<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 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 (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
THE GIBBONS BUILDING
10 QUEEN STREET, SUITE 301
HAMILTON HM11 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. PAUL T. SCHNELL, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM
LLP
919 THIRD AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
------------------------
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 May 25, 1998, described in the Proxy Statement/ Prospectus
included in this Registration Statement have been satisfied or waived.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Shares, par value $0.20 per share.......... 68,565,595(1) N/A $4,149,566,205(2) $1,224,125
</TABLE>
(1) Represents the estimated number of Common Shares issuable upon consummation
of the merger (the "Merger") of a subsidiary of the Registrant with and into
United States Surgical Corporation ("US Surgical"), assuming the exercise
prior to the effective time of the Merger of all exercisable options or
other rights to purchase or acquire shares of common stock, par value $0.10,
of US Surgical (the "US Surgical Common Stock").
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 ("Rule 457") promulgated under the Securities Act of 1933, as
amended, on the basis of $46.03125, the average of the high and low prices
of the US Surgical Common Stock on the New York Stock Exchange on July 7,
1998, multiplied by 90,146,720, the maximum number of shares of US Surgical
Common Stock to be acquired in the Merger.
------------------------------
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>
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
[LOGO]
UNITED STATES SURGICAL CORPORATION
150 GLOVER AVENUE
NORWALK, CONNECTICUT 06856
(203) 845-1290
, 1998
To our Stockholders:
Enclosed are a Notice of Special Meeting, a Proxy Statement/Prospectus and a
proxy card in connection with a Special Meeting of stockholders (the "Special
Meeting") of United States Surgical Corporation ("US Surgical") to be held at
[10:00 a.m.] local time on , 1998 at [ ]. At
the Special Meeting you will be asked to consider and vote upon a proposal to
approve the Merger (the "Merger") of US Surgical and T11 Acquisition Corp., a
Delaware subsidiary of Tyco International Ltd. ("Merger Sub"), and adopt the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 25, 1998,
among Tyco International Ltd., a Bermuda company ("Tyco"), Merger Sub and US
Surgical, providing for the Merger.
The terms of the Merger Agreement provide that each issued and outstanding
share of common stock, par value $0.10 per share, of US Surgical ("US Surgical
Common Stock") will, upon the terms and subject to the conditions set forth in
the Merger Agreement, be converted into the right to receive 0.7606 (the
"Exchange Ratio") validly issued, fully paid and nonassessable Tyco Common
Shares, par value $0.20 per share ("Tyco Common Shares"). The closing price of
the Tyco Common Shares as reported on the NYSE Composite Tape on ,
1998 was $ . Outstanding options to acquire shares of US Surgical Common
Stock issued under US Surgical's stock option plans will be assumed by Tyco and
will be deemed to constitute options to acquire Tyco Common Shares.
Details of the matters to be considered at the Special Meeting are set forth
in the accompanying Proxy Statement/Prospectus. In addition, you may obtain
additional information about US Surgical and Tyco from documents filed with the
Securities and Exchange Commission. We encourage you to read this document
carefully, in its entirety.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the Merger described in this Proxy Statement/Prospectus
or the securities to be issued under this Proxy Statement/Prospectus nor have
they determined if this Proxy Statement/Prospectus is accurate or adequate.
Furthermore, the Securities and Exchange Commission has not determined the
fairness or merit of the Merger. Any representation to the contrary is a
criminal offense. The information in this Proxy Statement/Prospectus is not
complete and may be amended. This prospectus is not an offer to sell nor is it
seeking an offer to buy these securities in any state where the offer or sale is
not permitted.
- --------------------------------------------------------------------------------
This Proxy Statement/Prospectus is dated , 1998 and is first being mailed
to stockholders on or about , 1998.
<PAGE>
The Board of Directors of US Surgical has carefully considered the terms and
conditions of the proposed Merger, as well as a number of other factors,
including the oral opinion of Chase Securities Inc. ("Chase") (subsequently
confirmed in writing) that the Exchange Ratio was fair to US Surgical
stockholders from a financial point of view as of the date of such opinion. The
full text of the written opinion of Chase, which sets forth a description of the
matters considered, assumptions made and limits on the review undertaken by
Chase, is attached to the accompanying Proxy Statement/Prospectus as Annex B.
THE BOARD OF DIRECTORS OF US SURGICAL HAS UNANIMOUSLY (WITH ONE DIRECTOR ABSENT)
APPROVED THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF US SURGICAL AND ITS STOCKHOLDERS AND
RECOMMENDS THAT HOLDERS OF SHARES OF US SURGICAL COMMON STOCK VOTE FOR APPROVAL
OF THE MERGER AND ADOPTION OF THE MERGER AGREEMENT.
To be certain that your shares are voted at the Special Meeting, whether or
not you plan to attend in person, please sign, date and return the enclosed
proxy as soon as possible. If you sign, date and mail your proxy card without
indicating how you wish to vote, your proxy will be counted as a vote FOR the
approval of the Merger and adoption of the Merger Agreement and the transactions
contemplated thereby. If you fail to return your card, the effect will be a vote
AGAINST the approval of the Merger and adoption of the Merger Agreement and the
transactions contemplated thereby. YOUR VOTE IS VERY IMPORTANT. You may attend
the Special Meeting and vote in person, whether or not you have executed and
returned your proxy. You may revoke your proxy at any time prior to its use.
Sincerely,
LEON C. HIRSCH
CHAIRMAN OF THE BOARD,
AND CHIEF EXECUTIVE OFFICER
NORWALK, CONNECTICUT
, 1998
<PAGE>
[U.S SURGICAL LOGO]
UNITED STATES SURGICAL CORPORATION
150 Glover Avenue
Norwalk, Connecticut 06856
----------
NOTICE OF SPECIAL MEETING
TO BE HELD ON , 1998
----------
To the Stockholders of United States Surgical Corporation:
Notice is hereby given that a Special Meeting of Stockholders of United
States Surgical Corporation, a Delaware corporation ("US Surgical"), will be
held at [10:00]a.m., local time, on [ ], 1998, at
[ ] (the "Special Meeting") for the following purposes:
1. To consider and vote upon a proposal to approve the Merger (the
"Merger") of US Surgical and T11 Acquisition Corp. ("Merger Sub") a
Delaware subsidiary of Tyco International Ltd.("Tyco"), a Bermuda
Company, and adopt the Agreement and Plan of Merger, dated as of May 25,
1998 (the "Merger Agreement"), by and among US Surgical, Tyco, Merger
Sub, and the transactions contemplated thereby, pursuant to which, among
other things, (i) Merger Sub will merge with and into US Surgical, with
the result that US Surgical will become a wholly owned subsidiary of Tyco
and (ii) each issued and outstanding share of common stock, par value
$0.10 per share, of US Surgical will be converted into the right to
receive 0.7606 validly issued, fully paid and nonassessable Tyco Common
Shares, par value $0.20 per share.
2. To consider and vote upon such other matters which may properly come
before the Special Meeting or any adjournment or postponement thereof.
The accompanying Proxy Statement/Prospectus contains information regarding
the business to be considered at the Special Meeting. A copy of the Merger
Agreement is attached as Annex A to the accompanying Proxy Statement/Prospectus.
You are cordially invited to attend the Special Meeting. Whether or not you
plan to attend the Special Meeting, you are requested to sign and date the
accompanying proxy and return it promptly in the enclosed envelope. If you
attend the Special Meeting, you may vote in person if you wish, whether or not
you have executed and returned your proxy. A proxy may be revoked at any time
prior to its use.
ATTENDANCE AT THE SPECIAL MEETING WILL BE LIMITED TO STOCKHOLDERS OF US
SURGICAL. ADMITTANCE TICKETS WILL BE REQUIRED.
If you are a stockholder and plan to attend, you must request an admittance
ticket by writing to the Office of the Secretary at the address shown above
prior to , 1998. If your shares are not registered in your own name,
evidence of your stock ownership, which you can obtain from your bank,
stockbroker, etc., must accompany your letter. An admittance ticket will be sent
to you.
Only stockholders of record at the close of business on
[ ], 1998, the record date established by the Board of
Directors in connection with the Special Meeting, are entitled to notice of, and
to vote at, the Special Meeting or any adjournment or postponement thereof. A
list of stockholders will be made available at the principal executive offices
of US Surgical during normal business hours at least 10 days prior to the date
of the Special Meeting for examination by any stockholder for any purpose
germane to the Special Meeting. Our principal executive offices are located at
150 Glover Avenue, Norwalk, Connecticut 06856. Our telephone number is (203)
845-1290.
<PAGE>
UNITED STATES SURGICAL CORPORATION
150 Glover Avenue
Norwalk, Connecticut 06856
THE BOARD OF DIRECTORS OF US SURGICAL HAS UNANIMOUSLY (WITH ONE DIRECTOR ABSENT)
APPROVED THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE MERGER IS
FAIR AND IN THE BEST INTERESTS OF US SURGICAL AND ITS STOCKHOLDERS AND
RECOMMENDS THAT HOLDERS OF SHARES OF US SURGICAL COMMON STOCK VOTE FOR APPROVAL
OF THE MERGER AND ADOPTION OF THE MERGER AGREEMENT. Failure to return your
properly endorsed proxy card will have the same effect as a vote AGAINST the
approval of the Merger and adoption of the Merger Agreement and the transactions
contemplated thereby. Your cooperation is appreciated.
<TABLE>
<CAPTION>
By Order of the Board of Directors
<S> <C>
PAMELA KOMENDA
NORWALK, CONNECTICUT Corporate Secretary
, 1998
</TABLE>
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE PRE-PAID RETURN
ENVELOPE.
DO NOT SEND ANY STOCK CERTIFICATES
WITH YOUR PROXY CARD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE TYCO/US SURGICAL MERGER....................................................
SUMMARY....................................................................................................
The Companies..........................................................................................
The Special Meeting....................................................................................
Reasons for the Merger.................................................................................
Recommendation to Stockholders.........................................................................
The Merger.............................................................................................
Certain Considerations.................................................................................
Forward Looking Information............................................................................
CURRENT DEVELOPMENTS.......................................................................................
SELECTED FINANCIAL DATA FOR TYCO AND US SURGICAL...........................................................
Selected Tyco Historical Financial Information.........................................................
Selected US Surgical Historical Financial Information..................................................
Selected Tyco and US Surgical Unaudited Pro Forma Combined Financial Information.......................
Comparative Per Share Information......................................................................
US SURGICAL SPECIAL MEETING................................................................................
Purpose of the US Surgical Special Meeting.............................................................
Record Date; Voting Rights; Proxies....................................................................
Solicitation of Proxies................................................................................
Quorum.................................................................................................
Required Vote..........................................................................................
THE MERGER.................................................................................................
General................................................................................................
Effective Time.........................................................................................
Conversion of Shares; Procedures for Exchange of Certificates..........................................
Background of the Merger...............................................................................
Reasons of Tyco for the Merger.........................................................................
Recommendation of the Board of Directors of US Surgical; Reasons of US Surgical for the Merger.........
Opinion of US Surgical's Financial Advisor.............................................................
Interests of Certain Persons in the Merger.............................................................
Certain United States Federal Income Tax and Bermuda Tax Consequences..................................
Anticipated Accounting Treatment.......................................................................
Effect on Stock Plans and Agreements...................................................................
Certain Legal Matters..................................................................................
U.S. Federal Securities Law Consequences...............................................................
Stock Exchange Listing.................................................................................
Dividends..............................................................................................
Appraisal Rights.......................................................................................
Fees and Expenses......................................................................................
THE MERGER AGREEMENT AND RELATED AGREEMENTS................................................................
Terms of the Merger....................................................................................
Exchange of Certificates...............................................................................
Representations and Warranties.........................................................................
Conduct of Business Pending the Merger.................................................................
Additional Agreements..................................................................................
Conditions to the Merger...............................................................................
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Termination............................................................................................
Amendment and Waiver...................................................................................
Stockholder Agreements.................................................................................
COMPARATIVE PER SHARE PRICES AND DIVIDENDS.................................................................
Tyco...................................................................................................
US Surgical............................................................................................
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION...............................................
BUSINESSES OF TYCO.........................................................................................
Disposable and Specialty Products......................................................................
Fire and Security Services.............................................................................
Flow Control Products..................................................................................
Electrical and Electronic Components...................................................................
BUSINESS OF US SURGICAL....................................................................................
DESCRIPTION OF SHARE CAPITAL OF TYCO.......................................................................
Authorized Share Capital...............................................................................
Tyco Common Shares.....................................................................................
Tyco Preference Shares.................................................................................
Stock Exchange Listing.................................................................................
COMPARISON OF SHAREHOLDER RIGHTS...........................................................................
OTHER MATTERS..............................................................................................
LEGAL MATTERS..............................................................................................
EXPERTS....................................................................................................
FUTURE STOCKHOLDER PROPOSALS...............................................................................
WHERE TO FIND MORE INFORMATION.............................................................................
GLOSSARY................................................................................................... G-1
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Opinion of Chase Securities Inc.
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE TYCO/US SURGICAL MERGER
Q: WHY HAS UNITED STATES SURGICAL CORPORATION AGREED TO MERGE WITH A
SUBSIDIARY OF TYCO INTERNATIONAL LTD.?
A: US Surgical develops, manufactures and markets to hospitals throughout
the world a line of surgical wound closure products and advanced surgical
products. Tyco is a diversified manufacturing and service company with expected
annual revenues in excess of $13 billion. Through its Disposable and Specialty
Products Group, Tyco designs, manufactures and distributes disposable medical
supplies and other specialty products.
For the two companies, the merger is an attractive strategic combination
which will benefit from synergies and cost savings. For US Surgical
stockholders, among other things, the merger offers a significant premium above
the average price of their shares over the month preceding the execution of the
merger agreement.
For a more detailed discussion of the reasons for the merger, see "The
Merger--Reasons of Tyco for the Merger"; and "--Recommendation of the Board of
Directors of US Surgical; Reasons of US Surgical for the Merger."
Q: WHAT WILL HAPPEN TO THE STOCK OF US SURGICAL IN THE MERGER?
A: In the merger, US Surgical stockholders will receive 0.7606 of a Tyco
share in exchange for each of their shares of US Surgical common stock. Cash
will be paid instead of the distribution of fractional shares.
FOR EXAMPLE, A US SURGICAL STOCKHOLDER THAT OWNED 100 SHARES OF US SURGICAL
COMMON STOCK WILL OWN 76 TYCO SHARES AND RECEIVE A CHECK FOR THE MARKET VALUE OF
0.06 OF A TYCO SHARE.
Q: HOW MUCH WILL MY SHARES IN TYCO BE WORTH AFTER THE MERGER?
A: That will depend on the market price of Tyco shares after the merger. On
July , 1998, the closing price per Tyco share on the New York Stock Exchange
was . If Tyco shares had that market value after the merger, holders of US
Surgical common stock would receive Tyco shares (and cash for fractional shares)
with a value of for each of their US Surgical shares. However, the market
price for Tyco shares is likely to change between now and the merger. You are
urged to obtain current quotes for Tyco and US Surgical shares.
Q: WHEN WILL THE MERGER TAKE EFFECT?
A: Tyco and US Surgical expect that the merger will become effective
promptly after the stockholders of US Surgical approve the merger at a special
stockholders meeting. The meeting is scheduled for , 1998.
Q: WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
FOR THE STOCKHOLDERS OF US SURGICAL?
A: The receipt of Tyco shares in the merger will generally be tax free to
the stockholders of US Surgical; however, a stockholder may be required to pay
taxes on cash received in lieu of a fractional share of Tyco. 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 discussion of
the general tax consequences of the merger, see "-- Certain Considerations" and
"The Merger--Certain U.S. Federal Income Tax and Bermuda Tax Consequences."
Q: WILL STOCKHOLDERS HAVE APPRAISAL RIGHTS?
A: Stockholders of US Surgical will not have any appraisal rights as a
result of the merger.
<PAGE>
Q: WHAT SHOULD STOCKHOLDERS DO NOW?
A: Stockholders should mail their signed proxy card in the enclosed postage
pre-paid return envelope, as soon as possible, so that their shares will be
represented at the US Surgical special stockholders meeting. The Board of
Directors of US Surgical recommends that US Surgical stockholders vote in favor
of the merger and the merger agreement. After the merger is completed,
stockholders will receive written instructions for exchanging their stock
certificates.
Q: CAN STOCKHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED IN A SIGNED
PROXY CARD?
A: Yes. Stockholders can change their vote in one of three ways at any time
before their proxies are tabulated at the special stockholders meeting. First,
stockholders can revoke their proxies by written notice. Second, stockholders
can complete new, later dated proxy cards. Third, stockholders can attend the
special stockholders meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions as to
how to vote your shares. You should follow the directions provided by your
broker regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted by that broker and the failure to
vote will have the same effect as a vote AGAINST the approval of the merger and
adoption of the merger agreement and the transactions contemplated thereby.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written instructions
for sending in your stock certificates and receiving the merger consideration
for your shares.
Q: WHOM SHOULD STOCKHOLDERS CALL WITH QUESTIONS?
A: Stockholders who have questions about the merger should call US Surgical
at 1-203-845-1404.
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY 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." A GLOSSARY OF CAPITALIZED TERMS USED IN THIS SUMMARY AND
ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS BEGINS ON PAGE G-1.
THE COMPANIES
UNITED STATES SURGICAL CORPORATION
150 Glover Avenue
Norwalk, Connecticut 06856
(203) 845-1290
United States Surgical Corporation ("US Surgical") was reincorporated in
Delaware in 1990. Prior to its reincorporation in Delaware, US Surgical was a
New York corporation. US Surgical primarily develops, manufactures and markets a
proprietary line of technologically advanced surgical products to hospitals
throughout the world. US Surgical's products include surgical staplers,
laparoscopic products, electrosurgical and ultrasonic products and sutures and
products in numerous surgical specialties including spine surgery, vascular and
cardiovascular surgery and interventional cardiology, urology and breastcare.
For further information on the business of US Surgical, see "Business of US
Surgical."
TYCO INTERNATIONAL LTD.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM11, Bermuda
(441) 292-8674
Tyco International Ltd., a Bermuda company ("Tyco"), is the continuing
public company resulting from the business combination (the "ADT Merger") on
July 2, 1997 of Tyco International Ltd. (now Tyco International (US) Inc.), a
Massachusetts corporation ("Former Tyco" or "Tyco US"), and a wholly-owned
subsidiary of what was formerly called ADT Limited, a Bermuda company ("ADT").
Upon consummation of the ADT Merger, ADT (the continuing public company) changed
its name to Tyco International Ltd.
Tyco is a diversified manufacturing and service company that, through its
subsidiaries, operates in four segments: (i) the design, manufacture and
distribution of disposable medical supplies and other specialty products, and
the conduct of vehicle auctions and related services; (ii) the design,
manufacture, installation and service of fire detection and suppression systems,
and the installation, monitoring and maintenance of electronic security systems;
(iii) the design, manufacture and distribution of flow control products; and
(iv) the design, manufacture and distribution of electrical and electronic
components, and the design, manufacture, installation and service of undersea
cable communication systems.
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's registered and principal executive offices are located at the above
address in Bermuda. The executive offices of Tyco US, 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."
3
<PAGE>
THE SPECIAL MEETING
The Special Meeting of the US Surgical stockholders will be held on at
.
The Record Date for US Surgical stockholders entitled to receive notice of
and to vote at the Special Meeting is . On that date there were
shares of US Surgical Common Stock outstanding, each of which entitles its
registered holder to one vote.
REASONS FOR THE MERGER
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 with Tyco's existing operations and that are expected to be
accretive to earnings per share. For US Surgical stockholders, among other
things, the Merger presents the opportunity to receive a significant premium
above the average price for their shares over the month preceding execution of
the Merger Agreement and to participate in a larger and more diversified
company.
To review the reasons for the Merger in greater detail, see "The
Merger--Reasons of Tyco for the Merger"; and "--Recommendation of the Board of
Directors of US Surgical; Reasons of US Surgical for the Merger."
RECOMMENDATION TO STOCKHOLDERS
The US Surgical Board of Directors believes that the Merger is fair and in
the best interests of US Surgical and the US Surgical stockholders and has
unanimously (with one director absent) recommended that stockholders vote FOR
the proposal to approve the Merger and adopt the Merger Agreement.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS. YOU SHOULD READ THE MERGER AGREEMENT, AS IT IS THE LEGAL
DOCUMENT WHICH GOVERNS THE MERGER.
CONSEQUENCES OF THE MERGER
In the Merger, US Surgical will merge with a subsidiary of Tyco. As a
result, US Surgical will become a wholly-owned subsidiary of Tyco, and the
former stockholders of US Surgical will become shareholders of Tyco.
WHAT US SURGICAL STOCKHOLDERS WILL RECEIVE IN THE MERGER
In the Merger, US Surgical stockholders will receive 0.7606 Tyco Common
Shares in exchange for each of their shares of US Surgical Common Stock. Cash
will be paid in lieu of the distribution of fractional shares.
4
<PAGE>
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 (the "Code"). Stockholders of
US Surgical generally should not have any taxable gain or loss for United States
("U.S.") federal income tax purposes upon receipt of Tyco Common Shares in the
Merger; however, a stockholder may be required to pay 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 "--Certain Considerations" and "The Merger--Certain
U.S. Federal Income Tax and Bermuda Tax Consequences."
STOCKHOLDER VOTE REQUIRED
The favorable vote of a majority of the outstanding shares of US Surgical
Common Stock is required to approve the Merger and adopt the Merger Agreement.
IF YOU FAIL TO RETURN YOUR CARD, THE EFFECT WILL BE THE SAME AS A VOTE AGAINST
THE MERGER (UNLESS YOU APPEAR IN PERSON AT THE SPECIAL MEETING AND VOTE FOR THE
MERGER). As of the Record Date, approximately % of the outstanding shares of
US Surgical Common Stock were held by the officers and directors of US Surgical
and their affiliates ( % including exercisable stock options). Two of these
officers and directors, beneficially owning % of the outstanding shares of US
Surgical Common Stock ( % including exercisable options), have agreed to vote
their shares in favor of the Merger and Merger Agreement. For further details,
see "The Merger Agreement and Related Agreements -- Stockholder Agreements."
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the US Surgical Board of Directors in
favor of the Merger, US Surgical stockholders should be aware that members of
its management and Board of Directors will receive benefits as a result of the
Merger that will be in addition to benefits received by stockholders generally.
For further details, see "The Merger--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 the following:
(1) effectiveness of the Registration Statement registering with the
Commission the Tyco Common Shares to be issued to the US Surgical stockholders
in the Merger;
(2) approval of the Merger and the adoption of the Merger Agreement by the
stockholders of US Surgical;
(3) receipt of any required regulatory approvals;
(4) absence of governmental action prohibiting the Merger or requiring Tyco
to dispose of or hold separate any material portion of its business or assets;
(5) absence of any law that makes the Merger illegal;
(6) receipt by each of Tyco and US Surgical of the written opinion of its
counsel that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code and that the transfer of US Surgical Common Stock, other
than by US Surgical stockholders who will be "5% transferee shareholders",
pursuant to the Merger will qualify for an exception under United States
Treasury Regulation Section 1.367(a)-3;
(7) receipt by Tyco of the opinion of PricewaterhouseCoopers regarding the
qualification of the Merger as a pooling of interests for accounting purposes;
5
<PAGE>
(8) conformity (subject to certain variances permitted by the Merger
Agreement) of the capitalization of US Surgical as of the Effective Time with
the capitalization of US Surgical set forth in, or disclosed pursuant to, the
Merger Agreement; and
(9) listing on the NYSE of the Tyco Common Shares to be issued in the
Merger.
For further details, see "The Merger Agreement and Related
Agreements--Conditions to the Merger."
TERMINATION OF THE MERGER AGREEMENT
Either US Surgical or Tyco may terminate the Merger Agreement if:
(1) the Merger is not completed by December 31, 1998;
(2) a court or governmental agency permanently prohibits the Merger;
(3) the stockholders of US Surgical do not approve the Merger and adopt the
Merger Agreement by December 31, 1998, or if the US Surgical stockholders do not
approve the Merger and adopt the Merger Agreement at the Special Meeting; or
(4) the other party breaches its representations, warranties or obligations
under the Merger Agreement and that breach cannot be remedied.
US Surgical may also terminate the Merger Agreement if:
(5) the Board of Directors of US Surgical adversely modifies its approval of
the Merger, but US Surgical may only terminate under these circumstances if the
Board's modification is in keeping with its fiduciary obligations to its
stockholders.
Tyco may also terminate the Merger Agreement if:
(6) the US Surgical Board of Directors recommends a tender offer or merger
proposal made by a third party; or
(7) subject to certain variances permitted by the Merger Agreement, if the
capitalization of US Surgical does not conform to the capitalization of US
Surgical set forth in, or disclosed pursuant to, the Merger Agreement.
For further details, see "The Merger Agreement and Related
Agreements--Termination."
TERMINATION FEE AND EXPENSES
US Surgical is required to pay to Tyco a termination fee of $125 million,
plus up to $5 million of reasonable out-of-pocket expenses, if the Merger
Agreement is terminated under certain circumstances, and up to $5 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 US Surgical up to $5 million of reasonable out-of-pocket expenses if
the Merger Agreement is terminated under certain other circumstances.
For further details, see "The Merger--Fees and Expenses" and "The Merger
Agreement-- Termination."
REGULATORY APPROVALS
Tyco and US Surgical have given each other a commitment to use their
reasonable best efforts to take whatever actions are required to obtain
necessary regulatory approvals.
6
<PAGE>
The U.S. Hart-Scott-Rodino statute prohibits Tyco and US Surgical 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 a required waiting period has expired. This waiting
period is expected to expire on July 19, 1998, unless earlier terminated or
extended. 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 (the "EC Commission") under Council
Regulation (EEC) No. 4064/89 of 21 December, 1989 on the control of
concentrations (the "EC Merger Regulation"). Tyco and US Surgical made the
requisite notification filing with the EC Commission on July 14, 1998. The EC
Commission has until on or about August 14, 1998 (subject to extension in
certain circumstances) to inform Tyco and US Surgical whether it has serious
doubts as to the compatibility of the Merger with the European Common Market.
Each other state and country where either Tyco or US Surgical has operations may
also review the Merger under such jurisdiction's antitrust law.
ANTICIPATED ACCOUNTING TREATMENT
Tyco and US Surgical 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 "The Merger--Anticipated Accounting
Treatment."
OPINION OF FINANCIAL ADVISOR
Chase Securities, Inc. ("Chase") delivered its opinion to the Board of
Directors of US Surgical to the effect that, as of the date of the Merger
Agreement, the Exchange Ratio was fair to the holders of US Surgical Common
Stock from a financial point of view.
The full text of the written opinion of Chase, which sets forth assumptions
made, matters considered and limitations on the review undertaken in connection
with the opinion, is attached as Annex B and is incorporated herein by
reference. HOLDERS OF SHARES OF US SURGICAL COMMON STOCK ARE URGED TO, AND
SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See "The Merger--Opinion of US
Surgical's Financial Advisor."
APPRAISAL RIGHTS
US Surgical stockholders do not have appraisal rights by reason of the
Merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION; LISTING
Tyco Common Shares are listed on the NYSE, the London Stock Exchange and the
Bermuda Stock Exchange. US Surgical Common Stock is listed on the NYSE. The NYSE
closing price per Tyco Common Share was $55.875 on May 22, 1998, the last
trading day prior to the public announcement of the proposed Merger. Based upon
multiplying such closing price by the Exchange Ratio, US Surgical stockholders
would receive in the Merger Tyco Common Shares (or cash in lieu of a fractional
share) with a market value of $42.50 for each share of US Surgical Common Stock
held. On , 1998, the closing price per Tyco Common Share on the New York
Stock Exchange was $ . Based upon mutiplying such closing price by the
Exchange Ratio, US Surgical stockholders would receive in the Merger Tyco Common
Shares (or cash in lieu of a fractional share) with a market value of $
for each share of US Surgical Common Stock held. The closing price per share on
the NYSE of US Surgical Common Stock was $39.25 on May 22, 1998 and on
, 1998. Stockholders are urged to obtain current market quotations. See
also "Certain Considerations--Fixed Exchange Ratio" below.
7
<PAGE>
Application will be made to list the Tyco Common Shares issuable in the
Merger on the NYSE, the London Stock Exchange and the Bermuda Stock Exchange.
CERTAIN CONSIDERATIONS
The following information should be considered by US Surgical stockholders
with respect to the approval of the Merger and the adoption of the Merger
Agreement.
FIXED EXCHANGE RATIO. Under the terms of the Merger Agreement, each share
of US Surgical Common Stock will be exchanged for 0.7606 Tyco Common Shares.
This ratio was determined on the basis of the closing price per Tyco Common
Share on the NYSE of $55.875 on May 22, 1998, the trading day immediately
preceding the public announcement of the Merger. Because the Exchange Ratio is
fixed, US Surgical stockholders will be entitled to receive a fixed number of
Tyco Common Shares based upon their US Surgical Common Stock holdings and the
Exchange Ratio. Such number of Tyco Common Shares will not be affected by the
price of Tyco Common Shares at the time of the Merger, which price will likely
differ from the price of the Tyco Common Shares on May 22, 1998. Such a
difference may result from changes in the business, operations or prospects of
Tyco, regulatory considerations, general market and economic conditions and
other factors. In particular, US Surgical stockholders will not receive a
greater number of Tyco Common Shares if the price per Tyco Common Share at the
time of the Merger is less than $55.875. US Surgical stockholders are urged to
obtain current market quotations for Tyco Common Shares.
TAX TREATMENT. The Merger is intended to be treated as a reorganization
within the meaning of Section 368 of the Code, and generally to be tax free to
the stockholders of US Surgical. It is a condition to the obligations of each of
US Surgical and Tyco to consummate the Merger that it receive opinions from its
counsel that the Merger will be treated as such a reorganization within the
meaning of Section 368 of the Code and that the transfer of US Surgical Common
Stock by US Surgical stockholders pursuant to the Merger, other than US Surgical
stockholders who will be "5% transferee shareholders" within the meaning of
United States Treasury Regulation Section 1.367(a)-3(c)(5)(ii), will qualify for
an exception under United States Treasury Regulation Section 1.367(a)-3. In
rendering their opinions, counsel to US Surgical and Tyco will rely upon certain
representations, made as of the Effective Time, by Tyco and US Surgical. If such
representations are incorrect in certain material respects, the conclusions
reached in the opinions could be jeopardized and the receipt in the Merger by US
Surgical stockholders of Tyco Common Shares may be taxable. See "The
Merger--Certain U.S. Federal Income Tax and Bermuda Tax Consequences-U.S.
Federal 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, stockholders of US Surgical
will become shareholders of a Bermuda company. There are significant differences
between the corporate laws of Bermuda and the corporate laws of Delaware and
between the constitutional documents of US Surgical and Tyco. See "Comparison of
Shareholder Rights." These differences may materially affect the rights of US
Surgical stockholders.
FORWARD LOOKING INFORMATION
Certain statements in this Proxy Statement/Prospectus are "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. All forward looking statements involve risks and uncertainties. In
particular, any statements contained herein regarding the consummation and
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 US Surgical, 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, overall economic and business conditions, the demand for the
Tyco and/or US Surgical goods and services, competitive factors in the
industries in which Tyco and/or US Surgical competes, changes in government
regulation and the timing, impact and other uncertainties of future
acquisitions.
8
<PAGE>
CURRENT DEVELOPMENTS
In July 1998, a subsidiary of Tyco completed its acquisition of the
outstanding shares of Sigma Circuits, Inc. for a total purchase price of
approximately $59 million. Sigma, with estimated fiscal 1998 revenues of
approximately $94 million, is a leading manufacturer of electronic interconnect
products.
On May 29, 1998, a subsidiary of Tyco acquired the Wells Fargo Alarm
business of Borg-Warner Security Corporation for $425 million in cash. Wells
Fargo Alarm, with annual revenues of approximately $250 million, is a full
service provider of electronic security services, including intrusion, fire
detection and monitoring, as well as closed circuit television and access
control.
On May 25, 1998, a subsidiary of Tyco purchased 6.7 million shares of
capital stock of CIPE S.A., representing approximately 63% of the outstanding
shares of CIPE, for approximately $265 million. This subsidiary is conducting a
simplified tender offer for the remaining outstanding shares of CIPE. In July
1998, this subsidiary completed a simplified tender offer resulting in aggregate
ownership of up to 98% of the outstanding shares of CIPE with the expectations
of owning 100% of the outstanding shares by August 1998. The total purchase
price for all of the outstanding shares is estimated to be approximately $415
million. CIPE, with annual revenues of approximately $230 million, is a full
service provider of electronic security services and equipment throughout
Europe, with operations in France, Belgium, the Netherlands, Spain, Germany and
Switzerland.
On April 13, 1998, a subsidiary of Tyco acquired Confab, Inc. for
approximately $200 million in cash. Confab, with sales in excess of $200
million, is a major manufacturer of adult incontinence and other hygiene
products sold to retailers and, to a lesser extent, institutions in the United
States.
Tyco and its subsidiaries review acquisition opportunities in the ordinary
course of their 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.
In June 1998, Tyco International Group S.A., a Luxembourg company and a
subsidiary of Tyco, issued $750 million 6 1/8% Notes due 2001, $750 million
6 3/8% Notes due 2005 $750 million 6 1/4% Dealer Remarketable Securities-SM-
(Drs.)-SM- due 2013, and $500 million 7.0% Notes due 2028. Repayment of amounts
outstanding under these debt securities are fully and unconditionally guaranteed
by Tyco. The net proceeds of approximately $2.74 billion were ultimately used to
repay borrowings under a $2.2 billion bank credit facility and uncommitted lines
of credit of Tyco US.
9
<PAGE>
SELECTED FINANCIAL DATA FOR TYCO AND US SURGICAL
The following information is being provided to assist in analyzing the
financial aspects of the Merger. The selected consolidated financial data for
Tyco reflect the combined results of operations and financial position of Tyco,
Former Tyco and Keystone International, Inc. ("Keystone"), which was acquired in
Fiscal 1997, restated for all periods presented pursuant to the pooling of
interests method of accounting. The selected consolidated financial data of Tyco
prior to January 1, 1997 does not reflect the results of operations and
financial position of INBRAND Corporation ("INBRAND"), which was acquired in
Fiscal 1997 and accounted for under the pooling of interests method of
accounting, due to immateriality. The data presented for Tyco for the six months
ended March 31, 1998 and 1997 are unaudited and, in the opinion of Tyco's
management, include all adjustments, consisting of normal recurring adjustments
necessary for the fair presentation of such data. Tyco's results for the six
months ended March 31, 1998 are not necessarily indicative of the results to be
expected for the fiscal year ending September 30, 1998. The information for US
Surgical has been derived from US Surgical's audited financial statements for
the fiscal years ended December 31, 1993 through 1997 and US Surgical's
unaudited financial statements for the three months ended March 31, 1998 and
March 31, 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 US
Surgical with the Commission. 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 the Proxy Statement/Prospectus to "$" mean United States
dollars.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO
<TABLE>
<CAPTION>
SIX MONTHS
ENDED NINE MONTHS
MARCH 31, ENDED YEAR ENDED DECEMBER 31,
-------------------- SEPTEMBER 30, ------------------------------------------
1998 1997 1997(1) 1996(2) 1995(2) 1994(2) 1993(2)
--------- --------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales............................. $ 5,539.5 $ 4,564.9 $ 7,588.2 $ 8,103.7 $ 6,915.6 $ 6,240.9 $ 5,964.0
Operating income (loss)(3)(4)(5)...... 847.6 294.4 (476.5) (18.8) 649.6 653.6 522.5
Income (loss) from continuing
operations.......................... 517.0 215.4 (776.8) (296.7) 267.5 304.8 244.3
Income (loss) from continuing
operations per common share(6):
Basic............................... 0.94 0.44 (1.50) (0.62) 0.58 0.65 0.52
Diluted............................. 0.91 0.43 (1.50) (0.62) 0.57 0.63 0.51
Cash dividends per common
share(6)(7)......................... 0.05 See (7) below.
