
(b) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the requisite vote of the shareholders of the Company, and the
issuance of the Tyco Common Shares in connection with the Merger shall have
been approved in accordance with the rules of the NYSE by the requisite vote
of the shareholders of Tyco;
(c) ANTITRUST. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and all
clearances and approvals required to be obtained in respect of the Merger
prior to the Effective Time under any Foreign Monopoly Laws shall have been
obtained, except where the failure to have obtained any such clearances or
approvals with respect to any Foreign Monopoly Laws would not reasonably be
expected to have a Material Adverse Effect on the Company, Tyco or Tyco's
electrical and electronic component business;
(d) GOVERNMENTAL ACTIONS. There shall not have been instituted, pending
or threatened any action or proceeding (or any investigation or other
inquiry that is reasonably likely to result in such an action or proceeding)
by any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, United States or non-United States, that is reasonably likely
to result in an order, nor shall there be in effect any judgment, decree or
order of any governmental authority, administrative agency or court of
competent jurisdiction, or any other legal restraint (i) preventing or
seeking to prevent consummation of the Merger, (ii) prohibiting or seeking
to prohibit or limiting or seeking to limit, Beta from exercising all
material rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Tyco or any of its subsidiaries
of all or a material portion of the business or assets of the Surviving
Corporation and its subsidiaries, or (iii) compelling or seeking to compel
Tyco or any of its subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of Tyco or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as
a result of the Merger or the transactions contemplated by this Agreement;
(e) ILLEGALITY. No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(f) TAX OPINIONS. The Company shall have received a written opinion of
Skadden, Arps, and Beta shall have received a written opinion of
PricewaterhouseCoopers LLP, in form and substance reasonably satisfactory to
each of them, to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and (ii) the
transfer of Company Common Stock by Company shareholders pursuant to the
Merger, other than Company shareholders who are or will be "5% transferee
shareholders" within the meaning of Treasury Regulation Section
1.367(a)-3(c)(5)(ii), will qualify for an exception under Treasury
Regulation Section 1.367(a)-3 and, accordingly, Tyco will be treated as a
corporation for United States federal income tax purposes. Each party agrees
to make all reasonable representations and covenants in connection with the
rendering of such opinions; and
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(g) OPINION OF ACCOUNTANT. Beta shall have received an opinion of
PricewaterhouseCoopers, independent public accountants, to the effect that
the Merger, to the best of their knowledge after due inquiry, qualifies for
pooling of interests accounting treatment if consummated in accordance with
this Agreement. Such opinion shall be in form and substance reasonably
satisfactory to Beta and the Company.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF BETA AND MERGER SUB.
The obligations of Beta and Merger Sub to effect the Merger are also subject to
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects on and as of the Effective Time, with the same force and effect as
if made on and as of the Effective Time, except for (i) changes contemplated
by this Agreement, (ii) those representations and warranties which address
matters only as of a particular date (which shall have been true and correct
as of such date, subject to clause (iii)), or (iii) where the failure to be
true and correct would not reasonably be expected, individually or in the
aggregate with all other such failures, to have a Material Adverse Effect,
and Beta and Merger Sub shall have received a certificate of the Company to
such effect signed by the Chief Executive Officer or Chief Financial Officer
of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Beta and Merger Sub shall have received a certificate to
such effect signed by the Chief Executive Officer or Chief Financial Officer
of the Company;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Company for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company, except where the
failure to receive such consents, waivers, approvals, authorizations or
orders would not reasonably be expected, individually or in the aggregate
with all other such failures, to have a Material Adverse Effect on the
Company or Beta;
(d) AFFILIATE AGREEMENTS. Tyco shall have received from each person who
is identified in the Affiliate Letter as an "affiliate" of the Company an
Affiliate Agreement, and such Affiliate Agreement shall be in full force and
effect; and
(e) RIGHTS AGREEMENT. A Distribution Date shall not have occurred under
the Rights Agreement.
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Beta and Merger Sub contained in this Agreement shall be true and correct
in all respects on and as of the Effective Time, with the same force and
effect as if made on and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations and warranties
which address matters only as of a particular date (which shall have been
true and correct as of such date, subject to clause (iii)), or (iii) where
the failure to be true and correct could not reasonably be expected,
individually or in the aggregate with all other such failures, to have a
Material Adverse Effect, and the Company shall have received a certificate
to such effect signed by the President or Chief Financial Officer of Beta;
(b) AGREEMENTS AND COVENANTS. Beta and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and the Company shall have received a
certificate of Beta to such effect signed by the President or Chief
Financial Officer of Beta;
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(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Beta or Merger Sub for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Beta or Merger Sub,
except where the failure to receive such consents, waivers, approvals,
authorizations or orders would not reasonably be expected, individually or
in the aggregate with all other such failures, to have a Material Adverse
Effect on the Company or Beta;
(d) LISTING. The Tyco Common Shares issuable in connection with the
Merger and upon exercise of the Adjusted Options shall have been authorized
for listing on the NYSE upon official notice of issuance; and
(e) SHAREHOLDER RIGHTS PLAN. A Distribution Date shall not have occurred
under Tyco's Shareholder Rights Plan dated November 6, 1996, as amended.
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ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company or approval of the issuance of the Tyco Common
Shares in connection with the Merger by the shareholders of Tyco:
(a) by mutual written consent duly authorized by the Boards of Directors
of Beta and the Company; or
(b) by either Beta or the Company if the Merger shall not have been
consummated by July 31, 1999 (other than for the reasons set forth in clause
(d) below); PROVIDED, HOWEVER, that the right to terminate this Agreement
under this Section 7.01(b) shall not be available to any party whose failure
to fulfill any obligation under this agreement has been the cause of, or
resulted in, the failure of the Merger to be consummated on or prior to such
date; or
(c) by either Beta or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(d) by either Beta or the Company (i) if the requisite vote of the
shareholders of the Company shall not have been obtained by July 31, 1999,
or if the shareholders of the Company shall not have approved the Merger and
this Agreement at the Company Shareholders Meeting, or (ii) if the requisite
vote of the shareholders of Tyco shall not have been obtained by July 31,
1999 or if the shareholders of Tyco shall not have approved the issuance of
the Tyco Common Shares in connection with the Merger at the Tyco
Shareholders Meeting; or
(e) by Beta, if, whether or not permitted to do so by this Agreement,
the Board of Directors of the Company or the Company shall (x) (i) withdraw,
modify or change its approval or recommendation of this Agreement or the
Merger in a manner adverse to Beta, (ii) approve or recommend to the
shareholders of the Company an Acquisition Proposal or Alternative
Transaction; or (iii) approve or recommend that the shareholders of the
Company tender their shares in any tender or exchange offer that is an
Alternative Transaction or (y) take any position or make any disclosures to
the Company's shareholders permitted pursuant to Section 4.02(e) which has
the effect of any of the foregoing; or
(f) by Beta or the Company, if any representation or warranty of the
Company, or Beta and Merger Sub, respectively, set forth in this Agreement
shall be untrue when made, such that the conditions set forth in Sections
6.02(a) or 6.03(a), as the case may be, would not be satisfied (a
"Terminating Misrepresentation"); PROVIDED, that, if such Terminating
Misrepresentation is curable prior to July 31, 1999 by the Company or Beta,
as the case may be, through the exercise of its reasonable best efforts and
for so long as the Company or Beta, as the case may be, continues to
exercise such reasonable best efforts, neither Beta nor the Company,
respectively, may terminate this Agreement under this Section 7.01(f); or
(g) by Beta, if any representation or warranty of the Company shall have
become untrue such that the condition set forth in Section 6.02(a) would not
be satisfied (a "Company Terminating Change"), or by the Company, if any
representation or warranty of Beta and Merger Sub shall have become untrue
such that the condition set forth in Section 6.03(a) would not be satisfied
(a "Beta Terminating Change" and together with a Company Terminating Change,
a "Terminating Change"), in either case other than by reason of a
Terminating Breach (as hereinafter defined); PROVIDED that, if any such
Terminating Change is curable prior to July 31, 1999 by the Company or Beta,
as the case may be, through the exercise of its reasonable best efforts, and
for so long as the Company or Beta, as
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the case may be, continues to exercise such reasonable best efforts, neither
Beta nor the Company, respectively, may terminate this Agreement under this
Section 7.01(g); or
(h) by Beta or the Company, upon a breach of any covenant or agreement
on the part of the Company or Beta, respectively, set forth in this
Agreement such that the conditions set forth in Sections 6.02(b) or 6.03(b),
as the case may be, would not be satisfied (a "Terminating Breach");
PROVIDED, THAT, except for any breach of the Company's obligations under
Section 4.02, if such Terminating Breach is curable prior to July 31, 1999
by the Company or Beta, as the case may be, through the exercise of its
reasonable best efforts and for so long as the Company or Beta, as the case
may be, continues to exercise such reasonable best efforts, neither Beta nor
the Company, respectively, may terminate this Agreement under this Section
7.01(h); or
(i) by Beta prior to the time of the Company Shareholder Meeting, if (x)
the Average Stock Price is less than $60.00 and (y) on or before the second
trading day prior to the date of the Company Shareholders Meeting, the
Company has not agreed by notice to Beta in writing to an Exchange Ratio
equal to 0.8500; PROVIDED that, in the event of such notice, the Exchange
Ratio shall thereafter, for all purposes of this Agreement, be deemed to be
such ratio.
As used herein, "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Beta or its
affiliates (a "Third Party") acquires or would acquire more than 20% of the
outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 20% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination (iii) any transaction pursuant to which any Third Party acquires or
would acquire control of assets (including for this purpose the outstanding
equity securities of subsidiaries of the Company and securities of the entity
surviving any merger or business combination including any of the Company's
subsidiaries) of the Company, or any of its subsidiaries having a fair market
value (as determined by the Board of Directors of the Company in good faith)
equal to more than 20% of the fair market value of all the assets of the Company
and its subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any other consolidation, business combination, recapitalization or
similar transaction involving the Company or any of the Company Significant
Subsidiaries, other than the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that the term Alternative Transaction shall not include any
acquisition of securities by a broker dealer in connection with a bona fide
public offering of such securities.
SECTION 7.02. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.01, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or shareholders (i) except that the Company or
Beta or Merger Sub may have liability as set forth in Section 7.03 and Section
8.01 hereof, and (ii) nothing herein shall relieve the Company, Beta or Merger
Sub from liability for any willful material breach hereof (it being understood
that the mere existence of a Material Adverse Effect, by itself, shall not
constitute such a willful material breach).
SECTION 7.03. FEES AND EXPENSES. (a) Except as set forth in this Section
7.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that Beta
and the Company shall share equally all SEC filing fees and printing expenses
incurred in connection with the printing and filing of the Joint Proxy
Statement/Prospectus (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) The Company shall pay Tyco a fee of $300 million (the "Fee"), and shall
pay Tyco's and Beta's respective actual, documented and reasonable out-of-pocket
expenses, relating to the transactions contemplated by this Agreement
(including, but not limited to, fees and expenses of counsel and accountants and
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out-of-pocket expenses (but not fees) of financial advisors) ("Expenses", as
applicable to Tyco, Beta or the Company), such payment of Expenses not to exceed
$30 million, upon the first to occur of any of the following events (it being
understood that for these purposes this Agreement shall be deemed to be
terminated by Beta pursuant to Section 7.01(d)(i), Section 7.01(e), Section
7.01(g) or Section 7.01(h), as the case may be, if at the time this Agreement is
terminated it could have been terminated pursuant to the appropriate Section):
(i) the termination of this Agreement by Beta or the Company
pursuant to Section 7.01(d)(i) as a result of the failure to receive the
requisite vote for approval of the Merger and this Agreement by the
shareholders of the Company by July 31, 1999 or of the failure of the
shareholders of the Company to approve the Merger and this Agreement at
the Company Shareholders Meeting, provided that, prior to or during the
Company Shareholders Meeting an Acquisition Proposal (other than the
proposal by AlliedSignal on its currently pending or any less favorable
terms and conditions), including any improved proposal by AlliedSignal,
shall have been made directly to the shareholders of the Company or
otherwise become publicly known or any credible third party shall have
announced 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 or shall have been withdrawn prior to the time of such
termination or meeting); or
(ii) the termination of this Agreement by Beta pursuant to Section
7.01(e); or
(iii) the termination of this Agreement by Beta pursuant to Section
7.01(g) or (h), provided that, prior to such termination an Acquisition
Proposal (other than the proposal by AlliedSignal on its currently
pending or any less favorable terms and conditions), including any
improved proposal by AlliedSignal, shall have been made directly to the
shareholders of the Company or otherwise become publicly known or any
credible third party shall have announced 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 or shall have been
withdrawn prior to the time of such termination); or
(iv) the Company shall approve or recommend, or propose to approve
or recommend, an Acquisition Proposal, or redeem the Rights under the
Rights Plan or waive or amend any provision of the Rights Plan to permit
or facilitate the consummation of any Acquisition Proposal or Alternative
Transaction, or enter into an agreement with respect to any Acquisition
Proposal, or an Alternative Transaction shall be consummated, during the
period ending prior to one year following termination of this Agreement,
provided that at the time of any such termination, (x) Beta was not in
breach of this Agreement such that the condition set forth in Section
6.03(b) would not be satisfied and (y) if the Tyco Shareholders Meeting
shall have occurred prior to termination of the Agreement, the
shareholders of Tyco shall not have declined to approve the issuance of
the Tyco Common Shares, and provided further, that this Agreement has not
been terminated pursuant to Section 7.01(c), 7.01(d)(ii) or 7.01(i) or
terminated by the Company pursuant to Section 7.01(f), 7.01(g) or
7.01(h); or
(v) the termination of this Agreement (other than pursuant to
Section 7.01(c), 7.01(d)(ii) or 7.01(i) or a termination by the Company
pursuant to Section 7.01(f), 7.01(g) or 7.01(h)), if prior to such
termination the shareholders of the Company elect as a majority of the
Board of Directors of the Company persons who (x) are not Continuing
Directors (as defined in the Rights Agreement as in effect on the date
hereof), (y) were not initially nominated by the incumbent directors or
(z) even if nominated by the incumbent directors, were proposed by or are
affiliated with AlliedSignal or any other third party that has made an
Acquisition Proposal or who at the time of election publicly supported
any Acquisition Proposal or Alternative Transaction other than the Merger
and the other transactions contemplated hereby.
