<PAGE>
Filed Pursuant to Rule 424(B)(3)
Registration No. 333-68745
[TYCO]
[AMP]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Tyco International Ltd. and AMP Incorporated have
agreed on a merger. The merger is structured so that Tyco will be the surviving
publicly-traded company and AMP will become a subsidiary of Tyco. AMP
shareholders will receive a fraction of a Tyco common share for each share of
AMP common stock they own based upon an exchange ratio which is designed to give
AMP shareholders between $51.00 and $55.95 in market value of Tyco common shares
for each of their AMP shares. Under some circumstances, the value could be below
this range. Tyco shareholders will continue to own their existing shares. We
estimate, based upon a range of current market prices for Tyco common shares,
that the Tyco common shares to be issued to AMP shareholders will represent
approximately 20% to 22% of the Tyco common shares outstanding after the merger.
Likewise, the Tyco common shares held by Tyco shareholders prior to the merger
will represent approximately 78% to 80% of the Tyco common shares outstanding
upon completion of the merger.
The merger cannot be completed unless the AMP shareholders approve the
merger and the Tyco shareholders approve issuing the Tyco shares to be delivered
to AMP shareholders in connection with the merger. We have scheduled special
meetings for our shareholders to vote on these matters. YOUR VOTE IS VERY
IMPORTANT.
Whether or not you plan to attend a meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us. If you sign, date and mail
your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger if you are an AMP shareholder, and in
favor of the issuance of Tyco shares in connection with the merger if you are a
Tyco shareholder.
Only shareholders of record of AMP as of February 12, 1999 and shareholders
of record of Tyco as of the date of the Tyco meeting are entitled to attend and
vote at the meetings. The dates, times and places of the meetings are as
follows:
For Tyco shareholders:
April 1, 1999
1:00 p.m. (local time)
Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
For AMP shareholders:
April 1, 1999
10:00 a.m. (local time)
Global Leadership Center
411 S. 40th Street
Harrisburg, PA 17105
Tyco common shares are listed on the New York Stock Exchange and the Bermuda
Stock Exchange under the symbol TYC and on the London Stock Exchange under the
symbol TYI.
This document provides you with detailed information about the proposed
merger. We encourage you to read this entire document carefully. In addition,
you may obtain information about our companies from documents that we have filed
with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
/s/ L. Dennis Kozlowski /s/ Robert Ripp
<S> <C>
L. Dennis Kozlowski Robert Ripp
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Tyco International Ltd. AMP Incorporated
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF RISKS WHICH
SHOULD BE CONSIDERED BY SHAREHOLDERS WITH RESPECT TO THE MERGER.
Neither the SEC nor any state securities regulators have approved the Tyco
common shares to be issued under this document or determined if this document
is accurate or adequate. Any representation to the contrary is a criminal
offense.
Joint Proxy Statement/Prospectus dated February 12, 1999 and first mailed to
shareholders on or about
February 17, 1999.
<PAGE>
AMP INCORPORATED
P.O. Box 3608
Harrisburg, PA 17105-3608
----------
NOTICE OF SPECIAL MEETING
TO BE HELD ON APRIL 1, 1999
----------
To the Shareholders of AMP Incorporated:
You are cordially invited to attend a special meeting of shareholders of AMP
Incorporated at 10:00 a.m., local time, on April 1, 1999, at the AMP Global
Leadership Center, 411 S. 40th Street Harrisburg, PA to vote on a proposal
recommended by the Board of Directors of AMP to approve and adopt the merger
agreement among Tyco International (PA) Inc., a wholly-owned subsidiary of Tyco
International Ltd., AMP Merger Corp., a wholly-owned subsidiary of Tyco
International (PA), and AMP.
Only shareholders of record at the close of business on February 12, 1999
are entitled to notice of and to vote at the special meeting or any adjournments
or postponements of the special meeting.
To ensure your representation at the special meeting, please sign, date and
promptly return your proxy in the enclosed envelope whether or not you plan to
attend the meeting. If you do attend the meeting you may vote in person if you
wish, whether or not you have already executed and returned your proxy card. You
may revoke your proxy at any time before it is voted. Please review the document
accompanying this notice for more complete information regarding the matter
proposed for your consideration at the special meeting.
By Order of the Board of Directors
David F. Henschel
General Counsel and Corporate
Secretary
FEBRUARY 12, 1999
THE BOARD OF DIRECTORS OF AMP UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. YOUR SUPPORT IS APPRECIATED.
<PAGE>
TYCO INTERNATIONAL LTD.
(Incorporated in Bermuda with limited liability)
------------------------
NOTICE OF SPECIAL GENERAL MEETING
---------------------
Notice is hereby given that a Special General Meeting of Tyco International
Ltd. will be held on April 1, 1999 at 1:00 p.m., local time, at Cedar House, 41
Cedar Avenue, Hamilton HM12,
Bermuda, for the following purposes:
1. to approve the issuance of common shares, of the nominal value of
US$0.20 each, to be delivered in connection with the merger contemplated
by the Agreement and Plan of Merger, dated as of November 22, 1998, by
and among Tyco International (PA) Inc., AMP Merger Corp. and AMP
Incorporated;
and, conditioned on the consummation of the merger,
2. to increase the number of directors from eleven to twelve and to elect
Robert Ripp, AMP's current Chairman and Chief Executive Officer, as a
director, to serve until the next annual general meeting;
3. to approve an increase in the authorized share capital to 2,500,000,000
common shares by the creation of an additional 996,250,000 common shares,
of the nominal value of US$0.20 each, to authorize the issue or other
disposal by the Board of such shares and to amend consequentially the
Bye-Laws of Tyco; and
4. to authorize an increase in the number of common shares in respect of
which grants may be made under the Tyco International Ltd. Long Term
Incentive Plan.
You are cordially invited to attend the special general meeting. Whether or
not you plan to attend the meeting, please sign, date and return the
accompanying proxy card to ensure that your shares are represented at the
meeting. If you attend the special general meeting, you may vote in person if
you wish, whether or not you have executed and returned your proxy card. Your
proxy may be revoked at any time before it is voted. Please review the Joint
Proxy Statement/Prospectus accompanying this notice for more complete
information regarding the matters proposed for your consideration at the special
general meeting.
By Order of the Board of Directors
Michael Jones, Secretary
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM 11 Bermuda
FEBRUARY 12, 1999
NOTES:
1. A shareholder is entitled to appoint a proxy to attend and vote at the
meeting on his or her behalf. A proxy must be a shareholder.
2. Proxy cards should be signed, dated and returned as soon as possible.
<PAGE>
WHERE TO FIND MORE INFORMATION
Tyco and AMP file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information filed by Tyco and AMP at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The filings of Tyco and AMP with the SEC are also available to
the public from commercial document retrieval services and at the world wide web
site maintained by the SEC at "http://www.sec.gov."
Tyco filed a registration statement on Form S-4 to register with the SEC the
Tyco common shares to be delivered in connection with the merger. This document
is a part of that registration statement and constitutes a prospectus of Tyco in
addition to being a proxy statement of Tyco and AMP for the special meetings. As
allowed by SEC rules, this document does not contain all the information you can
find in the registration statement or the exhibits to the registration
statement.
The SEC allows Tyco and AMP to "incorporate by reference" information into
this document, which means that they can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document. This
document incorporates by reference the documents set forth below that Tyco and
AMP have previously filed with the SEC. These documents contain important
information about Tyco and AMP and their finances.
<TABLE>
<CAPTION>
TYCO SEC FILINGS (FILE NO. 0-16979) PERIOD
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K and 10-K/A, except for Part II, Fiscal year ended September 30, 1998
Items 6, 7, 7A and 8
Current Reports on Form 8-K and 8-K/A Filed on May 13, 1998, December 10, 1998 and
December 11, 1998
</TABLE>
<TABLE>
<CAPTION>
AMP SEC FILINGS (FILE NO. 001-04235) PERIOD
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year Ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters Ended March 31, 1998, June 30, 1998 and
September 30, 1998
Form 8-K Filed on November 25, 1998
Form 8-A/A Filed on October 13, 1998
Proxy Statement Relating to AMP Incorporated's 1998 annual
meeting of shareholders. Filed on March 16, 1998
</TABLE>
Tyco and AMP are also incorporating by reference additional documents that
they file with the SEC between the date of this document and the date of the
special meetings.
Tyco has supplied all information contained or incorporated by reference in
this document relating to Tyco, and AMP has supplied all such information
relating to AMP.
If you are a shareholder, Tyco and AMP may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
Tyco, AMP or the SEC. Documents incorporated by reference are available from
Tyco and AMP without charge. Exhibits to the documents will not be sent,
however, unless those exhibits have specifically been incorporated by reference
in this document. Shareholders may obtain, without charge, documents
incorporated by reference in this document by requesting them in writing or by
telephone from the appropriate company at the following address:
<TABLE>
<S> <C>
Tyco International Ltd. AMP Incorporated
The Gibbons Building P.O. Box 3608, M.S.176-48
10 Queen Street, Suite 301 Harrisburg, Pennsylvania
Hamilton HM 11 Bermuda 17105-3608
(441) 292-8674 (717) 592-4205
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM TYCO OR AMP, PLEASE DO SO BY
MARCH 19, 1999 TO RECEIVE THEM BEFORE THE SPECIAL MEETINGS.
i
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE MATTERS SUBMITTED TO YOU. NEITHER TYCO
NOR AMP HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED FEBRUARY 12,
1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE DOCUMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THIS DATE, AND NEITHER THE MAILING OF THIS
DOCUMENT TO SHAREHOLDERS NOR THE DELIVERY OF TYCO COMMON SHARES PURSUANT TO THE
MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
WHERE TO FIND MORE INFORMATION................. i
QUESTIONS AND ANSWERS ABOUT THE TYCO/AMP
MERGER......................................... iv
SUMMARY........................................ 1
The Companies.............................. 1
The Meetings............................... 1
The Exchange Ratio......................... 2
The Merger................................. 2
Other Tyco Proposals....................... 4
RISK FACTORS................................... 5
FORWARD LOOKING INFORMATION.................... 7
SELECTED FINANCIAL DATA OF TYCO AND AMP........ 8
Selected Consolidated Historical Financial
Data of Tyco............................. 8
Selected Consolidated Historical Financial
Data of AMP.............................. 10
Selected Tyco and AMP Unaudited Pro Forma
Combined Financial Information........... 11
Comparative Per Share Information.......... 12
Comparative Market Value Information....... 13
CURRENT DEVELOPMENTS........................... 14
Sale of $1.2 Billion of Notes by Tyco
Subsidiary............................... 14
Tyco Results for Quarter Ended December 31,
1998..................................... 14
AMP Results for Quarter Ended December 31,
1998..................................... 16
AMP Results for Year Ended December 31,
1998..................................... 17
AMP SPECIAL MEETING............................ 19
Purpose of the AMP Special Meeting......... 19
Solicitation of Proxies.................... 19
Record Date; Voting Rights; Proxies;
Required Vote............................ 19
Quorum..................................... 20
Other Information.......................... 20
Attendance at the Meeting.................. 20
TYCO SPECIAL GENERAL MEETING................... 21
Purpose of the Tyco Special General
Meeting.................................. 21
Solicitation of Proxies.................... 21
Voting Rights; Proxies..................... 22
Quorum..................................... 23
<CAPTION>
PAGE
---------
<S> <C>
Required Vote.............................. 23
THE MERGER..................................... 24
Background of the Merger................... 24
Exchange of Financial Forecasts............ 31
Recommendation of the Board of Directors of
AMP; Reasons of AMP for the Merger....... 32
Opinion of AMP's Financial Advisor......... 33
Recommendation of the Board of Directors of
Tyco; Reasons of Tyco for the Merger..... 40
Opinion of Tyco's Financial Advisor........ 41
Interests of Certain Persons in the
Merger................................... 47
Material U.S. Federal Income Tax and
Bermuda Tax Consequences................. 52
Anticipated Accounting Treatment........... 56
Certain Legal Matters...................... 56
U.S. Federal Securities Law Consequences... 56
Dividends.................................. 57
Stock Exchange Listing..................... 57
Dissenters Rights.......................... 57
THE EXCHANGE RATIO AND ITS EFFECT ON AMP
SECURITIES AND EQUITY-BASED BENEFIT PLANS...... 58
General.................................... 58
The Exchange Ratio......................... 58
Basis of AMP's Determination to Fix the
Exchange Ratio........................... 58
Basis of Tyco's Determination to Proceed if
the Exchange Ratio is above 0.8500....... 59
Fractional Shares.......................... 59
Treatment of AMP Equity-Based Awards....... 59
PROVISIONS OF THE MERGER AGREEMENT AND RELATED
AGREEMENTS..................................... 62
General.................................... 62
The Merger Agreement....................... 62
Effective Time............................. 62
Exchange of AMP Common Stock............... 62
Representations and Warranties............. 63
Conduct of Business by AMP................. 63
Conduct of Business by Tyco................ 64
No Solicitation............................ 64
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Certain Other Covenants.................... 65
Conditions to the Merger................... 68
Termination................................ 70
Amendment and Waiver; Parties in
Interest................................. 73
Stock Option Agreement..................... 73
Guarantees................................. 74
COMPARATIVE PER SHARE PRICES AND DIVIDENDS..... 75
Tyco....................................... 75
AMP........................................ 76
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION.......................... 77
BUSINESSES OF TYCO............................. 85
Electrical and Electronic Components....... 85
Disposable and Specialty Products.......... 87
Fire and Security Services................. 90
Flow Control Products...................... 93
BUSINESS OF AMP................................ 96
DESCRIPTION OF SHARE CAPITAL OF TYCO........... 100
Authorized Share Capital................... 100
Tyco Common Shares......................... 100
Tyco Preference Shares..................... 101
Stock Exchange Listing..................... 101
EXPANSION OF TYCO BOARD AND ELECTION OF TYCO
DIRECTOR PROPOSAL.............................. 102
<CAPTION>
PAGE
---------
<S> <C>
Information Concerning Nominee............. 102
TYCO CAPITAL INCREASE PROPOSAL................. 102
TYCO LTIP SHARE INCREASE PROPOSAL.............. 103
COMPARISON OF SHAREHOLDER RIGHTS............... 108
OTHER MATTERS.................................. 121
LEGAL MATTERS.................................. 121
EXPERTS........................................ 121
FUTURE SHAREHOLDER PROPOSALS................... 122
ANNEXES
Annex A--Agreement and Plan of Merger and
Tyco Guarantee
Annex B--Stock Option Agreement and Tyco
Guarantee
Annex C--Opinion of Credit Suisse First
Boston Corporation
Annex D--Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Annex E--Tyco International Ltd. Long Term
Incentive Plan
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE TYCO/AMP MERGER
Q. WHY ARE TYCO AND AMP PROPOSING TO MERGE?
A. Tyco and AMP are engaged in complementary businesses in the electrical
and electronic component industry, and the merger will create opportunities for
cost savings and synergies. By synergies we mean that the companies will be able
to sell to one another's customers, offer customers a more comprehensive product
line, use a combined worldwide distribution network and pursue jointly future
acquisitions. This should mean increased value for shareholders through higher
earnings per share.
For AMP shareholders the merger means that they will have an interest in a
larger and more diversified manufacturing and service company. They will also
receive a significant premium for their shares over the value of the AMP common
stock on August 4, 1998. That is the date that AlliedSignal Inc. announced its
intention to acquire AMP for $44.50 per share in cash.
Q. WHAT WILL SHAREHOLDERS RECEIVE IN THE MERGER?
A. AMP shareholders will receive a fraction of a Tyco common share in
exchange for each of their shares of AMP common stock. This fraction is referred
to as the "exchange ratio."
Tyco shareholders will not change their holdings of Tyco common shares as a
result of the merger.
Q. HOW WILL SHAREHOLDERS KNOW WHAT THE EXCHANGE RATIO IS?
A. Shareholders can call toll free 1-888-750-5835 at any time beginning
March 9, 1999, which is the day after the first day of the 15 trading day period
used to calculate the exchange ratio, for a voice recording with the following
information:
- - Each day the voice recording will provide the average of the daily weighted
averages of the trading price of Tyco common shares from March 8, the first
day in the 15 day trading period, through the trading day preceding the day of
the recording. Shareholders will also be informed what the exchange ratio
would be based on this average.
- - Beginning on March 26, 1999, after the close of trading, the voice recording
will provide the actual exchange ratio. If this exchange ratio is greater than
0.8500, shareholders will be informed that Tyco has the right to call off the
merger unless AMP agrees to an exchange ratio of 0.8500 and will be advised to
call again on March 31, 1999 for final information on the exchange ratio.
Q. WHAT SHOULD SHAREHOLDERS DO NOW?
A. Shareholders should complete, sign, date and mail their proxy card in the
enclosed postage paid envelope as soon as possible so that their shares will be
voted at the meetings. AMP shareholders can also vote by transmitting both sides
of their proxy card by facsimile to 212-750-5799. Tyco shareholders cannot vote
by facsmile although they can change their vote by facsimile, as discussed
below. THE BOARD OF DIRECTORS OF AMP RECOMMENDS VOTING FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF TYCO RECOMMENDS VOTING FOR
THE ISSUANCE OF TYCO COMMON SHARES IN CONNECTION WITH THE MERGER AND THE OTHER
PROPOSALS THAT ARE BEING PRESENTED TO TYCO SHAREHOLDERS AT THE TYCO SPECIAL
GENERAL MEETING.
AMP shareholders should not send in their share certificates now. After the
merger is completed, Tyco will send AMP shareholders written instructions for
exchanging their share certificates.
Q. CAN SHAREHOLDERS CHANGE THEIR VOTE?
A. Yes. Shareholders can change their vote at any time prior to the special
meetings by mailing a later-dated signed proxy card, submitting via facsimile
both sides of a later dated signed proxy card or by attending their meeting and
voting in person. AMP shareholders can fax their vote changes to the number
provided above. Tyco shareholders can fax their vote changes to: 212-929-0308.
Q. WHAT SHOULD SHAREHOLDERS DO IF THEY HAVE QUESTIONS?
A. AMP shareholders should call Innisfree M&A Incorporated at 1-888-750-5834
(toll free in the United States) or 1-212-750-5833 (call collect).
Tyco shareholders should call MacKenzie Partners, Inc. at 1-800-322-2885
(toll free in the United States) or 1-212-929-5500 (call collect).
iv
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE MERGER AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE MERGER,
YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH YOU
HAVE BEEN REFERRED. SEE "WHERE TO FIND MORE INFORMATION" ON PAGE I.
THE COMPANIES
TYCO INTERNATIONAL LTD.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM 11 Bermuda
(441) 292-8674
Tyco is a diversified manufacturing and service company that, through its
subsidiaries:
- designs, manufactures and distributes electrical and electronic components
and designs, manufactures, installs and services undersea cable
communication systems;
- designs, manufactures and distributes disposable medical supplies and
other specialty products, and conducts vehicle auctions and related
services;
- designs, manufactures, installs and services fire detection and
suppression systems and installs, monitors and maintains electronic
security systems; and
- designs, manufactures and distributes flow control products.
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
Tyco's registered and principal executive offices are located at the above
address in Bermuda. The executive offices of Tyco International (US) Inc.,
Tyco's principal United States subsidiary, are located at One Tyco Park, Exeter,
New Hampshire 03833, and its telephone number is (603) 778-9700.
For further information see "Businesses of Tyco" beginning on page 85.
AMP INCORPORATED
P.O. Box 3608
Harrisburg, PA 17105-3608
(717) 564-0100
AMP, a Pennsylvania corporation, is the world leader in the design,
manufacture and marketing of electronic, electrical and electro-optic connection
devices, and associated application tools and machines. In the past several
years, AMP has been diversifying into an expanding number of interconnection
systems, related components and connector-intensive assemblies. AMP's products
have uses in electronic, electrical, computer and telecommunications systems.
AMP's products are becoming increasingly critical to the performance of these
systems as voice, data and video communications converge, system speeds increase
and devices are miniaturized. AMP's customers include original equipment
manufacturers and their subcontractors, utilities, government agencies,
distributors, value-added resellers, and customers who install, maintain and
repair equipment. These customers are found in the automotive, power technology,
personal computer, communications, and consumer industrial industries. AMP has
facilities located in 53 countries throughout the world.
For further information see "Business of AMP" beginning on page 96.
THE MEETINGS (PAGES 19 AND 21)
The meeting of the AMP shareholders will be held on April 1, 1999 at 10:00
a.m. local time, and the meeting of Tyco shareholders will be held on April 1,
1999 at 1:00 p.m. local time.
The record date for AMP shareholders entitled to receive notice of and to
vote at the AMP special meeting is the close of business on February 12, 1999.
On that date, there were 219,113,163 shares of AMP common stock outstanding.
However, based on a recent decision of
1
<PAGE>
the Federal District Court for the Eastern District of Pennsylvania finding that
the shares of AMP common stock held by AlliedSignal Inc. are "control shares,"
the shares of AMP common stock held by AlliedSignal are not presently entitled
to be voted. Accordingly, absent such decision being reversed on appeal, as of
February 12, 1999, there were 199,113,063 shares of AMP common stock outstanding
and entitled to vote.
Notice of the Tyco special general meeting is being sent to all holders of
record of Tyco common shares on February 12, 1999. On that date, there were
652,110,358 common shares of Tyco outstanding. Holders of record of Tyco common
shares on the date of the Tyco special general meeting will be entitled to vote.
THE EXCHANGE RATIO
The exchange ratio will be determined based on an average stock price
computed by taking the average of the daily weighted averages of the trading
price of Tyco common shares on the New York Stock Exchange over the 15 trading
days ending four trading days before the AMP shareholders meeting. The exchange
ratio is designed so that the value of the Tyco common shares exchanged for each
AMP share will be between $51.00 and $55.95, based on the average stock price.
The table below illustrates the fraction of a Tyco common share that would
be received for each share of AMP common stock at different assumed average
stock prices. If the average stock price is less than $60, Tyco has the right to
call off the merger unless AMP agrees to fix the exchange ratio at 0.8500. See
the risk factor entitled "AMP shareholders could end up with less than $51.00
worth of Tyco stock per share of AMP common stock" on page 5. See the
information under "Basis of AMP's Determination to Fix the Exchange Ratio" on
page 58 for a discussion of the factors that AMP will consider in deciding
whether to agree to an exchange ratio of 0.8500 if the average stock price is
less than $60.00
<TABLE>
<CAPTION>
VALUE
AVERAGE PER SHARE OF
STOCK EXCHANGE AMP COMMON
PRICE RATIO STOCK
- --------- ----------- ---------------
<S> <C> <C>
$ 76.00 0.7362 $ 55.9500
75.00 0.7460 55.9500
74.00 0.7561 55.9500
73.51 0.7611 55.9500
----------- ---------------
73.50 0.7612 55.9482
73.00 0.7612 55.5676
72.00 0.7612 54.8064
71.00 0.7612 54.0452
70.00 0.7612 53.2840
69.00 0.7612 52.5228
68.00 0.7612 51.7616
67.00 0.7612 51.0004
----------- ---------------
66.99 0.7613 51.0000
66.00 0.7727 51.0000
65.00 0.7846 51.0000
64.00 0.7969 51.0000
63.00 0.8095 51.0000
62.00 0.8226 51.0000
61.00 0.8361 51.0000
60.00 0.8500 51.0000
----------- ---------------
59.99 0.8501* 51.0000*
59.00 0.8644* 51.0000*
58.00 0.8793* 51.0000*
57.00 0.8947* 51.0000*
</TABLE>
- ------------------------
* If AMP agrees to an exchange ratio of 0.8500, AMP shareholders will receive
Tyco common shares with a value of less than $51.00 based on the average
stock price.
THE MERGER (PAGE 24)
SHAREHOLDER VOTE REQUIRED
The favorable vote of two-thirds of the votes cast by the AMP shareholders
at a meeting at which a quorum is present is required to approve the merger.
The favorable vote of a majority of the votes cast by the Tyco shareholders
is required to approve the issuance of the Tyco common shares to be delivered in
connection with the merger, as long as at least a majority of the outstanding
Tyco common shares vote on this proposal.
DISSENTERS' RIGHTS
Neither AMP shareholders nor Tyco shareholders have dissenters' rights of
appraisal or
2
<PAGE>
other rights to demand fair value for their shares in cash by reason of the
merger.
TAX TREATMENT
The receipt of Tyco common shares in the merger will generally be tax free
to AMP shareholders for United States federal income tax purposes, except for
tax on cash received for fractional shares. To review tax consequences of the
merger in greater detail, see page 52.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the AMP Board of Directors in favor of
the merger, AMP and Tyco shareholders should be aware that members of the AMP
Board and AMP management will receive benefits as a result of the merger that
will be in addition to or different from benefits received by AMP shareholders
generally. For example, options to purchase AMP stock that are held by AMP's
directors and members of its management generally will become fully vested and
exercisable upon consummation of the merger. See "Interests of Certain Persons
in the Merger" beginning on page 47.
CONDITIONS OF THE MERGER
The consummation of the merger depends upon satisfaction of a number of
conditions, including:
- approval of the merger by the AMP shareholders;
- approval by the Tyco shareholders of the issuance of Tyco common shares to
be delivered in connection with the merger;
- the absence of legal restraints to the consummation of the merger;
- receipt of opinions with respect to the tax-free nature of the merger; and
- receipt of the opinion of PricewaterhouseCoopers confirming that the
merger qualifies for pooling of interests accounting treatment.
TERMINATION OF THE MERGER
Either AMP or Tyco may call off the merger if:
- both parties consent in writing;
- the merger is not completed by July 31, 1999 through no fault of the party
seeking to call off the merger;
- there exist legal restraints preventing the merger;
- the AMP shareholders do not approve the merger or the Tyco shareholders do
not approve the issuance of the Tyco common shares to be delivered in
connection with the merger; or
- the other party breaches in a material way its representations,
warranties, covenants or agreements and that breach is not or cannot be
remedied.
In addition, Tyco may terminate the merger if the Board of Directors of AMP
withdraws or adversely modifies its approval or recommendation of the merger or
recommends a business combination transaction with a third party.
For further details, see "Termination" beginning on page 70.
TERMINATION FEE AND EXPENSES; STOCK OPTION AGREEMENT; NO-SOLICITATION
PROVISIONS
AMP may be required to pay to Tyco a termination fee of $300 million and up
to $30 million of Tyco's reasonable out-of-pocket expenses, if the merger is
terminated. Tyco may be required to pay to AMP up to $30 million of AMP's
reasonable out-of-pocket expenses if the merger is terminated.
See "Termination--Fees and Expenses" beginning on page 71 for a discussion
of the circumstances in which the fee and expenses are payable.
AMP has granted an option to Tyco to purchase shares of AMP common stock
equal to approximately 19.9% of the outstanding shares of AMP common stock. The
option is exercisable under the same circumstances that the termination fee is
payable to Tyco, provided that the profit realized on the exercise of the option
may
3
<PAGE>
not exceed $301 million, less the amount of the termination fee that is paid to
Tyco. See "Stock Option Agreement" beginning on page 73.
AMP may not redeem or amend its rights plan, approve a business combination
transaction other than the merger or enter into an agreement with respect to
such a business combination transaction until November 6, 1999, even if the
merger has been terminated. These restrictions do not apply if the merger is
terminated because of Tyco's breach, because Tyco's shareholders have not
approved the issuance of Tyco common shares to be delivered in connection with
the merger or because the merger has not been consummated by July 31, 1999. See
"No Solicitation" beginning on page 64.
The termination fee, the stock option agreement and the no-solicitation
provisions may have the effect of discouraging persons who might be interested
in entering into a business combination with AMP from proposing a business
combination transaction. This may be so even where the consideration payable to
AMP shareholders in the other transaction would exceed the consideration payable
in the merger.
ANTICIPATED ACCOUNTING TREATMENT
Tyco and AMP expect the merger to qualify as a pooling of interests for
accounting purposes, which means that the companies will be treated as if they
had always been combined for accounting and financial reporting purposes. As a
condition to the merger, Tyco must receive an opinion from its independent
accounting firm regarding qualification of the merger as a pooling of interests
for accounting purposes. See "Anticipated Accounting Treatment" on page 56.
OPINION OF AMP'S FINANCIAL ADVISOR
AMP's financial advisor, Credit Suisse First Boston Corporation, has given a
written opinion to the Board of Directors of AMP as to the fairness, from a
financial point of view, of the exchange ratio set forth in the merger
agreement. The full text of the written opinion of Credit Suisse First Boston
Corporation dated November 22, 1998 is attached to the back of this document as
Annex C and should be read carefully in its entirety. THE OPINION OF CREDIT
SUISSE FIRST BOSTON CORPORATION IS DIRECTED TO THE AMP BOARD AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER HOW TO VOTE ON THE MERGER.
OPINION OF TYCO'S FINANCIAL ADVISOR
Tyco's financial advisor, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, has given a written opinion to the Board of Directors of Tyco as
to the fairness to Tyco, from a financial point of view, of the consideration to
be delivered to AMP's shareholders in the merger. The full text of the written
opinion of Merrill Lynch dated November 22, 1998 is attached to the back of this
document as Annex D and should be read carefully in its entirety. THE OPINION OF
MERRILL LYNCH IS DIRECTED TO THE TYCO BOARD AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER HOW TO VOTE ON THE ISSUANCE OF TYCO COMMON
SHARES TO BE DELIVERED IN CONNECTION WITH THE MERGER OR THE OTHER MATTERS BEING
PRESENTED TO A VOTE BY TYCO SHAREHOLDERS.
OTHER TYCO PROPOSALS
The other proposals being presented to Tyco shareholders at the Tyco special
general meeting are:
- An increase in the size of the Tyco Board from 11 to 12 directors and
election of Robert Ripp, AMP's Chairman and Chief Executive Officer, as a
director;
- An increase in the number of Tyco's authorized shares to 2,500,000,000
common shares; and
- An increase in the number of shares authorized under Tyco's Long Term
Incentive Plan from 44,000,000 to 70,000,000.
Each of these proposals is conditioned upon the consummation of the merger.
Approval of each of the proposals requires the favorable vote of a majority of
the Tyco common shares cast on the matter.
4
<PAGE>
RISK FACTORS
In evaluating the merger and the merger agreement, shareholders should take
into account the following risks, as well as other information included in or
incorporated by reference into this document:
AMP SHAREHOLDERS COULD END UP WITH LESS THAN $51.00 WORTH OF TYCO STOCK PER
SHARE OF AMP COMMON STOCK.
Although the merger is designed to provide AMP shareholders with between
$51.00 and $55.95 worth of Tyco common shares for each of their AMP shares, they
could get less in market value. The merger values the Tyco common shares that
AMP shareholders will receive based upon the "Average Stock Price." The Average
Stock Price is equal to the average of the daily weighted averages of the
trading price of Tyco common shares on the New York Stock Exchange over the 15
trading days ending four trading days before the AMP shareholders' meeting. At
the time of the merger, which is expected but not certain to occur promptly
following the shareholders' meetings, the market price of a Tyco common share
could be more or less than the Average Stock Price. If it is less, the value of
the Tyco common shares that an AMP shareholder receives in the merger would be
lower than the value indicated in the table on page 2, and could be lower than
$51.00 per share of AMP common stock. The market value of Tyco common shares may
fluctuate based upon general market and economic conditions, Tyco's business and
prospects and other factors.
AMP shareholders should also note that they will receive less than $51.00
worth of Tyco common shares calculated on the basis of the Average Stock Price,
if the Average Stock Price is less than $60.00 and AMP agrees to an exchange
ratio of 0.8500 so that Tyco will not have the right to call off the merger. See
"Basis of AMP's Determination to Fix the Exchange Ratio" on page 58 for a
discussion of the factors that AMP will consider in deciding whether to agree to
an exchange ratio of 0.8500 if the Average Stock price is less than $60.00.
THE MERGER WILL NOT BE ACCRETIVE TO TYCO'S EARNINGS PER SHARE UNLESS TYCO
CAN SUCCESSFULLY INTEGRATE AMP WITH TYCO'S EXISTING OPERATIONS AND REALIZE COST
SAVINGS AND SYNERGIES. ON A PRO FORMA BASIS, WITHOUT COST SAVINGS AND SYNERGIES,
THE MERGER IS NOT ACCRETIVE TO EARNINGS PER SHARE.
The benefits to Tyco and its shareholders of the merger are predicated on
the assumption that the merger will be accretive to Tyco's earnings per share,
but this will only be the case if Tyco can efficiently integrate AMP with Tyco's
existing operations. On a pro forma basis, which combines the financial results
of the two companies based upon their historical performance, the merger is not
accretive to earnings per share. See "Selected Tyco and AMP Unaudited Pro Forma
Combined Financial Information" on page 11. Tyco expects that the merger will be
accretive if it can realize cost savings and synergies through the combination
of the two companies. In this regard, Tyco's management believes that it can
continue to implement and enhance AMP's profit improvement plan, which involves
staff reductions, plant closings and consolidations and other cost cutting
activities. Tyco has in the past been successful in integrating prior
acquisitions and realizing anticipated earnings benefits. However, with
facilities in 53 countries and approximately 48,500 employees worldwide, AMP is
substantially larger than the largest company previously integrated by Tyco's
management. It is possible that Tyco will not be able to integrate AMP in a
manner that achieves the desired savings and other benefits. Also, it may take
longer to achieve these savings and other benefits than anticipated by Tyco's
management. If so, Tyco's earnings-per-share performance, which is driven in
part by the success of its acquisitions, is likely to suffer.
TYCO HAS NOT HAD SIGNIFICANT EXPOSURE TO THE DOWNTURN IN THE ASIAN ECONOMY
BUT THAT MAY CHANGE WITH THE AMP ACQUISITION.
The AMP acquisition could significantly increase the effects of the downturn
in Asia on Tyco. Historically, only 3% of Tyco's revenues were attributable to
Tyco's Asian operations, as opposed to
5
<PAGE>
20% of AMP's revenues. The effect of the downturn has been more pronounced on
AMP because of AMP's greater dependence on Asian business. Tyco cannot predict
how long the economic downturn in Asia will persist.
THE RIGHTS OF SHAREHOLDERS OF TYCO UNDER BERMUDA LAW IN SOME WAYS ARE NOT AS
FAVORABLE AS THE RIGHTS OF SHAREHOLDERS OF AMP UNDER PENNSYLVANIA LAW.
- Shareholders may not be able to obtain jurisdiction over Tyco outside
Bermuda, so that certain remedies available to shareholders of AMP, such
as class action lawsuits under United States federal and Pennsylvania law,
might not be available to Tyco shareholders.
- The right to bring a derivative action in the name of the company for a
wrong to a company committed by present or former directors of the company
is more limited under Bermuda law than under Pennsylvania law.
- Under Bermuda law and Tyco's bye-laws, only shareholders holding 5% or
more of the outstanding Tyco shares or numbering 100 or more may propose a
resolution at a Tyco general meeting. AMP shareholders do not have to
satisfy these requirements to propose a resolution at an AMP shareholders
meeting.
- AMP shareholders may take action without a meeting by majority written
consent. Tyco shareholders cannot do so.
6
<PAGE>
FORWARD LOOKING INFORMATION
Certain statements contained in or incorporated by reference into this
document are "forward looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995. All forward looking
statements involve risks and uncertainties. In particular, any statements
regarding the benefits of the merger, as well as expectations with respect to
future sales, operating efficiencies and product expansion, are subject to known
and unknown risks, uncertainties and contingencies, many of which are beyond the
control of Tyco and AMP, which may cause actual results, performance or
achievements to differ materially from anticipated results, performance or
achievements. Factors that might affect such forward looking statements include,
among other things:
- the ability to integrate AMP into Tyco's operations,
- overall economic and business conditions,
- the demand for Tyco's and AMP's goods and services,
- competitive factors in the industries in which Tyco and AMP compete,
- changes in government regulation,
- changes in tax requirements, including tax rate changes, new tax laws and
revised tax law interpretations,
- interest rate fluctuations, foreign currency rate fluctuations and other
capital market conditions,
- economic and political conditions in international markets, including
governmental changes and restrictions on the ability to transfer capital
across borders,
- the ability to achieve anticipated synergies and other cost savings in
connection with acquisitions,
- the timing, impact and other uncertainties of future acquisitions by Tyco,
and
- the ability of Tyco and AMP, and the ability of their respective customers
and suppliers, to replace, modify or upgrade computer programs in order to
adequately address the Year 2000 issue.
For a description of some of the factors or uncertainties that exist in
AMP's operations and business environment which could cause actual results to
differ, reference is made to the section entitled "Cautionary Statements for
Purposes of the 'Safe Harbor"' in AMP's Annual Report on Form 10-K for the year
ended December 31, 1997.
7
<PAGE>
SELECTED FINANCIAL DATA OF TYCO AND AMP
The following information is being provided to assist in analyzing the
financial aspects of the merger. The selected consolidated historical financial
data for Tyco reflect the combined results of operations and financial position
of Tyco and United States Surgical Corporation, which was acquired by Tyco on
October 1, 1998, restated for all periods presented pursuant to the pooling of
interests method of accounting. The information for Tyco has been derived from
Tyco's audited consolidated financial statements for the fiscal year ended
September 30, 1998, the nine months ended September 30, 1997 and the year ended
December 31, 1996, and certain historical financial information of Tyco and US
Surgical for the years ended December 31, 1995 and 1994. The information for AMP
has been derived from AMP's audited financial statements for the years ended
December 31, 1993 through 1997 and AMP's unaudited financial statements for the
nine months ended September 30, 1998 and September 30, 1997. The information is
only a summary. The information should be read in conjunction with the
historical financial statements and related notes contained in the annual,
quarterly and other reports filed by Tyco and AMP with the SEC. See "Where To
Find More Information" on page i. The unaudited pro forma information is
presented for illustrative purposes only and is not indicative of the operating
results or financial position that would have occurred if the merger had been
consummated at the dates indicated, nor is it necessarily indicative of future
operating results of the combined company. References in this document to "$"
mean United States dollars.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ------------------ -------------------------------
1998(1) 1997(1) 1996(2) 1995(2) 1994(2)
------------- ------------------ --------- --------- ---------
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales.................................. $ 13,537.2 $ 8,457.8 $ 9,216.4 $ 7,937.9 $ 7,159.6
Operating income (loss)(3)(4)(5)(6)........ 1,625.2 (376.0) 131.9 760.1 704.5
Income (loss) from continuing operations... 965.1 (697.7) (187.6) 346.7 324.0
Income (loss) from continuing operations
per common share(7):
Basic.................................... 1.54 (1.23) (0.40) 0.65 0.60
Diluted.................................. 1.50 (1.23) (0.40) 0.64 0.59
Cash dividends per common share(7)(8)...... See (8) below.
CONSOLIDATED BALANCE SHEET DATA:
Total assets............................... $ 18,722.6 $ 12,141.6 $ 9,986.1 $ 8,623.3 $ 8,156.7
Long-term debt............................. 5,254.3 2,613.2 2,020.8 2,017.2 2,003.8
Shareholders' equity....................... 7,199.6 4,659.3 4,342.4 4,083.8 3,692.0
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. Accordingly, the nine-month transition period ended September
30, 1997 and the year ended September 30, 1998 is presented.
(2) On July 2, 1997, Tyco, formerly called ADT Limited, merged with Tyco
International Ltd., a Massachusetts Corporation ("Former Tyco"). See
"Businesses of Tyco" beginning on page 85. On August 27, 1997, August 29,
1997, and October 1, 1998, Tyco merged with INBRAND Corporation, Keystone
International, Inc., and US Surgical, respectively. These four combinations
are more fully described in Notes 1 and 2 to the Consolidated Financial
Statements contained in Tyco's Current Report on Form 8-K filed on December
10, 1998, incorporated herein by reference. Prior to their
8
<PAGE>
respective mergers, ADT, Keystone and US Surgical had a December 31 fiscal
year end and Former Tyco had a June 30 fiscal year end. The historical
results have been combined using a December 31 fiscal year end for ADT,
Keystone, Former Tyco and US Surgical for the year ended December 31, 1996.
For 1995 and 1994, the results of operations and financial position reflect
the combination of ADT, Keystone and US Surgical with a December 31 fiscal
year end and Former Tyco with a June 30 fiscal year end. Net sales and net
income for Former Tyco for the period July 1, 1995 through December 31,
1995, which results are not included in the historical combined results,
were $2.46 billion and $136.4 million, respectively.
(3) Operating income in the fiscal year ended September 30, 1998 includes
certain charges of $80.5 million, consisting of $9.6 million of merger costs
and $70.9 million of costs to exit certain businesses in US Surgical's
operations, and restructuring charges of $12.0 million related to severance
costs, facility disposals and asset write-downs as part of US Surgical's
cost cutting objectives. See Note 15 to the Consolidated Financial
Statements contained in Tyco's Form 8-K filed on December 10, 1998.
(4) Operating loss in the nine months ended September 30, 1997 includes charges
related to merger, restructuring and other non-recurring costs of $917.8
million and impairment of long-lived assets of $148.4 million primarily
related to the mergers and integration of ADT, Former Tyco, Keystone and
INBRAND and charges of $24.3 million for litigation and other related costs
and $5.8 million for restructuring charges in US Surgical's operations. See
Notes 11 and 15 to the Consolidated Financial Statements contained in Tyco's
Form 8-K filed on December 10, 1998. The results for the nine months ended
September 30, 1997 also include a charge of $361.0 million for the write-off
of purchased in-process research and development related to the acquisition
of the submarine systems business of AT&T Corp.
(5) Operating loss in 1996 includes non-recurring charges of $744.7 million
related to the adoption of Statement of Financial Accounting Standards No.
121, $237.3 million related principally to the restructuring of ADT's
electronic security services business in the United States and United
Kingdom and $8.8 million of fees and expenses related to ADT's acquisition
of Automated Security (Holdings) plc, a United Kingdom company. See Notes 11
and 15 to the Consolidated Financial Statements contained in Tyco's Form 8-K
filed on December 10, 1998.
(6) Operating income in 1995 includes a loss of $65.8 million on the disposal of
the European auto auction business and a gain of $31.4 million from the
disposal of the European electronic article surveillance business. Operating
income also includes non-recurring charges of $97.1 million for
restructuring charges at ADT and Keystone and for the fees and expenses
related to the 1994 merger of Kendall International, Inc. and Former Tyco,
as well as a charge of $8.2 million relating to the divestiture of certain
assets by Keystone.
(7) Per share amounts for all periods presented have been restated to give
effect to the mergers with Former Tyco, Keystone, INBRAND and US Surgical, a
0.48133 reverse stock split effected on July 2, 1997, and a two-for-one
stock split distributed on October 22, 1997, effected in the form of a stock
dividend.
(8) Tyco has paid a quarterly dividend of $0.025 per common share since July 2,
1997, the date of the Former Tyco/ADT merger. ADT had not paid any dividends
on its common shares since 1992. Prior to the merger with ADT, Former Tyco
paid a quarterly cash dividend of $0.025 per share of common stock since
January 1992. Prior to its merger with Tyco, Keystone paid quarterly
dividends of $0.19 per share since January 1994. US Surgical paid quarterly
dividends of $0.04 per share in the year ended September 30, 1998 and the
nine months ended September 30, 1997 and aggregate dividends of $0.08 per
share in 1996, 1995 and 1994. The payment of dividends by Tyco in the future
will be determined by Tyco's Board of Directors and will depend on business
conditions, Tyco's financial condition and earnings and other factors.
9
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF AMP
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998(1) 1997 1997(2) 1996(2) 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales....................... $ 4,084.9 $ 4,293.5 $ 5,745.2 $ 5,468.0 $ 5,227.2 $ 4,369.1 $ 3,790.5
Operating income................ 198.0 543.8 767.1 502.7 718.0 660.0 504.6
Income from continuing
operations.................... 81.0 330.2 457.6 287.0 427.3 373.8 284.4
Income from continuing
operations per common
share(3)(4):
Basic......................... 0.37 1.50 2.08 1.31 1.97 1.72 1.31
Diluted....................... 0.37 1.50 2.08 1.31 1.96 1.72 1.31
Cash dividends per common
share(3)...................... 0.81 0.78 1.04 1.00 0.92 0.84 0.80
CONSOLIDATED BALANCE SHEET DATA:
Total assets.................... $ 4,718.3 $ 4,808.0 $ 4,848.1 $ 4,685.7 $ 4,504.7 $ 4,092.6 $ 3,448.9
Long-term debt.................. 170.4 172.7 159.7 181.6 212.5 278.8 199.3
Shareholders' equity............ 2,817.9 2,898.0 2,951.5 2,789.9 2,768.0 2,495.8 2,206.5
</TABLE>
- ------------------------
(1) Restructuring and one-time charges on a pre-tax basis of $185.8 million were
recorded in the nine months ended September 30, 1998 in connection with
AMP's profit improvement plan.
(2) Restructuring and other one-time charges on a pretax basis of $195 million
were recorded in 1996 primarily in connection with AMP's decision to exit
certain product lines, manufacturing operations and investments. These
charges were adjusted in the fourth quarter of 1997, resulting in a credit
of $25.9 million to the charges established in 1996. Of the $195 million
charge and the $25.9 million adjustment, $98 million and $21.4 million,
respectively, were related to restructuring charges.
(3) Share data has been adjusted for the 2-for-1 stock split in 1995.
(4) Appropriate per share data in all periods has been restated for the effects
of the adoption of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" in the fourth quarter of 1997.
10
<PAGE>
SELECTED TYCO AND AMP UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER ----------------------------------
1998(1) 30, 1997(1) 1996 1995 1994
------------- ------------ ---------- ---------- ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales................................... $ 19,073.8 $ 12,751.3 $ 14,684.4 $ 13,165.1 $ 11,528.7
Operating income............................ 2,046.5 167.8 634.6 1,478.1 1,364.5
Income (loss) from continuing
operations(2)............................. 1,173.5 (367.5) 99.4 774.0 697.8
Income (loss) from continuing operations per
common share(2)(3)
Basic..................................... 1.48 (0.50) 0.12 1.13 1.02
Diluted................................... 1.45 (0.50) 0.11 1.11 1.00
Cash dividends per common share(4).......... See (4) below.