CONSOLIDATED BALANCE SHEET DATA:
Total assets.......................... $13,338.5 $10,447.0 $ 8,471.3 $ 7,357.8 $ 7,053.2 $ 7,098.9
Long-term debt........................ 3,144.4 2,480.6 1,878.4 1,760.7 1,755.3 1,800.8
Shareholders' equity.................. 5,402.8 3,429.4 3,288.6 3,342.7 3,030.0 2,674.2
</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 ("Fiscal 1997") is presented.
(2) On July 2, 1997, Tyco (formerly ADT) merged with Former Tyco. On August 27,
1997 and August 29, 1997, Tyco merged with INBRAND and Keystone,
respectively. These three combinations are more fully described in Notes 1
and 2 to the Consolidated Financial Statements contained in Tyco's
Transition Report on Form 10-K for the nine-month period ended September 30,
1997 ("Tyco's Form 10-K"), incorporated herein by reference. Prior to their
respective mergers, ADT and Keystone 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 and Former
Tyco for the year ended December 31, 1996. For 1995, 1994 and
10
<PAGE>
1993, the results of operations and financial position reflect the
combination of ADT and Keystone 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 loss in Fiscal 1997 includes charges related to merger,
restructuring and other non-recurring costs of $917.8 million and impairment
of long-lived assets of $148.4 million primarily related to the mergers and
integration of ADT, Former Tyco, Keystone, and INBRAND. See Notes 11 and 15
to the Consolidated Financial Statements contained in Tyco's Form 10-K.
Fiscal 1997 also includes a charge of $361.0 million for the write-off of
purchased in-process research and development related to the acquisition of
the submarine systems business of AT&T Corp.
(4) Operating loss in 1996 includes non-recurring charges of $744.7 million
related to the adoption of SFAS 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 Consolidated Financial
Statements contained in Tyco's Form 10-K.
(5) Operating income in 1995 includes a loss of $65.8 million on the disposal of
the European auto auction business and a gain of $31.4 million from the
disposal of the European electronic article surveillance business. See Note
3 to the Consolidated Financial Statements contained in Tyco's Form 10-K.
Operating income also includes non-recurring charges of $97.1 million for
restructuring charges at ADT and at Keystone and for the fees and expenses
related to the 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. See Notes 11 and 15 to Consolidated Financial Statements
contained in Tyco's Form 10-K.
(6) Per share amounts for all periods presented have been restated to give
effect to the mergers with Former Tyco, Keystone and INBRAND, 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.
(7) Tyco declared a dividend of $0.025 per share in each of the first two
quarters of Fiscal 1998 and the third quarter of Fiscal 1997. Prior to the
ADT Merger, ADT had not declared any dividends on its common shares since
April 1991. Former Tyco declared quarterly dividends of $0.025 per share in
the first two quarters of Fiscal 1997 and aggregate dividends of $0.10 per
share in 1996, 1995 and 1994 and $0.095 per share in 1993. Keystone declared
quarterly dividends of $0.19 per share in each of the three quarters in
Fiscal 1997, aggregate dividends of $0.76 per share in 1996, 1995 and 1994
and $0.74 per share in 1993. 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.
11
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF US SURGICAL
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------------ ------------------------------------------------------
1998 1997 1997(1) 1996 1995 1994 1993(2)
-------------- -------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales................... $ 317.3 $ 284.6 $ 1,172.1 $ 1,112.7 $ 1,022.3 $ 918.7 $ 1,037.2
Operating income (loss)..... 41.3 41.4 122.2 150.7 110.5 50.9 (118.9)
Income (loss) from
continuing operations..... 25.0 29.7 94.1 109.1 79.2 19.2 (138.7)
Income (loss) from
continuing operations per
common share:
Basic..................... 0.33 0.39 1.24 1.48 1.05 0.08 (2.48)
Diluted................... 0.32 0.38 1.21 1.43 1.04 0.08 (2.48)
Cash dividends per common
share..................... 0.04 0.04 0.16 0.08 0.08 0.08 0.245
CONSOLIDATED BALANCE SHEET
DATA:
Total assets................ $ 2,209.0 $ 1,726.0 $ 1,514.8 $ 1,265.5 $ 1,103.5 $ 1,170.5
Long-term debt.............. 582.1 131.3 142.4 256.5 248.5 505.3
Total shareholders'
equity(3)................. 1,293.7 1,256.9 1,053.8 741.1 662.0 443.9
</TABLE>
- ------------------------
(1) Operating income in 1997 includes charges of $24.3 million for litigation
and other related costs and $17.8 million for restructuring charges.
(2) Operating loss in 1993 includes restructuring charges of $137.6 million.
(3) Included in shareholders' equity in 1996, 1995 and 1994 is $191.5 million of
convertible preferred stock which had a liquidation value of $200.0 million.
The preferred stock was redeemed and converted into common shares on April
1, 1997.
12
<PAGE>
SELECTED TYCO AND US SURGICAL UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH NINE MONTHS
31, ENDED YEAR ENDED DECMEMBER 31,
---------------------- SEPTEMBER ------------------------------------------
1998(1) 1997(1) 30, 1997(1) 1996 1995 1994 1993
---------- ---------- ------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Net sales.......................... $ 6,159.3 $ 5,132.6 $ 8,457.8 $ 9,216.4 $ 7,937.9 $ 7,159.6 $ 7,001.2
Operating income (loss)............ 910.6 377.8 (376.0) 131.9 760.1 704.5 403.6
Income (loss) from continuing
operations (2)................... 557.0 276.9 (697.7) (187.6) 346.7 324.0 105.6
Income (loss) from continuing
operations per common
share(2)(3):
Basic............................ 0.91 0.50 (1.23) (0.40) 0.65 0.60 0.18
Diluted.......................... 0.89 0.48 (1.22) (0.40) 0.64 0.59 0.18
Cash dividends per common
share(4)......................... see (4) below
CONSOLIDATED BALANCE SHEET DATA:
Total assets....................... $ 15,547.5 $ 12,141.6 $ 9,986.1 $ 8,623.3 $ 8,156.7 $ 8,269.4
Long-term debt..................... 3,726.5 2,613.2 2,020.8 2,017.2 2,003.8 2,306.1
Total shareholders' equity......... 6,646.5 4,659.3 4,342.4 4,083.8 3,692.0 3,118.1
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. US Surgical has a calendar year end. For purposes of the pro
forma financial information, the historical results for the six months ended
March 31, 1998 and 1997 and for the nine months ended September 30, 1997
have been combined using the results of Tyco and US Surgical for those
periods.
(2) See Notes (3) and (4) to "Selected Consolidated Historical Financial Data of
Tyco" and Note (1) to "Selected Consolidated Historical Financial Data of US
Surgical" for information on the combined income per common share before
certain non-recurring items. On a pro forma combined basis, diluted income
per share for the six months ended March 31, 1998 and 1997 before these non-
recurring items is $0.90 and $0.64, respectively. On a pro forma combined
basis, diluted income per common share for Fiscal 1997 and 1996 before these
non-recurring items is $1.07 and $1.15, respectively.
(3) The unaudited pro forma combined per share data are based on US Surgical
shareholders receiving 0.7606 of a Tyco Common Share for each share of US
Surgical Common Stock held.
(4) Tyco declared a dividend of $0.025 per share in each of the first two
quarters of Fiscal 1998 and in the third quarter of Fiscal 1997. Prior to
the ADT Merger, ADT had not declared any dividends on its common shares
since April 1991. Former Tyco declared quarterly dividends of $0.025 per
share in the first two quarters of Fiscal 1997, and aggregate dividends of
$0.10 in 1996, 1995 and 1994 and $0.095 per share in 1993. US Surgical
declared dividends of $0.04 per share in each of the two quarters in the six
months ended March 31, 1998 and in each of the three quarters in the nine
months ended September 30, 1997, and aggregate dividends of $0.08 per share
in 1996, 1995 and 1994 and $.245 per share in 1993. 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.
13
<PAGE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
TYCO AND
US SURGICAL US SURGICAL
UNAUDITED EQUIVALENT
TYCO US SURGICAL PRO FORMA PRO FORMA
HISTORICAL HISTORICAL PER COMBINED PER SHARE
PER SHARE DATA SHARE DATA PER SHARE DATA(1) DATA(1)
--------------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
AT OR FOR THE SIX MONTHS ENDED MARCH 31, 1998
Income from continuing operations per common
share(2):
Basic........................................... $ 0.94 $ 0.52 $ 0.91 $ 0.69
Diluted......................................... 0.91 0.52 0.89 0.67
Cash dividends declared per common share(3)....... 0.05 0.08
Book value per common share....................... 9.31 16.88 9.78 7.44
AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Loss) income from continuing operations per
common share(2):
Basic........................................... (1.50) 1.05 (1.23) (0.93)
Diluted......................................... (1.50) 1.02 (1.22) (0.93)
Cash dividends declared per common share(3)....... 0.12
Book value per common share....................... 6.39 16.25 7.84 5.97
AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
(Loss) income from continuing operations per
common share(2):
Basic........................................... (0.62) 1.48 (0.40) (0.30)
Diluted......................................... (0.62) 1.43 (0.40) (0.30)
Cash dividends declared per common share(3)....... 0.08
Book value per common share(4).................... 6.84 13.49 7.83 5.95
AT OR FOR THE YEAR ENDED DECEMBER 31, 1995
Income from continuing operations per common
share(2):
Basic........................................... 0.58 1.05 0.65 0.49
Diluted......................................... 0.57 1.04 0.64 0.48
Cash dividends declared per common share(3)....... 0.08
Book value per common share(4).................... 7.04 9.47 7.50 5.70
</TABLE>
- ------------------------
(1) The unaudited pro forma (loss) income and book value per share are based on
US Surgical stockholders receiving 0.7606 of a Tyco Common Share for each
share of US Surgical Common Stock held. The US Surgical equivalent pro forma
per share data are calculated by multiplying the unaudited pro forma
combined per share data by 0.7606.
(2) See Notes (3) and (4) to "Selected Consolidated Historical Financial Data of
Tyco" and Note (1) to "Selected Consolidated Historical Financial Data of US
Surgical" for information on the combined income per common share before
certain non-recurring items. On a pro forma combined basis, diluted income
per common share for the six months ended March 31, 1998 before these
non-recurring items is $0.90. On an equivalent pro forma basis, diluted
income per common share for the six months ended March 31, 1998 before these
non-recurring items is $0.68. On a pro forma combined basis, diluted income
per common share for Fiscal 1997 and 1996 before these non-recurring items
is $1.07 and $1.15, respectively. On an equivalent pro forma basis, diluted
income per common share before non-recurring items for Fiscal 1997 and 1996
is $0.81 and $.87, respectively.
(3) Tyco declared a dividend of $0.025 per share in each of the first two
quarters of Fiscal 1998 and in the third quarter of Fiscal 1997. Prior to
the ADT Merger, ADT had not declared any dividends on its common shares
since April 1991. Former Tyco declared quarterly dividends of $0.025 per
share in the first two quarters of Fiscal 1997, and aggregate dividends of
$0.10 in 1996 and 1995. US Surgical declared dividends of $0.04 per share in
each of the two quarters in the six months ended March 31, 1998 and in each
of the three quarters in the nine months ended September 30, 1997, and
aggregate dividends of $0.08 per share in 1996 and 1995. 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.
(4) Book value per common share excludes the $200.0 million liquidation value of
US Surgical's convertible redeemable preferred stock, included in
stockholders' equity as of December 31, 1996 and 1995. The preferred stock
was redeemed and converted into common shares on April 1, 1997.
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US SURGICAL SPECIAL MEETING
PURPOSE OF THE US SURGICAL SPECIAL MEETING
At the Special Meeting, holders of US Surgical Common Stock will consider
and vote upon: (i) a proposal to approve the Merger of US Surgical and T11
Acquisition Corp., a Delaware subsidiary of Tyco ("Merger Sub"), and adopt the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 25, 1998,
among Tyco, Merger Sub, and US Surgical, providing for the Merger; and (ii) such
other matters as may properly be brought before the Special Meeting.
THE BOARD OF DIRECTORS OF US SURGICAL HAS UNANIMOUSLY (WITH ONE DIRECTOR
ABSENT) APPROVED THE MERGER AND ADOPTION OF THE MERGER AGREEMENT AND RECOMMENDS
THAT US SURGICAL STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AND ADOPTION OF
THE MERGER AGREEMENT. SEE "THE MERGER--BACKGROUND OF THE MERGER,"
"--RECOMMENDATION OF THE BOARD OF DIRECTORS OF US SURGICAL; REASONS OF US
SURGICAL FOR THE MERGER" AND "--INTERESTS OF CERTAIN PERSONS IN THE MERGER."
RECORD DATE; VOTING RIGHTS; PROXIES
The US Surgical Board of Directors has fixed the close of business on
as the Record Date for determining holders entitled to notice of and to
vote at the Special Meeting.
As of the Record Date, there were shares of US Surgical Common
Stock issued and outstanding, each of which entitles its holder to one vote. All
shares of US Surgical Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH SHARES OF US SURGICAL COMMON STOCK WILL BE VOTED IN FAVOR OF
APPROVAL OF THE MERGER AND THE ADOPTION OF THE MERGER AGREEMENT.US Surgical does
not know of any matters other than approval of the Merger and the adoption of
the Merger Agreement that are to come before the Special Meeting. If any other
matter or matters are properly presented for action at the 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. A stockholder 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 US
Surgical, by signing and returning a later dated proxy, or by voting in person
at the Special Meeting. However, mere attendance at the Special Meeting will
not, in and of itself, have the effect of revoking the proxy.
Votes cast by proxy or in person at the Special Meeting will be tabulated by
the election inspectors appointed for the meeting, who will determine whether or
not a quorum is present. The election inspectors 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 stockholders for a vote. Accordingly, since approval
of the Merger requires the affirmative vote of a majority of the holders of the
outstanding shares of US Surgical Common Stock, an abstention will be the same
as a vote against the Merger. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will be considered as present and entitled to vote for
purposes of determining the presence of a quorum but will not be entitled to
vote on such matter. Without instruction from the beneficial owner, brokers will
not have authority to vote shares held in "street name" at the Special Meeting.
Accordingly, since approval of the Merger requires the affirmative vote of a
majority of the holders of the outstanding shares of US Surgical Common Stock,
such "broker non-votes" will be the same as a vote against the Merger.
SOLICITATION OF PROXIES
US Surgical will bear its own cost of solicitation of proxies. Brokerage
houses, fiduciaries, nominees and others will be reimbursed for their
out-of-pocket expenses in forwarding proxy materials to beneficial owners of
stock held in their names.
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QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of US Surgical Common Stock is
necessary to constitute a quorum at the Special Meeting.
REQUIRED VOTE
The approval of the Merger and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of US
Surgical Common Stock. Accordingly, abstentions and broker non-votes will have
the effect of votes against approval of the Merger and adoption of the Merger
Agreement. As of the Record Date, approximately % of the outstanding shares
of US Surgical Common Stock were held by the officers and directors of US
Surgical and their affiliates ( % including exercisable stock options). Two of
these officers and directors, beneficially owning % of the outstanding shares
of US Surgical Common Stock ( % including exercisable Stock options), have
agreed to vote their shares in favor of the Merger and Merger Agreement. For
further details, see "The Merger Agreement and Related Agreements -- Stockholder
Agreements."
In certain circumstances, including if US Surgical stockholders fail to
approve the Merger and adopt the Merger Agreement and an Acquisition Proposal
(as described in the Merger Agreement) is announced within one year of the date
of the Special Meeting and is subsequently consummated, US Surgical will be
obligated to pay to Tyco a termination fee of $125 million, plus up to $5
million of reasonable out-of-pocket expenses. See "The Merger
Agreement--Termination--Fees and Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF US SURGICAL. ACCORDINGLY, US SURGICAL STOCKHOLDERS ARE
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PRE-PAID RETURN ENVELOPE.
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THE MERGER
This section of the Proxy Statement/Prospectus as well as the next section
of the Proxy Statement/ Prospectus entitled "The Merger Agreement and Related
Agreements" describe certain aspects of the proposed Merger. The following
discussion is qualified in its entirety by reference to the Merger Agreement,
which is attached as Annex A to this Proxy Statement/Prospectus, and to the
other agreements and documents that are discussed, which are filed as exhibits
to the Registration Statement of which this Proxy Statement/Prospectus forms a
part. All stockholders are urged to read the Merger Agreement in its entirety.
GENERAL
The Merger Agreement provides that the Merger will be consummated if the
required approval of the US Surgical stockholders is obtained and all other
conditions to the Merger are satisfied or waived. Upon consummation of the
Merger, Merger Sub will be merged with and into US Surgical, and US Surgical
will become a wholly-owned subsidiary of Tyco.
Pursuant to the Merger Agreement, each outstanding share of US Surgical
Common Stock will be converted into Tyco Common Shares in a ratio (the "Exchange
Ratio") of 0.7606 Tyco Common Shares for each share of US Surgical Common Stock.
The Exchange Ratio will be appropriately adjusted to reflect the effect of any
stock split, reverse split, stock dividend, reorganization, recapitalization,
split up, combination or exchange of shares or other like event with respect to
the Tyco Common Shares or US Surgical Common Stock.
Based upon the number of shares of US Surgical Common Stock outstanding on
the Record Date and the number of outstanding Stock Options currently
exercisable, a maximum number of [77,525,599] Tyco Common Shares may be issued
in the Merger. Based upon the capitalization of Tyco and US Surgical as of the
Record Date, the stockholders of US Surgical will own approximately [ ]% of
the outstanding Tyco Common Shares following consummation of the Merger.
EFFECTIVE TIME
As promptly as practicable after the satisfaction or waiver of the
conditions to the Merger set forth in the Merger Agreement, the parties will
file a Certificate of Merger with the Secretary of State of the State of
Delaware. The time of such filing is the Effective Time of the Merger. The
Merger Agreement may be terminated by either party if the Merger has not been
consummated on or before December 31, 1998. The Merger Agreement may also be
terminated under certain other circumstances. See "The Merger Agreement and
Related Agreements--Conditions to the Merger," and "--Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of US Surgical Common Stock into the right to receive Tyco
Common Shares will occur automatically at the Effective Time.
As soon as practicable after the Effective Time, a transmittal letter and
instructions to effect the surrender of US Surgical stock certificates will be
mailed by the Exchange Agent to each US Surgical stockholder informing
stockholders of the procedures to follow in forwarding stock certificates
representing US Surgical Common Stock to the Exchange Agent. Upon receipt of a
stockholder's US Surgical stock certificates with a duly executed letter of
transmittal and such other documents as may be required, the Exchange Agent will
deliver certificates for whole Tyco Common Shares to such stockholder and cash
in lieu of fractional shares pursuant to the terms of the Merger Agreement and
in accordance with the transmittal letter, together with any dividends or other
distributions to which such stockholder is entitled.
No certificates or scrip representing less than one Tyco Common Share shall
be issued in connection with the transaction. In lieu of any such fractional
share, each holder of US Surgical Common Stock who would otherwise have been
entitled to a fraction of a Tyco Common Share shall be paid cash (without
interest) upon surrender of US Surgical Common Stock in an amount equal to such
fraction multiplied by the Closing Price of the Tyco Common Shares on the date
of the Effective Time.
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After the Effective Time and until surrendered, shares of US Surgical Common
Stock will be deemed for all corporate purposes, other than the payment of
dividends and distributions, to evidence ownership of the number of whole Tyco
Common Shares into which such shares of US Surgical Common Stock were converted
at the Effective Time. No dividends or other distributions, if any, payable to
holders of Tyco Common Shares will be paid to the holders of any certificates
for shares of US Surgical Common Stock until such certificates are surrendered.
Upon surrender of such certificates, however, all such declared dividends and
distributions which shall have become payable with respect to such Tyco Common
Shares in respect of a record date after the Effective Time will be paid to the
holder of record of the Tyco Common Shares represented by the certificate issued
in exchange therefor, without interest.
After the Effective Time, there will be no further transfers of US Surgical
Common Stock on the stock transfer books of US Surgical. If a certificate
representing US Surgical Common Stock is presented for transfer, it will be
cancelled and a certificate representing the appropriate number of whole Tyco
Common Shares and cash in lieu of fractional shares and any dividends and
distributions will be issued in exchange therefor.
For more information, see "The Merger Agreement and Related
Agreements--Exchange of Certificates."
US SURGICAL STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. US SURGICAL
STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
BACKGROUND OF THE MERGER
In early April 1998, US Surgical determined to consider more closely the
competitive advantages and increased stockholder value that might be obtained
through a strategic business combination of US Surgical with another entity.
Accordingly, US Surgical instructed Chase, US Surgical's financial advisor, to
contact potential merger partners to explore their possible interest in a
transaction with US Surgical.
On April 8, 1998, Leon C. Hirsch, US Surgical's Chairman of the Board and
Chief Executive Officer, telephoned L. Dennis Kozlowski, Tyco's Chairman of the
Board and Chief Executive Officer, to inquire whether Tyco would be interested
in a potential combination with US Surgical. Mr. Kozlowski indicated that Tyco
would be willing to investigate such a possibility. On April 9, 1998, Tyco
received from US Surgical a form of confidentiality agreement regarding the
disclosure to Tyco of non-public US Surgical information. Following discussions
between representatives of Tyco and US Surgical, the confidentiality agreement
was executed. In mid-April other interested parties executed confidentiality
agreements with US Surgical as well and received non-public information
concerning US Surgical.
On April 14, representatives of Tyco, including Mr. Kozlowski and Mark H.
Swartz, Tyco's Executive Vice President and Chief Financial Officer, met at US
Surgical's offices in North Haven, Connecticut with representatives of US
Surgical, including Mr. Hirsch and Howard K. Rosenkrantz, President and Chief
Operating Officer of US Surgical, and representatives of Chase, to discuss US
Surgical's business. During the week ended April 17, 1998, representatives of US
Surgical met with representatives of other potential merger partners to
determine if such companies were interested in exploring a transaction with US
Surgical.
On April 17, 1998, representatives of Tyco, including Messrs. Kozlowski and
Swartz, met with representatives of US Surgical, including Messrs. Hirsch, and
Rosenkrantz, in New Hampshire and discussed the possibility of a merger between
Tyco and US Surgical. No discussions of price were held at such time.
On or about April 23, 1998, Tyco representatives, including Messrs.
Kozlowski and Swartz, representatives of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Tyco's financial advisor with respect to a potential acquisition
of US Surgical, and representatives of Chase, in several telephone conversations
discussed preliminary per share valuations of US Surgical. At that time, Tyco
stated that any transaction would be subject to its continued due diligence
investigations and the approval of Tyco's Board of Directors and governmental
regulators.
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On April 28, 1998, the Board of Directors of US Surgical met and authorized
US Surgical's management to proceed with discussions with all interested parties
in an effort to seek to obtain a bona fide offer for a business combination
transaction with US Surgical. Also on April 28, 1998, Tyco representatives
contacted Chase and confirmed Tyco's interest in exploring a transaction with US
Surgical in which US Surgical stockholders would receive Tyco Common Shares in
exchange for their shares of US Surgical Common Stock. While continuing
discussions with other parties who had expressed varying degrees of interest in
a transaction with US Surgical, US Surgical determined to focus on negotiating a
transaction with Tyco.
Between April 29 and May 12, 1998, Tyco and US Surgical conducted additional
due diligence. On May 14, 1998, Tyco communicated to US Surgical an indication
of interest for a transaction pursuant to which US Surgical stockholders would
receive a fraction of a Tyco Common Share having a value of $41.00 for each
share of US Surgical Common Stock.
On May 15, 1998, the US Surgical Board of Directors discussed this proposal.
The US Surgical Board reviewed the competitive advantages to be achieved by a
merger with Tyco and the value to US Surgical's stockholders that the proposed
transaction could provide. The US Surgical Board determined that a business
combination with Tyco could be in the best interests of US Surgical and its
stockholders and instructed Chase to seek to obtain an indication of interest at
a higher price from Tyco.
Between May 15 and May 18, 1998, representatives of Tyco and US Surgical
negotiated the principal terms of a possible agreement while due diligence
investigations continued. On May 18, 1998, Mr. Kozlowski telephoned Mr. Hirsch
to express an interest, subject, among other things, to the conclusion of Tyco's
due diligence investigations, approval by Tyco's Board of Directors and
negotiation of satisfactory documentation, in a merger transaction in which US
Surgical stockholders would receive $42.50 in value of Tyco Common Shares for
each share of US Surgical Common Stock.
Later on May 18, 1998, Tyco's Board of Directors met in Bermuda to discuss a
potential transaction with US Surgical. The Tyco Board determined that a
transaction with US Surgical was in the best interests of Tyco's shareholders
and authorized Tyco's officers to complete the transaction within certain
parameters.
On May 19, 1998, the US Surgical Board of Directors discussed Tyco's
proposal of May 18, 1998. The US Surgical Board instructed US Surgical's
management to continue negotiations with Tyco.
On May 21, 1998, US Surgical concluded its due diligence review of Tyco.
Between May 21 and May 25, 1998, representatives of Tyco and US Surgical
negotiated the terms of the Merger Agreement. On May 25, 1998, the parties
agreed upon the terms of the Merger Agreement, including the Exchange Ratio,
subject to the approval of US Surgical's Board of Directors. Based on the
closing price per Tyco Common Share on the NYSE on May 22, 1998 (the last
trading day prior to the conclusion of negotiations) the 0.7606 Exchange Ratio
represented $42.50 in value of Tyco Common Shares for each share of US Surgical
Common Stock.
On May 25, 1998, following the conclusion of negotiations, US Surgical's
Board of Directors held a special meeting to consider the terms of the proposed
transaction. At this meeting, management of US Surgical discussed the results of
the negotiations between the parties and the terms of the proposed merger
agreement; representatives of Chase presented an analysis of the financial terms
of the proposed transaction and delivered an opinion as to the fairness of the
Exchange Ratio, from a financial point of view, to the holders of US Surgical
Common Stock; and representatives of Skadden, Arps, Slate, Meagher & Flom LLP,
US Surgical's outside legal counsel, outlined the terms of the proposed
transaction and the proposed Merger Agreement and reviewed the US Surgical
Board's legal duties and responsibilities. Following these presentations and the
related discussions by the US Surgical Board, the members of US Surgical's Board
who were not officers of US Surgical discussed the proposed transaction with US
Surgical's financial and legal advisors. The entire US Surgical Board then
unanimously (with one director absent) concluded that the Merger was in the best
interests of US Surgical and US Surgical's stockholders, unanimously (with one
director absent) approved the proposed terms of the Merger and the Merger
Agreement and authorized US Surgical's officers to complete the negotiation of
and execute the Merger Agreement.
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After approval of the Merger by the US Surgical Board of Directors, on May
25, 1998 the Merger Agreement was executed by the parties and publicly
announced.
REASONS OF TYCO FOR THE MERGER
The Tyco Board of Directors believes that the Merger is in keeping with
Tyco's corporate strategy of complementing its internal growth with acquisitions
that are likely to benefit from cost reductions and synergies with Tyco's
existing operations and that are expected to be accretive to earnings per share.
In particular, the Tyco Board of Directors believes that there are several
significant benefits from this transaction, including: (i) combination of the
product lines manufactured by US Surgical with the complementary products
manufactured by Tyco, enabling Tyco to broaden substantially the line of medical
supplies offered to its customers; (ii) realization of synergies from the
manufacturing and distribution expertise of both US Surgical and Tyco in the
medical supplies markets; (iii) access to US Surgical's worldwide distribution
network for advanced surgical supply products to complement Tyco's existing
distribution channels for these products; (iv) utilization of the US Surgical
acquisition as a platform for future growth in the segments of the disposable
and specialty medical products markets in which US Surgical is active; and (v)
reduction of certain US Surgical corporate costs, possible elimination of excess
facilities and potential cost reduction for materials and services.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF US SURGICAL; REASONS OF US SURGICAL
FOR THE MERGER
The Board of Directors of US Surgical has unanimously (with one director
absent) approved the Merger and the Merger Agreement, has unanimously (with one
director absent) determined that the Merger is fair and in the best interests of
US Surgical and its stockholders and has unanimously (with one director absent)
recommended that holders of shares of US Surgical Common Stock vote FOR approval
of the Merger and adoption of the Merger Agreement.
The decision of US Surgical's Board of Directors to approve the Merger and
the Merger Agreement and to recommend approval of the Merger and adoption of the
Merger Agreement by the holders of the Company's Common Stock was based upon a
number of factors. The following are the material factors considered by US
Surgical's Board:
i. the understanding by US Surgical's Board of the impact upon US Surgical
of the present and anticipated environment in the medical supply
industry, including the need to compete by offering a more extensive
product line to customers as a result of increasing use of managed care,
centralized purchasing decisions by group purchasing organizations,
consolidations among hospitals and hospital groups, and integration of
health care providers which prefer to purchase surgical supplies from a
single vendor;
ii. information concerning the financial condition, results of operations,
prospects and businesses of US Surgical and Tyco, including the revenues
of the companies, their complementary businesses, the recent stock price
performance of US Surgical Common Stock and Tyco Common Shares, the ratio
of the price of US Surgical Common Stock to the price of Tyco Common
Shares over various periods, and the percentage of the combined company
to be owned by US Surgical's stockholders following the Merger;
iii. current industry, economic and market conditions;
iv. the financial and business prospects for the combined company,
including general information relating to possible synergies, cost
reductions, operating efficiencies and consolidations; and the ability of
the combined company to offer customers a more complete line of surgical
products;
v. the fact that the Exchange Ratio represented, as of the signing of the
Merger Agreement, consideration having a value (based upon a price of
$55.875 per Tyco Common Share) of $42.50 per share of US Surgical Common
Stock, representing a premium of approximately 8.3% over the $39.25
closing price of US Surgical Common Stock on the NYSE Composite
Transaction Tape on May 22, 1998, the last trading day prior to the US
Surgical Board of Directors approval of the Merger and the Merger
Agreement, a premium of approximately 29.5% over the $32.81 average
closing price of US Surgical Common Stock on the NYSE Composite
Transactions Tape over the month period prior to the announcement of the
execution of the Merger Agreement, a
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premium of approximately 6% over the highest closing price of US Surgical
Common Stock over the 52 week period prior to such date, and a premium of
approximately 73% over the lowest closing price of US Surgical Common
Stock over the 52 week period prior to such date;
vi. the opportunity for the holders of US Surgical Common Stock to benefit
from ownership in a higher growth and higher price-to-earnings ratio
business and to participate in the enhanced prospects of the combined
company through ownership of Tyco Common Shares.
vii. presentations from, and discussions with, senior executives of US
Surgical, representatives of Chase and representatives of US Surgical's
outside counsel regarding the business, financial and accounting aspects,
and the results of legal due diligence, with respect to and the terms of
and conditions to the Merger Agreement;
viii. the recommendation of US Surgical's management that the Merger be
approved;
ix. the understanding of US Surgical's Board of the risks involved in
successfully integrating the business and managements of the two
companies;
x. the fact that Tyco, subject to applicable fiduciary obligations of
Tyco's Board of Directors, will cause the US Surgical Chairman of the
Board and Chief Executive Officer, Mr. Leon Hirsch, to be appointed to
fill any vacancy occurring on Tyco's Board prior to, or to be nominated
for election to the Tyco Board at, the next annual general meeting of
Tyco shareholders, and that, while this arrangement presents a potential
conflict of interest, and after considering that conflict in connection
with its approval of the Merger, the US Surgical Board's belief that this
arrangement will contribute to the successful integration of the
companies and to the achievement of the potential benefits offered by the
combination;
xi. the recognition by US Surgical's Board that certain of its members and
members of US Surgical's management have interests in the Merger that are
in addition to, and not necessarily aligned with, the interests of
holders of US Surgical Common Stock, which interests were considered in
connection with its approval and adoption of the Merger Agreement. See
"--Interests of Certain Persons in the Merger and Related Matters"; and
xii. the financial and other analysis presented by Chase, including the oral
opinion of Chase (subsequently confirmed in writing) that the Exchange
Ratio was fair to the Company's stockholders from a financial point of
view. A copy of the opinion, dated as of May 25, 1998, setting forth the
assumptions and qualifications made, facts considered and the scope of
the review undertaken is attached hereto as Annex B and is incorporated
by reference herein. Stockholders of US Surgical are encouraged to read
the opinion of Chase carefully and in its entirety.
The May 25, 1998 meeting of US Surgical's Board of Directors was attended by
US Surgical's Senior Vice President and General Counsel and US Surgical's
outside law firm, which advised US Surgical's Board on issues relating to the
corporation law of Delaware, the state of US Surgical's incorporation. Before
making its decision, US Surgical's Board was advised by counsel of the standards
of conduct for directors of a Delaware corporation, including a director's duty
to act in good faith and without self-interest. The directors were also given
the opportunity and encouraged to discuss with legal counsel any questions they
might have concerning their duties to the US Surgical's stockholders.
US Surgical's Board of Directors also considered (i) the risk that the
benefits sought in the Merger would not be obtained, (ii) the risk that the
Merger would not be consummated, (iii) the potential adverse effect of the
public announcement of the Merger on US Surgical's sales, and its customer and
supplier relationships, operating results and ability to retain employees, and
on the trading price of US Surgical Common Stock, (iv) the substantial
management time and effort that will be required to consummate the Merger and
integrate the operations of the two companies, (v) the possibility that certain
provisions of the Merger Agreement might have the effect of discouraging other
persons potentially interested in merging with or acquiring US Surgical from
pursuing such an opportunity and (vi) other matters described under
"Summary--Certain Considerations" and "--Forward Looking Statements." In the
judgment of US Surgical's Board, the potential benefits of the Merger outweighed
these considerations.
The foregoing discussion of the information and factors considered and given
weight by US Surgical's Board of Directors is not intended to be exhaustive. In
view of the variety of factors considered in
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connection with its evaluation of the merger, US Surgical'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 US Surgical's Board of Directors may have given different
weights to different factors. For a discussion of the interest of certain
members of US Surgical's management and the US Surgical's Board in the Merger,
see "--Interests of Certain Persons in the Merger."
THE US SURGICAL BOARD OF DIRECTORS HAS UNANIMOUSLY (WITH ONE DIRECTOR
ABSENT) RECOMMENDED THAT THE HOLDERS OF US SURGICAL COMMON STOCK VOTE FOR
APPROVAL OF THE MERGER AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF US SURGICAL'S FINANCIAL ADVISOR
On May 25, 1998, Chase delivered its oral opinion to the US Surgical Board
of Directors, which was subsequently confirmed in a written opinion dated the
date of the oral opinion, to the effect that, as of such date, and based upon
the assumptions made, matters considered and limits of review in connection with
such opinion, the Exchange Ratio pursuant to the Merger was fair to the holders
of shares of US Surgical from a financial point of view. References herein to
the Chase Opinion refer to such written opinion.
The full text of the Chase Opinion, which sets forth the assumptions made,
matters considered, and limitations on the review undertaken, is attached as
Annex B to this Proxy Statement/Prospectus and is incorporated herein by
reference. Holders of US Surgical Common Stock should read the Chase Opinion
carefully in its entirety. The Chase Opinion is for the benefit of the Board of
Directors of US Surgical and Chase's determination of the fairness of the
Exchange Ratio from a financial point of view is directed to the holders of
shares of US Surgical, and it does not address any other aspect of the Merger
nor does it constitute a recommendation to any holder of US Surgical Common
Stock as to how to vote regarding the Merger. The summary of the Chase Opinion
set forth in this Proxy Statement/Prospectus, while containing all material
provisions of such opinion, is qualified in its entirety by reference to the
full text of such opinion.