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(c) Upon a termination of this Agreement pursuant to Sections 7.01(a),
7.01(b) (provided that, at the time of termination pursuant to Section 7.01(b),
Beta was entitled to terminate the Agreement under Section 7.01(b)) or 7.01(c)
or a termination of this Agreement by Beta pursuant to Section 7.01(d)(i),
7.01(f), 7.01(g) or 7.01(h), under circumstances where Section 7.03(b) does not
apply, the Company shall pay to Tyco and Beta their respective Expenses relating
to the transactions contemplated by this Agreement, but in no event more than
$30 million. Upon termination of this Agreement by the Company pursuant to
Section 7.01(d)(ii), 7.01(f) or 7.01(g), Beta shall pay to the Company the
Expenses of the Company relating to the transactions contemplated by this
Agreement, but in no event more than $30 million.
(d) The Fee and/or Expenses payable pursuant to Section 7.03(b) or Section
7.03(c) shall be paid within one business day after a demand for payment
following the first to occur of any of the events described in Section 7.03(b)
or Section 7.03(c); PROVIDED THAT, in no event shall the Company or Beta, as the
case may be, be required to pay such Fee and/or Expenses to the entities
entitled thereto, if, immediately prior to the termination of this Agreement,
the entity entitled to receive such Fee and/or Expenses was in material breach
of its obligations under this Agreement or, in the case of Tyco, its guarantee
of this Agreement.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as otherwise provided in this Section 8.01, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and Sections 5.07 and 5.09 and any other agreement in this
Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely and those set forth in Section 7.03 and 4.02(d)
shall survive termination indefinitely. The Confidentiality Letters shall
survive termination of this Agreement.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Beta Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Beta Disclosure Schedule
shall not be deemed an admission that such matter is material.
SECTION 8.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Beta or Merger Sub:
Beta Zeno Corp./Alpha Zeno Corp.
One Tyco Park
Exeter, NH 03833
Attn: President and Chief Executive Officer
Telecopy: (603) 778-7700
With a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attn: Mark A. Belnick, Esq.
Telecopy: (603) 778-7700
and
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Joshua M. Berman, Esq.
Telecopy: (212) 715-8000
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(b) If to the Company:
AMP Incorporated
P.O. Box 3608
470 Friendship Road
Harrisburg, PA 17105-3608
Attn: David F. Henschel, Esq.
Telecopy: (717) 564-4022
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: David J. Friedman, Esq.
Telecopy: (212) 735-2000
SECTION 8.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliates" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or
understanding, or (ii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "dollars" or "$" means United States dollars;
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Beta, Tyco or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Beta or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval of the
Merger and this Agreement by the shareholders of the Company, no amendment may
be made which by law requires further approval by such shareholders without such
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further approval. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.06. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. SEVERABILITY. (a) If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
(b) The Company and Beta agree that each of the Fee provided in Section
7.03(b) and the Stock Option Agreement is fair and reasonable in the
circumstances, considering not only the Merger Consideration but also the
outstanding funded indebtedness (including capital leases) of the Company and
its subsidiaries. If a court of competent jurisdiction shall nonetheless, by a
final, non-appealable judgment, determine that the amount of the Fee and/or the
benefits to Beta under the Stock Option Agreement exceeds the maximum amount
permitted by law, then the amount of the Fee and/or the benefits to Beta under
the Stock Option Agreement shall be reduced to the maximum amount permitted by
law in the circumstances, as determined by such court of competent jurisdiction.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement and the Stock Option
Agreement constitute the entire agreement and supersede all prior agreements and
undertakings (other than the Confidentiality Letters, except to the extent
specifically superseded hereby), both written and oral, among the parties, or
any of them, with respect to the subject matters hereof and thereof, except as
otherwise expressly provided herein or therein.
SECTION 8.09. ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise, except that all or any of the rights of Beta and/or Merger
Sub hereunder may be assigned to any wholly-owned subsidiary of Tyco provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.
SECTION 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.07 (which is intended to be for the benefit of the Indemnified Parties
and Officer Employees and may be enforced by such Indemnified Parties and
Officer Employees) and Section 7.03 (which contains provisions intended to be
for the benefit of Tyco and may be enforced by Tyco).
SECTION 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other
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right. All rights and remedies existing under this Agreement are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
SECTION 8.12. GOVERNING LAW; JURISDICTION. (a) This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York applicable to contracts executed and fully performed within the State
of New York.
(b) Each of the parties hereto submits to the non-exclusive jurisdiction of
the state and federal courts of the United States located in the City of New
York, Borough of Manhattan with respect to any claim or cause of action arising
out of this Agreement or the transactions contemplated hereby.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF BETA, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, Beta, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
BETA ZENO CORP.
By /s/ MARK H. SWARTZ
------------------------------------
Name: Mark H. Swartz
Title: VICE PRESIDENT
ALPHA ZENO CORP.
By /s/ MARK A. BELNICK
------------------------------------
Name: Mark A. Belnick
Title: VICE PRESIDENT
AMP INCORPORATED
By /s/ ROBERT RIPP
------------------------------------
Name: Robert Ripp
Title: CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
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GUARANTEE
Tyco guarantees each and every representation, warranty, covenant, agreement
and other obligation of Beta and Merger Sub, and/or any of their respective
permitted assigns (and where any such representation or warranty is made to the
knowledge of Beta or Merger Sub, such guarantee shall be deemed made to the
knowledge of Tyco), and the full and timely performance of their respective
obligations under the provisions of the foregoing Agreement. This is a guarantee
of payment and performance, and not of collection, and Tyco acknowledges and
agrees that this guarantee is unconditional, and no release or extinguishment of
Beta's and Merger Sub's obligations or liabilities (other than in accordance
with the terms of the Agreement), whether by decree in any bankruptcy proceeding
or otherwise, shall affect the continuing validity and enforceability of this
guarantee, as well as any provision requiring or contemplating performance by
Tyco.
Without limiting in any way the foregoing guarantee, Tyco covenants and
agrees to adhere to the provisions of SECTION 1.06, SECTION 1.07, SECTION 5.01,
SECTION 5.03 AND SECTION 5.11 of the Agreement.
The provisions of ARTICLE VIII of the Agreement are incorporated herein,
mutatis mutandis, except that notices and other communications hereunder to Tyco
shall be delivered to Tyco International Ltd., The Gibbons Building, 10 Queen
Street, Suite 301, Hamilton HM 11 Bermuda, Attn: Secretary, Telecopy No. (441)
295-9647, Confirm No. (441) 292-8674 (with a copy as provided therefor in
Section 8.02(a)).
We understand that the Company is relying on this guarantee in entering into
the Agreement and may enforce this guarantee as if Tyco were a party thereto.
TYCO INTERNATIONAL LTD.
By /s/ MARK A. BELNICK
------------------------------------
Name: Mark A. Belnick
Title: EXECUTIVE VICE PRESIDENT
AND
CHIEF CORPORATE COUNSEL
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ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 22, 1998 (the "Agreement"),
between AMP INCORPORATED, a Pennsylvania corporation ("COMPANY"), and Beta Zeno
Corp., a Pennsylvania corporation ("GRANTEE").
RECITALS
A. Company, Grantee and Alpha Zeno Corp., a Pennsylvania corporation and a
wholly-owned subsidiary of Grantee ("Merger Sub"), have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "MERGER
AGREEMENT"; defined terms used but not defined herein have the meanings set
forth in the Merger Agreement), providing for, among other things, the merger of
Merger Sub with and into Company pursuant to the terms of the Merger Agreement;
and
B. As a condition and inducement to the willingness of Grantee and Merger
Sub to enter into the Merger Agreement, Grantee has requested that Company
agree, and Company has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Company
and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Company hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 43,500,000 shares (the "OPTION SHARES") of common stock, without
par value, of Company, including the associated rights ("COMPANY COMMON STOCK"),
or such lesser number of shares of Company Common Stock constituting 19.9% of
the issued and outstanding shares of Company Common Stock on the date the Option
is first exercised, at an exercise price of $51.00 (as adjusted as set forth
herein) per Option Share (the "EXERCISE PRICE").
2. EXERCISE OF OPTION. (a) Grantee may exercise the Option, with respect to
any or all of the Option Shares at any one time or from time to time, subject to
the provisions of Section 2(c), upon the occurrence of an Exercise Event (as
defined below). Subject to the last sentence of this Section 2(a), the Option
will terminate and be of no further force and effect upon the earliest to occur
of (i) the Effective Time, (ii) termination of the Merger Agreement pursuant to
Section 7.01(c), 7.01(d)(ii) or 7.01(i) of the Merger Agreement or termination
of the Merger Agreement by the Company pursuant to Section 7.01(f), 7.01(g) or
7.01(h) of the Merger Agreement and (iii) the earlier of (x) twelve months after
the date on which an Exercise Event occurs and (y) the third business day
following the first anniversary of termination of the Merger Agreement, but in
no event, in the case of clause (iii)(x) or (y), sooner than eighteen months and
four business days after the date hereof. Any purchase of Option Shares upon
exercise of the Option will be subject to compliance with the HSR Act and the
obtaining or making of any consents, approvals, orders, notifications or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares illegal (the "REGULATORY
APPROVALS") and no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect. "EXERCISE EVENT" means any event as a result of
which Tyco International Ltd. ("TYCO") is entitled to receive the Fee (as
defined in the Merger Agreement) pursuant to Section 7.03 of the Merger
Agreement. Notwithstanding the termination of the Option, Grantee will be
entitled to purchase the Option Shares if it has exercised the Option in
accordance with the terms hereof prior to the termination of the Option, and the
termination of the Option will not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee wishes to exercise the Option, it will send to
Company a written notice (an "EXERCISE NOTICE"; the date of which being herein
referred to as the "NOTICE DATE") to that effect which Exercise Notice will also
specify the number of Option Shares, if any, Grantee wishes to purchase pursuant
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to this Section 2(b), the number of Option Shares, if any, with respect to which
Grantee wishes to exercise its Cash-Out Right (as defined herein) pursuant to
Section 8, the denominations of the certificate or certificates evidencing the
Option Shares which Grantee wishes to purchase pursuant to this Section 2(b) and
a date not earlier than 10 business days nor later than 20 business days from
the Notice Date for the closing (an "OPTION CLOSING") of such purchase (an
"OPTION CLOSING DATE"). Any Option Closing will be at an agreed location and
time in New York, New York on the applicable Option Closing Date or at such
later date as may be necessary so as to comply with Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b), and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Company agrees to use its reasonable
best efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise its
Cash-Out Right pursuant to Section 8 with respect to the Option Shares for which
such Regulatory Approval will not be issued or granted or has not been issued or
granted.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At any Option Closing, Grantee
will pay to Company an amount equal to the Exercise Price multiplied by the
number of Option Shares to be purchased at such Option Closing, at Grantee's
sole election (but subject to applicable restrictions under the HSR Act and
compliance with other applicable laws), (i) in immediately available funds by
wire transfer to a bank account designated in writing by Company or (ii) in
shares of common stock, par value $0.20 per share, of Tyco ("TYCO COMMON
SHARES"), valued at the average of the reported closing prices for Tyco Common
Shares on the New York Stock Exchange for the five trading days ending on the
trading day before exercise. If Grantee notifies Company of its desire to use
Tyco Common Shares as provided above, Company shall make promptly all filings,
required by applicable law.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds or Tyco Common Shares as provided in Section 3(a), Company will
deliver to Grantee a certificate or certificates (or other appropriate evidence
under the direct registration system) representing the Option Shares to be
purchased at such Option Closing, which Option Shares will be free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever. If at the
time of issuance of Option Shares pursuant to an exercise of the Option
hereunder, Company shall have issued any rights or similar securities under the
Rights Agreement or any similar plan or arrangement ("SHAREHOLDER RIGHTS"), then
each Option Share issued pursuant to such exercise will also represent such
rights or similar securities with terms substantially the same as and at least
as favorable to Grantee as are provided under the Rights Agreement or any
similar plan or arrangement then in effect.