CONSOLIDATED BALANCE SHEET DATA:
Total assets................................ $ 23,440.9 $ 16,949.6 $ 14,671.8 $ 13,128.0 $ 12,249.3
Long-term debt.............................. 5,424.7 2,785.9 2,202.4 2,229.7 2,282.6
Total shareholders' equity.................. 9,717.5 7,557.3 7,132.3 6,851.8 6,187.8
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. AMP has a calendar year end. For purposes of the pro forma
combined financial information, the historical results for the fiscal year
ended September 30, 1998 and the nine months ended September 30, 1997 have
been combined using the results of Tyco and AMP for those periods.
(2) See Notes (3), (4), (5) and (6) to "Selected Consolidated Historical
Financial Data of Tyco" on page 9 and Notes (1) and (2) to "Selected
Consolidated Historical Financial Data of AMP" on page 10 for information on
certain non-recurring items.
(3) The unaudited pro forma combined per share data are based on AMP
shareholders receiving 0.7612 of a Tyco common share for each share of AMP
common stock held, which assumes the Average Stock Price is within the range
of $67.00 to $73.50. The actual exchange ratio may be more or less than
0.7612. For example, based on an Average Stock Price of $76.00, the exchange
ratio would be 0.7362. Assuming this ratio, pro forma combined income (loss)
per common share on a diluted basis would be $1.46 for the fiscal year ended
September 30, 1998, $(0.51) for the nine months ended September 30, 1997 and
$0.11, $1.12 and $1.01 for the years ended December 31, 1996, 1995 and 1994,
respectively. Based on an Average Stock Price of $60.00, the exchange ratio
would be 0.8500. Assuming this ratio, pro forma combined income (loss) per
common share on a diluted basis would be $1.42 for the fiscal year ended
September 30, 1998, $(0.49) for the nine months ended September 30, 1997 and
$0.11, $1.08 and $0.97 for the years ended December 31, 1996, 1995 and 1994,
respectively.
(4) Tyco has paid a quarterly dividend of $0.025 per common share since July 2,
1997, the date of the Former Tyco/ADT Merger. ADT had not paid any dividends
on its common shares since 1992. Prior to the merger with ADT, Former Tyco
paid a quarterly cash dividend of $0.025 per share since January 1992. AMP
paid dividends of $0.27 per share in each of the four quarters during
calendar 1998, $0.26 per share in each of the four quarters during calendar
1997, and aggregate dividends of $1.00 per share in 1996, $0.92 per share in
1995 and $0.84 per share in 1994. The payment of dividends by Tyco in the
future will be determined by Tyco's Board and will depend on business
conditions, Tyco's financial condition and earnings and other factors.
11
<PAGE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
EXCHANGE RATIO OF
EXCHANGE RATIO OF 0.7612 0.7362
-------------------------------- -------------------
TYCO AND TYCO AND
AMP AMP AMP
TYCO UNAUDITED EQUIVALENT UNAUDITED
HISTORICAL AMP PRO FORMA PRO FORMA PRO FORMA
PER HISTORICAL COMBINED PER SHARE COMBINED
SHARE DATA PER SHARE DATA PER SHARE DATA(1) DATA(1) PER SHARE DATA(2)
------------- --------------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
QUARTER ENDED DECEMBER 31, 1998
Loss from continuing operations per
common share:
Basic..................................... $ (0.04) $ (0.36) $ (0.13) $ (0.10) $ (0.13)
Diluted................................... (0.04) (0.36) (0.13) (0.10) (0.13)
Cash dividends per common share(5).......... 0.025 0.27
Book value per common share................. 11.21 12.32 12.23 9.31 12.31
YEAR ENDED SEPTEMBER 30, 1998
Income from continuing operations per
common share(4):
Basic..................................... 1.54 0.95 1.48 1.13 1.49
Diluted................................... 1.50 0.95 1.45 1.10 1.46
Cash dividends per common share(5).......... 1.07
Book value per common share................. 11.15 12.88 11.96 9.11 12.04
NINE MONTHS ENDED SEPTEMBER 30, 1997
(Loss) income from continuing operations per
common share(4):
Basic..................................... (1.23) 1.50 (0.50) (0.38) (0.51)
Diluted................................... (1.23) 1.50 (0.50) (0.38) (0.51)
Cash dividends per common share(5).......... 0.78
Book value per common share................. 7.84 13.17 9.93 7.56 10.00
YEAR ENDED DECEMBER 31, 1996
(Loss) income from continuing operations per
common share(4):
Basic..................................... (0.40) 1.31 0.12 0.09 0.12
Diluted................................... (0.40) 1.31 0.11 0.09 0.11
Cash dividends per common share(5).......... 1.00
Book value per common share(6).............. 7.83 12.70 9.96 7.58 10.03
<CAPTION>
EXCHANGE RATIO OF 0.8500
--------------------------------
TYCO AND
AMP AMP AMP
EQUIVALENT UNAUDITED EQUIVALENT
PRO FORMA PRO FORMA PRO FORMA
PER SHARE COMBINED PER SHARE
DATA(2) PER SHARE DATA(3) DATA(3)
----------- ------------------- -----------
<S> <C> <C> <C>
QUARTER ENDED DECEMBER 31, 1998
Loss from continuing operations per
common share:
Basic..................................... $ (0.10) $ (0.13) $ (0.11)
Diluted................................... (0.10) (0.13) (0.11)
Cash dividends per common share(5)..........
Book value per common share................. 9.06 11.94 10.15
YEAR ENDED SEPTEMBER 30, 1998
Income from continuing operations per
common share(4):
Basic..................................... 1.10 1.44 1.23
Diluted................................... 1.07 1.42 1.20
Cash dividends per common share(5)..........
Book value per common share................. 8.87 11.68 9.93
NINE MONTHS ENDED SEPTEMBER 30, 1997
(Loss) income from continuing operations per
common share(4):
Basic..................................... (0.37) (0.49) (0.42)
Diluted................................... (0.37) (0.49) (0.42)
Cash dividends per common share(5)..........
Book value per common share................. 7.36 9.68 8.23
YEAR ENDED DECEMBER 31, 1996
(Loss) income from continuing operations per
common share(4):
Basic..................................... 0.09 0.11 0.10
Diluted................................... 0.08 0.11 0.09
Cash dividends per common share(5)..........
Book value per common share(6).............. 7.39 9.68 8.23
</TABLE>
- ------------------------------
(1) Assuming the Average Stock Price is within the range of $67.00 to $73.50,
the unaudited pro forma income (loss) and book value per common share are
based on AMP shareholders receiving 0.7612 of a Tyco common share for each
share of AMP common stock held. The AMP equivalent pro forma per share data
are calculated by multiplying the unaudited pro forma combined per share
data by 0.7612.
(2) Assuming an Average Stock Price of $76.00, the unaudited pro forma income
(loss) and book value per common share are based on AMP shareholders
receiving 0.7362 of a Tyco common share for each share of AMP common stock
held. The AMP equivalent pro forma per share data are calculated by
multiplying the unaudited pro forma combined per share data by 0.7362.
(3) Assuming an Average Stock Price of $60.00, the unaudited pro forma income
(loss) and book value per common share are based on AMP shareholders
receiving 0.8500 of a Tyco common share for each share of AMP common stock
held. The AMP equivalent pro forma per share data are calculated by
multiplying the unaudited pro forma combined per share data by 0.8500.
(4) See Notes (3), (4) and (5) to "Selected Consolidated Historical Financial
Data of Tyco" on page 9 and Notes (1) and (2) to "Selected Consolidated
Historical Financial Data of AMP" on page 10 for information on certain
non-recurring items.
(5) See Note (4) to "Selected Tyco and AMP Unaudited Pro Forma Combined
Financial Information" on page 11 for information on cash dividends per
common share.
(6) Book value per common share excludes the $200.0 liquidation value of Tyco's
redeemable preferred stock, included in shareholders' equity as of December
31, 1996. The preferred stock was redeemed and converted into common shares
on April 1, 1997.
12
<PAGE>
COMPARATIVE MARKET VALUE INFORMATION
The following table sets forth:
1. the closing prices per share and aggregate market values of Tyco common
shares and AMP common stock on the NYSE on November 20, 1998, the last trading
day prior to the public announcement of the proposed merger, and on February 12,
1999, the most recent date for which prices were available prior to printing
this document; and
2. the equivalent price per share and equivalent market values of AMP common
stock, based on the exchange ratio that would apply if the Tyco closing price on
the NYSE were equal to the Average Stock Price.
<TABLE>
<CAPTION>
TYCO AMP AMP
HISTORICAL HISTORICAL EQUIVALENT(1)
-------------- -------------- --------------
<S> <C> <C> <C>
On November 20, 1998
Closing price per common share................................. $ 65.0625 $ 45.1250 $ 51.0000
Market value of common shares (2).............................. $42,159,624,714 $9,873,700,486 $11,159,196,117
On February 12, 1999
Closing price per common share................................. $ 74.0625 $ 52.3125 $ 55.9500
Market value of common shares (2).............................. $48,296,923,389 $11,462,357,339 $12,259,381,469
</TABLE>
- ------------------------------
(1) The AMP equivalent data for November 20, 1998 corresponds to an exchange
ratio of 0.7839, and the AMP equivalent data for February 12, 1999
corresponds to an exchange ratio of 0.7554.
(2) Market value based on 647,986,547 Tyco common shares and 218,807,767 shares
of AMP common stock outstanding as of November 20, 1998, and 652,110,358
Tyco common shares and 219,113,163 shares of AMP common stock outstanding as
of February 12, 1999, excluding, in each case, shares held in treasury.
Market values are likely to differ from values based on the Average Stock Price.
See "Risk Factors-- AMP shareholders could end up with less than $51.00 worth of
Tyco stock per share of AMP common stock" on page 5.
13
<PAGE>
CURRENT DEVELOPMENTS
SALE OF $1.2 BILLION OF NOTES BY TYCO SUBSIDIARY
On January 12, 1999, a wholly owned subsidiary of Tyco consummated the
public sale of $400 million aggregate principal amount of its 6.125% Notes due
2009 and $800 million aggregate principal amount of its 6.875% Notes due 2029.
The net proceeds of approximately $1.17 billion were used to repay borrowings
under such subsidiary's $2.25 billion bank credit agreement. The borrowings
under this facility were used primarily to finance the cost of certain business
acquisitions and to repay borrowings under US Surgical's committed credit
facilities.
TYCO RESULTS FOR QUARTER ENDED DECEMBER 31, 1998
RESULTS OF OPERATIONS (1)(2)
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
12/31/98 12/31/97
--------- ---------
<S> <C> <C>
SALES.................................................................................... $ 3,819.6 $ 2,990.0
--------- ---------
--------- ---------
Income before income taxes............................................................... $ 42.2 $ 380.2
Income taxes............................................................................. (68.2) (124.4)
--------- ---------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM.................................................. $ (26.0) $ 255.8
--------- ---------
--------- ---------
(LOSS) EARNINGS PER SHARE:
Basic.................................................................................. $ (0.04) $ 0.42
--------- ---------
--------- ---------
Diluted (3)............................................................................ $ (0.04) $ 0.41
--------- ---------
--------- ---------
Weighted average common shares:
Basic.................................................................................. 646.7 602.9
--------- ---------
--------- ---------
Diluted................................................................................ 646.7 626.8
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Three months ended December 31, 1998 include merger, restructuring and other
non-recurring charges of $427.6 million, after-tax, or $0.66 per share,
primarily related to the US Surgical merger, which was accounted for as a
pooling of interests. Three months ended December 31, 1998 are before
extraordinary losses of $2.4 million, after-tax, relating to the early
extinguishment of debt.
(2) Three months ended December 31, 1997 are restated for the US Surgical
merger, and include restructuring and non-recurring changes of $9.2 million,
after-tax, or $0.01 per share. These charges relate to restructuring actions
taken by US Surgical prior to its merger with Tyco. Three months ended
December 31, 1997 are before extraordinary losses of $0.9 million,
after-tax, relating to the early extinguishment of debt.
(3) Earnings per share based on diluted shares assumes conversion of LYONs
notes. Accordingly, net interest expense of $2.2 million in the three months
ended December 31, 1997 has been added back to income before extraordinary
item in computing diluted earnings per share. The effect on diluted loss per
share resulting from the assumed conversion of LYONs notes is anti-dilutive
in the quarter ended December 31, 1998.
14
<PAGE>
On January 19, 1999, Tyco announced its results for the first quarter of
fiscal 1999, the three months ended December 31, 1998. For the fiscal 1999 first
quarter, (loss) income before extraordinary item was $(26.0) million, or $(0.04)
per share on a fully diluted basis, as compared to $255.8 million, or $0.41 per
share, for the quarter ended December 31, 1997. During the fiscal 1999 first
quarter, Tyco incurred an after-tax charge of $427.6 million, or $0.66 per
share, for merger, restructuring and other non-recurring charges in its
Healthcare and Specialty Products group primarily related to the US Surgical
merger. During the quarter ended December 31, 1997, Tyco recorded an after-tax
charge of $9.2 million, or $0.01 per share, related to restructuring actions
taken by US Surgical prior to its merger with Tyco. Sales increased 28% to $3.82
billion in the fiscal 1999 first quarter from $2.99 billion in the quarter ended
December 31, 1997. Results for the first quarter of fiscal 1998 have been
restated to reflect the merger with US Surgical which was accounted for as a
pooling of interests.
The following segment discussion is presented before merger, restructuring
and other non-recurring charges and extraordinary item consistent with Tyco
management's view of operations. Results for the first quarter of fiscal 1998
have been restated to reflect the merger with US Surgical, which has been
combined into Tyco's Healthcare and Specialty Products group.
- Earnings at Tyco's Healthcare and Specialty Products group increased 74%
to $273.8 million in the fiscal 1999 first quarter compared to $157.3
million in the quarter ended December 31, 1997. Sales grew 37% to $1.34
billion in the fiscal 1999 first quarter from $979.1 million in the
quarter ended December 31, 1997. Synergies and cost savings associated
with the integration of US Surgical and of Graphic Controls Corporation,
which was acquired in the fiscal 1999 first quarter, contributed to higher
operating margins for the group in this quarter. The results also reflect
increased unit volume and improved margins of Tyco plastics and adhesives,
notwithstanding that sales in this division reflected the impact of lower
raw material pricing.
- Earnings of Tyco's Fire and Security Services group increased 40% to
$205.4 million in the fiscal 1999 first quarter compared to $146.3 million
in the quarter ended December 31, 1997. Sales rose 22% to $1.38 billion in
the fiscal 1999 first quarter from $1.13 billion in the quarter ended
December 31, 1997. The results for this group reflect improved sales and
operating margins in all geographic areas.
- Earnings of Tyco's Flow Control group increased 30% to $93.5 million in
the fiscal 1999 first quarter compared to $71.9 million in the quarter
ended December 31, 1997. Sales grew 19% to $652.5 million in the fiscal
1999 first quarter from $555.0 million in the quarter ended December 31,
1997. Results for this group reflect higher volume and operating margins
in each of the operating units of the group.
- Earnings of Tyco's Electrical and Electronic Components group increased
33% to $95.0 million in the fiscal 1999 first quarter compared to $71.6
million in the quarter ended December 31, 1997. Sales rose 32% to $440.0
million in the fiscal 1999 first quarter from $334.3 million in the
quarter ended December 31, 1997. Results for this group reflect strong
growth in the operations of Tyco Submarine Systems Ltd. and Tyco's Printed
Circuit Group.
The earnings of Tyco's four business groups are stated before deduction for
general corporate expenses, interest expense and taxes.
15
<PAGE>
AMP RESULTS FOR QUARTER ENDED DECEMBER 31, 1998
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
AS REPORTED FOR THE FOR THE THREE
THREE MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER
SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Net sales........................................................... $ 1,397,000 $ 1,451,763
Cost of sales....................................................... 1,026,000(1) 975,133
----------- -----------------
Gross income...................................................... 371,000 476,630
Selling, general and administrative expenses........................ 249,000 274,703
Restructuring and one-time charges/(credits) 169,000(1) (21,338)
----------- -----------------
Income (loss) from operations..................................... (47,000) 223,265
Interest expense.................................................... (32,000)(2) (6,683)
Other income (deductions), net...................................... (38,000)(3) (27,820)
----------- -----------------
Income (loss) before income taxes................................. (117,000) 188,762
Income tax expense (benefit)........................................ (38,000) 61,348
----------- -----------------
Net income (loss)................................................... $ (79,000) $ 127,414
----------- -----------------
----------- -----------------
Per share data:
Basic earnings per share.......................................... $ (0.36) $ 0.58
Diluted earnings per share........................................ (0.36) 0.58
</TABLE>
- ------------------------
(1) Includes one-time charges recorded in the fourth quarter ended December 31,
1998 associated with the profit improvement plan of $52.0 million in cost of
sales and $169.0 million in restructuring and one-time charges/(credits),
primarily related to involuntary separations, facility closures,
divestitures, and certain one-time asset write-downs.
(2) Includes the $22 million write-off of deferred financing fees originally
capitalized in connection with the proposed financing relating to the
self-tender offer, which was cancelled in the fourth quarter ended December
31, 1998.
(3) Includes expenses incurred during the fourth quarter ended December 31, 1998
to defend against the unsolicited takeover attempt by AlliedSignal of $26.0
million and a restructuring charge of $7 million associated with the sale of
a joint venture.
On January 28, 1999, AMP announced its results for its fourth quarter ended
December 31, 1998. For the quarter, net (loss)/income was $(79.0) million or
$(0.36) per share, as compared to $127.4 million, or $0.58 per share, for the
quarter ended December 31, 1997. AMP's management reviews results of operations
before restructuring and other one-time charges as a more meaningful analysis of
its business. Aggregate restructuring and other one-time charges and expenses
were $186.0 million after tax, or $0.85 per share, during the quarter ended
December 31, 1998. For the quarter ended September 30, 1998, net (loss) income
was $(76.3) million, or $(.35) per share, which includes restructuring and other
one-time charges and expenses of $155.6 million after tax, or $(.71) per share.
The sequential quarter to quarter results reflect the positive impact of AMP's
profit improvement plan, particularly staff reductions made during the quarter.
Sales in the quarter ended December 31, 1998 decreased 3.8% in reported U.S.
dollars and 4.7% in local currencies from the comparable prior year quarter.
Sales increased in the quarter ended December 31, 1998 4.4% in U.S. dollars and
1.1% in local currencies over sales in the quarter ended September 30, 1998.
16
<PAGE>
AMP RESULTS FOR THE YEAR ENDED DECEMBER 31, 1998
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
AS REPORTED FOR
THE FOR THE YEAR
YEAR ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ -----------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER
SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Net sales............................................................. $ 5,482,000 $ 5,745,235
Cost of sales......................................................... 3,904,000 3,896,243
------------------ -----------------
Gross income........................................................ 1,578,000 1,848,992
Selling, general and administrative expenses.......................... 1,072,000 1,103,219
Restructuring and one-time charges/(credits).......................... 355,000 (21,338)
------------------ -----------------
Income from operations.............................................. 151,000 767,111
Interest expense...................................................... (63,000) (31,843)
Other income (deductions), net........................................ (85,000) (57,283)
------------------ -----------------
Income before income taxes.......................................... 3,000 677,985
Income tax expense (benefit).......................................... 1,000 220,345
------------------ -----------------
Net income before accounting changes.................................. 2,000 457,640
Cumulative effect of accounting changes............................. -- 15,450
------------------ -----------------
Net income............................................................ $ 2,000 $ 473,090
------------------ -----------------
------------------ -----------------
Per share data:
Net income before cumulative
effect of accounting changes
Basic earnings per share............................................ $ 0.01 $ 2.08
Diluted earnings per share.......................................... 0.01 2.08
Cumulative effect of accounting changes
Basic earnings per share............................................ -- 0.07
Diluted earnings per share.......................................... -- 0.07
Net income
Basic earnings per share............................................ 0.01 2.15
Diluted earnings per share.......................................... 0.01 2.15
</TABLE>
- ------------------------
(1) Includes one-time charges recorded in 1998 associated with the profit
improvement plan of $53 million in cost of sales and $355 million in
restructuring and one-time charges/(credits), primarily related to the
reduction of approximately 6,400 employees through early retirement programs
and involuntary separations, facility closures, divestitures, and certain
one-time asset write-downs.
(2) Includes the financing fees of $30 million incurred in connection with the
proposed financing relating to the self-tender offer, which was cancelled in
the fourth quarter ended December 31, 1998.
(3) Includes expenses of $42 million incurred to defend against the unsolicited
takeover attempt by AlliedSignal, a charge for the Company's estimate for
litigation of $20 million, and a restructuring charge of $7 million
associated with the sale of a joint venture.
17
<PAGE>
For the year ended December 31, 1998, net income was $2.0 million or $.01
per share, as compared to $473.1 million, or $2.15 per share, for the year ended
December 31, 1997. During 1998, AMP incurred aggregate after tax charges of
$342.0 million, or $1.56 per share, related to restructuring and other one-time
charges and expenses. During 1997, AMP incurred a net after tax benefit of $12.6
million, or $0.06 per share, related to restructuring and other one-time items.
The 1997 net benefit was comprised of an after tax restructuring credit of $14.4
million due to an adjustment to the restructuring charge recorded in 1996, a
one-time after tax charge for the permanent impairment of investments of $17.2
million and a net after tax benefit of $15.4 million from the cumulative effect
of accounting changes. Sales for the year ended December 31, 1998 decreased 4.6%
in U.S. dollars and 2.3% in local currencies from the prior year.
AMP CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER DECEMBER
31, 31,
1998 1997
---------- ----------
(CONDENSED) (DOLLARS
IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash & cash equivalents...................................... $ 261,000 $ 350,320
Securities available for sale................................ 12,000 79,350
Receivables.................................................. 1,061,000 1,051,422
Inventories.................................................. 957,000 908,219
Other current assets......................................... 328,000 260,489
---------- ----------
Total current assets....................................... 2,619,000 2,649,800
---------- ----------
Property, plant & equipment.................................... 4,785,000 4,627,415
Less-accumulated depreciation................................ (2,896,000) (2,711,434)
---------- ----------
Property, plant & equipment, net............................. 1,889,000 1,915,985
---------- ----------
Investments and other assets................................... 263,000 282,318
---------- ----------
Total assets................................................... $4,771,000 $4,848,103
---------- ----------
---------- ----------
Liabilities and shareholders' equity
Current liabilities:
Short-term debt.............................................. $ 485,000 $ 465,233
Payables, trade & other...................................... 480,000 487,863
Accrued liabilities.......................................... 512,000 492,200
---------- ----------
Total current liabilities.................................. 1,477,000 1,445,296
---------- ----------
Long-term debt................................................. 217,000 159,695
Other liabilities & deferred credits........................... 379,000 291,577
---------- ----------
Total liabilities.......................................... 2,073,000 1,896,568
---------- ----------
Shareholders' equity........................................... 2,698,000 2,951,535
---------- ----------
Total Liabilities and Shareholders' Equity..................... $4,771,000 $4,848,103
---------- ----------
---------- ----------
</TABLE>
18
<PAGE>
AMP SPECIAL MEETING
PURPOSE OF THE AMP SPECIAL MEETING
At the AMP special meeting, AMP shareholders will consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
November 22, 1998, by and among Tyco International (PA) Inc., AMP Merger Corp.
and AMP providing for the merger. Tyco (PA) and AMP Merger Corp. are
subsidiaries of Tyco, whose obligations in connection with the merger are
guaranteed by Tyco.
THE BOARD OF DIRECTORS OF AMP HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND RECOMMENDS THAT AMP SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "RECOMMENDATION OF THE BOARD OF DIRECTORS
OF AMP; REASONS OF AMP FOR THE MERGER" BEGINNING ON PAGE 32 AND "INTERESTS OF
CERTAIN PERSONS IN THE MERGER" BEGINNING ON PAGE 47.
SOLICITATION OF PROXIES
The solicitation of the enclosed proxies from AMP shareholders is made on
behalf of the Board of Directors of AMP. The expenses of the solicitation of
proxies, including preparing, handling, printing and mailing the proxy
soliciting material, will be borne by AMP. Solicitation will be made by mail, by
electronic telecommunications or in person. AMP has retained the services of
Innisfree M&A Incorporated to assist in the solicitation of proxies for a fee
estimated at $12,500 plus out-of-pocket expenses. Management of AMP may also use
the services of its directors, officers and employees in soliciting proxies, who
will not receive any additional compensation therefor, but who will be
reimbursed for their out-of-pocket expenses. AMP will reimburse banks, brokers,
nominees, custodians and fiduciaries for their expenses in forwarding copies of
the proxy soliciting material to the beneficial owners of the stock held by such
persons and in requesting authority for the execution of proxies.
RECORD DATE; VOTING RIGHTS; PROXIES; REQUIRED VOTE
Only holders of record of shares of AMP common stock on February 12, 1999
are entitled to notice of and to vote at the AMP special meeting.
As of February 12, 1999, there were 219,113,163 issued and outstanding
shares of AMP common stock, excluding shares held in treasury, held by
approximately 13,196 holders of record, each of which is entitled to one vote
per share on any matter that properly comes before the AMP special meeting.
However, based on a recent decision of the Federal District Court for the
Eastern District of Pennsylvania, the 20,000,100 shares of AMP common stock
owned by AlliedSignal are "control shares" under Pennsylvania law and, as such,
these shares do not have voting rights. Accordingly, absent such decision being
reversed on appeal, as of February 12, 1999, there were 199,133,063 shares of
AMP common stock outstanding and entitled to vote. All shares of AMP common
stock represented by properly executed proxies will be voted in accordance with
the instructions indicated in such proxies, unless such proxies have been
previously revoked. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF AMP COMMON
STOCK WILL BE VOTED IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
AMP is not proposing any matters other than approval and adoption of the merger
agreement to come before the AMP special meeting, and AMP has not received
notice of other proposals to be considered at the meeting. Moreover, neither
Pennsylvania law nor AMP's Bylaws permit shareholder proposals to be considered
at a special meeting unless the Board of Directors wishes to include them.
However, if any other matter or matters incidental to the approval and adoption
of the merger agreement or conduct of the meeting are properly presented for
action at the AMP special meeting, including a motion to adjourn the meeting to
another time or place, the persons named in the enclosed form of proxy will have
the discretion to vote on such matters in accordance with their best judgment,
unless such authorization is withheld by notation on the proxy. Notwithstanding
the previous sentence, no proxy which is voted against the proposal to approve
and adopt the merger agreement will be voted in favor of any
19
<PAGE>
adjournment of the AMP special meeting and such discretionary authority will
only be exercised to the extent permitted by applicable federal and state
securities and corporate law. A shareholder who has given a proxy may revoke it
at any time prior to its exercise by giving written notice of revocation to the
Secretary of AMP, by signing and returning a later dated proxy, or by voting in
person at the AMP special meeting. However, mere attendance at the AMP special
meeting will not, in and of itself, have the effect of revoking the proxy.
AMP shareholders can vote either by mailing their completed and signed proxy
card to ChaseMellon Shareholder Services, Proxy Processing, Church Street
Station, P.O. Box 1597, New York, NY 10277 or by transmitting both sides of
their proxy card by facsimile to 212-750-5799. AMP shareholders can change their
vote prior to the AMP special meeting by mailing or faxing a later dated signed
proxy in the same manner.
The affirmative vote of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the votes cast by all shareholders entitled to vote on the
merger is required to approve and adopt the merger agreement. Abstentions will
be counted for purposes of determining the presence of a quorum but will not be
counted for purposes of determining the number of votes cast. Shares represented
by "broker non-votes," if any, will be counted for purposes of determining
whether there is a quorum at the AMP special meeting, but will not be counted
for purposes of determining the number of votes cast. "Broker non-votes" are
shares held by brokers or nominees which are represented at a meeting but with
respect to which the broker or nominee is not empowered to vote on a particular
proposal. Thus, if a quorum is present, abstentions and broker non-votes will
not have the effect of a vote against the merger.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of AMP common stock entitled to
vote is necessary to constitute a quorum at the AMP special meeting.
OTHER INFORMATION
On February 9, 1999, the executive officers and directors of AMP, including
their affiliates, had voting power with respect to an aggregate of 2,555,310
shares of AMP common stock or approximately 1.17% of the shares of AMP common
stock then outstanding. AMP currently expects that these directors and officers
will vote all of such shares in favor of the approval and adoption of the merger
agreement. On February 12, 1999, neither Tyco nor any of its directors or
executive officers beneficially owned any shares of AMP common stock.
In certain circumstances, including if AMP shareholders fail to approve the
merger and certain other conditions are met, AMP will be obligated to pay to
Tyco a termination fee of $300 million, and pay up to $30 million of Tyco's and
Tyco (PA)'s reasonable out-of-pocket expenses. See "Termination-- Fees and
Expenses" beginning on page 71.
ATTENDANCE AT THE MEETING
All shareholders are invited to attend the meeting. If your shares are
registered in your own name and you plan to attend the meeting, you must request
in advance that an admission card be sent to you for admittance to the meeting.
If you are a shareholder but do not own shares in your name, you must bring
proof of ownership, for example, a current broker's statement, in order to be
admitted to the meeting.
20
<PAGE>
TYCO SPECIAL GENERAL MEETING
PURPOSE OF THE TYCO SPECIAL GENERAL MEETING
At the Tyco special general meeting, Tyco shareholders will be asked to
consider and vote upon the following proposals:
1. to approve the issuance of common shares of Tyco to be delivered in
connection with the merger;
and, conditioned upon consummation of the merger,
2. to increase the size of the Tyco Board from 11 to 12 directors and to
elect Robert Ripp, presently the Chairman and Chief Executive Officer of
AMP, as a director of Tyco;
3. to increase the number of authorized Tyco common shares from
1,503,750,000 to 2,500,000,000, to authorize the issue or other disposal
by the Tyco Board of such shares and to amend consequentially the
Bye-Laws of Tyco; and
4. to authorize an increase in the number of common shares in respect of
which grants may be made under the Tyco International Ltd. Long Term
Incentive Plan from 44 million to 70 million.
The merger is not conditioned on the approval by the Tyco shareholders of
proposals 2, 3 and 4.
THE BOARD OF DIRECTORS OF TYCO HAS DETERMINED THAT EACH OF THESE PROPOSALS
IS IN THE BEST INTERESTS OF TYCO AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT TYCO SHAREHOLDERS VOTE "FOR" APPROVAL OF EACH OF THE PROPOSALS. SEE
"BACKGROUND OF THE MERGER" BEGINNING ON PAGE 24, "RECOMMENDATION OF THE BOARD OF
DIRECTORS OF TYCO; REASONS OF TYCO FOR THE MERGER" BEGINNING ON PAGE 40 AND
"INTERESTS OF CERTAIN PERSONS IN THE MERGER" BEGINNING ON PAGE 47 FOR ADDITIONAL
INFORMATION ON THE TYCO BOARD'S RECOMMENDATION OF PROPOSAL 1; AND "EXPANSION OF
TYCO BOARD AND ELECTION OF TYCO DIRECTOR PROPOSAL" ON PAGE 102, "TYCO CAPITAL
INCREASE PROPOSAL" ON PAGE 102 AND "TYCO LTIP SHARE INCREASE PROPOSAL" BEGINNING
ON PAGE 103 FOR ADDITIONAL INFORMATION ON THEIR RECOMMENDATION OF PROPOSALS 2, 3
AND 4.
SOLICITATION OF PROXIES
The Tyco Board is soliciting proxies for the Tyco special general meeting in
favor of the proposals submitted to Tyco shareholders. A proxy card is enclosed
with this document. You are requested to complete and return this blue form of
proxy as soon as possible. In order to be valid, the proxy card for the Tyco
special general meeting must be completed in accordance with the instructions on
it and received by the times and dates set forth below at any of the offices of
Tyco's agents named below or A.S.& K. Services Ltd. Limited, Tyco's Registrar,
at the addresses are set out below:
IN THE UNITED STATES:
by 10:00 a.m. on March 31, 1999 (Eastern Time):
by mail at:
Tyco International Ltd.
Midtown Station
P.O. Box 938
New York, NY 10138-0738
21
<PAGE>
IN THE UNITED KINGDOM:
by 10:00 a.m. on March 31, 1999 (Greenwich Mean Time)
by hand or mail at:
Tyco International Ltd.
Airsystems Couriers Ltd.
Greenlane
Hounslow
Middlesex TW4 6DH
United Kingdom
IN BERMUDA:
to the Registrar by 10:00 a.m. on March 31, 1999 (Bermuda Time)
by hand or mail at:
A.S.&K. Services Ltd.
Cedar House
41 Cedar Avenue
P.O. Box, HM 1179
Hamilton, HM 12
Bermuda
IN AUSTRALIA:
by 10:00 a.m. on March 31, 1999 (local time)
by mail at:
Tyco International Ltd.
P.O. Box 5608
Chatswood NSW 2057
Australia
As an alternative to appointing a proxy, a Tyco shareholder which is a
corporation may appoint any person to act as its representative by delivering
written evidence of the appointment of the representative, by hand or mail, at
any of the offices of Tyco's agents or Registrar, whose names and addresses are
set forth above, up to one hour before the time fixed for the commencement of
the Tyco special general meeting. A representative so authorized may exercise
the same powers, including voting rights, as the appointing corporation could
exercise if it were an individual shareholder.
The expenses of the solicitation of proxies, including preparing, handling,
printing and mailing the proxy soliciting material, will be borne by Tyco.
Solicitation will be made primarily through the mail but may also be made, if
necessary, by advertising, electronic telecommunications and personal interview.
Tyco has retained the services of MacKenzie Partners, Inc. to assist with the
soliciting of proxies for a fee estimated at $9,500 plus out-of-pocket expenses.
Tyco management may also use the services of its directors, officers and
employees in soliciting proxies, who will not receive any additional
compensation therefor, but who will be reimbursed for their out-of-pocket
expenses. Tyco will reimburse banks, brokers, nominees, custodians and
fiduciaries for their expenses in forwarding copies of the proxy soliciting
material to the beneficial owners of the shares held by such persons and in
requesting authority for the execution of proxies.
VOTING RIGHTS; PROXIES
Notice of the Tyco special general meeting is being sent to all holders of
record of Tyco common shares on or about February 17, 1999.
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As of February 12, 1999, there were 652,110,358 issued and outstanding Tyco
common shares, excluding shares held in treasury, held by approximately 52,658
holders of record. Holders of record of Tyco common shares on the date of the
Tyco special general meeting will be entitled to attend and vote at the meeting
and, on a poll, each such share will be entitled to one vote per share. All Tyco
common shares represented by properly executed proxies will be voted on a poll
in accordance with the instructions indicated in such proxies, unless such
proxies have been previously revoked, or the instructions have been altered by
the record holder, in which case the proxy will vote in accordance with the
instructions as altered. IF NO INSTRUCTIONS ARE GIVEN, SUCH TYCO COMMON SHARES
WILL BE VOTED IN FAVOR OF THE PROPOSALS SUBMITTED TO THE TYCO SPECIAL GENERAL
MEETING. Tyco does not know of any matters other than the matters set forth in
this document that are to come before the Tyco special general meeting. If any
other matter or matters incidental to the business set forth in the notice of
the special general meeting are properly presented for action at the Tyco
special general meeting, the persons named in the enclosed form of proxy will
have the discretion to vote on such matters in accordance with their best
judgment, unless such authorization is withheld. Notwithstanding the previous
sentence, no proxy which is voted against the proposal to approve the issuance
of Tyco common shares to be delivered in connection with the merger will be
voted in favor of any adjournment of the Tyco special general meeting, and such
discretionary authority will be exercised to the extent permitted by applicable
securities and corporate laws. A shareholder who has given a proxy may revoke it
at any time prior to its exercise by giving written notice of revocation to the
above-referenced addresses on pages 21 and 22 in the United States, the United
Kingdom, Australia or Tyco's Registrar in Bermuda, by signing and returning a
later dated proxy to the same locations, or by voting in person at the Tyco
special general meeting. Tyco shareholders can also submit their vote changes by
transmitting both sides of a later dated signed proxy by facsimile to
212-929-0308. However, mere attendance at the Tyco special general meeting will
not, in and of itself, have the effect of revoking a proxy.
QUORUM
At the Tyco special general meeting not less than two holders of Tyco common
shares present in person or by proxy shall form a quorum for the transaction of
business, and if a quorum does not assemble within half an hour after the time
appointed for the Tyco special general meeting, the Tyco special general meeting
shall be adjourned to a future date as determined by the directors of Tyco. A
properly executed proxy for the Tyco special general meeting marked "ABSTAIN" on
any matter will be counted for purposes of determining whether there is a quorum
but will not otherwise be voted on such matter. Similary, shares represented by
"broker non-votes" will be counted for purposes of determining whether there is
a quorum at the special general meeting, but will be considered to be voted only
as to those matters actually voted on.
REQUIRED VOTE
The approval of the proposals set forth in this document requires the
affirmative vote of the holders of a majority of the outstanding Tyco common
shares voting on such proposal. In addition, on a proposal such as approval of
the issuance of the Tyco common shares to be delivered in connection with the
merger, the NYSE generally requires that at least a majority of the outstanding
Tyco common shares vote on such proposal. Under such NYSE requirements,
abstentions and broker non-votes would have the effect of a vote against the
proposal if, as a result of such abstentions and broker non-votes, a majority of
the outstanding Tyco common shares would not have voted on such proposal.
On February 12, 1999 the executive officers and directors of Tyco, including
their affiliates, had voting power with respect to an aggregate of 6,595,937
Tyco common shares, or approximately 1.0% of the Tyco common shares then
outstanding. Tyco currently expects that such directors and officers will vote
all of such shares in favor of the proposals set forth in this document to be
voted on at the Tyco special general meeting.
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THE MERGER
This section of this document as well as the next sections entitled "The
Exchange Ratio and its Effect on AMP Securities and Equity Based Benefit Plans"
and "Provisions of the Merger Agreement and Related Agreements" describe the
material aspects of the proposed merger. These discussions are qualified in
their entirety by reference to the merger agreement, the stock option agreement
and the related Tyco guarantees which are attached as Annexes to this document,
and to the other agreements and documents that are discussed in this document
and that are filed as exhibits to the registration statement of which this
document forms a part. YOU SHOULD READ THE MERGER AGREEMENT IN ITS ENTIRETY AS
IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
BACKGROUND OF THE MERGER
In mid-1997, Mr. Lawrence A. Bossidy, Chairman of the Board and Chief
Executive Officer of AlliedSignal, telephoned a director of AMP to inquire
whether AMP had an interest in exploring a possible combination of the two
companies. The inquiry was referred to the Finance Committee of the AMP Board
for consideration. Upon consideration, it was the conclusion of the Finance
Committee that such a combination did not offer any benefits to AMP's businesses
and, accordingly, that there was no interest in pursuing a combination with
AlliedSignal. The Finance Committee's determination was communicated through the
director by telephone to Mr. Bossidy. Prior to the summer of 1998, there were no
further communications from Mr. Bossidy with respect to a potential business
combination.
On August 4, 1998, AlliedSignal announced its intention to commence an
unsolicited tender offer to acquire all of the outstanding shares of AMP common
stock for $44.50 per share in cash, and on August 10, 1998, AlliedSignal
commenced such tender offer. Also, on August 10, 1998, Mr. Bossidy sent a letter
to Mr. William J. Hudson, who was then Chief Executive Officer and President of
AMP, to request a meeting to discuss a possible business combination. Mr.
Bossidy also advised AMP of AlliedSignal's intention to file materials shortly
with the SEC for use by AlliedSignal to solicit consents from AMP's shareholders
with respect to a series of proposals. These proposals were principally intended
to increase the size of AMP's Board of Directors from 11 to 28 members and add
17 AlliedSignal nominees, all of whom were directors and/or executive officers
of AlliedSignal. By letter dated August 11, 1998, Mr. Hudson indicated to Mr.
Bossidy that since the Board had not yet reviewed AlliedSignal's offer or Mr.
Bossidy's request for a meeting, it was premature for such a meeting. Mr.
Bossidy, nonetheless, called Mr. Hudson later on August 11, at which time Mr.
Hudson reiterated the essence of his letter.
On August 5, August 12 and August 20, 1998, the AMP Board held meetings at
which the Board discussed AlliedSignal's offer with AMP's financial advisor,
Credit Suisse First Boston Corporation, and AMP's legal advisors. At the August
12 and August 20 meetings, Credit Suisse First Boston reviewed with the AMP
Board certain financial aspects of the AlliedSignal offer and various
alternatives available to AMP. AMP's senior management also reviewed the
potential impact of the AlliedSignal offer on AMP's various constituencies
including its shareholders, employees, customers, suppliers and the communities
served by it. After lengthy discussions, and presentations from AMP's senior
management and financial and legal advisors, the AMP Board determined at the
August 20 meeting, based in part on the recommendation of all of the independent
directors present, that the best course of action under all prevailing
circumstances was for AMP to continue aggressively to pursue its strategic
initiatives and business plans. The AMP Board concluded that, given the values
inherent in AMP's businesses and the steps being taken to improve the
profitability of these businesses, the AlliedSignal offer was not in the best
interests of AMP and its relevant constituencies. In particular, the AMP Board
determined that AMP's current strategic initiatives and business plans offered
the potential for greater benefits for AMP's various constituencies, including
its shareholders, than did the AlliedSignal offer.
Also, following the recommendation, reached prior to the commencement of
AlliedSignal's offer, of a committee of the AMP Board formed several months
earlier, effective as of August 20, 1998, the AMP Board appointed Robert Ripp as
Chairman and Chief Executive Officer to lead AMP in its
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efforts aggressively to implement its profit improvement plan on a timely and
successful basis. The Board also appointed Herbert Cole, formerly Corporate Vice
President and President, Global Terminal and Connector Operations, as Senior
Vice President for Operations and Dr. Juergen Gromer, formerly Corporate Vice
President, Global Automotive Division, as Senior Vice President, Global Industry
Businesses. James E. Marley retired as Chairman, and William J. Hudson assumed
the position of Vice Chairman.
At the meeting held on August 20, 1998, the AMP Board also fixed October 15,
1998 as the record date for determining those shareholders of AMP entitled to
consent or withhold their consent in connection with AlliedSignal's consent
solicitation. The AMP Board also authorized an amendment to the AMP Rights
Agreement dated as of October 25, 1989 which, among other things, provided that
the rights would become nonredeemable if there were a change in the AMP Board
following the announcement of an unsolicited acquisition proposal such that
those directors then in office who qualified as disinterested directors under
Pennsylvania law, and persons appointed by the board of directors, no longer
constituted a majority of the AMP Board. An unsolicited acquisition proposal
means generally a transaction not approved by AMP's board involving the
acquisition by a person or entity of 20% or more of AMP's common stock or other
significant corporate transaction involving AMP or its stock such as a merger
transaction or the sale of a significant amount of AMP's assets.
On August 26, 1998, AMP retained Donaldson, Lufkin & Jenrette Securities
Corporation to assist in AMP's evaluation of AlliedSignal's offer and various
alternatives thereto.
On September 14, 1998, AlliedSignal amended its offer to reduce the number
of shares of AMP common stock sought to be purchased from all outstanding shares
of AMP common stock to up to 40,000,000 shares at a price of $44.50 in cash per
share. At the time of such amendment, AlliedSignal stated that it would commence
another offer to acquire the remaining shares of AMP common stock at a price of
$44.50 in cash following consummation of its offer to purchase up to 40,000,000
shares. At the same time, AlliedSignal also announced its intention to solicit
consents for a new proposal which would purport to amend AMP's Bylaws to strip
the AMP Board of all authority, rights and duties with respect to the AMP Rights
Agreement or any similar agreement, and to vest such authority, rights and
duties in three individuals, who were never identified, selected by
AlliedSignal. At a meeting of the AMP Board held on September 22, 1998, the AMP
Board fixed a record date of November 16, 1998 for AlliedSignal's new proposal.
At a meeting held on September 17, 1998, the AMP Board, by unanimous vote of
the directors present, determined that the amended offer from AlliedSignal was
not in the best interests of AMP and its relevant constituencies, including its
shareholders. At the same meeting, the AMP Board approved another amendment to
the AMP Rights Agreement which, among other things, amended the definition of
the term "Acquiring Person" to reduce from 20% to 10% the threshold at which a
person who has made an unsolicited acquisition proposal may become an Acquiring
Person and thereby trigger a number of provisions of the AMP Rights Agreement.
On September 21, 1998, AlliedSignal further modified its offer to reduce
from up to 40,000,000 to up to 20,000,000 the number of shares of AMP common
stock sought to be purchased for $44.50 per share in cash.
On September 28, 1998, AMP announced that it intended to commence a
self-tender offer to purchase up to 30,000,000 shares of AMP common stock at a
price of $55 per share in cash. The AMP self-tender offer, which commenced on
October 9, 1998, and was scheduled to expire on November 20, 1998, was
subsequently extended to November 25, 1998. The AMP self-tender offer was
intended to provide AMP shareholders with an opportunity to sell a portion of
their shares of common stock at a price in excess of AlliedSignal's $44.50 per
share offer. Also on September 28, 1998, AMP stated its intention to create a
new Flexitrust that would hold 25 million shares of AMP common stock to fund,
among other things, future AMP benefit and compensation requirements.