In arriving at the Chase Opinion, Chase: (1) reviewed US Surgical's Annual
Reports, Forms 10-K and related information for the three fiscal years ended
December 31, 1997 and September 30, 1997, respectively, the unaudited financial
information for the three months ended March 31, 1998, and the six months ended
March 31, 1998, respectively; (2) reviewed Tyco's Annual Report, Form 10-K and
related information for the nine-month transitional period ended September 30,
1997 and the two years ended December 31, 1996 and the unaudited financial
information for the six months ended March 31, 1998; (3) reviewed certain
information, including information relating to the future prospects of US
Surgical and Tyco furnished to Chase by US Surgical's and Tyco's management,
respectively; (4) conducted discussions with members of senior management of US
Surgical and Tyco concerning the business and prospects of US Surgical and Tyco,
respectively; (5) reviewed the historical market prices and trading activity for
US Surgical Common Stock and Tyco Common Shares and compared them with that of
certain publicly traded companies which Chase deemed to be comparable to US
Surgical and Tyco, respectively; (6) compared the results of operations of US
Surgical and Tyco with that of certain publicly traded companies which Chase
deemed to be comparable to US Surgical and Tyco, respectively; (7) compared the
proposed financial terms of the transaction contemplated by the Merger Agreement
with the financial terms of certain other mergers and acquisitions which Chase
deemed to be comparable; (8) considered the pro forma effects of the Merger on
Tyco's revenues, operating income, and earnings, including pre-tax amounts of
synergies expected by US Surgical to be realized among the various affiliated
companies following the Merger; and (9) reviewed the Merger Agreement.
Chase reviewed certain trading information for each of US Surgical and Tyco,
including market value, enterprise value, and historical and forward trading
multiples for each company.
In preparing the Chase Opinion, Chase assumed and relied upon, without
assuming any responsibility for verification, the accuracy and completeness of
all of the financial and other information provided to, discussed with, or
reviewed by or for Chase by US Surgical and Tyco, or publicly available. Chase
did not conduct any valuation or appraisal of any assets or liabilities of US
Surgical or Tyco nor were any such valuations or appraisals provided to it.
Chase did not make any physical inspections of the properties and
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facilities of US Surgical or Tyco. With respect to information relating to the
future prospects of US Surgical and Tyco, Chase assumed that such information
was reasonably determined on bases reflecting the best currently available
estimates and judgments of the managements of US Surgical and Tyco,
respectively, as to the expected future prospects of US Surgical and Tyco to
which such information relates. Chase also assumed that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code and is
intended to qualify for accounting treatment as a pooling of interests.
The Chase Opinion was necessarily based upon economic, market and other
conditions as in effect on, and information made available to it as of, the date
of the Chase Opinion. Chase expressed no opinion as to the price at which Tyco
Common Shares will trade at any future time.
The following is a summary of certain financial and comparative analyses
performed by Chase in arriving at its oral opinion delivered to the US Surgical
Board of Directors on May 25, 1998.
HISTORICAL STOCK PERFORMANCE. Chase reviewed the historical trading prices
and volumes for the US Surgical Common Stock and Tyco Common Shares. In
addition, Chase reviewed the consideration to be received by holders of US
Surgical shares pursuant to the Merger in relation to the May 22, 1998 closing
market price of US Surgical Common Stock and the closing price of Tyco Common
Shares on the NYSE. Chase determined that the price of US Surgical Common Stock
to be paid pursuant to the Merger Agreement represented a premium of 8.3% based
on (i) the May 22, 1998 closing price of $39.25 per share of US Surgical Common
Stock on the NYSE and (ii) the May 22, 1998 closing price of $55.875 per share
of Tyco Common Shares on the NYSE. Chase also determined that the price of US
Surgical Common Stock to be paid pursuant to the Merger Agreement represented a
premium of 29.5% based on (i) the $32.81 per share average closing price of US
Surgical Common Stock from April 23, 1998 to May 22, 1998 and (ii) the May 22,
1998 closing price of $55.875 per share of Tyco Common Shares on the NYSE.
DISCOUNTED CASH FLOW ANALYSIS. Chase performed a discounted cash flow
analysis to calculate a present value of the stand-alone unlevered free cash
flows that US Surgical and Tyco are expected to generate if US Surgical and Tyco
perform in accordance with certain assumed scenarios. With respect to US
Surgical, Chase analyzed three scenarios: (i) the "US Surgical Management Case"
which was based upon projections provided by US Surgical management; (ii) the
"US Surgical Management Sensitivity Case" which adjusted downward the
aforementioned US Surgical Management Case based on a range of several
contingencies reviewed by US Surgical management, and (iii) the "US Surgical
Street Case" which was based on a set of financial forecasts that comprised an
average of publicly available analysts' estimates of US Surgical's future
performance (estimates were chosen based on the level of detail, the proximity
to the Institutional Brokers Estimate System ("IBES") mean estimates, and their
timeliness). With respect to Tyco, Chase analyzed two scenarios: (i) the "Tyco
Street Case" which was based on discussions with Tyco management and a set of
financial forecasts that comprised an average of publicly available analysts'
estimates of Tyco's future performance (estimates were chosen based on the level
of detail, the proximity to IBES mean estimates, and their timeliness), and (ii)
the "Tyco Street Case with Synergies" which added synergies to the
aforementioned Tyco Street Case. Chase discounted the estimated unlevered free
cash flows using a range of discount rates of capital as follows: (i) 14% to 16%
for the US Surgical Management and US Surgical Management Sensitivity Cases,
(ii) 13% to 15% for the US Surgical Street Case, and (iii) 11.5% to 13.5% for
the Tyco Street Case and Tyco Street Case with Synergies. Chase added to the
present values of the cash flows the terminal values of US Surgical and Tyco,
respectively, in the year 2002, and discounted the terminal values using the
relevant range of discount rates of capital. The terminal values were calculated
by applying a range of EBITDA multiples as follows: (i) 9.5x to 11.5x for the US
Surgical Cases, and (ii) 14.5x to 16.5x for the Tyco Cases. Based on this
analysis, Chase calculated a per share equity value of US Surgical ranging from
$44.75 to $58.00 based on the US Surgical Management Case, $29.25 to $43.00
based on the US Surgical Management Sensitivity Case, and $31.75 to $41.50 based
on the US Surgical Street Case. The per share equity values calculated for Tyco
ranged from $53.25 to $65.25 using the Tyco Street case, and $56.00 to $68.75
using the Tyco Street Case with Synergies.
COMPARABLE PUBLIC COMPANY ANALYSIS. Using publicly available information,
Chase compared certain financial information for each of US Surgical and Tyco to
the corresponding financial information of certain other comparable companies.
Chase calculated the following multiples for such companies: (i) market value
per share to calendarized next fiscal year projected EPS based on information
from IBES,
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(ii) multiples of market capitalization to latest twelve months' ("LTM") sales
and EBITDA, and (iii) 1998 EPS multiples (based on IBES estimates) expressed as
a ratio to the IBES five year forecast of EPS growth plus the dividend yield.
Chase compared US Surgical to a group of nine medical products companies:
Arrow International Inc.; Baxter International Inc.; Becton, Dickinson & Co.;
C.R. Bard, Inc. (the "US Surgical Selected Comparables") and Arterial Vascular
Engineering Inc. (AVEI); Boston Scientific Corp.; Guidant Corp.; Medtronic
Corp.; and Sofamor/Danek Group, Inc. (along with the US Surgical Selected
Comparables, the "US Surgical Broad Universe Comparables"). An analysis of the
multiples for the US Surgical Selected Comparables produced the following
results (i) market value to next fiscal year projected EPS yielded a range of
17.5x to 25.5x with a mean of 20.8x, relative to 19.3x for US Surgical; (ii)
market capitalization to LTM sales yielded a range of 2.0x to 3.3x with a mean
of 2.8x, relative to 2.3x for US Surgical; (iii) market capitalization to LTM
EBITDA yielded a range of 10.2x to 13.5x with a mean of 11.7x, relative to 10.2x
for US Surgical; and (iv) 1998 EPS multiples (based on IBES estimates) expressed
as a ratio to the IBES five year forecast of EPS growth plus the dividend yield
produced a range of 1.01x to 1.75x with a mean of 1.38x, relative to 1.26x for
US Surgical.
An analysis of the multiples for the US Surgical Broad Universe Comparables
produced the following results (i) market value to next fiscal year projected
EPS yielded a range of 17.5x to 36.3x with a mean of 25.7x; (ii) market
capitalization to LTM sales yielded a range of 2.0x to 9.4x with a mean of 5.2x;
(iii) market capitalization to LTM EBITDA yielded a range of 10.2x to 24.7x with
a mean of 16.9x; and (iv) 1998 EPS multiples (based on IBES estimates) expressed
as a ratio to the IBES five year forecast of EPS growth plus the dividend yield
produced a range of 0.55x to 1.84x with a mean of 1.46x.
Chase compared Tyco to a group of 11 diversified products companies deemed
by Chase to be reasonably similar to Tyco: Allied Signal Inc.; Cooper Industries
Inc.; Corning Inc.; Dover Corp.; Emerson Electric Corp.; General Electric Co.;
Honeywell Inc.; Illinois Tool Works Inc., Minnesota Mining & Manufacturing
Company; Textron Inc.; and United Technologies (the "Tyco Comparables"). An
analysis of the multiples for the Tyco Comparables produced the following
results (i) market value to 1998 projected EPS yielded a range of 18.4x to 30.2x
with a mean of 22.5x, relative to 27.1x for Tyco; (ii) market capitalization to
LTM sales yielded a range of 1.0x to 5.1x with a mean of 2.5x, relative to 3.3x
for Tyco; (iii) market capitalization to LTM EBITDA yielded a range of 8.4x to
23.8x with a mean of 13.1x, relative to 17.4x for Tyco; and (iv) 1998 EPS
multiples (based on IBES estimates) expressed as a ratio to the IBES five year
forecast of EPS growth plus the dividend yield produced a range of 1.18x to
2.06x with a mean of 1.48x, relative to 1.32x for Tyco.
PRECEDENT TRANSACTION ANALYSIS. Chase reviewed certain publicly available
information regarding 15 transactions from 1994 to 1998 involving the
acquisition of manufacturers of medical products. For each transaction, where
available, Chase calculated the transaction value as a multiple of sales (11
transactions available) and EBITDA (9 transactions available). Such analysis
indicated that transaction value as a multiple of sales and EBITDA,
respectively: (i) ranged from 1.6x to 3.7x, with a mean of 2.4x and a median of
2.9x; and (ii) ranged from 8.3x to 16.1x, with a mean of 11.3x and a median of
11.9x. With respect to US Surgical, the transaction value as a multiple of sales
and EBITDA were 3.0x and 13.4x, respectively.
Chase also analyzed 21 merger transactions each with an aggregate value in
excess of $3 billion announced from 1994 to 1997. Such analysis indicated that
the premium to unaffected price ranged from 1.9% to 79.7%, with a mean of 36.8%
and a median of 29.2%. Such analysis also indicated that, assuming the Exchange
Ratio of 0.7606 shares of Tyco Common Shares for each share of US Surgical
Common Stock and a Tyco stock price of $55.875 per share, the premium to
unaffected price (one month prior average) was 29.5%.
HISTORICAL EXCHANGE RATIO ANALYSIS. Chase analyzed the historical exchange
ratio between Tyco Common Shares and US Surgical Common Stock over several time
periods. For each time period, the average exchange ratios were calculated. The
time periods as of May 25, 1998 selected for the analysis were as follows: last
twelve months, last six months, last 90 days, last 30 days, last 5 days, and
closing price on May 22, 1998 (which for Tyco was the closing price on the
NYSE). The average exchange ratio for each aforementioned time period was
0.7437, 0.6180, 0.6028, 0.6069, 0.6473, and 0.7025, respectively.
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IMPLIED EXCHANGE RATIO. Chase reviewed the implied exchange ratios derived
from the discounted cash flow analysis and comparable public company analysis of
US Surgical and Tyco. For the purposes of this analysis, the US Surgical
Scenarios and Tyco Scenarios were as follows: (i) US Surgical Management Case
and Tyco Street Case; (ii) US Surgical Management Sensitivity Case and Tyco
Street Case; (iii) US Surgical Street Case and Tyco Street Case; (iv) US
Surgical Management Case and Tyco Street Case with Synergies; (v) US Surgical
Management Sensitivity Case and Tyco Street Case with Synergies; (vi) US
Surgical Street Case and Tyco Street Case with Synergies; and (vii) US Surgical
Selected Comparable Companies and Tyco Comparable Companies. By comparing the
highest implied values of US Surgical to the lowest implied values of Tyco, and
vice-versa, the ranges of implied exchange ratios indicated were as follows: (i)
0.6858 to 1.0892; (ii) 0.4483 to 0.8075; (iii) 0.4866 to 0.7793; (iv) 0.6509 to
1.0357; (v) 0.4255 to 0.7679; (vi) 0.4618 to 0.7411; and (vii) 0.4762 to 0.6636,
respectively.
PRO FORMA EPS ANALYSIS. Chase analyzed certain pro forma effects resulting
from the Merger, including the potential impact of the Merger on projected EPS
for the combined company (assuming, equity analysis consensus projections for
both US Surgical and Tyco) and a range of expected synergies. In all scenarios,
the Merger would be accretive to the holders of Tyco Common Shares in the fiscal
years ended September 30, 1999 and 2000.
RELATIVE CONTRIBUTION ANALYSIS. Chase compared the portion attributable to
the holders of US Surgical Common Stock and the holders of Tyco Common Shares
with respect to the pro forma fully-diluted market capitalization of the
combined company of approximately 10.2% and 89.8%, respectively, to the relative
contributions of each of US Surgical and Tyco to the combined company's
revenues, operating income, and net income based on publicly available
information, before synergies and transaction adjustments. This analysis
indicated that for the twelve months ending September 30, 1998, US Surgical
would contribute 10.4% of the revenues of the combined entity, 10.0% of the
operating income of the combined entity, and 10.4% of the net income of the
combined entity.
The summary set forth above, while containing all material elements of the
analyses performed by Chase, does not purport to be a complete description of
such analyses. Arriving at a fairness opinion is a complex process not
necessarily susceptible to partial or summary description. Chase believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all such
factors and analyses, could create a misleading view of the process underlying
its analyses set forth in the Chase Opinion. The matters considered by Chase in
its analyses are based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond US Surgical's or Tyco's
control and involve the application of complex methodologies and educated
judgment. Any estimates incorporated in the analyses performed by Chase are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty. No public company utilized as a comparison is
identical to US Surgical or Tyco, and none of the acquisition comparables or
other business combinations utilized as a comparison is identical to the
proposed Merger. Accordingly, an analysis of publicly traded comparable
companies and comparable business combinations is not mathematical; rather it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies
or company to which they are being compared.
The US Surgical Board of Directors selected Chase to act as its financial
advisor on the basis of Chase's reputation as an internationally recognized
investment banking firm with substantial expertise in transactions similar to
the Merger and because it is familiar with US Surgical and its business. As part
of its investment banking business, Chase is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions.
CHASE FEES. With respect to Chase's services as a financial advisor in
connection with the Merger, pursuant to a sliding fee scale contained in a
letter agreement dated as of May 19, 1998, US Surgical has agreed to pay Chase a
fee of between 0.335% and 0.395% (depending on the price per share of US
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Surgical Common Stock received by US Surgical stockholders) of the total
consideration paid by Tyco in connection with the proposed Merger. A retainer
fee of $100,000 and an agreement fee of $2,500,000 will be payable upon approval
of the Merger by US Surgical Stockholders, with such fees to be credited towards
Chase's total fee. The balance of Chase's fee will be paid upon consummation of
the Merger. US Surgical has also agreed to reimburse Chase for its reasonable
out-of-pocket expenses (including reasonable fees and expenses of its legal
counsel) and to indemnify Chase and certain related persons against certain
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.
Chase has, in the past, provided financial advisory and financing services
to US Surgical and Tyco and has received fees for rendering such services. In
addition, in the ordinary course of their businesses, Chase and its affiliates
may actively trade the debt and equity securities of US Surgical and Tyco for
their own accounts or for the accounts of customers and, accordingly, they may
at any time hold long or short positions in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the US Surgical Board of Directors that
the US Surgical stockholders approve the Merger and adopt the Merger Agreement,
US Surgical stockholders should be aware that certain directors and officers of
US Surgical have interests in the Merger in addition to their interests solely
as stockholders of US Surgical, as described below. The US Surgical Board of
Directors was aware of these interests when it considered and approved the
Merger and the Merger Agreement.
EXECUTIVE SEVERANCE AGREEMENTS; DIRECTOR APPOINTMENT. Effective as of
November 25, 1997, US Surgical entered into Executive Severance Agreements with
eighteen executive officers (the "Executive Officers") including Leon C. Hirsch,
US Surgical's Chairman of the Board and Chief Executive Officer, Turi Josefsen,
US Surgical's Executive Vice President and President, International Operations,
Howard M. Rosenkrantz, US Surgical's President and Chief Operating Officer,
Richard A. Douville, US Surgical's Senior Vice President and Chief Financial
Officer and Robert A. Knarr, US Surgical's Executive Vice President and Group
Vice President, New Technologies, (collectively, the "Executive Severance
Agreements"). Pursuant to the terms of the Executive Severance Agreements, each
Executive Officer may be entitled to receive certain severance benefits
following a "Change in Control" as defined in the Executive Severance
Agreements. Assuming the Merger is consummated, the execution of the Merger
Agreement constituted a "Change in Control" for purposes of the Executive
Severance Agreements. In the event an Executive Officer's employment is
terminated within three years following a Change in Control (i) by US Surgical
other than for "Cause" (as defined in the Executive Severance Agreements) or
(ii) by the Executive Officer for "Good Reason" (as defined in the Executive
Severance Agreements), the terminated Executive Officer will be entitled to
receive the following payments and benefits: (i) the Executive Officer shall
receive a lump sum cash payment equal to (a) 2.99 times the Executive Officer's
"Base Salary" (as defined in the Executive Severance Agreements) in effect at
the time of the termination plus (b) 2.99 times certain specified annual and
long term incentive bonus amounts, (ii) the Executive Officer shall be entitled
to coverage and benefits for a three year period under all welfare benefit plans
of US Surgical for which the Executive Officer was eligible at the time of such
termination, (iii) all options and other equity awards held by the Executive
Officer, whether or not then vested and exercisable, shall become vested and
exercisable as of the date of such termination, (iv) the Executive Officer shall
receive a lump sum cash payment equal to 2.99 times the annual amount of the
Executive Officer's most recent automobile allowance, (v) the Executive Officer
will receive outplacement, office space and secretarial services for twelve
months following such termination, (vi) certain debt under agreements to
purchase shares or options to purchase shares of US Surgical will be forgiven
and (vii) the Executive Officer will receive up to $15,000 in tax advice
provided by a third party at US Surgical's expense. Under the Executive
Severance Agreements, US Surgical is required to make an additional "gross-up
payment" to each Executive Officer to offset fully the effect of any excise tax
imposed on change-in-control payments under Section 4999 of the Code, whether
made pursuant to the Executive Severance Agreement or otherwise. As of the
Effective Time and as a result of the Merger, all of the Executive Officers will
have "Good Reason" to terminate their employment pursuant to the terms of the
Executive Severance Agreements.
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If any of the Executive Officers are terminated following a Change in
Control under circumstances which give rise to severance payments under the
Executive Severance Agreements, the approximate amount of the cash severance
payment to each Executive Officer listed above, excluding the "gross-up payment"
described above, would be $14,161,537 to Leon C. Hirsch, $7,245,966 to Howard M.
Rosenkrantz, $6,529,487 to Turi Josefsen, $5,714,787 to Robert A. Knarr and
$3,477,893 to Richard A. Douville.
Tyco has agreed in the Merger Agreement that, following consummation of the
Merger and subject to applicable fiduciary obligations of Tyco's Board of
Directors, Tyco will cause US Surgical's Chairman of the Board and Chief
Executive Officer, Mr. Leon Hirsch, to be appointed to fill any vacancy
occurring on Tyco's Board prior to, or to be nominated for election to the Tyco
Board at, the next annual general meeting of Tyco shareholders.
STOCK OPTIONS. As a result of the Merger, at the Effective Time each
outstanding option, whether or not exercisable, to purchase US Surgical Common
Stock (a "Stock Option") held by Executive Officers and directors of US Surgical
will be assumed by Tyco and will be deemed to constitute an immediately
exercisable (or, in the case of Stock Options issued under US Surgical's Outside
Directors Stock Option Plan, exerciseable following vesting in accordance with
its terms) option to acquire the number of Tyco Common Shares as each such
Executive Officer or director would be entitled to receive pursuant to the
Merger if the Executive Officer or director were to exercise the option in full
immediately prior to the Effective Time (whether or not such option is in fact
exercisable at that time).
Based upon the options outstanding as of July 1, 1998, options to purchase
9,311,382 shares of US Surgical Common Stock held by Executive Officers will
become fully vested and exercisable upon consummation of the Merger, of which
options to purchase 5,921,382 shares of US Surgical Common Stock may be
purchased at less than $42.50 per share (which, based on the $55.875 closing
price of Tyco Common Shares on the NYSE on May 22, 1998, the last trading day
prior to execution of the Merger Agreement, and the Exchange Ratio, are
"in-the-money"). Based on the foregoing, the value of the in-the-money options
held by each Executive Officer named above at the Effective Time will be
$26,889,576 to Mr. Hirsch, $10,367,558 to Ms. Josefsen, $11,937,103 to Mr.
Rosenkrantz, $12,157,228 to Mr. Knarr and $7,634,720 to Mr. Douville.
INDEMNIFICATION. The Merger Agreement provides that, after the Effective
Time, the Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Certificate of Incorporation
or By-laws, indemnify and hold harmless each present and former director,
officer or employee of US Surgical 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 (i) arising out of the
transactions contemplated by the Merger Agreement, or (ii) otherwise with
respect to any acts or omissions occurring at or prior to the Effective Time, to
the same extent as provided in US Surgical's Certificate of Incorporation or
By-Laws or any applicable contract or agreement as in effect on the date of the
Merger Agreement, in each case for a period of six years after such date. The
Merger Agreement further provides that the provisions with respect to
indemnification in US Surgical's Certificate of Incorporation and By-Laws
existing on the date of the Merger Agreement shall continue in full force and
effect in the Certificate of Incorporation and By-Laws of the Surviving
Corporation, and shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective Time were
directors, officers, employees or agents of US Surgical. The Merger Agreement
also provides that, for a period of six years after the Effective Time, Tyco
will cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who are
currently covered by US Surgical's directors' and officers' liability insurance
policy on terms comparable to those applicable to directors and officers of US
Surgical as of the date of the Merger Agreement; provided, however, that Tyco or
the Surviving Corporation will not be required to expend in excess of 200% of
the annual premium
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currently paid by US Surgical for such coverage, but if the premium for such
coverage exceeds such amount, Tyco or the Surviving Corporation will purchase a
policy with the greatest coverage available for 200% of the current annual
premium.
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 US Surgical Common Stock for Tyco Common
Shares pursuant to the Merger and the ownership of Tyco Common Shares. The
discussion which follows is based on the 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 US Surgical Common Stock and will hold Tyco Common Shares as capital
assets. The tax treatment of a US Surgical stockholder may vary depending upon
such stockholder's particular situation, and certain stockholders (including,
for example, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, and individuals who received US Surgical 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 US Surgical
stockholder 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 taking into account ownership under the applicable attribution rules of
the Code) ("5% transferee shareholders") or non-U.S. Holders (defined below) who
have held more than 5% of the US Surgical Common Stock at any time within the
five-year period ending at the Effective Time.
As used in this section, a "U.S. Holder" means a holder of US Surgical
Common Stock who exchanges US Surgical Common Stock for Tyco Common Shares that
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 US Surgical Common
Stock who exchanges US Surgical Common Stock for Tyco Common Shares that is not
a U.S. Holder.
1. CONSEQUENCES OF THE MERGER.
Consummation of the Merger is conditioned upon the receipt by Tyco of an
opinion from Kramer, Levin, Naftalis & Frankel, its counsel, and by US Surgical
of an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, its counsel, 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 US Surgical Common Stock by
US Surgical stockholders pursuant to the Merger, other than US Surgical
stockholders who 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. Such opinions of counsel will be
based on facts existing as of the Effective Time and on certain representations
as to factual matters made by Tyco and US Surgical. Such representations, if
incorrect in certain material respects, could jeopardize the conclusions reached
in the opinions. Neither Tyco nor US Surgical is currently aware of any facts or
circumstances
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which would cause any such representations made to counsel to be untrue or
incorrect in any material respect. Any opinion of counsel is 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. A US Surgical stockholder will not recognize any income, gain or loss as
a result of the receipt of Tyco Common Shares in exchange for US Surgical Common
Stock pursuant to the Merger, except for cash received in lieu of a fractional
Tyco Common Share.
b. The tax basis of a US Surgical stockholder for the Tyco Common Shares
received pursuant to the Merger, including any fractional share interest in Tyco
Common Shares for which cash is received, will equal such US Surgical
stockholder's tax basis in the US Surgical Common Stock exchanged therefor.
c. The holding period of a US Surgical stockholder for the Tyco Common
Shares received pursuant to the Merger will include the holding period of the US
Surgical Common Stock surrendered in exchange therefor.
d. A US Surgical stockholder that is a U.S. Holder and that 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 US Surgical stock allocable to such fractional
share. The tax rate applicable to capital gains of an individual taxpayer will
vary depending on the taxpayer's holding period for its shares of US Surgical
Common Stock. In the case of an individual, any such capital gain will be
subject to a maximum federal income tax rate of (i) 20% if the individual's
holding period for such shares was more than 18 months at the Effective Time or
(ii) 28% if the individual's holding period was more than one year but not more
than 18 months at the Effective Time. Gains on the sale of capital assets held
for one year or less by individuals are subject to tax as ordinary income at a
maximum rate of 39.6%. Recent legislation passed by Congress and awaiting the
President's signature would reduce the holding period for long-term capital
gains entitled to the 20 percent capital gains tax rate from a holding period of
more than 18 months to one of more than 12 months effective retroactively as of
January 1, 1998. Non-U.S. Holders that 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.
e. No income, gain or loss will be recognized by Tyco, US Surgical or Merger
Sub as a result of the Merger.
2. TRANSFER TAXES
In the event that any state or local transfer taxes ("Transfer Taxes") are
imposed on US Surgical stockholders as a result of the Merger, US Surgical will
pay all such Transfer Taxes, if any, directly to state and local taxing
authorities on behalf of all US Surgical stockholders. Any such payments by US
Surgical made on behalf of the US Surgical stockholders may result in dividend
income to each US Surgical stockholder. The amount of such dividend income
attributable to each share of US Surgical 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
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current or accumulated earnings and profits as determined for U.S. federal
income tax purposes (regardless of whether 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 (which gain for individuals will be subject to
tax at the rates described in 1.d above). Such 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.
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
(including a distribution in liquidation) will be subject to U.S. federal income
taxation as capital gain or loss (which gain for individuals will be subject to
tax at the rates described in 1.d above) in an amount equal to the difference
between the amount realized on such sale or exchange 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.
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.
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. 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. Holders should consult their tax advisors.
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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 US Surgical 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 OF THE MERGER AND THE MERGER
AGREEMENT. US SURGICAL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN 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 US Surgical 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 US Surgical 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 and US Surgical have agreed to use its reasonable best efforts
to cause its "affiliates" (as defined for purposes of the rules and regulations
of the Commission relating to pooling of interests accounting treatment for
merger transactions) to agree in writing that they will comply with the
applicable restrictions on the sale of US Surgical 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 of an opinion from PricewaterhouseCoopers,
independent public accountants of Tyco, regarding the qualification of the
Merger as a "pooling of interests" for accounting purposes.
EFFECT ON STOCK PLANS AND AGREEMENTS
At the Effective Time, each then outstanding Stock Option granted under the
US Surgical Stock Option Plans which by its terms is not extinguished in the
Merger will be assumed by Tyco and will be deemed to 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 into
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account 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 (whether or not such
option was in fact exercisable at that time). The exercise price per Tyco Common
Share (rounded to the nearest whole cent) under such Adjusted Options will be
equal to (x) the aggregate exercise price for US Surgical Common Stock otherwise
purchasable pursuant to such Stock Option divided by (y) the aggregate number of
Tyco Common Shares deemed purchasable pursuant to the Adjusted Option. The other
terms of each such Stock Option, and the plans under which they were issued,
will 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 Merger. As of June 30, 1998, there were outstanding Stock
Options to acquire 23,895,339 shares of US Surgical Common Stock. See "The
Merger Agreement--Terms of the Merger--Options."
CERTAIN LEGAL MATTERS
Tyco and US Surgical have given each other a commitment to use their
reasonable best efforts to take whatever actions are required to obtain
necessary regulatory approvals. See "The Merger Agreement-- Additional
Agreements."
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), prohibits Tyco and US Surgical from completing the Merger until they
have furnished certain information and materials to the Federal Trade Commission
(the "FTC") and the Antitrust Division of the U.S. Department of Justice (the
"Antitrust Division") and a required waiting period has expired. Pursuant to the
requirements of the HSR Act, Tyco and US Surgical have each filed a Notification
and Report Form for review under the HSR Act with the FTC and the Antitrust
Division and the waiting period thereunder is expected to expire on July 19,
1998, unless earlier terminated or extended. Even after the HSR Act waiting
period has expired or been terminated, 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 US Surgical. The Merger is subject to notification to, and the approval by,
the EC Commission under the EC Merger Regulation. Tyco and US Surgical made the
requisite notification filing (a Form CO) with the EC Commission on July 14,
1998. The EC Commission has an initial period of one month following acceptance
of the filing to decide whether the Merger raises serious doubts as to its
compatibility with the European common market, although this period may be
extended to six weeks in certain circumstances (including where the parties
volunteer undertakings to remedy competition concerns). If the EC Commission
considers that serious doubts do arise, it will initiate a more detailed
investigation, which may last for a further period of up to four months.
Consummation of the Merger is conditioned upon, among other things, the absence
of any pending or threatened governmental proceeding or any judgment, decree or
order of any governmental authority or court or any other legal restraint that
would prevent the consummation of the Merger or require Tyco to dispose of or
hold separate any material portion of its business or assets, including business
or assets of US Surgical. For these purposes, a line of business of US Surgical
which accounts for no more than 10% of US Surgical's consolidated revenues, and
a line of business of Tyco which accounts for no more than 10% of the revenues
of Tyco's Disposable and Specialty Products group, will not be deemed material.
Tyco does not believe that consummation of the Merger will result in a
violation of any applicable antitrust laws. However, there can be 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 US Surgical do not believe that any additional material
governmental filings in the United States or the European Union, other than the
Certificate of Merger, are required with respect to the Merger. In addition to
the United States and the European Union, Tyco and US Surgical conduct
operations in a number of countries where regulatory filings or approvals may be
required in connection
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with the consummation of the Merger. Tyco and US Surgical 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
All Tyco Common Shares issued in connection with the Merger will be freely
transferable under the Securities Act, except that any Tyco Common Shares
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of US Surgical prior to the Merger may be sold by them
only in transactions permitted by the resale provisions of Rule 145 under the
Securities Act, or as otherwise permitted under the Securities Act. Persons who
may be deemed to be affiliates of US Surgical generally include individuals or
entities that control, are controlled by, or are under common control with, US
Surgical and may include certain officers and directors of US Surgical as well
as principal stockholders of US Surgical.
In general, under Rule 145, for one year following the Effective Time, a US
Surgical affiliate (together with certain related persons) would be entitled to
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. Additionally, the number
of shares to be sold by an affiliate (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. Rule 145 would only be available, however, if Tyco
remained current with its informational filings with the Commission under the
Exchange Act. After the end of one year from the Effective Time, a US Surgical
affiliate would be able to 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 Effective Time, an affiliate of US
Surgical would be able to 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.
US Surgical has agreed to use its reasonable best efforts to cause its
affiliates to agree in writing that they will comply with Rule 145.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the Tyco Common Shares to be issued in
connection with the Merger be authorized for listing on the NYSE, subject to
official notice of issuance. In addition, it is contemplated that such shares
will also be listed on the London Stock Exchange and the Bermuda Stock Exchange.
DIVIDENDS
Tyco expects to declare regularly scheduled dividends consistent with the
practices of Tyco prior to the Merger and of Former Tyco prior to the ADT
Merger. US Surgical is not permitted under the terms of the Merger Agreement to
declare, set aside, make or pay 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 Effective Time.
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APPRAISAL RIGHTS
Holders of US Surgical Common Stock will not have dissenter's appraisal
rights under the Delaware General Corporation Law (the "DGCL") by reason of the
Merger Agreement and the consummation of the Merger.
FEES AND EXPENSES
US Surgical has agreed to pay Tyco a fee (a "Fee") of $125 million plus
Tyco's actual, documented and reasonable out-of-pocket expenses up to $5
million, if the Merger Agreement is terminated under certain circumstances, and
has agreed to pay Tyco's actual, documented and reasonable out-of-pocket
expenses up to $5 million (but no Fee) if the Merger Agreement is terminated in
certain other circumstances. Tyco has agreed to pay to US Surgical its actual,
documented and reasonable out-of-pocket expenses up to $5 million, if the Merger
Agreement is terminated under certain other circumstances. See "The Merger
Agreement--Termination."
The Fee payable under certain circumstances by US Surgical to Tyco is
intended, among other things, to compensate Tyco for its costs, including lost
opportunity costs, if the Merger is not consummated as a result of certain
actions or inactions by US Surgical or its stockholders. The Fee may have the
effect of increasing the likelihood that the Merger will be consummated in
accordance with the terms of the Merger Agreement. The Fee may also have the
effect of discouraging persons who might now or prior to the consummation of the
Merger be interested in acquiring all of or a significant interest in US
Surgical from considering or proposing such an acquisition by increasing the
costs of any such acquisition.
Except as aforesaid, and except for printing and filing fees in respect of
this Proxy Statement/ Prospectus and the Registration Statement, which will be
shared equally, Tyco and US Surgical will each pay its own expenses in
connection with the Merger.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
The description of the Merger Agreement set forth below does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement/Prospectus as
Annex A and incorporated herein by reference. YOU SHOULD READ THE MERGER
AGREEMENT, AS IT IS THE LEGAL DOCUMENT WHICH GOVERNS THE MERGER.
TERMS OF THE MERGER
THE MERGER. At the Effective Time, and subject to and upon the terms and
conditions of the Merger Agreement and the DGCL, Merger Sub will be merged with
and into US Surgical, the separate corporate existence of Merger Sub will cease,
and US Surgical will continue as the Surviving Corporation.
EFFECTIVE TIME. As promptly as practicable after the satisfaction or waiver
of the conditions to the Merger set forth in the Merger Agreement, the parties
will file a Certificate of Merger with the Secretary of State of the State of
Delaware, as contemplated by the DGCL (the time of such filing being the
"Effective Time").
CERTIFICATE OF INCORPORATION AND BY-LAWS. The Merger Agreement provides
that, unless otherwise determined by Tyco prior to the Effective Time, the US
Surgical Certificate of Incorporation and By-laws, as in effect immediately
prior to the Effective Time, will be the Certificate of Incorporation and
By-Laws of the Surviving Corporation, except that provisions related to US
Surgical's capital stock will be deleted and replaced such that the
capitalization of the Surviving Corporation shall consist of 1,000 shares of
common stock, par value $.01 per share.
DIRECTORS AND OFFICERS. The directors of Merger Sub immediately prior to
the Effective Time will be the initial directors of the Surviving Corporation,
and the officers of US Surgical immediately prior to the Effective Time will be
the initial officers of the Surviving Corporation.
CONVERSION OF US SURGICAL COMMON STOCK AND THE STOCK OF MERGER SUB IN THE
MERGER. At the Effective Time, each share of US Surgical Common Stock issued
and outstanding immediately prior to the Effective Time (excluding shares
referred to in the following paragraph) will be converted into the right to
receive 0.7606 fully paid and nonassessable Tyco Common Shares.
Each share of US Surgical Common Stock held in the treasury of US Surgical
or its subsidiaries or owned by Tyco, Merger Sub, or any other subsidiary of
Tyco immediately prior to the Effective Time will be canceled and retired
without payment of any consideration.