(c) Certificates (or other appropriate evidence under the direct
registration system) for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993, AND MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF
ANY EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
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SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS
SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22,
1998, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF AMP
INCORPORATED AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), in the
above legend will be removed by delivery of substitute certificate(s) (or other
appropriate evidence under the direct registration system) without such
reference if such Option Shares have been sold in compliance with the
registration and prospectus delivery requirements of the Securities Act, such
Option Shares have been sold in reliance on and in accordance with Rule 144
under the Securities Act, or Grantee has delivered to Company a copy of a letter
from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Company and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the reference
to restrictions pursuant to this Agreement in the above legend will be removed
by delivery of substitute certificate(s) (or other appropriate evidence under
the direct registration system) without such reference if the Option Shares
evidenced by certificate(s) containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
4. INCORPORATION OF REPRESENTATIONS AND WARRANTIES OF COMPANY. The
representations and warranties of Company contained in Article II of the Merger
Agreement are hereby incorporated by reference herein with the same force and
effect as though made pursuant to this Agreement.
5. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF COMPANY. Company hereby
represents and warrants to Grantee as follows:
(a) CORPORATE AUTHORIZATION. Company has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Company, and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Company, and assuming this Agreement
constitutes a valid and binding agreement of Grantee, this Agreement
constitutes a valid and binding agreement of Company, enforceable against
Company in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) AUTHORIZED STOCK. Company has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act, to permit it
to issue, and, at all times from the date hereof until the obligation to
deliver Option Shares upon the exercise of the Option terminates, shall have
reserved for issuance, upon exercise of the Option, shares of Company Common
Stock necessary for Grantee to exercise the Option, and Company will take
all necessary corporate action to authorize and reserve for issuance all
additional shares of Company Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Company Common Stock to be issued upon due exercise of the Option, including
all additional shares of Company Common Stock or other securities which may
be issuable upon exercise of the Option or any other securities which may be
issued pursuant to Section 7, upon issuance pursuant hereto, will be duly
and validly issued, fully paid and nonassessable, and will be delivered free
and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including without limitation any preemptive rights of any
stockholder of Company.
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6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Company that:
(a) CORPORATE AUTHORIZATION. Grantee has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by authority of the Board of Directors of Grantee, and no other
corporate proceedings on the part of Grantee are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Grantee, and assuming this
Agreement constitutes a valid and binding agreement of Company, this
Agreement constitutes a valid and binding agreement of Grantee, enforceable
against Grantee in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies).
(b) PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, and the Option
is not being, acquired by Grantee with a view to the public distribution
thereof. Neither the Option nor any of the Option Shares will be offered,
sold, pledged or otherwise transferred except in compliance with, or
pursuant to an exemption from, the registration requirements of the
Securities Act.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event, on one
or more occasions, of any changes in Company Common Stock by reason of a stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Company Common Stock), distribution,
exercise or exchange of Rights, reorganization, recapitalization, splitup,
division, combination, share exchange or like event, the class and number of
securities subject to the Option, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee will receive upon exercise of the Option the number and class of shares
or other securities or property, cash or other form of consideration that
Grantee would have received with respect to Company Common Stock if the Option
had been exercised immediately prior to such event or the record date therefor,
as applicable. The Exercise Price will also be appropriately adjusted in any
such case.
(b) Without limiting the provisions of clause (a) above or the parties'
relative rights and obligations under the Merger Agreement, in the event that
the Company enters into an agreement (i) to consolidate with or merge with or
into any person, other than Grantee or any other subsidiary of Tyco, and Company
will not be the continuing or surviving corporation in such consolidation or
merger, (ii) to permit any person, other than Grantee or any other subsidiary of
Tyco, to merge with or into Company and Company will be the continuing or
surviving corporation, but in connection with such merger, the shares of Company
Common Stock outstanding immediately prior to the consummation of such merger
will be changed into or exchanged for stock or other securities of Company or
any other person or cash or any other property, or the shares of Company Common
Stock outstanding immediately prior to the consummation of such merger will,
after such merger represent less than 51% of the outstanding voting securities
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or any other
subsidiary of Tyco, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and condition set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Company
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments. If the holders of the
Company Common Stock may elect from choices the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer, then for the purpose of this Section 7(b) the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or
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transfer shall be the available choice with the greatest aggregate value. For
purposes of this Option, the term "merger" shall be deemed to include a share
exchange pursuant to Section 1931 of the Pennsylvania Business Corporation Law
of 1988 ("PBCL") or division pursuant to Section 1951 et seq. of the PBCL.
8. CASH-OUT RIGHT. If, at any time during the period when the Option is
exercisable in accordance with Section 2, Grantee sends to Company an Exercise
Notice indicating Grantee's election to exercise its right (the "CASH-OUT
RIGHT") pursuant to this Section 8, then Company shall pay to Grantee in
exchange for the cancellation of the Option with respect to such number of
Option Shares as Grantee specifies in the Exercise Notice, an amount in cash
equal to such number of Option Shares multiplied by the difference between (i)
the average closing price for the ten NYSE trading days commencing on the NYSE
trading day immediately preceding the Notice Date, per share of Company Common
Stock as reported on the NYSE Composite Transactions Tape (or, if not listed on
the NYSE, as reported on any other national securities exchange or national
securities quotation system on which Company Common Stock is listed or quoted,
as reported in The Wall Street Journal (Northeast edition), or, if not reported
thereby, any other authoritative source) or, if Company is at the time of such
exercise no longer a Registered Corporation (as defined in Section 2502 of the
PBCL), the price per share paid to the shareholders of the Company in the
transaction which caused the Company Common Stock to cease being required to be
registered under the Securities Exchange Act of 1934 (the "CLOSING PRICE") and
(ii) the Exercise Price. Notwithstanding the termination of the Option, Grantee
will be entitled to exercise its rights under this Section 8 if it has exercised
such rights in accordance with the terms hereof prior to the termination of the
Option.
9. PROFIT LIMITATIONS. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Total Option Profit (as hereinafter defined)
exceed in the aggregate $301 million minus any Fee actually received by Tyco
pursuant to the terms of the Merger Agreement (such amount, the "PROFIT LIMIT")
and, if any payment to be made to Grantee otherwise would cause such aggregate
amount to be exceeded, the Grantee, at its sole election, shall either (i)
reduce the number of shares of Company Common Stock subject to this Option, (ii)
deliver to the Company for cancellation Option Shares previously purchased by
Grantee, (iii) pay cash to Company, (iv) deliver the undertaking described in
Section 9(f) or (v) any combination thereof, so that the Total Option Profit
shall not exceed the Profit Limit after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares of Company Common Stock as would, as of
the date of exercise, result in a Notional Total Option Profit (as hereinafter
defined) which would exceed in the aggregate the Profit Limit and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall on
or prior to the date of exercise either (i) reduce the number of shares of
Company Common Stock subject to such exercise, (ii) deliver to Company for
cancellation Option Shares previously purchased by Grantee, (iii) pay cash to
Company, (iv) deliver the undertaking described in Section 9(f) or (v) any
combination thereof, so that the Notional Total Option Profit shall not exceed
the Profit Limit after taking into account the foregoing actions, provided that
this paragraph (b) shall not be construed as to restrict any exercise of the
Option that is not prohibited hereby on any subsequent date.
(c) As used herein and subject to Section 9(f), the term "TOTAL OPTION
PROFIT" shall mean the aggregate amount (before taxes) of the following: (i) any
amount received by Grantee pursuant to the Cash-Out Right and (ii) (x) the net
consideration, if any, received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, valuing any non-cash consideration at its
fair market value (as defined below), LESS (y) the Exercise Price and any cash
paid by Grantee to Company pursuant to Section 9(a)(iii) or Section 9(b)(iii),
as the case may be.
(d) As used herein and subject to Section 9(f), the term "NOTIONAL TOTAL
OPTION PROFIT" with respect to any number of shares of Company Common Stock as
to which Grantee may propose to exercise the Option shall be the aggregate of
(i) the Total Option Profit determined under paragraph (c) above with
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respect to prior exercises and (ii) Total Option Profit with respect to such
number of shares of Company Common Stock as to which Grantee proposes to
exercise and all other Option Shares held by Grantee and its affiliates as of
such date, assuming that all such shares were sold for cash at the closing
market price for Company Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions or underwriting
discounts).
(e) As used herein, the "FAIR MARKET VALUE" of any non-cash consideration
consisting of:
(i) securities listed on the national securities exchange or traded
on the NASDAQ shall be equal to the average closing price per share of
such security as reported on such exchange or NASDAQ for the five trading
days after the date of determination; and
(ii) consideration which is other than cash or securities of the
form specified in clause (i) above shall be determined by a nationally
recognized independent investment banking firm mutually agreed upon by
the parties within five business days of the event requiring selection of
such banking firm, provided that if the parties are unable to agree
within two business days after the date of such event as to the
investment banking firm, then the parties shall each select one firm, and
those firms shall select a third nationally recognized independent
investment banking firm, which third firm shall make such determination.
(f) Total Option Profit and Notional Total Option Profit shall be reduced by
any amount that is subject to recapture by the Company pursuant to Subchapter H
of the PBCL if Grantee pays such amount or such obligation has matured and
Grantee acknowledges its liability. In addition, if in connection with an
exercise, Grantee elects, at its sole discretion, to undertake to return to the
Company any profit realized by Grantee with respect to any Option Shares covered
by such exercise, if any, when realized (whether or not subject to Subchapter H
at the time of realization), then in all calculations of Total Option Profit and
Notional Total Option Profit the Total Option Profit and Notional Total Option
Profit related to such Option Shares shall be zero. Any undertaking delivered
pursuant to the preceding sentence shall also include an undertaking by Grantee
to dispose of the related Option Shares within nine months after the earliest of
(i) the date of exercise or (ii) the later of (x) the first anniversary of the
termination of the Merger Agreement and (y) the first anniversary of the date on
which the Exercise Event occurred, or, if not legally permitted to do so within
such period, at such time as it is so legally permitted, and to treat as part of
the profits realized any dividends or other distributions received with respect
to such Option Shares.
10. GRANTEE REGISTRATION RIGHTS.
(a) Grantee may by written notice (a "GRANTEE REGISTRATION NOTICE") to
Company request Company to register under the Securities Act all or any part
of the Option Shares or other securities acquired by Grantee pursuant to
this Agreement (collectively, the "COMPANY REGISTRABLE SECURITIES") in order
to permit the sale or other disposition of such securities pursuant to a
bona fide, firm commitment underwritten public offering in which Grantee,
and the underwriters shall effect as wide a distribution of such Company
Registrable Securities as is reasonably practicable and shall use reasonable
efforts to prevent any person or group from purchasing through such offering
shares representing more than 3% of the shares of Company Common Stock then
outstanding on a fully-diluted basis.
(b) Company shall use reasonable best efforts to effect, as promptly as
practicable, but in no event later than 90 days following receipt of the
applicable Grantee Registration Notice, the registration under the Securities
Act of the Company Registrable Securities requested to be registered in the
Grantee Registration Notice; PROVIDED, HOWEVER, that (i) Grantee shall not be
entitled to more than an aggregate of two effective registration statements
hereunder and (ii) Company will not be required to file any such registration
statement during any period of time (not to exceed 40 days after receipt of a
Grantee Registration Notice in the case of clause (A) below, 90 days after
receipt of a Grantee Registration Notice
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in the case of clause (B) below and 60 days after receipt of a Grantee
Registration Notice in case of clause (C) below) when (A) Company is in
possession of material non-public information which it reasonably believes would
be detrimental to be disclosed at such time and, based upon the advice of
outside securities counsel to Company, believes such information would have to
be disclosed if a registration statement were filed at that time; (B) Company
would be required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) Company determines, in its reasonable judgment, that such registration
would interfere with any financing, acquisition or other material transaction
involving Company or any of its subsidiaries. If the consummation of the sale of
any Company Registrable Securities pursuant to a registration hereunder does not
occur within 90 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section shall again be applicable to
any proposed registration, it being understood that Grantee shall not be
entitled to more than an aggregate of two effective registration statements
hereunder. Company will use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor, and to keep such registration statement
effective for such period not in excess of 90 calendar days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. Company shall use reasonable best efforts
to cause any Company Registrable Securities registered pursuant to this Section
to be qualified for sale under the securities or blue sky laws of such
jurisdictions as Grantee may reasonably request and shall continue such
registration or qualification in effect in such jurisdictions; PROVIDED,
HOWEVER, that Company shall not be required to qualify to do business in, or
consent to general service of process in, any jurisdiction.