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On October 9, 1998, AlliedSignal announced that it had purchased 20,000,000
shares of AMP common stock, at a price of $44.50 per share, pursuant to its
offer. Following the commencement of the AMP self-tender offer, AlliedSignal
indicated that, if the AMP self-tender offer were consummated, it would reduce
the consideration to be paid in any further offer commenced by AlliedSignal to
$42.64 per share, and possibly lower to take into account expenses incurred by
AMP in connection with the AMP self-tender offer. AlliedSignal has not commenced
another tender offer for the shares of AMP common stock not purchased by it
pursuant to its original offer.
Beginning in August 1998, following commencement of the original
AlliedSignal offer, Tyco was approached by a number of investment banking firms
concerning its possible interest in a business combination transaction with AMP.
Management of Tyco reviewed publicly available information concerning AMP and
the industry in which AMP operates, and made certain analyses based upon that
information. Tyco did not, however, express any interest at that time in
participating in a business combination transaction with AMP.
On October 18, 1998, Mr. Ripp and outside counsel for AMP met with Mr.
Bossidy and AlliedSignal's general counsel. The meeting was an outgrowth of
contact initiated by AlliedSignal's outside counsel shortly beforehand, in which
such counsel indicated AlliedSignal would be prepared to offer a modest price
increase if AMP would be willing to negotiate a transaction. Prior to the
meeting, AMP indicated through its counsel that, while AMP's Board had publicly
stated it would give serious consideration to any offer providing reasonable
value for AMP, because AMP was not for sale AMP was not prepared to negotiate
based on a price already determined to be inadequate, but that Mr. Ripp was
prepared to meet with Mr. Bossidy. At the meeting, Mr. Ripp generally described
to Mr. Bossidy why he believed that AMP's value was significantly above $44.50
per share. No discussion of price occurred. However, both Mr. Ripp and Mr.
Bossidy each agreed that they should feel free to contact one another in the
future as events unfolded if either wished to do so.
In mid-October, representatives of Credit Suisse First Boston, at AMP's
request, informally contacted a number of companies regarding their potential
interest in exploring a business combination transaction with AMP. Such informal
contacts did not result in any proposals from those companies.
On November 3, 1998, representatives of Credit Suisse First Boston met with
L. Dennis Kozlowski, Chairman, President and Chief Executive Officer of Tyco,
regarding a number of matters, including the status of AlliedSignal's efforts to
acquire AMP, whether Tyco might have an interest in exploring a business
combination transaction with AMP, and, if Tyco were so interested, the
possibility of arranging a meeting for Tyco with Mr. Ripp. Mr. Kozlowski
indicated that Tyco would be interested in such a meeting.
On November 10, 1998, Mr. Ripp and representatives of Credit Suisse First
Boston met with Mr. Kozlowski and Mark Swartz, Executive Vice President and
Chief Financial Officer of Tyco. At the meeting, Mr. Ripp stated his belief that
AMP was worth significantly more than the $44.50 per share being offered by
AlliedSignal. Following the meeting, Tyco's management reviewed certain
information provided by AMP, including materials that had been presented at the
meeting, as well as certain information prepared in connection with the
financing for AMP's self-tender offer, and made a preliminary assessment of
value.
On November 11, 1998, Mr. Kozlowski contacted representatives of Credit
Suisse First Boston to express an interest in pursuing a business combination
transaction with AMP. Based on the information that Tyco had reviewed and its
discussions with representatives of AMP through that date, Tyco gave its
preliminary indication of a transaction value of $50.00 per share of AMP common
stock. This value assumed a transaction in which AMP shares would be exchanged
for Tyco shares, accounted for as a pooling of interests, and was subject to the
conduct of appropriate due diligence and agreement on other transaction terms
satisfactory to Tyco. Discussions concerning a potential transaction continued
on November 12-13, 1998. The parties scheduled a meeting for November 16, 1998,
and agreed that further due diligence would be conducted during the week of
November 16, 1998. Tyco and AMP executed reciprocal confidentiality letters on
November 16, 1998.
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On November 16, 1998, Mr. Kozlowski, Mr. Swartz and other members of Tyco's
management met with Mr. Ripp, William S. Urkiel, AMP's Chief Financial Officer,
David F. Henschel, AMP's General Counsel and Corporate Secretary,
representatives of Credit Suisse First Boston and AMP's outside counsel to
discuss in detail AMP's business and prospects, including its profit improvement
plan. The following day, Messrs. Kozlowski and Swartz met with Mr. Ripp and
another AMP board member, together with representatives of Credit Suisse First
Boston and AMP's outside counsel, to discuss Tyco's business and prospects.
Beginning on November 16, 1998, Tyco conducted an extensive due diligence
investigation of AMP. In the course of this investigation, Tyco personnel
reviewed documentation and conducted discussions with AMP, its accountants and
other AMP representatives concerning AMP's financial condition, facilities,
operations, profit improvement plan, human resources programs, intellectual
property, tax posture, environmental compliance and other business and legal
matters. As part of the due diligence process, Messrs. Kozlowski and Swartz and
various Tyco operating personnel toured certain AMP facilities. Also during this
period, the parties' legal counsel conducted negotiations concerning the terms
of the merger agreement and the related stock option agreement. Beginning on
November 16, 1998, AMP and its advisors conducted legal and financial due
diligence with respect to Tyco.
On November 17, 1998, Mr. Ripp and outside counsel for AMP met with Mr.
Bossidy and AlliedSignal's general counsel. The meeting was initiated the prior
week by a call from Mr. Bossidy to Mr. Ripp, during which Mr. Ripp indicated he
would be prepared to discuss the subject of price among other matters. At the
meeting, Mr. Ripp elaborated on his view regarding AMP's values as well as
considerations relating to various AMP constituencies. Mr. Bossidy addressed
certain constituency matters, and indicated that AlliedSignal would be prepared
to increase its proposed acquisition price for AMP by a modest amount and to
include an equity component for a limited portion of the total consideration
with downside price protection and upside participation, intended to offer
tax-free treatment to certain low-basis AMP shareholders. Mr. Ripp indicated
that the value expectations of AMP's Board were at levels above $50.00 per
share, to which Mr. Bossidy indicated that AlliedSignal would not go to such
levels. Mr. Ripp asked if AlliedSignal would be prepared to offer more than the
modest amount contemplated and Mr. Bossidy indicated that a small amount more
could be available to reach an agreement. Mr. Ripp indicated that he would
report the discussion with Mr. Bossidy to AMP's directors within the next few
days and call Mr. Bossidy thereafter. Mr. Ripp informed AMP's directors of these
discussions during a telephonic Board meeting on November 19, 1998, and advised
Mr. Bossidy by telephone shortly thereafter that AMP's Board felt that
AlliedSignal's enhanced proposal was not satisfactory and that the AMP Board
would continue to review its alternatives and options.
On November 19, 1998, representatives of Tyco and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Tyco's financial advisor, met with AMP's legal and
financial advisors to review the key financial and contractual terms of a
business combination transaction, including the transaction consideration.
During these discussions, subject to satisfactory conclusion of Tyco's due
diligence investigation and agreement on all contractual terms, Tyco indicated a
willingness to consider an increase of the transaction consideration to at least
$51.00 worth of Tyco common shares for each share of AMP common stock.
On November 20, 1998, the Board of Directors of Tyco met to consider a
business combination transaction with AMP on the terms that had been discussed
to date. At the meeting:
- Mr. Kozlowski reviewed with the Tyco Board his discussions with
representatives of AMP and the results of Tyco's due diligence
investigation,
- Mr. Swartz discussed with the Tyco Board pro forma financial information
reflecting a combination of Tyco and AMP,
- Mark A. Belnick, Tyco's Chief Corporate Counsel, reviewed the basic terms
of the merger, and
- Merrill Lynch made a presentation regarding certain financial aspects of
the merger and provided its preliminary, oral opinion, which opinion was
subsequently confirmed by delivery of a
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written opinion dated November 22, 1998, to the effect that, as of the
date of such opinion, and based upon the assumptions made, matters
considered and limits of review set forth in its written opinion, the
consideration to be issued to AMP's shareholders in the merger was fair to
Tyco from a financial point of view.
At the meeting following the presentations of Tyco's management and advisors
and Tyco Board discussion, the Tyco Board unanimously voted to:
- approve the terms of the merger,
- approve and adopt Tyco's guarantee of Tyco (PA)'s obligations under the
merger agreement on the terms presented,
- reserve for issuance and transfer to Tyco (PA) the shares to be delivered
in connection with the merger,
- convene a special general meeting of Tyco shareholders to consider and act
upon the various matters proposed for action at the Tyco special general
meeting in connection with the merger, and recommend that Tyco
shareholders take such action, and
- authorize management to conclude the necessary agreements for the merger
and take other action required or deemed advisable to consummate the
merger.
On November 21, 1998, the Board of Directors of Tyco (PA) and AMP Merger
Corp. convened to approve the terms of the merger and other actions necessary
for Tyco (PA) and AMP Merger Corp. to consummate the merger. Also on November
21, 1998, Tyco retained Lehman Brothers Inc. to assist in certain financial
analyses with respect to the proposed merger and assess market reaction to the
transaction.
On November 21, 1998, the AMP Board of Directors met to review the terms of
the proposed business combination with Tyco. At the meeting, the AMP Board heard
presentations from:
- Mr. Ripp and legal and financial advisors with respect to the proposed
terms of the merger,
- Credit Suisse First Boston regarding certain financial aspects of the
merger, and
- Mr. Kozlowski and Mr. Swartz, who had been invited to attend a portion of
the AMP Board meeting, regarding Tyco's business, financial matters,
corporate structure, management approach, and AMP's position within Tyco.
The AMP Board held another meeting on November 22, 1998, at which it
reviewed the results of final negotiations on the contractual terms of the
merger and related matters. Credit Suisse First Boston rendered to the AMP Board
an oral opinion, which opinion was subsequently confirmed by delivery of a
written opinion dated November 22, 1998, to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
exchange ratio was fair to holders of AMP common stock from a financial point of
view. Following discussion, the AMP Board of Directors voted unanimously to:
- approve the merger agreement and the related stock option agreement and
the transactions that they contemplate,
- recommend approval of the merger and adoption of the merger agreement to
AMP's shareholders,
- terminate the AMP self-tender offer,
- terminate the Flexitrust,
- terminate AMP's share repurchase plan, and
- amend the AMP Rights Agreement so that the AMP Rights Agreement will be
inapplicable to the merger agreement, the stock option agreement and the
transactions contemplated thereby.
Following conclusion of negotiations and approval of the merger agreement,
the stock option agreement and the transactions contemplated thereby by the AMP
Board of Directors on November 22, 1998, the parties executed the merger
agreement and the stock option agreement and Tyco
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executed the guarantees. The transaction, as well as the termination of the AMP
self-tender offer and the Flexitrust, were announced before the opening of
business on November 23, 1998.
Following the announcement of the transaction, AlliedSignal publicly
announced that the price being paid by Tyco, based on then current market prices
for the Tyco common shares, exceeded the value which AlliedSignal placed on AMP.
AlliedSignal also stated that it would defer commencement of its consent
solicitation pending clarification of certain legal issues described below with
respect to AlliedSignal's efforts to gain control of AMP and pending
verification that AMP shareholders will receive the value then being indicated.
CERTAIN LITIGATION.
On August 4, 1998, AlliedSignal filed a complaint against AMP in the United
States District Court for the Eastern District of Pennsylvania (ALLIEDSIGNAL
CORPORATION V. AMP INCORPORATED, CIVIL ACTION NO. 98-CV-4058). In its initial
complaint, AlliedSignal sought a declaratory judgment as to, among other things,
the applicability and validity of the continuing director provisions contained
at the time in the AMP Rights Agreement and the constitutionality of certain
anti-takeover provisions of Pennsylvania law. AlliedSignal subsequently amended
its complaint three times. On September 14, 1998, AlliedSignal moved to amend
its complaint to add a claim for declaratory and injunctive relief declaring the
amendment to the AMP Rights Agreement approved by the AMP Board of Directors on
August 20, 1998, to be invalid under Pennsylvania law. On September 22, 1998,
AlliedSignal moved to amend its complaint again to incorporate a challenge to
the September 17, 1998 amendment to the AMP Rights Agreement. On September 25,
1998, AlliedSignal filed a third amended complaint in which it challenged the
November 16, 1998 record date set by AMP's Board of Directors for the
solicitation of consents regarding AlliedSignal's proposal to strip the AMP
Board of its authority with respect to the AMP Rights Agreement. AMP did not
oppose AlliedSignal's motions to amend its complaint.
AMP shareholders filed four purported shareholder class action lawsuits
against AMP and its Board of Directors in the United States District Court for
the Eastern District of Pennsylvania on or about August 6 and 7, 1998. These
complaints each alleged similar acts of supposed misconduct, i.e., that AMP and
its directors improperly refused to consider the original AlliedSignal offer and
wrongfully relied upon provisions of the AMP Rights Agreement and Pennsylvania
law to block the original AlliedSignal offer, as well as challenges to the
constitutionality of certain anti-takeover provisions of Pennsylvania law. These
shareholder actions were consolidated and a consolidated amended complaint was
filed on September 28, 1998. This complaint omitted class action allegations
asserted in the initial complaints, named a number of additional officers of AMP
as defendants and added claims brought under the Williams Act alleging that AMP
failed to disclose relevant information in its Schedule 14D-9 consent revocation
filing. No service has been made on the additional defendants.
On August 21, 1998, AMP filed a complaint in the United States District
court for the Eastern District of Pennsylvania against AlliedSignal seeking
declaratory and injunctive relief to prevent AlliedSignal from pursuing its
attempt to pack the AMP Board of Directors with AlliedSignal executive officers
and directors who would have an irreconcilable conflict of interest were they to
serve as directors of AMP (AMP INCORPORATED V. ALLIEDSIGNAL INC. AND PMA
ACQUISITION CORPORATION, CIVIL ACTION NO. 98-CV-04405). The complaint also
alleged that the Schedule 14D-1 filed by AlliedSignal and its subsidiary PMA
Acquisition Corp. with the SEC was false and misleading because it failed to
disclose that those AlliedSignal representatives would have such conflicts of
interest or how AlliedSignal would propose to deal with such conflicts, and that
AlliedSignal's attempt to pack the Board of Directors would prevent the current
members of the Board of Directors from fulfilling their fiduciary duties to AMP
under Pennsylvania law. On September 22, 1998, AMP amended its complaint to add
several claims against AlliedSignal. The amended complaint sought, among other
things, (1) an order declaring that the Pennsylvania Control-Share Acquisition
Statute bars AlliedSignal from voting AMP shares acquired pursuant to its tender
offer and (2) a declaratory judgment that AlliedSignal's consent proposal with
respect to the AMP Rights Agreement violates Pennsylvania law.
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On September 11, 1998, AMP filed a motion for summary judgment on its claim
that AlliedSignal's attempt to pack AMP's Board of Directors with AlliedSignal's
directors and senior management would create extensive, irreconcilable conflicts
of interest. AMP's motion sought an order declaring that the AlliedSignal
consent solicitation proposals violate Pennsylvania law. On September 18, 1998,
AlliedSignal filed a cross-motion for summary judgment seeking the dismissal of
this claim.
On September 14, 1998, AlliedSignal filed a motion for summary judgment,
declaratory judgment and a preliminary injunction, seeking a declaration that
the August 20, 1998 amendment to the AMP Rights Agreement is invalid under
Pennsylvania law or that AMP should be enjoined from enforcing it. AlliedSignal
filed a supplemental motion on September 21, 1998 challenging the September 17,
1998 amendment to AMP's Rights Agreement. AlliedSignal also challenged the
November 16, 1998 record date set by the AMP Board of Directors for
AlliedSignal's proposal with respect to the AMP Rights Agreement. On September
23, 1998, AMP filed a cross motion for summary judgment, seeking dismissal of
AlliedSignal's claims regarding the validity to the AMP Rights Agreement. The
Court heard arguments on AMP's and AlliedSignal's motions on September 28, 1998.
On October 8, 1998, the Court entered an Order and Memorandum Opinion in the
above-referenced actions. The Court granted in part AMP's motion for partial
summary judgment in the nature of a declaratory judgment regarding the claim
that AlliedSignal's consent solicitation plan is unlawful. The Court enjoined
AlliedSignal's board-packing consent proposals "until [AlliedSignal] states
unequivocally that its director nominees have a fiduciary duty solely to AMP
under Pennsylvania law and includes a statement from each nominee affirmatively
committing personally to that duty." The Court denied in part AMP's motion to
the extent it sought additional relief.
The Court also denied AlliedSignal's motions for summary judgment,
preliminary injunction and declaratory judgment with respect to the AMP Rights
Agreement in their entirety. The Court held that "AMP's actions in amending its
shareholder rights plan cannot be enjoined as ultra vires acts or breaches of
fiduciary duty." In addition, the Court declared that AlliedSignal's consent
proposal to amend AMP's Bylaws in order to shift the Board of Directors'
authority over the AMP Rights Agreement to persons not on the Board was
unlawful. The Court denied AlliedSignal's motion challenging the November 16,
1998 record date for the consent proposal with respect to the AMP Rights
Agreement.
The Court further held that shareholders participating in the shareholders'
litigation against AMP, IN RE AMP SHAREHOLDER LITIGATION, do not have standing
to seek an injunction against the actions of the AMP Board for not agreeing to
AlliedSignal's merger proposal.
On October 9, 1998, AlliedSignal filed appeals in ALLIEDSIGNAL V. AMP and in
AMP V. ALLIEDSIGNAL, ET AL. in the United States Court of Appeals for the Third
Circuit. On October 22, 1998, AlliedSignal filed with the Third Circuit Court of
Appeals an Emergency Motion for A Stay of Injunction Pending Appeal or, in the
alternative, For An Emergency Hearing On A Limited Merits Issue. This motion was
subsequently denied.
After the issuance of the October 8, 1998 Order, the Court held a number of
conferences and an evidentiary hearing regarding the injunction relating to
AlliedSignal's consent solicitation. Following expedited discovery, at the
evidentiary hearing on November 4, 1998, the Court indicated that it was
inclined to find that AlliedSignal had complied with the portion of the October
8, 1998 Order which required statements by AlliedSignal and its nominees
regarding the fiduciary duty to AMP that the AlliedSignal nominees would have if
elected to AMP's Board.
Several more conferences among the Court and the parties occurred thereafter
regarding the nominees' understanding of the conflicts of interest issue and
AlliedSignal's disclosure about that issue in its consent statement to be
distributed to AMP's shareholders. As a result of these conferences, the Court
required further disclosure. On November 20, 1998, the Court, having concluded
that the disclosure was adequate, dissolved the injunction of the consent
solicitation. At the same time, the Court ordered that while AlliedSignal could
proceed with the consent solicitation, the nominees would be
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enjoined from being seated on the AMP Board until the Court of Appeals decides
whether the conflicts the nominees would face, if elected, are so pervasive
that, as a matter of Pennsylvania law, they should not be seated as directors of
AMP. AMP filed a notice of appeal with respect to the District Court's rulings
regarding the irreconcilable conflicts issue on November 23, 1998.
On October 15, 1998, AMP moved for summary judgment, a declaratory judgment
and injunctive relief with respect to its claim that the Pennsylvania
Control-Share Acquisition Statute bars AlliedSignal from voting the AMP shares
it acquired in its tender offer. AlliedSignal filed a cross motion for summary
judgment on October 29, 1998. On November 18, 1998, the District Court granted
AMP's motion for partial summary judgment. The District Court ruled that the
shares of AMP common stock acquired by AlliedSignal are "control shares" under
Pennsylvania law. As a result, the Court issued an order enjoining AlliedSignal
from voting any shares of AMP's common stock owned by AlliedSignal unless and
until AlliedSignal's voting rights are restored under Pennsylvania law. On
November 24, 1998, AlliedSignal appealed the November 18, 1998 Order.
AMP's appeal of the irreconcilable conflicts issue and AlliedSignal's appeal
of the "control shares" issue were fully briefed by January 7, 1999. The parties
subsequently provided a status update to the Court of Appeals, at which time it
was determined that AlliedSignal's appeal regarding AMP's amendments to its
Rights Agreement, which had been fully briefed earlier, and AMP's appeal
regarding the irreconcilable conflicts of AlliedSignal's nominees should be held
in abeyance, pending the proposed merger of Tyco and AMP. Arguments in the third
matter before the Court of Appeals--whether the shares of AMP common stock
acquired by AlliedSignal are "control shares" which cannot be voted-- were held
on January 21, 1999. The panel which heard argument took the matter under
advisement. No ruling has been issued.
EXCHANGE OF FINANCIAL FORECASTS
As part of their respective business planning cycles, management of each of
Tyco and AMP from time to time have prepared internal financial forecasts
regarding their respective anticipated future operations. In the course of the
discussions described in "Background of the Merger," Tyco and AMP provided
certain of these internal forecasts to each other and to their respective
financial advisors.
The internal financial forecasts regarding AMP prepared by AMP's management
reflected the following forecasted information:
<TABLE>
<CAPTION>
FISCAL YEAR SALES EBITDA NET INCOME EPS
- ------------- ---------------- ---------------- -------------- ---------
<S> <C> <C> <C> <C>
1999 $ 5,665 million $ 1,190 million $ 533 million $ 2.43
2000 $ 6,059 million $ 1,430 million $ 673 million $ 3.07
2001 $ 6,604 million $ 1,678 million $ 787 million $ 3.58
</TABLE>
The internal financial forecasts regarding Tyco prepared by Tyco's
management reflected the following forecasted information for Tyco's fiscal year
1999:
<TABLE>
<CAPTION>
SALES NET INCOME EPS
- ---------------- ------------- -----------
<S> <C> <C>
$16.9 billion $ 1.8 billion $ 2.66
</TABLE>
AMP's and Tyco's forecasts were prepared for internal budgeting and planning
purposes only and not with a view to public disclosure or compliance with
published guidelines of the SEC or the guidelines established by the American
Institute of Certified Public Accountants regarding projections or forecasts.
While presented with numerical specificity, the forecasts are based upon a
variety of assumptions relating to the business of the respective companies and
are inherently subject to significant uncertainties and contingencies that are
beyond the control of the managements of AMP or Tyco, including the impact of
general economic and business conditions, the competitive environment in which
each operates and other factors. See "Forward-Looking Information" on page 7.
Accordingly, actual results may differ materially from those forecasted.
Although the Boards of AMP and Tyco were
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<PAGE>
provided with these internal financial forecasts, the forecasts were only one of
many items considered by the Boards.
The inclusion of the forecasts herein should not be regarded as a
representation by AMP, Tyco or any other person that such forecasts are or will
prove to be correct. As a matter of course, neither AMP nor Tyco makes public
projections or forecasts of its anticipated financial position or results of
operations. Except to the extent required under applicable securities laws,
neither AMP nor Tyco intends to make publicly available any update or other
revisions to any of the forecasts to reflect circumstances existing after the
respective dates of preparation of such forecasts.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF AMP; REASONS OF AMP FOR THE MERGER
At a meeting of the AMP Board held on November 22, 1998, after careful
consideration, the AMP Board unanimously:
- approved the merger and the merger agreement,
- determined that the merger is in the best interests of AMP and fair to its
shareholders, and
- recommended that holders of shares of AMP common stock vote FOR approval
and adoption of the merger agreement.
In reaching its decision to approve the merger and the merger agreement and
to recommend approval and adoption of the merger agreement by the holders of
AMP's common stock, AMP's Board considered the following material factors:
1. information concerning the financial condition, results of operations,
prospects and businesses of AMP and Tyco, including:
- the revenues of the companies, their complementary businesses and
the potential for synergies,
- the recent stock price performance of AMP common stock and Tyco
common shares, and
- the percentage of the combined company AMP's shareholders would own
following the merger;
2. the fact that the merger will present the opportunity for the holders
of AMP common stock to receive a significant premium over the trading
value of AMP common stock on August 4, 1998 when AlliedSignal announced
its intention to seek to acquire AMP at $44.50 per share in cash, and
over the $44.50 per share price AlliedSignal proposed, while at the
same time allow such shareholders to participate in a larger and more
diversified company and, as shareholders of Tyco, benefit from the
implementation of AMP's recently announced profit improvement plan;
3. the fact that the exchange ratio represented, as of the signing of the
merger agreement, consideration having a value, based upon a price of
$65.0625 per Tyco common share, of $51.00 representing a premium of
13.02% over $45.125, the closing price per share on November 20, 1998,
and that prior to the announcement of the AlliedSignal offer, AMP
shares had traded as low as $28.125 per share;
4. the AMP Board's determination that the unsolicited offer to purchase
all of the outstanding shares of AMP common stock at a price of $44.50
per share in cash by AlliedSignal was inadequate, did not reflect the
value or prospects of AMP and was not in the best interests of AMP and
its relevant constituencies, including its shareholders, and that the
merger proposal made by Tyco provided AMP and its shareholders with
significantly better value than the offer by AlliedSignal;
5. the result of efforts undertaken at the request of AMP by AMP's
financial advisor to canvass a number of companies regarding their
potential interest in discussing the possibility of a business
combination or other transaction and the fact that, given the duration
and visibility of AlliedSignal's unsolicited takeover bid for AMP, and
AMP's public statements that its
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Board of Directors would give serious consideration to any proposal
offering reasonable value for AMP, there was general awareness in the
business and financial communities of the possibility that AMP would
consider a possible business combination with a third party;
6. the review of, and discussions with, AMP senior management, legal and
financial advisors and accountants, regarding certain business,
financial, legal and accounting aspects of the merger, the results of
legal and financial due diligence and a review of the terms of and
conditions to the merger agreement and the stock option agreement;
7. the financial presentation of Credit Suisse First Boston, including the
oral opinion of Credit Suisse First Boston, subsequently confirmed in
writing, to the effect that, as of the date of such opinion and based
upon and subject to certain matters stated therein, the exchange ratio
was fair to the holders of AMP common stock from a financial point of
view. See "Opinion of AMP's Financial Advisor" beginning below;
8. the recommendation of AMP's management that the merger be approved; and
9. the recognition by AMP's Board that Robert Ripp and certain members of
AMP's management have interests in the merger that are in addition to
or different from their interests as holders of AMP common stock. See
"Interests of Certain Persons in the Merger" beginning on page 47.
AMP's Board of Directors also considered:
- the risk that the merger would not be consummated,
- the substantial management time and effort that will be required to
consummate the merger and integrate the operations of the two companies,
- the possibility that certain provisions of the merger agreement, including
the stock option agreement and the no solicitation and certain other
provisions in the merger agreement, might have the effect of discouraging
other persons potentially interested in merging with or acquiring AMP from
pursuing such an opportunity or, if pursued, from consummating such a
transaction prior to November 6, 1999,
- the fact that AMP common stock had traded as high as $56 11/16 during the
twelve month period preceding the commencement of the original offer by
AlliedSignal, and
- other matters described under "Risk Factors."
In the judgment of AMP's Board, the potential benefits of the merger
outweighed these considerations.
This discussion of the information and factors considered by AMP's Board is
not intended to be exhaustive. In view of the variety of factors considered in
connection with its evaluation of the merger, AMP's Board did not find it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination. In addition,
individual members of AMP's Board of Directors may have given different weights
to different factors.
THE AMP BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF AMP
COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF AMP'S FINANCIAL ADVISOR
Credit Suisse First Boston has acted as financial advisor to AMP in
connection with the merger. Credit Suisse First Boston was selected by AMP based
on Credit Suisse First Boston's experience, expertise and familiarity with AMP
and its business. Credit Suisse First Boston is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
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<PAGE>
In connection with Credit Suisse First Boston's engagement, AMP requested
that Credit Suisse First Boston evaluate the fairness of the exchange ratio from
a financial point of view. On November 22, 1998, at a meeting of the Board of
Directors of AMP held to evaluate the proposed merger, Credit Suisse First
Boston rendered to the AMP Board an oral opinion, subsequently confirmed in
writing, to the effect that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the exchange ratio was fair to the
holders of AMP common stock from a financial point of view.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION TO THE AMP
BOARD, WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX C TO
THIS DOCUMENT AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF AMP COMMON
STOCK ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. CREDIT SUISSE
FIRST BOSTON'S OPINION IS ADDRESSED TO THE BOARD OF DIRECTORS OF AMP AND RELATES
ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW, DOES
NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE AMP SPECIAL MEETING.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and certain publicly available business and financial information
relating to AMP and Tyco. Credit Suisse First Boston also reviewed certain other
information relating to AMP and Tyco, including financial forecasts, provided to
or discussed with Credit Suisse First Boston by AMP and Tyco, and met with the
managements of AMP and Tyco to discuss the businesses and prospects of AMP and
Tyco. Credit Suisse First Boston also considered certain financial and stock
market data of AMP and Tyco, and compared those data with similar data for other
publicly held companies in businesses similar to AMP and Tyco and considered, to
the extent publicly available, the financial terms of certain other business
combinations and other transactions recently effected. In connection with its
engagement, Credit Suisse First Boston was requested to approach, and held
discussions with, certain third parties to solicit indications of interest in a
possible business combination with AMP. Credit Suisse First Boston also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which Credit Suisse
First Boston deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by Credit Suisse First Boston and relied on such
information being complete and accurate in all material respects. With respect
to financial forecasts, Credit Suisse First Boston was advised, and assumed,
that such forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of AMP and Tyco
as to the future financial performance of AMP and Tyco and the best currently
available estimates and judgments of the management of AMP as to the operating
cost savings, including the amount, timing and achievability of the operating
cost savings, projected to be realized through AMP's various cost reduction
plans. Credit Suisse First Boston assumed that the merger will be treated as a
pooling of interests in accordance with generally accepted accounting principles
and as a tax-free reorganization for federal income tax purposes.
Credit Suisse First Boston was not requested to, and did not, make an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of AMP or Tyco, nor was Credit Suisse First Boston furnished with any
such evaluations or appraisals. Credit Suisse First Boston's opinion was
necessarily based upon information available to, and financial, economic, market
and other conditions as they existed and could be evaluated by, Credit Suisse
First Boston on the date of its opinion. Credit Suisse First Boston did not
express any opinion as to the actual value of the Tyco common shares when issued
pursuant to the merger or the prices at which the Tyco common shares will trade
subsequent to the merger. Although Credit Suisse First Boston evaluated the
exchange ratio from a financial point of view, Credit Suisse First Boston was
not requested to, and did not, recommend the specific consideration payable in
the merger, which consideration was determined between AMP and Tyco. No other
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<PAGE>
limitations were imposed on Credit Suisse First Boston with respect to the
investigations made or procedures followed by Credit Suisse First Boston in
rendering its opinion.
In preparing its opinion to the AMP Board, Credit Suisse First Boston
performed a variety of financial and comparative analyses, including those
described below. The summary of Credit Suisse First Boston's analyses set forth
below does not purport to be a complete description of the analyses underlying
Credit Suisse First Boston's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. In arriving at its opinion,
Credit Suisse First Boston made qualitative judgments as to the significance and
relevance of each analysis and factor considered by it. Accordingly, Credit
Suisse First Boston believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors or focusing on information
presented in tabular format, without considering all analyses and factors or the
narrative description of the analyses, could create a misleading or incomplete
view of the processes underlying such analyses and its opinion.
In its analyses, Credit Suisse First Boston made numerous assumptions with
respect to AMP, Tyco, industry performance, regulatory, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of AMP and Tyco. No company, transaction or business used in
such analyses as a comparison is identical to AMP or Tyco or the proposed
merger, nor is an evaluation of the results of such analyses entirely
mathematical; rather such analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions being analyzed. The estimates contained in
such analyses and the ranges of valuations resulting from any particular
analysis are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one of
many factors considered by the AMP Board in its evaluation of the proposed
merger and should not be viewed as determinative of the views of the AMP Board
or management with respect to the merger or the exchange ratio.
The following is a summary of the material analyses underlying Credit Suisse
First Boston's opinion dated November 22, 1998 rendered to the AMP Board in
connection with the merger. CERTAIN OF THE FINANCIAL ANALYSES SUMMARIZED BELOW
INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND
CREDIT SUISSE FIRST BOSTON'S FINANCIAL ANALYSES, THE TABLES MUST BE READ
TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A
COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH
IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE
FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE
ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF CREDIT SUISSE FIRST
BOSTON'S FINANCIAL ANALYSES.
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<PAGE>
DISCOUNTED CASH FLOW ANALYSIS.
Credit Suisse First Boston estimated the present value of the stand-alone,
unlevered, after-tax free cash flows that AMP could produce over the calendar
years 1999 through 2008 based on three scenarios:
<TABLE>
<S> <C> <C>
Case I -- a scenario based on estimates of the management of AMP, including
estimates as to the potential operating cost savings anticipated to
be realized from AMP's various cost reduction plans,
Case II -- a scenario based on certain adjustments to the Case I estimates
prepared by the management of AMP for calendar years 1999 to 2001 and
extrapolated for calendar years 2002 to 2008 in conjunction with the
management of AMP which assumed, among other things, accelerated
revenue growth in certain markets, and
Case III -- a scenario based on the First Call Corporation consensus earnings
estimates for AMP for calendar year 1999 and growth rates thereafter
consistent with estimates of research analysts and industry reports
which assumed, among other things, lower operating cost savings from
AMP's cost reduction plans.
</TABLE>
Ranges of estimated terminal values were calculated using terminal multiples
of estimated calendar year 2008 earnings before interest, taxes, depreciation
and amortization, commonly known as EBITDA, of 7.5x to 8.5x. The free cash flow
streams and estimated terminal values were then discounted to present value
using discount rates of 10.5% to 11.5%. This analysis indicated the following
selected equity reference range for AMP as compared to the equity value implied
in the merger, and the following exchange ratio reference range as compared to
the exchange ratio in the merger, based on closing stock prices of AMP common
stock and Tyco common shares on November 19, 1998:
<TABLE>
<CAPTION>
SELECTED EQUITY EQUITY VALUE OF AMP EXCHANGE RATIO EXCHANGE RATIO
REFERENCE RANGE FOR AMP IMPLIED IN THE MERGER REFERENCE RANGE IN THE MERGER
- ----------------------------- --------------------- --------------- --------------
<S> <C> <C> <C>
$45.00 to $56.00 per share $51.00 per share 0.67x to 0.84x 0.7612x
</TABLE>
SELECTED COMPANIES ANALYSIS.
Credit Suisse First Boston compared financial, operating and stock market
data of AMP to corresponding data of the following selected publicly traded
companies in the electrical and electronic connectors industry, collectively,
the AMP selected companies:
- Amphenol Corporation,
- Hubbel Incorporated,
- Methode Electronics, Inc.,
- Molex Incorporated, and
- Thomas & Betts Corporation.
Credit Suisse First Boston calculated equity values for the AMP selected
companies as a multiple of estimated calendar years 1998 and 1999 net income and
enterprise values, defined as equity value, plus debt, less cash, as multiples
of estimated calendar years 1998 and 1999 sales, EBITDA and earnings before
interest and taxes, commonly known as EBIT. Estimated financial data for the AMP
selected companies were based on estimates of selected investment banking firms
and estimated financial data for AMP were based on AMP management's Case I
estimates. Applying a range of multiples of estimated calendar years 1998 and
1999 net income, sales, EBITDA and EBIT of the AMP selected
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<PAGE>
companies to corresponding financial data of AMP indicated the following
selected equity reference range for AMP as compared to the equity value implied
in the merger, and the following exchange ratio reference range as compared to
the exchange ratio in the merger, based on closing stock prices of AMP common
stock and Tyco common shares on November 19, 1998:
<TABLE>
<CAPTION>
SELECTED EQUITY EQUITY VALUE OF AMP EXCHANGE RATIO EXCHANGE RATIO
REFERENCE RANGE FOR AMP IMPLIED IN THE MERGER REFERENCE RANGE IN THE MERGER
- ----------------------------- --------------------- --------------- --------------
<S> <C> <C> <C>
$45.00 to $51.00 per share $51.00 per share 0.67x to 0.76x 0.7612x
</TABLE>
Credit Suisse First Boston also compared financial, operating and stock
market information for Tyco and the following selected publicly held
manufacturing conglomerates, collectively, the Tyco selected companies:
- Danaher Corporation,
- Emerson Electric Co.,
- General Electric Company,
- Dover Corporation,
- AlliedSignal Inc.,
- Illinois Tool Works Inc.,
- Minnesota Mining and Manufacturing Company, and
- United Technologies Corporation.
Credit Suisse First Boston calculated equity values for the Tyco selected
companies as a multiple of estimated calendar year 1999 earnings per share
commonly known as EPS, and enterprise values as multiples of estimated calendar
year 1999 sales, EBITDA and EBIT and also compared price-to-earnings ratios,
commonly known as P/E ratios, to long-term EPS growth rates. Estimated financial
data for the Tyco selected companies and Tyco were based on estimates of
selected investment banking firms. This analysis indicated the following ranges
of implied multiples of estimated calendar year 1999 EPS, sales, EBITDA and EBIT
and P/E ratios to long-term EPS growth rates for the Tyco selected companies as
compared to the multiples of estimated calendar year 1999 EPS, sales, EBITDA and
EBIT and P/E ratio to long-term EPS growth rate for Tyco:
<TABLE>
<CAPTION>
RANGE OF MULTIPLES
OF TYCO SELECTED TYCO
COMPANIES MULTIPLES
------------------ -----------
<S> <C> <C>
Estimated Calendar 1999 EPS................................ 16.1x to 28.8x 22.9x
Estimated Calendar 1999 Sales.............................. 1.0x to 5.6x 2.8x
Estimated Calendar 1999 EBITDA............................. 7.2x to 16.4x 12.1x
Estimated Calendar 1999 EBIT............................... 9.5x to 18.1x 15.8x
P/E Ratios To Long-Term EPS
Growth Rates............................................. 115.9 to 209.1 120.5
</TABLE>
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<PAGE>
SELECTED ACQUISITIONS ANALYSIS.
Credit Suisse First Boston analyzed the implied purchase price and
transaction multiples paid or proposed to be paid in the following selected
merger and acquisition transactions in the electrical and electronic components
industries, collectively, the selected transactions:
Acquiror/Target
- Framatome Connectors International S.A./Berg Electronics Corp.,
- Siebe PLC/Eurotherm PLC,
- Kohlberg Kravis Roberts & Co./Amphenol Corporation,
- Thomas & Betts Corporation/Augat Inc.,
- Vishay Intertechnology, Inc./Vitramon, Inc., and
- Hicks, Muse/Berg Electronics Corp.
Credit Suisse First Boston compared purchase prices in the selected transactions
as multiples of latest 12 months net income and transaction values as multiples
of latest 12 months sales, EBITDA and EBIT. Credit Suisse First Boston then
applied a range of multiples for the selected transactions to corresponding
financial data of AMP, utilizing AMP management's Case I estimates, both after
and before giving effect to certain potential operating cost savings anticipated
to be realized by AMP from its various cost reduction plans. This analysis
indicated the following selected equity reference ranges for AMP as compared to
the equity value implied in the merger, and the following exchange ratio
reference ranges as compared to the exchange ratio in the merger, based on
closing stock prices of AMP common stock and Tyco common shares on November 19,
1998:
<TABLE>
<CAPTION>
SELECTED EQUITY EQUITY VALUE EXCHANGE RATIO
REFERENCE RANGES OF AMP IMPLIED IN REFERENCE EXCHANGE RATIO IN
FOR AMP THE MERGER RANGES THE MERGER
- ---------------------------- ------------------ -------------------- -----------------
<S> <C> <C> <C>
$50.00 to $59.00 per $ 51.00 per share 0.75x to 0.88x, 0.7612x
share, assuming cost assuming cost
reductions reductions
$42.00 to $51.00 per 0.63x to 0.76x,
share, assuming no cost assuming no cost
reductions reductions
</TABLE>
EXCHANGE RATIO ANALYSES.
Credit Suisse First Boston also conducted the following relative analyses
and compared the exchange ratio in the merger, based on closing stock prices of
AMP common stock and Tyco common shares on November 19, 1998, of 0.7612x with
the exchange ratios implied by such analyses:
HISTORICAL STOCK TRADING EXCHANGE RATIO ANALYSIS. Credit Suisse First
Boston performed an exchange ratio analysis comparing the average daily
closing stock prices for AMP and Tyco during the one-month, three-month,
six-month and one-year periods preceding November 18, 1998. This analysis
indicated exchange ratios ranging from 0.6502x to 0.7614x.
RELATIVE CONTRIBUTION EXCHANGE RATIO ANALYSIS. Based on AMP
management's Case I estimates and estimates of the management of Tyco,
Credit Suisse First Boston performed an exchange ratio analysis comparing
the relative contributions of AMP and Tyco to the estimated net income,
EBITDA and EBIT of the combined company in calendar years 1998 and 1999.
This analysis yielded selected exchange ratios ranging from 0.77x to
0.96x.
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PRO FORMA MERGER ANALYSIS.
Credit Suisse First Boston analyzed the potential pro forma effect of the
merger on Tyco's EPS for fiscal years ended September 1999 through 2001, based
on AMP management's Case I estimates, adjusted to Tyco's September fiscal year
end, and estimates of the management of Tyco. Based on an exchange ratio of
0.7612x, this analysis indicated that the proposed merger would be accretive to
Tyco's EPS by approximately 2.5%, 4.2% and 5.7% in fiscal years 1999, 2000 and
2001, respectively. The actual results achieved by the combined company may vary
from projected results and the variations may be material.
OTHER FACTORS.
In the course of preparing its opinion, Credit Suisse First Boston also
reviewed and considered, among other things:
- historical market prices for Tyco common shares and the relationship
between movements in Tyco common shares and movements in the S&P 500
Index,
- the pro forma capitalization and shareholder profile of AMP and Tyco,
and
- selected analysts' reports on Tyco, including EPS and stock price
estimates of such analysts.
MISCELLANEOUS.
Pursuant to the terms of Credit Suisse First Boston's engagement, AMP has
agreed to pay Credit Suisse First Boston for its financial advisory services in
connection with the merger an aggregate financial advisory fee equal to 0.30% of
the aggregate consideration, including liabilities assumed, payable in the
merger, as calculated and payable upon the closing of the merger. Based upon the
closing price of Tyco common shares on January 26, 1999, it is currently
estimated that the aggregate financial advisory fee payable to Credit Suisse
First Boston in connection with the merger will be approximately $37.9 million.
AMP also has agreed to reimburse Credit Suisse First Boston for out-of-pocket
expenses incurred by Credit Suisse First Boston in performing its services,
including fees and expenses of legal counsel and any other advisor retained by
Credit Suisse First Boston, and to indemnify Credit Suisse First Boston and
certain related persons and entities against certain liabilities, including
certain liabilities under the federal securities laws, arising out of Credit
Suisse First Boston's engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to AMP and Tyco unrelated to the proposed merger for which
services Credit Suisse First Boston has received compensation, including, with
respect to AMP, strategic and financial planning matters and AMP's proposed
self-tender offer, for which services Credit Suisse First Boston and its
affiliates have received aggregate compensation of approximately $12.0 million.
Credit Suisse First Boston also provided financial advisory services to AMP in
connection with AlliedSignal's unsolicited tender offer, for which services
Credit Suisse First Boston and its affiliates have received aggregate
compensation of approximately $10.0 million. Amounts paid to Credit Suisse First
Boston in connection with AlliedSignal's unsolicited tender offer will be
credited against the aggregate financial advisory fee payable to Credit Suisse
First Boston in connection with the merger. In the ordinary course of business,
Credit Suisse First Boston and its affiliates may actively trade the debt and
equity securities of both AMP and Tyco for their own accounts and for the
accounts of customers and, accordingly, may at any time hold long or short
positions in such securities.
39
<PAGE>
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF TYCO; REASONS OF TYCO FOR THE
MERGER
At a meeting of the Tyco Board held on November 20, 1998, after careful
consideration, the Tyco Board unanimously:
- determined that the acquisition of AMP was in the best interests of Tyco
and its shareholders, and
- recommended that holders of Tyco common shares take the action necessary
to effect such acquisition including approval of the issuance of Tyco
common shares to be delivered in connection with the merger.
In reaching its decision to approve, and to recommend that Tyco's
shareholders approve, the issuance of Tyco common shares to be delivered in
connection with the merger, Tyco's Board considered the following material
factors:
1. the terms and structure of the merger, including the provisions
governing the exchange ratio which effectively place a maximum limit on
the exchange ratio by allowing Tyco to terminate the merger agreement if
the exchange ratio would be greater than 0.8500;
2. the results of Tyco's due diligence investigation of AMP and other
information concerning the business, assets, capital structure, financial
performance and prospects of Tyco and AMP;
3. current and historical market prices and trading information with
respect to the Tyco common shares and the AMP common stock;
4. Tyco's corporate strategy of complementing its internal growth with
acquisitions that are likely to benefit from cost reductions and
synergies when combined with Tyco's existing operations and that are
expected to be accretive to earnings per share;
5. Tyco's history of growth through acquisitions, including its substantial
experience integrating acquired businesses with existing operations and
thereby achieving synergies and cost savings;
6. the expectation that the merger before restructuring and similar charges
and assuming the realization of certain of the cost savings referred to
below and other synergies would be immediately accretive to Tyco's
earnings per share;
7. AMP's implementation of its profit improvement plan and the belief of
Tyco's management that the plan can be enhanced and accelerated;
8. the belief of Tyco's management that there are other prospects for
reduction of AMP corporate costs, possible elimination of excess
facilities and potential cost reduction for purchased materials and
services;
9. the difficulties in integrating an acquisition of the size of AMP and
the risks that anticipated cost savings and synergies, and the expected
accretive effect of the merger, might not be realized;
10. the combination of the product lines manufactured by AMP with
complementary products manufactured by Tyco, enabling Tyco to broaden
substantially the line of electrical and electronic products offered to
its customers;
11. the access that the combination would provide to AMP's worldwide
distribution network for electrical interconnection products and devices
to complement Tyco's existing distribution channels for its electrical
and electronic component products;
12. the prospect of utilization of AMP as a platform for further growth in
the markets served by AMP;
13. the preliminary, oral opinion of Merrill Lynch rendered on November 20,
1998, which opinion was subsequently confirmed by delivery of a written
opinion on November 22, 1998, to the Tyco Board to the effect that, as of
the date of such opinion and based upon the assumptions
40
<PAGE>
made, matters considered and limits of review set forth in its written
opinion, the consideration to be issued to the shareholders of AMP in the
merger was fair to Tyco from a financial point of view. See "Opinion of
Tyco's Financial Advisor" beginning below;
14. the fact that the merger will generally be tax free to both Tyco and AMP
shareholders under the tax laws of the United States and other relevant
jurisdictions; and
15. the anticipated treatment of the merger as a pooling of interests for
financial accounting purposes.