Each share of common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
OPTIONS, ETC. At the Effective Time, each outstanding Stock Option to
purchase Common Stock granted under the US Surgical Stock Option Plans will be
deemed to constitute an Adjusted Option to acquire, on the same terms and
conditions, MUTATIS MUTANDIS, as were applicable to such Stock Option prior to
the Effective Time, 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 option
in full immediately prior to the Effective Time, at a price per share equal to
the aggregate exercise price for Common Stock purchasable pursuant to such Stock
Option divided by the number of Tyco Common Shares purchasable pursuant to such
Adjusted Option. The Tyco Common Shares issuable upon exercise of the Stock
Options are to be registered under the Securities Act as soon as practicable
after the Effective Time, and Tyco will use its best efforts to maintain the
effectiveness of such registration for so long as the Adjusted Options remain
outstanding. See "The Merger -- Effect of Employee Benefit Plans and
Agreements."
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Certain contingent obligations of US Surgical (the "PAS Obligations") to
issue shares of US Surgical Common Stock to certain former stockholders of
Progressive Angioplasty Systems, Inc. ("PAS") will be assumed by Tyco from and
after the Effective Time and will constitute an obligation to issue, on the same
terms and conditions MUTATIS MUTANDIS as were applicable to such PAS Obligations
prior to the Effective Time, Tyco Common Shares (rounded to the nearest whole
Tyco Common Share).
As soon as reasonably practicable following the Effective Time, Parent will
cause the Tyco Common Shares that may be issued pursuant to the PAS Obligations
to be registered under the Securities Act pursuant to a resale shelf
registration statement on Form S-3 (or any successor or other appropriate form)
and shall use its commercially reasonable efforts, subject to the receipt of
information from and as to the relevant former PAS stockholders, to cause such
registration statement to become effective as promptly after filing as
practicable.
FRACTIONAL SHARES. No certificates representing fractional Tyco Common
Shares will be issued in connection with the Merger. In lieu of any such
fractional share, each US Surgical shareholder who would otherwise have been
entitled to a fractional Tyco Common Share will be paid an amount in cash
(without interest) equal to such fraction multiplied by the Closing Price on the
date of the Effective Time.
EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. ChaseMellon Shareholder Services, L.L.C., or such other
bank or trust company as shall be mutually designated by US Surgical and Tyco,
will act as Exchange Agent for the Merger.
EXCHANGE PROCEDURES. As soon as reasonably practicable after the Effective
Time, Tyco will instruct the Exchange Agent to mail to each holder of record of
US Surgical Common Stock a letter of transmittal and instructions to effect the
surrender of the certificates representing US Surgical Common Stock in exchange
for certificates evidencing Tyco Common Shares. Upon surrender of a certificate
representing US Surgical Common Stock 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 will be entitled to receive in exchange (i) certificates
evidencing that number of whole Tyco Common Shares which such holder has the
right to receive in the Merger, (ii) any dividends or other distributions on the
Tyco Common Shares declared or made after the Effective Time to which such
holder is entitled, and (iii) cash in respect of fractional Tyco Common Shares
as provided above (the Tyco Common Shares, dividends, distributions and cash
being, collectively, the "Merger Consideration"), and the certificate so
surrendered will be canceled. In the event of a transfer of ownership of shares
of US Surgical Common Stock which is not registered in the transfer records of
US Surgical as of the Effective Time, Tyco Common Shares, dividends and
distributions may be issued and 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. Until so surrendered, each
outstanding certificate that, prior to the Effective Time, represented shares of
US Surgical Common Stock will be deemed from and after the Effective Time, for
all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full Tyco Common Shares, and cash in respect of
fractional shares, into which such shares of US Surgical Common Stock shall have
been so converted.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF US SURGICAL COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Tyco Common Shares will be paid to the holder of an
unsurrendered certificate representing shares of US Surgical Common Stock.
Subject to applicable law, following surrender of any certificate formerly
representing shares of US Surgical Common Stock, there will be paid to the
record holder of the certificates representing Tyco Common Shares issued in
exchange, without interest, at the time of surrender, the amount of dividends or
other distributions with a record date after the Effective Time previously paid
with respect to such Tyco Common Shares.
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TRANSFERS OF OWNERSHIP. If any certificate for Tyco Common Shares is to be
issued in a name other than that in which the certificate representing shares of
US Surgical Common Stock surrendered in exchange is registered, it will be a
condition of the issuance that the certificate surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Tyco or any designated agent 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 established to the satisfaction of Tyco or any
designated agent that such tax has been paid or is not payable.
ESCHEAT AND WITHHOLDING. Neither Tyco, Merger Sub nor US Surgical will be
liable to any holder of US Surgical Common Stock for any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. Tyco or the Exchange Agent will be entitled to deduct
and withhold from the Merger Consideration otherwise payable to any US Surgical
stockholder such amounts as Tyco or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under any provision of
federal, state, local or foreign tax law.
LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any certificates
representing shares of US Surgical Common Stock have been lost, stolen or
destroyed, the Exchange Agent will issue Tyco Common Shares in exchange for such
lost, stolen or destroyed certificates upon the making of an affidavit of that
fact by the owner of such certificates, PROVIDED, HOWEVER, that Tyco may, 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 may be
made against Tyco or the Exchange Agent with respect to the certificates alleged
to have been lost, stolen or destroyed.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO US
SURGICAL STOCKHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF US SURGICAL COMMON
STOCK. US SURGICAL STOCKHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR
SHARES TO THE EXCHANGE AGENT PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of US
Surgical, in respect of itself and its subsidiaries, and of Tyco, in respect of
itself and its subsidiaries, relating, among other things, to the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions): (i) corporate organization, standing, qualification and
similar corporate matters; (ii) the absence of violation of provisions of
charter documents; (iii) capitalization; (iv) the authorization, execution,
delivery and enforceability of the Merger Agreement; (v) the absence of conflict
of the Merger Agreement with charter documents, laws or agreements and required
consents for the execution and delivery of the Merger Agreement; (vi) the
absence of conflict with, default under or violation of agreements and laws, and
the holding of permits necessary for the conduct of business; (vii) reports and
other documents filed with the Commission, the absence of material misstatements
in the information contained therein, and the fair presentation of the financial
statements contained therein in accordance with generally accepted accounting
principles; (viii) conduct of business in the ordinary course and the absence of
certain changes or events since the close of the most recent fiscal year, of US
Surgical or Tyco, respectively; (ix) the absence of undisclosed liabilities; (x)
the absence of litigation; (xi) employee benefit matters; (xii) labor matters;
(xiii) the absence of any material untrue statements in the Registration
Statement and this Proxy Statement/Prospectus; (xiv) the absence of restrictions
on business; (xv) title to property; (xvi) payment of taxes and certain other
tax matters; (xvii) compliance with environmental laws; (xviii) brokers, finders
and investment bankers; (xvix) ownership, rights to use and absence of
violations or claims in respect of intellectual property; (xx) relationships or
transactions with affiliates; (xxi) maintenance of insurance; (xxii) the absence
of product liability claims or product recalls; and (xxiii) the absence
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of actions that, to the knowledge of certain officers of the parties, could
reasonably be expected to prevent the Merger from being accounted for as a
pooling of interests.
CONDUCT OF BUSINESS PENDING THE MERGER
CONDUCT OF BUSINESS BY US SURGICAL. The Merger Agreement provides that,
prior to the Effective Time, unless Tyco otherwise agrees in writing and except
as previously disclosed by US Surgical to Tyco, US Surgical will conduct its
business and cause the businesses of its subsidiaries to be conducted only in
the ordinary course of business and in a manner consistent with past practice;
and US Surgical will use reasonable commercial efforts to preserve substantially
intact the business organization of US Surgical and its subsidiaries, to keep
available the services of the present officers, employees and consultants of US
Surgical and its subsidiaries and to preserve the present relationships of US
Surgical and its subsidiaries with customers, suppliers and other persons with
which US Surgical or any of its subsidiaries has significant business relations.
In particular, except as contemplated by the Merger Agreement or previously
disclosed to Tyco by US Surgical, neither US Surgical nor any of its
subsidiaries, without the prior written consent of Tyco, will (subject, in
certain cases, to specified exceptions):
(i) amend or otherwise change US Surgical's Certificate of Incorporation or
By-laws;
(ii) issue, dispose of or encumber, or authorize the issuance, 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
ownership interest in US Surgical, any of its subsidiaries or affiliates;
(iii) dispose of or encumber any assets of US Surgical or any of its
subsidiaries;
(iv) (1) declare or pay any dividend or other distribution in respect of any
of its capital stock, (2) 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, or (3) amend
the terms or change the period of exercisability of, acquire, or permit any
subsidiary to acquire, any of its securities or any securities of its
subsidiaries;
(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 110% of the amount thereof provided for in US Surgical's current
business plan; or (4) enter into or amend any contract, agreement, commitment or
arrangement to effect any of the foregoing;
(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 in excess of $100,000 with any director,
officer or other employee of US Surgical or any subsidiary, 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
or agree to an extension of a statute of limitations, except for settlements the
amount of which has been reserved for in the financial statements contained in
US Surgical's SEC Reports filed prior to the date of this Agreement or other
settlements not in excess of $2,000,000 in the aggregate;
(ix) satisfy any claims, liabilities or obligations in excess of $5,000,000
in the aggregate; or
(x) take, or agree to take, any of the foregoing actions.
NO SOLICITATION. The Merger Agreement provides that US Surgical will not,
directly or indirectly, through any officer, director, employee, representative
or agent of US Surgical or any of its subsidiaries, solicit or encourage the
initiation of any inquiries or proposals regarding any merger, sale of
substantial
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assets, sale of shares of capital stock or similar transactions involving US
Surgical or any subsidiaries of US Surgical (any of the foregoing being referred
to herein as an "Acquisition Proposal"). However, the Board of Directors of US
Surgical is not prevented from (i) considering, negotiating, approving and
recommending to the stockholders of US Surgical a bona fide Acquisition Proposal
not solicited in violation of the Merger Agreement, (ii) taking and disclosing
to its stockholders a position with respect to any tender or exchange offer
commenced by a third party, or amending or withdrawing such position, as
contemplated by Rules 14d-9 and 14e-2 under the Exchange Act, (iii) making any
disclosure to the US Surgical stockholders or (iv) furnishing information to a
third party that has made a BONA FIDE Acquisition Proposal, PROVIDED that such
third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between US Surgical and Tyco;
PROVIDED that as to each of clauses (i)-(iv) above, the Board of Directors of US
Surgical determines in good faith (upon advice of independent counsel) that it
is required to do so in order to discharge properly its fiduciary duties.
Under the Merger Agreement, US Surgical is required immediately to notify
Tyco after receipt of any Acquisition Proposal, or any modification of or
amendment to any Acquisition Proposal, or any request for nonpublic information
relating to US Surgical or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of US
Surgical or any subsidiary by any person or entity that informs the Board of
Directors of US Surgical or such subsidiary that it is considering making, or
has made, an Acquisition Proposal.
The Merger Agreement also provides that US Surgical will not release any
third party from the confidentiality provisions of any confidentiality agreement
to which US Surgical is a party.
US Surgical is required to ensure that the officers, directors and employees
of US Surgical and its subsidiaries and any investment banker or other advisor
or representative retained by US Surgical are aware of the foregoing
restrictions.
CONDUCT OF BUSINESS BY TYCO. The Merger Agreement provides that, prior to
the Effective Time, unless US Surgical otherwise agrees in writing, Tyco will
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 will not, without the prior written consent of US Surgical (subject,
in certain cases, to specified exceptions):
(i) amend or otherwise change Tyco's Memorandum of Association or Bye-Laws;
(ii) make or agree to make any acquisition 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 in respect of any of
its capital stock; or
(iv) take or agree to take, any action which would make any of the
representations or warranties of Tyco contained in the Merger Agreement untrue
or incorrect or prevent Tyco from performing its covenants under the Merger
Agreement.
ADDITIONAL AGREEMENTS
ACCESS TO INFORMATION; CONFIDENTIALITY. The Merger Agreement provides that,
upon reasonable notice and subject to confidentiality agreements by which US
Surgical or Tyco are bound, US Surgical and Tyco will each afford to the
officers, employees, accountants, counsel and other representatives of the
other, reasonable access, during the period prior to the Effective Time, to all
its properties, books, contracts, commitments and records and, during such
period, US Surgical and Tyco each will furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and each will make available to the other the
appropriate individuals for discussion of the other's business, properties and
personnel as either Tyco or US Surgical may reasonably request. Each party shall
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keep such information confidential in accordance with the terms of the
confidentiality letter between US Surgical and Tyco dated April 9, 1998.
CONSENTS; APPROVALS. US Surgical and Tyco will each use their reasonable
best efforts to obtain all consents, waivers, approvals, authorizations or
orders, and US Surgical and Tyco will make all filings required in connection
with the authorization, execution and delivery of the Merger Agreement and the
consummation by them of the transactions contemplated thereby.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that the
Certificate of Incorporation and By-Laws of the Surviving Corporation will
contain the provisions with respect to indemnification set forth in the
Certificate of Incorporation and By-Laws of US Surgical, which will not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees or
agents of US Surgical, unless such modification is required after the Effective
Time by law.
After the Effective Time, the Surviving Corporation will, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
Certificate of Incorporation or By-Laws, indemnify and hold harmless, each
present and former director, officer or employee of US Surgical 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
Effective Time, to the same extent as provided in US Surgical's Certificate of
Incorporation or By-Laws or any applicable contract or agreement as in effect on
the date of the Merger Agreement, in each case for a period of six years after
the date of the Merger Agreement.
Tyco will provide, or cause the Surviving Corporation to provide, for a
period of not less than six years after the Effective Time, US Surgical's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring at or prior to the Effective Time that is
no less favorable than the existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; PROVIDED,
HOWEVER, that Tyco and the Surviving Corporation shall not be required to pay an
annual insurance premium in excess of 200% of the annual premium currently paid
by US Surgical for such insurance, but in such case shall purchase as much such
coverage as possible for such amount.
Tyco has agreed to guarantee the obligations of the Surviving Corporation
under the foregoing provisions.
NOTIFICATION OF CERTAIN MATTERS. US Surgical and Tyco will each give the
other prompt notice of the occurrence or nonoccurrence of any event which would
be likely 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. Each of the parties to the Merger Agreement
agrees 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 its obligations under the Merger
Agreement. However, Tyco is under no obligation to agree to divest, abandon,
license or take similar action with respect to any assets, except as to any line
of business of US Surgical or its subsidiaries which accounts for no more than
10% of the total revenue of US Surgical and its subsidiaries taken as a whole,
or any line of business of Tyco which accounts for no more than 10% of the total
revenues of Tyco's Disposable and Specialty Products Group. In addition, each of
the parties agrees to use its reasonable best efforts to cause the Merger to
qualify as a reorganization under the provisions of
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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 US Surgical stockholders who are or will be "5% transferee shareholders"
within the meaning of Treasury Regulation Section 1.367(a)-3(c)(5)(ii)), and
will not (both before and after consummation of the Merger) take any actions
which to its knowledge could reasonably be expected to prevent the Merger from
so qualifying.
PUBLIC ANNOUNCEMENTS. Tyco and US Surgical agree to consult with each other
before issuing any press release with respect to the Merger or the Merger
Agreement and will not issue any such press release or make any such public
statement 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.
LISTING OF TYCO SHARES. The Merger Agreement provides that Tyco will use
its best efforts to cause the Tyco Common Shares to be issued in the Merger to
be listed, upon official notice of issuance, on the NYSE prior to the Effective
Time.
OPTION PLAN AND BENEFITS. Prior to the Effective Time, the Parties to this
Agreement shall take all such actions as are necessary to effectuate the
provisions of the Agreement regarding Stock Options and the PAS Obligations.
Tyco and Merger Sub agree that as of the Effective Time, Tyco shall, or shall
cause the Surviving Corporation and its subsidiaries to, provide those persons
who, immediately prior to the Effective Time, were employees of the US Surgical
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 Effective Time.
ACCOUNTANT'S LETTERS. Upon reasonable notice from the other, US Surgical or
Tyco will use its respective best efforts to cause PricewaterhouseCoopers to
deliver to US Surgical a letter covering such matters as are requested by US
Surgical and as are customarily addressed in accountant's "comfort" letters, and
US Surgical will use its best efforts to cause Deloitte & Touche LLP to deliver
to Tyco a letter covering such matters as are requested by Tyco and as are
customarily addressed in accountant's "comfort" letters.
POOLING ACCOUNTING TREATMENT. Each of Tyco and US Surgical agreed not to
take any action that would reasonably be expected to adversely affect the
ability of Tyco to treat the Merger as a pooling of interests, and each of Tyco
and US Surgical agreed to use its best efforts to take such action as may be
reasonably required to negate the impact of any past actions which, to its
knowledge, could reasonably be expected to adversely impact the ability of Tyco
to treat the Merger as a pooling of interests. Tyco and US Surgical agreed to
use their best efforts to obtain, at the Effective Time, from their respective,
independent public accountants, opinions to the effect that the Merger qualifies
for pooling of interests accounting treatment if consummated in accordance with
the Merger Agreement.
DIRECTOR APPOINTMENT. In the event that there shall be a vacancy in Tyco's
Board of Directors occurring after the Effective Time and before Tyco's next
annual general shareholders' meeting, Tyco agreed to take all necessary action,
subject to applicable fiduciary obligations of its Board of Directors, to
appoint Leon C. Hirsch, US Surgical's Chairman and Chief Executive Officer, to
fill such a vacancy. In the absence of such a vacancy, Tyco agreed, subject to
applicable fiduciary obligations of Tyco's Board of Directors, to nominate Mr.
Hirsch for election as a director of Tyco at the next annual general
shareholders' meeting occurring after the Effective Time.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
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(i) EFFECTIVENESS OF REGISTRATION STATEMENT. No stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
Commission and no proceedings for that purpose and no similar proceeding in
respect of this Proxy Statement/Prospectus shall have been initiated or
threatened by the Commission;
(ii) SHAREHOLDER APPROVAL. The Merger Agreement and the Merger shall have
been approved by the requisite vote of the stockholders of US Surgical;
(iii) ANTITRUST. All waiting periods applicable to the consummation of the
Merger under HSR Act shall have expired or 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;
(iv) GOVERNMENTAL ACTIONS. There shall not have been instituted, pending or
threatened any action or proceeding (or any investigation or other inquiry that
might 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, nor shall there be in
effect any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction or other legal
restraint, in either case, preventing or seeking to prevent or limiting or
seeking to limit Tyco 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 Tyco or any of its subsidiaries, or 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, as a result of the Merger or the transactions contemplated by this
Agreement; provided that for purposes of this Section (iv) (but not for any
other purpose of this Agreement or otherwise), a line of business of the
Surviving Corporation and its subsidiaries which accounts for no more than 10%
of the total revenues of the Surviving Corporation and its subsidiaries taken as
a whole, or a line of business of Tyco which accounts for no more than 10% of
the total revenues of Tyco's Disposable and Specialty Products Group shall not
be deemed material;
(v) 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;
(vi) TAX OPINIONS. US Surgical and Tyco shall have received written opinions
of Skadden, Arps, Slate, Meagher & Flom LLP and Kramer, Levin, Naftalis &
Frankel, respectively, in form and substance reasonably satisfactory to them, to
the effect that (1) the Merger will constitute a reorganization within the
meaning of Section 368 of the Code (2) the transfer of US Surgical Common Stock
by US Surgical stockholders, other than US Surgical stockholders who are or will
be "5% transferee shareholders" within the meaning of Treasury Regulation
Section 1.367(a)-3(c)(5)(ii), pursuant to the Merger 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;
and
(vii) OPINION OF ACCOUNTANT. Tyco shall have received the opinion of
PricewaterhouseCoopers to the effect that the Merger qualifies for pooling of
interests accounting treatment.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF TYCO AND MERGER SUB. The
obligations of Tyco and Merger Sub to effect the Merger are also subject to the
following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and warranties of US
Surgical contained in the Merger Agreement shall be true and correct in all
respects on and as of the Effective Time, except for (1) changes contemplated by
the Merger Agreement, (2) those representations and warranties which address
matters only as of a particular date (which shall have been true and correct as
of such date), and (3) where the failure to be true and correct could not
reasonably be expected to have a Material Adverse Effect, with the same force
and effect as if made on and as of the Effective Time, and Tyco and Merger Sub
shall have received a certificate to such effect signed by the Chief Executive
Officer or Chief Financial Officer of US Surgical;
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(ii) AGREEMENTS AND COVENANTS. US Surgical shall have performed or complied
in all material respects with all agreements and covenants required by the
Merger Agreement to be performed or complied with by it on or prior to the
Effective Time, and Tyco and Merger Sub shall have received a certificate to
such effect signed by the Chief Executive Officer or Chief Financial Officer of
US Surgical;
(iii) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by US Surgical for the authorization, execution and delivery of the Merger
Agreement and the consummation by it of the transactions contemplated thereby
shall have been obtained and made by US Surgical, except where the failure to
receive such consents, etc. could not reasonably be expected to have a Material
Adverse Effect on US Surgical or Tyco;
(iv) AFFILIATE AGREEMENTS. Tyco shall have received from each person who is
identified as an "affiliate" of US Surgical an agreement to comply with
restrictions on such affiliates pursuant to Rule 145 under the Securities Act
and under pooling of interests accounting treatment and;
(v) CAPITALIZATION. As of the date of the Merger Agreement and the Effective
Time, the capitalization of US Surgical (including the aggregate of the excess
of the value of the Merger Consideration over the aggregate exercise prices of
the outstanding Stock Options) shall conform (subject to certain permitted
variances) to the capitalization set forth in, or disclosed pursuant to, the
Merger Agreement.
ADDITIONAL CONDITIONS TO OBLIGATION OF US SURGICAL. The obligation of US
Surgical to effect the Merger is also subject to the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Tyco and Merger Sub contained in the Merger Agreement shall be true and correct
in all respects on and as of the Effective Time, except for (1) changes
contemplated by the Merger Agreement, (2) those representations and warranties
which address matters only as of a particular date (which shall have been true
and correct as of such date), and (3) where the failure to be true and correct
could not reasonably be expected to have a Material Adverse Effect, with the
same force and effect as if made on and as of the Effective Time, and US
Surgical shall have received a certificate to such effect signed by the
President or Chief Financial Officer of Tyco;
(ii) AGREEMENTS AND COVENANTS. Tyco and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by
the Merger Agreement to be performed or complied with by them on or prior to the
Effective Time, and US Surgical shall have received a certificate to such effect
signed by the President or Chief Financial Officer of Tyco;
(iii) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Tyco and Merger Sub for the authorization, execution and delivery of
the Merger Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Tyco and Merger Sub,
except where the failure to receive such consents, etc. could not reasonably be
expected to have a Material Adverse Effect on US Surgical or Tyco; and
(iv) LISTING. The Tyco Common Shares issuable in the Merger and upon
exercise of the Adjustment Options shall have been authorized for listing on the
NYSE upon official notice of issuance.
TERMINATION
CONDITIONS TO TERMINATION. The Merger Agreement may be terminated at any
time prior to the Effective Time, notwithstanding approval thereof by the
shareholders of US Surgical:
(i) by mutual written consent duly authorized by the Boards of Directors of
Tyco and US Surgical; or
(ii) by either Tyco or US Surgical if the Merger shall not have been
consummated by December 31, 1998 (OTHER THAN for reasons set forth in (iv)
below); or
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(iii) by either Tyco or US Surgical 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 action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger; or
(iv) by Tyco or US Surgical, if the requisite vote of the stockholders of US
Surgical shall not have been obtained by December 31, 1998, or if the
stockholders of US Surgical shall not have approved the Merger and the Merger
Agreement at the Special Meeting; or
(v) by Tyco, if (1) the Board of Directors of US Surgical shall withdraw,
modify or change its approval or recommendation of the Merger Agreement or the
Merger in a manner adverse to Tyco or shall have resolved to do so; (2) the
Board of Directors of US Surgical shall have recommended to the stockholders of
US Surgical an Alternative Transaction (as defined in the Merger Agreement); or
(3) a tender offer or exchange offer for 25% or more of the outstanding shares
of US Surgical Common Stock is commenced (other than by Tyco or an affiliate of
Tyco) and the Board of Directors of US Surgical recommends that the shareholders
of US Surgical tender their shares in such tender or exchange offer; or
(vi) by US Surgical, if the Board of Directors of US Surgical shall
withdraw, modify or change its approval or recommendation of the Merger
Agreement or the Merger in a manner adverse to Tyco or shall have resolved to do
so in compliance with the provisions described above under "-- No Solicitation;"
or
(vii) by Tyco or US Surgical, (1) if any representation or warranty of US
Surgical or Tyco and Merger Sub, respectively, set forth in the Merger Agreement
shall be untrue when made (a "Terminating Misrepresentation"), or (2) upon a
breach of any covenant or agreement on the part of US Surgical or Tyco,
respectively, set forth in the Merger Agreement (a "Terminating Breach"), such
that the conditions set forth above in clause (i) or (ii) under "--Conditions to
the Merger-Additional Conditions to Obligations of Tyco and Merger Sub" or in
clause (i) or (ii) under "--Conditions to the Merger-Additional Conditions to
Obligation of US Surgical" above, as the case may be, would not be satisfied,
PROVIDED THAT, if such Terminating Misrepresentation or Terminating Breach is
curable prior to December 31, 1998 by US Surgical or Tyco, as the case may be,
through the exercise of its reasonable best efforts and for so long as US
Surgical or Tyco, as the case may be, continues to exercise such reasonable best
efforts, neither Tyco nor US Surgical, respectively, may terminate the Merger
Agreement under this clause; or
(viii) by Tyco, if any representation or warranty of US Surgical shall have
become untrue such that the condition set forth above in clause (i) under
"--Conditions to the Merger--Additional Conditions to Obligations of Tyco and
Merger Sub" would not be satisfied (a "US Surgical Terminating Change"), or by
US Surgical, if any representation or warranty of Tyco shall have become untrue
such that the condition set forth above in clause (i) under "--Conditions to the
Merger--Additional Conditions to Obligation of US Surgical" would not be
satisfied (a "Tyco Terminating Change," and together with a US Surgical
Terminating Change, a "Terminating Change"), in either case other than by reason
of a Terminating Breach; PROVIDED THAT, if such Terminating Change is curable
prior to December 31, 1998 by US Surgical or Tyco, as the case may be, through
exercise of its reasonable best efforts and for so long as US Surgical or Tyco,
as the case may be, continues to exercise such reasonable best efforts, Tyco or
US Surgical, respectively, may not terminate the Merger Agreement under this
clause; or
(ix) by Tyco if any representation or warranty of US Surgical shall be
untrue when made or shall have become untrue such that the condition set forth
above in clause (v) under "--Conditions to the Merger-- Additional Conditions to
Obligations of Tyco and Merger Sub" would not be satisfied (other than by reason
of a Terminating Breach).
FEES AND EXPENSES. Except as set forth below, all fees and expenses
incurred in connection with the Merger Agreement and the Merger will be paid by
the party incurring such expenses, whether or not the Merger is consummated,
provided that Tyco and US Surgical shall share equally all SEC filing fees and
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printing expenses incurred in connection with the printing and filing of this
Proxy Statement/Prospectus and the Registration Statement.
The Merger Agreement provides that US Surgical will pay Tyco the Fee of $125
million, plus actual, documented and reasonable out-of-pocket expenses of Tyco
of up to $5 million relating to the transactions contemplated by the Merger
Agreement (including, but not limited to, fees and expenses of Tyco's counsel,
accountants and financial advisors, but excluding any fees paid to such
financial advisors) upon the first to occur of any of the following events:
(i) the termination of the Merger Agreement by Tyco or US Surgical pursuant
to clause (iv) under "--Conditions to Termination" above; PROVIDED, HOWEVER,
that such fee and expenses shall not be payable under this clause if the
stockholders of US Surgical shall not have approved the Merger and the Merger
Agreement at the Special Meeting unless an Acquisition Proposal is publicly
announced within one year of the date of the Special Meeting; or
(ii) the termination of the Merger Agreement by Tyco pursuant to clause (v)
under "--Conditions to Termination" above; or
(iii) the termination of the Merger Agreement by US Surgical pursuant to
clause (vi) under "-- Conditions to Termination" above; or
(iv) the termination of the Merger Agreement by Tyco on account of a
Terminating Breach of US Surgical, provided that such Terminating Breach is
willful.
Upon a termination of the Merger Agreement by Tyco or US Surgical, as the
case may be, as a result of a Terminating Misrepresentation pursuant to clause
(vii) under "--Conditions to Termination" above, the other party shall pay to
the terminating party documented and reasonable out-of-pocket expenses of up to
$5 million.
The Fee and aforesaid 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.
AMENDMENT AND WAIVER
The Merger Agreement may be amended in writing by the parties 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 by
the stockholders of US Surgical, no amendment may be made which by law requires
further approval by such stockholders without such further approval.
At any time prior to the Effective Time, any party to the Merger Agreement
may, with respect to any other party, extend the time for the performance of any
of the obligations or other acts, waive any inaccuracies in the representations
and warranties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement, or waive compliance with any of the agreements
or conditions contained in the Merger Agreement. Any such extension or waiver
will be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
STOCKHOLDER AGREEMENTS
The description of the Stockholder Agreements set forth below does not
purport to be complete and is qualified in its entirety by reference to the
original agreements, copies of which are filed as exhibits to the Registration
Statement.
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Concurrently with the execution of the Merger Agreement, Leon C. Hirsch, US
Surgical's Chairman of the Board and Chief Executive Officer, and Turi Josefsen,
US Surgical's Executive Vice President and President, International Operations
(the "Stockholders") entered into certain agreements with respect to the
securities of US Surgical (the "Stockholder Agreements") held by them.
AGREEMENT TO VOTE. The Stockholder Agreements each provide that the
respective Stockholder will vote the voting securities of US Surgical
beneficially owned by the Stockholder (the "Subject Securities") in favor of
adoption of the Merger Agreement and approval of the Merger and any matter
necessary to facilitate the Merger and against approval of any Acquisition
Proposal made in opposition to or in competition with the Merger, any corporate
transaction of US Surgical with any person other than Tyco or its affiliates,
and any liquidation or winding up of US Surgical (each, an "Opposing Proposal").
SOLICITATION. The Stockholder Agreements provide that each Stockholder will
not, and will not permit any representative or entity under its control, to
solicit proxies or become a "participant" in a "solicitation" (as such terms are
defined in Regulation 14A under the Exchange Act) with respect to an Opposing
Proposal or otherwise encourage or assist any person in taking or planning any
action that would constitute an Opposing Proposal or initiate a stockholders'
vote or action by written consent of US Surgical's stockholders with respect to
an Opposing Proposal. However, the Stockholders may exercise their fiduciary
duties as a director or officer of US Surgical as opposed to taking action with
respect to the direct or indirect ownership of Subject Securities, and no such
exercise of fiduciary duties shall be a breach of, or a violation of the
restrictions of the Stockholder Agreements, PROVIDED that such duties are
exercised in accordance with the Merger Agreement.
TRANSFERS OR SALES. From and after the date of the Stockholder Agreements
until the earlier to occur of 30 days prior to the Effective Time and the
Termination Date (hereinafter defined), each Stockholder has agreed not to
effect a sale or other transfer of any US Surgical securities to any person
unless such person shall agree in writing and be bound by all provisions of the
respective Stockholder Agreement.
From and after 30 days prior to the Effective Time, each Stockholder has
agreed not to engage in any sale of securities of US Surgical or Tyco until such
time as Tyco has published financial results covering at least 30 days combined
operations of Tyco and US Surgical after the Effective Time. Tyco has agreed
that it will use its reasonable best efforts to publish financial results
covering at least 30 days of combined operations of Tyco and US Surgical after
the Effective Time, as soon as practicable and in no event later than 30 days
after the end of the first fiscal quarter which includes at least 30 days of
such combined operations after the Effective Time.
The Stockholder Agreements also contain provisions relating to the
restrictions on sales of Tyco Common Shares received in the Merger by affiliates
of US Surgical pursuant to Rule 145 under the Securities Act, as they may apply
to the Stockholders.
TERMINATION. The Stockholder Agreements will terminate at such time as the
Merger Agreement is terminated according to its terms (the "Termination Date").
46
<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 price and dividends for the Tyco Common Shares have
been restated to reflect the 0.48133 reverse stock split related to the ADT
Merger on July 2, 1997 and a two-for-one stock split effected in the form of a
stock dividend which was distributed October 22, 1997. The prices per Tyco
Common Share listed in the table for periods prior to the ADT Merger are for
common shares of ADT.
<TABLE>
<CAPTION>
TYCO COMMON SHARES
----------------------
<S> <C> <C> <C>
DIVIDENDS
HIGH LOW PER SHARE(2)
---------- ---------- -------------
Fiscal 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 --
Fiscal 1997 (1):
First quarter......................................... $ 28.6965 $ 22.0743 --
Second quarter........................................ 35.4487 25.4503 --
Third quarter......................................... 43.0000 34.4099 $ 0.025
Fiscal 1998:
First quarter......................................... $ 45.5000 $ 34.0000 $ 0.025
Second quarter........................................ 57.4375 42.3750 0.025
Third quarter......................................... 63.0625 51.4375 0.025
Fourth quarter (through July , 1998)................
</TABLE>
(1) Fiscal 1997 represents the transitional nine-month fiscal year ended
September 30, 1997.
(2) Tyco declared a dividend of $0.025 per Common Share in each of the first
three quarters of Fiscal 1998 and in the third quarter of Fiscal 1997. Prior
to the ADT Merger, ADT had not declared any dividends on its common shares
since April 1991. Former Tyco declared quarterly dividends of $0.025 per
share in the first two quarters of Fiscal 1997 and aggregate dividends of
$0.10 per share in Fiscal 1996. 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.
On May 22, 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 $55.875. Based upon multiplying such
closing price by the Exchange Ratio, US Surgical stockholders would receive in
the Merger Tyco Common Shares (or cash in lieu of a fractional share) with a
market value of $42.50 for each share of US Surgical Common Stock held. On July
, 1998, the most recent date for which prices were available prior to
printing this Proxy Statement/Prospectus, the closing price per Tyco Common
Share, as reported in the NYSE Composite Transaction Tape, was $ . Based
upon multiplying such closing price by the Exchange Ratio, US Surgical
stockholders would receive in the Merger Tyco Common Shares (or cash in lieu of
a fractional share) with a market value of $ for each share of US Surgical
Common Stock held. Stockholders are urged to obtain current market quotations.
See also "Summary--Certain Considerations--Fixed Exchange Ratio."
47
<PAGE>
US SURGICAL
US Surgical Common Stock is listed and traded on the NYSE. The following
table sets forth the high and low sales prices per share of US Surgical Common
Stock as reported in the NYSE Composite Transaction Tape, and the dividends paid
on such US Surgical Common Stock, for the quarterly periods presented below.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
--------- --------- -----------
<S> <C> <C> <C>
US SURGICAL COMMON STOCK
---------------------------------
1996:
First quarter.............................................. $ 33.125 $ 19.750 $ 0.02
Second quarter............................................. 38.750 29.375 0.02
Third quarter.............................................. 43.750 26.500 0.02
Fourth quarter............................................. 46.625 35.750 0.02
1997:
First quarter.............................................. 47.000 29.500 0.04
Second quarter............................................. 38.875 30.000 0.04
Third quarter.............................................. 40.250 28.000 0.04
Fourth quarter............................................. 33.375 23.250 0.04
1998:
First quarter.............................................. 35.188 27.000 0.04
Second quarter............................................. 46.000 29.313 0.04
Third quarter (through 1998).........................
</TABLE>
On May 22, 1998, the last trading day prior to announcement of the execution
of the Merger Agreement, the closing price per share of US Surgical Common
Stock, as reported in the NYSE Composite Transaction Tape, was $39.25. On July
, 1998, the most recent date for which prices were available prior to
printing this Proxy Statement/Prospectus, the closing price per share of US
Surgical Common Stock, as reported in the NYSE Composite Transaction Tape, was
$ . Stockholders are urged to obtain current market quotations.
Under the terms of the Merger Agreement, other than in respect of its
regularly scheduled quarterly dividend of $0.04 per share of US Surgical Common
Stock, US Surgical 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 Effective Time.