(c) If Company effects a registration under the Securities Act of Company
Common Stock for its own account or for any other shareholders of Company (other
than on Form S-4 or Form S-8, or any successor form), it will allow Grantee the
right to participate in such registration, and such participation will not
affect the obligation of Company to effect demand registration statements for
Grantee under this Section, except that, if the managing underwriters of such
offering advise Company in writing that in their opinion the number of shares of
Company Common Stock requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
offering, Company will include only the shares requested to be included therein
by Grantee which may be included therein without adversely affecting the
offering.
(d) The registration rights set forth in this Section are subject to the
condition that Grantee shall provide Company with such information with respect
to Company Registrable Securities, the plan for distribution thereof, and such
other information with respect to Grantee as, in the reasonable judgment of
counsel for Company, is necessary to enable Company to include in a registration
statement all material facts required to be disclosed with respect to a
registration hereunder.
(e) A registration effected under this Section shall be effected at
Company's expense, except for underwriting discounts and commissions and the
fees and expenses of Grantee's counsel, and Company shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, Grantee and Company agree to enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type.
10A. COMPANY REGISTRATION RIGHTS. (a) In the event Grantee shall elect to
pay the Exercise Price in Tyco Common Shares as permitted pursuant to Section
3(a), Company may by written notice (a "COMPANY REGISTRATION NOTICE") to Grantee
request Grantee to take all action necessary so that Tyco will register under
the Securities Act all or any part of the Tyco Common Shares so received by
Company (collectively, the "TYCO REGISTRABLE SECURITIES") in order to permit the
sale or other disposition of such securities pursuant to a bona fide, firm
commitment underwritten public offering in which Company and the underwriters
shall effect as wide a distribution of such Tyco Registrable Securities as is
reasonably practicably and shall
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<PAGE>
use reasonable efforts to prevent any person or group from purchasing through
such offering shares representing more than 3% of the Tyco Common Shares then
outstanding on a fully-diluted basis.
(b) Grantee shall take all action necessary so that Tyco will use reasonable
best efforts to effect, as promptly as practicable (but in no event later than
90 days following receipt of the applicable Company Registration Notice), the
registration under the Securities Act of the Tyco Registrable Securities
requested to be registered in the Company Registration Notice; PROVIDED,
HOWEVER, that (i) Company shall not be entitled to more than an aggregate of two
effective registration statements hereunder and (ii) Grantee will not be
required to take all action necessary so that Tyco will file any such
registration statement during any period of time (not to exceed 40 days after
receipt of a Company Registration Notice in the case of clause (A) below, 90
days after receipt of a Company Registration Notice in the case of clause (B)
below and 60 days after receipt of a Company Registration Notice in case of
clause (C) below) when (A) Tyco is in possession of material non-public
information which it reasonably believes would be detrimental to be disclosed at
such time and, based upon the advice of outside securities counsel to Tyco,
believes such information would have to be disclosed if a registration statement
were filed at the time; (B) Tyco would be required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) Tyco determines, in its reasonable judgment,
that such registration would interfere with any financing, acquisition or other
material transaction involving Tyco or any of its subsidiaries. If the
consummation of the sale of any Tyco Registrable Securities pursuant to a
registration hereunder does not occur within 90 days after the filing with the
SEC of the initial registration statement therefor, the provisions of this
Section shall again be applicable to any proposed registration, it being
understood that Company shall not be entitled to more than an aggregate of two
effective registration statements hereunder. Grantee will take all action
necessary so that Tyco will use reasonable efforts to cause each such
registration statement to become effective, to obtain all consents or waivers of
other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 90 calendar days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. Grantee shall take all
action necessary so that Tyco will use reasonable best efforts to cause any Tyco
Registrable Securities registered pursuant to this Section to be qualified for
sale under the securities or blue sky laws of such jurisdictions as Company may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; PROVIDED, HOWEVER, that neither Tyco nor Grantee
shall be required to qualify to do business in, or consent to general services
of process in, any jurisdiction.
(c) If Tyco effects a registration under the Securities Act of Tyco Common
Shares for its own account or for any other stockholders of Tyco (other than on
Form S-4 or Form S-8, or any successor form), Grantee shall take all action
necessary so that Tyco will allow Company the right to participate in such
registration, and such participation will not affect the obligation of Grantee
to take all action necessary so that Tyco will effect demand registration
statements for Company under this Section, except that if the managing
underwriters of such offering advise Grantee in writing that in their opinion
the number of shares of Tyco Common Shares requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the offering, Grantee will take all action necessary so that
Tyco will include only the shares requested to be included therein by Company
which may be included therein without adversely affecting the offering.
(d) The registration rights set forth in this Section are subject to the
condition that Company shall provide Tyco with such information with respect to
the Tyco Registrable Securities, the plan for distribution thereof, and such
other information with respect to Company as, in the reasonable judgment of
counsel for Tyco, is necessary to enable Tyco to include in a registration
statement all material facts required to be disclosed with respect to a
registration hereunder.
(e) A registration effected under this Section shall be effected at
Grantee's expense, except for underwriting discounts and commissions and the
fees and expenses of Company's counsel, and Grantee
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<PAGE>
shall provide to the underwriter such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings and as such underwriters may
reasonably require. In connection with any registration, Company agrees to, and
Grantee agrees to take all action necessary so that Tyco will, enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type.
11. TRANSFERS. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) to Tyco or any direct or indirect subsidiary of
Tyco, (ii) in an underwritten public offering as provided in Section 10 or (iii)
to any purchaser or transferee who would not, to the knowledge of the Grantee
after reasonable inquiry, immediately following such sale, assignment, transfer
or disposal beneficially own more than 9.9% of the then-outstanding voting power
of the Company, except that Grantee shall be permitted to sell any Option Shares
if such sale is made pursuant to a tender or exchange offer that has been
approved or recommended by a majority of the members of the Board of Directors
of Company (which majority shall include a majority of directors who were
directors as of the date hereof or any other director approved by such
directors).
12. LISTING. (a) If Company Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the NYSE (or any other
national securities exchange or national securities quotation system), Company,
upon the request of Grantee, will promptly file an application to list the
shares of Company Common Stock or other securities to be acquired upon exercise
of the Option on the NYSE (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to obtain
approval of such listing as promptly as practicable.
(b) If Tyco Common Shares received by Company pursuant to Section 3(a) are
then listed on the NYSE (or any other national securities exchange or national
securities quotation system), Grantee, upon the request of Company, will
promptly take all action necessary so that Tyco will file an application to list
the Tyco Common Shares on the NYSE (and any such other national securities
exchange or national securities quotation system) and will take all action
necessary so that Tyco will use reasonable efforts to obtain approval of such
listing as promptly as practicable.
13. MISCELLANEOUS. (a) EXPENSES. Except as otherwise provided in the Merger
Agreement, each of the parties hereto will pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties.
(c) EXTENSION; WAIVER. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith) and the
Confidentiality Agreements (i) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement, and (ii) except as
provided in Section 8.10 of the Merger Agreement, are not intended to confer
upon any person other than the parties any rights or remedies.
(e) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
B-9
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(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) If to Company to:
AMP Incorporated
P.O. Box 3608
470 Friendship
Harrisburg, Pennsylvania 17105
Attention: David F. Henschel, Esq.
Telecopy: (717) 592-4022
Confirm: (717) 592-4205
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: David J. Friedman, Esq.
Telecopy: (212) 735-2000
(ii) If to Grantee to:
Beta Zeno Corp.
One Tyco Park
Exeter, New Hampshire 03833
Attention: President and Chief Executive Officer
Telecopy: (603) 778-7700
with a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, New hampshire 03833
Attention: Mark A. Belnick, Esq.
Telecopy: (603) 778-7700
and
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Joshua M. Berman, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(g) ASSIGNMENT. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned, transferred or
delegated, in whole or in part, by operation of law or otherwise, by Company or
Grantee without the prior written consent of the other, except that Grantee may
assign its rights and interest under this Agreement to Tyco or any direct or
indirect subsidiary of Tyco. Any assignment, transfer or delegation in violation
of the preceding sentence will be void. Subject to the first and second
sentences of this Section 13(g), this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
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<PAGE>
(h) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Company and Grantee will execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT; CONSENT TO JURISDICTION The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement. Each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any United States
federal or state court located in the City of New York, Borough of Manhattan in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (iii) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a United States federal or state court located in the City of New
York, Borough of Manhattan.
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<PAGE>
IN WITNESS WHEREOF, Company and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
AMP INCORPORATED
By: /s/ ROBERT RIPP
-----------------------------------
Name: Robert Ripp
Title: Chairman and Chief Executive
Officer
BETA ZENO CORP.
By: /s/ MARK A. BELNICK
-----------------------------------
Name: Mark A. Belnick
Title: Vice President
B-12
<PAGE>
GUARANTEE
Tyco International Ltd. ("Tyco") guarantees each and every representation,
warranty, covenant, agreement or other obligation of Grantee, and/or any of its
respective permitted assigns, and the full and timely performance of their
respective obligations under the provisions of the foregoing Agreement. This is
a guarantee of payment and performance, and not of collection, and Tyco
acknowledges and agrees that this guarantee is unconditional, and no release or
extinguishment of Grantee's obligations or liabilities (other than in accordance
with the terms of the Agreement), whether by decree in any bankruptcy proceeding
or otherwise, shall affect the continuing validity and enforceability of this
guarantee.
The provisions of SECTION 13 of the Agreement are incorporated herein,
MUTATIS MUTANDIS, except that notices and other communications hereunder to Tyco
shall be delivered to Tyco International Ltd., The Gibbons Building, 10 Queen
Street, Suite 301, Hamilton HM 11 Bermuda, Attn: Secretary, Telecopy No. (441)
295-9647, Confirm No. (441) 292-8674 (with a copy as provided therefor in
Section 13(f)(ii)). We understand that Company is relying on this guarantee in
entering into the Agreement.
TYCO INTERNATIONAL LTD.
By: /s/ MARK A. BELNICK
-----------------------------------
Name: Mark A. Belnick
Title: Executive Vice President
and
Chief Corporate Counsel
B-13
<PAGE>
ANNEX C
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
November 22, 1998
Board of Directors
AMP Incorporated
470 Friendship Road
Harrisburg, Pennsylvania 17111
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of AMP Incorporated ("AMP") from a financial point of view
of the Exchange Ratio (as defined below) set forth in the Agreement and Plan of
Merger, dated as of November 22, 1998 (the "Merger Agreement"), by and among
Beta Zeno Corp. ("Beta"), a wholly owned subsidiary of Tyco International Ltd.
("Tyco"), Alpha Zeno Corp., a wholly owned subsidiary of Beta ("Merger Sub"),
and AMP. The Merger Agreement provides for, among other things, the merger of
Merger Sub with and into AMP (the "Merger") pursuant to which each outstanding
share of the common stock, without par value, of AMP (the "AMP Common Stock")
will be converted into the right to receive common shares, par value $0.20 per
share, of Tyco (the "Tyco Common Shares") in the ratio provided below (the
"Exchange Ratio"), such that if the Average Stock Price (as defined below) is
(i) greater than $73.50, the Exchange Ratio will be equal to $55.95 divided by
the Average Stock Price, (ii) equal to or greater than $67.00 but less than or
equal to $73.50, the Exchange Ratio will be 0.7612, (iii) equal to or greater
than $60.00 but less than $67.00, the Exchange Ratio will be equal to $51.00
divided by the Average Stock Price, or (iv) less than $60.00, the Exchange Ratio
will be equal to $51.00 divided by the Average Stock Price (subject to certain
termination and notification provisions as more fully described in the Merger
Agreement). As defined in the Merger Agreement, "Average Stock Price" means the
average of the Daily Per Share Prices for the 15 consecutive trading days ending
on the fourth trading day prior to the AMP stockholders' meeting to consider the
Merger and the "Daily Per Share Price" for any trading day means the weighted
average of the per share selling prices on the New York Stock Exchange, Inc.