With regard to the considerations in paragraphs 4 through 9 above, Tyco's
management has estimated that the acquisition of AMP by Tyco (PA) would be
accretive to Tyco's earnings per share by $0.12, based upon the partial
realization during the 12 months following the merger of the $400 million of
cost savings expected from AMP's profit improvement plan and the additional $245
million of savings identified by Tyco to be achieved through the closure of
duplicate facilities, reduction of head count and exiting of product lines.
Tyco's management estimates that approximately $350 million, or $0.29 per share
after tax, of AMP's cost savings and $185 million, or $0.15 per share after tax,
of the additional savings identified by Tyco will be realized during the 12
months following the merger. There is no assurance that any of such cost savings
or synergies will be achieved. See "Risk Factors--The merger will not be
accretive to Tyco's earnings per share unless Tyco can successfully integrate
AMP with Tyco's existing operations and realize cost savings and synergies. On a
pro forma basis, without cost savings and synergies, the merger is not accretive
to earnings per share" on page 5.
This discussion of the information and factors considered and weight given
to such factors by Tyco's Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the merger, Tyco's Board did not find it practicable to and did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of Tyco's Board may
have given different weights to different factors.
THE TYCO BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF TYCO AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER, AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF TYCO COMMON SHARES VOTE FOR APPROVAL OF
THE ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE
MERGER.
OPINION OF TYCO'S FINANCIAL ADVISOR
GENERAL.
Merrill Lynch acted as financial advisor to Tyco in connection with the
merger. At the meeting of the Tyco Board held on November 20, 1998, Merrill
Lynch rendered its preliminary, oral opinion to the Tyco Board to the effect
that, as of such date, and based upon the assumptions made, matters considered
and limits of review set forth in Merrill Lynch's written opinion, the
consideration to be issued to the shareholders of AMP in the merger was fair to
Tyco from a financial point of view. Merrill Lynch subsequently confirmed its
preliminary, oral opinion by delivery of its written opinion dated November 22,
1998.
THE FULL TEXT OF MERRILL LYNCH'S NOVEMBER 22 OPINION IS INCLUDED IN ANNEX D
TO THIS DOCUMENT AND IS INCORPORATED HEREIN BY REFERENCE. MERRILL LYNCH'S
OPINION IS ADDRESSED TO THE TYCO BOARD AND DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION OF TYCO TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER OF TYCO AS TO HOW SUCH HOLDER SHOULD VOTE ON
THE ISSUANCE OF TYCO COMMON SHARES TO BE DELIVERED IN CONNECTION WITH THE MERGER
OR THE OTHER MATTERS BEING PRESENTED TO A VOTE OF TYCO SHAREHOLDERS. HOLDERS OF
TYCO COMMON SHARES ARE URGED TO, AND SHOULD, CAREFULLY READ MERRILL LYNCH'S
NOVEMBER 22 OPINION IN ITS ENTIRETY. THE OPINION CONTAINS THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND
LIMITATIONS OF THE REVIEW UNDERTAKEN BY MERRILL LYNCH IN CONNECTION WITH THE
OPINION.
41
<PAGE>
Merrill Lynch is an internationally recognized investment banking firm and,
as part of its investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, distributions of securities and similar activities.
Merrill Lynch was retained by the Tyco Board on the basis of its qualifications,
reputation and experience and its familiarity with Tyco and its businesses.
Merrill Lynch did not express any opinion as to the prices at which Tyco
common shares would trade following the announcement or consummation of the
merger.
Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the information made
available to Merrill Lynch as of, the date of such opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals, contractual or otherwise, for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the merger.
In arriving at its opinion, Merrill Lynch, among other things:
1. reviewed certain publicly available business and financial information
relating to Tyco and AMP that Merrill Lynch deemed to be relevant;
2. reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
Tyco and AMP, as well as the amount and timing of merger-related savings,
consisting of cost savings and related expenses and synergies expected to
result from the merger, furnished to Merrill Lynch by Tyco and AMP;
3. conducted discussions with members of senior management and
representatives of Tyco and AMP concerning the matters described in
clauses 1 and 2 above, as well as their respective businesses and
prospects before and after giving effect to the merger and the expected
merger-related savings;
4. reviewed the market prices and valuation multiples for shares of AMP
common stock and Tyco common shares and compared them with those of
certain publicly traded companies that Merrill Lynch deemed to be
relevant;
5. reviewed the results of operations of Tyco and AMP and compared them
with those of certain publicly traded companies that Merrill Lynch deemed
to be relevant;
6. compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant;
7. participated in certain discussions and negotiations among
representatives of Tyco and AMP and their financial and legal advisors;
8. reviewed the potential pro forma impact of the merger;
9. reviewed the merger agreement, the stock option agreement and the Tyco
guarantees; and
10. reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available, and did not
assume any responsibility for independently verifying such information or
undertake an independent evaluation or appraisal of any of the assets or
liabilities of Tyco or AMP, and was not furnished with any such evaluation or
appraisal. In addition, Merrill Lynch did not assume any obligation to conduct
any physical inspection of the properties or facilities of Tyco or AMP. With
respect to the financial forecast information and the expected merger-related
savings furnished to or discussed with Merrill Lynch by Tyco or AMP, Merrill
Lynch assumed that they had been reasonably prepared and reflected the best
currently available estimates and judgment of the management of Tyco or AMP, as
to the expected future financial performance of Tyco or AMP, as the case may be,
and the
42
<PAGE>
expected merger-related savings. Merrill Lynch also assumed that the merger
would be accounted for as a pooling of interests under generally accepted
accounting principles and that it would qualify as a tax-free reorganization for
U.S. federal income tax purposes.
Set forth below is a brief summary of the material analyses performed by
Merrill Lynch in connection with its preparation of its opinion. Certain of the
summaries of financial analyses include information presented in tabular format.
In order to fully understand the financial analyses performed by Merrill Lynch,
the tables must be read together with the text of each summary. The tables alone
do not constitute a complete description of such financial analyses. Considering
the data set forth in the tables without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses performed by Merrill Lynch.
HISTORICAL TRADING ANALYSIS.
Merrill Lynch reviewed the historical stock market performance of AMP common
stock and Tyco common shares. This analysis indicated that the 52-week closing
price of a share of AMP common stock ranged between $28.625 and $45.750, with a
closing price on November 20, 1998 of $45.125, as compared to the range of
consideration implied in the merger of $51.00 to $55.95 per share. This analysis
also indicated that the 52-week closing price of a Tyco common share ranged
between $39.000 and $68.563, with a closing price on November 20, 1998 of
$65.063.
DISCOUNTED CASH FLOW ANALYSIS.
Merrill Lynch performed a discounted cash flow analysis of the projected
after-tax unlevered free cash flows of AMP for the period 1999 through 2003.
After-tax unlevered free cash flow means operating cash flow available after
working capital, capital spending, tax and other operating requirements. Such
analysis was based upon:
1. the AMP projections, which were projections provided by AMP management
through 2001 and extrapolated for 2002 and 2003 based on discussions with
AMP and Tyco management, and
2. projections developed using 1999 and 2000 diluted earnings per share,
commonly known as EPS, as estimated by First Call Corporation and
publicly-available equity research on AMP.
Utilizing such financial forecasts, Merrill Lynch calculated a range of
present values for AMP based upon the discounted present value of the sum of:
1. the projected stream of after-tax unlevered free cash flows of AMP from
1999 through 2003, and
2. the projected terminal value of AMP in 2003 based upon a range of
multiples of AMP's projected earnings before interest, taxes,
depreciation and amortization, commonly known as EBITDA, in such year.
Merrill Lynch calculated implied equity values per share of AMP common
stock, before and after giving effect to the expected merger-related savings, by
applying discount rates ranging from 10.5% to 11.5% and terminal value multiples
of estimated EBITDA in 2003 ranging from 9.0x to 10.0x. The
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<PAGE>
following table presents the ranges of implied equity values per share of AMP
common stock indicated by this analysis as compared to the range of
consideration implied in the merger.
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
PER SHARE
OF AMP
COMMON STOCK
--------------------
LOW HIGH
--------- ---------
<S> <C> <C>
Discounted Cash Flow Analysis
Before Expected Merger-Related Savings:
Based upon the AMP Projections................................................... $ 53.50 $ 60.75
Based upon Publicly-Available Equity Research.................................... 47.75 54.50
After Expected Merger-Related Savings:
Based upon the AMP Projections................................................... $ 72.50 $ 79.75
Based upon Publicly-Available Equity Research.................................... 66.75 73.50
RANGE OF CONSIDERATION IMPLIED IN THE MERGER......................................... $ 51.00 $ 55.95
</TABLE>
SELECTED ACQUISITION TRANSACTIONS ANALYSIS.
Using publicly available information, Merrill Lynch reviewed the purchase
prices and multiples paid in selected mergers and acquisitions involving
companies in the electrical and electronic connectors industry which Merrill
Lynch deemed relevant in evaluating the merger. Merrill Lynch reviewed the
following acquisition transactions:
<TABLE>
<CAPTION>
Acquired Company Acquiring Company
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Berg Electronics Corp. Framatome Connectors
International S.A.
Reliance Electric Company Rockwell International Corporation
CBS Corporation's Distribution and Control Business Eaton Corporation
Unit
Square D Company Groupe Schneider S.A.
</TABLE>
Merrill Lynch calculated the multiple of net offer values for the selected
acquisition transactions, calculated as the consideration offered for the common
equity, including the net cost of "in-the-money" options, to the net income of
the acquired businesses for the twelve-month periods preceding the acquisition
announcements. Merrill Lynch also calculated the multiple of transaction values
for the selected acquisition transactions to the EBITDA of the acquired
businesses for such twelve-month periods. The transaction values were calculated
as the consideration offered for the common equity, including the net cost of
"in-the-money" options, plus liquidation value of preferred equity and the value
of debt and minority interests less cash and marketable securities. Merrill
Lynch calculated implied equity values per share of AMP common stock by applying
multiples of 28.0x to 33.0x and 11.0x to 11.5x, which multiples were based on
the foregoing analysis, respectively, to AMP's latest twelve-month net income
and EBITDA. Merrill Lynch applied these multiples both before and after
adjusting for the full twelve-month effect of certain operating cost savings
already realized by AMP.
44
<PAGE>
The following table presents the ranges of implied equity values per share of
AMP common stock indicated by this analysis as compared to the range of
consideration implied in the merger.
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
PER SHARE
OF AMP
COMMON STOCK
--------------------
LOW HIGH
--------- ---------
<S> <C> <C>
Selected Acquisition Transactions Analysis
Based upon AMP's Latest Twelve-Month Net Income.................................... $ 45.75 $ 64.00
Based upon AMP's Latest Twelve-Month EBITDA........................................ 48.00 55.25
RANGE OF CONSIDERATION IMPLIED IN THE MERGER......................................... $ 51.00 $ 55.95
</TABLE>
SELECTED PUBLICLY-TRADED COMPARABLE COMPANIES ANALYSIS.
Using publicly available information, Merrill Lynch compared certain
financial, operating and stock market data for AMP with the following four
publicly-traded companies in the electrical and electronic connectors industry
considered by Merrill Lynch to be reasonably comparable to AMP for purposes of
this analysis:
- Amphenol Corporation,
- Methode Electronics, Inc.,
- Molex Incorporated, and
- Thomas & Betts Corporation.
Merrill Lynch analyzed, among other things, the market price per share of
common stock of each of these comparable companies and AMP as of November 20,
1998, as a multiple of 1999 calendar year EPS as estimated by First Call. This
multiple of market price to EPS is commonly known as a P/E multiple. Merrill
Lynch calculated implied equity values per share of AMP common stock by applying
1999 calendar year P/E multiples of 18.0x to 20.0x, which multiples were based
on the foregoing analysis, to AMP's estimated 1999 EPS based upon the AMP
projections and First Call. The following table presents the ranges of implied
equity values per share of AMP common stock indicated by this analysis as
compared to the range of consideration implied in the merger.
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
PER SHARE
OF AMP
COMMON STOCK
--------------------
LOW HIGH
--------- ---------
<S> <C> <C>
Selected Publicly-Traded Comparable
Companies Analysis
Based upon the AMP Projections................................................... $ 43.75 $ 48.50
Based upon First Call............................................................ 40.00 44.50
RANGE OF CONSIDERATION IMPLIED IN THE MERGER......................................... $ 51.00 $ 55.95
</TABLE>
Using publicly available information, Merrill Lynch also compared certain
financial, operating and stock market data for Tyco with the following six
publicly-traded manufacturing conglomerates considered by Merrill Lynch to be
reasonably comparable to Tyco for purposes of this analysis:
- AlliedSignal Inc.,
- Dover Corporation,
- Emerson Electric Co.,
- General Electric Company,
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<PAGE>
- Textron Inc., and
- United Technologies Corporation.
Merrill Lynch analyzed, among other things, the 1999 calendar year P/E
multiple of each of these comparable companies and Tyco as of November 20, 1998,
and the 1999 calendar year P/E multiple as a percent of total return, which
represents projected long term EPS growth plus current dividend yield. This
analysis indicated 1999 calendar year P/E multiples for these comparable
companies ranging from 15.8x to 29.1x, and ratios of 1999 calendar year P/E
multiples to total returns ranging from 96.4% to 190.0%. The 1999 calendar year
P/E multiple and the ratio of 1999 calendar year P/E multiple to total return
for Tyco were 22.4x and 110.9%, respectively.
PRO FORMA MERGER ANALYSIS.
Merrill Lynch reviewed certain pro forma effects of the merger, which
included, among other things, the accretion to Tyco's standalone EPS for 1999
through 2001 inclusive, incorporating the expected merger-related savings and
utilizing financial forecasts for AMP based upon the AMP projections, adjusted
to reflect a September year-end, and for Tyco based upon First Call EPS
estimates and publicly available equity research on Tyco. Merrill Lynch
determined that, based upon exchange ratios of 0.7612 and 0.8500, the merger
would be accretive to Tyco's EPS in each of the years analyzed.
The information above summarizes the material analyses performed by Merrill
Lynch in connection with its opinion. This summary does not purport to be a
complete description of the analyses performed by Merrill Lynch in connection
with the rendering of its fairness opinion. The preparation of a fairness
opinion is a complex process and is not susceptible to partial analysis or
summary description. Merrill Lynch believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting part or all of the
above summary, without considering all factors and analyses, would create an
incomplete view of the process underlying Merrill Lynch's opinion.
In addition, Merrill Lynch considered the results of every portion of its
analysis and did not assign relative weights to any portion of its analysis, so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be Merrill Lynch's view of the actual value of Tyco
or AMP, which may be significantly more or less favorable than as set forth
herein. The fact that any specific analysis has been referred to in the summary
above or that certain information has been presented in tabular format is not
meant to indicate that such analysis or information was given more weight than
any other analyses or information.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of Tyco or AMP. The analysis
performed by Merrill Lynch is not necessarily indicative of actual values,
trading values or actual future results that might be achieved, all of which may
be significantly more or less favorable than suggested by such analysis. No
comparable company identified above is identical to AMP or Tyco, as the case may
be, and none of the selected acquisition transactions or other business
combinations utilized as a comparison is identical to the transactions
contemplated by the merger agreement. Accordingly, an analysis of publicly
traded comparable companies and comparable business combinations is not
mathematical; rather, such analysis involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies or the company, or transaction, and other factors that
could affect the public trading values of such comparable companies or company
to which they are being compared.
In connection with its analyses, Merrill Lynch utilized estimates and
forecasts of future operating results and expected merger-related savings
provided by the respective managements of Tyco and AMP. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the
46
<PAGE>
control of Tyco and AMP, none of Merrill Lynch, Tyco or AMP assumes
responsibility if future results or actual values are materially different from
these forecasts or assumptions.
Merrill Lynch's analyses were prepared solely as part of its analysis of the
fairness to Tyco from a financial point of view, of the consideration to be
issued to the shareholders of AMP in the merger, and were provided to the Tyco
Board in connection with the delivery of Merrill Lynch's opinion. Merrill
Lynch's analysis is not an appraisal and is not intended to reflect the prices
at which a company might actually be sold or the prices at which any securities
may be traded in the future.
In addition, as described above, Merrill Lynch's opinion was one of many
factors taken into consideration by the Tyco Board in making its determination
to approve the merger. Consequently, the analysis described above should not be
viewed as determinative of the opinion of either the Tyco Board or management of
Tyco with respect to the value of AMP or a combination of Tyco with AMP or
whether either the Tyco Board or management of Tyco would have been willing to
agree to different merger consideration.
Pursuant to a letter agreement dated November 20, 1998, Tyco has agreed that
if, during the period Merrill Lynch is retained by Tyco or within 18 months
thereafter:
- a merger or business combination whereby the business of AMP is combined
with Tyco is consummated or Tyco otherwise acquires a majority of the
capital stock of AMP or a substantial portion of its assets or revenues,
or
- Tyco enters into an agreement that subsequently results in such a
combination or acquisition,
Tyco will pay Merrill Lynch a fee ranging from $12,000,000 to $20,000,000,
payable in cash upon the closing of such a combination or acquisition. If such a
combination or acquisition is not consummated and Tyco receives the termination
fees set forth in the merger agreement or otherwise, Tyco will pay Merrill Lynch
a fee of $10,000,000 in cash when such termination fees are received. Tyco has
also agreed to reimburse Merrill Lynch for its reasonable out-of-pocket
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, and to indemnify Merrill Lynch and certain related parties from
and against certain liabilities, including certain liabilities under the federal
securities laws arising out of their engagement.
Merrill Lynch has, in the past, provided financial advisory and financing
services to Tyco and may continue to do so, and has received, and may receive,
fees for the rendering of such services. During the two year period preceding
the date of the merger agreement, Merrill Lynch received compensation from Tyco
for such services of approximately $50,800,000. Merrill Lynch has advised Tyco
that in the ordinary course of its business it may actively trade shares of AMP
common stock and other securities of AMP, as well as Tyco common shares and
other securities of Tyco, for Merrill Lynch's own account and for the accounts
of its customers. Accordingly, Merrill Lynch may at any time hold a long or
short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL.
Certain AMP executive officers and certain members of the AMP Board, in
their capacities as such, may be deemed to have interests in the merger that are
in addition to or different from their interests as shareholders of AMP
generally. These include, among other things, provisions in the merger agreement
relating to indemnification and the acceleration and/or payout of benefits under
certain agreements and employee benefit plans. The AMP Board was aware of these
interests and considered them, among other matters, in approving the merger
agreement and the transactions contemplated thereby.
The merger agreement provides that, following the merger, Tyco (PA) will,
and will cause AMP to, assume, honor, maintain and perform in accordance with
their respective terms AMP's employee severance plan and all other employment
and severance agreements and arrangements with respect to
47
<PAGE>
employees, former employees, directors and former directors of AMP, as amended
to the date of the merger agreement or as contemplated by the terms of the
merger agreement, including those that provide for payment or acceleration of
benefits upon or in connection with a change of control of AMP. The merger
agreement provides, however, that there are no intended third party
beneficiaries who may enforce the merger agreement in this regard.
The following table lists, with respect to each of AMP's executive officers,
(1) the approximate number of Tyco common shares, options to acquire Tyco common
shares and cash, where applicable, to be received following consummation of the
merger with respect to currently unvested equity-based awards of AMP, and (2)
the approximate amount of cash severance payments receivable in the event the
executive officer's employment is terminated under qualifying circumstances on
or shortly after completion of the merger. The plans and agreements governing
these awards and payments are summarized below. Neither AMP, Tyco (PA) nor Tyco
has determined whether any of these individuals will be terminated following the
merger. Figures with respect to equity awards are current as of January 21,
1999, the most recent date for which accurate figures are available. The payment
of dividends or the occurrence of applicable vesting dates prior to completion
of the merger would change these figures.
<TABLE>
<CAPTION>
UNVESTED STOCK BONUS UNITS
TIME-VESTING PERFORMANCE
NAME OF UNVESTED RESTRICTED STOCK RESTRICTED STOCK ---------------------------- CASH SEVERANCE
EXECUTIVE OFFICER STOCK OPTIONS (1) (2) NO. OF SHARES(3) CASH PAYMENTS(4)
- ----------------- ----------------- ----------------- ----------------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
William J.
Hudson......... 139,500 X Exch. 0 82,200 X Exch. 2,941 X Exch. $ 74,993 $4,214,000
Ratio* Ratio* Ratio*
James E.
Marley......... 111,600 X Exch. 0 65,800 X Exch. 0 3,233,000
Ratio* Ratio*
Robert Ripp...... 151,700 X Exch. 29,800 X Exch. 88,900 X Exch. 0 2,396,000
Ratio* Ratio* Ratio*
Juergen W.
Gromer......... 54,800 X Exch. 0 43,400 X Exch. 1,215 X Exch. 30,982 1,321,000
Ratio* Ratio* Ratio*
John E. Gurski... 72,200 X Exch. 0 27,400 X Exch. 0 N/A
Ratio* Ratio*
Herbert M. Cole.. 72,800 X Exch. 0 67,700 X Exch. 0 N/A
Ratio* Ratio*
Nazario
Proietto....... 33,900 X Exch. 0 27,000 X Exch. 0 801,000
Ratio* Ratio*
Thomas J.
DiClemente..... 37,000 X Exch. 0 31,500 X Exch. 637 X Exch. 16,232 770,000
Ratio* Ratio* Ratio*
William S.
Urkiel......... 57,500 X Exch. 4,000 X Exch. 25,100 X Exch. 0 836,000
Ratio* Ratio* Ratio*
Philippe
Lemaitre....... 42,300 X Exch. 0 33,100 X Exch. 0 810,000
Ratio* Ratio*
Richard P.
Clark.......... 34,100 X Exch. 0 11,600 X Exch. 582 X Exch. 14,835 N/A
Ratio* Ratio* Ratio*
John Kegel....... 31,400 X Exch. 0 14,400 X Exch. 0 753,000
Ratio* Ratio*
Joseph C.
Overbaugh...... 32,200 X Exch. 0 0 850 X Exch. 21,687 N/A
Ratio* Ratio*
David F.
Henschel....... 16,200 X Exch. 0 0 672 X Exch. 17,130 229,000
Ratio* Ratio*
Mark E. Lang..... 27,000 X Exch. 0 0 0 208,000
Ratio*
</TABLE>
- ------------------------
* See "The Exchange Ratio and its Effect on AMP Securities and Equity-Based
Incentive Plans" beginning on page 58.
(1) The Tyco shares will be delivered to the executive on the date on which the
corresponding AMP shares otherwise would have been delivered had the merger
not occurred.
(2) Includes the number of phantom shares credited to executive's AMP Dividend
Reinvestment Account.
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<PAGE>
(3) Number of shares determined based upon an AMP per share value of $51.
(4) Excludes tax gross-up, pension and welfare benefits.
The following table lists, with respect to each of AMP's non-employee
directors, (1) the approximate number of options to acquire Tyco common shares
and phantom shares credited in Tyco common shares to be received following
consummation of the merger with respect to currently unvested equity-based
awards of AMP, and (2) the annual retirement benefits which will become
non-forfeitable upon consummation of the merger.
<TABLE>
<CAPTION>
ANNUAL
NAME OF UNVESTED UNVESTED RETIREMENT
NON-EMPLOYEE DIRECTOR STOCK OPTIONS * PHANTOM SHARES BENEFIT
- ------------------------------------------------- --------------------- --------------------- -----------------
<S> <C> <C> <C>
Ralph D. DeNunzio................................ 2,000 X Exch. Ratio* 0 0
Barbara H. Franklin.............................. 2,000 X Exch. Ratio* 0 0
Joseph M. Hixon.................................. 2,000 X Exch. Ratio* 0 0
Joseph M. Magliochetti........................... 2,000 X Exch. Ratio* 1,249 X Exch. Ratio* 0
Jerome J. Meyer.................................. 2,000 X Exch. Ratio* 1,253 X Exch. Ratio* 0
John C. Morley................................... 2,000 X Exch. Ratio* 0 0
Paul G. Schloemer................................ 2,000 X Exch. Ratio* 0 $ 20,800
Takeo Shiina..................................... 2,000 X Exch. Ratio* 1,578 X Exch. Ratio* 0
</TABLE>
- ------------------------
* See "The Exchange Ratio and its Effect on AMP Securities and Equity-Based
Incentive Plans" beginning on page 58.
SEVERANCE AGREEMENTS.
AMP has entered into severance agreements with 14 of its current or former
executive officers, including Messrs. Robert Ripp, James E. Marley, William J.
Hudson, Herbert M. Cole, Juergen W. Gromer and John E. Gurski. Each of these
severance agreements provides generally that, in the event that the executive's
employment with AMP is terminated either:
- by AMP other than for Cause, as defined in the severance agreements, or
- by the executive with Good Reason, as defined in the severance
agreements,
in either case within two years following a change of control, AMP will pay to
the executive the severance payments, and will provide to the executive the
severance benefits, as follows:
(1) a lump sum cash payment, which, based upon each of the executive's
current salary and bonus history, approximately equals the cash severance
payment set forth for such officer in the chart above,
(2) the continuation of all hospital, major medical, medical, dental and
other insurance or benefits in substantially the same manner and amount to
which such executive is entitled at the time of employment, at the sole cost
of AMP, until the later of:
- one, two or three years following termination of employment, as the
case may be, and
- until the time at which the executive would have been discontinued from
such plans providing post-termination insurance or benefits.
Messrs. Ripp, Marley and Hudson are entitled to at least three years of
continued insurance and benefits, and Messrs. Cole, Gromer and Gurski are
entitled to at least two years of continued insurance and benefits. Any such
benefits are subject to reduction to the extent comparable benefits are
actually received by the executive from a new employer without cost to the
executive; and
(3) immediate vesting of benefits under AMP's tax-qualified pension plan
(the "Pension Plan") and supplemental nonqualified defined benefit pension
plan (the "Pension Restoration Plan"), together with an additional pension
benefit derived from using the executive's highest annual base salary as in
effect during the 12 months prior to termination as the high consecutive
three-year compensation amount under the Pension Plan and from using the
executive's Base Salary and Annual Bonus as the high consecutive three-year
compensation amount under the
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Pension Restoration Plan, such additional benefits to be paid in accordance
with the terms of the plans.
In connection with their elections to retire pursuant to AMP's Voluntary
Early Retirement Program, Messrs. Cole, Gurski and one additional executive
officer elected to relinquish their rights to receive the foregoing severance
payments and benefits, but otherwise retain their rights under their respective
severance agreements.
Each of the severance agreements also provides that, upon the occurrence of
a change of control such as the merger:
(1) all outstanding bonus units, whether granted under AMP's 1993 Long
Term Equity Incentive Plan or Bonus Plan (Stock Plus Cash), held by the
executive, and including any supplemental cash bonus related to such bonus
units, will immediately be vested and payable;
(2) all outstanding AMP stock options pursuant to AMP's 1993 Long Term
Equity Incentive Plan, held by the executive will become immediately vested
and exercisable for the remainder of their respective terms;
(3) all outstanding Performance Restricted Shares, as defined under the
AMP 1993 Long Term Equity Incentive Plan, held by the executive, together
with phantom shares credited to the executive's Dividend Reinvestment
Account, will become immediately vested and payable in Tyco common shares at
200% of the original award;
(4) all unvested restricted shares of AMP common stock held by the
executive that were not granted pursuant to the 1993 Long Term Equity
Incentive Plan will be cancelled, and Tyco will be required to issue a
number of unrestricted Tyco common shares appropriately adjusted to reflect
such transaction, such issuance to take place on the date or dates such
shares would otherwise have become vested under the terms of such agreement;
(5) the executive's interest in matching accounts under the AMP Deferred
Compensation Plan will become immediately vested; and
(6) if the executive is participating in AMP's split dollar life
insurance program, AMP is obligated to deposit in an irrevocable grantor
trust, which AMP has previously done, an amount sufficient to pay AMP's
premiums for the period ending on the policy anniversary following the
executive's 65th birthday or the 15th anniversary of the policy, whichever
is later.
In addition, the severance agreements provide that AMP is obligated to pay
an additional amount sufficient to make such executive whole with respect to any
excise tax that may be imposed by Section 4999 of the Internal Revenue Code and
any taxes imposed on such additional amounts. Consummation of the merger will
constitute a change of control for purposes of the severance agreements.
AMP intends to offer to certain executive officers of AMP the opportunity to
enter into retention agreements with AMP in connection with the merger. The
retention agreements would generally supercede the executive officer's severance
agreement with AMP described above. It is anticipated that, among other things,
the retention agreements generally would provide for payment of salary,
incentive opportunities and other benefits consistent with Tyco's practices and
policies. In the event that such an executive's employment with AMP is
terminated within two years following the merger, either by AMP, other than for
cause, or by the executive for good reason, the executive would be entitled to
receive lump sum cash severance benefits, continuation of welfare benefits for a
specified period of time and enhanced pension benefits. The retention agreement
would also provide that the executive would be subject to certain
non-competition, non-solicitation, confidentiality and intellectual property
covenants for a period of time following termination of employment. The amounts
payable under the retention agreements, in circumstances contemplated by the
executive severance agreements, would not materially exceed the amounts that
would have been payable under the executive severance agreements. As of the date
hereof, no retention agreements have been entered into between AMP, Tyco (PA) or
Tyco and
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any AMP executives. For the terms of employment of Mr. Ripp following
consummation of the merger, see "Employment of Robert Ripp" below.
AMP EQUITY-BASED INCENTIVE AWARDS.
The conversion of AMP stock options and other equity-based awards into Tyco
stock options and other equity based awards of Tyco pursuant to the merger
agreement is described below in "Treatment of AMP Equity Based Awards." Pursuant
to the terms of the 1993 Long Term Equity Incentive Plan, upon consummation of
the merger, all bonus units, stock options and performance restricted shares
granted under such plan will become immediately vested and exercisable and/or
payable. The Bonus Plan (Stock Plus Cash) does not provide for change of control
acceleration, but the one remaining grant of bonus units thereunder is held by
Mr. Hudson, who is party to a severance agreement, pursuant to which such award
will become fully vested and payable as of the consummation of the merger. AMP's
Stock Option Plan for Outside Directors provides that each AMP stock option
granted to a director of AMP under such plan becomes fully exercisable upon the
occurrence of a change of control of AMP as defined in such plan. Consummation
of the merger will constitute a change of control of AMP for purposes of the
1993 Long Term Equity Incentive Plan and the Stock Option Plan for Outside
Directors.
SUPPLEMENTAL RETIREMENT PLANS.
AMP's Supplemental Executive Pension Plan and Pension Restoration Plan are
non-qualified defined benefit pension plans that provide benefits in excess of
limitations imposed by the Code upon benefits payable under tax-qualified plans.
The terms of each such Plan provide that, upon a change of control, all accrued
rights of the participants will become fully vested. Consummation of the merger
will constitute a change of control of AMP for purposes of the plans described
above.
DEFERRAL PLANS.
The terms of AMP's Deferred Compensation Plan provide for deferral of a
portion of a participant's salary and bonus and matching contributions provided
by AMP which are based on the matching percentage in effect from time to time
under AMP's Employee Savings and Thrift Plan. Deferrals may be credited to an
account earning a defined investment return rate equal to a fixed return or an
equivalent investment in AMP common stock, including dividend reinvestment. Upon
a change of control of AMP, matching amounts under the Deferred Compensation
Plan become fully vested. The terms of AMP's Deferred Compensation Plan for
Non-Employee Directors provide for the deferral of a director participant's
fees. Deferrals may be credited to an account earning a defined investment
return rate equal to a fixed return or an equivalent investment in AMP common
stock, including payments of dividends. Upon a change of control of AMP,
accounts under the Deferred Compensation Plan for Non-Employee Directors become
immediately due and payable to the participants.
The terms of AMP's Deferred Stock Accumulation Plan for Outside Directors
provides for an annual grant of 300 phantom shares of AMP common stock credited
to the participant's account. Grants are subject to an overall limitation of ten
300-share allocations. Accounts under such Plan vest on the earlier to occur of
the participant's fifth anniversary of continuous service on AMP's board of
directors, the participant's 72nd birthday or the date of the participant's
death while serving on AMP's board of directors. In the event of a change of
control of AMP followed by cessation of a participant's service, the entire
balance of such participant's account becomes immediately due and payable in a
single lump sum. In lieu of participating in the Deferred Stock Accumulation
Plan for Outside Directors, one AMP director continued to participate in the AMP
Incorporated Retirement Plan for Outside Directors. Under this plan, upon the
participant's cessation of service following a change of control, the
participant becomes vested in a pension benefit for life equal to 80% of the
current base annual retainer payable to AMP directors. Consummation of the
merger will constitute a change of control of AMP for purposes of the plans
described above.
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DIRECTOR APPOINTMENT.
Tyco (PA) has agreed to use its best efforts, subject to the exercise of the
Tyco Board's fiduciary duties, to have the Tyco Board propose at the Tyco
special general meeting that the Tyco Board be increased from eleven to twelve
members; nominate Robert Ripp, Chairman and Chief Executive Officer of AMP, to
fill the newly created vacancy; and recommend to Tyco's shareholders that they
elect Mr. Ripp to the Tyco Board.
EMPLOYMENT OF ROBERT RIPP.
If the merger is consummated, Mr. Ripp will serve in the capacity as
President of AMP reporting to L. Dennis Kozlowski, Tyco's Chairman, President
and Chief Executive Officer. As President of AMP, Mr. Ripp will be eligible to
receive, among other things, the following compensation and benefits:
- annual base salary of $1,000,000;
- a grant, effective as of the consummation of the merger, of 1,000,000
options to purchase Tyco common shares, which will vest pro rata over
three years, and will generally be subject to the terms and conditions of
the Tyco International Ltd. Long Term Incentive Plan, provided that in the
event of Mr. Ripp's termination of employment, any vested options will
remain outstanding for the remainder of their full 10-year term;
- 70,000 restricted Tyco common shares which will vest over two years,
provided certain performance-based criteria are achieved or upon certain
earlier terminations of Mr. Ripp's employment;
- continuation of Mr. Ripp's nonqualified retirement benefits, reduced,
however, to reflect the value of certain amounts previously paid or
awarded to Mr. Ripp;
- annual bonus payments determined on a basis consistent with the
determination of bonuses for other Tyco executives; and
- other benefits no less favorable than those provided to other Tyco
executives.
During the two-year period following the merger, if Mr. Ripp's employment is
terminated under certain circumstances, he will be entitled to receive certain
payments and benefits, including three years of severance pay based on the sum
of his annual base salary in effect at the time of the merger plus the highest
annual cash bonus earned by Mr. Ripp in the three years preceding the merger. In
addition, Mr. Ripp will be entitled to an additional payment to make him whole
for any excise taxes that may be imposed under section 4999 of the U.S. Internal
Revenue Code of 1986 with respect to any payments and benefits provided to Mr.
Ripp by Tyco or AMP. For a period of two years following termination of his
employment, Mr. Ripp will be subject to certain non-competition,
non-solicitation, confidentiality and intellectual property covenants.
MATERIAL U.S. FEDERAL INCOME TAX AND BERMUDA TAX CONSEQUENCES
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences of the exchange of AMP common stock for Tyco common shares in
the merger and the ownership of Tyco common shares. The discussion which follows
is based on the U.S. Internal Revenue Code, Treasury Regulations promulgated
thereunder, administrative rulings and pronouncements and judicial decisions as
of the date hereof, all of which are subject to change, possibly with
retroactive effect.
The discussion below, except where specifically noted, does not address the
effects of any state, local or non-United States tax laws. In addition, the
discussion below relates to persons who hold AMP common stock and will hold Tyco
common shares as capital assets. The tax treatment of an AMP shareholder may
vary depending upon such shareholder's particular situation, and certain
shareholders may be subject to special rules not discussed below. Such
shareholders would include, for example, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, and individuals
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<PAGE>
who received AMP common stock pursuant to the exercise of employee stock options
or otherwise as compensation. In addition, this discussion does not address the
tax consequences to any AMP shareholder who will own 5% or more of either the
total voting power or the total value of the outstanding Tyco common shares
after the merger, determined after there is taken into account ownership under
the applicable attribution rules of the U.S. Internal Revenue Code, or non-U.S.
Holders, defined below, who have held more than 5% of the AMP common stock at
any time within the five-year period ending at the consummation of the merger.
As used in this section, a "U.S. Holder" means a holder of AMP common stock
who exchanges AMP common stock for Tyco common shares and who is, for U.S.
federal income tax purposes:
- a citizen or resident of the U.S.;
- a corporation, partnership or other entity, other than a trust, created or
organized in or under the laws of the U.S. or any political subdivision
thereof;
- an estate whose income is subject to U.S. federal income tax regardless of
its source; or
- a trust if, in general, a court within the U.S. is able to exercise
primary supervision over its administration and one or more U.S. persons
have authority to control all of its substantial decisions.
As used in this section, a non-U.S. Holder is a holder of AMP common stock
who exchanges AMP common stock for Tyco common shares and who is not a U.S.
Holder.
1. CONSEQUENCES OF THE MERGER
In the opinion of PricewaterhouseCoopers LLP and Skadden, Arps, Slate,
Meagher & Flom LLP, the material U.S. federal income tax consequences that will
result from the merger are as follows:
a. The merger will constitute a reorganization within the meaning of
Section 368 of the U.S. Internal Revenue Code.
b. An AMP shareholder, other than an AMP shareholder that is a "5%
transferee shareholder" within the meaning of U.S. Treasury Regulation
1-367(a)-3, will not recognize any income, gain or loss as a result of
the receipt of Tyco common shares in exchange for AMP common stock
pursuant to the merger, except for cash received in lieu of a fractional
Tyco common share.
c. The tax basis to an AMP shareholder of the Tyco common shares received
in exchange for AMP common stock pursuant to the merger, including any
fractional share interest in Tyco common shares for which cash is
received, will equal such AMP shareholder's tax basis in the AMP common
stock surrendered in exchange therefor.
d. The holding period of an AMP shareholder for the Tyco common shares
received pursuant to the merger will include the holding period of the
AMP common stock surrendered in exchange therefor.
e. An AMP shareholder who is a U.S. Holder and who receives cash in lieu of
a fractional share interest in Tyco common shares pursuant to the merger
will be treated as having received such cash in exchange for such
fractional share interest and generally will recognize capital gain or
loss on such deemed exchange in an amount equal to the difference between
the amount of cash received and the basis of the AMP stock allocable to
such fractional share. Non-U.S. Holders who receive cash in lieu of a
fractional share interest in Tyco common shares will not be subject to
United States income or withholding tax except as set forth in paragraph
3.b below.
f. No income, gain or loss will be recognized by Tyco, Tyco (PA), AMP or
Merger Sub as a result of the transfer to AMP shareholders of the Tyco
common shares provided by Tyco to Tyco (PA) pursuant to the merger.
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Consummation of the merger is conditioned upon the receipt of opinions to this
effect, which will be rendered as of the consummation of the merger. If delivery
of such opinions is waived notwithstanding a material change in the tax
consequences of the merger, AMP and Tyco will recirculate and resolicit this
document. Such opinions are and will be based on facts existing as of the date
hereof and as of the consummation of the merger and on certain representations
as to factual matters made by Tyco, Tyco (PA) and AMP. Such representations, if
incorrect in certain material respects, could jeopardize the conclusions reached
in the opinions. Such opinions are not binding on the Internal Revenue Service
or the courts.
2. TRANSFER TAXES
In the event that any state or local transfer taxes are imposed on AMP
shareholders as a result of the merger, AMP will pay all such transfer taxes, if
any, directly to state and local taxing authorities on behalf of all AMP
shareholders. Any such payments by AMP made on behalf of the AMP shareholders
may result in dividend income to each AMP shareholder on behalf of whom such
payment is made. The amount of such dividend income attributable to each share
of AMP common stock cannot be calculated at this time, but is not expected to be
material.
3. OWNERSHIP OF TYCO COMMON SHARES
a. U.S. Holders
DISTRIBUTIONS.
Distributions made to U.S. Holders of Tyco common shares will be treated as
dividends and taxable as ordinary income to the extent that such distributions
are made out of Tyco's current or accumulated earnings and profits as determined
for U.S. federal income tax purposes, with any excess being treated as a
tax-free return of capital which reduces such U.S. Holder's tax basis in the
Tyco common shares to the extent thereof, and thereafter as capital gain from
the sale or exchange of property. The U.S. federal income tax treatment
described in the immediately preceding sentence applies whether or not such
distributions are treated as a return of capital for non-tax purposes. Amounts
taxable as dividends generally will be treated as foreign source "passive"
income for foreign tax credit purposes. The amount of any distribution of
property other than cash will be the fair market value of such property on the
date of distribution by Tyco. U.S. Holders of Tyco common shares that are
corporations generally will not be entitled to claim a dividends received
deduction with respect to distributions by Tyco, because Tyco is a foreign
corporation.
DISPOSITION.
Gain or loss realized by a U.S. Holder of Tyco common shares on the sale,
exchange or other taxable disposition of Tyco common shares will be subject to
U.S. federal income taxation as capital gain or loss in an amount equal to the
difference between the amount realized on such sale, exchange or other
disposition and such U.S. Holder's adjusted tax basis in the Tyco common shares
surrendered. Such gain or loss will be long term capital gain or loss if such
U.S. Holder's holding period for its Tyco common shares is more than one year.
Any gain or loss so realized generally will be United States source.
INFORMATION REPORTING AND BACKUP WITHHOLDING.
Certain U.S. Holders may be subject to information reporting with respect to
payments of dividends on, and the proceeds of the disposition of, Tyco common
shares. U.S. Holders who are subject to information reporting and who do not
provide appropriate information when requested may be subject to backup
withholding at a 31% rate. U.S. Holders should consult their tax advisors
regarding the imposition of backup withholding and information reporting with
respect to distributions on, and dispositions of, Tyco common shares.
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b. Non-U.S. Holders
DISTRIBUTIONS AND DISPOSITION.
In general, and subject to the discussion below under "Information Reporting
and Backup Withholding", a non-U.S. Holder will not be subject to U.S. federal
income or withholding tax on income from distributions with respect to, or gain
upon the disposition of, Tyco common shares, unless either (1) the income or
gain is effectively connected with the conduct by the non-U.S. Holder of a trade
or business in the U.S. or (2) in the case of gain realized by an individual
non-U.S. Holder upon a disposition of Tyco common shares, the non-U.S. Holder is
present in the U.S. for 183 days or more in the taxable year of the sale and
certain other conditions are met.
In the event that clause 1 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%, although a lower
rate may be provided by an applicable income tax treaty. In the event that
clause 2, but not clause 1, in the preceding paragraph applies, the gain
generally will be subject to tax at a rate of 30%, or such lower rate as may be
provided by an applicable income tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING.
If the Tyco common shares are held by a non-U.S. Holder through a non-U.S.,
and non-U.S. related, broker or financial institution, information reporting and
backup withholding generally would not be required with respect to distributions
on and dispositions of Tyco common shares. Information reporting, and possibly
backup withholding, may apply if the Tyco common shares are held by a non-U.S.
Holder through a U.S., or U.S. related, broker or financial institution and the
non-U.S.Holder fails to provide appropriate information. Non-U.S. holders should
consult their tax advisors regarding the imposition of backup withholding and
information reporting with respect to distributions on and dispositions of Tyco
common shares.
BERMUDA TAX CONSEQUENCES
In the opinion of Appleby, Spurling & Kempe, attorneys in Bermuda for Tyco,
there will be no Bermuda income, corporation or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty or inheritance tax payable
in respect of an exchange of Tyco common shares for AMP common stock pursuant to
the merger. In addition, as of the date hereof, there is no Bermuda income,
corporation or profits tax, withholding tax, capital gains tax, capital transfer
tax, estate duty or inheritance tax payable in respect of capital gains realized
on a disposition of Tyco common shares or in respect of distributions by Tyco
with respect to Tyco common shares. Furthermore, Tyco has received from the
Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection
Act of 1966 an undertaking that, in the event of there being enacted in Bermuda
any legislation imposing any tax computed on profits or income, including any
dividend or capital gains withholding tax, or computed on any capital assets,
gain or appreciation or any tax in the nature of an estate or inheritance tax or
duty, the imposition of such tax shall not be applicable to Tyco or any of its
operations, nor to its common shares nor to obligations of Tyco until the year
2016. This undertaking applies to Tyco common shares. It does not, however,
prevent the application of Bermuda taxes to persons ordinarily resident in
Bermuda.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A
DECISION WHETHER TO VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. AMP SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING
THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX CONSEQUENCES
OF THE MERGER TO THEM.
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ANTICIPATED ACCOUNTING TREATMENT
The merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting:
- the recorded assets and liabilities of Tyco and AMP will be carried
forward to the combined company at their recorded amounts, subject to any
adjustments required to conform the accounting policies of the companies;
- income of the combined corporation will include income of Tyco and AMP for
the entire fiscal year in which the merger occurs; and
- the reported income of the separate corporations for prior periods will be
combined and restated as income of the combined company.
Each of Tyco (PA) and AMP has agreed to use its reasonable best efforts to
cause its "affiliates," as defined for purposes of the rules and regulations of
the SEC relating to pooling of interests accounting treatment for merger
transactions, to agree in writing that they will comply with the applicable
restrictions on the sale of AMP common stock and Tyco common shares contained in
such rules and regulations.