48
<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 consolidated financial statements, including
the accounting policies and notes thereto, included in Tyco's Form 10-K, as
supplemented by Tyco's Current Report on Form 8-K dated April 23, 1998, (ii)
Tyco's consolidated financial statements and notes thereto included in its
quarterly reports on Form 10-Q for the quarterly periods ended December 31, 1997
and March 31, 1998, (iii) US Surgical's 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 ("US Surgical's Form
10-K"), and (iv) US Surgical's consolidated financial statements and notes
thereto included in its quarterly report on Form 10-Q for the quarterly period
ended March 31, 1998. In September 1997, Tyco changed its fiscal year end from
December 31 to September 30. US Surgical has a calendar year end. The historical
results for the six months ended March 31, 1998 and 1997 and the nine months
ended September 30, 1997 have been combined using the actual results of Tyco and
US Surgical for those periods. See "Where To Find More Information."
The unaudited pro forma combined condensed financial information has been
prepared in United States dollars in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP"). 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 March 31, 1998, combining the balance sheets of
Tyco and US Surgical at March 31, 1998. The unaudited pro forma combined
condensed statements of operations give effect to the Merger as if it had
occurred on January 1, 1995.
49
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
US PRO FORMA PRO FORMA
TYCO SURGICAL ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 5,539.5 $ 619.8 $ $ 6,159.3
Cost of sales................................................... (3,664.3) (247.2) (3,911.5)
Research and development (3).................................... -- (43.3) 43.3 --
Selling, general and administrative expenses (3)................ (1,027.6) (254.3) (43.3) (1,325.2)
Restructuring charges(8)........................................ -- (12.0) (12.0)
---------- --------- ----------- ----------
Operating income................................................ 847.6 63.0 -- 910.6
Interest income (3)............................................. 13.7 -- 1.4 15.1
Interest expense (3)............................................ (95.4) (7.5) (1.4) (104.3)
---------- --------- ----------- ----------
Income from continuing operations before income taxes........... 765.9 55.5 -- 821.4
Income taxes.................................................... (248.9) (15.5) (264.4)
---------- --------- ----------- ----------
Income from continuing operations............................... $ 517.0 $ 40.0 $ -- $ 557.0
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Income per common share from continuing operations(2)(4):
Basic......................................................... $ 0.94 $ 0.52 $ 0.91
---------- --------- ----------
---------- --------- ----------
Diluted....................................................... $ 0.91 $ 0.52 $ 0.89
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares(2)(4):
Basic......................................................... 552.6 76.2 610.6
---------- --------- ----------
---------- --------- ----------
Diluted....................................................... 574.1 77.4 632.9
---------- --------- ----------
---------- --------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
50
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
US PRO FORMA PRO FORMA
TYCO SURGICAL ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 4,564.9 $ 567.7 $ $ 5,132.6
Cost of sales................................................... (3,096.4) (229.4) (3,325.8)
Research and development (3).................................... -- (34.5) 34.5 --
Selling, general and administrative expenses (3)................ (927.2) (220.4) (34.5) (1,182.1)
Restructuring and other non-recurring charges(8)................ (246.9) -- (246.9)
---------- --------- ----------- ----------
Operating income................................................ 294.4 83.4 -- 377.8
Interest income (3)............................................. 15.0 -- 4.3 19.3
Interest expense (3)............................................ (94.8) (0.8) (4.3) (99.9)
Other income less expenses(8)................................... 118.4 -- 118.4
---------- --------- ----------- ----------
Income from continuing operations before income taxes........... 333.0 82.6 -- 415.6
Income taxes.................................................... (117.6) (21.1) (138.7)
---------- --------- ----------- ----------
Income from continuing operations............................... $ 215.4 $ 61.5 $ -- $ 276.9
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Income per common share from continuing operations(2)(4):
Basic......................................................... $ 0.44 $ 0.81 $ 0.50
---------- --------- ----------
---------- --------- ----------
Diluted....................................................... $ 0.43 $ 0.78 $ 0.48
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares(2)(4):
Basic......................................................... 489.6 64.0 538.2
---------- --------- ----------
---------- --------- ----------
Diluted....................................................... 518.7 66.5 569.2
---------- --------- ----------
---------- --------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
51
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF CONTINUING OPERATIONS
FOR THE TRANSITIONAL FISCAL YEAR ENDED SEPTEMBER 30, 1997 (1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
US PRO FORMA PRO FORMA
TYCO SURGICAL ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales....................................................... $ 7,588.2 $ 869.6 $ $ 8,457.8
Cost of sales................................................... (5,102.6) (352.6) (5,455.2)
Research and development (3).................................... -- (51.9) 51.9 --
Selling, general and administrative expenses (3)................ (1,534.9) (334.5) (51.9) (1,921.3)
Merger, restructuring and other non-recurring charges (9)....... (917.8) (30.1) (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......................................... (476.5) 100.5 -- (376.0)
Interest income (3)............................................. 24.2 -- 7.0 31.2
Interest expense (3)............................................ (137.5) (0.3) (7.0) (144.8)
---------- --------- ----------- ----------
(Loss) income from continuing operations before income taxes.... (589.8) 100.2 -- (489.6)
Income taxes.................................................... (187.0) (21.1) (208.1)
---------- --------- ----------- ----------
(Loss) income from continuing operations........................ $ (776.8) $ 79.1 $ -- $ (697.7)
---------- --------- ----------- ----------
---------- --------- ----------- ----------
(Loss) income per common share from continuing operations(2)(4):
Basic......................................................... $ (1.50) $ 1.05 $ (1.23)
---------- --------- ----------
---------- --------- ----------
Diluted....................................................... $ (1.50) $ 1.02 $ (1.22)
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares(2)(4):
Basic......................................................... 519.5 70.8 573.4
---------- --------- ----------
---------- --------- ----------
Diluted....................................................... 519.5 72.7 574.8
---------- --------- ----------
---------- --------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
52
<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>
US PRO FORMA PRO FORMA
TYCO SURGICAL ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 8,103.7 $ 1,112.7 $ $ 9,216.4
Cost of sales.................................................... (5,475.2) (460.6) (5,935.8)
Research and development (3)..................................... -- (58.0) 58.0 --
Selling, general and administrative expenses (3)................. (1,656.5) (443.4) (58.0) (2,157.9)
Merger, restructuring and other non-recurring charges (10)....... (246.1) (246.1)
Charge for the impairment of long-lived assets (10).............. (744.7) (744.7)
---------- --------- ----------- ----------
Operating (loss) income.......................................... (18.8) 150.7 -- 131.9
Interest income (3).............................................. 31.5 -- 5.0 36.5
Interest expense (3)............................................. (193.3) (9.0) (5.0) (207.3)
Other income less expenses (10).................................. 119.4 -- 119.4
---------- --------- ----------- ----------
(Loss) income from continuing operations before income taxes..... (61.2) 141.7 -- 80.5
Income taxes..................................................... (235.5) (32.6) (268.1)
---------- --------- ----------- ----------
(Loss) income from continuing operations......................... $ (296.7) $ 109.1 $ -- $ (187.6)
---------- --------- ----------- ----------
---------- --------- ----------- ----------
(Loss) income per common share from continuing operations (2)(4):
Basic.......................................................... $ (0.62) $ 1.48 $ (0.40)
---------- --------- ----------
---------- --------- ----------
Diluted........................................................ $ (0.62) $ 1.43 $ (0.40)
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares (2)(4):
Basic.......................................................... 475.6 60.5 521.6
---------- --------- ----------
---------- --------- ----------
Diluted........................................................ 475.6 62.6 523.2
---------- --------- ----------
---------- --------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
53
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF CONTINUING OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
US PRO FORMA PRO FORMA
TYCO SURGICAL ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales...................................................... $ 6,915.6 $ 1,022.3 $ $ 7,937.9
Cost of sales.................................................. (4,665.3) (451.7) (5,117.0)
Research and development (3)................................... -- (43.1) 43.1 --
Selling, general and administrative expenses (3)............... (1,495.4) (417.0) (43.1) (1,955.5)
Merger, restructuring and other non-recurring charges.......... (97.1) (97.1)
Charge for the impairment of long-lived assets................. (8.2) (8.2)
---------- --------- ----------- ----------
Operating income............................................... 649.6 110.5 -- 760.1
Interest income (3)............................................ 19.0 -- 2.0 21.0
Interest expense (3)........................................... (187.5) (20.7) (2.0) (210.2)
Other income less expenses..................................... (5.0) -- (5.0)
---------- --------- ----------- ----------
Income from continuing operations before income taxes.......... 476.1 89.8 -- 565.9
Income taxes................................................... (208.6) (10.6) (219.2)
---------- --------- ----------- ----------
Income from continuing operations.............................. $ 267.5 $ 79.2 $ -- $ 346.7
---------- --------- ----------- ----------
---------- --------- ----------- ----------
Income per common share from continuing
operations (2)(4):
Basic........................................................ $ 0.58 $ 1.05 $ 0.65
---------- --------- ----------
---------- --------- ----------
Diluted...................................................... $ 0.57 $ 1.04 $ 0.64
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares (2)(4):
Basic........................................................ 460.6 57.0 504.0
---------- --------- ----------
---------- --------- ----------
Diluted...................................................... 469.6 57.4 513.3
---------- --------- ----------
---------- --------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
54
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AT MARCH 31, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
US PRO FORMA PRO FORMA
TYCO SURGICAL ADJUSTMENTS COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 562.0 $ 11.9 $ $ 573.9
Accounts receivable, net..................................... 2,091.0 399.0 2,490.0
Contracts in process......................................... 147.7 147.7
Inventories.................................................. 1,411.7 260.9 1,672.6
Deferred income taxes........................................ 493.7 493.7
Prepaid expenses and other current assets.................... 198.7 92.3 291.0
---------- --------- ----------- ----------
Total current assets..................................... 4,904.8 764.1 5,668.9
Property, plant and equipment, net........................... 3,269.0 461.4 3,730.4
Goodwill and other intangibles, net(3)....................... 4,622.4 702.4 5,324.8
Deferred income taxes........................................ 123.3 123.3
Other assets(3).............................................. 419.0 983.5 (702.4) 700.1
---------- --------- ----------- ----------
Total assets............................................. $ 13,338.5 $ 2,209.0 $ -- $ 15,547.5
---------- --------- ----------- ----------
---------- --------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable and current portion of long-term debt(11)...... $ 255.0 $ 5.4 $ $ 260.4
Accounts payable............................................. 972.7 43.0 1,015.7
Accrued expenses and other current liabilities(6)............ 2,142.5 189.6 50.0 2,382.1
Contracts in process-billings in excess of cost.............. 297.7 297.7
Deferred revenue............................................. 174.1 174.1
Income taxes payable......................................... 375.5 65.2 440.7
Deferred income taxes........................................ 27.7 27.7
---------- --------- ----------- ----------
Total current liabilities................................ 4,245.2 303.2 50.0 4,598.4
Long-term debt(11)........................................... 3,144.4 582.1 3,726.5
Other long-term liabilities.................................. 485.0 485.0
Deferred income taxes........................................ 61.1 30.0 91.1
---------- --------- ----------- ----------
Total liabilities........................................ 7,935.7 915.3 50.0 8,901.0
---------- --------- ----------- ----------
Retained (deficit) earnings(6)............................... (375.8) 417.7 (50.0) (8.1)
Other shareholders' equity................................... 5,778.6 876.0 6,654.6
---------- --------- ----------- ----------
Total shareholders' equity............................... 5,402.8 1,293.7 (50.0) 6,646.5
---------- --------- ----------- ----------
Total liabilities and shareholders' equity............. $ 13,338.5 $ 2,209.0 $ -- $ 15,547.5
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
55
<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. US Surgical has a calendar year end. The historical results
for the six months ended March 31, 1998 and 1997 and the nine months ended
September 30, 1997 have been combined using the actual results of Tyco and
US Surgical for those periods.
(2) The pro forma combined per share amounts are based on the combined weighted
average number of Tyco Common Shares and US Surgical Common Stock
outstanding for all periods presented based on US Surgical stockholders
receiving 0.7606 of a Tyco Common Share for each share of US Surgical Common
Stock held.
(3) Certain reclassifications, none of which affects (loss) income from
continuing operations, have been made to the US Surgical statements of
operations in the pro forma combined condensed statements of operations to
classify research and development expenses and interest income on a
consistent basis. The pro forma adjustments to the balance sheet were
required to classify on a consistent basis goodwill, patents, licenses and
other intangibles.
(4) Basic earnings (loss) per common share from continuing operations for Tyco,
after deducting dividends on Tyco convertible preference shares, was based
on adjusted (loss) income from continuing operations available to common
shareholders of $215.3 million for the six months ended March 31, 1997,
($297.0) million for the twelve months ended December 31, 1996 and $267.2
million for the twelve months ended December 31, 1995. There were no
dividends on Tyco convertible preference shares in Fiscal 1997 and during
the six months ended March 31, 1998.
Diluted earnings 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 $521.3 million for the six months ended March 31, 1998 and
$222.2 million for the six months ended March 31, 1997. The effects on
diluted earnings per common share resulting from the assumed exchange of
LYONS debt are anti-dilutive in Fiscal 1997, 1996 and 1995.
Earnings per common share from continuing operations for US Surgical, after
deducting dividends on US Surgical convertible preferred stock, was based on
income from continuing operations available to common shareholders of $74.4
million for the nine months ended September 30, 1997, $51.9 million for the
six months ended March 31, 1997, $89.6 million for the twelve months ended
December 31, 1996 and $59.7 million for the twelve months ended December 31,
1995. There were no dividends on US Surgical convertible preferred stock
during the six months ended March 31, 1998.
(5) There were no material transactions between Tyco and US Surgical during any
of the periods presented.
(6) Total transaction costs to be incurred by Tyco and US Surgical in connection
with the Merger are estimated to be approximately $50.0 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 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.
56
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION (CONTINUED)
(8) During the six months ended March 31, 1998, US Surgical recorded $12 million
for restructuring charges. On a pro forma combined basis, income from
continuing operations for the six months ended March 31, 1998 before these
non-recurring items was $565.4 million, or $0.90 per common share on a
diluted basis.
During the comparative six months ended March 31, 1997, Tyco recorded
certain restructuring charges related to ADT and its security services
division and certain non-recurring gains (see (10) below). On a pro forma
combined basis, income from continuing operations for the six months ended
March 31, 1997 before these non-recurring items was $366.8 million, or $0.64
per share on a diluted basis.
(9) In Fiscal 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
and $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. During the nine months ended September 30, 1997, US Surgical
recorded charges of $24.3 million for litigation and other related costs and
$5.8 million for restructuring charges. On a pro forma combined basis,
income from continuing operations for Fiscal 1997 before these non-recurring
items, was 643.2 million, or $1.07 per common share on a diluted basis.
(10) In 1996 Tyco recorded certain non-recurring items including (i) a non-cash
charge relating to the write-down of specific assets of ADT Security and ADT
Automotive to their estimated fair values in accordance with SFAS 121, (ii)
a charge principally relating to costs associated with integrating the
businesses of Automated Security (Holdings) plc in the United Kingdom and
the United States into ADT Security, together with the costs of
administrative accounting, management information and technological
infrastructure enhancements currently being implemented in the United States
electronic security services division, (iii) a gain arising on the sale of
Tyco's entire interest in Limelight Group plc, which was recorded in the
balance sheet at a nominal value and (iv) a gain represented by cash
receivable as a result of the settlement of ADT's litigation against BDO
Binder Hamlyn. On a pro forma combined basis, income from continuing
operations for the twelve months ended December 31, 1996 before these
non-recurring items is $647.8 million, or $1.15 per common share on a
diluted basis.
(11) In June 1998, Tyco International Group S.A., a Luxembourg company and a
subsidiary of Tyco, issued $750 million 6 1/8% Notes due 2001, $750 million
6 3/8% Notes due 2005, $750 million 6 1/4% Dealer Remarketable
Securities-SM- (Drs.)-SM- due 2013 and $500 million 7.0% Notes due 2028.
Repayment of amounts outstanding under these debt securities are fully and
unconditionally guaranteed by Tyco. The net proceeds of approximately $2.74
billion were ultimately used to repay borrowings under a $2.2 billion bank
credit facility and uncommitted lines of credit of Tyco US.
57
<PAGE>
BUSINESSES OF TYCO
Tyco is a diversified manufacturing and service company that, through its
subsidiaries, operates in four segments: (i) the design, manufacture and
distribution of disposable medical supplies and other specialty products, and
the conduct of vehicle auctions and related services; (ii) the design,
manufacture, installation and service of fire detection and suppression systems,
and the installation, monitoring and maintenance of electronic security systems;
(iii) the design, manufacture and distribution of flow control products; and
(iv) the design, manufacture and distribution of electrical and electronic
components, and the design, manufacture, installation and service of undersea
cable communication systems.
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.
DISPOSABLE AND SPECIALTY PRODUCTS
The principal divisions in the Disposable and Specialty Products group are
Kendall International ("Kendall"), ADT Automotive and the Tyco Plastics and
Adhesive Group.
Kendall 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. The
Tyco Plastics and Adhesive Group manufactures polyethylene films and packaging,
industrial and consumer plastic products, molded plastic garment hangers,
laminated and coated products and adhesive products and tapes.
KENDALL
Kendall conducts its operations through four business units: Kendall
Healthcare, Kendall International, Sherwood-Davis & Geck and Ludlow Technical
Products. In each of its business units, Kendall competes with numerous
companies, including a number of larger, well-established companies. Kendall
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 Healthcare business unit manufactures and markets a broad range
of wound care, vascular therapy, urological care, incontinence care, anesthetic
care and other products to hospitals in the United States and Canada and to
alternate site health care customers. Kendall Healthcare is the industry leader
in gauze production with its Kerlix-Registered Trademark- and
Curity-Registered Trademark- brands. 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 has become an industry leader in the adult incontinence
market serving both the acute care and long-term care markets. It offers a
complete line of disposable adult briefs, underpads and other related products.
INBRAND also manufactures a broad range of disposable personal absorbent
products, including adult incontinence products, feminine hygiene products and
baby diapers for the clinical and retail markets in North America and Europe.
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Kendall Healthcare distributes its products through its own sales force and
through a network of more than 250 independent distributors. Kendall
Healthcare's sales force is divided into three groups: one promoting its
vascular therapy products, one promoting its wound care and other health care
products and one selling all of its products into the alternate site markets.
Most of the distributors in the United States also sell similar products made by
Kendall's competitors, a practice common in the industry.
Kendall International is responsible for the manufacturing, marketing,
distribution and export of Kendall products worldwide. Kendall International
markets directly to hospitals and medical professionals, as well as through
independent distributors. Its operations are organized primarily into three
geographic regions: Europe, Latin America and the Far East. The range of
products marketed is similar to that of Kendall Healthcare, although the mix of
product lines varies from country to country.
The Sherwood-Davis & Geck division manufactures and distributes medical and
surgical devices, such as catheters, needles and syringes, sutures, thermometers
and other specialized disposable medical products. This division distributes its
products through its own sales force and independent distributors. The products
are distributed around the world with approximately 50% of the sales coming from
within the United States.
The Ludlow Technical Products division manufactures and sells a variety of
disposable medical products, specialized paper and film products. These products
include transcutaneous electrical nerve stimulation electrodes and related
products which are used primarily in physical therapy and other forms of
rehabilitative medicine, medical electrodes for EKGs and similar diagnostic
tests, gels which are used with medical electrodes for testing and other
monitoring purposes, hydrogel wound care products and neonatal electrodes,
diagnostic and monitoring electrodes, defibrillation electrodes, electrotherapy
electrodes and cable and lead wires. The division 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.
These products are marketed primarily by the division's own sales force.
Competitors vary from small regional firms to larger firms that compete on a
national basis. Competition is on the basis of price and quality.
ADT AUTOMOTIVE
ADT Automotive operates a network of 27 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
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appearance reconditioning and paint and body work to bring vehicles up to retail
ready condition. More extensive body work services including body panel painting
and repair of minor collision damage are also carried out. Reconditioning
services are also provided for vehicles other than those going through the
auction process, principally for fleet owners and insurance companies.
ADT Automotive competes with two other significant auction chains and a
large number of independently owned local auctions which are members of the
National Auto Auction Association. Competition is based primarily on price in
relation to the quality and range of services offered to sellers and buyers of
vehicles and on ease of accessibility of auction locations.
TYCO PLASTICS AND ADHESIVE GROUP
The Tyco Plastics and Adhesive Group consists of Armin Plastics, Carlisle
Plastics, A&E Products, Tyco Adhesive 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.
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.
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A&E PRODUCTS
A&E Products sells molded plastic garment hangers to garment manufacturers,
national, regional and local retailers and mass merchants. Garment manufacturers
put their products on A&E Products hangers before shipping to retail outlets.
National retailers purchase customized hanger designs created and manufactured
by A&E Products. Regional and local retailers buy standard A&E Products hanger
lines for retail clothing displays, and A&E Products also supplies mass
merchants with consumer plastic hangers for sale to the general public.
Carlisle and A&E Products operate in a competitive marketplace where success
is dependent upon price, service and quality.
TYCO ADHESIVE
The Tyco Adhesive 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 Adhesive 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 Adhesive 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 Adhesive 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. Tyco 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 largest provider of electronic security services in
the world.
FIRE PROTECTION CONTRACTING AND SERVICES
Operating under several trade names including Grinnell, Wormald, Mather &
Platt, Total Walther, O'Donnell Griffin and Tyco, Tyco designs, fabricates,
installs and services automatic fire sprinkler systems,
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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, 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 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 engages in the installation of
electrical wire and related electrical equipment in new and existing structures
and provides specialized electrical contracting services, including applications
for railroad and bridge construction 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 ("UA"). In
April 1994, following lengthy negotiations, contracts between Tyco's Grinnell
Corporation ("Grinnell") subsidiary and a number of locals of the UA were not
renewed. Employees in those locations, representing 64 percent of those
employees represented by the UA unions, went on strike. Grinnell has continued
to operate with former union members who have crossed over and with replacement
workers. The labor action has not had, and is not expected to have, any material
adverse effect on 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.
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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, 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, 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. It has been
Tyco's experience that commercial and residential contracts are generally
renewed after their initial terms. Contract discontinuances occur principally as
a result of customer relocation or closure. Systems installed at commercial
customers' premises may be owned by 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,
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continental Europe, Asia and New Zealand. 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, 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 in "Flow Control Products" below, and through
independent distributors.
ENVIRONMENTAL SERVICES
Through its Earth Technology Corporation ("Earth Tech") 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.
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 ("Allied"), Mueller Co. ("Mueller") 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.
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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, 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.
The Flow Control Products group, operating under several trade names
including Grinnell, Mueller, Hersey, Keystone, Anderson-Greenwood, Yarway, 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 and Brazil.
DISTRIBUTION
Tyco 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 and France.
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
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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. Tyco 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.
Tyco 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. Tyco competes with several other manufacturers in
the United States and Canada for the sale of iron and brass flow control devices
for water and natural gas distribution systems.
Keystone's products are sold both in the United States and internationally.
Tyco 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.
ELECTRICAL AND ELECTRONIC COMPONENTS
The Electrical and Electronic Components group consists of Tyco Submarine
Systems Ltd. ("TSSL"), Allied's Electrical Conduit division and the Tyco Printed
Circuit Group ("TPCG"). TSSL designs, manufactures, installs and services
undersea communications cable systems. Allied manufactures and distributes
electrical conduit and related components used in commercial electrical
installations. TPCG manufactures printed circuit boards and assembles backplanes
for the electronics industry.
TYCO SUBMARINE SYSTEMS
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 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
TPCG is one of the largest independent manufacturers of complex
multi-layered printed circuit boards and assemblers of backplanes 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 sides or layers that contain circuitry 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 include printed
circuit boards and are assemblies of connectors and other electronic components
which distribute power and interconnect printed circuit boards, power supplies
and other system elements. The group maintains manufacturing facilities in
Connecticut, California and Utah, which provide its customers with prompt
service and delivery capabilities.
TPCG manufactures highly sophisticated double-sided, mass molded boards of
up to eight layers, precision tooled, custom laminated multi-layer boards of up
to 68 layers and sophisticated flex-rigid circuit boards for use in
environmentally demanding conditions. The majority of sales are derived from
high-density multi-layer boards. The backplanes facility produces fully
assembled units utilizing press-fit or soldered connection technology, custom
pin grid array sockets and surface mounted assembly. Printed circuit boards and
backplanes are manufactured on a job order basis to the customers' designs and
specifications.
TPCG markets its products mainly through independent manufacturers'
representatives and, to a lesser extent, through its own internal sales
organization. Customers are generally original equipment manufacturers in the
telecommunications, aircraft, computer, military and other industrial and
consumer electronics industries. Tyco competes with several large companies
which manufacture less complex single-sided and double-sided printed circuit
boards in the United States, as well as with many companies that have their own
in-house manufacturing capabilities. Competition is on the basis of quality,
price, reliability and timeliness of delivery. Tyco believes that fewer
competitors manufacture the more complex, high-density double-sided and
multi-layer boards.
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BUSINESS OF US SURGICAL
US Surgical is a Delaware corporation primarily engaged in developing,
manufacturing and marketing a proprietary line of technologically advanced
surgical products to hospitals throughout the world. US Surgical develops,
manufactures and markets surgical staplers, laparoscopic products and sutures
and products in numerous surgical specialties including spine surgery; vascular
and cardiovascular surgery and interventional cardiology; urology; and
breastcare. US Surgical has also completed the acquisition of Valleylab, the
world's leading manufacturer and marketer of electrosurgical and ultrasound
surgical products. US Surgical currently operates in the U.S. and
internationally.
US Surgical believes that in the evolving domestic health care system, its
products offer a significant opportunity for reducing costs for the total health
care system while providing considerable advantages for the patient. US Surgical
has expanded its marketing efforts to meet the needs of hospital management
through cost effective pricing programs, by assisting hospitals in implementing
more efficient surgical practices, and by demonstrating the favorable economics
associated with the use of US Surgical's products. US Surgical has also
implemented a strategy to expand its product lines beyond general surgery
through a program of acquisitions and alliances in a number of surgical
specialties where US Surgical believes market conditions and product innovation
offer substantial growth opportunities. In addition, US Surgical continues to
expand its product and technology base in its established businesses through
investment in internal research and development and acquisition of new
technologically advanced products that provide better patient care and an
effective means of reducing hospital costs.
For additional information regarding the business of US Surgical, refer to
US Surgical's Form 10-K. See "Where to Find More Information."
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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 the Tyco Memorandum
and the Tyco Bye-Laws. Copies of the Tyco Memorandum and the Tyco Bye-Laws are
incorporated by reference in this Proxy Statement/Prospectus and will be sent to
holders of US Surgical Common Stock 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. 7,500,000 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 June 30, 1998,
there were 585,479,856 Tyco Common Shares outstanding and no Preference Shares
outstanding.
TYCO COMMON SHARES
DIVIDENDS. The Board of Directors of Tyco 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 Board of Directors of Tyco 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 of Directors may approve. The Tyco Board of Directors 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 of Directors may
approve and must
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be lodged at the office of the registrar of Tyco for registration. The Tyco
Board of Directors may decline to register any transfer of shares on which Tyco
has a lien, any transfer of shares not fully paid up, any transfer of shares 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, L.L.C. is the transfer agent for Tyco Common
Shares.
TYCO PREFERENCE SHARES
Under the Tyco Bye-Laws, the Tyco Board of Directors, 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, the Tyco Memorandum or the Tyco Bye-Laws, the Board
of Directors 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, 7,500,000 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 issuable in the Merger be approved for listing on the NYSE at or prior to
the Effective Time, subject to official notice of issuance. Application will
also be made to list such shares on the London Stock Exchange and the Bermuda
Stock Exchange.
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COMPARISON OF SHAREHOLDER RIGHTS
The rights of Tyco shareholders are governed by Bermuda law, the Tyco
Memorandum and the Tyco Bye-Laws. The rights of US Surgical stockholders are
governed by Delaware law, the US Surgical Certificate of Incorporation and the
US Surgical By-laws. Upon consummation of the Merger, Bermuda law, the Tyco
Memorandum and the Tyco Bye-Laws will govern the rights of US Surgical
stockholders who become Tyco shareholders. The following is a summary of certain
of the principal differences between the current rights of US Surgical
stockholders 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, Delaware law, the Tyco
Memorandum, the Tyco Bye-Laws, the US Surgical Certificate of Incorporation and
the US Surgical By-Laws. Copies of the Tyco Memorandum, the Tyco Bye-Laws, the
US Surgical Certificate of Incorporation and the US Surgical By-Laws will be
sent to holders of US Surgical Common Stock upon request. See "Where You Can
Find More Information."
NOTICE OF ANNUAL MEETINGS. The US Surgical By-Laws provide that written
notice of annual stockholder meetings shall be delivered to each shareholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of such meeting, except as otherwise provided by law.
Under the Tyco Bye-Laws, written notice of annual general meetings of
shareholders shall be delivered to shareholders at least five days before the
date of such meeting.
SPECIAL MEETINGS OF THE SHAREHOLDERS. Delaware law provides that special
meetings of stockholders of a company may be called by the board of directors or
by such person or persons as may be authorized by the certificate of
incorporation or by the bylaws of that company. The US Surgical By-Laws provide
that special meetings of the stockholders may be called only by the Board of
Directors, the Chairman of the Board, the President or any Vice President.
Written notice of such meeting shall be delivered to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of such meeting.
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 of Directors, 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.
QUORUM. The US Surgical By-Laws provide that the presence at any meeting of
stockholders, in person or by proxy, of the holders of record of a majority of
the shares then issued and outstanding and entitled to vote shall be necessary
and sufficient to constitute a quorum for the transaction of business, except as
otherwise provided by law.
The Tyco Bye-Laws provide that the presence, either in person or by proxy,
of two holders of Tyco Common Shares form a quorum for the transaction of
business at any general meeting.
VOTING RIGHTS. Pursuant to the US Surgical Certificate of Incorporation,
stockholders are entitled to one vote for each share of common stock held by
such stockholder on all matters on which shareholders generally are entitled to
vote. Under the US Surgical By-Laws, directors shall be chosen by a plurality of
the votes cast at an election, and, except as otherwise provided by law or by
the US Surgical Certificate of Incorporation, all other questions shall be
determined by a majority of the votes cast on such question. No share shall be
entitled to vote if any installment payable thereon to the company is overdue
and unpaid. The US Surgical By-Laws and Certificate of Incorporation, and
Delaware law, do not provide for stockholder voting by a show of hands.
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Under Bermuda law questions proposed for consideration at a company's
general meeting shall be decided by a simple majority vote or by such majority
as the bye-laws of a 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 shall be 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 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 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 Directors of such loss of right.
Delaware law allows for cumulative voting provided that the company's
articles of incorporation allow for cumulative voting. Under cumulative voting,
each shareholder casts as many votes for directors as he or she has shares of
stock multiplied by the number of directors to be elected. The US Surgical
By-Laws and Certificate of Incorporation do not provide for cumulative voting.
Bermuda law allows, but does not require, cumulative voting for the election
of directors. Tyco shareholders do not have cumulative voting rights for the
election of directors, either under Bermuda law or under the Tyco Bye-Laws.
ACTION BY CONSENT. The US Surgical By-Laws provide that any action which
might have been taken by a vote of the stockholders at a meeting thereof may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing setting forth the action so taken shall be individually signed and
dated by the holders of all outstanding shares entitled to vote thereon,
provided that no written consent will be effective unless the necessary number
of written consents is delivered to the Corporation within sixty days of the
earliest delivered consent to the Corporation.
Pursuant to Bermuda law, action by written consent of shareholders is
permitted where the written resolution is signed by all of the shareholders who
would be entitled to attend and vote at a meeting, with the exception of a
resolution to remove an auditor or a director before the expiration of his or
her term of office.
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STOCKHOLDER PROPOSALS. The US Surgical By-Laws provide that notice 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 stockholders by a stockholder
must be provided in writing to the company not later than 60 days prior to the
meeting, nor earlier than 120 days prior to the meeting. As to each person whom
the stockholder proposes to nominate for election as a director, the notice
shall set forth all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, and evidence
reasonably satisfactory to the company that such nominee has no interests that
would limit their ability to fulfill their duties of office. As to any other
business that the stockholder proposes to bring before the meeting, the notice
shall set forth a brief description of the business, the reasons for conducting
such business at the meeting, and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made.
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 other than the circumstance of a
director retiring at a general meeting of shareholders, or unless recommended by
the Tyco Board of Directors, advance written notice to the Secretary of Tyco of
shareholder nominations of persons for election to the Tyco Board of Directors
is required. To be timely, 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 Delaware law, any shareholder, upon written demand
under oath stating the purpose of the requested inspection, has the right to
inspect the company's stock ledger, a list of its shareholders, and its other
books and records for any purpose reasonably related to such person's interest
as a shareholder. If the company refuses to permit such an inspection or does
not reply to the shareholder's inspection demand within 5 business days after
the demand has been made, then the shareholder may apply to the Court of
Chancery 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.
DIVIDENDS. Under Delaware law, the directors of a company, subject to any
restrictions in the company's certificate of incorporation, may declare and pay
dividends out of the company's surplus (i.e. the excess of the net assets of the
company over the company's capital). Alternatively, dividends may be paid out of
the company's net profits for the fiscal year in which the dividend is declared
and/or the preceding fiscal year. A dividend may not be declared if the capital
of the company has been diminished to an amount less than the aggregate amount
of the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets.
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
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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 Delaware law, a shareholder may institute a
derivative suit in the right of the company against the shareholders, officers
or directors of a company 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. In addition, the shareholder bringing the derivative
suit must be an adequate representative of the interests of the company in
enforcing the rights of the company.
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.
The court retains the discretion to make such order as it may think fit.
BOARD OF DIRECTORS. Under Delaware law, the board of directors of a company
shall consist of one or more members. The US Surgical By-Laws provide that the
number of directors which shall constitute the Board of Directors shall be fixed
from time to time by resolution of the Board of Directors or stockholders, with
any such resolution of either the Board of Directors or stockholders being
subject to any later resolution of either of them. The US Surgical Certificate
of Incorporation provides that elections of directors need not be by ballot
unless the By-Laws of the company so provide. The US Surgical By-Laws do not
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. Delaware law allows the directors
of a company to be divided into one, two or three classes, with the effect that
directors are elected and serve for staggered terms. The US Surgical Board of
Directors is not classified, and the US Surgical By-Laws do not contemplate a
classified board.
The Tyco Board is not classified, and the Tyco Bye-Laws do not contemplate a
classified board. Under Bermuda law, the election of directors of a company may
be regulated by its bye-laws or otherwise
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determined by the company in general meeting. The Tyco Bye-Laws do not prescribe
any particular term of office for a director, except one appointed to fill a
casual vacancy.
REMOVAL OF DIRECTORS; VACANCIES ON THE BOARD OF DIRECTORS. Under Delaware
law, any director or the entire board of directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except (i) that class-designated directors may be
removed only for cause (unless the articles of incorporation otherwise provide);
and (ii) for companies with cumulative voting, if less than the entire board is
to be removed, no director may be removed without cause if the votes cast
against his or her removal would be sufficient to elect him or her if then
cumulatively voted at an election of the entire board of directors, or, if there
be classes of directors, at an election of the class of directors of which he or
she is a part. Under Delaware law, the board of directors fills any vacancy on
the board of directors
The US Surgical By-Laws provide that at any special meeting of the
stockholders any director or directors may be removed from office, with or
without cause, as provided by law. At such meeting, a successor or successors
may be elected by a plurality of the votes cast, or if any such vacancy is not
so filled, it may be filled by a majority of the directors then in office, or a
sole remaining director, though less than a quorum, may fill any such vacancy.
US Surgical does not have class-designated directors or cumulative voting.