(the "NYSE") of Tyco Common Shares (as reported in the NYSE Composite
Transactions) for that day.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to AMP
and Tyco. We have also reviewed certain other information relating to AMP and
Tyco, including financial forecasts, provided to or discussed with us by AMP and
Tyco, and have met with the managements of AMP and Tyco to discuss the
businesses and prospects of AMP and Tyco. We have also considered certain
financial and stock market data of AMP and Tyco, and we have compared those data
with similar data for other publicly held companies in businesses similar to AMP
and Tyco, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and we have assumed,
that such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of AMP and Tyco
as to the future financial performance of AMP and Tyco and the best currently
available estimates and judgments of the management of AMP as to the operating
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<PAGE>
Board of Directors
AMP Incorporated
November 22, 1998
Page 2
cost savings (including the amount, timing and achievability thereof) projected
to be realized through AMP's various cost reduction plans. We also have assumed,
with your consent, that the Merger will be treated as a pooling of interests in
accordance with generally accepted accounting principles and as a tax-free
reorganization for federal income tax purposes. In addition, we have not been
requested to make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of AMP or Tyco, nor have we
been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon information available to us, and financial, economic,
market and other conditions as they exist and can be evaluated, on the date
hereof. We are not expressing any opinion as to the actual value of the Tyco
Common Shares when issued pursuant to the Merger or the prices at which the Tyco
Common Shares will trade subsequent to the Merger. In connection with our
engagement, we were requested to approach, and held discussions with, certain
third parties to solicit indications of interest in a possible business
combination with AMP.
We have acted as financial advisor to AMP in connection with the Merger and
will receive a fee for such services, a significant portion of which is
contingent upon the consummation of the Merger. We have in the past provided
financial services to AMP and Tyco, and are currently providing financial
services to AMP, unrelated to the proposed Merger, for which services we have
received compensation. In the ordinary course of business, Credit Suisse First
Boston and its affiliates may actively trade the debt and equity securities of
both AMP and Tyco for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of AMP in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the Merger, and is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of AMP Common Stock from
a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
C-2
<PAGE>
ANNEX D
November 22, 1998
Board of Directors
Tyco International Ltd.
Gibbons Building
10 Queen Street--Suite 301
Hamilton, HM11, Bermuda
Members of the Board of Directors:
AMP Incorporated (the "Company"), Beta Zeno Corp. ("Beta"), a newly formed,
wholly-owned subsidiary of Tyco International Ltd. ("Tyco") and Alpha Zeno Corp.
("Merger Sub"), a newly formed, wholly-owned subsidiary of Beta, are entering
into an Agreement and Plan of Merger, dated as of November 22, 1998 (the
"Agreement") pursuant to which the Company will be merged with Merger Sub in a
transaction (the "Merger") in which each outstanding share of the Company's
common stock, without par value (together with the common stock purchase rights
associated therewith, the "Company Shares"), will be converted into the right to
receive a number of shares of common stock of Tyco, par value $.20 per share
(the "Tyco Common Shares") in the ratio hereinafter provided (the "Exchange
Ratio") such that if the Average Stock Price (as defined in the Agreement) is:
(i) greater than $73.50, the Exchange Ratio will be equal to $55.95 divided by
the Average Stock Price; (ii) equal to or greater than $67.00 but less than or
equal to $73.50, the Exchange Ratio will be fixed at 0.7612; (iii) equal to or
greater than $60.00 but less than $67.00, the Exchange Ratio will be equal to
$51.00 divided by the Average Stock Price; or (iv) less than $60.00, the
Exchange Ratio will be equal to $51.00 divided by the Average Stock Price
(provided that Beta will have the right to terminate the Agreement by reason of
such Average Stock Price unless the Company has given notice in accordance with
the Agreement that it agrees that the Exchange Ratio will be fixed at 0.8500).
In addition, the Company and Beta are entering into a Stock Option Agreement,
dated as of November 22, 1998 (the "Option Agreement"), pursuant to which the
Company will grant to Beta an option (the "Option") to purchase up to 43,500,000
Company Shares, or such lesser number of Company Shares constituting 19.9% of
the issued and outstanding Company Shares on the date the Option is first
exercised, at an exercise price of $51.00 (subject to adjustment as provided in
the Option Agreement) per Company Share. Tyco is entering into separate
Guarantees (collectively, the "Guarantees") pursuant to which Tyco is
guaranteeing the representations, warranties, covenants, agreements and other
obligations of Beta and Merger Sub under the Agreement and of Beta under the
Option Agreement.
You have asked us whether, in our opinion, the consideration to be issued to
the shareholders of the Company in the Merger is fair from a financial point of
view to Tyco.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and Tyco that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company and Tyco, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result from the
Merger (the "Expected Synergies") furnished to us by the Company and
Tyco;
(3) Conducted discussions with members of senior management and
representatives of the Company and Tyco concerning the matters described
in clauses 1 and 2 above, as well as their respective businesses and
prospects before and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Tyco Common Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and Tyco and compared
them with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
D-1
<PAGE>
(7) Participated in certain discussions and negotiations among
representatives of the Company and Tyco and their financial and legal
advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement, the Option Agreement and the Guarantees; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or Tyco or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company or Tyco. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by the Company or Tyco, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's or Tyco's management as to the expected
future financial performance of the Company or Tyco, as the case may be, and the
Expected Synergies. We have further assumed that the Merger will be accounted
for as a pooling of interests under generally accepted accounting principles and
that it will qualify as a tax-free reorganization for U.S. federal income tax
purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
We are acting as financial advisor to Tyco in connection with the Merger and
will receive a fee from Tyco for our services, which is contingent upon the
consummation of the Merger. In addition, Tyco has agreed to indemnify us for
certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory and financing services to Tyco and may continue to
do so and have received, and may receive, fees for the rendering of such
services. In addition, in the ordinary course of our business, we may actively
trade the Company Shares and other securities of the Company, as well as the
Tyco Common Shares and other securities of Tyco, for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of Tyco.
Our opinion does not address the merits of the underlying decision by Tyco to
engage in the Merger and does not constitute a recommendation to any shareholder
of Tyco as to how such shareholder should vote on the proposed Merger or any
matter related thereto.
We are not expressing any opinion herein as to the prices at which the Tyco
Common Shares will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the consideration to be issued to the shareholders of the
Company in the Merger is fair from a financial point of view to Tyco. This
opinion confirms our preliminary, oral opinion given to Tyco's Board of
Directors at its meeting in Bermuda on November 20, 1998.
Very truly yours,
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
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<PAGE>
ANNEX E
TYCO INTERNATIONAL LTD. LONG TERM INCENTIVE PLAN
(AS AMENDED , 1998)
SECTION 1. PURPOSE.
The purposes of this Tyco International Ltd. Long Term Incentive Plan
(the"Plan") are to promote the interest of Tyco International Ltd. (together
with any successor thereto, the "Company") and its shareholders by (i)
attracting and retaining officers, key employees or directors of the Company and
its Subsidiaries (ii) motivating such employees or directors by means of
performance-related incentives to achieve longer-range performance goals, and
(iii) enabling such employees or directors to participate in the long-term
growth and financial success of the Company.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
"ADT MERGER" shall mean the July 2, 1997 merger of Former Tyco with and
into a wholly-owned subsidiary of the Company (formerly called ADT Limited).
"AWARD" shall mean any Option, Stock Appreciation Right, Performance
Award, Dividend Equivalent, or other Stock-Based Award, including any Prior
ADT Option or Prior Tyco Option. "Award Agreement" shall mean any written
agreement, contract or other instrument or document evidencing any Award,
which may, but need not, be executed or acknowledged by a Participant.
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the U.S. Internal Revenue Code of 1986, as amended
from time to time.
"COMMITTEE" shall mean the Board or a committee of the Board designated
by the Board to administer the Plan and composed of not less than the
minimum number of persons from time to time required by Rule 16b-3 or any
applicable law, each of whom, to the extent necessary to comply with Rule
16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3.
"DIRECTOR" shall mean any member of the Board.
"DIVIDEND EQUIVALENT" shall mean any right granted under Section 6(d) of
the Plan.
"EMPLOYEE" shall mean any officer or key employee of the Company or of
any Subsidiary, as determined by the Committee.
"EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean, (A) with respect to any property other
than the Shares, the fair market value of such property determined by such
methods or procedures as shall be established from time to time by the
Committee and (B) with respect to the Shares, as of any date, (i) the last
reported sales price regular way on the New York Stock Exchange or, if not
reported for the New York Stock Exchange, on the Composite Tape, or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked quotations on the New York Stock Exchange, (ii) if the
Shares are not listed on the New York Stock Exchange or no such quotations
are available, the closing price of the Shares as reported by the National
Market System, or similar organization, or if no such quotations are
available, the average of the high bid and low asked quotations in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated or similar organization; or (iii) in
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the event that there shall be no public market for the Shares, the fair
market value of the Shares as determined (which determination shall be
conclusive) in good faith by the Committee, based upon the value of the
Company as a going concern, as if such Shares were publicly owned stock, but
without any discount with respect to minority ownership.
"FORMER TYCO OPTION" shall mean any option granted with respect to Prior
Tyco Shares by Tyco International Ltd. to its employee, or assumed by Former
Tyco, prior to the ADT Merger.
"FORMER TYCO SHARES" shall mean the shares of common stock of Former
Tyco prior to the ADT Merger.
"INCENTIVE STOCK OPTION" shall mean an option granted under Section 6(a)
of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger dated as
of March 17, 1997 by and among ADT Limited, Limited Apache, Inc. and Former
Tyco.
"OPTION" shall mean an option granted under Section 6(a) of the Plan.
"OTHER STOCK-BASED AWARD" shall mean any right granted under Section
6(e) of the Plan.
"PARTICIPANT" shall mean any Employee or Director granted an Award under
the Plan.
"PERFORMANCE AWARD" shall mean any right granted under Section 6(c) of
the Plan.
"PERSON" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"PRIOR ADT OPTION" shall mean any option granted under the ADT Senior
Executive Share Option Plan, the ADT US Stock Option Plan 1990, the ADT
International Executive Share Option Plan, or this Plan by ADT Limited or
its affiliate with respect to Prior ADT Shares.
"PRIOR ADT SHARES" shall mean the common shares of ADT Limited prior to
the ADT Merger.
"RULE 16B-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act or any successor rule or regulation thereto as in effect from
time to time.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
"SHARES" shall mean the common shares of the Company, U.S. $0.20 par
value, and such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(b) of the Plan.
"STOCK APPRECIATION RIGHT" shall mean any right granted under Section
6(b) of the Plan.
"SUBSIDIARY" shall mean a subsidiary company (wherever incorporated) as
defined by Section 86 of the Companies Act 1981 of Bermuda (as amended).
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Committee. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to (i) designate Participants; (ii) determine the type
or types of Awards to be granted to an eligible Employee or Director; (iii)
determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with,
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Shares, other securities,
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other Awards or other property, or canceled, forfeited, or suspended and the
method or methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended, (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan. Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any Subsidiary,
any Participant, any holder or beneficiary of any Award, any shareholder and any
Employee.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE
Subject to adjustment as provided in Section 4(b);
(i) Calculation of Number Shares Available.
The number of Shares with respect to which Awards may be granted under
the Plan shall be . If, during the term of the Plan, any Award is
forfeited, or any Award otherwise terminates or is canceled without the
delivery of Shares or of other consideration, then the Shares covered by
such Award or to which such Award relates, or the number of Shares otherwise
counted against the aggregate number of Shares with respect to which Awards
may be granted, to the extent of any such forfeiture, termination or
cancellation, shall again be, or shall become, Shares with respect to which
Awards may be granted.
(ii) ACCOUNTING FOR AWARDS
For purposes of this Section 4:
(A) if an Award (other than a Dividend Equivalent) is related to or
payable in Shares, the number of Shares covered by such Award, or to
which such Award related, shall be counted on the date of grant of such
Award against the aggregate number of Shares with respect to which Awards
may be granted under the Plan; and
(B) Dividend Equivalents and Awards not related to or payable in
Shares shall be counted against the aggregate number of Shares with
respect to which Awards may be granted under the Plan in such amount and
at such time as the Committee shall determine under procedures adopted by
the Committee consistent with the purposes of the Plan.
provided, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards may be counted or not counted under procedures adopted
by the Committee in order to avoid double counting. Subject to the
requirements of applicable law, any Shares delivered by the Company, or
any Shares with respect to which Awards are made by the Company, or any
Shares with respect to which the Company becomes obligated to make
Awards, through the assumption of, or in substitution for, outstanding
awards previously granted by an acquired company, shall not be counted
against the Shares available for Awards under the Plan.
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(iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS
Any Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or, to the extent permissible under
applicable law, of Shares acquired by any Subsidiary or any other Person
designated by the Company.
(b) ADJUSTMENTS
In the event that the Committee determines that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, subdivision,
consolidation or reduction of capital, reorganization, merger, scheme of
arrangement, split-up, spin-off or combination involving the Company or
repurchase or exchange of Shares or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that any adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or property) with respect
to which Awards may be granted, (ii) the number and type of Shares (or other
securities or property subject to outstanding Awards), and (iii) the grant or
exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award; provided, in
each case that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would cause the
Plan to violate Section 422(b)(1) of the Code or any successor provision
thereto; and provided further, that the number of Shares subject to any Award
denominated in Shares shall always be a whole number.