The merger agreement provides that a condition to the consummation of the
merger is the receipt by Tyco (PA) of an opinion from PricewaterhouseCoopers,
independent public accountants of Tyco, regarding the qualification of the
merger as a pooling of interests for accounting purposes.
CERTAIN LEGAL MATTERS
Tyco (PA) and AMP have given each other a commitment to use their reasonable
best efforts to take whatever actions are required to obtain necessary
regulatory approvals.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Tyco (PA)
and AMP from completing the merger until certain information and materials have
been furnished to the U.S. Federal Trade Commission and the Antitrust Division
of the U.S. Department of Justice and a required waiting period has expired or
been terminated. The waiting period expired on January 17, 1999. Even though the
waiting period has expired, the FTC or the Antitrust Division could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking divestiture of substantial assets of Tyco or AMP.
The merger is also subject to notification to, and the approval by, the
Commission of the European Communities under Council Regulation (EEC) No.
4064/89 of 21 December, 1989 on the control of concentrations. Tyco and AMP made
the requisite notification filing with the EC Commission, and on February 4,
1999 the EC Commission announced it had cleared the transaction. Neither Tyco
nor AMP believes that consummation of the merger will result in a violation of
any applicable antitrust laws. However, there is no assurance that a challenge
to the merger on antitrust grounds will not be made or, if such a challenge is
made, of the result.
Tyco and AMP do not believe that any additional material governmental
filings in the United States or the European Economic Area, other than the
Articles of Merger, are required with respect to the merger. In addition to the
United States and the European Economic Area, Tyco and AMP conduct operations in
a number of countries where regulatory filings or approvals may be required in
connection with the consummation of the merger. Tyco and AMP believe that all
such material filings and approvals have been made or obtained, or will be made
or obtained, as the case may be.
U.S. FEDERAL SECURITIES LAW CONSEQUENCES
Recipients of Tyco common shares issued in connection with the merger can
freely transfer such shares under the U.S. Securities Act of 1933, except that
persons who are deemed to be "affiliates", as such term is defined under the
Securities Act, of AMP prior to the merger may only sell shares they receive in
the merger in transactions permitted by the resale provisions of Rule 145 under
the Securities Act, or as otherwise permitted under the Securities Act.
Individuals or entities that control, are
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controlled by, or are under common control with, AMP, including directors and
certain officers of AMP, are typically considered to be affiliates.
In general, under Rule 145, for one year following the consummation of the
merger, AMP affiliates will be subject to the following restrictions on the
public sale of Tyco common shares acquired in the merger:
- an AMP affiliate, together with certain related persons, may sell only
through unsolicited "broker transactions" or in transactions directly with
a "market maker," as such terms are defined in Rule 144 under the
Securities Act,
- the number of shares an AMP affiliate may sell, together with certain
related persons and certain persons acting in concert, within any
three-month period for purposes of Rule 145 may not exceed the greater of
1% of the outstanding Tyco common shares or the average weekly trading
volume of such stock during the four calendar weeks preceding such sale,
and
- an AMP affiliate may sell only if Tyco remains current with its
informational filings with the SEC under the Exchange Act.
After the end of one year from the consummation of the merger, an AMP
affiliate may sell Tyco common shares received in the merger without such manner
of sale or volume limitations provided that Tyco is current with its Exchange
Act informational filings and such AMP affiliate was not then an affiliate of
Tyco. Two years after the consummation of the merger, an affiliate of AMP may
sell such Tyco common shares without any restrictions so long as such affiliate
had not been an affiliate of Tyco for at least three months prior to such sale.
DIVIDENDS
Although the payment of dividends by Tyco in the future will depend on
business conditions, Tyco's financial condition and earnings and other factors,
Tyco expects to declare regularly scheduled dividends consistent with the
practices of Tyco prior to the merger and of Former Tyco prior to Former Tyco's
merger with ADT. The merger agreement restricts each of AMP and Tyco from
declaring, setting aside, making or paying any dividend or other distribution in
respect of its capital stock, other than its regularly scheduled dividend
consistent with past practices, during the period from the date of the merger
agreement until the earlier of the termination of the merger agreement or the
consummation of the merger.
STOCK EXCHANGE LISTING
It is a condition to the merger that the NYSE authorize for listing the Tyco
common shares to be delivered in connection with the merger. In addition, Tyco
expects to list such shares on the London Stock Exchange and the Bermuda Stock
Exchange in due course after the completion of the merger.
DISSENTERS RIGHTS
Neither AMP shareholders nor Tyco shareholders have dissenters' rights of
appraisal or other rights to demand fair value in cash for their shares by
reason of the merger or other transactions contemplated by the merger agreement.
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THE EXCHANGE RATIO AND ITS EFFECT ON AMP SECURITIES AND
EQUITY BASED BENEFIT PLANS
GENERAL
As a result of the merger, all outstanding shares of AMP common stock will
be converted into Tyco common shares in accordance with the terms of the merger
agreement, and all outstanding equity based awards under AMP's benefit plans
will be assumed by Tyco and appropriately adjusted to reflect the merger in
accordance with the merger agreement. The following is a summary of these
effects of the merger and is qualified in its entirety by the full description
set forth in Section 1.06 of the merger agreement attached as Annex A to this
document.
THE EXCHANGE RATIO
The exchange ratio will be determined as follows:
- If the Average Stock Price is equal to or greater than $67.00 but less
than or equal to $73.50, the exchange ratio will be 0.7612 Tyco common
shares for each share of AMP common stock.
- If the Average Stock Price is greater than $73.50, the exchange ratio will
equal $55.95 divided by the Average Stock Price.
- If the Average Stock Price is equal to or greater than $60.00 but less
than $67.00, the exchange ratio will equal $51.00 divided by the Average
Stock Price.
- If the Average Stock Price is less than $60.00, the exchange ratio will
equal $51.00 divided by the Average Stock Price. In this case, Tyco may
call off the merger prior to the time of the AMP special meeting, unless
on or before the second trading day prior to the date of the AMP special
meeting, AMP agrees to an exchange ratio equal to 0.8500. If AMP agrees to
fix the exchange ratio at 0.8500, then Tyco will not have the right to
call off the merger and the exchange ratio will be 0.8500.
Please see the table on page 2 that sets forth the applicable exchange
ratios and illustrative values of Tyco common shares to be received by AMP
shareholders based upon various illustrative values of the Average Stock Price.
BASIS OF AMP'S DETERMINATION TO FIX THE EXCHANGE RATIO
The Average Stock Price will not be known until the close of trading on
March 26, 1999, the fourth trading day before the AMP special meeting. AMP has
made no decision as to whether, if the Average Stock Price were less than
$60.00, it would agree to fix the exchange ratio at 0.8500. In the event such
decision is required to be made, the AMP Board would consult with its management
and legal and financial advisors and take into account, consistent with its
fiduciary duties, all relevant facts and circumstances that exist at such time,
including:
- the amount of the decrease in the value of Tyco common shares to be
received in the merger if the exchange ratio is fixed at 0.8500;
- general market, economic and business conditions;
- the results of AMP's continuing diligence investigation of Tyco and
management's assessment of the potential benefits expected to be realized
by combining the operations of AMP and Tyco;
- other opportunities available to AMP; and
- whether the proposed merger continues to be in the best interests of AMP.
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Any decision of the AMP Board to fix the exchange ratio at 0.8500 will be
made prior to the AMP special meeting. Approval of the merger agreement by AMP
shareholders will constitute approval of such decision. AMP has not considered
whether it will seek a revised fairness opinion if the Average Stock Price is
less than $60.00 and it elects to fix the exchange ratio at 0.8500. AMP does not
currently intend to resolicit proxies if it determines to proceed with the
merger at a fixed exchange ratio of 0.8500.
BASIS OF TYCO'S DETERMINATION TO PROCEED IF THE EXCHANGE RATIO IS ABOVE 0.8500
If the Average Stock Price is below $60.00 and AMP does not agree to fix the
exchange ratio at 0.8500, the Tyco Board will make a determination at that time
whether to call off the merger or to proceed with the merger at an exchange
ratio in excess of 0.8500. Approval of the issuance of Tyco shares in connection
with the merger by Tyco shareholders will constitute approval of the action of
the Tyco Board to proceed with the merger at an exchange ratio in excess of
0.8500. In making its determination, the Tyco Board would consult with its
management and legal and financial advisors and take into account all relevant
facts and circumstances that exist at such time, including:
- the amount of the increase in the exchange ratio above 0.8500, with Tyco
being more likely to proceed with the transaction the smaller the
increase;
- the likelihood that the merger would be immediately accretive to earnings
per share at the higher exchange ratio before restructuring and similar
charges;
- the results of Tyco's continuing diligence investigation of AMP and
management's assessment at the time of the cost savings and synergies that
Tyco expects to realize by combining the operations of Tyco and AMP and
whether in, management's view, the proposed merger is in the best
interests of Tyco and its shareholders on the basis of the increased
exchange ratio;
- general market, economic and business conditions; and
- other acquisition opportunities that are available at the time to Tyco.
Tyco has not considered whether it will seek a revised fairness opinion if
it decides to proceed, but it would be more likely to do so the greater the
increase above 0.8500 in the exchange ratio. Tyco does not currently intend to
resolicit proxies should it determine to proceed with an exchange ratio above
0.8500.
FRACTIONAL SHARES
In the merger, AMP shareholders will be entitled to receive only whole
numbers of Tyco common shares for their shares of AMP common stock. If applying
the exchange ratio would entitle a shareholder to receive a fraction of a Tyco
common share, such shareholder will be paid cash without interest in an amount
equal to the fraction of a Tyco common share that he or she is entitled
multiplied by the closing price on the NYSE of a Tyco common share on the last
trading day prior to consummation of the merger. FOR EXAMPLE, ASSUMING AN
EXCHANGE RATIO OF 0.7612 AND THAT THE CLOSING PRICE FOR A TYCO COMMON SHARE ON
THE LAST TRADING DAY PRIOR TO THE CONSUMMATION OF THE MERGER IS $73.50, AN AMP
SHAREHOLDER THAT OWNED 100 SHARES OF AMP COMMON STOCK IMMEDIATELY BEFORE THE
MERGER WILL OWN 76 TYCO COMMON SHARES IMMEDIATELY AFTER THE MERGER AND RECEIVE A
CHECK FOR $8.82.
TREATMENT OF AMP EQUITY-BASED AWARDS
The merger agreement provides that outstanding awards under AMP's 1993 Long
Term Equity Incentive Plan, Bonus Plan (Stock Plus Cash), Stock Option Plan for
Outside Directors, Deferred Compensation Plan, Deferred Compensation for
Non-Employee Directors Plan, Deferred Stock Accumulation Plan for Outside
Directors and any other individual agreement evidencing an equity-
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based incentive award will be assumed by Tyco and appropriately adjusted to
reflect the conversion of the AMP common stock into Tyco common shares based on
the exchange ratio. The following summarizes the effect of the merger on these
awards.
STOCK OPTIONS.
Each AMP stock option outstanding at the time the merger is consummated will
constitute an option to acquire the number of Tyco common shares, rounded to the
nearest whole Tyco common share, as the holder of such stock option would have
been entitled to receive pursuant to the merger had such holder exercised his or
her AMP stock option in full immediately prior to the consummation of the
merger. The per Tyco common share exercise price of these options after the
merger will be equal to (x) the aggregate exercise price for the shares of AMP
common stock purchasable pursuant to such AMP stock option immediately before
the merger divided by (y) the number of Tyco common shares deemed purchasable
pursuant to such option after the merger. FOR EXAMPLE, ASSUMING AN EXCHANGE
RATIO OF 0.7612, IF SOMEONE OWNS AN OPTION TO PURCHASE 100 SHARES OF AMP COMMON
STOCK AT AN EXERCISE PRICE OF $30.00 PER SHARE, AFTER THE MERGER THAT PERSON
WILL OWN AN OPTION TO PURCHASE 76 TYCO COMMON SHARES AT A PER SHARE EXERCISE
PRICE OF $39.47 ($3,000 DIVIDED BY 76).
The other terms of each AMP stock option, and the plans under which they
were issued, will continue to apply in accordance with their terms, including,
if so provided, the acceleration of vesting of such stock options as a result of
the merger. As soon as practicable after the merger is consummated, Tyco will
deliver to all holders of outstanding AMP stock options an appropriate notice
which will explain how their stock options are affected by the merger.
RESTRICTED STOCK AWARDS/DIVIDEND REINVESTMENT ACCOUNT.
In general, restricted shares of AMP common stock outstanding before the
merger, and in the case of Performance Restricted Shares awarded under AMP's
1993 Long Term Equity Incentive Plan, the related phantom shares credited to the
Dividend Reinvestment Account of the awardee, will, as a result of the merger,
be converted into Tyco common shares in accordance with the exchange ratio. The
other terms of the restricted stock awards, and their governing plans or
agreements, including, as applicable, any severance agreement in effect with an
AMP executive, will continue to apply in accordance with their terms, including,
if so provided, the acceleration of vesting of, or increase in the number of,
such restricted shares as a result of the merger. FOR EXAMPLE, ASSUMING AN
EXCHANGE RATIO OF 0.7612, IF SOMEONE OWNS 100 RESTRICTED SHARES OF AMP COMMON
STOCK AND 10 PHANTOM SHARES OF AMP COMMON STOCK ARE CREDITED TO HIS OR HER
DIVIDEND REINVESTMENT ACCOUNT, AFTER THE MERGER THAT PERSON WILL OWN 83 TYCO
COMMON SHARES AND WILL RECEIVE CASH IN LIEU OF ANY FRACTIONAL SHARES.
PHANTOM SHARES.
Upon consummation of the merger, phantom shares of AMP common stock credited
to a participant's account under AMP's Deferred Compensation Plan, Deferred
Compensation Plan for Non-Employee Directors and Deferred Stock Accumulation
Plan for Outside Directors, in accordance with the terms of the applicable plan,
will be adjusted by multiplying such number of phantom shares by the exchange
ratio. These accounts will otherwise be subject to the terms of such plans. FOR
EXAMPLE, USING AN EXCHANGE RATIO OF 0.7612, IF AN ACCOUNT UNDER THESE PLANS HAS
BEEN CREDITED WITH 100 PHANTOM SHARES OF AMP COMMON STOCK, AFTER THE MERGER THE
ACCOUNT WILL BE CREDITED WITH 76.12 PHANTOM TYCO COMMON SHARES.
BONUS UNITS.
Bonus Units awarded under AMP's 1993 Long Term Equity Incentive Plan or
Bonus Plan (Stock Plus Cash Plan) in accordance with the terms of such plan or
other governing agreements, including, as
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applicable, any severance agreement in effect with an AMP executive, will, upon
consummation of the merger, be settled in Tyco common shares. The number of Tyco
common shares to be issued for each Bonus Unit will be determined by multiplying
the number of shares of AMP common stock that the award holder would have been
entitled to receive with respect to such Bonus Unit, considering the date the
merger is consummated as a "Bonus Computation Date" under such plans, by the
exchange ratio. In addition, the Cash Bonus, as defined in the governing plan or
agreement, related to the Bonus Unit will be paid in accordance with the terms
of such plan or agreement. The other terms of the Bonus Units, and the plan or
agreements under which they were issued, will continue to apply in accordance
with their terms.
REGISTRATION OF TYCO COMMON SHARES.
Tyco has guaranteed that it will reserve for issuance enough Tyco common
shares for delivery upon exercise of the outstanding AMP stock options and
distributions in respect to bonus units and restricted stock awards in
accordance with the merger agreement. As soon as practicable following
consummation of the merger, Tyco has guaranteed that it will register the Tyco
common shares subject to the AMP stock options with the SEC to the extent such
registration is required. Tyco has guaranteed that it will use at least such
efforts as are applied to Tyco's other stock options generally to cause the
effectiveness of such registration statement or registration statements, and the
current status of the prospectus or prospectuses included in such registration
statements, to be maintained for so long as the AMP stock options remain
outstanding.
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PROVISIONS OF THE MERGER AGREEMENT AND RELATED AGREEMENTS
GENERAL
This section of the document describes the material provisions of the merger
agreement, the stock option agreement and Tyco's guarantees of these agreements.
This description is not complete, and shareholders are encouraged to read the
full texts of these agreements which are annexed to this document. In these
agreements, Tyco (PA) is referred to by its former name of Beta Zeno Corp., and
AMP Merger Corp. is referred to by its former name of Alpha Zeno Corp. In
addition, important information about the merger agreement and the merger is
provided in the previous sections entitled "The Merger" beginning on page 24 and
"The Exchange Ratio and its Effect on AMP Securities and Equity Based Benefit
Plans" beginning on page 58.
THE MERGER AGREEMENT
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the conditions to the merger
set forth in the merger agreement, AMP will file Articles of Merger with the
Department of State of Pennsylvania, as prescribed by Pennsylvania law. The
effect of this filing is that AMP Merger Corp. will merge with and into AMP, and
AMP will become a direct wholly-owned subsidiary of Tyco (PA) and an indirect
wholly-owned subsidiary of Tyco.
EXCHANGE OF AMP COMMON STOCK
As soon as reasonably practicable after the consummation of the merger, Tyco
(PA) will instruct ChaseMellon Shareholder Services LLC, as exchange agent, to
mail to each holder of record of AMP common stock a letter of transmittal and
instructions as to how to surrender certificates of AMP common stock in exchange
for Tyco common shares and payment for any fractional shares. AMP SHAREHOLDERS
SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the consummation of the merger, each certificate or other authorized
evidence of ownership that previously represented shares of AMP common stock
will represent only the right to receive the Tyco common shares into which such
AMP shares were converted in the merger and the right to receive cash in lieu of
fractional shares as described above.
Holders of certificates previously representing AMP common stock will not be
paid dividends or distributions on the Tyco common shares and will not be paid
cash in lieu of a fractional Tyco common share until such certificates are
surrendered to ChaseMellon for exchange. When such certificates are surrendered,
any unpaid dividends declared by Tyco after the consummation of the merger and
any cash in lieu of a fractional Tyco common share will be paid without
interest. For all other corporate purposes, certificates that represented shares
of AMP common stock prior to the consummation of the merger will represent from
and after the consummation of the merger, the number of Tyco common shares and
cash in respect of fractional shares, into which such shares of AMP common stock
are actually converted in the merger.
ChaseMellon will deliver Tyco common shares in exchange for lost, stolen or
destroyed certificates if the owner of such certificates signs an affidavit of
loss, theft or destruction, as appropriate. Tyco (PA) may also, in its
discretion, require the holder of such lost, stolen or destroyed certificates to
deliver a bond in a reasonable sum as indemnity against any claim that might be
made against Tyco (PA), Tyco or ChaseMellon with respect to alleged lost, stolen
or destroyed certificates.
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REPRESENTATIONS AND WARRANTIES
Tyco (PA) and AMP have made various customary mutual representations and
warranties in the merger agreement about themselves and their subsidiaries, as
well as, in the case of Tyco (PA), Tyco and its other subsidiaries. Tyco (PA)'s
representations and warranties have been unconditionally guaranteed by Tyco.
In addition, AMP represented that the AMP Board of Directors, prior to the
execution of the merger agreement, authorized the termination of its outstanding
self tender offer and an amendment to the AMP Rights Agreement to render the AMP
Rights Agreement inapplicable to the merger agreement, the stock option
agreement and the transactions contemplated thereby. AMP announced the
termination of the self tender and appropriately amended the AMP Rights
Agreement on November 23, 1998.
CONDUCT OF BUSINESS BY AMP
AMP has agreed that, prior to the consummation of the merger, AMP will
conduct its business, and that of its subsidiaries, only in the ordinary course
of business and in a manner consistent with past practice; and AMP will use
reasonable commercial efforts to preserve substantially intact the business
organization of AMP and its subsidiaries, to keep available the services of the
present officers, employees and consultants of AMP and its subsidiaries and to
preserve the present relationships of AMP and its subsidiaries with customers,
suppliers and other persons with which AMP or any of its subsidiaries has
significant business relations. In particular, unless the merger agreement
provides otherwise or as previously disclosed to Tyco (PA) by AMP, AMP has
agreed that neither it nor any of its subsidiaries, without the prior written
consent of Tyco (PA), will, subject in certain cases to specified exceptions:
1. amend or otherwise change AMP's Restated Articles of Incorporation or
Bylaws;
2. issue, dispose or encumber any shares of capital stock of any class, or
any options, warrants, convertible securities or other rights of any kind to
acquire any ownership interest in AMP, any of its subsidiaries or affiliates;
3. dispose of or encumber any assets of AMP or any of its subsidiaries out
of the ordinary course of business;
4. - declare or pay any dividend or other distribution on any of its
capital stock, other than regular quarterly dividends,
- split, combine or reclassify any of its capital stock or permit or
propose the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock,
- amend the terms or change the period of exercisability of, acquire, or
permit any subsidiary to amend the terms of or to acquire, any of its
or its subsidiaries securities, or
- settle or discharge any action brought or threatened against AMP
arising out of a shareholder equity interest in AMP;
5. - make any acquisitions,
- incur any indebtedness,
- authorize capital expenditures or purchases of fixed assets which are,
in the aggregate, in excess of $500 million over the 12 months from the
date of the merger agreement, or
- enter into or amend any contract, agreement, commitment or arrangement
to do any of the above;
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6. increase the compensation payable or to become payable to its officers
or employees, or grant severance or termination pay to or enter into any
employment or severance agreement with any new employee of AMP or any of its
subsidiaries which provides for annual base and bonus compensation in excess of
$200,000, or establish, adopt, enter into or amend any collective bargaining,
employment, termination, severance or benefit plan, agreement, trust, fund,
policy or arrangement for any current or former directors, officers or
employees;
7. change accounting policies or procedures;
8. make any material tax election inconsistent with past practice or settle
or compromise any material federal, state, local or foreign tax liability other
than settlements that have been reserved for or that do not exceed $10,000,000
in the aggregate;
9. satisfy any claims, liabilities or obligations out of the ordinary
course of business in excess of $10,000,000 in the aggregate; or
10. take, or agree to take, any of the above actions or take or agree to
take, any action which would make any of the representations or warranties of
AMP contained in the merger agreement untrue or incorrect or prevent AMP from
performing its covenants under the merger agreement or the stock option
agreement.
CONDUCT OF BUSINESS BY TYCO
Tyco has guaranteed that, prior to the consummation of the merger, it will
conduct its business and that of its subsidiaries in the ordinary course of
business and consistent with past practice, other than actions taken by Tyco or
its subsidiaries in contemplation of the merger, and will not, without the prior
written consent of AMP:
1. amend or otherwise change Tyco's Memorandum of Association or Bye-Laws;
2. make or agree to make any acquisition or disposition which would
materially delay or prevent the consummation of the transactions contemplated by
the merger agreement;
3. declare or pay any dividend or other distribution on any of its capital
stock, other than regular quarterly dividends;
4. change accounting policies or procedures; or
5. take or agree to take, any action which would make any of the
representations or warranties
of Tyco (PA) contained in the merger agreement untrue or incorrect or prevent
Tyco (PA) from performing its covenants under the merger agreement.
NO SOLICITATION
AMP has agreed that it will not solicit or encourage the initiation of any
inquiries or proposals regarding any other consolidation, business combination,
recapitalization or similar transaction, including any transaction with a third
party in which such party would acquire more than a 20% interest in any class of
AMP's equity securities or in the outstanding equity of the surviving entity in
a merger with AMP or would acquire more than 20% of the fair market value of
AMP's assets. Any of the foregoing transactions are referred to in this document
as an "Alternative Transaction" and any proposal from a third party to effect an
Alternative Transaction is referred to as an "Acquisition Proposal."
Until the AMP shareholders approve and adopt the merger agreement and if the
AMP Board, following consultation with counsel, determines that such action is
reasonably likely to be required to discharge properly its fiduciary duties, the
AMP Board, after notice to Tyco, is permitted to:
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1. furnish information to a third party which has made, and was not
solicited to make in violation of the merger agreement, a "Superior Proposal"
defined as a BONA FIDE Acquisition Proposal to acquire for cash and/or
securities, all of the voting equity securities of AMP or all or substantially
all of AMP's assets, on terms which the Board of Directors reasonably believes
are more favorable than the merger:
- from a financial point of view to AMP shareholders, after consultation
with a nationally recognized financial advisor, taking into account at the
time of determination any changes to the financial terms of the merger
proposed by Tyco, and
- to AMP, taking into account all pertinent factors deemed relevant by the
AMP Board under the laws of Pennsylvania; and
2. consider and negotiate such Superior Proposal.
Notwithstanding the foregoing points 1 and 2, AMP and the AMP Board of
Directors may not in any circumstance:
- withdraw or modify in a manner adverse to Tyco (PA) the AMP Board's
approval of the merger unless the merger agreement has been terminated in
accordance with its terms,
- prior to November 6, 1999, unless the merger agreement is terminated in
certain specified circumstances, redeem the rights issued under the AMP
Rights Agreement or otherwise amend or waive any provision of the AMP
Rights Agreement that would facilitate the consummation of an Alternative
Transaction, or
- prior to November 6, 1999, unless the merger agreement is terminated in
certain specified circumstances, enter into an agreement with respect to,
or otherwise approve or recommend, any Alternative Transaction.
The merger agreement expressly provides that the foregoing restrictions
shall not prohibit AMP from taking or disclosing to its shareholders a position
regarding an Alternative Transaction or Acquisition Proposal or from making any
disclosure to its shareholders required by law.
AMP has agreed to cease any discussions or negotiations with any third party
that were ongoing at the time of the execution of the merger agreement. AMP has
also agreed not to release any third party from the confidentiality and
standstill provisions of any agreement to which AMP is a party.
AMP will ensure that the officers and directors of AMP and its subsidiaries
and any investment banker or other advisor or representative retained by AMP are
aware of the no-solicitation restrictions described in the merger agreement.
CERTAIN OTHER COVENANTS
CONSENTS; APPROVALS.
Tyco (PA) and AMP will each use its reasonable best efforts to obtain all
consents, waivers, approvals, authorizations or orders, and Tyco (PA) and AMP
will make all filings, required in connection with the authorization, execution
and delivery of the merger agreement and the consummation by each of them of the
transactions contemplated thereby.
INDEMNIFICATION AND INSURANCE.
Tyco (PA) and AMP have agreed that for six years following consummation of
the merger, the Restated Articles of Incorporation and Bylaws of AMP will
contain the same indemnification provisions as currently in the Restated
Articles of Incorporation and Bylaws of AMP and such provisions will not
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be modified in any manner adverse to those individuals who were directors,
officers or employees of AMP at the consummation of the merger.
After consummation of the merger, AMP will, to the fullest extent permitted
under applicable law or under its Restated Articles of Incorporation or Bylaws,
indemnify and hold harmless each present and former director, officer or
employee of AMP or any of its subsidiaries against any costs or expenses,
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the transactions contemplated by the merger agreement,
or otherwise with respect to any acts or omissions occurring at or prior to the
consummation of the merger, to the same extent as provided in AMP's Restated
Articles of Incorporation or Bylaws or any applicable contract or agreement as
in effect on the date of the merger agreement, in each case for a period of six
years after the date of the merger agreement.
Following the merger, AMP will continue to honor in all respects its
obligations under the indemnification agreements and employment agreements with
AMP's officers and directors existing at or before consummation of the merger.
Tyco (PA) will provide, or cause AMP to provide, for a period of not less
than six years after consummation of the merger, AMP's current directors and
officers an insurance and indemnification policy for events occurring at or
prior to consummation of the merger that is no less favorable than AMP's
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Tyco (PA) and
AMP will not be required to pay an annual insurance premium in excess of 200% of
the annual premium currently paid by AMP for such insurance, but in such case
will purchase as much coverage as possible for such amount.
NOTIFICATION OF CERTAIN MATTERS.
Tyco (PA) and AMP will each give each other prompt notice of the occurrence
or nonoccurrence of any event which would be reasonably expected to cause any
representation or warranty of the notifying party contained in the merger
agreement to be materially untrue or inaccurate, or any failure of the notifying
party materially to comply with any covenant, condition or agreement in the
merger agreement.
FURTHER ACTION/TAX TREATMENT.
Tyco (PA) and AMP agreed to use all reasonable efforts to take, or cause to
be taken, all actions and do other things necessary, proper or advisable to
consummate as promptly as practicable the transactions contemplated by the
merger agreement, to obtain in a timely manner all necessary waivers, consents
and approvals and to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all conditions precedent to each
of their obligations under the merger agreement. However, Tyco (PA) is under no
obligation to agree to divest, abandon, license or take similar action with
respect to any assets of Tyco or AMP. In addition, Tyco (PA) and AMP have each
agreed to use their reasonable best efforts to cause the merger to qualify as a
reorganization under the provisions of Section 368 of the U.S. Internal Revenue
Code, as specified in the merger agreement, and will not, both before and after
consummation of the merger, take any actions which to their knowledge could
reasonably be expected to prevent the merger from so qualifying.
PUBLIC ANNOUNCEMENTS.
Tyco (PA) and AMP will not issue any press release or make any public
written statement with respect to the merger or the merger agreement without the
prior consent of the other party, which consent will not be unreasonably
withheld, except as required by law or the regulations of the NYSE.
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TYCO COMMON SHARES.
Tyco has guaranteed to take all action necessary so that Tyco (PA) will
obtain, prior to consummating the merger, the Tyco common shares to be delivered
to the AMP shareholders in the merger. Tyco has also guaranteed to use its best
efforts to list on the NYSE the Tyco common shares to be delivered in the
merger.
OPTION PLAN AND BENEFITS.
Tyco (PA) and AMP have each agreed to take all actions necessary to
effectuate the provisions of the merger agreement regarding the conversion and
assumption of AMP's outstanding stock options and other equity based benefit
awards. In addition, AMP has agreed to terminate its stock purchase plan as of
the consummation of the merger. Furthermore, Tyco (PA) has agreed that,
following the consummation of the merger and through December 31, 1999, AMP will
provide to those persons who, immediately prior to the merger, were employees of
AMP or its subsidiaries, and who continue their employment with AMP following
the merger, employee welfare and retirement plans and programs with
substantially similar benefits to those provided immediately prior to the
execution of the merger agreement. For this purpose, service accrued by these
employees with AMP or its subsidiaries prior to the merger will be recognized
except to the extent necessary to prevent duplication of benefits. Tyco (PA) has
also agreed to provide to any person who, immediately prior to the merger is a
retiree under an AMP retiree medical program with retiree medical benefits in
accordance with AMP's current practice. Tyco (PA) has also agreed to honor the
terms of AMP's employee severance plan and any other severance agreement or
other plan or arrangement which provides for the payment or acceleration of
benefits in connection with a change of control of AMP.
The continuation of welfare, retirement and severance plans, programs or
agreements are subject to the limitations contained in the merger agreement
including Tyco (PA)'s right to amend or modify such plans, programs or
agreements in any respect and to terminate or modify the terms of employment of
any AMP employee subsequent to the merger.
The merger agreement provides that the foregoing provisions are not
enforceable by persons not parties to the merger agreement.
RIGHTS AGREEMENT.
The AMP Board has agreed to take all necessary action to render the rights
under the AMP Rights Agreement inapplicable to the merger agreement, the stock
option agreement and the transactions contemplated thereby, including the
merger.
POOLING ACCOUNTING TREATMENT.
Tyco (PA) and AMP have each agreed not to do anything that would reasonably
be expected to adversely affect the ability of Tyco to treat the merger as a
pooling of interests, and Tyco (PA) and AMP have agreed to use their best
efforts to take such action as may be reasonably required to negate the impact
of any past actions which, to either of Tyco (PA) or AMP's knowledge, could
reasonably be expected to adversely impact the ability of Tyco to treat the
merger as a pooling of interests. Tyco (PA) has agreed to use its best efforts
to obtain from its independent public accountant an opinion with respect to the
qualification of the merger for pooling of interests accounting treatment. AMP
has agreed to use its best efforts to obtain from its independent public
accountant an opinion with respect to AMP's ability to be a party to a pooling
of interest transaction.
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DIRECTOR APPOINTMENT.
Tyco has guaranteed that the Tyco Board will, subject its fiduciary
obligations, propose at the Tyco special general meeting to increase the size of
the Tyco Board from eleven to twelve members and nominate, and recommend that
the Tyco shareholders elect, Robert Ripp, AMP's Chairman and Chief Executive
Officer, to the Tyco Board.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
Each of Tyco (PA)'s and AMP's respective obligations to complete the merger
are subject to the satisfaction at or prior to the consummation of the merger of
the following conditions:
1. EFFECTIVENESS OF REGISTRATION STATEMENT. The SEC has not issued any stop
order suspending the effectiveness of the registration statement of which this
document is a part, nor has it started or threatened any proceedings for that
purpose or in respect of this document;
2. SHAREHOLDER APPROVAL. The AMP shareholders have approved and adopted the
merger agreement and Tyco shareholders have approved the issuance of the Tyco
common shares to be delivered in connection with the merger;
3. ANTITRUST. All waiting periods applicable to the consummation of the
merger under HSR Act have expired or terminated, and all necessary clearances
and approvals for the merger under any non-U.S. anti-trust laws have been
obtained, other than for clearances and approvals under any non-U.S. antitrust
laws which, if not obtained, would not be reasonably expected to have a material
adverse effect on AMP, Tyco or Tyco's electrical and electronic component
business;
4. GOVERNMENTAL ACTIONS. No action or proceeding has been instituted,
pending or threatened by any governmental authority or administrative agency
before any governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign that is reasonably likely to result in an
order, nor is any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction or other legal
restraint in effect, which, in either case, prevents or seeks to prevent or
limits or seeks to limit Tyco from exercising all material rights and privileges
pertaining to its ownership of AMP following the merger or the ownership or
operation by Tyco or any of its subsidiaries of all or a material portion of the
business or assets of AMP or any of its subsidiaries following the merger, or
compels or seeks to compel Tyco or any of its subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of Tyco or any of
its subsidiaries, as a result of the merger or the transactions contemplated by
the merger agreement;
5. ILLEGALITY. No statute, rule, regulation or order is enacted, entered,
enforced or deemed applicable to the merger which makes the consummation of the
merger illegal;
6. TAX OPINIONS. AMP and Tyco (PA) have received the respective written
opinions of Skadden, Arps, Slate, Meagher & Flom LLP and of
PricewaterhouseCoopers LLP, Tyco's U.S. accountants, in form and substance
reasonably satisfactory to them, with respect to the tax-free nature of the
merger, as specified in the merger agreement; and
7. OPINION OF ACCOUNTANT. Tyco (PA) has received the opinion of
PricewaterhouseCoopers, Tyco's Bermuda accountants, to the effect that the
merger qualifies for pooling of interests accounting treatment.
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<PAGE>
ADDITIONAL CONDITIONS TO OBLIGATIONS OF TYCO (PA) AND AMP MERGER CORP.
The obligations of Tyco (PA) and Merger Sub to complete the merger are also
subject to the following conditions:
1. REPRESENTATIONS AND WARRANTIES. Except as would not reasonably be
expected to have a material adverse effect on AMP, the representations and
warranties of AMP in the merger agreement are true and correct in all material
respects on and as of the date of the consummation of the merger, with the same
force and effect as if made on and as of the date of the consummation of the
merger, and Tyco (PA) has received a certificate to such effect signed by the
Chief Executive Officer or Chief Financial Officer of AMP;
2. AGREEMENTS AND COVENANTS. AMP has performed or complied in all material
respects with all agreements and covenants required by the merger agreement, and
Tyco (PA) and AMP Merger Corp. have received a certificate to such effect signed
by the Chief Executive Officer or Chief Financial Officer of AMP;
3. CONSENTS OBTAINED. AMP has obtained all material consents, waivers,
approvals, authorizations or orders required to be obtained, and has made all
filings required by AMP for the authorization, execution and delivery of the
merger agreement and the consummation by it of the merger except as would not
reasonably be expected to have a material adverse effect on AMP or Tyco (PA);
4. AFFILIATE AGREEMENTS. Tyco (PA) has received from each person who is
identified as an "affiliate" of AMP an agreement to comply with restrictions on
such affiliates pursuant to Rule 145 under the Securities Act and under the
pooling of interests accounting treatment rules; and
5. RIGHTS AGREEMENT. A Distribution Date, as defined in the AMP Rights
Agreement, has not occurred under the AMP Rights Agreement.
ADDITIONAL CONDITIONS TO OBLIGATION OF AMP.
The obligation of AMP to complete the merger is also subject to the
following conditions:
1. REPRESENTATIONS AND WARRANTIES. Except as would not reasonably be
expected to have a material adverse effect on Tyco (PA), the representations and
warranties of Tyco (PA) contained in the merger agreement are true and correct
in all material respects at and as of the consummation of the merger, with the
same force and effect as if made on and as of the date of the consummation of
the merger, and AMP has received a certificate to such effect signed by the
President or Chief Financial Officer of Tyco (PA);
2. AGREEMENTS AND COVENANTS. Tyco (PA) and AMP Merger Corp. have performed
or complied in all material respects with all agreements and covenants required
by the merger agreement, and AMP has received a certificate to such effect
signed by the President or Chief Financial Officer of Tyco (PA);
3. CONSENTS OBTAINED. Tyco (PA) has obtained all material consents,
waivers, approvals, authorizations or orders required to be obtained, and has
made all filings required for the authorization, execution and delivery of the
merger agreement and the consummation by them of the transactions contemplated
except as would not reasonably be expected to have a material adverse effect on
AMP or Tyco (PA);
4. LISTING. The NYSE has authorized for listing the Tyco common shares
issuable in connection with the merger; and
5. TYCO SHAREHOLDERS RIGHTS PLAN. A Distribution Date, as defined in the
Tyco Shareholders Rights Plan, has not occurred under Tyco's Shareholders Rights
Plan.
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<PAGE>
TERMINATION
CONDITIONS TO TERMINATION.
The merger agreement may be terminated at any time prior to the consummation
of the merger, notwithstanding the approval and adoption by the AMP shareholders
of the merger agreement and the approval of the Tyco shareholders of the
issuance of the Tyco common shares to be delivered in connection with the
merger:
1. by mutual written consent duly authorized by the Boards of Directors of
both AMP and Tyco (PA);
2. by either of Tyco (PA) or AMP, if the merger has not been consummated by
July 31, 1999, other than for reasons set forth in 4 below, PROVIDED, HOWEVER,
that this right to terminate is not available to the party whose failure to
fulfill its obligation under the merger agreement caused the merger not to be
consummated before July 31, 1999;
3. by either of Tyco (PA) or AMP, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission issues a
nonappealable final order, decree or ruling or takes any other action which
permanently prohibits the merger;
4. by either of Tyco (PA) or AMP, if:
- the requisite vote of the shareholders of AMP has not been obtained by
July 31, 1999 or if the AMP shareholders do not approve and adopt the
merger agreement at the AMP special meeting, or
- the requisite vote of the shareholders of Tyco has not been obtained by
July 31, 1999 or the shareholders of Tyco do not approve the issuance
of the Tyco common shares to be delivered in connection with the merger
at the Tyco special general meeting;
5. by Tyco (PA), if, whether or not permitted to do so by the merger
agreement, AMP or the AMP Board:
- withdraws or changes its approval or recommendation of the merger
agreement or the merger in a manner adverse to Tyco (PA),
- approves or recommends to the shareholders of AMP an Acquisition
Proposal or Alternative Transaction,
- approves or recommends that the AMP shareholders tender their shares in
any tender offer or exchange offer that is an Alternative Transaction,
or
- takes any position or makes any disclosures required by law that has
the effect of any of the foregoing;
6. by either of Tyco (PA) or AMP:
- if any representation or warranty of the other party set forth in the
merger agreement shall be untrue when made, or
- upon a breach of any covenant or agreement set forth in the merger
agreement by the other party,
such that in either case, the conditions to the terminating party's obligation
to complete the merger would not be satisfied, PROVIDED THAT, if such
misrepresentation or breach is curable prior to July 31, 1999 and the party in
breach exercises its reasonable best efforts to cure the same, the merger
agreement may not be terminated under this clause while such party continues to
exercise such efforts;
7. by Tyco (PA), if any representation or warranty of AMP shall have become
untrue such that Tyco (PA)'s condition to its obligation to complete the merger
would not be satisfied, or by AMP, if any
70
<PAGE>
representation or warranty of Tyco (PA) shall have become untrue such that AMP's
condition to its obligation to complete the merger would not be satisfied, in
either case other than by reason of a breach of a covenant or agreement by the
breaching party; PROVIDED THAT, if such representation or warranty is curable
prior to July 31, 1999 and the breaching party exercises its reasonable best
efforts or continues to exercise its reasonable best efforts to cure such
representation or warranty, the merger agreement may not be terminated under
this clause; or
8. by Tyco (PA) prior to the time of the AMP special meeting if (x) the
Average Stock Price is less than $60.00 and (y) on or before the second trading
day prior to the AMP special meeting, AMP has not agreed to an exchange ratio
equal to 0.8500.
FEES AND EXPENSES.
Except as set forth below, each of Tyco (PA) or AMP will pay its own fees
and expenses incurred in connection with the merger agreement and the merger,
whether or not the merger is completed, provided that Tyco (PA) and AMP will
share equally all filing fees and printing expenses incurred in connection with
the printing and filing of this document and the related registration statement.
AMP will pay Tyco a fee of $300 million, and will pay Tyco's and Tyco (PA)'s
actual, documented and reasonable out-of-pocket expenses relating to the merger
of up to $30 million, upon the first to occur of any of the following events:
1. the termination of the merger agreement for any reason, if at the time
of such termination Tyco (PA) was entitled to terminate the merger agreement due
to the failure of AMP to obtain by July 31, 1999 the requisite shareholder vote
to approve the merger, or due to the failure of the AMP shareholders to approve
and adopt the merger agreement at the AMP special meeting; PROVIDED, that such
fee and expenses shall only be payable if prior to or during the AMP special
meeting an Acquisition Proposal, other than the AlliedSignal proposal as it
currently exists, is made directly to the AMP shareholders or otherwise becomes
publicly known or a credible third party has announced a bona fide intention to
make such an Acquisition Proposal;
2. the termination of the merger agreement for any reason, if at the time
of such termination Tyco (PA) was entitled to terminate the merger agreement due
to the AMP Board's withdrawal or change of its approval or recommendation of the
merger, its approval or recommendation of an Acquisition Proposal or Alternative
Transaction or its approval or recommendation to AMP shareholders to tender
their shares in an Alternative Transaction;
3. the termination of the merger agreement for any reason, if at the time
of such termination Tyco (PA) was entitled to terminate the merger agreement due
to AMP's breach of a covenant or agreement or a representation or warranty of
AMP becoming untrue; PROVIDED, that such fee and expenses shall only be payable
if prior to such termination an Acquisition Proposal, other than the
AlliedSignal proposal as it currently exists, is made directly to the AMP
shareholders or otherwise becomes publicly known or a credible third party has
announced a bona fide intention to make such an Acquisition Proposal;
4. during the one year period following termination of the merger
agreement, AMP approves or recommends, or proposes to approve or recommend, an
Acquisition Proposal, or redeem the rights under AMP's Rights Agreement or amend
or waive any provision of AMP's Rights Agreement to facilitate the consummation
of any Acquisition Proposal or Alternative Transaction, or an Alternative
Transaction shall be consummated, provided that at the time of such termination:
- there was no material breach by Tyco (PA) of a covenant or agreement under
the merger agreement,
- if the Tyco special general meeting occurred prior to such termination,
the Tyco shareholders did not decline to approve the issuance of the Tyco
common shares, and
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<PAGE>
- the merger agreement had not been terminated as a result of:
(1) a legal action permanently prohibiting the merger,
(2) the failure of Tyco to obtain by July 31, 1999 the requisite
shareholder vote to approve the issuance of the Tyco common shares to be
delivered in connection with the merger,
(3) the failure of the Tyco shareholders to approve such issuance at the
Tyco special general meeting,
(4) the Average Stock Price being less than $60.00, or
(5) a Tyco (PA) breach of a representation, warranty, covenant or
agreement under the merger agreement; or
5. the merger agreement is terminated other than as a result of any of the
events enumerated in (1) through (5) of the immediately preceding paragraph and,
prior to such termination, the AMP shareholders elect as a majority of the AMP
Board persons who:
- are not Continuing Directors, as defined in the AMP Rights Agreement,
- were not initially nominated by the incumbent directors, or
- even if nominated by the incumbent directors, were proposed by or are
affiliated with any third party that has made an Acquisition Proposal or
who at the time of the AMP Board election publicly supported any
Acquisition Proposal or Alternative Transaction.
AMP is required to pay to Tyco and Tyco (PA) their respective expenses relating
to the merger, but in no event more than $30 million, under circumstances where
the $300 million fee is not payable, upon the first to occur of any of the
following events:
1. Upon a termination of the merger agreement by either party:
- by mutual written consent,
- due to the merger not being consummated by July 31, 1999, provided
that, at the time of termination, Tyco (PA) was entitled to terminate
the merger agreement under such clause, or
- as a result of a legal action permanently prohibiting the merger; or
2. Upon a termination of the merger agreement by Tyco (PA):
- due to the failure of AMP to obtain by July 31, 1999 the requisite
shareholder vote to approve and adopt the merger agreement,
- due to the failure of the AMP shareholders to approve and adopt the
merger agreement at the AMP special meeting, or
- as a result of a material breach by AMP of a covenant or agreement
under the merger agreement.