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 further provide that any director may at any time be removed from office by
a written resolution signed by all the other Tyco directors. The remaining Tyco
directors have the power to appoint any qualified person to fill a casual
vacancy in the Tyco Board who will 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. Under Delaware law, a company's bylaws or
articles of incorporation may include a provision eliminating or limiting the
personal liability of a director to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision will not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its shareholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) for acts pertaining to the
unlawful payment of dividend or unlawful stock purchase or redemption; or (iv)
for any transaction from which the director derived an improper personal
benefit. The US Surgical Certificate of Incorporation includes such an
exculpatory provision.
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. Delaware law provides
that a company may indemnify any director, officer, employee or agent 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, he or she had no reasonable cause to believe
his or her conduct was unlawful. In addition, to the extent that a present or
former director or officer of the company has been successful on the merits or
otherwise in defense of any suit referred to above, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense.
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The US Surgical By-Laws provide that the company shall indemnify, in the
manner and to the full extent permitted by law, any person who was or is a party
to, or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, by reason of the fact that such person is or was a
director, officer, employee or agent of the company.
Delaware law permits a company to purchase insurance on behalf of any person
who is or was a director, officer, employee or agent of the company against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of Section 145 of the DGCL. The US Surgical By-Laws provide
that the company may, to the full extent permitted by law, purchase and maintain
insurance for directors, officers, employees or agents of the company on behalf
of any such person against any liability which may be asserted against such
person.
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.
INTERESTED DIRECTOR TRANSACTIONS. Under Delaware law, a transaction between
a company and one or more of its directors and officers, or between a company
and another company (or other organization) in which one or more of its
directors or officers, are directors or officers, or have a financial interest,
shall not be void solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board, or committee,
which authorizes the contract or transaction, or solely because his or her or
their votes are counted for such purpose, if: (i) the material facts as to his
or her relationship or interest, and as to the contract or transaction, are
disclosed or are known to the board of directors or the committee, and the board
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or her relationship or interest, and as to the contract or transaction, are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the company as
of the time it is authorized, approved or ratified, by the board of directors, a
committee or the shareholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors, or
of a committee, which authorizes the contract or transaction.
The Tyco Bye-Laws provide that no director is disqualified from contracting
with Tyco, and no contract will be avoided by reason of such director holding
that office, or of the fiduciary relationship thereby established, if the
requisite disclosure by the interested director is made. A director who to his
or her knowledge is in any way, whether directly or indirectly, interested in a
contract or arrangement with Tyco shall declare the nature of his or her
interest at the meeting of the directors at which the question of entering into
the contract or arrangement is first taken into consideration, if he or she
knows his or her interest then exists, or in any other case at the first meeting
of the directors after he or she knows that he
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or she is or has become so interested. Subject to certain exceptions, an
interested director shall not be counted towards a quorum, nor vote, with
respect to the board of directors' authorization of such contract. Failure to
make a declaration of interest constitutes a breach of duty of a director under
Bermuda law.
AMENDMENTS TO CONSTITUTIONAL DOCUMENTS. Delaware law provides that
amendments to the certificate of incorporation (after a corporation has received
payment for any of its capital stock) require the affirmative vote of a majority
of the outstanding stock entitled to vote thereon, and of a majority of the
outstanding stock of each class entitled to vote thereon as a class. The holders
of the outstanding shares of a class shall be entitled to vote as a class upon a
proposed amendment, whether or not entitled to vote thereon by the certificate
of incorporation, if the amendment would increase or decrease the aggregate
number of authorized shares of such class, increase or decrease the par value of
the shares of such class, or alter or change the power, preferences, or special
rights of the shares of such class so as to affect them adversely.
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).
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. 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
shareholder 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.
Under Delaware law, after a company has received any payment for any of its
stock, the power to adopt, amend or repeal bylaws lies with the shareholders
entitled to vote, unless the company's certificate of incorporation confers
these powers on the directors. In the latter circumstance, however, the
shareholders retain their power to adopt, amend or repeal bylaws. The US
Surgical Certificate of Incorporation gives the Board of Directors the power to
adopt, amend and repeal from time to time the US Surgical By-Laws. The US
Surgical By-Laws provide that all By-Laws of the company may be amended or
repealed, and new By-Laws made, by an affirmative majority of the votes cast at
any annual or special stockholders' meeting by holders of outstanding shares of
stock of the company entitled to vote, or by an affirmative vote of a
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majority of the directors present at any organizational, regular, or special
meeting of the Board of Directors.
Pursuant to Bermuda law and the Tyco Bye-Laws, 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 of the Tyco
shareholders.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS. Delaware law provides that
the merger or the sale, lease or exchange of all or substantially all of a
company's property and assets must be approved by a majority of the outstanding
stock of the company entitled to vote thereon.
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 assets of the company to another company. Any such
compromise or arrangement requires the 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.
PROVISIONS CONCERNING CERTAIN BUSINESS COMBINATIONS. Delaware law prohibits
a company from engaging in any business combination with any interested
shareholder for a period of 3 years following the time that such shareholder
became an interested shareholder, unless: (i) prior to such time the board of
directors of the company approved either the business combination or the
transaction which resulted in the shareholder becoming an interested
shareholder; or (ii) upon consummation of the transaction which resulted in the
shareholder becoming an interested shareholder, the interested shareholder owned
at least 85% of the outstanding voting stock (excluding for purposes of
determining the number of shares outstanding shares owned by directors who are
also officers and by certain employee plans); or (iii) on or after such time
that the shareholder became an interested shareholder, the business combination
is approved by the board of directors and by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the interested
shareholder. Such business combinations include mergers, asset sales and other
transactions resulting in a financial benefit to the interested shareholder. An
interested shareholder is a person (other than the company or a majority-owned
subsidiary of the company) who, alone or together with affiliates and
associates, owns 15% or more of the outstanding voting stock of the company, or
who is an affiliate or associate of the company and was the owner, alone or with
affiliates, of 15% or more of the outstanding voting stock of the company at any
time within the previous 3 years.
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.
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Tyco Bye-Law 104(3) further provides that where any person is interested in
30% or more of the company's outstanding shares, the Tyco Board of Directors may
serve a notice requiring that person to make an offer for all of the outstanding
securities of Tyco if the Tyco Board of Directors 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 of
Directors 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 directors
in their sole discretion. Unless the Tyco Board of Directors otherwise agree,
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 of Directors 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 to dispose, or to procure the disposal by any person with whom such
person has acted in concert, of any interest in shares acquired within 28 days
of the date of such notice. 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, on any change in that person's interest
amounting to one percent or more of the issued capital of any class, of such
change. Any such notification 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 provisions,
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, 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 shall 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 such 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.
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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 Delaware law, where at least 90% of outstanding
shares of each class of the stock of a company is owned by another company, the
parent company may merge such other company into itself by vote of the parent
company's directors only.
Bermuda law provides for short form mergers between companies and their
wholly-owned subsidiaries.
APPRAISAL RIGHTS. Pursuant to Delaware law, shareholders may demand
appraisal of their shares in the case of a merger or a consolidation, except
where: (i) they are shareholders of the surviving company and the merger did not
require their approval under Delaware law; or (ii) the company's shares are
either listed on a national securities exchange or NASDAQ, or held of record by
more than 2,000 shareholders, as of the record date for the vote on such merger
or consolidation. Appraisal rights are available in either (i) or (ii) above,
however, if the shareholders are required by the terms of the merger or
consolidation to accept any consideration other than: (a) stock of the company
surviving or resulting from the merger or consolidation; (b) shares of stock of
another company which at the effective date of the merger or consolidation will
be either listed on a national securities exchange or NASDAQ, or held of record
by more than 2,000 shareholders; (c) cash in lieu of fractional shares; or (d)
any combination of the foregoing.
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. 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 Delaware law, subject to any provisions in
the certificate of incorporation, every company may create and issue rights or
options entitling the holders thereof to purchase from the corporation any
shares of its capital stock of any class or classes. The price and terms of such
shares shall be stated in the certificate of incorporation. US Surgical has not
adopted a shareholder rights or similar plan.
In November 1996, Tyco adopted a Shareholder Rights Plan which was amended
in March and July, 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 of Directors 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).
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OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement/Prospectus will be brought before the Special Meeting. If any other
matters are presented, however, it is the intention of the persons named in the
US Surgical 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 US Surgical
stockholders 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, 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 and owns 68,000 Tyco Common Shares. Certain legal matters in
connection with the Merger will be passed upon for US Surgical by Skadden, Arps,
Slate, Meagher & Flom, L.L.P., New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedule
included in Tyco's Transition Report on Form 10-K for the fiscal year ended
September 30, 1997 and included in Tyco's Current Report on Form 8-K dated April
23, 1998 and incorporated by reference in this Proxy Statement/Prospectus have
been audited by PricewaterhouseCoopers, independent public accountants, as set
forth in their reports included therein. In those reports, that firm states that
with respect to certain subsidiaries its opinion is based upon the reports of
other independent public accountants, namely PricewaterhouseCoopers LLP and
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 those firms as experts in
accounting and auditing.
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from the Annual
Report on Form 10-K of US Surgical for the year ended December 31, 1997 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
With respect to the unaudited interim financial information of US Surgical
for the periods ended March 31, 1998 and 1997 which is incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their report included in the quarterly report on Form 10-Q of US Surgical for
the quarter ended March 31, 1998 and incorporated by reference herein, they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. Deloitte & Touche LLP are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their report on the
unaudited interim financial information because such report is not a "report" or
a "part" of the registration statement prepared or certified by an accountant
within the meaning of section 7 and 11 of the Act.
FUTURE STOCKHOLDER PROPOSALS
Due to the contemplated consumation of the Merger, US Surgical does not
currently expect to hold a 1999 Annual Meeting of Stockholders because US
Surgical will be a wholly owned subsidiary of Tyco following the Merger. In the
event the Merger is not consummated, proposals of US Surgical stockholders to be
included in the proxy statement to be mailed to all US Surgical stockholders
entitled to vote at the 1999 Annual Meeting of US Surgical stockholders must be
received at US Surgical's principal executive
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offices either (1) within a reasonable time after US Surgical announces publicly
the date of the meeting and before US Surgical mails its proxy statement to
stockholders in connection with such meeting, or (ii) no later than November 30,
1998, if US Surgical shall have announced publicly its intent not to consummate
the Merger prior to such date.
WHERE TO FIND MORE INFORMATION
Tyco and US Surgical file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or other information filed by Tyco and US Surgical at the
Commission's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The filings of Tyco and US Surgical
with the Commission are also available to the public from commercial document
retrieval services and at the world wide web site maintained by the Commission
at "http://www.sec.gov."
Tyco filed a Registration Statement on Form S-4 to register with the
Commission the Tyco Common Shares to be issued to US Surgical stockholders in
the Merger. This Proxy Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of Tyco in addition to being a proxy
statement of US Surgical. As allowed by Commission rules, this Proxy
Statement/Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
The Commission allows Tyco and US Surgical to "incorporate by reference"
information into this Proxy Statement/Prospectus, which means that they can
disclose important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be part of this Proxy Statement/Prospectus, except for any information
superseded by information in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that Tyco and US Surgical have previously filed with the Commission. These
documents contain important information about Tyco and US Surgical and their
finances.
<TABLE>
<CAPTION>
TYCO COMMISSION FILINGS (FILE NO. 0-16979) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Transition Reports on Form 10-K and 10-K/A Fiscal year ended September 30, 1997
Quarterly Reports on Form 10-Q Quarters ended December 31, 1997 and
March 31, 1998
Current Reports on Form 8-K Filed on March 6, 1998, March 11, 1998, April 23, 1998,
May 13, 1998 and June 24, 1998
</TABLE>
<TABLE>
<CAPTION>
US SURGICAL COMMISSION FILINGS (FILE NO. 1-9776) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year Ended December 31, 1997
Quarterly Report on Form 10-Q Quarter Ended March 31, 1998
Current Reports on Form 8-K Filed on February 11, 1998 and March 5, 1998
</TABLE>
Tyco and US Surgical are also incorporating by reference additional
documents that they file with the Commission between the date of this Proxy
Statement/Prospectus and the date of the Special Meeting.
Tyco has supplied all information contained or incorporated by reference in
this Proxy Statement/ Prospectus relating to Tyco, and US Surgical has supplied
all such information relating to US Surgical.
If you are a stockholder, Tyco and US Surgical may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
Tyco, US Surgical or the Commission. Documents incorporated by reference are
available from Tyco and US Surgical without charge. Exhibits to the documents
will not be sent, however, unless those exhibits have specifically been
incorporated by reference as exhibits in this Proxy Statement/Prospectus.
Stockholders may obtain documents incorporated by reference in this Proxy
Statement/Prospectus by requesting them in writing or by telephone from the
appropriate party at the following address:
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<TABLE>
<S> <C>
Tyco International Ltd. United States Surgical Corporation
The Gibbons Building 150 Glover Avenue
10 Queen Street, Suite 301 Norwalk, Connecticut 06856
Hamilton HM11, Bermuda USA
(441) 292-8674 (203) 845-1404
</TABLE>
If you would like to request documents from Tyco or US Surgical, please do
so by , 1998 to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. NEITHER TYCO
NOR US SURGICAL HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED , 1998. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF TYCO COMMON SHARES IN
THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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GLOSSARY
<TABLE>
<CAPTION>
TERM DEFINITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Acquisition Proposals........................ Any inquiries or proposals regarding any merger, sale of
substantial assets, sale of shares of capital stock or similar
transactions involving US Surgical or any of its subsidiaries.
Adjusted Option.............................. A Stock Option assumed by Tyco at the Effective Time and deemed to
constitute an option to acquire Tyco Common Shares, as provided in
the Merger Agreement.
ADT.......................................... ADT Limited (now Tyco International Ltd.)
ADT Automotive............................... A division of Tyco's Disposable and Specialty Products group which
operates vehicle auction centers.
ADT Security................................. A division of Tyco's Electronic Security Services division.
ADT Merger................................... The business combination on July 2, 1997 of Former Tyco and ADT.
Allied....................................... Allied Tube & Conduit Corporation, one of the principal Tyco
subsidiaries in Tyco's Flow Control Products group.
Antitrust Division........................... The Antitrust Division of the U.S. Department of Justice.
Certificate of Merger........................ The Certificate of Merger to be filed with the Secretary of State
of the State of Delaware to effectuate the Merger.
Chase........................................ Chase Securities Inc.
Chase Opinion................................ Chase's opinion to the US Surgical Board of Directors dated May
25, 1998 and attached to this Proxy Statement/ Prospectus as Annex
B.
City Code.................................... City Code on Takeovers and Mergers of the United Kingdom.
Closing Price................................ On any day, the last reported sale price of one Tyco Common Stock
on the NYSE Composite Transaction Tape.
Code......................................... The United States Internal Revenue Code of 1986, as amended.
Commission................................... The Securities and Exchange Commission.
DGCL......................................... The Delaware General Corporation Law, as amended.
Earth Tech................................... Earth Technology Corporation, a subsidiary of Tyco.
"dollars" or $............................... United States dollars.
EBIT......................................... Earnings Before Income Taxes.
EBITDA....................................... Earnings Before Income Taxes, Depreciation and Amortization.
EC Commission................................ Commission of the European Communities.
EC Merger Regulation......................... Council Regulation (EEC) No. 4064/89 of 21 December, 1989 on the
control of concentrations.
Effective Time............................... The time of the filing of the Certificate of Merger.
EPS.......................................... Earnings Per Share
</TABLE>
G-1
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Exchange Act................................. The United States Securities Exchange Act of 1934, as amended.
Exchange Agent............................... ChaseMellon Shareholder Services, L.L.C, or such other bank or
trust company mutually designated by US Surgical and Tyco as the
exchange agent for the Merger.
Exchange Ratio............................... 0.7606 of a Tyco Common Share for each outstanding share of US
Surgical Common Stock.
Fee.......................................... The $125 million termination fee payable by US Surgical if the
Merger Agreement is terminated under certain circumstances.
Fiscal 1997.................................. Tyco's nine-month transition fiscal period ended September 30,
1997.
Fiscal 1998.................................. Tyco's fiscal year ending September 30, 1998.
"5% transferee shareholders"................. This term is defined in United States Treasury Regulation Section
1.367(a)-3(c)(5)(ii) and, as it relates to the Merger, means a US
Surgical stockholder who will own 5% or more of either the total
voting power or the total value of the outstanding Tyco Common
Shares immediately after the Effective Time (determined after
taking into account ownership under the applicable attribution
rules of the Code).
Foreign Monopoly Laws........................ Any applicable foreign laws intended to prohibit, restrict, or
regulate actions having the purpose or effect of monopolization or
restraint of trade.
Former Tyco.................................. Prior to the ADT Merger, Tyco International Ltd. (now Tyco
International (US) Inc.).
FTC.......................................... The United States Federal Trade Commission.
Grinnell..................................... Grinnell Corporation, a subsidiary of Tyco.
HSR Act...................................... The United States Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
IBES......................................... Institutional Brokers Estimate System.
INBRAND...................................... INBRAND Corporation, a subsidiary of Tyco acquired in August 1997.
incorporate by reference..................... Information in another document filed with the Commission is
deemed to be a part of this Proxy Statement/Prospectus.
Kendall...................................... Kendall International, a division of Tyco's Disposable and
Specialty Products group.
Keystone..................................... Keystone International, Inc., a subsidiary of Tyco acquired in
August, 1997.
LTM.......................................... Latest Twelve Months
Material Adverse Effect...................... Please see Section 1.13 of the Merger Agreement attached as Annex
A for a complete definition of this term.
</TABLE>
G-2
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Merger....................................... The merger of US Surgical with Merger Sub.
Merger Agreement............................. The Agreement and Plan of Merger, dated as of May 25, 1998, by and
among Tyco, Merger Sub and US Surgical and attached to this Proxy
Statement/Prospectus as Annex A.
Merger Consideration......................... The Tyco Common Shares, dividends and distributions, if any,
declared or made after the Effective Time with respect to Tyco
Common Shares and cash in respect of Tyco fractional shares, if
any, to be received by holders of US Surgical Common Stock in
exchange therefor.
Merger Sub................................... T11 Acquisition Corp., a wholly owned subsidiary of Tyco.
Mergers...................................... The 1997 mergers of Tyco with Former Tyco, INBRAND and Keystone,
respectively, each of which was accounted for as a pooling of
interests.
NYSE......................................... New York Stock Exchange.
Opposing Proposal............................ Any Acquisition Proposal made in opposition to or in competition
with the Merger, any corporate transaction of US Surgical with any
person other than Tyco or its affiliates, and any liquidation or
winding up of US Surgical.
PAS.......................................... Progressive Angioplasty Systems, Inc., acquired by US Surgical in
1997.
PAS Obligations.............................. Certain contingent obligations of US Surgical to issue shares of
US Surgical Common Stock to certain former stockholders of PAS.
pooling of interests......................... A method of accounting under which the recorded assets and
liabilities of the parties to a merger are carried forward to the
combined corporation at their recorded amounts, subject to any
adjustments required to conform the accounting policies of the
companies.
Preference Shares............................ Preference shares of Tyco, par value $1 per share.
Record Date.................................. , the record date for US Surgical stockholders entitled to receive
notice of and to vote at the Special Meeting.
Registration Statement....................... Registration Statement on Form S-4, as amended, (file no.
333- ) filed with the Commission of which this Proxy
Statement/Prospectus is a part.
Retained Employees........................... Persons who immediately prior to the Effective Time were employees
of US Surgical or its subsidiaries.
SARs......................................... Rules Governing Substantial Acquisitions of Shares of the United
Kingdom.
Securities Act............................... The United States Securities Act of 1933, as amended.
SFAS 121..................................... Statements of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets to be Disposed Of."
Shareholder Rights Plan...................... Tyco's Shareholder Rights Plan adopted in 1996.
</TABLE>
G-3
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Special Meeting.............................. The special meeting of US Surgical stockholders on to
consider and vote upon the Merger and the Merger Agreement.
Stockholder Agreements....................... Agreements entered into by the Stockholders with respect to the
securities of US Surgical held by them.
Stockholders................................. Leon C. Hirsch, US Surgical's Chairman of the Board and Chief
Executive Officer, and Turi Josefsen, US Surgical's Executive Vice
President and President, International Operations. Mr. Hirsch and
Ms. Josefsen beneficially own, in the aggregate, % of the
outstanding shares of US Surgical Common Stock as of the Record
Date.
Stock Option................................. An option under the US Surgical Stock Option Plans to purchase
shares of US Surgical Common Stock outstanding at the Effective
Time.
Subject Securities........................... Voting securities of US Surgical beneficially owned by a
Stockholder.
Surviving Corporation........................ US Surgical as the continuing corporation following the Merger.
Terminating Breach........................... A breach of any covenant or agreement on the part of US Surgical
or Tyco, respectively, set forth in the Merger Agreement that
gives rise to the right of the non-breaching party to terminate
the Merger Agreement.
Terminating Change........................... A US Surgical Terminating Change or a Tyco Terminating Change.
Terminating Misrepresentation................ A representation or warranty of US Surgical or Tyco, respectively,
set forth in the Merger Agreement is untrue when made and such
failure to be true is reasonably expected to have a Material
Adverse Effect on the misrepresented party.
TIN.......................................... Taxpayer Identification Number.
TPCG......................................... Tyco Printed Circuit Board Group.
Transfer Taxes............................... Any state or local transfer taxes imposed on US Surgical
stockholders as a result of the Merger.
TSSL......................................... Tyco Submarine Systems Ltd., a subsidiary of Tyco and a part of
Tyco's Electrical and Electrical Components group.
Tyco......................................... Tyco International Ltd., a Bermuda company.
Tyco Bye-Laws................................ The Bye-laws of Tyco.
Tyco Common Shares........................... The common shares of Tyco, par value $0.20 per share.
Tyco Comparables............................. The 11 diversified companies deemed by Chase to be reasonably
similar to Tyco.
Tyco Memorandum.............................. The Tyco Memorandum of Association.
</TABLE>
G-4
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Tyco Street Case............................. A scenario analyzed by Chase and based on discussion with Tyco's
management and a set of financial forecasts that comprised an
average of publicly available analysts' estimates of Tyco's future
performance.
Tyco Street Case with Synergies.............. A scenario analyzed by Chase which added certain synergies to the
Tyco Street Case scenario.
Tyco Terminating Change...................... A representation or warranty of Tyco set forth in the Merger
Agreement becomes untrue prior to the Effective Time and such
untruth is reasonably expected to result in a Material Adverse
Effect on Tyco.
Tyco US...................................... Tyco International (US) Inc., Tyco's principal U.S. subsidiary.
Tyco's Form 10-K............................. Tyco's Transition Report on Form 10-K for the nine month
transition period ended September 30, 1997.
UA........................................... United Association of Plumbers and Pipefitters
U.S.......................................... United States
US Surgical.................................. United States Surgical Corporation.
US Surgical Common Stock..................... US Surgical common stock, par value $0.10 per share.
US Surgical's Form 10-K...................... US Surgical's Annual Report on Form 10-K for the year ended
December 31, 1997.
US Surgical Management Case.................. A scenario analyzed by Chase and based upon projections provided
by US Surgical management.
US Surgical Management Sensitivity Case...... A scenario analyzed by Chase which adjusted downward the US
Surgical Management Case based on a range of several contingencies
reviewed by US Surgical management.
US Surgical Selected Comparables............. Arrow International Inc., Baxter International Inc., Becton,
Dickinson & Co.; C.R. Bard, Inc.
US Surgical Broad Universe Comparables....... The group of nine medical products companies (including the US
Surgical Selected Comparables) to which Chase compared US
Surgical.
US Surgical Street Case...................... A scenario analyzed by Chase and based on a set of financial
forecasts that comprised an average of publicly available
analysts' estimates of US Surgical's future performance.
US Surgical Stock Option Plans............... US Surgical 1990 Employee Stock Option Plan, the US Surgical 1993
Employee Stock Option Plan, the US Surgical 1996 Employee Stock
Option Plan, the US Surgical 1997 Key Management Equity Investment
Plan, the PAS Stock Option Plans, the US Surgical 1997 Stock
Option Purchase Agreement, the US Surgical Serviced Based Stock
Option Plan, US Surgical's Outside Directors Stock Option Plan or
any other stock option plan or agreement of US Surgical.
</TABLE>
G-5
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
US Surgical Terminating Change............... A representation or warranty of US Surgical set forth in the
Merger Agreement becomes untrue prior to the Effective Time and
such untruth is reasonably expected to result in a Material
Adverse Effect on US Surgical.
U.S. GAAP.................................... Generally accepted accounting principles in the United States.
Wells Fargo Alarm............................ The Wells Fargo Alarm business of Borg-Warner Security Corporation
acquired by a subsidiary of Tyco in May, 1998.
</TABLE>
G-6
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TYCO INTERNATIONAL LTD.,
T11 ACQUISITION CORP.
AND
UNITED STATES SURGICAL CORPORATION
Dated as of May 25, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
THE MERGER................................................................ A-1
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. Certificate of Incorporation; By-Laws.................................... A-2
SECTION 1.05. Directors and Officers................................................... A-2
SECTION 1.06. Effect on Capital Stock.................................................. A-2
SECTION 1.07. Exchange of Certificates................................................. A-4
SECTION 1.08. Stock Transfer Books..................................................... A-5
SECTION 1.09. No Further Ownership Rights in Company Common Stock...................... A-6
SECTION 1.10. Lost, Stolen or Destroyed Certificates................................... A-6
SECTION 1.11. Tax and Accounting Consequences.......................................... A-6
SECTION 1.12. Taking of Necessary Action; Further Action............................... A-6
SECTION 1.13. Material Adverse Effect.................................................. A-6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. A-7
SECTION 2.01. Organization and Qualification; Subsidiaries............................. A-7
SECTION 2.02. Certificate of Incorporation and By-Laws................................. A-7
SECTION 2.03. Capitalization........................................................... A-8
SECTION 2.04. Authority Relative to this Agreement..................................... A-8
SECTION 2.05. No Conflict; Required Filings and Consents............................... A-8
SECTION 2.06. Compliance; Permits...................................................... A-9
SECTION 2.07. SEC Filings; Financial Statements........................................ A-10
SECTION 2.08. Absence of Certain Changes or Events..................................... A-10
SECTION 2.09. No Undisclosed Liabilities............................................... A-10
SECTION 2.10. Absence of Litigation.................................................... A-11
SECTION 2.11. Employee Benefit Plans; Employment Agreements............................ A-11
SECTION 2.12. Labor Matters............................................................ A-13
SECTION 2.13. Registration Statement; Proxy Statement/Prospectus....................... A-13
SECTION 2.14. Restrictions on Business Activities...................................... A-14
SECTION 2.15. Title to Property........................................................ A-14
SECTION 2.16. Taxes.................................................................... A-14
SECTION 2.17. Environmental Matters.................................................... A-15
SECTION 2.18. Brokers.................................................................. A-17
SECTION 2.19. Intellectual Property.................................................... A-17
SECTION 2.20. Interested Party Transactions............................................ A-18
SECTION 2.21. Insurance................................................................ A-18
SECTION 2.22. Product Liability and Recalls............................................ A-18
SECTION 2.23. Opinion of Financial Advisor............................................. A-18
SECTION 2.24. Pooling Matters.......................................................... A-18
SECTION 2.25. Tax Matters.............................................................. A-19
SECTION 2.26 Accuracy of Information................................................... A-19
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................... A-20
SECTION 3.01. Organization and Qualification; Subsidiaries............................. A-20
SECTION 3.02. Articles of Organization and By-Laws..................................... A-20
SECTION 3.03. Capitalization........................................................... A-20
SECTION 3.04. Authority Relative to this Agreement..................................... A-21
SECTION 3.05. No Conflict; Required Filings and Consents............................... A-21
SECTION 3.06. Compliance; Permits...................................................... A-22
SECTION 3.07. SEC Filings; Financial Statements........................................ A-22
SECTION 3.08. Absence of Certain Changes or Events..................................... A-23
SECTION 3.09. No Undisclosed Liabilities............................................... A-23
SECTION 3.10. Absence of Litigation.................................................... A-23
SECTION 3.11. Employee Benefit Plans; Employment Agreements............................ A-23
SECTION 3.12. Labor Matters............................................................ A-25
SECTION 3.13. Registration Statement; Proxy Statement/Prospectus....................... A-26
SECTION 3.14. Restrictions on Business Activities...................................... A-26
SECTION 3.15. Title to Property........................................................ A-26
SECTION 3.16. Taxes.................................................................... A-26
SECTION 3.17. Environmental Matters.................................................... A-27
SECTION 3.18. Brokers.................................................................. A-28
SECTION 3.19. Intellectual Property.................................................... A-28
SECTION 3.20. Interested Party Transactions............................................ A-28
SECTION 3.21. Insurance................................................................ A-29
SECTION 3.22. Product Liability and Recalls............................................ A-29
SECTION 3.23. Ownership of Merger Sub; No Prior Activities............................. A-29
SECTION 3.24. Pooling Matters.......................................................... A-29
SECTION 3.25. Tax Matters.............................................................. A-29
SECTION 3.26. DGCL Section 203......................................................... A-29
SECTION 3.27. Accuracy of Information.................................................. A-29
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.................................... A-30
SECTION 4.01. Conduct of Business by the Company Pending the Merger.................... A-30
SECTION 4.02. No Solicitation.......................................................... A-31
SECTION 4.03. Conduct of Business by Parent Pending the Merger......................... A-32
ARTICLE V
ADDITIONAL AGREEMENTS..................................................... A-33
SECTION 5.01. Proxy Statement/Prospectus; Registration Statement....................... A-33
SECTION 5.02. Company Shareholders Meeting............................................. A-33
SECTION 5.03. Access to Information; Confidentiality................................... A-33
SECTION 5.04. Consents; Approvals...................................................... A-33
SECTION 5.05. Agreements with Respect to Affiliates.................................... A-34
SECTION 5.06. Indemnification and Insurance............................................ A-34
SECTION 5.07. Notification of Certain Matters.......................................... A-35
SECTION 5.08. Further Action/Tax Treatment............................................. A-35
SECTION 5.09. Public Announcements..................................................... A-36
SECTION 5.10. Listing of Parent Shares................................................. A-36
SECTION 5.11. Conveyance Taxes......................................................... A-36
SECTION 5.12. Option Plans and Benefits, etc........................................... A-36
SECTION 5.13. Accountant's Letters..................................................... A-36
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C>
SECTION 5.14. Pooling Accounting Treatment............................................. A-37
SECTION 5.15. Connecticut Transfer Act................................................. A-37
SECTION 5.16. Director Appointment..................................................... A-37
ARTICLE VI
CONDITIONS TO THE MERGER.................................................. A-38
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger.............. A-38
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger Sub............ A-39
SECTION 6.03. Additional Conditions to Obligation of the Company....................... A-39
ARTICLE VII
TERMINATION............................................................... A-40
SECTION 7.01. Termination.............................................................. A-40
SECTION 7.02. Effect of Termination.................................................... A-41
SECTION 7.03. Fees and Expenses........................................................ A-42
ARTICLE VII
GENERAL PROVISIONS........................................................ A-43
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements A-43
SECTION 8.02. Notices.................................................................. A-43
SECTION 8.03. Certain Definitions...................................................... A-44
SECTION 8.04. Amendment................................................................ A-45
SECTION 8.05. Waiver................................................................... A-45
SECTION 8.06. Headings................................................................. A-45
SECTION 8.07. Severability............................................................. A-45
SECTION 8.08. Entire Agreement......................................................... A-45
SECTION 8.09. Assignment; Merger Sub................................................... A-45
SECTION 8.10. Parties in Interest...................................................... A-45
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative.................... A-45
SECTION 8.12. Governing Law; Jurisdiction.............................................. A-45
SECTION 8.13. Counterparts............................................................. A-46
SECTION 8.14. WAIVER OF JURY TRIAL..................................................... A-46
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 25, 1998 (this "Agreement"),
among TYCO INTERNATIONAL LTD., a Bermuda company ("Parent"), T11 ACQUISITION
CORP., a Delaware corporation and a direct, wholly owned subsidiary of Parent
("Merger Sub"), and UNITED STATES SURGICAL CORPORATION, a Delaware corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, 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 Parent to cause Merger Sub to
merge 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
Parent, 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 Delaware General Corporation Law (the "DGCL"), and upon the
terms and subject to the conditions set forth herein;
WHEREAS, Parent, 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;
WHEREAS, Parent, Merger Sub and the Company intend that the Merger be
accounted for as a pooling-of-interests for financial reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of the
Company's Common Stock, par value $.10 per share (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;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. (a) EFFECTIVE TIME. At the Effective Time (as
defined in Section 1.02 hereof), and subject to and upon the terms and
conditions of this Agreement and the DGCL, 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. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
(b) CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the consummation of the Merger (the "Closing") will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York,
unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated as of the day of the Closing by
filing a certificate of merger as contemplated by the DGCL (the "Certificate of
Merger"), together with any required related certificates, with the Secretary of
State of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the time of such filing
being the "Effective Time").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. 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. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) Certificate of
Incorporation. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Certificate of Incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the DGCL and such Certificate of Incorporation; provided, however, that
Article FOURTH shall be amended and restated in its entirety to provide that the
capital stock of the Surviving Corporation shall consist of 1,000 shares of
common stock, par value $.01 per share.
(b) BY-LAWS. The By-Laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by the DGCL, the Certificate of Incorporation of
the Surviving Corporation and such By-Laws.
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 Certificate of
Incorporation and By-Laws 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 CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of the following securities:
(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
A-2
<PAGE>
Section 1.06(f), into the right to receive 0.7606 (the "Exchange Ratio") validly
issued, fully paid and nonassessable Parent Common Shares, par value $.20
("Parent Common Shares").
(b) CANCELLATION. Each Share held in the treasury of the Company and each
Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent 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) ASSUMPTION OF OUTSTANDING STOCK OPTIONS, ETC.. (1) Each option
outstanding at the Effective Time to purchase shares of Company Common Stock (a
"Stock Option") granted under (I) (i) the Company's 1990 Employee Stock Option
Plan, (ii) the Company's 1993 Employee Stock Option Plan, (iii) the Company's
1996 Employee Stock Option Plan, (iv) the Company's 1997 Key Management Equity
Investment Plan, (v) the PAS Stock Option Plans, (vi) the Company's 1997 Stock
Option Purchase Agreement, (vii) the Company's Serviced Based Stock Option Plan,
and (viii) the Company's Outside Directors Stock Option Plan, or (II) any other
stock plan or agreement of the Company (collectively, the "Company Stock Option
Plans"), which by its terms is not extinguished in the Merger, shall be assumed
by Parent and 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 Parent Common Shares (rounded to the nearest whole Parent 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 Parent 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, Parent 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.
Parent shall cause to be taken all corporate action necessary to reserve for
issuance a sufficient number of Parent Common Shares for delivery upon exercise
of Stock Options in accordance with this Section 1.06(c)(1). As soon as
practicable following the Effective Time, Parent shall cause the Parent Common
Shares subject to the Adjusted Options to be registered under the Securities Act
of 1933, as amended, and the SEC's rules thereunder (the "Securities Act")
pursuant to a registration statement on Form S-8 (or any successor or other
appropriate form), and shall use at least such efforts as are applied to
Parent'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 Parent with respect to its
option plans generally, because of developments affecting Parent or otherwise).
(2) The contingent obligations of the Company (the "PAS Obligations") to
issue shares of Company Common Stock to certain former stockholders of
Progressive Angioplasty Systems, Inc. ("PAS"), pursuant to Section 2.07 and
Section 2.08 of the Agreement and Plan of Merger dated February 4, 1997, by and
among the Company, a wholly owned subsidiary of the Company and PAS (as amended
by the First Amendment dated as of August 6, 1997, the "PAS Agreement") shall be
assumed by Parent from and after the Effective Time and shall constitute an
obligation to issue, on the same terms and conditions mutatis mutandis as were
applicable under the PAS Agreement prior to the Effective Time, Parent Common
A-3
<PAGE>
Shares (rounded to the nearest whole Parent Common Share), and Parent Common
Shares shall be substituted for Company Common Stock in the definition of the
term "Closing Price" for purposes of determining the number of Parent Common
Shares, if any, that may be issued in accordance with the PAS Agreement as
aforesaid.