(c) LIMITATION
No Participant shall be granted Awards for more than 6,000,000 Shares in
1997 or any subsequent calendar year. For purposes of this limitation, neither
the modification of a Prior ADT Option pursuant to Section 7(a) nor the
replacement of a Prior Tyco Option pursuant to Section 7(b) shall be treated as
the grant of an Award.
SECTION 5. ELIGIBILITY.
Any Employee or Director shall be eligible to be designated a Participant.
SECTION 6. AWARDS.
(a) OPTIONS
The Committee is hereby authorized to grant to eligible Employees and
Directors an option to purchase Shares (an "Option") which shall (except as
otherwise provided in Section 7) contain the following terms and conditions and
such additional terms and conditions, which are not inconsistent with the
provisions of the Plan, as the Committee shall determine.
(i) EXERCISE PRICE
The purchase price per Share under an Option shall be not less than the
Fair Market Value of a Share at the date of the grant, except that if the
Award requires the option to be paid for by the Participant, or if any
discount from such Fair Market Value is expressly granted in lieu of a
reasonable amount of salary or cash bonus, the Committee may fix such
purchase price at not less than 85% of such Fair Market Value.
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(ii) TIME AND METHOD OF EXERCISE
The Committee shall determine the time or times at which an Option may
be exercised in whole or in part, and the method or methods by which, and
the form or forms (which may include, without limitation, cash, Shares,
outstanding Awards, other securities or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price) in which, payment of the exercise price with
respect thereto may be deemed to have been made.
(iii) INCENTIVE STOCK OPTIONS
The terms of any Incentive Stock Option granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code, or
any successor provisions, and any regulations promulgated thereunder. The
aggregate fair market value (determined on the date an option is granted) of
shares with respect to which Incentive Stock Options become exercisable by
any Employee in any year shall not exceed $100,000.
(b) STOCK APPRECIATION RIGHTS
The Committee is hereby authorized to grant to eligible Employees and
Directors a "Stock Appreciation Right", which shall consist of a right to
receive the excess of (i) the Fair Market Value of one Share on the date the
right is exercised or, if the Committee shall so determine in the case of any
such right other than one related to any Incentive Stock Option, at any time
during a specified period before or after the date of exercise over (ii) the
grant price (determined in the manner set forth below) of the right. A Stock
Appreciation Right may be granted in tandem with an Option, in addition to an
Option, or free standing and unrelated to an Option.
(i) GRANT PRICE
The grant price of a Stock Appreciation Right shall be not less than the
Fair Market Value of a Share at the date of the grant, except that if the
Award requires the SAR to be paid for by the Participant, or if any discount
from such Fair Market Value is expressly granted in lieu of a reasonable
amount of salary or cash bonus, the Committee may fix such grant price at
not less than 85% of such Fair Market Value.
(ii) OTHER TERMS AND CONDITIONS
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine, at or after the grant of a Stock Appreciation
Right, the term, methods of exercise, methods of settlement, and any other
terms and conditions of any Stock Appreciation Right. Any such determination
by the Committee may be changed by the Committee from time to time and may
govern the exercise of Stock Appreciation Rights granted or exercised prior
to such determination as well as Stock Appreciation Rights granted or
exercised thereafter. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it shall
deem appropriate.
(c) PERFORMANCE AWARDS
The Committee is hereby authorized to grant to eligible Employees and
Directors a "Performance Award", which shall consist of a right, (i) denominated
or payable in cash, Shares, other securities or other property (including
without limitation, restricted securities), and (ii) which shall confer on the
holder thereof rights valued as determined by the Committee and payable to, or
exercisable by, such holder, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee shall
establish. The criteria with respect to which performance goals may be
established are stock price, market share, sales, earnings, earnings per share,
earnings before income tax, cash flow and return on equity.
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(i) TERMS AND CONDITIONS
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award and the amount of any payment or transfer to be made
pursuant to any Performance Award.
(ii) PAYMENT OF PERFORMANCE AWARDS
Performance Awards may be paid in a lump sum or in installments
following the close of the performance period or, in accordance with
procedures established by the Committee, on a deferred basis.
(d) DIVIDEND EQUIVALENTS
The Committee is hereby authorized to grant to eligible Employees and
Directors a "Dividend Equivalent," which shall consist of a right pursuant to
which any such eligible Employee or Director shall be entitled to receive
payments equivalent to dividends with respect to a number of Shares determined
by the Committee, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional Shares or otherwise reinvested.
Subject to the terms of the Plan and any applicable Award Agreement, such Awards
may have such terms and conditions as the Committee shall determine.
(e) OTHER STOCK-BASED AWARDS
The Committee is hereby authorized to grant to eligible Employees and
Directors an "Other Stock-Based Award", which shall consist of a right (i) which
is other than an Award or right described in Section 6(a), (b), (c), or (d)above
and (ii) which is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Committee
to be consistent with the purposes of the Plan. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall determine the terms and
conditions of any such Other Stock-Based Award, which conditions may include
satisfaction of performance goals relating to stock price, market share,
sales,earnings, earnings per share, earnings before income tax, cash flow and
return on equity.
(f) GENERAL
(i) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER
Awards may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for any other Award
granted under the Plan or any award granted under any other plan of the
Company or any Subsidiary. Awards granted in addition to or in tandem with
other Awards or awards granted under any other plan of the Company or any
Subsidiary may be granted either at the same time as or at a different time
from the grant of such other Awards or awards.
(ii) FORMS OF PAYMENT BY COMPANY UNDER AWARDS
Subject to the terms of the Plan and of any applicable Award Agreement
and the requirements of applicable law, payments or transfers to be made by
the Company or a Subsidiary upon the grant, exercise or payment of an Award
may be made in such form or forms as the Committee shall determine,
including, without limitation, cash, Shares, other securities, other Awards
or other property, or any combination thereof, and may be made in a single
payment or transfer, in installments, or on a deferred basis, in each case
in accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for the
payment or
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crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents in respect of installment or
deferred payments denominated in Shares.
(iii) LIMITS ON TRANSFER OF AWARDS
Subject to paragraph (ix) below:
(A) Each Award, and each right under any Award, shall be exercisable
only by the Participant during the Participant's lifetime, or, if
permissible under applicable law, by the Participant's guardian or legal
representative or by a transferee receiving such Award pursuant to a
qualified domestic relations order (a "QDRO") as defined in the Code or
Title I of the U.S. Employee Retirement Income Security Act of 1974
("ERISA"), or the rules thereunder, or any analogous order in any other
relevant jurisdiction.
(B) No Award (prior to the time, if applicable, Shares are issued in
respect of such Award), and no right under any such Award, may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of
descent and distribution (or, in the case of restricted securities, to
the Company) or pursuant to a QDRO, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company or any Subsidiary; provided,
that the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.
(iv) TERMS OF AWARDS
The term of each Award shall be for such period as may be determined by
the Committee; provided, that in no event shall the term of any Incentive
Stock Option exceed a period of ten years from the date of its grant.
(v) RULE 16B-3 SIX-MONTH LIMITATIONS
To the extent required in order to comply with Rule 16b-3 only, any
equity security offered pursuant to the Plan must be held for at least six
months after the date of grant, and with respect to any derivative security
issued pursuant to the Plan at least six months must elapse from the date of
acquisition of such derivative security to the date of disposition (other
than upon exercise or conversion) of the derivative security or its
underlying equity security after the grant thereof. Terms used in the
preceding sentence shall, for the purposes of such sentence only, have the
meanings, if any, assigned to them under Rule 16b-3.
(vi) SHARE CERTIFICATES
All certificates for Shares or other securities of the Company or any
Subsidiary delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the U.S. Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities
are then listed, and any applicable laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. Notwithstanding the foregoing, no action
shall be taken by the Committee which would, under the laws of Bermuda,
cause a separate class of securities other than Shares to be created and the
Committee shall consult with appropriate legal counsel in this regard.
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(vii) CONSIDERATION FOR GRANTS
Awards may be granted for no cash consideration, for such nominal cash
consideration as may be required by applicable law or for such greater
amount as may be established by the Committee.
(viii) DELIVERY OF SHARES OR OTHER SECURITIES AND PAYMENT BY
PARTICIPANT OF CONSIDERATION
No Shares or other securities shall be delivered pursuant to any Award
until payment in full of any amount required to be paid pursuant to the Plan
or the applicable Award Agreement is received by the Company. Such payment
may be made by such method or methods and in such form or forms as the
Committee shall determine, including, without limitation, cash, Shares,
other securities, other Awards or other property, or any combination
thereof, provided that the combined value, as determined by the Committee,
of all cash and cash equivalent and the Fair Market Value of any such Shares
or other property so tendered to the Company, as of the date of such tender,
is at least equal to the full amount required to be paid pursuant to the
Plan or the applicable Award Agreement to the Company.
(ix) COMMITTEE DISCRETION TO REMOVE OR AMEND RESTRICTIONS ON
TRANSFERABILITY
Notwithstanding the provisions of paragraph (iii) above and any other
restrictions on transferability of Awards referred to in this Plan, the
Committee may, in its discretion, either generally or specifically,
prospectively or retroactively, (a) grant Awards without limits on
transferability thereof or with such limits on transferability as the
Committee may deem appropriate in the circumstances, and (b) waive, amend,
alter, suspend, discontinue, cancel or terminate any limits on
transferability of Awards on such terms as the Committee may deem
appropriate; provided, that any of the acts described in clause (b) of this
paragraph that would impair the rights of any Participant, or any holder or
any beneficiary of any Award theretofore granted, shall not to that extent
be effective without the consent of the affected Participant, holder or
beneficiary.
SECTION 7. MODIFICATION AND REPLACEMENT OF OUTSTANDING OPTIONS.
(a) MODIFICATION OF PRIOR ADT OPTIONS
Each Prior ADT Option outstanding as of the effective date of the ADT Merger
shall be modified, as of that date, as follows:
(i) SHARES TO WHICH OPTION RELATES.
Each Prior ADT Option shall entitle the recipient to purchase a number
of Shares equal to the product of .48133 (subject to adjustment as necessary
to reflect any change in the "Reverse Stock Split Ratio" under the ADT
Merger Agreement) and the number of Prior ADT Shares to which such Prior ADT
Option originally related.
(ii) EXERCISE PRICE.
The exercise price of each Prior ADT Option shall be equal to the
original exercise price of such Prior ADT Option, divided by .48133 (subject
to adjustment as necessary to reflect any change in the "Reverse Stock Split
Ratio" under the ADT Merger Agreement).
Each Prior ADT Option shall continue to have the same term, and shall
otherwise continue to be subject to all of the other terms and conditions, as
applied to such option prior to the ADT Merger. In the event of a conflict
between the terms of this Plan and the terms of the Award Agreement by which a
Prior ADT Option was originally granted, the terms of the Award Agreement shall
govern.
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(b) REPLACEMENT OF PRIOR TYCO OPTIONS
In addition to any other Awards that may be granted under the Plan, Options
("Substitute Options") shall be granted hereunder in replacement of all
outstanding Former Tyco Options, as of the effective date of the ADT Merger. The
number of Shares subject to each Substitute Option issued in respect of a Former
Tyco Option shall be the same as the number of Former Tyco Shares to which such
Former Tyco Option related, and the exercise price of such Substitute Option
shall be the same as the exercise price of such Former Tyco Option. Each
Substitute Option shall have the same term as the original option in respect of
which it is granted, and shall otherwise be subject to all of the other terms
and conditions as applied to such original option. Except to the extent required
to reflect the ADT Merger, in the event of a conflict between the terms of this
Plan and the terms of the Award Agreement by which a Former Tyco Option was
originally granted, the terms of the Award Agreement shall govern.
(c) ALL PRIOR ADT OPTIONS SUBJECT TO PLAN.
From and after the date on which this amended Plan is effective each
outstanding Prior ADT Option will be subject to the terms of this Plan and the
Award Agreement with respect to such Option.
SECTION 8. AMENDMENT AND TERMINATION.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN
The Board may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of any shareholder, Participant, other holder or
beneficiary of an Award, or other Person; provided that any such amendment,
alteration, suspension, discontinuation, or termination that would impair
the rights of any Participant, or any other holder or beneficiary of any
Award theretofore granted, shall not to that extent be effective without the
consent of the affected Participant, holder or beneficiary and provided
further, that notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the shareholders of the Company no such
amendment, alteration, suspension, discontinuation, or termination shall be
made that would:
(i) increase the total number of Shares available for Awards under
the Plan, except as provided in Section 4 of the Plan; or
(ii) otherwise cause the Plan to cease to comply with any applicable
law or regulatory requirement with respect to which the Board determines
compliance is necessary or desirable.