Tyco (PA) is required to pay to AMP the expenses of AMP relating to the
merger, but in no event more than $30 million, upon termination of the merger
agreement by AMP:
1. due to the failure of Tyco to obtain by July 31, 1999 the requisite
shareholder vote to approve the issuance of the Tyco common shares to be
delivered in connection with the merger,
2. due to the failure of the Tyco shareholders to approve such issuance at
the special general meeting, or
3. as a result of a material breach of a representation or warranty by Tyco
(PA),
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<PAGE>
The fee and/or expenses are payable within one business day after a demand
for payment following the occurrence of the event requiring such payment,
PROVIDED that, in no event will a party be required to pay such fee and/or
expenses to the other if, immediately prior to the termination of the merger
agreement, the party to receive the fee and/or expenses was in material breach
of its obligations under the merger agreement or, in the case of Tyco, its
guarantee of Tyco (PA)'s obligations under the merger agreement.
The fee payable under certain circumstances by AMP to Tyco, as well as the
stock option agreement described below, is intended, among other things, to
compensate Tyco for its costs, including lost opportunity costs, if certain
actions or inactions by AMP or its shareholders lead to the abandonment of the
merger. This may have the effect of increasing the likelihood of consummation of
the merger in accordance with the terms of the merger agreement. The fee may
also have the effect of discouraging persons from making an offer to acquire all
of or a significant interest in AMP by increasing the cost of any such
acquisition.
AMENDMENT AND WAIVER; PARTIES IN INTEREST
Tyco (PA) and AMP may amend the merger agreement in writing by action taken
by or on behalf of their respective Boards of Directors at any time prior to
consummation of the merger, PROVIDED, HOWEVER, that after approval of the merger
by the shareholders of AMP, the merger agreement cannot be amended without
shareholder approval if shareholder approval of such amendment is required by
law.
At any time prior to consummation of the merger, either of Tyco (PA) and AMP
may extend the time for the performance of any of the obligations or other acts
by the other, waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered pursuant to the
merger agreement, or, to the extent allowed by law, waive compliance with any of
the agreements or conditions contained in the merger agreement. Any such
extension or waiver will be valid if set forth in writing by the party or
parties granting such extension or waiver.
The merger agreement is binding upon and inures solely to the benefit of the
parties thereto, and nothing in the merger agreement confers upon any other
person any right, benefit or remedy, other than certain indemnification,
employment and insurance obligations of Tyco (PA) and AMP following consummation
of the merger which are intended for the benefit of certain specified officers,
directors and employees of AMP and may be enforced by such individuals, and
other than AMP's obligation to pay fees and expenses to Tyco in certain
circumstances.
STOCK OPTION AGREEMENT
As an inducement to Tyco (PA) to enter into the merger agreement, AMP and
Tyco (PA) entered into a stock option agreement, pursuant to which AMP granted
Tyco (PA) an irrevocable option to purchase from AMP at any one time or from
time to time of up to 43,500,000 shares of AMP common stock or a lesser amount
of shares that is 19.9% of the outstanding AMP common stock at the time the
option is exercised, subject to certain adjustments. On the date of the stock
option agreement 43,500,000 AMP shares represented approximately 19.9% of the
shares of AMP common stock outstanding. The exercise price of the option is
$51.00 per share, subject to certain adjustments. The closing sale price of AMP
common stock on the last trading day preceding the execution of the stock option
agreement was $45.125 per share. Tyco (PA) may exercise the option only upon the
occurrence of an event as a result of which Tyco becomes entitled under the
merger agreement to the termination fee. The stock option agreement permits Tyco
(PA) to pay the exercise price in cash or with Tyco common shares.
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<PAGE>
The option will terminate upon the earliest to occur of:
1. the consummation of the merger;
2. the termination of the merger agreement as a result of:
- a legal action permanently prohibiting the merger,
- the failure of Tyco to obtain by July 31, 1999 the requisite
shareholder vote to approve the issuance of the Tyco common shares to
be delivered in connection with the merger,
- the failure of the Tyco shareholders to approve such issuance at the
Tyco special general meeting,
- the Average Stock Price of Tyco common shares being less than $60.00,
or
- a breach by Tyco of a representation, warranty, covenant or agreement
under the merger agreement; and
3. the earlier of (x) twelve months after the date on which the option
becomes exercisable and (y) the third business day following the first
anniversary of termination of the merger agreement, but in no event, in the case
of clause 3, sooner than May 26, 2000.
The option agreement provides Tyco (PA) with a cash-out-right which would
allow Tyco (PA) to receive cash in exchange for the cancellation of the option
in an amount equal to the number of option shares specified by Tyco (PA) for
cancellation, multiplied by the difference between (x) the average closing price
per share of AMP common stock as reported on the NYSE Composite Transactions
Tape for the ten NYSE trading days commencing on the NYSE trading day
immediately preceding the date of Tyco (PA)'s election to exercise the cash-out
right and (y) the exercise price of the option.
Under all circumstances, the profit that Tyco (PA) realizes upon exercise of
the option, calculated as provided under the stock option agreement, cannot
exceed $301 million minus any amount of the termination fee actually received by
Tyco pursuant to the terms of the merger agreement.
The stock option agreement also contains provisions governing the procedure
for exercise of the option and payment for the shares purchased upon such
exercise and other provisions that adjust the number of shares and the exercise
price therefor upon the occurrence of certain changes to the capital structure
of AMP or certain other events or transactions.
Finally, the stock option agreement contains provisions granting Tyco (PA)
demand registration rights with respect to the shares of AMP common stock
received upon exercise of the option, and granting AMP demand registration
rights with respect to the Tyco common shares, if any, received from Tyco (PA)
as payment of the exercise price of the option.
GUARANTEES
Tyco has fully and unconditionally guaranteed each and every representation,
warranty, covenant, agreement or other obligation of Tyco (PA) and AMP Merger
Corp. under the merger agreement and the stock option agreement.
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<PAGE>
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
TYCO
Tyco common shares are listed and traded on the NYSE, the London Stock
Exchange and the Bermuda Stock Exchange. The following table sets forth the high
and low sales prices per Tyco common share, as reported in the NYSE Composite
Transaction Tape, and the dividends paid on such shares, for the quarterly
periods presented below. The prices per Tyco common share listed in the table
for periods prior to July 2, 1997, the date of Former Tyco's merger with ADT,
are for common shares of ADT. The price and dividends for the Tyco common shares
have been restated to reflect the 0.48133 reverse stock split related to the ADT
merger and a two-for-one stock split effected in the form of a stock dividend
which was distributed October 22, 1997. Although Tyco's fiscal year end is
September 30, the information is presented on a calendar year basis.
<TABLE>
<CAPTION>
TYCO COMMON SHARES
----------------------
<S> <C> <C> <C>
DIVIDENDS
HIGH LOW PER SHARE(1)
---------- ---------- -------------
1996:
First quarter......................................... $ 18.6982 $ 14.5430 --
Second quarter........................................ 20.2564 16.8803 --
Third quarter......................................... 25.7100 16.4908 --
Fourth quarter........................................ 24.3466 19.0877 --
1997(1):
First quarter......................................... $ 28.6965 $ 22.0743 --
Second quarter........................................ 35.4487 25.4503 --
Third quarter......................................... 43.0000 34.4099 $ 0.025
Fourth quarter........................................ 45.5000 34.0000 0.025
1998:
First quarter......................................... $ 57.4375 $ 42.3750 $ 0.025
Second quarter........................................ 63.0625 51.4375 0.025
Third quarter......................................... 69.0000 50.0000 0.025
Fourth quarter........................................ 79.1875 40.3125 0.025
1999:
First Quarter (through February 12, 1999)............. $ 78.8750 $ 67.5000 $ 0.025
</TABLE>
- ------------------------
(1) Tyco has paid a quarterly cash dividend of $0.025 per common share since
July 2, 1997, the date of the Former Tyco/ADT merger. ADT had not paid any
dividends on its common shares since 1992. Prior to the merger with ADT,
Former Tyco paid a quarterly cash dividend of $0.025 per share of common
stock since January 1992.
See "Comparative Market Value Information" on page 13 for recent Tyco common
share price information. Shareholders are urged to obtain current market
quotations. See also "Risk Factors-- AMP shareholders could end up with less
than $51.00 worth of Tyco stock per share of AMP common stock" on page 5.
Under the terms of the merger agreement, other than in respect of its
regularly scheduled quarterly dividend of $0.025 per Tyco common share, Tyco is
not permitted to declare, set aside, make or pay any dividend or distribution in
respect of its capital stock from the date of the merger agreement until the
earlier of the termination of the merger agreement and the consummation of the
merger. The payment of dividends by Tyco in the future will be determined by the
Tyco Board and will depend on business conditions, Tyco's financial condition
and earnings and other factors.
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AMP
AMP common stock is listed and traded on the NYSE. The following table sets
forth the high and low sales prices per share of AMP common stock as reported in
the NYSE Composite Transaction Tape, and the dividends paid on such AMP common
stock, for the quarterly calendar periods presented below.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---------- ---------- ------------
<S> <C> <C> <C>
AMP COMMON STOCK
------------------------------------
1996:
First quarter......................................... $ 44.7500 $ 36.3750 $ 0.2500
Second quarter........................................ 46.1250 39.0000 0.2500
Third quarter......................................... 41.7500 36.1250 0.2500
Fourth quarter........................................ 39.8750 32.8750 0.2500
1997:
First quarter......................................... $ 43.0000 $ 33.8750 $ 0.2600
Second quarter........................................ 43.1250 33.1250 0.2600
Third quarter......................................... 56.6875 41.7500 0.2600
Fourth quarter........................................ 54.2500 39.0625 0.2600
1998:
First quarter......................................... $ 44.6875 $ 36.6250 $ 0.2700
Second quarter........................................ 44.1875 33.5000 0.2700
Third quarter......................................... 43.0000 28.1250 0.2700
Fourth quarter........................................ 52.8750 34.3750 0.2700
1999:
First Quarter (through February 12, 1999)............. $ 52.9375 $ 50.1875 --
</TABLE>
See "Comparative Market Value Information" on page 13 for recent AMP common
stock price information. Shareholders are urged to obtain current market
quotations.
Under the terms of the merger agreement, other than in respect of regular
quarterly dividends of $0.27 per share of AMP common stock, AMP is not permitted
to declare, set aside, make or pay any dividend or distribution in respect of
its capital stock from the date of the merger agreement until the earlier of the
termination of the merger agreement and the consummation of the merger.
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<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:
1. Tyco's audited consolidated financial statements, including the
accounting policies and notes thereto, included in Tyco's Current Report on
Form 8-K filed on December 10, 1998,
2. AMP's audited consolidated financial statements, including the
accounting policies and notes thereto, included in its annual report on Form
10-K for the year ended December 31, 1997, and
3. AMP's unaudited consolidated financial statements and notes thereto
included in its quarterly reports on Form 10-Q for the quarterly periods
ended March 31, 1998, June 30, 1998 and September 30, 1998.
In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. AMP has a calendar year end. The historical results for the year
ended September 30, 1998, the twelve months ended September 30, 1997 and the
nine months ended September 30, 1997 have been combined using the actual results
of Tyco and AMP for those periods. See "Where To Find More Information" on page
i.
The unaudited pro forma combined condensed financial information has been
prepared in accordance with generally accepted accounting principles in the
United States. These principles require management to make extensive use of
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The unaudited pro forma combined condensed results of operations are
not necessarily indicative of future operating results.
The unaudited pro forma combined condensed balance sheet gives effect to the
merger as if it had occurred on September 30, 1998, combining the balance sheets
of Tyco and AMP at September 30, 1998. The unaudited pro forma combined
condensed statements of continuing operations give effect to the merger as if it
had occurred on January 1, 1996.
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 13,537.2 $ 5,536.6 $ $ 19,073.8
Cost of sales................................................ (8,621.1) (3,853.2) (12,474.3)
Selling, general and administrative expenses................. (3,198.4) (1,097.7) (4,296.1)
Restructuring and other non-recurring charges(8)............. (92.5) (164.4) (256.9)
---------- ---------- ----------- -----------
Operating income............................................. 1,625.2 421.3 2,046.5
Interest income(3)........................................... 38.9 -- 23.7 62.6
Interest expense............................................. (270.1) (37.8) (307.9)
Other expenses, net(3)....................................... -- (74.7) (23.7) (98.4)
---------- ---------- ----------- -----------
Income from continuing operations before income taxes........ 1,394.0 308.8 -- 1,702.8
Income taxes................................................. (428.9) (100.4) (529.3)
---------- ---------- ----------- -----------
Income from continuing operations............................ $ 965.1 $ 208.4 $ -- $ 1,173.5
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Income per common share from continuing
operations(2)(4):
Basic...................................................... $ 1.54 $ 0.95 $ 1.48
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... $ 1.50 $ 0.95 $ 1.45
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of common shares(2)(4):
Basic...................................................... 627.0 219.4 794.0
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... 647.0 220.3 814.7
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
78
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE COMPARATIVE TWELVE MONTHS ENDED SEPTEMBER 30, 1997(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 10,973.0 $ 5,696.8 $ $ 16,669.8
Cost of sales................................................ (7,099.5) (3,979.6) (11,079.1)
Selling, general and administrative expenses................. (2,491.7) (1,088.4) (3,580.1)
Merger, restructuring and other non-recurring charges(9)..... (1,185.2) (98.0) (1,283.2)
Charge for the impairment of long-lived assets(9)............ (148.4) -- (148.4)
Write-off of purchased in-process research and
development(9)............................................. (361.0) -- (361.0)
---------- ---------- ----------- -----------
Operating (loss) income...................................... (312.8) 530.8 218.0
Interest income(3)........................................... 43.8 -- 17.1 60.9
Interest expense............................................. (199.1) (32.2) (231.3)
Other income (expenses), net(3).............................. 118.4 (69.9) (17.1) 31.4
---------- ---------- ----------- -----------
(Loss) income from continuing operations before income
taxes...................................................... (349.7) 428.7 -- 79.0
Income taxes................................................. (248.1) (138.4) (386.5)
---------- ---------- ----------- -----------
(Loss) income from continuing operations..................... $ (597.8) $ 290.3 $ -- $ (307.5)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
(Loss) income per common share from continuing
operations(2)(4):
Basic...................................................... $ (1.08) $ 1.32 $ (0.43)
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... $ (1.08) $ 1.32 $ (0.43)
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of common shares(2)(4):
Basic...................................................... 562.3 219.7 729.5
---------- ---------- -----------
---------- ---------- -----------
Diluted.................................................... 562.3 220.3 729.5
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
79
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE TRANSITIONAL NINE MONTH FISCAL YEAR ENDED SEPTEMBER 30, 1997(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales..................................................... $ 8,457.8 $ 4,293.5 $ $ 12,751.3
Cost of sales................................................. (5,455.2) (2,921.1) (8,376.3)
Selling, general and administrative expenses.................. (1,921.3) (828.6) (2,749.9)
Merger, restructuring and other non-recurring
charges(9).................................................. (947.9) -- (947.9)
Charge for the impairment of long-lived assets(9)............. (148.4) -- (148.4)
Write-off of purchased in-process research and
development(9).............................................. (361.0) -- (361.0)
---------- ---------- ------ ----------
Operating (loss) income....................................... (376.0) 543.8 167.8
Interest income(3)............................................ 31.2 -- 12.6 43.8
Interest expense.............................................. (144.8) (25.2) (170.0)
Other expenses, net(3)........................................ -- (29.4) (12.6) (42.0)
---------- ---------- ------ ----------
(Loss) income from continuing operations before
income taxes................................................ (489.6) 489.2 -- (0.4)
Income taxes.................................................. (208.1) (159.0) (367.1)
---------- ---------- ------ ----------
(Loss) income from continuing operations...................... $ (697.7) $ 330.2 $ -- $ (367.5)
---------- ---------- ------ ----------
---------- ---------- ------ ----------
(Loss) income per common share from continuing
operations(2)(4):
Basic....................................................... $ (1.23) $ 1.50 $ (0.50)
---------- ---------- ----------
---------- ---------- ----------
Diluted..................................................... $ (1.23) $ 1.50 $ (0.50)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares(2)(4):
Basic....................................................... 573.4 219.7 740.6
---------- ---------- ----------
---------- ---------- ----------
Diluted..................................................... 573.4 220.3 740.6
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF
CONTINUING OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales...................................................... $ 9,216.4 $ 5,468.0 $ $ 14,684.4
Cost of sales.................................................. (5,935.8) (3,834.3) (9,770.1)
Selling, general and administrative expenses................... (2,157.9) (1,033.0) (3,190.9)
Merger, restructuring and other non-recurring
charges(10).................................................. (246.1) (98.0) (344.1)
Charge for the impairment of long-lived assets(10)............. (744.7) -- (744.7)
---------- ---------- ----------- -----------
Operating income............................................... 131.9 502.7 634.6
Interest income(3)............................................. 36.5 -- 14.0 50.5
Interest expense............................................... (207.3) (31.2) (238.5)
Other income (expenses), net(3)................................ 119.4 (33.2) (14.0) 72.2
---------- ---------- ----------- -----------
Income from continuing operations before
income taxes................................................. 80.5 438.3 -- 518.8
Income taxes................................................... (268.1) (151.3) (419.4)
---------- ---------- ----------- -----------
(Loss) income from continuing operations....................... $ (187.6) $ 287.0 $ -- $ 99.4
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
(Loss) income per common share from continuing
operations(2)(4):
Basic........................................................ $ (0.40) $ 1.31 $ 0.12
---------- ---------- -----------
---------- ---------- -----------
Diluted...................................................... $ (0.40) $ 1.31 $ 0.11
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of common shares(2)(4):
Basic........................................................ 521.6 219.2 688.5
---------- ---------- -----------
---------- ---------- -----------
Diluted...................................................... 521.6 219.6 700.4
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
81
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AT SEPTEMBER 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO AMP ADJUSTMENTS COMBINED
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 836.9 $ 236.0 $ $ 1,072.9
Securities available for sale.............................. -- 8.2 8.2
Accounts receivable, net................................... 2,418.5 1,059.9 3,478.4
Contracts in process....................................... 565.3 -- 565.3
Inventories................................................ 1,706.6 903.4 2,610.0
Deferred income taxes(3)................................... 646.3 -- 148.7 795.0
Prepaid expenses and other current assets(3)............... 316.3 254.9 (148.7) 422.5
---------- ---------- ------------ ----------
Total current assets................................... 6,489.9 2,462.4 -- 8,952.3
---------- ---------- ------------ ----------
Property, plant and equipment, net......................... 4,159.4 1,944.9 6,104.3
Goodwill and other intangibles, net(3)..................... 7,006.5 -- 99.0 7,105.5
Long-term investments(3)................................... 141.6 -- 86.8 228.4
Deferred income taxes...................................... 296.7 -- 296.7
Other assets(3)............................................ 628.5 311.0 (185.8) 753.7
---------- ---------- ------------ ----------
Total assets........................................... $ 18,722.6 $ 4,718.3 $ -- $ 23,440.9
---------- ---------- ------------ ----------
---------- ---------- ------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable and current portion of long-term debt........ $ 355.9 $ 459.1 $ $ 815.0
Accounts payable........................................... 1,340.4 393.0 1,733.4
Accrued expenses and other current liabilities(3)(6)....... 2,660.7 514.9 193.7 3,369.3
Contracts in process-billings in excess of cost............ 332.9 -- 332.9
Deferred revenue........................................... 260.6 -- 260.6
Income taxes payable(3).................................... 591.5 -- 106.3 697.8
Deferred income taxes...................................... 12.5 -- 12.5
---------- ---------- ------------ ----------
Total current liabilities.............................. 5,554.5 1,367.0 300.0 7,221.5
---------- ---------- ------------ ----------
Long-term debt............................................. 5,254.3 170.4 5,424.7
Other long-term liabilities(3)............................. 631.8 363.0 (22.5) 972.3
Deferred income taxes(3)................................... 82.4 -- 22.5 104.9
---------- ---------- ------------ ----------
Total liabilities...................................... 11,523.0 1,900.4 300.0 13,723.4
---------- ---------- ------------ ----------
Retained earnings(6)....................................... 400.0 2,844.3 (300.0) 2,944.3
Other shareholders' equity................................. 6,799.6 (26.4) 6,773.2
---------- ---------- ------------ ----------
Total shareholders' equity............................. 7,199.6 2,817.9 (300.0) 9,717.5
---------- ---------- ------------ ----------
Total liabilities and shareholders' equity........... $ 18,722.6 $ 4,718.3 $ -- $ 23,440.9
---------- ---------- ------------ ----------
---------- ---------- ------------ ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
82
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. AMP has a calendar year end. The historical results for the
fiscal year ended September 30, 1998, the twelve months ended September 30,
1997 and the nine months ended September 30, 1997 have been combined using
the actual results of Tyco and AMP for those periods.
(2) The pro forma combined per share amounts are based on the combined weighted
average number of Tyco common shares and AMP common stock outstanding for
all periods presented based on AMP shareholders receiving 0.7612 of a Tyco
common share for each share of AMP common stock held, which assumes Tyco's
Average Stock Price is within the range from $67.00 to $73.50. The actual
exchange ratio may be more or less than 0.7612. For example, based on an
Average Stock Price of $76.00, the exchange ratio would be 0.7362. Assuming
this ratio, pro forma combined income (loss) per common share on a diluted
basis would be $1.46 for the fiscal year ended September 30, 1998, $(0.44)
for the comparative twelve months ended September 30, 1997, $(0.51) for the
nine months ended September 30, 1997 and $0.11 for the year ended December
31, 1996. Based on an Average Stock Price of $60.00, the exchange ratio
would be 0.8500. Assuming this ratio, pro forma combined income (loss) per
common share on a diluted basis would be $1.42 for the fiscal year ended
September 30, 1998, $(0.42) for the comparative twelve months ended
September 30, 1997, $(0.49) for the nine months ended September 30, 1997
and $0.11 for the year ended December 31, 1996.
(3) Certain reclassifications, none of which affects income (loss) from
continuing operations, have been made to the AMP statements of operations
in the pro forma combined condensed statements of continuing operations to
classify interest income on a consistent basis. The pro forma adjustments
to the balance sheet were required to classify on a consistent basis
goodwill and other intangibles, long-term investments, deferred income
taxes and income taxes payable.
(4) Basic loss per common share from continuing operations for Tyco, after
deducting dividends on Tyco convertible preference shares, was based on
adjusted loss from continuing operations available to common shareholders
of $(607.5) million for the twelve months ended September 30, 1997,
$(702.4) million for the nine months ended September 30, 1997, and ($207.4)
million for the year ended December 31, 1996. There were no dividends on
Tyco convertible preference shares in the fiscal year ended September 30,
1998.
Diluted income per common share from continuing operations for Tyco, after
adding Liquid Yield Option Notes ("LYONs") discount amortization, was based
on adjusted income from continuing operations available to common
shareholders of $972.3 million for the year ended September 30, 1998. The
effects on diluted income per common share resulting from the assumed
exchange of LYONs debt are anti-dilutive in 1997 and 1996.
(5) There were no material transactions between Tyco and AMP during any of the
periods presented.
(6) Total transaction costs to be incurred by Tyco and AMP in connection with
the merger are estimated to be approximately $300.0 million. These costs,
related to legal, printing, accounting, financial advisory services and
other expenses, will be charged against income upon consummation of the
merger. These charges were not considered in the pro forma combined
condensed statements of continuing operations.
(7) A restructuring charge to operations is expected to be recognized in
connection with the merger to reflect the combination of the two companies.
Such charge, which has not yet been estimated, may include amounts with
respect to the elimination of excess facilities, the write-off of certain
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<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION (CONTINUED)
goodwill and fixed assets, severance costs and the satisfaction of certain
liabilities. The effects of these costs have not been reflected in the pro
forma combined condensed financial information.
(8) During the fiscal year ended September 30, 1998, Tyco recorded certain
charges of $80.5 million and restructuring charges of $12.0 million related
to the operations of US Surgical. During the year ended September 30, 1998,
AMP recorded restructuring charges of $185.8 million in connection with its
profit improvement plan. In addition, AMP recorded a credit of $21.4
million to restructuring charges during the year ended September 30, 1998,
related to the execution of its 1996 restructuring plans.
(9) During the twelve months ended September 30, 1997, Tyco recorded $917.8
million of merger and transaction costs, restructuring and integration
costs related to the mergers with Former Tyco, Keystone and INBRAND, $148.4
related to the impairment of long-lived assets, $361.0 million for the
write-off of purchased in-process research and development related to the
acquisition of the submarine systems business of AT&T Corp., $237.3 million
related to restructuring charges in ADT's electronic security services
business and $30.1 million of restructuring and other non-recurring charges
related to the operations of US Surgical. During the twelve months ended
September 30, 1997, AMP recorded restructuring charges of $98.0 million in
connection with its decision to exit certain product lines, manufacturing
operations and investments.
(10) During the year ended December 31, 1996, Tyco recorded charges of $744.7
million related to the impairment of long-lived assets, $237.3 million
related to restructuring and other non-recurring items in ADT's electronic
security services operations and $8.8 million of transaction costs in
connection with ADT's acquisition of Automated Security (Holdings) plc.
During the year ended December 31, 1996, AMP recorded $98.0 million of
restructuring charges. See (9) above.
84
<PAGE>
BUSINESSES OF TYCO
Tyco is a diversified manufacturing and service company that, through its
subsidiaries:
- designs, manufactures and distributes electrical and electronic
components, and designs, manufactures, installs and services undersea
cable communication systems;
- designs, manufactures and distributes disposable medical supplies and
other specialty products, and conducts vehicle auctions and related
services;
- designs, manufactures, installs and services fire detection and
suppression systems, and installs, monitors and maintains electronic
security systems; and
- designs, manufactures and distributes flow control products;
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
On July 2, 1997, a wholly-owned subsidiary of what was formerly called ADT
Limited merged with Tyco International Ltd., a Massachusetts corporation. Upon
consummation of the merger ADT, the continuing public company, changed its name
to Tyco International Ltd. and the Massachusetts corporation changed its name to
Tyco International (US) Inc.
Tyco reviews acquisition opportunities in the ordinary course of its
business, some of which may be material and some of which are currently under
investigation, discussion or negotiation. There can be no assurance that any of
such acquisitions will be consummated.
ELECTRICAL AND ELECTRONIC COMPONENTS
The principal divisions of the Electrical and Electronic Components group
and their businesses are:
<TABLE>
<CAPTION>
<S> <C>
TYCO SUBMARINE SYSTEMS -- designs, manufactures, installs and services undersea
communications cable systems.
ALLIED ELECTRICAL CONDUIT -- manufactures and distributes electrical conduit and related
components used in commercial electrical installations.
TYCO PRINTED CIRCUIT GROUP -- manufactures printed circuit boards and assembles backplanes for
the electronics industry.
</TABLE>
TYCO SUBMARINE SYSTEMS
Tyco Submarine Systems Ltd., 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. Tyco Submarine Systems designs and builds long haul cable systems which
can provide 20 gigabytes per second of capacity over 10,000 kilometers, as well
as short haul systems which allow for even greater circuit capacity and reduced
transmission costs, over cable systems of several hundred kilometers. Tyco
Submarine Systems has designed, manufactured and installed approximately 265,000
kilometers of undersea optical cable.
Tyco Submarine Systems 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
85
<PAGE>
repairs, monitor transmission quality and perform system tests. Tyco Submarine
Systems 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 cable for unique field operations. In September 1996, Tyco acquired
the Rochester Corporation which manufactures wire rope, wirelines,
electro-optical products and subsea products.
Tyco Submarine Systems competes on a worldwide basis primarily against two
other entities: Alcatel-Alsthom, headquartered in France, and KDD, located in
Japan. Alcatel, like Tyco Submarine Systems, is vertically integrated and
produces its own cable, whereas KDD utilizes a Japanese cable manufacturer.
ALLIED ELECTRICAL CONDUIT
Allied's Electrical Conduit division is one of the leading producers of
steel electrical conduit in the United States. Electrical conduit is galvanized
steel tubing designed to contain current-carrying electrical wires both inside
and outside building structures. The conduit also serves as an electrical
ground, which ensures proper operation of circuit interrupters, and provides a
channel into which additional wires can be inserted as requirements change. The
division manufactures a full line of electrical conduit as well as metal framing
and other products.
The division's electrical conduit and related products are sold to wholesale
electrical distributors through Allied's distribution facilities by an internal
sales force and a network of commissioned sales agents. The division competes
for the sale of electrical products primarily with several other large United
States manufacturers. Competition in the electrical conduit industry is
primarily based upon price, quality, delivery and breadth of product line.
TYCO PRINTED CIRCUIT GROUP
Tyco Printed Circuit Group is one of the largest independent manufacturers
of complex multi-layered printed circuit boards and backplane assemblers in the
United States. Printed circuit boards are used in the electronics industry to
mount and interconnect components to create electronic systems. They are
categorized by the number of layers and can be single-sided, double-sided or
multi-layer. In general, single and double-sided boards are less advanced.
Multi-layer boards provide greater interconnection density while decreasing the
number of separate printed circuit boards which are required to accommodate
powerful and sophisticated components. Backplanes assemblies are comprised of
printed circuit boards, connectors and other electronic components, and serve as
an electrical and mechanical interconnect device.
The Printed Circuit Group manufactures double-sided and multi-layer boards,
including highly sophisticated precision tooled, custom laminated boards with
layer counts up to 68. The Printed Circuit Group also produces sophisticated
flexible-rigid circuit boards for use in commercial, aerospace and military
applications. The Printed Circuit Group's backplane facilities produce soldered,
press-fit and surface mount backplane assemblies. In addition, these facilities
also provide turnkey manufacturing services including full "box build" products.
Printed circuit boards and backplane products are manufactured on a job order
basis to the customers' design specifications. The majority of sales are derived
from high-density multi-layer boards.
The Printed Circuit Group markets its products mainly through a direct sales
force, and to a lesser extent, through a network of independent manufacturers'
representatives. Customers are generally original equipment manufacturers and
contract manufacturers in the communications, computer, aircraft,
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<PAGE>
military and other industrial and consumer electronics industries. Tyco competes
with several large independent and captive companies that manufacture printed
circuit board products primarily in the United States. Competition is on the
basis of quality, reliability, price and timeliness of delivery. Tyco believes
that fewer competitors manufacture the more complex, high-density double-sided
and multi-layer printed circuit board products.
DISPOSABLE AND SPECIALTY PRODUCTS
The principal divisions in the Disposable and Specialty Products group and
their businesses are:
<TABLE>
<CAPTION>
<S> <C>
TYCO HEALTHCARE GROUP -- manufactures and distributes medical supplies, disposable
medical products, personal absorbent products and other
products.
ADT AUTOMOTIVE -- the second largest provider of vehicle auction services in
the United States.
TYCO PLASTICS AND ADHESIVES -- manufactures polyethylene films and packaging, industrial and
consumer plastic products, molded plastic garment hangers,
laminated and coated products and adhesive products and
tapes.
</TABLE>
TYCO HEALTHCARE GROUP
Prior to the October 1998 acquisition of US Surgical, the Tyco Healthcare
Group was called Kendall International and was comprised of four business units:
Kendall Healthcare, Kendall International, Sherwood-Davis & Geck and Ludlow
Technical Products. The Tyco Healthcare Group is now comprised of three primary
units: The Kendall Company, which includes Kendall Healthcare, Kendall
International and Ludlow, Sherwood-Davis & Geck and the newly acquired US
Surgical. In each of its business units, Tyco Healthcare competes with numerous
companies, including a number of larger, well-established companies. Tyco
Healthcare relies on its reputation for quality and dependable service, together
with its low-cost manufacturing and innovative products, to compete in its
markets.
THE KENDALL COMPANY
The Kendall Company manufactures and markets worldwide a broad range of
wound care, needles, syringes, electrodes, specialized paper and film, vascular
therapy, urological care, incontinence care, anaesthetic care and other nursing
care products to hospitals and to alternate site healthcare customers. Its
Kendall Healthcare division, which operates throughout the United States and
Canada, is the industry leader in gauze products with its
Kerlix-Registered Trademark- and Curity-Registered Trademark- brand dressings.
Kendall Healthcare's other core product category consists of its vascular
therapy products, principally anti-embolism stockings, marketed under the
T.E.D.-Registered Trademark- brand name, sequential pneumatic compression
devices sold under the SCD-Registered Trademark- brand name and a venous plexus
foot pump. Kendall Healthcare pioneered the pneumatic compression form of
treatment and continues to be the dominant participant in the pneumatic
compression and elastic stocking segments of the vascular therapy market.
Kendall Healthcare is also an industry leader in the adult incontinence
market serving the acute care, long-term care and retail markets. It offers a
complete line of disposable adult briefs, underpads, baby diapers and other
related products.
Through Ludlow, The Kendall Company manufactures and sells a variety of
disposable medical products, specialized paper and film products. Ludlow's
products include medical electrodes and gels for monitoring and diagnostic tests
and hydrogel wound care products. These products are used primarily in critical
care, physical therapy and rehabilitative departments in hospitals. Ludlow also
produces
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<PAGE>
adhesive tapes used for business forms and in printing applications, high
quality facsimile paper and recording chart papers for medical and industrial
instrumentation.
The Kendall Company distributes its products in the United States and Canada
through its own sales force and through a network of more than 250 independent
distributors. The sales force is divided into five groups: vascular therapy
products, medical and surgical products, alternate site markets, Ludlow and
Confab, which markets incontinence and feminine hygiene products through food
and drug chains throughout North America.
The Kendall Company's Kendall International division is responsible for the
manufacturing, marketing, distribution and export of Kendall products worldwide.
Kendall International markets directly to hospitals and medical professionals,
as well as through independent distributors. Its operations are organized
primarily into three geographic regions: Europe, Latin America and the Far East,
although the mix of product lines offered varies from country to country.
SHERWOOD-DAVIS & GECK
The acquisition of Sherwood-Davis & Geck in February 1998 has made the Tyco
Healthcare Group one of the largest manufacturers of disposable medical products
in the world. The Sherwood-Davis unit manufactures and distributes medical and
surgical devices such as catheters, needles and syringes, sutures, thermometers
and other specialized disposable medical products. Its core brands of
Monject-Registered Trademark- syringes and Kangaroo-Registered Trademark-
feeding pumps are recognized throughout the industry. Sherwood-Davis & Geck
distributes its products worldwide through its own sales force and independent
distributors.
UNITED STATES SURGICAL CORPORATION
On October 1, 1998, Tyco completed its acquisition of US Surgical. US
Surgical, develops, manufactures and markets a line of surgical wound closure
products and other advanced surgical products to hospitals throughout the world.
Its products include surgical staplers, sutures, disposable laparoscopic
instrumentation and numerous other products in surgical and medical specialties
such as spine surgery, vascular and cardiovascular surgery, urology and
breastcare. Through its Valleylab division, US Surgical is a leading
manufacturer and marketer of electrosurgical and ultrasound surgical products.
ADT AUTOMOTIVE
ADT Automotive operates a network of 28 large modern auction centers in the
United States, providing an organized wholesale marketplace for the sale and
purchase of used vehicles. A substantial majority of the vehicles sold at ADT
Automotive auctions are passenger cars and light trucks. Other vehicles sold
consist of heavy trucks and industrial vehicles. Sales of vehicles from specific
market sources are held on a regularly scheduled basis and additional
specialized sales are scheduled as necessary. ADT Automotive operates almost
exclusively in the wholesale marketplace and, in general, the public is not
permitted to attend its auctions. It acts solely as an agent in auction
transactions and does not purchase vehicles for its own account.
The principal sources of vehicles for sale at auction are consignments by
new and used vehicle dealers, vehicle manufacturers, corporate owners of
vehicles such as fleet operators, rental companies, leasing companies, banks and
other financial institutions, manufacturers' credit subsidiaries and government
agencies. The vehicles consigned by dealers consist of vehicles of all types and
ages and include vehicles that have been traded in against new car sales.
Vehicles consigned by corporate and financial owners include both repossessed
and off-lease vehicles and, as a result, are normally in the range of one to
four years old. The principal purchasers of vehicles at auction are new and used
vehicle dealers and distributors.
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<PAGE>
In addition to the sale process, ADT Automotive provides a comprehensive
range of vehicle redistribution services including transportation,
reconditioning, title transfer assistance, vehicle repossession and fleet
management services. Vehicle reconditioning is carried out on-site and
principally consists of appearance reconditioning and paint and body work to
bring vehicles up to retail ready condition. ADT Automotive also performs more
extensive body work services including body panel painting and repair of minor
collision damage. In addition, ADT Automotive provides reconditioning services
for vehicles other than those going through the auction process, principally for
fleet owners and insurance companies.
ADT Automotive competes with two other significant auction chains and a
large number of independently owned local auctions which are members of the
National Auto Auction Association. Competition is based primarily on price in
relation to the quality and range of services offered to sellers and buyers of
vehicles and on ease of accessibility of auction locations.
TYCO PLASTICS AND ADHESIVES
Tyco Plastics and Adhesives consists of Armin Plastics, Carlisle Plastics,
A&E Products, Tyco Adhesives and Ludlow Coated Products.
ARMIN
Armin manufactures polyethylene film and packaging products in a wide range
of size, gauge, construction strength, stretch capacity, clarity and color. In
the process, Armin extrudes low density, high density and linear low density
polyethylene film from resin purchased in pellet form, incorporating such
additives as coloring, slip and anti-block chemicals. Armin's products include
plastic supermarket packaging, greenhouse sheeting, shipping covers and liners
and a variety of other packaging configurations for the aerospace, agricultural,
automotive, construction, cosmetics, electronics, food processing, healthcare,
pharmaceutical and shipping industries. Armin also manufactures a number of
other polyethylene products such as reusable plastic pallets, transformer pads
for electric utilities and a large variety of disposable gloves for the
cosmetic, medical, food handling and pharmaceutical industries. Armin generates
the majority of its sales through its own internal sales force and services more
than 6,000 customers in the United States.
Armin competes with a wide range of manufacturers, including some vertically
integrated companies and companies that manufacture polyethylene resins for
their own use. Armin competes in many market segments by emphasizing product
innovation, specialization and customer service.
CARLISLE
Carlisle is a leading producer of industrial and consumer plastic products,
including trash bags, flexible packaging and sheeting. Carlisle supplies plastic
trash bags to mass merchants, grocery chains, and institutional customers
primarily in North America. Carlisle manufactures Ruffies-Registered Trademark-,
a national brand consumer trash bag, for mass merchants and other retail stores.
Carlisle also provides heavy duty trash can liners for institutional customers,
such as food service distributors, janitorial supply houses, restaurants, hotels
and hospitals. In the consumer trash bag market, Carlisle competes primarily
with two nationally advertised brands. Carlisle has historically concentrated on
mass merchants as the primary market for its branded
Ruffies-Registered Trademark- trash bags, while the other major national brands
are marketed primarily through food retailers.
Film-Gard-Registered Trademark-, Carlisle's leading plastic sheeting
product, is sold to consumers and professional contractors through
do-it-yourself outlets, home improvement centers and hardware stores. A wide
range of Film-Gard-Registered Trademark- products are sold for various uses,
including painting, renovation, construction, landscaping and agriculture.
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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. 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 ADHESIVES
The Tyco Adhesives division, formerly known as Kendall-Polyken, manufactures
and markets specialty adhesive products and tapes for industrial applications,
including external corrosion protection tape products for oil, gas and water
pipelines. Other industrial applications include tapes used in the automotive
industry for wire harness wraps, sealing and other purposes, and tapes used in
the aerospace and heating, ventilation and air conditioning (HVAC) industries.
Tyco Adhesives also produces duct, foil, strapping, packaging and electrical
tapes and spray adhesives for industrial and consumer markets worldwide and
manufactures cloth and medical tapes for Kendall Healthcare and others. Tyco
Adhesive's Betham division develops and markets pressure sensitive adhesives and
coatings, principally for the automotive, medical and specialty markets.
Tyco Adhesives generally markets its pipeline products directly, working
with local manufacturers' representatives, international engineering and
construction companies and the owners and operators of pipeline transportation
facilities. Tyco Adhesives sells its other industrial products either directly
to major end users or through diverse distribution channels, depending upon the
industry being supplied.
LUDLOW COATED PRODUCTS
Ludlow Coated Products produces protective packaging and other materials
made of coated or laminated combinations of paper, polyethylene and foil. Coated
packaging materials provide barriers against grease, oil, light, heat, moisture,
oxygen and other contaminants. The division produces structural coated and
laminated products such as plastic coated kraft, linerboard and bleached boards
for rigid urethane insulation panels, automotive components and wallboard
panels. Other product applications include packaging for photographic film,
frozen foods, health care products, electrical and metallic components,
agricultural chemicals, cement and specialty resins.
Ludlow markets its laminated and coated products through its own sales force
and through independent manufacturers' representatives. Ludlow competes with
many large manufacturers of laminated and coated products on the basis of price,
service, marketing coverage and custom application engineering. There are
various specialized competitors in different markets.
FIRE AND SECURITY SERVICES
Tyco, through its subsidiaries, is the largest company in the world for the
design, manufacture, installation and service of fire detection, suppression and
sprinkler systems and is the world's largest provider of electronic security
services.
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FIRE PROTECTION CONTRACTING AND SERVICES
Operating under several trade names including Grinnell, Wormald, Mather &
Platt, Total Walther, O'Donnell Griffin and Tyco, Tyco designs, fabricates,
installs and services automatic fire sprinkler systems, fire alarm and detection
systems, special hazard suppression systems and security systems in buildings
and other installations.
Tyco's fire protection contracting and service business in North America
operates through a network of offices in the United States, Canada, Mexico,
Latin America and Puerto Rico. Tyco also operates worldwide through a network of
offices in the United Kingdom, continental Europe, Saudi Arabia, the United Arab
Emirates, Australia, New Zealand, Asia and South America.
Tyco installs fire protection systems in both new and existing structures.
Typically, the contracting businesses bid on contracts for fire protection
installation which are let by owners, architects, construction engineers and
mechanical or general contractors. In recent years, the business of retrofitting
existing buildings has grown as a result of legislation mandating the
installation of fire protection systems and also as a result of lower insurance
premiums available in respect of structures with automatic sprinkler systems.
The majority of the fire suppression systems installed by Tyco are
water-based. However, Tyco is also the world's leading provider of custom
designed special hazard fire protection systems which incorporate various
specialized non-water agents such as foams, dry chemicals and gases. Systems
using agents other than water are especially suited to fire protection in
certain manufacturing, power generation, petrochemical, offshore oil
exploration, transportation, telecommunications, mining and marine applications.
Tyco holds exclusive manufacturing and distribution rights in several regions of
the world for INERGEN-Registered Trademark- fire suppression products.
INERGEN-Registered Trademark- is an alternative to the ozone depleting agent
known as halon and consists of a mixture of three inert gases designed to
effectively extinguish fires without polluting the environment or damaging
costly equipment.
In Australia, New Zealand and Asia, Tyco also installs electrical wire and
related electrical equipment and provides specialized electrical contracting
services, including applications for railroad and bridge construction, primarily
through its O'Donnell Griffin division.
Substantially all of the mechanical components, and, in North America, a
high proportion of the pipe used in the fire protection systems installed by
Tyco are manufactured by Tyco. Tyco also has fabrication plants worldwide that
cut, thread and weld pipe, which is then shipped with other prefabricated
components to job sites for installation. Tyco has developed its own
computer-aided design technology that reduces the time required to design
systems for specific applications and coordinates the fabrication and delivery
of system components.
Tyco's fire protection contracting business employs both non-union and union
employees in North America, Europe and Asia-Pacific. Many of the union employees
are employed on an hourly basis for particular jobs. In North America, the
largest number of union employees is represented by a number of local unions
affiliated with the United Association of Plumbers and Pipefitters. In April
1994, following lengthy negotiations, contracts between Tyco's Grinnell
Corporation subsidiary and a number of locals of the United Association were not
renewed. Employees in those locations, representing 64 percent of those
employees represented by the United Association unions, went on strike. Grinnell
has continued to operate with former union members who have crossed over and
with replacement workers. The labor action has not had, and is not expected to
have, any material adverse effect on Tyco's business or results of operations.
Generally, competition in the fire protection business varies by geographic
location. In North America, Tyco competes with hundreds of smaller contractors
on a regional or local basis for the installation of fire suppression and fire
alarm and detection systems. Many of the regional and local competitors employ
non-union labor. In Europe, Tyco competes with many regional or local
contractors
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on a country by country basis. In Australia, New Zealand and Asia, Tyco competes
with a few large fire protection contractors as well as with many smaller
regional or local companies. Tyco competes for fire protection contracts
primarily on the basis of price, service and quality.
ELECTRONIC SECURITY SERVICES
Tyco provides electronic security services principally under the ADT trade
name and also under other trade names including Modern, Thorn Security, Holmes
Protection, CIPE, Zettler, Sonitrol, Securesys, Securiville and Armourguard
Security. Services are provided in the United States, Canada, the United
Kingdom, Spain, France, Belgium, Greece, The Netherlands, Germany, The Republic
of Ireland, Malaysia, Singapore, Hong Kong, New Zealand and Australia.
Electronically monitored security systems involve the installation and use
on a customer's premises of devices designed to detect or react to various
occurrences or conditions, such as intrusion, movement, fire, smoke, flooding or
other hazards. These systems may also monitor environmental conditions, such as
temperature or humidity variations, and industrial operations, such as water,
gas or steam pressure and process flow controls. 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. Tyco also provides card
and keypad activated access control systems and close circuit television
systems.
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 usually provides support and maintenance through service contracts,
which 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
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several national companies and several thousand regional and local companies in
the United Kingdom, continental Europe, Asia, New Zealand and Australia.
Competition is based primarily on price in relation to quality of service. Tyco
believes that the quality of its services is higher than that of many of its
competitors and, therefore, Tyco's prices may be higher than those charged by
its competitors.