As soon as reasonably practicable following the Effective Time, Parent shall
cause the Parent Common Shares that may be issued pursuant to the PAS
Obligations to be registered under the Securities Act pursuant to a resale shelf
registration statement on Form S-3 (or any successor or other appropriate form)
and shall use its commercially reasonable efforts, subject to the receipt of
information from and as to the relevant former PAS stockholders, to cause such
registration statement to become effective as promptly after filing as
practicable. The provisions of Sections 6.01 and 6.02 of the PAS Agreement shall
apply to such registration statement mutatis mutandis.
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, $.01 par value,
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
Parent Common Shares), reorganization, recapitalization, split up, combination
or exchange of shares or other like event with respect to Parent 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
Parent Share shall be issued upon the surrender for exchange of a certificate or
certificates 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
Parent 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 Closing Price of the Parent Common Shares on the date of the
Effective Time. "Closing Price" shall mean, on any day, the last reported sale
price of one Parent Common Share on the NYSE Composite Transaction Tape.
SECTION 1.07. EXCHANGE OF CERTIFICATES. (a) Exchange Agent. At the Effective
Time Parent shall cause to be supplied, to or for such bank or trust company as
shall be mutually designated by the Company and Parent (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 Parent Common Shares issuable pursuant to Section 1.06 in
exchange for outstanding Shares and the cash to be paid in lieu of fractional
shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent 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 Parent may reasonably
specify), and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing Parent 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 (A) certificates evidencing that number
of whole Parent 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, (B) any dividends or other distributions to which such
holder is entitled pursuant to Section 1.07(c), and (C) cash in respect of
fractional shares as provided in Section 1.06(f) (the Parent Common Shares and
cash being, collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer
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of ownership of Shares which is not registered in the transfer records of the
Company as of the Effective Time, Parent Common Shares, dividends,
distributions, and cash in respect of fractional shares, 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 the Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full Parent Common Shares, and cash
in respect of fractional shares, into which such shares of the Company Common
Stock shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Common Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Common Shares
they are 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 Parent
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 Parent
Common Shares.
(d) TRANSFERS OF OWNERSHIP. If any certificate for Parent 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 Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for Parent Common Shares in
any name other than that of the registered holder of the certificate
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(e) NO LIABILITY. Neither Parent, Merger Sub nor the Company 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. Parent or 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 such amounts as Parent or
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 foreign tax
law. To the extent that amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such deduction
and withholding was made by Parent or the Exchange Agent.
(g) UNDISTRIBUTED CERTIFICATES. Any portion of the certificates evidencing
the Parent 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 Parent,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Section 1.07 shall thereafter look only to Parent for payment
of their claim for Merger Consideration, any dividends or distributions with
respect to Parent Common Stock and any cash in lieu of fractional shares of
Parent Common Stock.
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.
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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 Parent Common
Shares as may be required pursuant to Section 1.06; provided, however, that
Parent 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 Parent 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 (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 Parent,
Merger Sub and the Company will take all such reasonable and lawful action 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 Parent or any of its subsidiaries, as the
case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), financial condition or results
of operations of the Company and its subsidiaries or Parent and its
subsidiaries, as the case may be, in each case taken as a whole; provided,
however, that the following shall be excluded from the definition of "Material
Adverse Effect" and from any determination as to whether a Material Adverse
Effect has occurred or may occur with respect to the Company: the effects of
changes that are applicable to (A) the healthcare or medical device industries
generally, (B) the United States economy generally or (C) the United States
securities markets generally.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent 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 could 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 will furnish to Parent 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 on a supplement to the Company Disclosure
Schedule (as defined below) to be delivered to Parent 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 written disclosure
schedule previously delivered by the Company to Parent (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, with respect to which interest the Company has
invested or is required to invest $5,000,000 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. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
heretofore made available to Parent a complete and correct copy of its
Certificate of Incorporation and By-Laws as amended to date, and has made
available to Parent the Certificate of Incorporation and By-Laws (or equivalent
organizational documents) of each of its material subsidiaries (the "Subsidiary
Documents"). Such Certificate of Incorporation, By-Laws and Subsidiary Documents
are in full force and effect. Neither the Company nor any of its subsidiaries is
in violation of any of the provisions of its Certificate of Incorporation or
such By-Laws or equivalent organizational documents, except for immaterial
violations of the documents which may exist.
SECTION 2.03. CAPITALIZATION. The authorized capital stock of the Company
consists of 250,000,000 shares of Company Common Stock and 5,000,000 shares of
Preferred Stock, par value $5.00 per share (the "Company Preferred Stock"). As
of April 30, 1998, (i) 76,698,965 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, and
an additional 7,003,014 shares were held in treasury, (ii) no shares of Company
Preferred Stock were outstanding or held in treasury, (iii) no shares of Company
Common Stock or Company Preferred Stock were held by subsidiaries of the
Company, (iv) 24,348,700 shares of Company Common Stock were reserved for
existing grants and 3,799,689 shares were reserved for future grants pursuant to
the Company Stock Option Plans, and (v) not in excess of 294,928 shares of
Company Common Stock were reserved and are available for future issuance
pursuant to the USCC Employees 1979 Stock Purchase Plan and the Company's 1994
Employee Stock Purchase Plan (together, the "Stock Purchase Plans"). The Company
may be obligated to issue additional shares of Company Common Stock pursuant to
the PAS Obligations. Except as set forth in
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Section 2.03 of the Company Disclosure Schedule, no change in such
capitalization has occurred between April 30, 1998 and the date hereof, except
for changes resulting from the exercise of Stock Options and shares purchased
under the Stock Purchase Plans. 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, 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 or 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. 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
is 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.
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action (including
pursuant to Section 203 of the DGCL), and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated (other than the approval of the Merger and this
Agreement by the holders of at least a majority of the outstanding shares of
Company Common Stock entitled to vote in accordance with the DGCL and the
Company's Certificate of Incorporation and By-Laws). 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 to consummate the Merger upon the terms and subject to the
conditions of this Agreement. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, as applicable, 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 a list of (i) 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 $10,000,000 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 $5,000,000 over the term of such contract, commitment, agreement, or
other understanding or arrangement; and (iii) all agreements which, as of the
date hereof, are required to be filed as "material contracts" with the
Securities and Exchange Commission
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("SEC") pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, and the SEC's rules thereunder (the "Exchange Act") but have not been
so filed with the SEC as of the date hereof.
(b) Except as set forth in Section 2.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Certificate of Incorporation or By-Laws 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 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 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 DGCL, (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay consummation of the Merger, or otherwise prevent or
delay the Company from performing its material obligations under this Agreement,
or would not otherwise reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect, or (iii) as to which any necessary consents,
approvals, authorizations, permits, filings or notifications have heretofore
been obtained or filed, as the case may be, by the Company.
SECTION 2.06. COMPLIANCE; PERMITS. (a) Except as 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
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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, 1994 and has made available to Parent (i) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1995, 1996 and 1997, (ii) its
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (the "March
31, 1998 10-Q"), and, (iii) all proxy statements relating to the Company's
meetings of shareholders (whether annual or special) held since December 31,
1994, (iv) all other reports or registration statements (other than Reports on
Form 10-Q not referred to in clause (ii) above filed by the Company with the SEC
since December 31, 1994, and (v) all amendments and supplements to all such
reports and registration statements filed by the Company with the SEC
(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,
between December 31, 1997 and the date hereof, 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 Certificate of
Incorporation or By-laws 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 aggregate, to have a
Material Adverse Effect; (iv) any material change by the Company in its
accounting methods, principles or practices; or (v) any sale of a material
amount of assets of the Company, except in the ordinary course of business.
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 March 31, 1998 included in the Company's Quarterly Report
of Form 10-Q for the quarter ended March 31, 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 March 31, 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.
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SECTION 2.10. ABSENCE OF LITIGATION. Except as set forth in Section 2.10 of
the Company Disclosure Schedule or the Company SEC Reports, 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 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), and any employment, executive
compensation or severance agreements (including those which contain 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 Internal Revenue Code of 1986, as amended (the "Code") (together for the
purposes of this Section 2.11, the "Employee Plans"). The Company has made
available to Parent, prior to the date of this Agreement, or the Company will
make available not later than 14 days after the date of this Agreement, copies
of (i) each such written Employee Plan (or a written description of any 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 most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Employee Plan required to
make such a filing, (iii) the most recent actuarial valuation for each 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 Employee Plan required to make
such filing and (v) the most recent favorable determination letters issued for
each Employee Plan and related trust which is subject to Parts 1, 2 and 4 of the
Subtitle B of Title I of ERISA (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 Employee
Plan, shall mean that the Company or a Company ERISA Affiliate has incurred or
may incur obligations in an amount exceeding $500,000 with respect to such
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 $500,000, with respect to any one such
or series of related 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 Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, and
none of the 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 Employee Plan which could subject
the Company or any Company ERISA Affiliate, directly or indirectly, to a tax,
penalty or other material liability for prohibited transactions under ERISA or
Section 4975 of the Code; (iii) no fiduciary of any 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 Employee Plans
have been established and maintained substantially in accordance with their
terms and have operated in compliance
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in all material respects with the requirements prescribed by any and all
statutes (including ERISA and the Code), orders, or governmental rules and
regulations currently in effect with respect thereto (including all applicable
requirements for notification to participants or the Department of Labor,
Internal Revenue Service (the "IRS") or Secretary of the Treasury), and may by
their terms be amended and/or terminated at any time subject to applicable law
and the terms of each 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 Employee Plans; (v) each Employee Plan which is subject to Parts 1, 2 and 4
of Subtitle B of ERISA is the subject of a favorable determination letter from
the IRS, and nothing has occurred which may reasonably be expected to impair
such determination; (vi) all contributions required to be made with respect to
any Employee Plan pursuant to Section 412 of the Code, or the terms of the
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 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) or any event described in
Section 4062, 4063 or 4041 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 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 the Company nor any Company
ERISA Affiliate has incurred or reasonably expects to incur any material
liability under Title IV 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 Supplemental Company Disclosure Schedule will set
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 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. Section 2.11(c)
of the Company Disclosure Schedule sets forth (x) the total number of any such
ISOs and any such nonqualified options and other such rights by exercise price
and (y) the amount by which the value of the Merger Consideration (using $42.50
as the value of the Merger Consideration) exceeds the option or exercise price
of all such ISOs, non-qualified options and rights (including pursuant to the
Company Stock Option Plan) in the aggregate (such excess being the "Aggregate
Option Exercise Spread").
(d) 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 $250,000; (iii) all agreements with respect
to the services of independent contractors or leased employees whether or not
they participate in any of the Employee Plans; (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 $150,000,
excluding 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 2.11(e) of the Company Disclosure
Schedule, no employee of the Company or any of its subsidiaries has participated
in any employee pension benefit plans (as defined in Section 3(2) of ERISA)
maintained by or on behalf of the Company. The PBGC has not instituted
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proceedings to terminate any Employee Plan that is subject to Title IV of ERISA
(each, a "Defined Benefit Plan"). The 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. The present
value of the benefit liabilities (within the meaning of Section 4041 of ERISA)
of the Defined Benefit Plans, determined on a termination basis using actuarial
assumptions that would be used by the PBGC does not exceed by more than
$1,000,000 the value of the Defined Benefit Plans' assets. All applicable
premiums required to be paid to the PBGC with respect to the Defined Benefit
Plans have been paid. No facts or circumstances exist with respect to any
Defined Benefit Plan which would give rise to a lien on the assets of the
Company under Section 4068 of ERISA or otherwise. All the assets of the Defined
Benefit Plans are readily marketable securities or insurance contracts.
(f) Except as provided in Schedule 2.11(f) of the Company Disclosure
Schedule or as contemplated by this Agreement, (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 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 Employee Plan (or the creation of new
benefits) or change in employee coverage which would increase the expense of
maintaining any 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; (iv) no person will
be entitled to any severance benefits under the terms of any Employee Plan
solely by reason of the consummation of this transaction contemplated by this
Agreement.
(g) Each Employee Plan covering non-U.S. employees (an "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 International
Plan was intended to so qualify) and has been maintained in good standing with
applicable regulatory authorities. The fair market value of the assets of each
funded International Plan, if any, (or the liability of each funded
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 International Plan.
(h) The Company has fiduciary liability insurance of at least $1,500,000 in
effect covering the fiduciaries of the 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 subsidiaries is a party to any material collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its subsidiaries, nor does the Company or any of its subsidiaries
know of any activities or proceedings of any labor union to organize any such
employees; and (iii) neither the Company nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Company or any of its
subsidiaries which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 2.13. REGISTRATION STATEMENT; PROXY STATEMENT/ PROSPECTUS. Subject
to the accuracy of the representations of Parent 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
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therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by the Company for inclusion in the 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") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement/Prospectus") will
not, on the date the Proxy Statement/ Prospectus (or any amendment thereof or
supplement thereto) is first mailed to shareholders or at the time of the
Company Shareholders Meeting 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 Company
Shareholders Meeting 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 Proxy Statement/Prospectus, the Company shall promptly inform
Parent and Merger Sub. The 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, the
Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained or incorporated by reference
in, or furnished in connection with the preparation of, the 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 Section 2.15 of the
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
detract from the value of or interfere with the present use of the property
affected thereby or which could 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 could 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 1997 Balance Sheet have been
established or which are being contested in good faith. 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
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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 1997 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.
(b) For purposes of this Agreement, the term "Tax" shall mean any federal,
state, local, foreign 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 entity with respect to
any Tax, including an information return, claim for refund, amended return or
declaration or estimated Tax.
(c) Except as set forth in Section 2.16 of the Company Disclosure Schedule:
(i) Neither the Company nor any of its subsidiaries has ever been a member of an
affiliated group within the meaning of Section 1504 of the Code or filed or been
included in a combined, consolidated or unitary Tax Return, other than of the
Company and its subsidiaries; (ii) 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; (iii) neither the Company nor any of its subsidiaries is a party to any
joint venture, partnership or other arrangement or contract which could be
treated as a partnership for federal income tax purposes; (iv) neither the
Company nor any of its subsidiaries has entered into any sale leaseback or any
leveraged lease transaction that fails to satisfy the requirements of Revenue
Procedure 75-21 (or similar provisions of foreign law); (v) neither the Company
nor any of its subsidiaries has agreed or is required, as a result of a change
in method of accounting or otherwise, to include any adjustment under Section
481 of the Code (or any corresponding provision of state, local or foreign law)
in taxable income; (vi) neither the Company nor any of its subsidiaries is a
party to any agreement, contract, arrangement or plan that would result (taking
into account the transactions contemplated by this Agreement), separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code; (vii) the prices for any property or
services (or for the use of property) provided by the Company or any of its
subsidiaries to any other subsidiary or to the Company have been arm's length
prices, determined using a method permitted by the Treasury Regulations under
Section 482 of the Code; (viii) neither the Company nor any of its subsidiaries
is liable with respect to any indebtedness the interest of which is not
deductible for applicable federal, foreign, state or local income tax purposes;
(ix) neither the Company nor any of its subsidiaries is a "consenting
corporation" under Section 341(f) of the Code or any corresponding provision of
state, local or foreign law; and (x) none of the assets owned by the Company or
any of its subsidiaries is property that is required to be treated as owned by
any other person pursuant to Section 168(g)(8) of the Internal Revenue Code of
1954, as amended, as in effect immediately prior to the enactment of the Tax
Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
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
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or in the aggregate, to have a Material Adverse Effect, the operations and
properties of the Company and its subsidiaries are in material compliance with
the Environmental Laws (as hereinafter defined), which compliance includes the
possession by the Company and its subsidiaries of all material permits and
governmental authorizations required under applicable Environmental Laws, and
material 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 either contractually or by operation of
law.
(c) There are no past or present actions, inactions, activities,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Material of Environmental Concern (as
hereinafter defined), that would 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 either contractually or by operation of
law, 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, (i) 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 has been listed on the National
Priority List, CERCLIS, state Superfund site list or state analog to CERCLIS,
and the Company and its subsidiaries have not been notified that either 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 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 (PCB's) 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.
(ii) "Environmental Laws" means all Federal, state, local and foreign
laws, regulations, codes, ordinances, any guidance or directive 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 manufacture, processing, distribution, 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
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and petroleum products, asbestos-containing materials, poly chlorinated
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
Chase Securities Inc. ("Chase"), the fees and expenses 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.
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 or applications 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) 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 the business of the Company and its subsidiaries as
currently conducted, without conflict with the rights of others, except as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(c) Except as disclosed in Section 2.19(c) of the Supplemental Company
Disclosure Schedule or as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, no claims with respect to the
Company Intellectual Property Assets, or 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, are currently pending or, to the knowledge of the Company, are
threatened by any person.
(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 Supplemental Company Disclosure Schedule 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 and all trade
names owned by the Company and/or each of its subsidiaries worldwide; (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 the 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 publicly available. To its knowledge, the
Company has heretofore made available to Parent a list of all such patents,
patent applications, trademark and service mark registrations, trademark and
service mark applications, trade names, copyright registrations, copyright
applications and licenses. 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, trade names, copyright registrations
and copyright applications and licenses set forth in the Company Disclosure
Schedule, except where the failure to so protect or maintain would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(f) Except as set forth in Section 2.19(f) 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
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Adverse Effect: (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 license of Company
Intellectual Property Assets 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.
(h) Except as set forth on Schedule 2.19(h) on the Company Disclosure
Schedule, the disclosure under the heading "IMPACT OF THE YEAR 2000 ISSUE"
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 is accurate and correct 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 date of the Company's proxy statement dated March 30, 1998 (the "1998
Company Proxy Statement"), 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 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.
(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 Company has been advised by
its financial advisor, Chase, to the effect that in its opinion, as of the date
hereof, the Exchange Ratio is fair from a financial point of view to the holders
of Shares.
SECTION 2.24. POOLING MATTERS. To the Company's knowledge and based upon
consultation with its independent accountants, the Company has provided to
Parent 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 would reasonably be expected to adversely affect the
ability of Parent 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, "to the Company's knowledge" means to the actual knowledge of
the
Company's Chairman and Chief Executive Officer, President and Chief Operating
Officer or Chief Financial Officer.
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SECTION 2.25. TAX MATTERS. The representations, statements and covenants set
forth in paragraph 2 through 18 of Exhibit A hereto are true and correct in all
material respects.
SECTION 2.26 ACCURACY OF INFORMATION. The Company acknowledges that none of
Parent, its subsidiaries or any of their respective directors, officers,
employees, affiliates, agents, advisors or representatives makes any
representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to the Company
or its agents or representatives including, without limitation, any estimations,
projections or other statement regarding future performance, except to the
extent set forth in this Agreement (including the Parent Disclosure Schedule).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent
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 Parent 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 could not reasonably be expected to have a
Material Adverse Effect. A true and complete list of all of Parent's
subsidiaries, together with the jurisdiction of incorporation of each subsidiary
and the percentage of each subsidiary's outstanding capital stock owned by
Parent or another subsidiary, is set forth in Section 3.01 of the written
disclosure schedule previously delivered by Parent to the Company (the "Parent
Disclosure Schedule"). Except as set forth in Section 3.01 of the Parent
Disclosure Schedule or the Parent SEC Reports (as defined in Section 3.07
below), Parent 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, with respect to which Parent
has invested or is required to invest $3,000,000 or more, excluding securities
in any publicly traded company held for investment by Parent and comprising less
than five percent of the outstanding capital stock of such company.
SECTION 3.02. ARTICLES OF ORGANIZATION AND BY-LAWS. Parent has heretofore
made available to the Company a complete and correct copy of its Memorandum of
Association and Bye-Laws, as amended to date. Such Memorandum of Association and
Bye-Laws are in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Memorandum of Association (or
Certificate of Incorporation) or by-laws.
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of Parent
consists of 1,503,750,000 Parent Common Shares and 125,000,000 Preference
Shares, $1.00 par value per share ("Parent Preferred Shares"). (i) As of April
23, 1998, (I) 583,096,885 Parent Common Shares were issued and outstanding, all
of which are validly issued, fully paid and non-assessable, (II) no Parent
Preferred Shares were outstanding and (III) no more than 5,000,000 Parent Common
Shares and no Parent Preferred Shares were held by subsidiaries of Parent; (ii)
as of March 31, 1998, warrants to purchase 185,933 Parent Common Shares were
outstanding; and (iii) as of September 30, 1997, approximately 44 million Parent
Common Shares were reserved for issuance upon exercise of stock options issued
under the Tyco International Ltd. Long Term Incentive Plan. No material change
in such capitalization has occurred between such dates and the date hereof 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 Parent Disclosure Schedule or
the Parent SEC Reports, there are no options, warrants or other rights,
agreements arrangements or commitments of any character binding on Parent or any
of its subsidiaries relating to the issued or unissued capital stock of Parent
or any of its subsidiaries or obligating Parent or any of its subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in,
Parent or any of its subsidiaries. Except as set forth in Section 3.03 of the
Parent Disclosure Schedule or the Parent SEC Reports, there are no obligations,
contingent or otherwise, of Parent or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Parent Common Shares or the capital stock of any
subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary other than guarantees
of bank obligations of
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subsidiaries entered into in the ordinary course of business. Except as set
forth in Section 3.01 or 3.03 of the Parent Disclosure Schedule, all of the
outstanding shares of capital stock (other than directors' qualifying shares) of
each of Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever.
(b) The Parent 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. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. The Board of Directors of Parent has determined that it is
advisable and in the best interest of Parent's shareholders for Parent to enter
into this Agreement and to consummate the Merger upon the terms and subject to
the conditions of this Agreement. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Parent and Merger Sub.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
3.05(a) of the Parent Disclosure Schedule includes a list of (i) 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 Parent
or any of its subsidiaries is a party or by which any of them is bound, each in
an amount exceeding $25,000,000, but excluding any such agreement between Parent
and its wholly-owned subsidiaries or between two or more wholly-owned
subsidiaries of Parent; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which Parent 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 Parent 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 as of the date hereof.
(b) Except as set forth in Section 3.05(b) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Memorandum of Association (or Certificate of
Incorporation) or by-laws of Parent or Merger Sub, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Parent 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 Parent'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 any of the properties or assets of Parent
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 Parent or any of its subsidiaries is a party or by which
Parent 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,
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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 Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub 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, Foreign Monopoly
Laws, and the filing and recordation of appropriate merger or other documents as
required by the DGCL, (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay consummation of the Merger, or otherwise prevent
Parent or Merger Sub from performing their respective material obligations under
this Agreement, 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 Parent.
SECTION 3.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
3.06(a) of the Parent Disclosure Schedule or the Parent SEC Reports, neither
Parent 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 Parent 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 Parent or any of its subsidiaries is a party
or by which Parent 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 Parent Disclosure Schedule
or the Parent SEC Reports, Parent 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 Parent and its subsidiaries taken as a whole as it is now
being conducted (collectively, the "Parent Permits" except where the failure to
hold such Parent Permits would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect). Parent and its subsidiaries
are in compliance with the terms of Parent Permits, except as described in the
Parent 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) Parent has filed all
forms, reports and documents required to be filed with the SEC since December
31, 1994, and has heretofore delivered to the Company, in the form filed with
the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended December
31, 1995 and 1996 and its Transition Report on Form 10-K for the nine month
period ended September 30, 1997, (ii) its Quarterly Reports on Form 10-Q for the
quarterly periods ending December 31, 1997, and March 31, 1998, (iii) all proxy
statements relating to Parent's meetings of shareholders (whether annual or
special) held since December 31, 1996, (iv) all other reports or registration
statements (other than Reports on Form 10-Q not referred to in clause (ii)
above) filed by Parent with the SEC since December 31, 1994, and (v) all
amendments and supplements to all such reports and registration statements filed
by Parent with the SEC (collectively, the "Parent SEC Reports"). The Parent 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 Parent'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 Parent 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 Parent SEC
Reports) and each fairly presents in all material respects the consolidated
financial position of Parent 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 Parent Disclosure Schedule or the Parent SEC Reports,
between December 31, 1997 and the date hereof, Parent 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 Memorandum of Association
or Bye-Laws of Parent; (iii) any damage to, destruction or loss of any assets of
the Parent (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 Parent in its accounting methods; or (v) any sale of
a material amount of assets of Parent, except in the ordinary course of
business.
SECTION 3.09. NO UNDISCLOSED LIABILITIES. Except as is disclosed in Section
3.09 of the Parent Disclosure Schedule and the Parent SEC Reports, neither the
Parent nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) in the aggregate adequately
provided for in the Parent's unaudited balance sheet (including any related
notes thereto) as of March 31, 1998 included in Parent's Quarterly Report on
Form 10-Q for the three months ended March 31, 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 March 31, 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 of
the Parent Disclosure Schedule, there are no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of the Parent, threatened against
the Parent or any of its subsidiaries, or any properties or rights of the Parent
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 to have a Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
3.11(a) of the Parent 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 Parent or any entity (whether or not incorporated) which
is a member of a controlled group including Parent or which is under common
control with Parent within the meaning of Sections 414(b), (c), (m) or (o) of
the Code or Section 4001(a) (14) or (b) of ERISA ("Parent ERISA Affiliate"), or
any subsidiary of Parent, as well as each plan with respect to which Parent or a
Parent 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 "Employee
Plans"). Prior to the date of this Agreement, Parent has made available to the
Company copies of (i) each such written Employee Plan (or a written description
of any 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
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participants, (ii) the three most recent annual reports on Form 5500 series,
with accompanying schedules and attachments, filed with respect to each Employee
Plan required to make such a filing, (iii) the most recent actuarial valuation
for each 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 Employee
Plan required to make such filing and (v) the most recent favorable
determination letters issued for each Employee Plan and related trust which is
subject to Parts 1, 2 and 4 of the Subtitle B of Title I of ERISA (and, if an
application for such determination is pending, a copy of the application for
such determination). For purposes of this Section 3.11, the term "material,"
when used with respect to (i) any Employee Plan, shall mean that Parent or a
Parent ERISA Affiliate has incurred or may incur obligations in an amount
exceeding $5,000,000 with respect to such Employee Plan, and (ii) any liability,
obligation, breach or non-compliance, shall mean that Parent or a Parent ERISA
Affiliate has incurred or may incur obligations in an amount exceeding
$3,000,000, with respect to any one such or series of related liabilities,
obligations, breaches, defaults, violations or instances of non-compliance.
(b) Except as set forth in Section 3.11(b) of the Parent Disclosure Schedule
or the Parent SEC Reports, (i) none of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, and none of the
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 Employee Plan which could subject Parent or
any Parent ERISA Affiliate, directly or indirectly, to a tax, penalty or other
material liability for prohibited transactions under ERISA or Section 4975 of
the Code; (iii) no fiduciary of any 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
Parent or any Parent ERISA Affiliate; (iv) all 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 prescribed
by any and all statutes (including ERISA and the Code), orders, or governmental
rules and regulations currently in effect with respect thereto (including all
applicable requirements for notification to participants or the Department of
Labor, IRS or Secretary of the Treasury), and may by their terms be amended
and/or terminated at any time subject to applicable law and the terms of each
Employee Plan, and Parent 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 Employee Plans; (v) each
Employee Plan which is subject to Parts 1, 2 and 4 of Subtitle B of ERISA is the
subject of a favorable determination letter from the IRS, and nothing has
occurred which may reasonably be expected to impair such determination; (vi) all
contributions required to be made with respect to any Employee Plan pursuant to
Section 412 of the Code, or the terms of the 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 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) or any event described in Section 4062, 4063 or 4041 of
ERISA has occurred for which there is any material outstanding liability to
Parent or any Parent 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 Parent nor any Parent ERISA Affiliate has incurred or
reasonably expects to incur any material liability under Title IV of ERISA
(other than liability for premium payments to the PBGC arising in the ordinary
course).
(c) Section 3.11(c) of the Parent Disclosure Schedule sets forth a true and
complete list of the aggregate number of (i) options to purchase Parent Common
Shares as of the date hereof, together with the number of shares of Parent
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 shares of
Parent Common Shares that are restricted; and (iii)
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any other rights, directly or indirectly, to receive Parent Common Shares,
together with the number of Parent Common Shares subject to such rights, held by
each current or former employee, officer or director of Parent or any of its
subsidiaries.
(d) Section 3.11(d) of the Parent Disclosure Schedule sets forth a true and
complete list of (i) all employment agreements with officers of Parent or any of
its subsidiaries; (ii) all agreements with consultants who are individuals
obligating Parent 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 Employee Plans obligating Parent or any of its subsidiaries to
make annual cash payments in an amount exceeding $1,500,000; (iv) all officers
of Parent or any of its subsidiaries who have executed a non-competition
agreement with Parent or any of its subsidiaries; (v) all severance agreements,
programs and policies of Parent or any of its subsidiaries with or relating to
its employees, in each case with outstanding commitments exceeding $1,500,000,
excluding 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 Parent Disclosure
Schedule, no employee of Parent or any of its subsidiaries has participated in
any employee pension benefit plans (as defined in Section 3(2) of ERISA)
maintained by or on behalf of Parent. The PBGC has not instituted proceedings to
terminate any Employee Plan that is subject to Title IV of ERISA (each, a
"Defined Benefit Plan"). The 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. The present value of
the benefit liabilities (within the meaning of Section 4041 of ERISA) of the
Defined Benefit Plans, determined on a termination basis using actuarial
assumptions that would be used by the PBGC does not exceed by more than
$10,000,000 the value of the Defined Benefit Plans' assets. All applicable
premiums required to be paid to the PBGC with respect to the Defined Benefit
Plans have been paid. No facts or circumstances exist with respect to any
Defined Benefit Plan which would give rise to a lien on the assets of Parent
under Section 4068 of ERISA or otherwise. All the assets of the Defined Benefit
Plans are readily marketable securities or insurance contracts.
(f) Except as provided in Schedule 3.11(f) of the Parent Disclosure
Schedule, Parent has never maintained an employee stock ownership plan (within
the meaning of Section 4975(e)(7) of the Code) or any other Employee Plan that
invests in Parent stock.
(g) Each Employee Plan covering non-U.S. employees (an "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 International
Plan was intended to so qualify) and has been maintained in good standing with
applicable regulatory authorities. The benefit liabilities of the International
Plans are adequately provided for on the consolidated financial statements of
Parent.
(h) Parent has fiduciary liability insurance of at least $15,000,000 in
effect covering the fiduciaries of the Employee Plans (including Parent) with
respect to whom Parent may have liability.
SECTION 3.12. LABOR MATTERS. Except as set forth in Section 3.12 of the
Parent Disclosure Schedule or the Parent SEC Reports, (i) there are no
controversies pending or, to the knowledge of Parent or any of its subsidiaries,
threatened, between Parent 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 Parent nor any of its subsidiaries is a party to any material collective
bargaining agreement or other labor union contract applicable to persons
employed by Parent or its subsidiaries, nor does Parent or any of its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) neither Parent nor any of its
subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any
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employees of Parent 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; PROXY STATEMENT/PROSPECTUS. Subject to
the accuracy of the representations of the Company in Section 2.13, the
registration statement (the "Registration Statement") pursuant to which the
Parent Common Shares to be issued in the Merger will be registered with the SEC
shall not, 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 Parent
in writing specifically for inclusion in the Proxy Statement/Prospectus will
not, on the date the Proxy Statement/Prospectus is first mailed to shareholders
or at the time of the Company Shareholders Meeting, 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 Company Shareholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Parent, Merger Sub or any of their respective affiliates, officers or directors
should be discovered by Parent or Merger Sub which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Parent or Merger Sub will promptly inform the Company. The
Registration Statement and 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, Parent
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 Proxy Statement/Prospectus.
SECTION 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, to the best of Parent's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon Parent 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 Parent or any of its
subsidiaries as currently conducted by Parent 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. Parent 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 detract from the value of or interfere with the present use of the
property affected thereby or which could 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
Parent's knowledge, all leases pursuant to which Parent or any of its
subsidiaries lease from other 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 Parent, 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:
(a) Parent 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
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reserves in the September 1997 Balance Sheet have been established or which are
being contested in good faith. There are no material claims or assessments
pending against Parent 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 Parent has not been
notified in writing of any proposed Tax claims or assessments against Parent or
any of its subsidiaries (other than in each case, claims or assessments for
which adequate reserves in the September 1997 Balance Sheet have been
established or which are being contested in good faith or are immaterial in
amount). Neither Parent 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 Parent 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 Parent, there are no liens for material
amounts of Taxes on the assets of Parent or any of its subsidiaries except for
statutory liens for current Taxes not yet due and payable.
(b) Except as set forth in Section 3.16 of the Parent Disclosure Schedule:
(i) Neither Parent nor any
of its subsidiaries has ever been a member of an affiliated group within the
meaning of Section 1504 of the Code or filed or been included in a combined,
consolidated or unitary Tax Return, other than of Parent and its subsidiaries;
(ii) other than with respect to Parent and its subsidiaries, neither Parent 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 Parent or any of its
subsidiaries with respect to Taxes; (iii) neither Parent nor any of its
subsidiaries is a party to any joint venture, partnership or other arrangement
or contract which could be treated as a partnership for federal income tax
purposes; (iv) neither Parent nor any of its subsidiaries has entered into any
sale leaseback or any leveraged lease transaction that fails to satisfy the
requirements of Revenue Procedure 75-21 (or similar provisions of foreign law);
(v) neither Parent nor any of its subsidiaries has agreed or is required, as a
result of a change in method of accounting or otherwise, to include any
adjustment under Section 481 of the Code (or any corresponding provision of
state, local or foreign law) in taxable income; (vi) the prices for any property
or services (or for the use of property) provided by Parent or any of its
subsidiaries to any other subsidiary or to Parent have been arm's length prices,
determined using a method permitted by the Treasury Regulations under Section
482 of the Code; (vii) neither Parent nor any of its subsidiaries is liable with
respect to any indebtedness the interest of which is not deductible for
applicable federal, foreign, state or local income tax purposes; (viii) neither
Parent nor any of its subsidiaries is a "consenting corporation" under Section
341(f) of the Code or any corresponding provision of state, local or foreign
law; and (ix) none of the assets owned by Parent or any of its subsidiaries is
property that is required to be treated as owned by any other person pursuant to
Section 168(g)(8) of the Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986, or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
3.17(a) to the Parent Disclosure Schedule or the Parent 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 Parent and its subsidiaries are
in material compliance with the Environmental Laws, which compliance includes
the possession by Parent and its subsidiaries of all material permits and
governmental authorizations required under applicable Environmental Laws, and
material compliance with the terms and conditions thereof.
(b) Except as set forth in Section 3.17(b) of the Parent Disclosure Schedule
or the Parent 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 Parent, threatened against Parent or any of its
subsidiaries or against
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any person or entity whose liability for any Environmental Claim Parent or any
of its subsidiaries has retained or assumed either contractually or by operation
of law.
(c) There are no past or present actions, inactions, activities,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Material of Environmental Concern, that
would form the basis of any Environmental Claim against Parent or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim Parent or any of its subsidiaries have retained or assumed
either contractually or by operation of law, 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 set forth in Section 3.17(d) of the Parent Disclosure Schedule
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect: (i) no off-site locations where Parent or any of
its subsidiaries has stored, disposed or arranged for the disposal of Materials
of Environmental Concern has been listed on the National Priority List, CERCLIS,
state Superfund site list or state analog to CERCLIS, and Parent and its
subsidiaries have not been notified that either 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 Parent or any of its subsidiaries;
(iii) there is no asbestos containing material contained in or forming part of
any building, building component, structure or office space owned, leased or
operated by Parent or any of its subsidiaries; and (iv) there are no
polychlorinated biphenyls (PCB's) or PCB-containing items contained in or
forming part of any building, building component, structure or office space
owned, leased or operated by Parent or any of its subsidiaries.
SECTION 3.18. BROKERS. No broker, finder or investment banker (other than
Merrill, Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the fees
and expenses of whom will be paid by Parent) 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.
SECTION 3.19. INTELLECTUAL PROPERTY. (a) Parent and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use all Parent Intellectual Property Assets that are used in the
business of Parent and its subsidiaries as currently conducted without conflict
with the rights of others except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. As used
herein, "Parent Intellectual Property Assets" shall mean the Intellectual
Property Assets used or owned by the Parent or any of its subsidiaries.