(b) AMENDMENTS TO AWARDS
The Committee may waive any conditions or rights under, amend any terms
of, or alter, suspend, discontinue, cancel or terminate, any Award
theretofore granted, prospectively or retroactively, without the consent of
any relevant Participant or holder or beneficiary of an Award; provided
that, subject to the Committee's right to adjust Awards pursuant to Section
6(f)(ix) and Section 8(c) and (d), (i) any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that
would materially impair the rights of any Participant, or any holder or
beneficiary of any Award theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary; and (ii) without the approval of the shareholders of the
Company, no such waiver, amendment, alteration, suspension, discontinuance,
cancellation or termination that would materially increase the rights of any
Participant or any holder or beneficiary of any Award, shall be effective
unless the Award, after giving effect to such waiver, amendment, alteration,
suspension,
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discontinuance, cancellation or termination, could permissibly have been
granted under the terms of the Plan (without regard to this Section 8(b)).
(c) ADJUSTMENTS OF AWARDS UPON CERTAIN ACQUISITIONS
In the event the Company or any Subsidiary shall assume outstanding
employee awards or the right or obligation to make future employee awards in
connection with the acquisition of another business or another corporation
or business entity, the Committee may make such adjustments, not
inconsistent with the terms of the Plan, in the terms of Awards as it shall
deem appropriate in order to achieve reasonable comparability, or other
equitable relationship between the assumed awards and the Awards as so
adjusted.
(d) ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING
EVENTS
The Committee is hereby authorized to make adjustments in the terms and
conditions of and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described
in Section 4(b) hereof) affecting the Company, any Subsidiary, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, or to be derived by the
Company.
SECTION 9. CHANGE IN CONTROL.
(a) In addition to the Committee's authority set forth in Section 8(d),
in order to maintain the Participants' rights in the event of any Change in
Control, as hereinafter defined, the Committee, as constituted before such
Change in Control, is hereby authorized, and has sole discretion, as to any
Award, either at the time such Award is made hereunder or any time
thereafter, to take any one or more of the following actions: (i) provide
for the acceleration of any time periods relating to the exercise or
realization of such Award so that such Award may be exercised or realized in
full on or before a date fixed by the Committee; (ii) provide for the
purchase of any such Award, upon the Participant's request, for an amount of
cash equal to the amount that could have been attained upon the exercise of
such Award or realization of the Participant's rights had such Award been
currently exercisable or payable; (iii) make such adjustment to any such
Award then outstanding as the Committee deems appropriate to reflect such
Change in Control; or (iv) cause any such Award then outstanding to be
assumed, or new rights substituted therefor, by the acquiring or surviving
corporation after such Change in Control. The Committee may, in its
discretion, include such further provisions and limitations in any Award
Agreement as it may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall mean the occurrence of any of the
following events:
(i) any "person" or "group" (as defined under Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) is
or becomes the direct or indirect "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), of securities
representing 50% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) individuals who either:
(A) are Directors of the Company at July 2, 1997 or
subsequently are appointed as Directors of the Company by, or on
the recommendation of, a majority of the Directors in office at
July 2, 1997; or
E-10
<PAGE>
(B) are subsequently appointed as Directors of the Company
by, or on the
recommendation of, a majority of those Directors of the Company
referred to in paragraph (A) above,
cease for any reason, other than death or incapacity of a Director or his
retirement at a general meeting of the Company at which he is re-elected
as a Director (but including as a result of any proxy contest involving
the solicitation of revocable proxies under Section 14(a) of the Exchange
Act), to constitute a majority of the Board of Directors of the Company;
(iii) any "person" or "group" (other than an employee benefit
plan or plans maintained by the Company or its affiliate) comes to
possess, directly or indirectly, the legal right to direct the
management and policies of the Company, whether through the ownership
of securities, by contract or otherwise (other than solely by virtue
of membership on the Board of Directors of the Company or any
committee thereof);
(iv) the Company effects a merger, amalgamation, scheme of
arrangement or other combination in which the Company is not the
surviving entity, or a sale or disposition of all, or substantially
all, of the assets of the Company; or
(v) a merger, amalgamation, scheme of arrangement or other
combination of the Company or any Subsidiary of the Company with or
into another person or any analogous or similar transaction or event
occurs as a result of which the voting rights exercisable at general
meetings of the Company in respect of the shares of the Company in
issue immediately prior to the relevant event no longer represent a
majority of all the voting rights normally exercisable at general
meetings of the Company in respect of the shares of the Company in
issue immediately after such event.
SECTION 10. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS
No Employee, Director, Participant or other Person shall have any claim
to be granted any Award, and there is no obligation for uniformity of
treatment of Employees, Directors, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with
respect to each recipient. No Participant shall have the rights of a
shareholder with respect to any Award unless and until Shares have been
issued in respect of such Award.
(b) DELEGATION
Subject to the terms of the Plan and applicable law, the Committee may
delegate to one or more officers or managers of the Company or any
Subsidiary, or to a committee of such officers or managers, the authority,
subject to the terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Employees who are
not officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
(c) WITHHOLDING
The Company or any Subsidiary is hereby authorized to withhold from any
Award, from any payment due or transfer made under any Award or under the
Plan or from any compensation or other amount owing to a Participant the
amount (in cash, Shares, other securities, other Awards or other property)
of any applicable withholding taxes in respect of an Award, its exercise, or
any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy
all obligations for the payment of such taxes.
E-11
<PAGE>
(d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS
Nothing contained in the Plan shall prevent the Company or any
Subsidiary from adopting or continuing in effect other compensation
arrangements (subject to shareholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only
in specific cases.
(e) NO RIGHT TO EMPLOYMENT
The grant of an Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company or any Subsidiary.
Further, the Company or a Subsidiary may at any time dismiss a Participant
from employment, free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement.
(f) GOVERNING LAW
The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
laws of Bermuda. In addition, the Committee may amend the terms of the Plan
and any Awards or Award Agreement in order to comply with the laws of
Bermuda or the laws of any other applicable jurisdiction.
(g) SEVERABILITY
If any provision of the Plan or any Award is or becomes or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be construed
or deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan of the Award, such provision shall be
stricken as to such jurisdiction, Person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.
(h) ADDITIONAL POWERS
The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary.
(i) NO TRUST OR FUND CREATED
Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company or any Subsidiary and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the Company
or any Subsidiary pursuant to an Award, such right shall be no greater than
the right of any unsecured general creditor of the Company or any
Subsidiary.
(j) NO FRACTIONAL SHARES
No fractional Shares shall be issued or delivered pursuant to the Plan
or any Award, and the Committee shall determine whether cash, other
securities, or other property shall be paid or transferred in lieu of any
fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated or otherwise eliminated.
E-12
<PAGE>
(k) HEADINGS
Headings are given to the Sections and subsections of the Plan solely as
a convenience to facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or interpretation of the
Plan or any provision thereof.
SECTION 11. EFFECTIVE DATE OF THE PLAN.
This amended Plan shall be effective as of the date of its approval, as
amended, by the shareholders of the Company.
SECTION 12. TERM OF THE PLAN.
No Award shall be granted under the Plan after June 30, 2007. However,unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may, and the authority of the Board or the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Award or to waive any conditions or rights under any such Award shall, extend
beyond such date.
E-13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Bye-Law 102 of the Tyco Bye-Laws provides, in part, that Tyco shall
indemnify its directors and other officers for all costs, losses and expenses
which they may incur in the performance of their duties as director or officer,
provided that such indemnification is not otherwise prohibited under the
Companies Act 1981 (as amended) of Bermuda. Section 98 of the Companies Act 1981
(as amended) prohibits such indemnification against any liability arising out of
the fraud or dishonesty of the director or officer. However, such section
permits Tyco to indemnify a director or officer against any liability incurred
by him in defending any proceedings, whether civil or criminal, in which
judgment is given in his favor or in which he is acquitted or when other similar
relief is granted to him.
The Registrant maintains $75,000,000 of insurance to reimburse its directors
and officers for charges and expenses incurred by them for wrongful acts claimed
against them by reason of their being or having been directors or officers of
the Registrant or any subsidiary thereof. Such insurance specifically excludes
reimbursement of any director or officer for any charge or expense incurred in
connection with various designated matters, including libel or slander,
illegally obtained personal profits, profits recovered by the Registrant
pursuant to Section 16(b) of the Exchange Act and deliberate dishonesty.
ITEM 21. EXHIBITS
<TABLE>
<C> <S>
2.1 --Agreement and Plan of Merger, dated as of November 22, 1998, by and among Beta
Zeno Corp., Alpha Zeno Corp. and AMP Incorporated, including guarantee of Tyco
International Ltd. (included as Annex A to the Joint Proxy Statement/Prospectus
which forms a part of this Registration Statement)
3.1 --Memorandum of Association of Registrant (previously filed as an Exhibit to
Registrant's Annual Report on Form 10-K for the Year Ended December 31, 1996)
3.2 --Certificate of Incorporation on Change of Name (previously filed as an Exhibit to
the Registrant's Current Report on Form 8-K filed July 10, 1997 (the "July 10,
1997 8-K"))
3.3 --Bye-Laws of the Registrant (previously filed as an Exhibit to the July 10, 1997
Form 8-K)
4.1 --Rights Agreement between Registrant and Citibank, N.A. dated as of November 6,
1996 (previously filed as an Exhibit to Registrant's Form 8-A dated November 12,
1996)
4.2 --First Amendment between Registrant and Citibank, N.A. dated as of March 3, 1997 to
Rights Agreement between Registrant and Citibank, N.A. dated as of November 6,
1996 (previously filed as an Exhibit to Registrant's Form 8-A/A dated March 3,
1997)
4.3 --Second Amendment between Registrant and Citibank, N.A. dated as of July 2, 1997 to
Rights Agreement between Registrant and Citibank N.A. dated as of November 6, 1996
(previously filed as an Exhibit to Registrant's Form 8-A/A dated July 2, 1997)
5 --Opinion of Appleby, Spurling & Kempe regarding the validity of the Tyco common
shares registered hereunder**
8.1 --Tax Opinion of PricewaterhouseCoopers LLP**
8.2 --Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP**
8.3 --Tax Opinion of Appleby, Spurling & Kempe**
10.1 --Stock Option Agreement dated as of November 22, 1998 between AMP Incorporated and
Beta Zeno Corp., including guarantee of Tyco International Ltd. (included as Annex
B to the Joint Proxy Statement/Prospectus which forms a part of this Registration
Statement)
10.2 --Tyco International Ltd. Long Term Incentive Plan, as amended, (included as Annex E
to the Joint Proxy Statement/Prospectus which forms a part of this Registration
Statement)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
23.1 --Consent of PricewaterhouseCoopers*
23.2 --Consent of Arthur Andersen LLP (Houston)*
23.3 --Consent of Deloitte & Touche LLP*
23.4 --Consent of Arthur Andersen LLP (Philadelphia)*
23.5 --Consent of Robert Ripp*
23.6 --Consent of Appleby, Spurling & Kempe (contained in Exhibit 5 and Exhibit 8.3)**
23.7 --Consent of PricewaterhouseCoopers LLP (contained in Exhibit 8.1)**
23.8 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in Exhibit 8.2)**
24.1 --Power of Attorney (contained on the signature page herewith)
99.1 --Consent of Credit Suisse First Boston Corporation*
99.2 --Consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated*
99.3 --Form of Proxy Card of Tyco International Ltd.*
99.4 --Form of Proxy Card of AMP Incorporated*
</TABLE>
- ------------------------
* Filed herewith
** To be filed by amendment
ITEM 22. UNDERTAKINGS
The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrant undertakes that prior to any public reoffering of the
securities registered hereunder through use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question
II-2
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Exeter,
State of New Hampshire, on the 11th day of December 1998.
TYCO INTERNATIONAL LTD.
By: /s/ MARK H. SWARTZ
------------------------------------------
Mark H. Swartz
Executive Vice President-Chief Financial
Officer
(Principal Financial and Accounting
Officer)
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints
L. Dennis Kozlowski and Mark H. Swartz, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
this Registration Statement (including all pre-effective and post-effective
amendments), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto such attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necesary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on December 11,
1998 in the capacities indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ L. DENNIS KOZLOWSKI Chairman of the Board, President, Chief Executive
------------------------------------------------ Officer and Director (Principal Executive Officer)
L. Dennis Kozlowski
/s/ MICHAEL A. ASHCROFT Director
------------------------------------------------
Michael A. Ashcroft
/s/ JOSHUA M. BERMAN Director and Vice President
------------------------------------------------
Joshua M. Berman
/s/ RICHARD S. BODMAN Director
------------------------------------------------
Richard S. Bodman
/s/ JOHN F. FORT Director
------------------------------------------------
John F. Fort
/s/ STEPHEN W. FOSS Director
------------------------------------------------
Stephen W. Foss
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ RICHARD A. GILLELAND Director
------------------------------------------------
Richard A. Gilleland
/s/ PHILIP M. HAMPTON Director
------------------------------------------------
Philip M. Hampton
/s/ JAMES S. PASMAN, JR. Director
------------------------------------------------
James S. Pasman, Jr.