MANUFACTURING
Tyco manufactures most of the components which are used in its own fire
protection contracting business, as well as a variety of products for sale to
other fire protection contractors. In North America, Tyco manufactures pipe and
pipe fittings, fire hydrants, sprinkler heads and substantially all of the
mechanical sprinkler components used in automatic fire suppression systems. In
the United Kingdom, France, Germany and the Asia-Pacific region, Tyco
manufactures and sells sprinkler heads, specialty valves, fire doors and
electronic panels for use in fire detection systems. In Mexico, Tyco
manufactures fire extinguishers, fire hose and related equipment.
Tyco's Ansul subsidiary manufactures and sells various lines of dry
chemical, liquid and gaseous portable fire extinguishers and related agents for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry, confined industrial spaces and commercial spaces housing electronic
and other delicate equipment. Ansul also manufactures spill control products
designed to absorb, neutralize and solidify spills of various hazardous
materials.
Fire protection products are sold through Tyco's flow control products
distribution network, discussed under "Flow Control Products" below, and through
independent distributors.
FLOW CONTROL PRODUCTS
Tyco, through its subsidiaries, manufactures and distributes flow control
products in North America, Latin America, Europe, Asia and the Pacific region.
Flow control products include pipe, fittings, valves, meters and related
products which are used to transport, control and measure the flow of liquids
and gases. The principal subsidiaries in the Flow Control Products group are
Grinnell, Allied Tube & Conduit, Mueller Co. and Keystone. The group also
includes a number of other specialized manufacturers of valves, fittings and
couplings.
MANUFACTURING
Tyco manufactures and distributes a wide range of flow control products,
including pipe and pipe fittings, tubing, valves, meters, couplings, pipe
hangers, strut and related components. These products are used in plumbing,
heating, ventilation and air conditioning (HVAC) systems, mechanical
contracting, power generation, manufacture of food and beverage products, water
and gas utilities, wastewater treatment, oil and gas exploration, pulp and
paper, petrochemical and numerous other industrial applications. Tyco also
manufactures certain related products such as steel tubing, custom iron
castings, malleable iron pipe fittings and fencing materials.
Allied is the leading North American manufacturer of pipe and other tubular
products. Allied manufactures a full line of steel pipe for the fire protection
and construction industries and for commercial, residential and institutional
markets. Its mechanical tube division offers steel tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications.
Allied's fence division is a leader in the manufacture of products for the
residential, industrial and commercial fence markets. Allied also manufactures
metal framing systems used in the construction, industrial and original
equipment manufacturer markets. In November 1996, Tyco acquired Unistrut Europe,
a manufacturer and distributor of metal framing, cable ladder and safety systems
and, in January 1997, it acquired
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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 operates under a variety of trade names
including Grinnell, Mueller, Hersey, Keystone, Anderson-Greenwood, Yarway,
Crosby Valve, Gimpel, Henry Pratt Co., James Jones Company, Edward Barber & Co.,
Neotecha, Belgicast, Hindle Cockburns, Charles Winn (Valves) Ltd., Sempell,
Smith Valve, Anvil, Canvil and others. The group supplies a wide range of valves
and flow control devices to the chemical, power, food and beverage, oil and gas,
processing, water utility, wastewater treatment, power generation and other
industries. Products are manufactured and assembled at facilities in the United
States, Canada, The United Kingdom, France, Italy, Spain, Germany, The
Netherlands, Switzerland, South Korea, China, India, Malaysia, Australia, New
Zealand, Mexico, Brazil and Argentina.
DISTRIBUTION
Tyco's Grinnell subsidiary sells flow control and fire protection products
in North America through a distribution network of five regional distribution
centers, strategically located in Georgia, Illinois, California, Pennsylvania
and Texas, which support local branches' product needs and ship directly to
customers. Each center stocks more than 8,500 products. Tyco's worldwide flow
control operations stock and sell products through distribution centers in
Europe, Australia, New Zealand, the Middle East and Asia. In Europe, Tyco
distributes fire protection products, industrial valves and products for
mechanical markets through warehouses located in The Netherlands, the United
Kingdom, Germany, France, Italy, Spain and Scandinavia. Products are sold
principally to fire protection contractors and in some instances to mechanical
and industrial contractors and original equipment manufacturers. In Asia, the
Pacific region and the Middle East, Tyco distributes fire protection and flow
control products through warehouses located in Australia, New Zealand, Dubai and
Singapore. Products are sold directly to fire protection and other contractors
as well as to mechanical and industrial contractors and independent
distributors. While distribution patterns vary, most centers stock an extensive
line of valves, fittings, pipe and other products for fire protection systems,
components for HVAC installations and water and gas distribution and specialized
valves and piping for the chemical, food, power and beverage processing
industries.
Grinnell's North American distribution network competes with independent
manufacturers' representatives and other manufacturers and, to a lesser extent,
with local and regional supply houses all of which carry lines from other United
States and non-United States manufacturers. Grinnell competes on the basis of
price, the breadth of its product line, service and quality. Grinnell competes
for the sale of gray iron pipe fittings, malleable and ductile iron fittings and
other flow control products and fire protection sprinklers and devices
principally with other United States producers as well as with non-United States
manufacturers of fittings. Grinnell uses an internal sales force for the sale of
certain other iron castings sold direct to original equipment manufacturers and
other end users.
Allied competes for the sale of steel pipe, which is sold through Grinnell's
distribution network, with pipe from other United States and non-United States
producers. Competition for the sale of pipe
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is based on price, service and breadth of product line. Fence and other
specialized industrial tubing is sold to wholesalers, original equipment
manufacturers and other distributors. Competition for the sale of fence products
is principally from national and regional United States producers and to a
lesser extent from non-United States companies on the basis of price, service
and distribution. Allied competes with many small regional manufacturers for
sales of specialized industrial tubing on the basis of price and breadth of
product line.
Mueller's water and natural gas distribution flow control products are sold
through independent distributors, and, to a lesser extent, directly to
utilities, municipalities and gas distribution companies. Certain of its gas
distribution products are also sold through the Grinnell distribution network.
Mueller competes for the sale of these products on the basis of product quality,
service, price, breadth of product line and conformity with municipal codes and
other engineering standards. Muller competes with several other manufacturers in
the United States and Canada for the sale of iron and brass flow control devices
for water and natural gas distribution systems.
Keystone's products are sold both in the United States and internationally.
Keystone has numerous competitors in these markets, which, in some instances,
are divisions of larger corporations and, in some instances, are companies with
limited product lines. Advanced technology, global presence, experienced
personnel and price are the primary factors in competition.
ENVIRONMENTAL SERVICES
Through its Earth Technology Corporation subsidiary, Tyco provides a broad
range of environmental, consulting and engineering services. Earth Tech's
principal services consist of full-spectrum environmental and hazardous waste
management services. These include infrastructure design and construction
services. They also include facilities engineering and construction management
services for institutional, civic, commercial and industrial clients, and
contract operations and management services for water and wastewater treatment
facilities operated by municipal and industrial clients.
Earth Tech has a network of 40 offices located throughout North America. It
competes with a number of national, regional and local companies on the basis of
price and breadth and quality of services.
In September 1998, Tyco acquired Rust Environmental and Infrastructure, Inc.
from Waste Management, Inc. The operations of Rust Environmental are in the
process of being combined with Earth Tech.
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BUSINESS OF AMP
AMP designs, manufactures and markets a broad range of electronic,
electrical and electro-optic connection devices and an expanding number of
interconnection systems and connector-intensive assemblies. AMP's products have
potential uses wherever an electronic, electrical, computer or
telecommunications system is involved, and are becoming increasingly critical as
system speeds increase and devices are miniaturized. AMP's customers are as
diverse as the products themselves, and include original equipment manufacturers
and their subcontractors, utilities, government agencies, distributors,
value-added resellers, and customers who install, maintain and repair equipment.
The industries covered by these accounts include automotive, power technology,
personal computer, communications, and consumer/industrial. AMP markets its
products worldwide primarily through its own direct sales force, but also
through distributors and value-added resellers to respond to customer buying
preferences. AMP has established facilities located in 53 countries to serve
customers in the current and emerging markets throughout the world. AMP is
positioning itself to be a market-driven, "GLOBE-ABLE" organization.
AMP was incorporated in 1941 as a New Jersey corporation under the name
Aircraft-Marine Products, Inc. At that time the focus of AMP's operations was
the terminal business. In 1952 AMP established its first international
operations, located in Canada and France. In 1956 AMP changed its name to AMP
Incorporated and became publicly owned. During the 1960s and 1970s AMP expanded
its focus to varying types of connectors, including those required in the
computer industry. AMP reincorporated in Pennsylvania in 1989. The world leader
in electronic/electrical connection devices and associated application tools and
machines, over the past five years AMP has been diversifying into total
interconnection systems, related components, and connector-intensive assemblies.
MARKETS
AMP serves over 90,000 customers located in over 143 countries, covering
many diverse markets.The business in which AMP is engaged is highly competitive.
The number of competitors is estimated at over 1,600 worldwide, and AMP faces
aggressive direct and indirect competition for all its products. The markets
served by AMP have generally been growing as a whole in spite of increasing
price erosion. Most of AMP's products involve technical competence in their
development and manufacture. Generally speaking, AMP competes primarily by
offering high-quality, technical products and associated application tooling,
with an emphasis on product performance, timely delivery and service. AMP has
experienced price pressures in its markets, particularly in the personal
computer and cellular/ mobile phone markets. AMP's broad range of products,
worldwide sales and marketing presence, and service innovations serve to
differentiate AMP from its competitors and position AMP to become a supplier of
choice to many customers as they reduce their supplier lists and seek global
sourcing contracts.
PRODUCTS
AMP manufactures and sells more than 800,000 parts in over 450 global
product lines, including terminals; fiber-optic, printed circuit board and cable
connectors and assemblies; connectorized printed circuit boards; cable and
cabling systems; and related application tools and machines. Nearly 77% of AMP's
business is in terminal and connector competency that encompasses
electronic/electrical connection, switching and programming devices and
associated application tools and machines. Included within this competency is a
great variety of types and sizes. These product families generally involve the
same or very similar basic technology, materials, production processes and
marketing approaches. The common manufacturing capabilities, which have become
core competencies of AMP, include connectivity technology, high speed precision
metal stamping, precision metal plating, plastic molding and automated assembly
of small metal and plastic parts. AMP sells some of its products in strip form
or on reels which are applied by customers with special application machines and
special tools. The balance
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of products and competencies include AMP's value-added and wireless businesses
and pre-assembled devices and other products that do not require application
tools or machines.
Application tooling has been and remains an integral part of AMP's sales
strategy and growth for many of AMP's products. AMP has provided thousands of
application machines to customers on either a lease or purchase basis, and has
sold millions of manual and power tools to customers, to apply AMP's products to
wires, cables, printed circuit boards and flexible circuitry. In the past decade
AMP has introduced more than 160 new types of machines and tools, ranging from
hand tools for maintenance and repair to computer-controlled machines that make
thousands of connections per hour and continuously monitor the quality of the
connections as they are being made. AMP has always marketed products on the
basis of total installed cost--not product price alone--and AMP's concentration
on providing fast and reliable application methods should give AMP an advantage
as concerns for productivity, quality and system performance continue to rise.
Hundreds of field service engineers throughout the world install this
applicating equipment, train customer personnel to operate, maintain and service
it, and provide emergency service.
In addition to the total installed cost approach to marketing product, a
fundamental concept of AMP marketing is to seek early involvement in customer
design activities. AMP has enhanced its capabilities in this approach in recent
years by a unique consulting service through which AMP can computer simulate
interconnection systems, thus reducing the time and costs associated with the
design phase.
While AMP seeks to widen its leadership in the terminal and connector
product area, it is also steadily diversifying into total interconnection
systems and higher value assemblies. This is increasing the potential markets
being addressed by AMP from approximately $28 billion to around $78 billion.
Part of this new breadth of potential business will come from cables,
fiber-optic and electro-optical networking, and flexible circuitry based
connectors that expand AMP's connector and interconnection technology. Another
source for expansion is interconnection solutions, such as cable, board and
panel assemblies, that are logically related to those connector and
interconnection competencies. The final thrust toward new opportunities for
growth addresses needs for home automation, microwave technologies, wireless
communication, and networking/premise wiring hardware and related services.
AMP is accomplishing this growth by new product development as well as by
numerous small, strategic acquisitions, minority interest investments, joint
ventures and other strategic alliances. Acquisitions provide technologies that
are key to entering or enhancing AMP's participation in the respective markets
and will form a cornerstone for AMP's expansion of its potential business. New
products, representing products and product extensions introduced during the
last five years, now comprise over 25% of current sales. Much of this growth,
whether by new product development or acquisitions and alliances, focuses on the
fastest growing sectors and major trends in the electronic and electrical
markets--such as miniaturization, high speed circuitry, networking, wireless
transmission, electro-optics, conversion to digital, software integration with
hardware, and the convergence of computer and communications technologies.
OPERATIONS
AMP is a global marketing, sales, engineering and manufacturing
interconnection systems company with principal offices located in Pennsylvania.
AMP maintains a strong local presence in the principal countries in which it
operates through its traditional geographic organizations: the Americas;
Asia/Pacific; and Europe/Middle East/Africa. The geographic organizations manage
the daily activities of terminal and connector manufacturing and regional and
local sales and customer logistics.
Strategic marketing and global account sales efforts are performed centrally
for the automotive, communications, personal computer and consumer electronics
industry markets. Strategic marketing for
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the end user, industrial machinery and instrumentation, appliance and aerospace
markets is controlled centrally and executed, along with the related sales
activities, by geographic sales organizations.
Manufacturing responsibilities for the fiber, optoelectronics and wireless
products are managed by the global industry business organization. Manufacturing
responsibilities for terminal and connector and cable products are managed
centrally by the global operations organization. AMP has been aggressively
locating manufacturing and sales operations where customers' operations and
local market opportunities coincide to make it a positive investment climate.
Since 1990, AMP has either finalized plans for or actually started sales or
manufacturing operations in India, Chile, China, Colombia, Greece, Hungary, the
Philippines, Thailand, The Czech Republic, Poland, Turkey, Ireland, Israel,
Russia, South Africa and Slovenia. During this period, marketing activities have
been extended into Indonesia, Vietnam, Pakistan, Croatia, Eastern Europe, Egypt
and the Middle East.
PRODUCT DEVELOPMENT
AMP is committed to an ongoing program of new product development and a
continual expansion of its technical capabilities. This broadening of products
and capabilities is made possible through both internal development efforts and
external strategic relationships. Such external relationships include
acquisitions, minority equity investment positions, joint ventures, alliances,
research contracts, teaming arrangements, licensing and the like with dozens of
customers, suppliers, consortiums, universities and research institutes. In
recent years an advanced development center has been established in Europe in
addition to those already existing in the U.S. The global technology office
works closely with the global business units and competencies and unifies AMP's
technology resources, including over 6,000 engineers, scientists and technicians
and support personnel.
For additional information regarding the business of AMP, including other
information on legal proceedings, refer to AMP's Form 10-K and the other filings
of AMP with the SEC incorporated by reference. See "Where to Find More
Information" on page i.
PROFIT IMPROVEMENT PLAN
AMP's profit improvement plan, the first elements of which were announced in
June 1998, reflects AMP's commitment to improve significantly its operating
margins and financial performance. In particular, AMP expects the profit
improvement plan to result in the elimination of costs and expenses of more than
$350 million per year beginning in the year 2000 and generate an operating
margin of at least 13.5% in 1999 and an operating margin of at least 16.5% in
the year 2000. Following the merger, shareholders of Tyco, including AMP
shareholders at the time of the merger, should benefit from implementation of
the profit improvement plan.
Key elements of the profit improvement plan include:
- REDUCING COSTS THROUGH REDUCTIONS IN SUPPORT STAFF AND SUPPORT FUNCTIONS
AMP has announced that it will reduce its support staff on a net basis
(gross reductions less new hires) by at least 3,500 worldwide through a
combination of early retirement, attrition and layoffs. As part of this
program, AMP will outsource certain support activities to allow AMP to
focus resources on core businesses and provide flexibility to respond to
fluctuations in product demand. As of October 1, 1998, AMP has exceeded
its objectives and identified in excess of 3,800 support staff reductions
worldwide. Approximately 1,500 of the support staff reductions are from
international subsidiaries. In addition, AMP has reduced the number of its
temporary and contract employees.
- RESHAPING AMP'S MANUFACTURING INTO A "GLOBAL MANUFACTURING COMPETENCY"
THROUGH PLANT CLOSINGS, CONSOLIDATIONS AND OTHER ACTIVITIES
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The streamlining and consolidation of the Terminal and Connector
operation, which represents the majority of AMP's sales, have resulted in
the closing of five plants in 1998. Additional sites have been announced
for consolidation and/or closing, including AMP's manufacturing facilities
in Harlow, Great Britain and in Hsin-Chu, Taiwan. Additionally, AMP is
stepping up activities to support the fast growing marketplace outside the
United States by shifting production closer to customers, thereby reducing
transportation and other costs, and relying on simpler, manual operations
in each region for high-volume, quick turnaround orders.
During the fourth quarter of 1998, AMP recorded pre-tax restructuring
charges of $189.6 million and other one-time charges of $38.4 million to
complete the implementation of its profit improvement plan.
- SIMPLIFYING AMP'S OPERATING STRUCTURE AND PROVIDING FOR GREATER
ACCOUNTABILITY
In August 1998, Robert Ripp was appointed Chairman and CEO of AMP with
overall responsibility for implementing the profit improvement plan.
Direct reports have been cut from 22 to 7, and each of a limited number of
executives has been charged with the responsibility of achieving a
specified portion of the expected cost savings.
- AMP'S FOCUS ON CUSTOMER SERVICE AND PRICING POLICIES TO ENHANCE ITS
COMPETITIVENESS IN THE MARKETPLACE AND RESPONSIVENESS TO CUSTOMER DEMANDS
AMP has launched new customer-focused programs to make the ordering,
pricing and delivery systems simpler and more responsive to customers. AMP
will replicate these programs, which have begun in the United States, in
other regions of the world. These include 24-hour customer service and
shipment on more than 10,000 widely used part numbers, simplified pricing
and a larger sales force to improve account coverage and presence at
customer facilities.
The profit improvement plan is designed to provide AMP with a more
simplified, results-oriented structure focused on enhancing performance and
creating value. AMP is committed to accelerating the implementation of, and
enhancing the steps being taken in connection with, the profit improvement plan.
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DESCRIPTION OF SHARE CAPITAL OF TYCO
The summary of the terms of the share capital of Tyco set forth below is not
complete. For a full description of these terms, shareholders must refer to
Tyco's Memorandum of Association and the Tyco Bye-Laws, which are incorporated
by reference in this document. Copies of the Memorandum and Bye-Laws will be
sent to AMP and Tyco shareholders upon request. See "Where To Find More
Information" on page i.
AUTHORIZED SHARE CAPITAL
Tyco's authorized share capital consists of 1,503,750,000 Tyco common shares
and 125,000,000 preference shares. 15,000,000 preference shares have been
designated as Series A Preference Shares and are reserved for issue upon
exercise of rights under Tyco's Shareholder Rights Plan. As of January 22, 1999,
there were 650,157,016 Tyco common shares outstanding and no preference shares
outstanding. See "Tyco Capital Increase Proposal" on page 102 for a discussion
of the proposal to increase Tyco's authorized share capital.
TYCO COMMON SHARES
DIVIDENDS.
The Tyco Board may declare dividends out of profits of Tyco available for
that purpose as long as there are no reasonable grounds for believing that Tyco
is, or after such dividend would be, unable to pay its liabilities as they
become due or if the realizable value of Tyco's assets would thereby be less
than the aggregate of its liabilities and its issued share capital and share
premium accounts. Subject to such special rights as may be attached to any other
shares in Tyco, all dividends are payable according to the amounts paid or
credited as paid on Tyco common shares. Dividends are normally payable in U.S.
dollars, but holders with a registered address in the United Kingdom and other
countries outside the United States may receive payment in another currency. Any
dividend which is unclaimed may be invested or otherwise made use of by the Tyco
Board and after a period of 12 years is forfeited and reverts to Tyco.
VOTING RIGHTS.
At any general meeting of Tyco, votes may be given in person or by proxy and
each holder of Tyco common shares is entitled, on a show of hands, to one vote
and, on a poll, to one vote for each Tyco common share held by him. The Tyco
Bye-Laws require that any proxy must be a shareholder of Tyco. Under the Tyco
Bye-Laws, two holders of Tyco common shares present, in person or by proxy,
constitute a quorum at a general meeting.
LIQUIDATION.
On a liquidation of Tyco, holders of Tyco common shares are entitled to
receive any assets remaining after the payment of Tyco's debts and the expenses
of the liquidation, subject to such special rights as may be attached to any
other class of shares.
SUSPENSION OF RIGHTS.
In certain circumstances, the rights of a shareholder to vote and to receive
any payment or income or capital in respect of a Tyco common share may be
suspended. Those circumstances include failure to provide information about
ownership of and other interests in Tyco common shares, if so required in
accordance with the Tyco Bye-Laws. See "Comparison of Shareholder Rights"
beginning on page 108.
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<PAGE>
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 may be varied with the consent in
writing of the holders of three-fourths of the issued shares of that class or
with the sanction of a resolution passed at a separate general meeting of the
holders of the shares of that class by a majority of three-fourths of such
holders voting in person or by proxy.
TRANSFERS.
A Tyco common share may be transferred in any manner the Tyco Board may
approve. The Tyco Board may require the transfer to be by an instrument signed
by the transferor and, in the case of a partly paid share, also by the
transferee. The instrument must be in writing in the usual common form or in any
other form which the Tyco Board may approve and must be lodged at the office of
the registrar of Tyco for registration. The Tyco Board may decline to register
any transfer of shares on which Tyco has a lien, any transfer of shares not
fully paid up to a transferee of whom they do not approve and any transfer of
shares by a transferor or to a transferee whose voting rights have been
suspended.
PREEMPTIVE RIGHTS.
Tyco common shares do not have preemptive rights.
GENERAL.
The Tyco common shares to be issued pursuant to the merger will be duly
authorized, validly issued, fully paid and non-assessable. All such shares will
be in registered form.
REGISTRAR AND TRANSFER AGENT.
AS&K Services Limited is Tyco's Registrar. ChaseMellon Shareholder Services
LLC is the transfer agent for Tyco common shares.
TYCO PREFERENCE SHARES
Under the Tyco Bye-Laws, the Tyco Board, in its sole discretion, may
designate, allot and issue one or more series of preference shares from the
authorized and unissued preference shares. Subject to limitations imposed by
law, Tyco's Memorandum of Association or Bye-Laws, the Tyco Board is empowered
to determine the designation of, and the number of shares constituting, each
series of preference shares, the dividend rate for each series, the terms and
conditions of any voting and conversion rights for each series, the amounts
payable on each series on redemption or return of capital and the preference and
relative rights among each series of preference shares. At present, 15,000,000
preference shares have been designated as Series A Preference Shares and are
reserved for issue upon exercise of the Rights under the Tyco Shareholder Rights
Plan. For a description of the Shareholder Rights Plan, see "Comparison of
Shareholder Rights--Shareholder Rights Plan" on page 119.
STOCK EXCHANGE LISTING
The Tyco common shares are listed on the NYSE, the London Stock Exchange and
the Bermuda Stock Exchange. It is a condition to the merger that the Tyco common
shares to be delivered in connection with the merger are authorized for listing
on the NYSE at or prior to the effective time of the merger, subject to official
notice of issuance. Application will be made in due course to list such shares
on the London Stock Exchange and the Bermuda Stock Exchange.
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<PAGE>
EXPANSION OF TYCO BOARD AND ELECTION OF TYCO DIRECTOR PROPOSAL
The merger agreement provides that Tyco shareholders will be asked at the
Tyco special general meeting to vote to increase the number of directors on the
Tyco Board from eleven to twelve and elect Robert Ripp as a director of Tyco
effective upon consummation of the merger. The merger is not conditioned on this
proposal being approved.
Unless otherwise specified in the form of proxy, the persons named in the
form of proxy will vote the shares represented by each properly executed form of
proxy to increase the size of the Tyco Board from 11 to 12 and to elect Robert
Ripp as a director of Tyco, to serve until the next annual general meeting of
Tyco. Mr. Ripp has agreed to stand for election and to serve as a director if
elected.
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE FOR THE
EXPANSION OF THE TYCO BOARD AND THE ELECTION OF ROBERT RIPP AS A DIRECTOR.
INFORMATION CONCERNING NOMINEE
Robert Ripp is 57 years of age and is currently a director of AMP. Mr. Ripp
has been Chairman and Chief Executive Officer of AMP since August 1998, after
serving as Executive Vice President, Global Businesses since January 1998. Mr.
Ripp was Corporate Vice President and Chief Financial Officer of AMP from
January 1995 to January 1998, after serving as Corporate Vice President, Finance
since August 1994. Prior to this, Mr. Ripp held various positions at IBM
Corporation from 1964 to 1993. He is also a director of ACE Limited, an
insurance company.
TYCO CAPITAL INCREASE PROPOSAL
At the Tyco special general meeting, Tyco shareholders will be asked to
approve an increase in the authorized share capital of Tyco to US$625,000,000 by
creating an additional 996,250,000 Tyco common shares of the nominal value of
US$0.20 each, thus increasing the number of authorized Tyco common shares from
1,503,750,000 to 2,500,000,000, to authorize the issue or other disposal by the
Tyco Board of such shares and to amend consequentially the Bye-Laws of Tyco. The
Tyco capital increase proposal is conditioned on the consummation of the merger.
The merger is not conditioned on approval for the Tyco capital increase
proposal, and Tyco has sufficient authorized but unissued shares for delivery in
connection with the merger even if the Tyco capital increase proposal is not
approved.
The Tyco capital increase proposal contemplates the creation of an
additional 996,250,000 Tyco common shares. The Tyco Board believes that as, a
result of the large number of shares to be issued in connection with the merger,
it is desirable to have available additional authorized Tyco common shares for
future stock dividends, employee benefit plans, financings, acquisitions and
other corporate purposes. The Tyco Board would have the discretion to issue the
additional Tyco common shares from time to time for any corporate purpose
without further action by shareholders, except as may be required by stock
exchange rules, and without first offering such shares to shareholders. Tyco has
no present plan to issue the new shares to be authorized.
A schedule to Tyco's Bye-Laws currently sets forth particulars of Tyco's
authorized share capital. As part of the capital increase proposal this schedule
will be revised to reflect the increase in common shares, as set forth above.
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE FOR THE
TYCO CAPITAL INCREASE PROPOSAL.
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<PAGE>
TYCO LTIP SHARE INCREASE PROPOSAL
At the Tyco special general meeting, Tyco shareholders will also be asked to
approve an increase in the number of Tyco common shares in respect of which
grants may be made under the Tyco International Ltd. Long Term Incentive Plan
from 44,000,000 to 70,000,000. Presently, only 2,259,734 shares remain available
for grant under the plan. Tyco believes that the anticipated increase in the
number of employees who may be eligible for grants under the plan as a result of
the merger and other recent acquisitions makes it advisable to increase the
number of Tyco common shares in respect of which awards may be made under the
plan. If the merger does not occur, the increase will not become effective.
The following summary of the plan assumes that the proposed increase in the
shares under the plan becomes effective. The summary is qualified in its
entirety by reference to the full text of the plan, a copy of which is attached
as Annex E to this document.
GENERAL.
The plan provides for the grant of options, stock appreciation rights and
other stock-based awards to officers, key employees and directors of Tyco and
its subsidiaries. The plan is a discretionary plan, and, accordingly, it is not
possible to presently determine the amount or form of any award which will be
available for grant to any individual during the term of the plan. The maximum
number of shares in respect of all awards which may be granted under the plan
during its term is 70,000,000 million shares. Options granted by companies
acquired by Tyco or its subsidiaries and assumed by Tyco may be administered
under the plan but do not count toward the total number of Tyco common shares in
respect of which grants may be made under the plan.
The maximum number of Tyco common shares available for awards under the plan
may be adjusted in the event of certain capital changes. Shares related to
grants that are forfeited, terminated or cancelled become eligible for re-grant
under the plan. No awards may be issued under the plan after June 30, 2007. The
maximum number of Tyco common shares in respect of which awards may be made
under the plan to any individual in a single year is six million shares.
The following chart provides certain information as of December 31, 1998
with respect to the number of outstanding Tyco common share awards issued and
the number of shares available for award under the plan.
<TABLE>
<CAPTION>
Number of outstanding stock options under the
plan, not including stock options assumed
by Tyco from acquired companies............ 23,432,367
<S> <C>
Number of Tyco common shares available for
award under the plan, assuming approval of
the increase proposal...................... 28,259,734
Number of Tyco stock options assumed by Tyco
from acquired companies and administered
under the plan............................. 15,907,036
Estimated number of stock options to be
assumed by Tyco from AMP upon consummation
of the merger and administered under the
plan....................................... 6,196,643
Estimated total number of Tyco common shares
subject to stock options under the plan
upon consummation of the merger............ 45,536,046
</TABLE>
103
<PAGE>
The estimated total number of Tyco common shares that will be issuable
pursuant to outstanding stock options under the plan following the merger will
represent approximately 5.3 percent of the Tyco common shares that will be
outstanding following the merger.
The numbers above do not include 2,712,547 Tyco common shares in respect of
awards which have been granted under the Tyco International Ltd. Long Term
Incentive Plan II or 22,356,153 Tyco common shares in respect of awards which
are available for grant under this second long term incentive plan. The terms of
the second plan are substantially similar to the terms of the original plan,
except that it does not provide for incentive stock options and executive
officers and directors are not eligible to participate in such plan. Shareholder
approval of grants under the second plan is not required under NYSE rules. Tyco
may determine to administer some or all of the AMP stock options assumed as a
result of the merger under the second plan.
PLAN ADMINISTRATION.
The plan is administered by the Compensation Committee of the Tyco Board.
Each member of the Tyco Compensation Committee is a "non-employee director,"
within the meaning of Rule 16b-3 promulgated under the Exchange Act, to the
extent necessary to comply with that Rule. Under the terms of the plan, the Tyco
Compensation Committee in its sole discretion may grant awards in such amounts
and in such of the forms permitted by the plan as it deems appropriate. The
permissible forms of awards under the plan are:
- stock options, both incentive stock options and other stock options;
- stock appreciation rights,
- performance awards;
- dividend equivalent rights; and
- other stock-based grants.
The material terms and features of the various forms of awards are set forth
below.
INCENTIVE STOCK OPTIONS.
These are stock options that are granted pursuant to the restrictions of
Section 422 of the U.S. Internal Revenue Code. Generally, incentive stock
options may not be exercised more than ten years after the date they are granted
and may not have an option price less than 100% of the fair market value of a
Tyco common share on the date they are granted. Payment of the option price may
be made in cash, Tyco common shares, other property or any combination thereof,
as determined by the Tyco Compensation Committee.
OTHER STOCK OPTIONS.
These are options to purchase Tyco common shares under terms other than
those applicable to incentive stock options. Such options shall have such terms
and conditions as are established by the Tyco Compensation Committee, except
that the exercise price for such options generally may not be less than the fair
market value of a Tyco common share on the date of grant. If the award requires
that the option be paid for by the recipient, or if a discounted exercise price
is expressly granted in lieu of a reasonable amount of salary or bonus, the
exercise price may be lower than the fair market value of a Tyco common share on
the date of grant, but may in no event be less than 85% of such fair market
value. Payment of the option price may be made in cash, Tyco common shares or
any combination thereof, as determined by the Tyco Compensation Committee.
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STOCK APPRECIATION RIGHTS.
These are rights to receive an amount equal to the appreciation of Tyco
common shares over a grant price established at the time of award. The grant
price generally may not be less than the fair market value of a Tyco common
share on the date of grant, except that if the award requires that the stock
appreciation right be paid for by the recipient, or if a discounted grant price
is expressly granted in lieu of a reasonable amount of salary or bonus, the
grant price may be established at not less than 85% of the fair market value of
a Tyco common share on the date of grant. Stock appreciation rights shall have
such other terms and conditions as are established by the Tyco Compensation
Committee, may be granted in tandem with options or separately and may be
terminated by the Tyco Compensation Committee.
PERFORMANCE AWARDS.
These are rights to receive amounts at a future date based upon the Tyco's
performance during the period between the date of grant and such future date.
Performance criteria with respect to which awards may be issued under the plan
include stock price, market share, sales, earnings, earnings per share, earnings
before income taxes, cash flow and return on equity. The amount of a performance
award may be denominated or payable in cash, Tyco common shares or other
securities or property.
DIVIDEND EQUIVALENT RIGHTS.
These are rights to receive payments equal to dividends paid on a number of
Tyco common shares determined by the Tyco Compensation Committee. The Tyco
Compensation Committee may provide that such payments will be deemed to have
been reinvested in additional Tyco common shares or otherwise reinvested.
OTHER STOCK-BASED GRANTS.
These are awards based on, or related to, Tyco common shares that do not
constitute any of the awards described above. Such awards shall have such terms
and conditions as are established by the Tyco Compensation Committee.
The number and type of shares with respect to which awards may be made under
the plan, the number of Tyco common shares subject to outstanding options, the
exercise price of options, and the grant price of stock appreciation rights may
be adjusted by the Tyco Compensation Committee in the event of certain corporate
transactions or events. These include a stock dividend, recapitalization,
subdivision, consolidation or reduction of capital, reorganization, merger,
amalgamation, scheme of arrangement, split-up, spin-off or combination involving
Tyco or a repurchase or exchange of Tyco shares or similar event. The Tyco
Compensation Committee is also authorized to make certain adjustments:
- to ensure comparability with the terms of any awards assumed in connection
with a corporate acquisition,
- to reflect certain unusual events such as changes in applicable law or
accounting principles, or
- in the event of a "change in control" of Tyco, as defined in the plan,
including, in such event, accelerating the time of exercise or payment of
awards under the plan.
The Board may terminate or amend the plan, except that any such amendment
shall require shareholder approval if:
- the amendment would increase the number of Tyco shares available for
awards under the plan, or
- such shareholder approval is necessary to comply with applicable laws or
regulatory requirements.
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TAX TREATMENT.
The following is a brief summary of the U.S. federal income tax rules
currently generally applicable to stock options granted under the plan. The
grant of an incentive stock option will have no immediate tax consequences to
the optionee or to Tyco. The exercise of an incentive stock option by the
payment of cash to Tyco will generally have no immediate tax consequences to the
optionee, except to the extent it is an adjustment in computing alternative
minimum taxable income, or to Tyco. If an optionee holds the shares acquired
pursuant to the exercise of an incentive stock option for the required holding
period, the optionee generally will realize long-term capital gain or long-term
capital loss upon a subsequent sale of the shares in the amount of the
difference between the amount realized upon the sale price and the exercise
price of the shares. In such a case, no deduction will be allowable to Tyco in
connection with the grant or exercise of the incentive stock option or the sale
of Tyco common shares acquired pursuant to such exercise.
If, however, an optionee disposes of the shares prior to the expiration of
the required holding period, the optionee will recognize ordinary income, and
Tyco will be entitled to a deduction, equal to the excess of the fair market
value of the shares on the date of exercise, or the proceeds of the disposition,
if less, over the exercise price. Special rules apply in the event all or a
portion of the exercise price is paid in the form of stock.
Stock options other than incentive stock options are referred to as
non-qualified stock options. The grant of a non-qualified stock option will have
no immediate tax consequences to the optionee or to Tyco. Upon the exercise of a
non-qualified stock option, the optionee will recognize ordinary income, and
Tyco will be entitled to a deduction, in an amount equal to the excess of the
fair market value of Tyco common shares on the date of the exercise of the
option over the exercise price. The optionee's tax basis in the shares will be
the exercise price plus the amount of ordinary income recognized by the
optionee, and the optionee's holding period will commence on the date of
exercise. Special rules apply in the event all or a portion of the exercise
price is paid in the form of stock. Other special rules may also apply to a
participant who is subject to Section 16 of the Securities Exchange Act of 1934.
Upon a subsequent sale of shares acquired pursuant to the exercise of a
non-qualified stock option, any difference between the optionee's tax basis in
the shares and the amount realized on the sale will be treated as long-term or
short-term capital gain or loss, depending on the holding period of the shares.
Certain limitations apply to Tyco's deduction of compensation payable to the
person serving as its Chief Executive Officer or to any of its four other most
highly compensated executives in office as of the end of the year in which such
compensation would otherwise be deductible. In general, Tyco may not deduct
compensation, other than "performance-based" compensation, payable to such an
executive in excess of $1 million for any year. It is expected that most awards
granted under the plan will qualify as performance-based compensation and hence
will be fully deductible. Nonetheless, Tyco will weigh the benefits of
compliance with Section 162(m) of the U.S. Internal Revenue Code against the
burdens thereof, and reserves the right to pay compensation that may not be
fully deductible if it is determined to be in Tyco's interest to do so.
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<PAGE>
The following tables summarize as of January 31, 1999 the stock options
currently outstanding under the Tyco Long Term Incentive Plan, showing the
number of Tyco common shares with respect to which options have been granted and
the range of exercise prices. Options vest according to a schedule determined
upon grant, with most vesting occurring in three equal installments commencing
on the first anniversary of the date of grant.
<TABLE>
<CAPTION>
OPTIONS RANGE OF EXERCISE
OUTSTANDING PRICES
------------ ----------------------
<S> <C> <C>
L. Dennis Kozlowski........................................................ 4,096,000 38.3125-68.2195
Jerry Boggess.............................................................. 299,118 38.3125-58.4619
Mark H. Swartz............................................................. 2,043,000 38.3125-68.2195
Neil R. Garvey............................................................. 239,250 38.3125-58.4619
Richard Meelia............................................................. 295,282 38.3125-58.4619
All Executive Officers and Directors....................................... 8,844,973 38.3125-58.4619
All employees other than Executive Officers................................ 30,494,430 0.11-138.8706
Total options outstanding.................................................. 39,339,403 0.11-138.8706
</TABLE>
Approval of the option shares increase proposal by Tyco shareholders is not
required under the merger agreement and is not a condition to the merger.
Whether or not the LTIP share increase proposal is approved or the merger is
consummated, the existing Tyco stock options will remain outstanding in
accordance with their terms.
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO SHAREHOLDERS VOTE FOR THE
TYCO LTIP SHARE INCREASE PROPOSAL.
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<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
The rights of Tyco shareholders are governed by Bermuda law, the Tyco
Memorandum of Association and the Tyco Bye-Laws. The rights of AMP shareholders
are governed by Pennsylvania law, the AMP Restated Articles of Incorporation and
the AMP Bylaws. Upon consummation of the merger, Bermuda law, the Tyco
Memorandum of Association and the Tyco Bye-Laws will govern the rights of AMP
shareholders who become Tyco shareholders. The following is a summary of the
material differences between the current rights of AMP shareholders and those of
Tyco shareholders following the merger.
The following summary of shareholder rights is not complete. For a full
description of the rights of Tyco and AMP shareholders, shareholders must refer
to Bermuda law, Pennsylvania law, the Tyco Memorandum, the Tyco Bye-Laws, the
AMP Restated Articles of Incorporation and the AMP Bylaws. Copies of the Tyco
Memorandum of Association, the Tyco Bye-Laws, the AMP Restated Articles of
Incorporation and the AMP Bylaws have been filed with the SEC and will be sent
to holders of Tyco common shares and AMP common stock upon request. See "Where
To Find More Information" on page i.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION BY CONSENT.
Generally, AMP shareholders may not call a special meeting of shareholders.
Tyco shareholders holding at least 10% of the paid-up capital of Tyco may call a
special meeting. However, AMP shareholders may take action without a meeting by
majority written consent, whereas Tyco shareholders may act without a meeting
only by unanimous consent.
QUORUM.
A quorum for an AMP shareholders meeting requires a majority of shares
entitled to vote on a particular matter. The presence of any two Tyco
shareholders at a meeting will generally constitute a quorum.
VOTING RIGHTS.
With certain exceptions, actions by the shareholders of AMP and Tyco require
a majority of the votes cast.
Pursuant to the AMP Restated Articles of Incorporation, no:
- merger, consolidation or share exchange to which AMP is a party;
- sale, lease, exchange or other disposition of all or substantially all of
the properties or assets of AMP;
- voluntary dissolution of AMP;
- amendment of the AMP Restated Articles of Incorporation; or
- agreement, plan or resolutions providing for actions described above
is valid unless such corporate action has been authorized by the affirmative
vote of at least sixty-six and two-thirds percent (66 2/3%) of the votes cast by
all shareholders entitled to vote thereon. The above-described voting
requirements do not apply if:
- Pennsylvania law permits corporate action with respect to any such
transaction to be taken by the Board of Directors, or any committee
thereof, and does not require a vote of shareholders; or
- the transaction is a "business combination" with an "interested
shareholder" as such terms are defined under Pennsylvania law and is
subject to a vote of shareholders in the manner prescribed by Pennsylvania
law. See "Share Acquisitions, Business Combination and Related Provisions"
on page 114 below.
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Subchapter G of Chapter 25 of the Pennsylvania Business Corporation Law of
1988 provides that "control shares" of registered corporations lose their voting
rights until those rights are restored by the affirmative vote of a majority of
both the disinterested shares, and all voting shares. "Disinterested shares" are
shares held by persons other than the acquiror, executive officers and directors
of the corporation and certain employee stock plans, "Control shares" include:
- voting shares whose acquisition would result in a control-share
acquisition;
- voting shares over which beneficial ownership was acquired by a person
within 180 days of the date such person makes a "control-share
acquisition"; or
- voting shares over which beneficial ownership was acquired with the
intention of making a "control-share acquisition."
A "control share acquisition" is the acquisition of voting power over 20% or
more but less than 33 1/3%, 33 1/3% or more but less than 50%, or 50% or more of
the outstanding voting shares of a corporation. Subchapter G contains safe
harbors for certain acquiring persons. Control shares do not include shares the
voting power over which was acquired through a revocable proxy that does not
confer discretionary voting authority and which was acquired without
consideration in a solicitation made in accordance with the Securities Exchange
Act of 1934 and without an intention to change or influence control of the
corporation. The board of directors is required to call a special meeting, at
the acquiror's request and expense, to consider the voting rights of control
shares within 50 days after the acquiror files certain prescribed information
with the corporation, and in the absence of such a request will submit the
matter of voting rights at the next meeting of shareholders, provided the
acquiror has filed the prescribed information and the issue has not become moot.
Under Bermuda law questions proposed for consideration at a company's
general meeting are decided by a simple majority vote or by such majority as the
bye-laws of the company may prescribe except where a larger majority is required
by law. A majority of three-fourths of the votes cast is required by Bermuda law
for the approval of an amalgamation and certain arrangements and
reconstructions.
Any question proposed for consideration at a general meeting may be decided
on a show of hands, in which each shareholder present in person or by proxy is
entitled to one vote and casts such vote by raising his or her hand, unless,
before or on the declaration of the result of a show of hands, a poll is
demanded by:
- the Chairman of the meeting;
- at least three shareholders present in person or represented by proxy;
- 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
- 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 on which
any part of the issuance price is due and has not been fully paid, together with
interest and expenses. The Tyco Bye-Laws also provide that any person who is
known or believed by Tyco to be interested in Tyco common shares, and who has
failed to comply with a notice from Tyco requesting specified information
regarding such person's interest in Tyco common shares, will lose voting rights
for the period such person fails to comply with the notice, plus an additional
ninety days. In addition, a shareholder loses voting rights if such shareholder
has failed to comply with
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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, 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, either alone or in concert with others, and fails
to notify Tyco of such acquisition within two days or, already possessing three
percent or more, the shareholder fails to notify Tyco of a change in the
shareholder's interests amounting to one percent or more of the share capital of
any class, and such shareholder is so notified by the Tyco Board of such loss of
right.
SHAREHOLDER PROPOSALS.
Any AMP shareholder may submit a shareholder proposal by providing notice to
AMP at least 45 days before the corresponding date that proxy materials were
mailed to AMP shareholders the previous year. Only Tyco shareholders holding not
less than 1/20th of the total voting rights or 100 or more in number may move
resolutions at an annual meeting by providing notice six weeks before the
meeting. Tyco shareholders wishing to nominate a director for election must give
notice not less than six nor more than 28 days before the scheduled meeting
date.
DERIVATIVE ACTIONS.
AMP shareholders do not have a direct and individual right to enforce rights
which could be asserted by the corporation, but may do so only derivatively on
behalf of the corporation. Tyco shareholders may proceed either in a derivative
action or, under certain circumstances, in an action seeking a winding up of the
corporation.
Pursuant to Pennsylvania law, upon compliance with certain requirements, a
shareholder may institute a derivative suit in the right of the corporation
against the present or former officers or directors of a corporation because the
corporation refused to enforce rights that could be asserted by the corporation,
if he or she was a shareholder at the time of the transaction complained of, or
if his or her stock thereafter devolved upon him or her by operation of law from
a person who was a shareholder at that time.
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:
1. where the act complained of is alleged to be beyond the corporate
power of the company or illegal;
2. 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;
3. where an act requires approval by a greater percentage of the
company's shareholders than actually approved it; or
4. 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
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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.
REMOVAL OF DIRECTORS; VACANCIES ON THE BOARD OF DIRECTORS.
A director of AMP may be removed for cause by a majority of the shareholders
and without cause by a unanimous vote of shareholders, and by the other
directors if such director is of unsound mind or convicted of crimes of a
certain degree or for any other proper cause. A director of Tyco may be removed
with or without cause at any special general meeting of shareholders by a
majority of the votes cast, or by a written resolution signed by all the other
directors.
Under Pennsylvania law, unless otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders, any director, class of
directors or the entire board of directors may be removed, with or without
cause, by a vote of shareholders entitled to elect such director or directors.