(b) Except as disclosed in Section 3.19(b) of the Parent Disclosure Schedule
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, no claims with respect to the Parent
Intellectual Property Assets, or 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 Parent or any of its subsidiaries,
are currently pending or, to the knowledge of Parent, are threatened by any
person.
(c) Except as set forth in Section 3.19(c) of the Parent Disclosure Schedule
or the Parent 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 Parent
and/or each of its subsidiaries is valid and subsisting.
(d) Except as set forth in Section 3.19(d) of the Parent Disclosure
Schedule, to Parent's knowledge: there is no material unauthorized use,
infringement or misappropriation of any of Parent's Intellectual Property Assets
by any third party, including any employee, former employee, independent
contractor or consultant of Parent or any of its subsidiaries.
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
3.20 of the Parent Disclosure Schedule or the Parent SEC Reports, since the date
of Parent's proxy statement dated
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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 Parent
Disclosure Schedule or the Parent SEC Reports, all material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by Parent or any of its subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Parent and its subsidiaries and
their respective properties and assets and are in character and amount
appropriate for the businesses conducted by Parent, 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 Parent Disclosure Schedule or the Parent SEC Reports,
Parent is not aware of any claim, pending or threatened, against Parent 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 Parent 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 Parent Disclosure Schedule
or the Parent SEC Reports, there is no pending or, to the knowledge of Parent,
overtly threatened, recall or investigation of any product sold by Parent, which
recall or investigation would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 3.23. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. (a) Merger Sub
is a direct, wholly-owned subsidiary of Parent 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 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 Parent's knowledge and based upon
consultation with its independent accountants, Parent has provided to the
Company and its independent accountants all information concerning actions taken
or agreed to be taken by Parent or any of its affiliates on or before the date
of this Agreement that would reasonably be expected to adversely affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests, and Parent has no knowledge that such business
combination cannot be accounted for in that manner. For purposes of this Section
3.26, "to Parent's knowledge" means to the actual knowledge of Parent's Chief
Executive Officer or Chief Financial Officer.
SECTION 3.25. TAX MATTERS. The representations, statements, and covenants
set forth in paragraph 2 through 25 of Exhibit B hereto are true and correct in
all material respects.
SECTION 3.26. DGCL SECTION 203. Other than by reason of this Agreement or
the transactions contemplated hereby, Parent is not an "interested stockholder"
of the Company, as that term is defined in Section 203 of the DGCL.
SECTION 3.27 ACCURACY OF INFORMATION. Each of Parent and Merger Sub
acknowledges that none of the Company, its subsidiaries or any of their
respective directors, officers, employees, affiliates, agents, advisors or
representatives makes any representation or warranty, either express or implied,
as to the accuracy or completeness of any of the information provided or made
available to Parent, Merger Sub or their agents or representatives including,
without limitation, including any estimations, projections or other statement
regarding future performance, except to the extent set forth in this Agreement
(including the Company Disclosure Schedule and the Supplemental Company
Disclosure Schedule).
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY 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, the Company covenants
and agrees that, unless Parent 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 Parent:
(a) amend or otherwise change the Company's Certificate 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);
(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $2,000,000 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, and
except that the Company may declare and pay quarterly cash dividends of
$0.04 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, or (iii) amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any subsidiary to 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 shares
of Company Common Stock, or propose to do any of the foregoing;
(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 $5,000,000 in the aggregate
or issue any debt securities or assume, guarantee (other than guarantees of
bank debt 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,
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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 110%
of the amount thereof provided for in the Company's current business plan, a
copy of which has heretofore been furnished to Parent; 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) increase the compensation payable or to become payable to its
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 or modify any employment or
severance agreement, in excess of $100,000 with, any director, officer or
other employee of the Company or any of its subsidiaries, or establish,
adopt, enter into or amend any collective bargaining agreement, 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, 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 federal, state, local or foreign 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 $2,000,000 in the aggregate;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $5,000,000 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.
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
any inquiries or proposals regarding any merger, sale of substantial 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 (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) considering, negotiating,
approving and recommending to the shareholders of the Company a bona fide
Acquisition Proposal not solicited in violation of this Agreement, (ii) taking
and disclosing to its shareholders a position with respect to any tender or
exchange offer commenced by a third party, or amending or withdrawing such
position, as contemplated by Rules 14d- 9 and 14e-2 under the Exchange Act,
(iii) making any disclosure to its shareholders or (iv) furnishing information
to a third party which has made a bona fide Acquisition Proposal, provided that
such third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between the Company and Parent;
provided that, as to each of clauses (i), (ii), (iii) and (iv), the Board of
Directors of the Company reasonably determines in good faith (after due
consultation with independent
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counsel, which may be Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden,
Arps")) that it is or is reasonably likely to be required to do so in order to
discharge properly its fiduciary duties.
(b) The Company shall immediately notify Parent 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 Parent shall be made orally and in writing, and, unless the Board
of Directors of the Company reasonably determines in good faith (after due
consultation with independent counsel) that it is or is reasonably likely to be
inconsistent with its fiduciary duties, 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 Parent, 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(c).
(c) Anything to the contrary in this Section or elsewhere in this Agreement
notwithstanding, the Board of Directors of the Company shall not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors of the matters set forth
in Section 5.02, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal or (iii) cause the Company to enter into any agreement
with respect to any Acquisition Proposal, except (x) to the extent that such
Board of Directors reasonably determines in good faith (after due consultation
with independent counsel) that it is or is reasonably likely to be required to
cause the Company to act as provided in this Section 4.02(d) in order for the
Board of Directors to discharge properly its fiduciary duties and (y) with
respect to the approval or recommendation of any Acquisition Proposal or
entering into any agreement with respect to any Acquisition Proposal, after the
third business day following Parent's receipt of written notice of the
information with respect to such Acquisition Proposal, and, if applicable, the
second business day after Parent's receipt of written notice of the information
with respect to all material amendments or modifications thereto, in each case
as contemplated by Section 4.02(b) above.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a party.
(e) The Company shall ensure that the officers, directors and employees of
the Company and its 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 PARENT 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, Parent covenants and agrees
that, except as set forth in Section 4.03 of Parent Disclosure Schedule or
unless the Company shall otherwise agree in writing, Parent 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 Parent or its subsidiaries in contemplation of the Merger, and
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 Parent's Memorandum of Association or
Bye-Laws;
(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,
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partnership, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets of any other person,
which, in any such case, would materially delay or prevent the consumma tion
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 Parent
may declare and pay a dividend to its parent, and except that Parent may
declare and pay quarterly cash dividends of $0.025 per share consistent with
past practice; or
(d) take or agree in writing or otherwise to take any action which would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect or prevent Parent from performing or cause
Parent not to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company shall
prepare and file with the SEC preliminary proxy materials which shall constitute
the Proxy Statement/Prospectus. As promptly as practicable after comments are
received from the SEC thereon and after the furnishing by the Company and Parent
of all information required to be contained therein, the Company and Parent
shall file with the SEC a combined proxy and Registration Statement on Form S-4
(or on such other form as shall be appropriate) 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 shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable. The Proxy Statement/Prospectus shall include the
recommendation of the Board of Directors of the Company in favor of the Merger,
subject to the Company's rights pursuant to last sentence of Section 5.02.
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. Subject to
its rights pursuant to the last sentence of Section 4.02(a), the Company shall
solicit from its shareholders proxies in favor of approval of the Merger and
this Agreement, 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. 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 and Parent shall each (and shall cause each of their
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, reasonable access, during the period prior
to the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, the Company and Parent each shall (and shall
cause each of their subsidiaries to) 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 Parent or the Company may reasonably request. Each party shall keep
such information confidential in accordance with the terms of the
confidentiality letter, dated April 9, 1998 (the "Confidentiality Letter"),
between Parent and the Company.
SECTION 5.04. CONSENTS; APPROVALS. The Company and Parent shall each use
their reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all
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United States and foreign governmental and regulatory rulings and approvals),
and the Company and Parent shall make all filings (including, without
limitation, all filings with United States and foreign governmental or
regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company and Parent and the consummation by
them of the transactions contemplated hereby. The Company and Parent shall
furnish all information required to be included in the 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 foreign governmental body in connection with the transactions
contemplated by this Agreement.
SECTION 5.05. AGREEMENTS WITH RESPECT TO AFFILIATES. (a) The Company shall
deliver to Parent, prior to the date the Registration Statement becomes
effective under the Securities Act, a letter (the " Company Affiliate Letter")
identifying all persons who are, at the time of the Company Shareholders
Meeting, anticipated to be "affiliates" of the Company 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 Parent, no less than 35 days prior to the date of the Company
Shareholders Meeting a written agreement (an "Affiliate Agreement") in
connection with restrictions on affiliates under Rule 145 and pooling of
interests accounting treatment, in form mutually agreeable to the Company and
Parent.
(b) Parent shall deliver to the Company, prior to the date the Registration
Statement becomes effective under the Securities Act, a letter (the "Parent
Affiliate Letter") identifying all persons who are, at the time of the Closing,
anticipated to be "affiliates" of Parent for purposes of the Pooling Rules.
Parent shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Parent Affiliate Letter to deliver to
Parent, no less than 35 days prior to the date of Closing a written agreement in
connection with restrictions on affiliates under pooling of interests accounting
treatment, in form mutually agreeable to the Company and Parent.
SECTION 5.06. INDEMNIFICATION AND INSURANCE. (a) The By-Laws and Certificate
of Incorporation of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the By-Laws and Certificate of
Incorporation of the Company, which provisions shall not be amended, repealed or
otherwise modified 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 Certificate of Incorporation
or By-Laws, 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 Certificate
of Incorporation or By-Laws 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, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (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, (iii)
any written determination made by such counsel shall, in the first instance and
subject to any contrary determination by a court of competent jurisdiction, be
presumptively binding on the parties with respect to whether an Indemnified
Party's conduct complies with the standards of applicable law, the Company's
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Certificate of Incorporation or By-Laws, or any such applicable contract or
agreement, and (iv) 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, Parent 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 Parent 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, Parent 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.
(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 5.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent 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 5.08. 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 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
Parent to agree to divest, abandon, license or take similar action with respect
to any assets (tangible or intangible) of Parent or the Company,
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except as to any line of business of the Company and its subsidiaries which
accounts for no more than 10% of the total revenues of the Company and its
subsidiaries taken as a whole, or any line of business of Parent which accounts
for no more than 10% of the total revenues of Parent's Disposable and Specialty
Products Group. Each of Parent, Merger Sub and the Company shall use its
reasonable best efforts to cause the Merger to qualify, and will not (both
before and after consummation of the Merger) take any actions, or fail to take
any action, which could 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)). Parent shall report the
Merger for income tax purposes as a reorganization within the meaning of Section
368 of the Code.
SECTION 5.09. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release 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 a party may, without the prior
consent of the other party, 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 5.10. LISTING OF PARENT SHARES. Parent shall use its best efforts to
cause the Parent Common Shares to be issued 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 5.11. CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time and the
Company shall be responsible for the payment of all such taxes and fees.
SECTION 5.12. 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). The Company shall
take such action as is necessary to cause the ending date of the then current
offering period under the Company Stock Purchase Plans to be prior to the
Effective Time and to terminate such plans as of the Effective Time.
(b) The Company shall use its best efforts to obtain prior to the Effective
Time an acknowledgment from each former PAS stockholder who may be entitled to
receive shares of Company Common Stock pursuant to the PAS Obligations, that
from and after the Effective Time Tyco Common Shares will be issued in lieu of
shares of Company Common Stock issuable pursuant to the PAS Obligations, as
provided in Section 1.06(c)(2) of this Agreement.
(c) Parent and Sub agree that, effective as of the Effective Time, Parent
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 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
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
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given credit for amounts paid under an 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 Parent, the Surviving Corporation or
their subsidiaries.
SECTION 5.13. ACCOUNTANT'S LETTERS. Upon reasonable notice from the other,
the Company shall use its best efforts to cause Deloitte & Touche, LLP to
deliver to Parent, and Parent shall use its best efforts to cause Coopers &
Lybrand to deliver to the Company, a letter covering such matters as are
reasonably requested by Parent or the Company, as the case may be, and as are
customarily addressed in accountant's "comfort" letters.
SECTION 5.14. POOLING ACCOUNTING TREATMENT. (a) Parent and the Company each
agrees to use its best efforts not to take any action that would reasonably be
expected to adversely affect the ability of Parent to account for the business
combination to be effected by the Merger as a pooling of interests, and Parent
and the Company each agrees to use its best efforts to take such action as may
be reasonably required to negate the impact of any past actions by Parent, the
Company or their respective affiliates which would reasonably be expected to
adversely impact the ability of Parent to treat the Merger as a pooling of
interests. The taking by Parent or the Company of any action prohibited by the
previous sentence, or the failure of Parent or the Company to use its best
efforts to take any action required by the previous sentence, if the Merger is
not able to be accounted for as a 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(i).
(b) Parent shall use its best efforts to obtain an opinion of Cooper &
Lybrand, independent public accountants, to the effect that the Merger, to the
best of their knowledge after due inquiry qualifies for pooling of interest
accounting treatment if consummated in accordance with this Agreement and the
Company shall use its best efforts to obtain an opinion of Deloitte & Touche,
independent certified 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.
SECTION 5.15. CONNECTICUT TRANSFER ACT. The Company shall comply with all
applicable provisions and requirements set forth in the Connecticut Transfer
Act, Conn. Gen. Stat. ss.22a-134 et. seq., as amended by Pub. Act 95- 183, in
respect of the Merger, required to be complied with prior to the Effective Time,
including, without limitation, making all required filings with the Connecticut
Department of Environmental Protection and all investigations required to be
made in respect thereof.
SECTION 5.16. DIRECTOR APPOINTMENT. In the event that there shall be a
vacancy in the Board of Directors of Parent occurring after the Effective Time
and prior to the next annual general meeting of shareholders of Parent, Parent
shall take all necessary action, subject to applicable fiduciary obligations of
Parent's Board of Directors, to appoint Leon C. Hirsch to fill such vacancy. In
the event that no such vacancy shall occur, Parent shall take all necessary
action, subject to applicable fiduciary obligations of Parent's Board of
Directors, to nominate Mr. Hirsch for election as a director of Parent at the
next annual general meeting of shareholders of Parent occurring after the
Effective Time.
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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 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;
(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.
(d) Governmental Actions. There shall not have been instituted, pending
or threatened any action or proceeding (or any investigation or other
inquiry that might 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, 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, Parent from exercising all
material rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Parent or any of its
subsidiaries of all or a material portion of the business or assets of the
Surviving Corporation or any of its subsidiaries, or (iii) compelling or
seeking to compel Parent or any of its subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of Parent 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; provided that for purposes of this Section 6.01(d) (but not
for any other purpose of this Agreement or otherwise), a line of business of
the Surviving Corporation and its subsidiaries which accounts for no more
than 10% of the total revenues of the Surviving Corporation and its
subsidiaries taken as a whole (in the case of (ii) above), or a line of
business of Parent which accounts for no more than 10% of the total revenues
of Parent's Disposable and Specialty Products Group (in the case of (iii)
above) shall not be deemed material;
(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 Parent shall have received a written opinion of Kramer,
Levin, Naftalis & Frankel, 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, 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), pursuant to the
Merger will qualify for an exception under Treasury Regulation Section
1.367(a)-3 and accordingly, Parent will be treated as a corporation for
United States federal income tax purposes.
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Each party agrees to make all reasonable representations and covenants in
connection with the rendering of such opinions; and
(g) Opinion of Accountant. Parent shall have received an opinion of
Coopers & Lybrand, independent certified 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 Parent and the Company.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent 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, 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, to have a Material Adverse Effect, with
the same force and effect as if made on and as of the Effective Time, and
Parent 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 Parent 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,
to have a Material Adverse Effect on the Company or Parent;
(d) Affiliate Agreements. Parent 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) Capitalization. The capitalization of the Company on the date of
this Agreement and as of the Effective Time (in terms of the sum of the
number of shares of Company Common Stock outstanding, plus the number of
shares reserved for existing grants pursuant to the Company Stock Option
Plans) shall not exceed by more than the sum of the number of shares
reserved and available for issuance under the Stock Purchase Plans as of the
date hereof (but in no event more than the number of shares set forth in
Section 2.03(v)), plus the number of shares, if any, issued pursuant to the
PAS Obligations after the date hereof, plus 50,000 shares the capitalization
with respect to such outstanding shares and shares reserved for Company
Stock Option Plans set forth in Section 2.03 (including Section 2.03 of the
Company Disclosure Schedule), and the Aggregate Option Exercise Spread as of
the date of this Agreement and as of the Effective Time shall not exceed by
more than $5,000,000 the amount set forth in Section 2.11(c) of the Company
Disclosure Schedule.
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:
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(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct in all respects 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 to have a Material Adverse Effect, with the same force and effect
as if made on and as of the Effective Time, and the Company shall have
received a certificate to such effect signed by the President or Chief
Financial Officer of Parent;
(b) Agreements and Covenants. Parent 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 Parent to such effect signed by the President or Chief
Financial Officer of Parent;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Parent 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 Parent or Merger
Sub, except where the failure to receive such consents, etc. could not
reasonably be expected to have a Material Adverse Effect on the Company or
Parent; and
(d) Listing. The Parent Common Shares issuable in the Merger and upon
exercise of the Adjustment Options shall have been authorized for listing on
the NYSE upon official notice of issuance.
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 Parent:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by December 31, 1998 (other than for the reasons set forth in
clause (d) below); or
(c) by either Parent 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
action having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) by either Parent or the Company, if the requisite vote of the
shareholders of the Company shall not have been obtained by December 31,
1998, or if the shareholders of the Company shall not have approved the
Merger and this Agreement at the Company Shareholders Meeting; or
(e) by Parent, if (i) the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement
or the Merger in a manner adverse to Parent or shall have resolved to do so;
(ii) the Board of Directors of the Company shall have approved or
recommended to the shareholders of the Company an Alternative Transaction
(as hereinafter defined); or (iii) a tender offer or exchange offer for 25%
or more of the outstanding shares of Company Common Stock is commenced
(other than by Parent or an affiliate of Parent) and the Board of Directors
of the Company approves or recommends that the shareholders of the Company
tender their shares in, such tender or exchange offer; or
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(f) by the Company, if the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement
or the Merger in a manner adverse to Parent or Merger Sub or shall have
resolved to do so, in each case in compliance with the provisions of Section
4.02; or
(g) by Parent or the Company, if any representation or warranty of the
Company, or Parent 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 December 31, 1998 by the Company or
Parent, as the case may be, through the exercise of its reasonable best
efforts and for so long as the Company or Parent, as the case may be,
continues to exercise such reasonable best efforts, neither Parent nor the
Company, respectively, may terminate this Agreement under this Section
7.01(g); or
(h) by Parent, 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 Parent and Merger Sub shall have become
untrue such that the condition set forth in Section 6.03(a) would not be
satisfied (a "Parent 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 December 31, 1998 by the
Company or Parent, as the case may be, through the exercise of its
reasonable best efforts, and for so long as the Company or Parent, as the
case may be, continues to exercise such reasonable best efforts, neither
Parent nor the Company, respectively, may terminate this Agreement under
this Section 7.01(h); or
(i) by Parent or the Company, upon a breach of any covenant or agreement
on the part of the Company or Parent, 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, if such Terminating Breach is curable prior to
December 31, 1998 by the Company or Parent, as the case may be, through the
exercise of its reasonable best efforts and for so long as the Company or
Parent, as the case may be, continues to exercise such reasonable best
efforts, neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(i); or
(j) by Parent if any representation or warranty of the Company shall be
untrue when made or shall have become untrue such that the condition set
forth in Section 6.02(e) would not be satisfied (other than by reason of a
Terminating Breach).
As used herein, "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Parent or its
affiliates (a "Third Party") acquires or would acquire more than 25% of the
outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 25% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, or (iii) any other 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 the entity
surviving any merger or business combination including any of them) of the
Company, or any of its subsidiaries having a fair market value (as determined by
the Board of Directors of the Company in good faith) equal to more than 25% of
the fair market value of all the assets of the Company and its subsidiaries,
taken as a whole, immediately prior to such transaction; 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
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party hereto or any of its affiliates, directors, officers or shareholders (i)
except that the Company or Parent or Merger Sub may have liability as set forth
in Section 7.03 and Section 8.01 hereof, and (ii) except as provided in Section
7.03, nothing herein shall relieve the Company, Parent 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
Parent and the Company shall share equally all SEC filing fees and printing
expenses incurred in connection with the printing and filing of the 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 Parent a fee of $125 million (the "Fee"), plus
Parent's 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 out-of-pocket expenses (but not
fees) of financial advisors) ("Expenses", as applicable to Parent or Company),
but in no event more than $5 million, upon the first to occur of any of the
following events:
(i) the termination of this Agreement by Parent or the Company pursuant
to Section 7.01(d) 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 December 31, 1998 or of the failure of the shareholders of the
Company to approve the Merger and this Agreement at the Company Shareholders
Meeting; provided, however, that the Fee and Expenses shall not be payable
under this clause (i) if the Company Shareholders Meeting is held and the
holders of the requisite number of shares of Company Common Stock do not
vote to approve the Merger and the Agreement, unless an Acquisition Proposal
is subsequently consummated, which Acquisition Proposal was publicly
announced within one year of the date the Company Shareholders Meeting
(including any adjournment thereof); or
(ii) the termination of this Agreement by Parent pursuant to Section
7.01(e); or
(iii) the termination of this Agreement by the Company pursuant to
Section 7.01(f); or
(iv) the termination of this Agreement by Parent pursuant to Section
7.01(i), provided that the Terminating Breach referred to therein is
willful.
(c) Upon a termination of this Agreement by Parent pursuant to Section
7.01(g) or 7.01(j), the Company shall pay to Parent the Expenses of Parent
relating to the transactions contemplated by this Agreement, but in no event
more than $5 million. Upon termination of this Agreement by Company pursuant to
Section 7.01(g), Parent shall pay to the Company the Expenses of the Company
relating to the transactions contemplated by this Agreement, but in no event
more than $5 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 Parent, as
the case may be, be required to pay such Fee and/or Expenses to the other party,
if, immediately prior to the termination of this Agreement, the party entitled
to receive such Fee and/or Expenses was in material breach of its obligations
under this Agreement.
A-42
<PAGE>
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 5.06 and 5.08 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 shall
survive termination indefinitely. The Confidentiality Letter shall survive
termination of this Agreement.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent 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 Parent 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 Parent or Merger Sub:
Tyco International Ltd.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton, Bermuda HM11
Telecopier No.: (441) 295-9647
Telephone No.: (441) 292-8674
Attention: Secretary
With a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Telecopier No.: (603) 778-7330
Telephone No.: (603) 778-9700
Attention: General Counsel, Tyco International (US) Inc.
and
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 715-8000
Telephone No.: (212) 715-9100
Attention: Joshua M. Berman, Esq.
(b) If to the Company:
A-43
<PAGE>
United States Surgical Corporation
150 Glover Avenue
Norwalk, Connecticut 06856
Telecopier No.: (203) 846-5988
Telephone No.: (203) 845-1000
Attention: General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 735-3000
Telephone No.: (212) 735-2000
Attention: Paul T. Schnell, Esq.
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) "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
(f) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent 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
further approval. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
A-44
<PAGE>
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 such 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 Parent agree that the Fee provided in Section 7.03(b) 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 exceeds the maximum amount permitted by law, then the
amount of the Fee shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by such court of competent jurisdiction.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein.
SECTION 8.09. ASSIGNMENT; MERGER SUB. This Agreement shall not be assigned
by operation of law or otherwise, except that all or any of the rights of Merger
Sub hereunder may be assigned to any direct, wholly-owned subsidiary of Parent
provided that no such assignment shall relieve the assigning party of its
obligations hereunder. Parent guarantees the full and punctual performance by
Merger Sub of all the obligations hereunder of Merger Sub or any such assignees.
SECTION 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.06 (which is intended to be for the benefit of the Indemnified Parties
and Officer Employees and may be enforced by such Indemnified Parties and
Officer Employees).
SECTION 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12. GOVERNING LAW; JURISDICTION. (a) This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York applicable to contracts executed and fully performed within the State
of New York.
A-45
<PAGE>
(b) Each of the parties hereto submits to the non-exclusive jurisdiction of
the federal courts of the United States located in the City of New York, Borough
of Manhattan with respect to any claim or cause of action arising out of this
Agreement or the transactions contemplated hereby.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in one 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 PARENT, 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.
[This space intentionally left blank.]
A-46
<PAGE>
IN WITNESS WHEREOF, Parent, 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.
<TABLE>
<S> <C> <C>
TYCO INTERNATIONAL LTD.
By /s/ MARK H. SWARTZ
-----------------------------------------
Name: Mark H. Swartz
Title: Executive Vice President and
Chief Financial Officer
T11 ACQUISITION CORP.
By /s/ MARK H. SWARTZ
-----------------------------------------
Name: Mark H. Swartz
Title: Vice President
UNITED STATES SURGICAL CORPORATION
By /s/ LEON C. HIRSCH
-----------------------------------------
Name: Leon C. Hirsch
Title: Chairman of the Board and
Chief Executive Officer
</TABLE>
A-47
<PAGE>
ANNEX B
[LOGO]
May 25, 1998
Board of Directors
United States Surgical Corporation
150 Glover Avenue
Norwalk, CT 06856
Members of the Board:
You have informed us that Tyco International Ltd. ("Acquiror"), T11
Acquisition Corp., a newly-formed, wholly-owned subsidiary of the Acquiror
("Sub"), and United States Surgical Corporation (the "Company") propose to enter
into an Agreement and Plan of Merger, dated as of May 25, 1998 (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Sub with and into the Company pursuant to a transaction in which each
outstanding share of the common stock, par value $.10 per share of the Company
(the "Company Shares") other than shares held in the Treasury of the Company or
owned by the Acquiror, Sub, or any subsidiary of the Company or Acquiror will be
converted into the right to receive 0.7606 shares (the "Exchange Ratio") of
common stock, par value $.20 per share, of the Acquiror (the "Acquiror Shares").
You have also informed us that the Merger is intended to qualify as a tax-free
reorganization for U.S. federal income tax purposes and to be accounted for as a
pooling of interests transaction.
You have requested that we render our opinion as to the fairness, from a
financial point of view, to the holders of Company Shares of the Exchange Ratio.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed the Merger Agreement dated May 25, 1998, in the form provided
to us;
(b) reviewed certain publicly available business and financial information
that we deemed relevant relating to the Acquiror and the Company and the
respective industries in which they operate;
(c) reviewed certain internal non-public financial and operating data
provided to us by or on behalf of the managements of the Company and the
Acquiror relating to their respective businesses, including certain
forecast and projection information as to the future financial results of
such businesses, as well as the amount and timing of the cost savings and
related expenses and synergies projected to result from the Merger (the
"Expected Synergies");
(d) discussed with members of the senior management and representatives of
the Company and the Acquiror the operations, historical financial
statements and future prospects (before and after giving effect to the
Merger) of the Company and the Acquiror, as well as their views of the
business, operational and strategic benefits and other implications of
the Merger, including the Expected Synergies and such other matters as we
deemed necessary or appropriate (and, in the case of the future prospects
of the Acquiror, been informed by the Acquiror to rely on public
analysts' estimates as the most reasonable estimates for the purposes of
this opinion);
(e) compared the financial and operating performance of the Company and the
Acquiror with publicly available information concerning certain other
companies we deemed relevant and
<PAGE>
reviewed the relevant historical stock prices and trading volumes of the
Company Shares, the Acquiror Shares and certain publicly traded
securities of such other companies;
(f) reviewed the financial terms of certain recent business combinations and
acquisition transactions we deemed relevant to the Merger and otherwise
relevant to our inquiry; and
(g) made such other analyses and examinations as we have deemed necessary or
appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for us, or publicly
available for purposes of this opinion, and have further relied upon the
assurances of management of the Company that they are not aware of any facts
that would make such information inaccurate or misleading. We have neither made
nor obtained any independent evaluations or appraisals of the assets or
liabilities of the Company or the Acquiror, nor assumed any obligation to
conduct nor have we conducted a physical inspection of the properties and
facilities of the Company or the Acquiror. We have assumed that the financial
forecast and projection information and the Expected Synergies provided to or
discussed with us by or on behalf of the Company and/or the Acquiror have been
reasonably determined on bases reflecting the best currently available estimates
and judgements of the managements of the Company and the Acquiror as to the
future financial performance of the Company and the Acquiror, as the case may
be, and the Expected Synergies. We have further assumed that, in all material
respects, such forecasts, projections and Expected Synergies will be realized in
the amounts and time indicated thereby. We express no view as to such forecast
or projection information or the assumptions on which they were based.
We have not been asked to consider, and this opinion does not in any manner
address, the prices at which the Company Shares or the Acquiror Shares will
actually trade following the announcement or consummation of the Merger.
For purposes of rendering our opinion, we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Merger Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be performed by it under
the Merger Agreement and that all conditions to the consummation of the Merger
will be satisfied without waiver thereof. We have also assumed that all material
governmental, regulatory or other consents and approvals will be obtained and
that in the course of obtaining any necessary governmental, regulatory or other
consents and approvals, or any amendments, modifications or waivers to any
documents to which either of the Company or the Acquiror are party, as
contemplated by the Merger Agreement, no restrictions will be imposed or
amendments, modifications or waivers made that would have any material adverse
effect on the contemplated benefits to the Company and the Acquiror of the
Merger.
Our opinion herein is necessarily based on market, economic and other
conditions as they exist and can be evaluated on the date of this letter. Our
opinion is limited to the fairness, from a financial point of view, to the
holders of Company Shares of the Exchange Ratio and we express no opinion as to
the merits of the underlying decision by the Company to engage in the Merger.
This opinion does not constitute a recommendation to any holder of Company
Shares as to how such holder of Company Shares should vote with respect to the
Merger or any matter related thereto.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We have acted as financial advisor to the Company in
connection with the Merger and will receive a fee for our services, payment of a
significant portion of which is contingent on the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. As we have previously advised you, The Chase Manhattan
Corporation and its affiliates, including Chase Securities Inc., in the ordinary
course of business, have, from time to time, provided, and in the future may
continue to provide, commercial and/or investment
B-2
<PAGE>
banking services to the Acquiror and the Company. In the ordinary course of
business, we or our affiliates may trade in the debt and equity securities of
the Acquiror and the Company for our own accounts and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that the Exchange Ratio is fair, from a financial point of view, to
the holders of Company Shares.
This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Merger and shall not be used for any other
purpose without the prior written consent of Chase Securities Inc.
Very truly yours,
[LOGO]
CHASE SECURITIES INC.
[SIGNATURE]
BY GREGORY L. SORENSEN, MD
B-3
<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 May 25, 1998, by and among Tyco, T11
Acquisition Corp. and United States Surgical Corporation (included as Annex A to the
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 Registrant's
Registration Statement on Form S-3 (File No. 333-50855))
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 to be issued to the US Surgical shareholders*
8.1 --Tax Opinion of Kramer, Levin, Naftalis & Frankel*
8.2 --Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP*
8.3 --Tax Opinion of Appleby, Spurling & Kempe*
15 --Letter re: Unaudited interim financial information of United States Surgical
Corporation
23.1 --Consent of PricewaterhouseCoopers
23.2 --Consent of PricewaterhouseCoopers LLP
23.3 --Consent of Arthur Andersen LLP
23.4 --Consent of Deloitte & Touche LLP
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
23.5 --Consent of Appleby, Spurling & Kempe (contained in Exhibit 5 and Exhibit 8.3)*
23.6 --Consent of Kramer, Levin, Naftalis & Frankel (contained in Exhibit 8.1)*
23.7 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in Exhibit 8.2)*
23.8 --Consent of Chase Securities Inc.
24.1 --Power of Attorney (contained on signature page hereto)
</TABLE>
- ------------------------
* 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 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
II-2
<PAGE>
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 that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Exeter, State of New Hampshire, on the 14th day
of July 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 neccesary 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 July 14, 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>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
2.1 --Agreement and Plan of Merger, dated as of May 25, 1998, by and among Tyco, T11
Acquisition Corp. and United States Surgical Corporation (included as Annex A to the
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 Registrant's
Registration Statement on Form S-3 (File No. 333-50855))
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 to
be issued to the US Surgical shareholders*
8.1 --Tax Opinion of Kramer, Levin, Naftalis & Frankel*
8.2 --Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP*
8.3 --Tax Opinion of Appleby, Spurling & Kempe*
15 --Letter re: Unaudited interim financial information of United States Surgical Corporation
23.1 --Consent of PricewaterhouseCoopers
23.2 --Consent of PricewaterhouseCoopers LLP
23.3 --Consent of Arthur Andersen LLP
23.4 --Consent of Deloitte & Touche LLP
23.5 --Consent of Appleby, Spurling & Kempe (contained in Exhibit 5 and Exhibit 8.3)*
23.6 --Consent of Kramer, Levin, Naftalis & Frankel (contained in Exhibit 8.1)*
23.7 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in Exhibit 8.2)*
23.8 --Consent of Chase Securities Inc.
24.1 --Power of Attorney (contained on signature page hereto)
</TABLE>
- ------------------------
* To be filed by amendment.
II-6
<PAGE>
EXHIBIT 15
July 13, 1998
United States Surgical Corporation
Norwalk, Connecticut
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
consolidated financial information of United States Surgical Corporation and
subsidiaries for the periods ended March 31, 1998 and 1997, as indicated in our
report dated April 22, 1998; because we did not perform an audit, we expressed
no opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 is being used
in this Registration Statement.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
Stamford, Connecticut
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of Tyco International Ltd. ("Tyco") on Form S-4 of our report dated November 21,
1997, which is included in Tyco's Transition Report on Form 10-K for the period
ended September 30, 1997, and our report dated November 21, 1997, except as to
the information presented in Note 25(b) for which the date is April 21, 1998,
which is included in Tyco's Current Report on Form 8-K dated April 23, 1998, on
our audits of the Consolidated Financial Statements and the Consolidated
Financial Statement Schedule of Tyco International Ltd. (formerly named ADT
Limited) as of September 30, 1997 and December 31, 1996 and for the nine months
ended September 30, 1997 and for each of the two years in the period ended
December 31, 1996. We also consent to the reference to our firm under the
caption "Experts."
/s/ PricewaterhouseCoopers
Hamilton, Bermuda
July 13, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of Tyco International Ltd. ("Tyco") on Form S-4 of our report dated July 10,
1997, which is included in Tyco's Transition Report on Form 10-K for the period
ended September 30, 1997 and in Tyco's Current Report on Form 8-K dated April
23, 1998, on our audits of the Consolidated Financial Statements and the
Consolidated Financial Statement Schedule of Tyco International Ltd.
(subsequently renamed Tyco International (US) Inc.) as of December 31, 1996 and
for the years ended December 31, 1996 and June 30, 1995 (not presented
separately therein). We also consent to the reference to our firm under the
caption "Experts."
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 13, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated January
31, 1997 on our audits of the consolidated financial statements of Keystone
International, Inc. and subsidiaries as of December 31, 1996 and for each of the
two years in the period then ended, included in the Tyco International Ltd.
Transition Report on Form 10-K for the year ended September 30, 1997, and to all
references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
July 13, 1998
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Tyco International Ltd. on Form S-4 of our report dated January 20, 1998,
appearing in the Annual Report on Form 10-K of United States Surgical
Corporation for the year ended December 31, 1997 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
Deloitte & Touche LLP
Stamford, Connecticut
July 14, 1998
<PAGE>
EXHIBIT 23.8
[LOGO]
Chase Securities Inc.
270 Park Avenue
New York, NY 10017-2070
We hereby consent to the inclusion of our opinion letter dated as of May 25,
1998 to the Board of Directors of United States Surgical Corporation as Annex B
to the Proxy Statement/Prospectus which forms a part of this Registration
Statement on Form S-4 and to references to such opinion in such Proxy
Statement/Prospectus. 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 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, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
CHASE SECURITIES INC.
July 13, 1998