/s/ W. PETER SLUSSER Director
------------------------------------------------
W. Peter Slusser
/s/ MARK H. SWARTZ Executive Vice President-Chief Financial Officer
------------------------------------------------ (Principal Financial and Accounting Officer)
Mark H. Swartz
/s/ FRANK E. WALSH, JR. Director
------------------------------------------------
Frank E. Walsh, Jr.
</TABLE>
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Tyco International Ltd. of our report dated October 23, 1998, on
our audits of the consolidated financial statements and consolidated financial
statement schedule at September 30, 1998 and 1997, and for the year ended
September 30, 1998, the nine months ended September 30, 1997 and the year ended
December 31, 1996, which report is included in Tyco's Annual Report on Form 10-K
for the year ended September 30, 1998, and of our report dated November 23,
1998, on our audit of the combination of the historical consolidated financial
statements and consolidated financial statement schedule of Tyco International
Ltd. and United States Surgical Corporation after restatement for the pooling of
interests as described in Note 1 to the supplemental consolidated financial
statements, which report is included in the Company's Current Report on Form 8-K
filed December 10, 1998. We also consent to the reference to our firm under the
caption "Experts."
/s/ PRICEWATERHOUSECOOPERS
Hamilton, Bermuda
December 10, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of Tyco International Ltd.
of our report dated January 31, 1997 on our audit of the consolidated statements
of income, changes in shareholders' investment and cash flows of Keystone
International, Inc. and subsidiaries for the year ended December 31, 1996,
included in the Tyco International Ltd. Annual Report on Form 10-K for the year
ended September 30, 1998 and the Tyco International Ltd. Current Report on Form
8-K filed December 10, 1998, and to all references to our Firm included in this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
December 10, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Tyco International Ltd. of our report dated September 30, 1998
(relating to the consolidated balance sheet of United States Surgical
Corporation and its subsidiaries as of September 30, 1997, and the consolidated
statements of operations, changes in stockholders' equity and cash flows for the
nine month period ended September 30, 1997, the twelve month period ended
December 31, 1996 and the related financial statement schedule for the nine
month period ended September 30, 1997 and the twelve month period ended December
31, 1996), which report is included in Tyco International Ltd.'s Current Report
on Form 8-K filed December 10, 1998.
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
December 10, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of Tyco International Ltd. on Form S-4
of our report dated February 13, 1998 included in the AMP Incorporated Annual
Report on Form 10-K for the year ended December 31, 1997, and to all references
to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 9, 1998
<PAGE>
EXHIBIT 23.5
CONSENT
I hereby consent to the reference to me in the Joint Proxy
Statement/Prospectus forming a part of the Registration Statement on Form S-4 of
Tyco International Ltd. relating to the merger contemplated by the Agreement and
Plan of Merger, dated as of November 22, 1998, by and among Tyco International
(PA) Inc. ("Tyco (PA)"), AMP Merger Corp., a wholly-owned subsidiary of Tyco
(PA), and AMP Incorporated.
/s/ Robert Ripp
------------------------------------------------------------------------------
Name: Robert Ripp
Date: December 11, 1998
<PAGE>
EXHIBIT 99.1
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
AMP Incorporated
470 Friendship Road
Harrisburg, Pennsylvania 17111
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of AMP Incorporated ("AMP") as Annex C to the Joint Proxy
Statement/Prospectus of AMP and Tyco International Ltd. ("Tyco") relating to the
proposed merger transaction involving AMP and Tyco and references thereto in
such Joint Proxy Statement/Prospectus under the captions "SUMMARY--Opinion of
AMP's Financial Advisor" and "THE MERGER--Opinion of AMP's Financial Advisor."
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under, and we do not admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
By: /s/ CREDIT SUISSE FIRST BOSTON CORPORATION
-------------------------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
New York, New York
December 11, 1998
<PAGE>
EXHIBIT 99.2
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter, dated November 22, 1998,
to the Board of Directors of Tyco International Ltd. ("Tyco") included as Annex
D to the Joint Proxy Statement/ Prospectus that forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of AMP Merger Corp., a
wholly-owned indirect subsidiary of Tyco, with and into AMP Incorporated, and to
the references to such opinion in such Joint Proxy Statement/Prospectus under
the captions entitled "Summary--The Merger--Opinion of Tyco's Financial
Advisor," and "The Merger--Background of the Merger," "--Recommendation of the
Board of Directors of Tyco; Reasons of Tyco for the Merger" and "--Opinion of
Tyco's Financial Advisor." In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, nor do we thereby
admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Richard P. Johnson
-----------------------------------
Richard P. Johnson
Managing Director
Investment Banking Group
December 11, 1998
<PAGE>
Exhibit 99.3
[LOGO OF TYCO INTERNATIONAL LTD.]
FORM OF PROXY
FOR TYCO INTERNATIONAL LTD.
SPECIAL GENERAL MEETING OF SHAREHOLDERS ON _____________, 1999
THIS PROXY CARD MUST BE RECEIVED, AT THE APPROPRIATE ADDRESS INDICATED BELOW,
BY ___________, PRIOR TO 10:00 A.M. (EASTERN DAYLIGHT TIME) ON _______, 1999
OR BY ___________, PRIOR TO 10:00 A.M. (GREENWICH MEAN TIME) ON _______,
1999, OR BY ___________, PRIOR TO 10:00 A.M. (BERMUDA TIME) ON _______, 1999.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF TYCO INTERNATIONAL LTD., A
COMPANY INCORPORATED IN BERMUDA WITH LIMITED LIABILITY, FOR THE SPECIAL
GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON ______________, 1999 AT
10:00 A.M.(BERMUDA TIME).
The undersigned, being a holder of common shares, par value $0.20
per, of Tyco International Ltd., hereby appoints ______________ or failing him
______________ or failing him ______________ as his proxy at the Special
General Meeting to be held on ___________, 1999 (and any adjournment thereof)
and to vote on behalf of the undersigned (or abstain from voting) as
indicated on the reverse of this card or, to the extent that no such
indication is given, as set forth herein. The Special General Meeting has
been convened to consider proposals (1) to approve the issuance of Tyco
common shares to be delivered in connection with the merger of AMP
Incorporated and AMP Merger Corp., a wholly-owned indirect subsidiary of
Tyco; (2) to increase the number of directors of Tyco from eleven to twelve
and elect Robert Ripp, the current Chairman and Chief Executive Officer of
AMP Incorporated, as a Tyco director; (3) to increase the authorized share
capital of Tyco to $625,000,000 by the creation of an additional 996,250,000
Tyco common shares of U.S.$0.20 each; and (4) to increase the number of Tyco
common shares in respect of which grants may be made under the Tyco
International Ltd. Long Term Incentive Plan, as amended from _________
to __________. In his discretion, the proxy is authorized to vote upon such
other business as may properly come before the meeting or any adjournments
thereof. The undersigned hereby revokes any previously dated forms of proxy
with respect to the Special General Meeting.
PLEASE INDICATE ON THE REVERSE OF THIS CARD HOW YOUR SHARES ARE TO BE VOTED.
THE TYCO BOARD RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. IF THIS CARD IS
RETURNED SIGNED BUT NOT MARKED WITH ANY INDICATION AS TO HOW TO VOTE, THE
UNDERSIGNED WILL BE DEEMED TO HAVE DIRECTED THE PROXY TO VOTE FOR EACH OF THE
PROPOSALS.
Completed proxy cards should be returned to: [insert information for each
jurisdiction]. An instrument evidencing the appointment of a corporate
representative may be delivered to any of the above addresses up to __:00
a.m. on __________, 1999. IF YOU HAVE QUESTIONS OR NEED ASSISTANCE, PLEASE
CONTACT _____________ at 1-800-XXX-XXXX (toll-free in the United States)
______________, at 0171-XXX-XXXX (in the United Kingdom) or ______________ at
212-XXX-XXXX (outside the United States and the United Kingdom)
PLEASE SIGN AND DATE ON REVERSE SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark your
votes as indicated /X/
in this example
THE BOARD OF DIRECTORS OF TYCO INTERNATIONAL LTD. RECOMMENDS THAT YOU VOTE
FOR EACH OF THE FOLLOWING PROPOSALS:
FOR AGAINST ABSTAIN
1. To approve the issuance of Tyco common / / / / / /
shares to be delivered in connection with
the merger of AMP Incorporated and AMP
Merger Corp., a wholly-owned indirect
subsidiary of Tyco.
FOR AGAINST ABSTAIN
2. To increase the number of Tyco directors / / / / / /
from eleven to twelve and elect Robert Ripp,
the current Chairman and Chief Executive
Officer of AMP Incorporated, as a Tyco
director.
FOR AGAINST ABSTAIN
3. To increase the authorized share capital / / / / / /
of Tyco to $625,000,000 by the creation
of an additional 996,250,000 Tyco common
shares, of the nominal value of U.S. $0.20
each.
FOR AGAINST ABSTAIN
4. To increase the number of Tyco common / / / / / /
shares in respect of which grants may
be made under the Tyco International
Ltd., Long Term Incentive Plan, as
amended, from _______ to _______.
EACH OF PROPOSALS 2 THROUGH 4 IS CONDITIONED UPON THE
CONSUMMATION OF THE MERGER
Signature(s)(and Title(s), if any) _______________________ Date:_________ , 199_
Please sign your name above exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or other representative capacity,
please give full title as such. If a corporation, please sign in full
corporate name by a duly authorized director or other officer, indicating
title, or execute under the corporation's common seal. In the case of joint
holders, any one may sign but the first-named in the share register may
exclude the voting rights of the other joint holder(s) by voting in person or
by proxy.
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<PAGE>
Exhibit 99.4
PROXY
AMP INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMP INCORPORATED.
The undersigned, a holder of shares of common stock, without par
value ("Common Stock"), of AMP Incorporated ("AMP"), acting with respect to
all shares of Common Stock held by the undersigned, hereby appoints Robert
Ripp and David F. Henschel, and each of them, as proxies for the undersigned,
with full power of substitution, to vote all shares of Common Stock of the
undersigned, other than shares held in AMP Benefit Plan (as defined below)
accounts, at the Special Meeting of the Shareholders of AMP to be held on
_______, ________, 1999, at 10:00 a.m., local time, at the AMP Global
Executive Leadership Center, 411 South 40th Street, Harrisburg, Pennsylvania,
and at any adjournments, postponements or reschedulings thereof, hereby
revoking any proxy previously given and ratifying all that said proxy or
proxies may do pursuant hereto. Except in the case of shares of Common Stock
held by the undersigned in an AMP Benefit Plan account, all shares held by
the undersigned will be voted by the proxies as directed on the reverse side
of this Proxy card. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting.
For those participants who hold accounts with Common Stock through
the AMP Incorporated Employee Savings and Thrift Plan - 401(k) ("401(k)"), or
the MERIT Plan of Benefits of M/A-COM ("MERIT", and together with the 401(k),
the "AMP Benefit Plans"): The undersigned instructs the applicable Trustee
under the AMP Benefit Plans to vote all shares or fractions of shares
credited to the undersigned's account as of the latest available processing
date on or before _____ __, 199_ as directed on the reverse side of this
proxy card. Those shares in 401(k) accounts for which no directions are
received will be voted by the Trustee in its sole and absolute discretion.
Those shares in MERIT accounts for which no directions are received will be
voted by the Trustee in the proportion established by all directions received
from the other participants in the MERIT Plan.
If you have Common Stock held directly and under one or more of the
AMP Benefit Plans, the voting directions on the reverse side of this proxy
card will apply to your combined shares.
(Continued and to be signed on reverse side)
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<PAGE>
Please mark your
votes as indicated /X/
in this example
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1. / / / / / /
Item 1- A proposal recommended by the Board of Directors The undersigned hereby acknowledges receipt
of AMP to approve and adopt the Agreement and Plan of of the Notice of the Special Meeting and the
Merger, dated as of November 22, 1998, by and among Tyco Joint Proxy Statement/Prospectus dated
International (PA) Inc., a wholly-owned subsidiary of ____________________, 1999.
Tyco International Ltd., AMP Merger Corp., a wholly-owned
subsidiary of Tyco International (PA) Inc., and AMP. The shares represented by this proxy will be
voted as directed by the shareholder. IF NO
DIRECTION IS MADE, THE SHARES WILL BE VOTED
"FOR" ITEM 1. Abstentions are not counted
as votes cast with respect to Item 1.
Signature(s)_______________________________________________________________________________________ Date ________________,1999
NOTE: Please date and sign exactly as name appears hereon. Each joint owner should sign. When signing as attorney, executor,
trustee, guardian or corporate officer, please give full title as such. Corporations should indicate full corporate name and
have a duly authorized officer sign.
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FOLD AND DETACH HERE
</TABLE>