Shareholder removal of directors is restricted if the board of directors is
classified, if shareholders vote cumulatively when electing directors, or if the
bylaws contain provisions adopted by the shareholders which address shareholder
removal of directors. Under the AMP Bylaws and under Pennsylvania law, a
director may be removed under the following circumstances:
- by the shareholders, only for cause, by the affirmative vote of
shareholders entitled to cast at least a majority of the votes entitled to
be cast at an annual election of directors;
- at any time, with or without cause, by the unanimous vote or consent of
shareholders entitled to vote thereon;
- by the affirmative vote of a majority of the directors in office if the
director being removed has been judicially declared of unsound mind, has
been convicted of an offense punishable by imprisonment for more than one
year, for any other proper cause or if such director has failed to accept
the office; or
- by the court, upon application in a derivative suit in case of fraudulent
or dishonest acts, gross abuse of authority or discretion with reference
to the company, or for any other proper cause.
Under Pennsylvania law, the board of directors may fill any vacancy on the
board of directors.
Bermuda law provides that, subject to a company's bye-laws, the shareholders
of a company may, at a special general meeting called for the purpose, remove a
director or the entire board of directors, with or without cause, by a majority
of the votes cast, subject to statutory due process requirements. The Tyco
Bye-Laws provide that any director may at any time be removed from office by a
written resolution signed by all the other directors. The remaining Tyco
directors have the power to appoint any qualified person to fill a casual
vacancy in the Board to hold office until the next following annual general
meeting, and the existing directors may act notwithstanding any vacancy in the
board of directors.
AMENDMENTS TO CHARTER DOCUMENTS.
Pennsylvania law requires that a corporation's charter may only be amended
upon a proposal of the board of directors and the approval of a majority of the
shareholders, except that AMP's Amended and Restated Articles of Incorporation
require the approval of sixty-six and two-thirds percent (66 2/3%) of the votes
cast by all shareholders entitled to vote thereon. Provisions of Tyco's
memorandum of association generally may be altered at a general meeting of
shareholders, and the rights attached to any class of shares may be varied by
the approval of the holders of three-fourths of the shares of the class,
provided that holders of a sufficient number of shares may apply to the Bermuda
Supreme Court to overturn such amendments or variations.
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Pennsylvania law provides that amendments to the articles of incorporation
of publicly owned companies may only be proposed by its board of directors.
Except for certain amendments which do not require shareholder approval and
unless a greater vote is required by its articles of incorporation, amendments
of the articles of incorporation of a Pennsylvania company are to be approved by
the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and, if any class or series of capital stock is
entitled to vote as a class, the affirmative vote of a majority of the votes
cast in each such separate vote. Under the AMP Restated Articles of
Incorporation, any amendment of the Articles of Incorporation shall be approved
by the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%)
of the votes cast by all shareholders entitled to vote thereon.
Bermuda law provides that a company may alter the provisions of its
memorandum of association by resolution passed at a general meeting of
shareholders of which due notice has been given and, where required, with the
consent of the Minister of Finance. Holders of at least 20% of any class of the
company's share capital may apply to the Bermuda Supreme Court to annul an
alteration and, if such application is made, the alteration shall not have
effect except insofar as it is confirmed by the Court. In addition, under
Bermuda law a company may alter the conditions of its memorandum of association
so as to increase:
- its share capital,
- divide its shares into several classes,
- consolidate and divide its share capital into shares of a larger par
value,
- sub-divide its shares into shares of a smaller par value,
- change the currency denomination of its share capital, and
- cancel any shares which have not been taken or agreed to be taken by any
person and diminish the amount of its share capital by the amount so
canceled,
if so authorized by a general meeting and by the company's bye-laws. The Tyco
Bye-Laws include such authority, except as to changing the currency denomination
of its share capital.
The Tyco Bye-Laws provide that the rights attached to any class of shares,
unless otherwise provided by the terms of such class, may be varied either by
the consent in writing of the holders of three-fourths of the shares of the
class, or by a resolution passed at a separate meeting of the holders of such
class of shares by holders of three-fourths of the shares of such class voting
at such separate meeting. The rules of a Tyco general meeting apply, MUTATIS
MUTANDIS, to such separate meeting, except that:
- the quorum required is 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,
constitute a quorum;
- every holder of shares of the class is entitled on a poll to one vote for
every share of such class held; and
- any holder of shares of the class present in person or by proxy may demand
a poll.
Pursuant to Bermuda law, holders of at least 10% of a class of shares in a
company in which the share capital is divided into different classes may apply
to the Bermuda Supreme Court to cancel a variation otherwise approved by the
requisite vote. Upon such application, the variation shall not have effect
unless and until it is confirmed by the Court.
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AMENDMENTS TO BYE-LAWS.
Under Pennsylvania law, both the board of directors and the shareholders may
amend the bylaws, although the directors do not have this power with respect to
matters expressly committed to the shareholders. The Tyco Bye-Laws may only be
amended by the board of directors, and any such amendment is effective only
after confirmation by the shareholders.
SHARE PURCHASES.
Generally, both AMP and Tyco may repurchase their respective shares. Shares
of AMP which are owned, or directly or indirectly controlled, by AMP may not be
voted. Shares of Tyco owned by a subsidiary of Tyco may be voted on all matters
on which shareholders are entitled to vote.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS.
Generally, the merger, consolidation or sale, lease or exchange of all or
substantially all of the assets of AMP must be authorized by the board of
directors and, subject to certain exceptions described on page 108 above under
"Voting Rights," approved by the affirmative vote of sixty-six and two-thirds
percent (66 2/3%) of the shares entitled to vote thereon. Generally, Tyco may
sell, lease or exchange all or substantially all of its property or assets
without shareholder approval, although a compromise or arrangement for the
reconstruction of the corporation requires approval of three-fourths in value of
the creditors or the shareholders, as applicable, and the sanction of the
Bermuda Supreme Court, and an amalgamation of Tyco requires the approval of
three-fourths of all shares, whether or not entitled to vote.
Except as provided for in a company's articles of incorporation or bylaws,
Pennsylvania law provides that the merger, consolidation or the sale, lease or
exchange of all or substantially all of a company's property and assets must be
approved by the affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon of each of the companies that is a party
to the merger, consolidation or asset sale and, if any class of series of shares
is entitled to vote thereon as a class, the affirmative vote of a majority of
the votes cast in each class vote. However, no shareholder approval or consent
is required under Pennsylvania law for:
- the sale, lease, or exchange of all or substantially all of a company's
property and assets, if:
(1) made in the usual and regular course of the business of the company,
or
(2) for the purpose of relocating all, or substantially all, of the
business of the company;
- transfers between parent and subsidiary corporations; and
- sale and lease-back transactions.
Except as otherwise restricted by a company's bylaws, such voluntary
transfer of a company's property and assets shall be authorized by its board of
directors. Subject to certain exceptions described under the caption "Voting
Rights" on page 108 above, the AMP Restated Articles of Incorporation requires
the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of
the votes cast by all shareholders entitled to vote thereon for any:
- merger, consolidation or share exchange to which the company is a party
and
- sale, lease, exchange or other disposition of all or substantially all of
the properties or assets of the company.
Under Pennsylvania law, there is a procedure, which operates in a manner
very similar to the merger procedure, by which shareholders may be required to
exchange their shares for other securities, cash or other forms of
consideration.
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Under Bermuda law, there is no requirement for a company's shareholders to
approve a sale, lease or exchange of all or substantially all of a company's
property and assets. Bermuda law provides that a company may enter into a
compromise or arrangement in connection with a scheme for the reconstruction of
the company on terms which include, among other things, the transfer of all or
part of the undertaking or the property of the company to another company. Any
such compromise or arrangement requires the approval of a majority in number
representing three-fourths in value of the creditors or shareholders or class of
shareholders, as the case may be, present and voting either in person or by
proxy at the meeting, and the sanction of the Bermuda Supreme Court.
Pursuant to Bermuda law, unless the company's bye-laws provide otherwise, an
amalgamation requires the approval of the holders of at least three-fourths of
those voting at a meeting of shareholders at which a requisite quorum is
present. The Tyco Bye-Laws do not contain any contrary provisions. For purposes
of approval of an amalgamation, all shares, whether or not otherwise entitled to
vote, carry the right to vote. A separate vote of a class of shares is required
if the rights of such class would be altered by virtue of the amalgamation.
SHARE ACQUISITIONS, BUSINESS COMBINATIONS AND RELATED PROVISIONS.
Certain Subchapters of Chapter 25 of the Pennsylvania Business Corporation
Law of 1988 which apply to AMP, have the general effect of creating substantial
barriers to an acquisition of all or substantially all of the assets or the
outstanding shares of AMP without the prior approval of either the board of
directors or at least 80% of the outstanding voting stock of AMP, including:
- provisions requiring approval of certain transactions by a majority of the
voting stock other than that held by the potential acquiror,
- provisions requiring the acquisition of all the outstanding shares of AMP
at "fair value,"
- a five-year moratorium on certain "business transactions" by an
"interested shareholder,"
- the loss by interested shareholders of their voting rights over "control
shares,"
- the disgorgement of profits realized by an interested shareholder from
certain dispositions of AMP shares, and
- provisions requiring severance payments for certain employees and
prohibiting termination of certain labor contracts.
An "interested shareholder" is generally defined as the beneficial owner,
directly or indirectly, of 20% or more of a corporation's voting stock. The Tyco
Bye-Laws generally require persons acquiring or interested in shares
representing 30% or more of the voting rights of Tyco to make a comparable offer
for all of the equity share capital of Tyco. If a person has acquired, is
acquiring or is likely to acquire Tyco shares in circumstances in which such
person would be subject to Rules Governing Substantial Acquisitions in Shares
issued by the Takeover Panel of the United Kingdom ("SARs"), the Tyco directors
may give notice to such person requiring compliance with the SARs, and upon any
failure to comply, notice to dispose of such person's Tyco shares.
The following provisions describe certain Subchapters of Chapter 25 of the
Pennsylvania Business Corporation Law of 1988 which apply to most publicly owned
Pennsylvania corporations that have not opted out of their application. A
corporation may elect through a provision of its articles of incorporation and
in some cases by a timely bylaw amendment, to have these subchapters become
inapplicable to it, but AMP has not done so.
Subchapter D generally provides that certain transactions with an interested
shareholder, including mergers, consolidations, share exchanges, sales of
assets, division or voluntary dissolution and winding up, must be approved by at
least a majority of the votes entitled to be cast by all shareholders other than
the interested shareholder. These provisions do not apply to transactions
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- approved by a majority vote of the board of directors without counting the
vote of directors who are affiliated with, have a material equity interest
in, or were nominated within 24 months of the date of the transaction
proposed by, the interested shareholder, or
- in which the consideration to be received by the shareholders is not less
than the highest amount paid by the interested shareholder in acquiring
shares of the same class.
Subchapter E generally provides for certain shareholder rights upon the
occurrence of a control transaction, defined as the acquisition by a person or
group of persons acting in concert, a control person of voting power over voting
shares of a corporation which would entitle the holders thereof to cast at least
20% of the votes that all shareholders would be entitled to cast in an election
of the corporation's directors. Following a control transaction, every other
holder of voting shares may require the control person to purchase such
shareholder's shares for "fair value." Fair value is defined as not less than
the highest price per share paid by the control person at any time during the
90-day period ending on the date of the control transaction plus any value paid
for the acquisition of control that may not be reflected in such price. Fair
value is determined in a procedure similar to the procedure applicable to
dissenters' rights.
Subchapter F places a five year moratorium on "business combinations" with a
registered corporation by an "interested shareholder" after the relevant "share
acquisition date." Following the expiration of the five-year moratorium, a
business combination with that interested shareholder must either:
- be approved by a majority of the shares not held by the interested
shareholder, or
- provide per share consideration that meets the highest price per share
test referred to below.
"Business combination" includes:
1. a merger or consolidation of a registered corporation:
- with an interested shareholder, or
- with, involving or resulting in any other corporation which is, or
after such merger or consolidation would be, an affiliate or
associate of such interested shareholder;
2. a sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with an interested shareholder or any affiliate or
associate thereof of assets having an aggregate market value equal to
at least 10% of the aggregate market value either of all of the
assets or of all the outstanding shares of such registered
corporation, or representing at least 10% of the net income on a
consolidated basis, of such registered corporation; and
3. other specified self-dealing transactions between such registered
corporation and an interested shareholder or any affiliate or
associate thereof.
"Share acquisition date" is defined as the date that a person first becomes an
interested shareholder.
Subchapter F does not apply to:
1. business combinations with persons who became interested shareholders
with the approval of the board;
2. business combinations which were approved by the board prior to the
date on which the shareholder became "interested;" and
3. business combinations approved by a majority of the votes which all
shareholders are entitled to cast other than the interested
shareholder, at a meeting at least three months after the interested
shareholder acquires at least 80% of the outstanding voting stock if,
among other tests, the aggregate amount of per share consideration to
be received by the holders of outstanding common shares is at least
the highest per share price paid by the interested shareholder over
the previous five years plus a specified amount of interest.
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The AMP Board approved the merger as an approved business combination prior to
the date upon which Tyco or Tyco (PA) would become an interested shareholder.
Subchapter G provides that "control shares" of registered corporations lose
their voting rights until those rights are restored by the affirmative vote of a
majority of both the disinterested shares, and all voting shares. Disinterested
shares are generally those held by persons other than the acquiror, executive
officers and directors of the corporation and certain employee stock plans. See
"Voting Rights" on page 106.
Unless prohibited by the articles of incorporation as in effect prior to the
acquisition, the corporation may redeem the control shares, at the average of
the high and low sales price on the date the corporation provides notice of
redemption to the acquiror, at any time within 24 months after the date of:
(1) the consummation of a control share acquisition if the acquiring person
does not, within 30 days after consummation, request that the issue of
voting rights be presented to the shareholders, and
(2) the date of the shareholder vote, if voting rights are not accorded or
are accorded and subsequently lapse.
Under Subchapter H any profits realized from the disposition of shares of a
registered corporation that occurs within 18 months after the shareholder has
acquired or expressed the intent to acquire 20% or more of the voting power or
otherwise disclosed an intention to acquire control of the corporation are
recoverable by the corporation if the shares were acquired within two years
before or 18 months subsequent to the acquiror's making such an acquisition or
expressing or disclosing such an intent. Among other exceptions, Subchapter H
does not apply to transactions that have received approval by both directors and
shareholders prior to such acquisition or, as to dispositions, prior to such
disposition if the shares are beneficially owned by a person or group in actual
control of the corporation.
Subchapter I mandates severance compensation for employees whose employment
by a registered corporation is terminated, defined as being laid off for at
least six months or being involuntarily terminated, other than for willful
misconduct:
- within 90 days before a control share approval, if such termination was
pursuant to an agreement with the acquiring person, or
- within 24 months after the control share approval.
"Control share approval" means an approval of voting rights for control
shares under Subchapter G. Eligible employees are entitled to a one-time,
lump-sum payment from the employer equal to the weekly compensation of the
employee multiplied by the number of completed years of service, up to 26, less
any payments made to the employee by the employer due to termination of
employment. To be eligible, an employee must have been employed by the
corporation within ninety days prior to the control share approval for at least
two years, and must perform all of his services within Pennsylvania except for
incidental out of state services.
Subchapter J provides that no business combination transaction following a
control share approval may result in the termination or impairment of the
provisions of any covered labor contract. A "covered labor contract" is one
relating to persons employed in Pennsylvania negotiated by a collective
bargaining representative with respect to a business operation owned by the
corporation or its subsidiary at the time of the control share approval.
Subchapter J does not apply to a business combination transaction occurring more
than five years after the control share approval. An affected employee or
collective bargaining agent may, in addition to other remedies, bring suit to
recover wages and benefits and to enjoin violation of Subchapter J.
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The Tyco Bye-Laws permit the Tyco Board to make applicable to Tyco certain
rules issued by the Panel on Takeovers and Mergers in the United Kingdom.
The City Code on Takeovers and Mergers issued by the Takeover Panel includes
provision that
- if a person or group acting in concert acquires shares which, together
with shares previously owned by it, have 30% or more of the voting power
of a company, then
- the person or group is required to make an offer to purchase all equity
shares of the company and any of the company's voting non-equity capital
shares of a type held by the person or group.
The price of the offer must not be less than the highest price paid in the
preceding twelve months for shares of the same class by the offeror or anyone
acting in concert with the offeror. The offer must be in cash or accompanied by
a cash alternative. The Tyco Board may require compliance with these provisions
with respect to the acquisition of Tyco shares.
If
- a person or group owns 30% or more of the Tyco common shares, and
- the Tyco Board determines that an offer under the City Code is not
expedient or the person or group is required to make such an offer but
fails to do so,
the Tyco Board may by notice require such a person or group to make an offer on
the following terms:
- The offer to purchase must include all shares of every class of share
capital of Tyco. The Tyco Board may also require the person or group to
offer to purchase all securities of Tyco convertible into shares.
- The offer must be in cash or accompanied by a cash alternative.
- The offer must be made within 30 days of the Tyco Board's notice, it must
remain open for at least 14 days after the offer becomes unconditional and
payment must be made within 21 days after the offer becomes unconditional.
- The price of the offer must not be less than the highest price paid in the
preceding twelve months for shares of the same class by the offeror or any
one acting in concert with the offeror. If this price is unavailable or
inappropriate, the price of the offer will be fixed by the Tyco Board. The
purchase price for convertible securities must be on terms that the Tyco
Board considers fair and reasonable.
The Rules Governing Substantial Acquisitions of Shares issued by the
Takeover Panel provide, subject to certain exceptions, that
- a person or a group acting in concert may not acquire in a period of seven
days shares representing 10% or more of the voting shares of a company, if
- those shares, when aggregated with shares of the company already held by
the person or group, would carry more than 15% but less than 30% of the
total voting rights of the company.
The Tyco Board may require compliance with these rules with respect to the
acquisition of shares of Tyco. If a person fails to comply with the rules, the
Tyco Board may require the person, and any person with whom he is acting in
concert, to dispose of the shares acquired in violation of the rules.
Under the Tyco Bye-Laws, any person who acquires an interest in three
percent or more of the issued share capital of any class of Tyco is required to
notify Tyco of that interest and of any change in that person's interest
amounting to one percent or more of the issued capital of any class. Any such
notification must be made within two days, Saturday and Sundays excluded, after
the relevant event. In determining the percentage interest of any person for
these purposes and for the purposes of Bye-Law 104, interests of persons acting
in concert may be aggregated.
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REQUIRED PURCHASE AND SALE OF SHARES.
Under circumstances in which the transfer of the shares of Tyco has been
approved by at least 90% of the outstanding shares, the acquiring person will be
entitled to acquire the remaining shares on the same terms and conditions,
unless otherwise ordered by the Bermuda Supreme Court with respect to a
dissenting shareholder. There is no analogous provision of Pennsylvania law or
AMP's Amended and Restated Articles of Incorporation or By-laws. See "Short Form
Merger" below and "Dissenters' Rights" on page 119.
Pursuant to Bermuda law, where the transfer of shares or any class of shares
in a company to another company, has, within four months after the making of the
offer in this regard by the transferee company, been approved by the holders of
not less than 90% in value of the shares or class of shares for which the offer
was made, subject to the satisfaction of certain conditions, the transferee
company may, within two months after the expiration of the four month period,
give notice to any dissenting shareholder that it desires to acquire his or her
shares. Such transferee company shall then be entitled and bound to acquire such
shares on the terms on which shareholders that approved such scheme or contract
transferred their shares, unless the Bermuda Supreme Court orders otherwise upon
application by the dissenting shareholder. "Dissenting shareholder" includes a
shareholder who has not assented to a scheme or contract and any shareholder who
has failed or refused to transfer shares to the transferee company.
Within one month of the transfer of 90% in value of the transferor company's
shares or class of shares to the transferee company, or to its nominee, the
transferee company is required to notify the holders of the remaining shares of
such transfer. Within three months of the giving of notice, any such remaining
holder of shares may require the transferee company to acquire his or her shares
on the same terms as provided for in the scheme or contract, or upon such terms
as may be agreed, or upon such terms as the Bermuda Supreme Court may determine
upon application of the transferee company or the shareholder.
Under Bermuda law, a holder or holders of not less than 95% of the shares or
any class of shares in a Bermuda company may give notice to the remaining
shareholders or class of shareholders of the intention to acquire their shares,
on the terms set out in the notice. Bermuda law provides that when such notice
is given the acquiring holder or holders shall be entitled and bound to acquire
the shares of the remaining shareholders on the terms set out in the notice,
unless the remaining shareholders exercise statutory appraisal rights.
SHORT FORM MERGER.
Pennsylvania law permits certain mergers without shareholder approval where
the shareholders will continue to hold a controlling interest in the surviving
corporation or in a merger of a subsidiary into a parent company owning at least
80% of the subsidiary. Under Bermuda law an amalgamation is only permitted
without shareholder vote when between a parent company and its wholly owned
subsidiary.
Under Pennsylvania law, a shareholders' vote is not required to approve a
merger or consolidation if:
- the plan does not alter the company's status as a Pennsylvania company or,
in a manner that would require shareholder approval, its articles of
incorporation;
- each share of its capital stock is to continue as or be converted into an
identical share of the surviving company; and
- the company's shareholders are to hold in the aggregate shares of the
surviving company entitled to cast a majority of the votes entitled to be
cast generally in electing directors; or
- the merger or consolidation is with another company which directly or
indirectly owns 80% or more of shares of each class of the company.
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DISSENTERS' RIGHTS.
Although neither AMP nor Tyco shareholders have dissenters' rights with
respect to the merger, shareholders may enjoy dissenters' rights in certain
other circumstances.
Pursuant to Pennsylvania law, a shareholder of a company has the right,
under varying circumstances, to dissent from:
- mergers
- share exchanges
- the sale of all or substantially all of the corporate assets
- corporate divisions,
and to obtain payment in cash of the fair value of his or her shares in lieu of
the consideration he or she would otherwise receive in the transaction. With
exceptions not relevant with respect to the merger, such dissenters rights are
not available where the shares held by the shareholder are either listed on a
national securities exchange or are held of record by more than 2,000
shareholders. Notwithstanding this limitation, Pennsylvania law provides that
the articles of incorporation, bylaws or a resolution of the board of directors
may direct that all or part of the shareholders shall have dissenters' rights in
connection with any corporate transaction that would not otherwise entitle such
shareholder to dissenters' rights. The AMP Restated Articles of Incorporation
and Bylaws do not include such a provision nor has the Board of Directors of AMP
adopted such a resolution.
Under Bermuda law, a properly dissenting shareholder who did not vote in
favor of an amalgamation and who is not satisfied that he or she has been
offered fair value for his or her shares may apply to the court to appraise the
fair value of his or her shares. If the court appraised value is greater than
the value received or to be received in the amalgamation, the company must pay
the court appraised value to the dissenting shareholder within one month of the
appraisal. Bermuda law additionally provides a right of appraisal in respect of
the situation in which a holder of not less than 95% of the shares or any class
of shares in the company proposes to acquire the remaining shares.
SHAREHOLDER RIGHTS PLAN.
Each of AMP and Tyco has adopted a shareholder rights plan. Such a plan
entitles the holder of rights distributed thereunder to purchase, under
circumstances generally involving an acquisition or a proposed acquisition of a
certain percentage of the outstanding shares of the corporation without the
prior approval of such corporation's board, shares of such corporation, or in
some cases, the acquiring corporation, at various discounts to the market price
of such shares. Each of such shareholder rights plans has the general effect of
creating substantial barriers to the acquisition of various threshold percentage
levels of such corporations' shares without the prior approval of such
corporations' respective boards. The respective plans have certain differences
in implementation and effect, as described below.
Under Pennsylvania law, except as otherwise provided in the articles of
incorporation, every company may create and issue rights or options entitling
the holders thereof to purchase from the company any shares of its capital stock
of any class or classes.
In 1989, AMP adopted a Shareholder Rights Plan and distributed to its
shareholders, for each outstanding share of AMP common stock held, one right to
purchase one share of AMP common stock at a purchase price of $87.50, subject to
certain further adjustments. The Rights Agreement dated as of October 25, 1989,
between AMP and ChaseMellon Shareholder Services L.L.C., as Rights Agent,
contains the terms and conditions of the rights. The rights will remain attached
to the AMP common stock until a Distribution Date, occurs or as otherwise set
forth in the AMP Rights Agreement. A Distribution Date will occur upon the
earliest of:
119
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- 10 business days following a public announcement that a person has
acquired or obtained the right to acquire ("an Acquiring Person")
beneficial ownership of 20% or more of the outstanding shares of AMP
common stock, or 10% or more of the outstanding shares of AMP common stock
if such person has made an unsolicited acquisition proposal;
- 10 business days, or such later date determined by the AMP Board,
following commencement of a tender offer or exchange offer which if
completed would result in a person becoming an Acquiring Person; or
- a merger or other business combination involving AMP.
Upon a Distribution Date, each right, except those held by an Acquiring
Person, will separate from the AMP common stock and become exercisable.
In the event that a person becomes an Acquiring Person, each holder of a
right, other than rights held by an Acquiring Person which are voided, will
thereafter have the right to receive, upon exercise, shares of AMP common stock,
and, in certain circumstances other consideration, having a value equal to two
times the exercise price of the right. In addition, in the event that:
- AMP is acquired in a merger or other business combination transaction in
which AMP is not the surviving corporation,
- AMP is a party to a merger in which AMP is the surviving company, but all
or part of its shares are exchanged for other consideration, or
- more than 50% of AMP's assets, cash flow or earning power is sold or
transferred,
each holder of a right, except rights that previously have been voided, shall
thereafter have the right to receive, upon exercise, common stock of the
surviving company, or a related party in certain cases, having a value equal to
two times the exercise price of the right. The AMP Rights Agreement has an
exception to these provisions for a Qualifying Offer, as defined, unless and
until the rights become non-redeemable.
The rights may be redeemed until ten business days after the day on which
any person becomes an Acquiring Person, subject to the following exceptions:
1. The AMP Board cannot redeem the rights until November 6, 1999, when
the AMP Rights Agreement will expire in accordance with its terms, if
the composition of the AMP Board of Directors changes at any time
following receipt of an unsolicited acquisition proposal such that
the disinterested directors, as such term is defined under
Pennsylvania law, in office prior to the unsolicited acquisition
proposal, together with their Board approved successors, no longer
constitute a majority of the Board of Directors.
2. Upon the adoption of a Bylaw which limits the authority of the AMP
Board and/or confers authority on any person other than the Board to
take action with respect to the AMP Rights Agreement and the rights
issued thereunder, the AMP Rights Agreement cannot be amended, the
Rights cannot be redeemed and the AMP Board will not be entitled to
exercise certain discretionary authority otherwise available or take
certain other actions.
3. Pursuant to the merger agreement, AMP agreed not to redeem the rights
prior to November 6, 1999 or, in certain circumstances earlier,
following the termination of the merger agreement. The AMP Rights
Agreement generally may not be amended when the rights are not
redeemable.
On November 22, 1998, the AMP Board further amended the AMP Rights Agreement
so that it would be inapplicable to the merger agreement, the stock option
agreement and the transactions contemplated thereby.
120
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Prior to the merger of Former Tyco and ADT on July 2, 1997, ADT, adopted a
Shareholder Rights Plan which was, amended in March and July of 1997. Under the
Plan, each right other than those rights owned by an Acquiring Person, as
defined, 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, in the event that a person becomes
an Acquiring Person.
The Tyco Board may redeem the rights prior to their becoming exercisable;
PROVIDED, HOWEVER, that the Tyco Board may not redeem the rights if a majority
of the directors on the Tyco Board have been changed as a result of a proxy or
consent solicitation or other shareholder initiative by a person who has stated,
or Tyco has determined in good faith, that such person intends to take such
actions which would result in such person becoming an Acquiring Person, unless
such redemption has been authorized by a majority of the Continuing Directors,
as defined.
OTHER MATTERS
It is not expected that any matters other than those described in this
document will be brought before the special meetings. If any other matters are
presented, however, it is the intention of the persons named in the appropriate
proxy to vote the proxy in accordance with the discretion of the persons named
in such proxy.
LEGAL MATTERS
The validity of the Tyco common shares to be issued to AMP shareholders in
connection with the merger will be passed upon by Appleby, Spurling & Kempe,
Hamilton, Bermuda, special counsel to Tyco. Certain other legal matters in
connection with the merger will be passed upon for Tyco by Kramer Levin Naftalis
& Frankel LLP, New York, New York, and by Appleby, Spurling & Kempe. Joshua M.
Berman, a director and vice president of Tyco, is counsel to Kramer Levin
Naftalis & Frankel LLP and beneficially owns 72,090 Tyco common shares. Certain
legal matters in connection with the merger will be passed upon for AMP by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements of Tyco as of September 30, 1998 and
1997 and for the year ended September 30, 1998, the nine months ended September
30, 1997 and the year ended December 31, 1996 included in Tyco's Current Report
on Form 8-K filed on December 10, 1998 and incorporated by reference in this
document give retroactive effect to the merger between Tyco International Ltd.
and United States Surgical Corporation and have been audited by
PricewaterhouseCoopers, independent accountants, as set forth in their report
included therein. In its report, that firm states that with respect to certain
subsidiaries its opinion is based upon the reports of other independent
accountants, namely Arthur Andersen LLP and Deloitte & Touche LLP. The
consolidated financial statements referred to above have been incorporated
herein in reliance upon said reports given upon the authority of such firms as
experts in accounting and auditing.
The combined financial statements of The Sherwood-Davis & Geck Group as of
and for the year ended December 31, 1997 included in Tyco's Current Report on
Form 8-K/A filed on May 13, 1998 and incorporated by reference in this document
have been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report included therein, and have been so incorporated in
reliance upon the report of said firm and upon the authority of said firm as
experts in accounting and auditing.
121
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The financial statements and the related financial statement schedule
incorporated in this document by reference from the Annual Report on Form 10-K
of AMP for the year ended December 31, 1997 have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, which are incorporated herein by reference, and have been so
incorporated in reliance upon the report of said firm and upon the authority of
said firm as experts in accounting and auditing.
FUTURE SHAREHOLDER PROPOSALS
Due to the contemplated consummation of the merger, AMP does not currently
expect to hold a 1999 Annual Meeting of Shareholders because AMP will be a
wholly owned indirect subsidiary of Tyco following the merger. In the event the
merger is not consummated, proposals of AMP shareholders to be included in the
proxy statement to be mailed to all AMP shareholders entitled to vote at the
1999 Annual Meeting of AMP shareholders must have been received at AMP's
principal executive offices not later than November 16, 1998.
Any shareholder proposal intended for inclusion in Tyco's proxy statement
for Tyco's 1999 annual general meeting of shareholders must be received by Tyco
a reasonable time before Tyco begins to print and mail its proxy materials for
the meeting.
Under the Companies Act, 1981 of Bermuda, any shareholders who represent not
less than 5 percent of the total voting rights of shareholders having the right
to vote at the meeting, or who are 100 or more in number, may requisition any
resolution which may properly be moved at an annual general meeting. A
shareholder wishing to move a resolution at an annual general meeting is
generally required to give notice to Tyco of the resolution at its registered
office at least six weeks before the meeting.
122
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TYCO INTERNATIONAL (PA) INC.
(FORMERLY KNOWN AS BETA ZENO CORP.),
AMP MERGER CORP.
(FORMERLY KNOWN AS
ALPHA ZENO CORP.)
AND
AMP INCORPORATED
INCLUDING
GUARANTEE
OF
TYCO INTERNATIONAL LTD.
Dated as of November 22, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
THE MERGER.............................................................. A-2
SECTION 1.01. The Merger............................................................. A-2
SECTION 1.02. Effective Time......................................................... A-2
SECTION 1.03. Effect of the Merger................................................... A-2
SECTION 1.04. Articles of Incorporation; Bylaws...................................... A-2
SECTION 1.05. Directors and Officers................................................. A-2
SECTION 1.06. Effect on Securities, Etc.............................................. A-2
SECTION 1.07. Exchange of Certificates............................................... A-5
SECTION 1.08. Stock Transfer Books................................................... A-7
SECTION 1.09. No Further Ownership Rights in Company Common Stock.................... A-7
SECTION 1.10. Lost, Stolen or Destroyed Certificates................................. A-7
SECTION 1.11. Tax and Accounting Consequences........................................ A-7
SECTION 1.12. Taking of Necessary Action; Further Action............................. A-7
SECTION 1.13. Material Adverse Effect................................................ A-7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... A-8
SECTION 2.01. Organization and Qualification; Subsidiaries........................... A-8
SECTION 2.02. Articles of Incorporation and Bylaws................................... A-8
SECTION 2.03. Capitalization......................................................... A-8
SECTION 2.04. Authority Relative to this Agreement and Stock Option Agreement........ A-9
SECTION 2.05. No Conflict; Required Filings and Consents............................. A-10
SECTION 2.06. Compliance; Permits.................................................... A-11
SECTION 2.07. SEC Filings; Financial Statements...................................... A-11
SECTION 2.08. Absence of Certain Changes or Events................................... A-12
SECTION 2.09. No Undisclosed Liabilities............................................. A-12
SECTION 2.10. Absence of Litigation.................................................. A-12
SECTION 2.11. Employee Benefit Plans; Employment Agreements.......................... A-12
SECTION 2.12. Labor Matters.......................................................... A-15
SECTION 2.13. Registration Statement; Joint Proxy Statement/Prospectus............... A-15
SECTION 2.14. Restrictions on Business Activities.................................... A-16
SECTION 2.15. Title to Property...................................................... A-16
SECTION 2.16. Taxes.................................................................. A-16
SECTION 2.17. Environmental Matters.................................................. A-17
SECTION 2.18. Brokers................................................................ A-18
SECTION 2.19. Intellectual Property.................................................. A-18
SECTION 2.20. Interested Party Transactions.......................................... A-20
SECTION 2.21. Insurance.............................................................. A-20
SECTION 2.22. Product Liability and Recalls.......................................... A-20
SECTION 2.23. Opinion of Financial Advisor........................................... A-20
SECTION 2.24. Pooling Matters........................................................ A-20
SECTION 2.25. Tax Matters............................................................ A-20
SECTION 2.26. Rights Agreement....................................................... A-20
SECTION 2.27. Supplemental Company Disclosure Schedule............................... A-21
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BETA AND MERGER SUB................... A-22
SECTION 3.01. Organization and Qualification; Subsidiaries........................... A-22
SECTION 3.02. Memorandum of Association and Bye-Laws................................. A-22
SECTION 3.03. Capitalization......................................................... A-22
SECTION 3.04. Authority Relative to this Agreement and the Stock Option Agreement.... A-23
SECTION 3.05. No Conflict; Required Filings and Consents............................. A-23
SECTION 3.06. Compliance; Permits.................................................... A-24
SECTION 3.07. SEC Filings; Financial Statements...................................... A-24
SECTION 3.08. Absence of Certain Changes or Events................................... A-25
SECTION 3.09. No Undisclosed Liabilities............................................. A-25
SECTION 3.10. Absence of Litigation.................................................. A-25
SECTION 3.11. Employee Benefit Plans; Employment Agreements.......................... A-25
SECTION 3.12. Labor Matters.......................................................... A-27
SECTION 3.13. Registration Statement; Joint Proxy Statement/Prospectus............... A-28
SECTION 3.14. Restrictions on Business Activities.................................... A-28
SECTION 3.15. Title to Property...................................................... A-28
SECTION 3.16. Taxes.................................................................. A-29
SECTION 3.17. Environmental Matters.................................................. A-29
SECTION 3.18. Brokers................................................................ A-30
SECTION 3.19. Intellectual Property.................................................. A-30
SECTION 3.20. Interested Party Transactions.......................................... A-30
SECTION 3.21. Insurance.............................................................. A-30
SECTION 3.22. Product Liability and Recalls.......................................... A-31
SECTION 3.23. Ownership of Beta and Merger Sub; No Prior Activities.................. A-31
SECTION 3.24. Pooling Matters........................................................ A-31
SECTION 3.25. Tax Matters............................................................ A-31
SECTION 3.26. PBCL Section 2538...................................................... A-31
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.................................. A-32
SECTION 4.01. Conduct of Business by the Company Pending the Merger.................. A-32
SECTION 4.02. No Solicitation........................................................ A-34
SECTION 4.03. Conduct of Business by Tyco Pending the Merger......................... A-35
ARTICLE V
ADDITIONAL AGREEMENTS................................................... A-36
SECTION 5.01. Joint Proxy Statement/Prospectus; Registration Statement............... A-36
SECTION 5.02. Company Shareholders Meeting........................................... A-36
SECTION 5.03. Tyco Shareholders Meeting.............................................. A-36
SECTION 5.04. Access to Information; Confidentiality................................. A-36
SECTION 5.05. Consents; Approvals.................................................... A-37
SECTION 5.06. Agreements with Respect to Affiliates.................................. A-37
SECTION 5.07. Indemnification and Insurance.......................................... A-37
SECTION 5.08. Notification of Certain Matters........................................ A-38
SECTION 5.09. Further Action/Tax Treatment........................................... A-39
SECTION 5.10. Public Announcements................................................... A-39
SECTION 5.11. Tyco Common Shares..................................................... A-39
SECTION 5.12. Conveyance Taxes....................................................... A-39
SECTION 5.13. Option Plans and Benefits, etc......................................... A-39
SECTION 5.14. Rights Agreement....................................................... A-40
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C>
SECTION 5.15. Accountant's Letters................................................... A-40
SECTION 5.16. Pooling Accounting Treatment........................................... A-40
SECTION 5.17. Compliance with State Property Transfer Statutes....................... A-41
SECTION 5.18. Director Appointment................................................... A-41
SECTION 5.19. Termination of Flexitrust.............................................. A-41
SECTION 5.20. Charities.............................................................. A-41
ARTICLE VI
CONDITIONS TO THE MERGER................................................ A-42
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger............ A-42
SECTION 6.02. Additional Conditions to Obligations of Beta and Merger Sub............ A-43
SECTION 6.03. Additional Conditions to Obligation of the Company..................... A-43
ARTICLE VII
TERMINATION............................................................. A-45
SECTION 7.01. Termination............................................................ A-45
SECTION 7.02. Effect of Termination.................................................. A-46
SECTION 7.03. Fees and Expenses...................................................... A-46
ARTICLE VIII
GENERAL PROVISIONS...................................................... A-49
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements............ A-49
SECTION 8.02. Notices................................................................ A-49
SECTION 8.03. Certain Definitions.................................................... A-50
SECTION 8.04. Amendment.............................................................. A-50
SECTION 8.05. Waiver................................................................. A-51
SECTION 8.06. Headings............................................................... A-51
SECTION 8.07. Severability........................................................... A-51
SECTION 8.08. Entire Agreement....................................................... A-51
SECTION 8.09. Assignment............................................................. A-51
SECTION 8.10. Parties in Interest.................................................... A-51
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative.................. A-51
SECTION 8.12. Governing Law; Jurisdiction............................................ A-52
SECTION 8.13. Counterparts........................................................... A-52
SECTION 8.14. WAIVER OF JURY TRIAL................................................... A-52
GUARANTEE.............................................................. A-53
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1998 (this
"Agreement"), among Beta Zeno Corp. ("Beta"), a Pennsylvania corporation and a
direct, wholly-owned subsidiary of Tyco International Ltd. ("Tyco"), Alpha Zeno
Corp., a Pennsylvania corporation and a direct, wholly-owned subsidiary of Beta
("Merger Sub"), and AMP Incorporated, a Pennsylvania corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Beta, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective shareholders, and consistent with and in furtherance of their
respective business strategies and goals, for Beta to acquire all of the
outstanding shares of the Company through the merger of Merger Sub with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of Beta
, Merger Sub and the Company have each approved the merger (the "Merger") of
Merger Sub with and into the Company in accordance with the applicable
provisions of the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania (the "PBCL"), and upon the terms and subject to the conditions set
forth herein;
WHEREAS, Beta, Merger Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder and that the
transactions contemplated by this Agreement be undertaken pursuant to such plan;
WHEREAS, Beta, Merger Sub and the Company intend that the Merger be
accounted for as a pooling of interests for financial reporting purposes;
WHEREAS, pursuant to the Merger, each outstanding share (together with the
common stock purchase right associated therewith, a "Share") of the Company's
Common Stock, without par value (the "Company Common Stock"), shall be converted
into the right to receive the Merger Consideration (as defined in Section
1.07(b)), upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition to the Company's willingness to enter into this Agreement, Tyco
has agreed fully and unconditionally to guarantee the representations,
warranties, covenants, agreements and other obligations of Beta and Merger Sub
in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition to Beta's and Merger Sub's entry into this Agreement, the Company
and Beta have entered into a Stock Option Agreement (the "Stock Option
Agreement") of even date herewith and attached hereto as Exhibit A;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, Beta,
Merger Sub and the Company hereby agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. (a) At the Effective Time (as defined in Section
1.02), and subject to and upon the terms and conditions of this Agreement and
the PBCL, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation").
SECTION 1.02. EFFECTIVE TIME. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01, as promptly as practicable (and in any event within
two business days) after the satisfaction or waiver of the conditions set forth
in Article VI, the parties hereto shall cause the Merger to be consummated by
filing articles of merger as contemplated by the PBCL (the "Articles of
Merger"), together with any required related certificates, with the Corporation
Bureau, Department of State of the Commonwealth of Pennsylvania, in such form as
required by, and executed in accordance with the relevant provisions of, the
PBCL. The Merger shall become effective at the time of such filing or at such
later time, which will be as soon as reasonably practicable, specified in the
Articles of Merger (the "Effective Time"). Prior to such filing, a closing shall
be held at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue,
New York, NY, unless another time or place is agreed to in writing by the
parties hereto, for the purpose of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Article VI.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the PBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION; BYLAWS. (a) ARTICLES OF
INCORPORATION. Unless otherwise determined by Beta prior to the Effective Time,
at the Effective Time, the Restated Articles of Incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by the PBCL and such Articles of Incorporation; PROVIDED, HOWEVER, that Article
FOURTH of the Surviving Corporation's Articles of Incorporation shall be amended
and restated in the Merger to read in its entirety as follows: "FOURTH. The
aggregate number of shares authorized is 1,000 shares of common stock, par value
$0.01 per share."
(b) BYLAWS. The Bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by the PBCL, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. EFFECT ON SECURITIES, ETC. At the Effective Time, by virtue of
the Merger and without any action on the part of Beta, Merger Sub, the Company
or the holders of any securities of the Company:
(a) CONVERSION OF SECURITIES. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.06(b)) shall be converted, subject to
A-2
<PAGE>
Section 1.06(e) and Section 1.06(f), into the right to receive a fraction of a
validly issued, fully paid and nonassessable common share, par value $0.20 per
share, of Tyco (a "Tyco Common Share") such fraction to be in the ratio provided
below (the "Exchange Ratio"). If the Average Stock Price (as hereinafter
defined) is:
(i) greater than $73.50, the Exchange Ratio shall be equal to $55.95 divided
by the Average Stock Price;
(ii) equal to or greater than $67.00 but less than or equal to $73.50, the
Exchange Ratio shall be fixed at 0.7612;
(iii) equal to or greater than $60.00 but less than $67.00, the Exchange
Ratio shall be equal to $51.00 divided by the Average Stock Price; or
(iv) less than $60.00, the Exchange Ratio shall be equal to $51.00 divided
by the Average Stock Price (provided that Beta will have the right to
terminate this Agreement by reason of such Average Stock Price pursuant
to Section 7.01(i)), EXCEPT THAT if the Company has given notice in
accordance with Section 7.01(i), the Exchange Ratio shall be fixed at
0.8500.
"Average Stock Price" means the average of the Daily Per Share Prices (as
hereinafter defined) for the fifteen consecutive trading days ending on the
fourth trading day prior to the Company Shareholders Meeting (as defined in
Section 2.13). The "Daily Per Share Price" for any trading day means the
weighted average of the per share selling prices on the New York Stock Exchange,
Inc. (the "NYSE") of Tyco Common Shares (as reported in the NYSE Composite
Transaction Tape) for that day.
(b) CANCELLATION. Each Share held in the treasury of the Company and each
Share owned by Beta, Merger Sub or any direct or indirect, wholly-owned
subsidiary of the Company or Tyco immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) COMPANY/EQUITY AWARDS. (i) STOCK OPTIONS. Each option outstanding at the
Effective Time to purchase shares of Company Common Stock (a "Stock Option")
granted under (A) the Company's Stock Option Plan for Outside Directors, as
amended, (B) the Company's 1993 Long-Term Equity Incentive Plan, as amended (the
"1993 Plan") or (C) any other stock option plan or agreement of the Company
(collectively, the "Company Stock Option Plans") shall constitute an option (an
"Adjusted Option") to acquire, on the same terms and conditions MUTATIS MUTANDIS
as were applicable under such Stock Option prior to the Effective Time (but
taking account of the Merger), the number of Tyco Common Shares (rounded to the
nearest whole Tyco Common Share) as the holder of such Stock Option would have
been entitled to receive pursuant to the Merger had such holder exercised such
Stock Option in full immediately prior to the Effective Time, at a price per
share (rounded to the nearest whole cent) equal to (x) the aggregate exercise
price for Company Common Stock otherwise purchasable pursuant to such Stock
Option divided by (y) the number of Tyco Common Shares deemed purchasable
pursuant to such Adjusted Option. The other terms of each such Stock Option, and
the plans under which they were issued, shall continue to apply in accordance
with their terms, including, to the extent provided therein, the acceleration of
vesting of such Stock Options in connection with the transactions contemplated
hereby. As soon as practicable after the Effective Time, Beta shall cause to be
delivered to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and that such Stock Option
shall continue in effect on the same terms and conditions (subject to the
adjustments as a result of the Merger described in this Section 1.06(c)).
(ii) RESTRICTED STOCK. Except as set forth on Section 1.06(c)(ii) of the
Company Disclosure Schedule (as defined in Section 2.01) and subject to the
immediately following sentence, all restricted Shares subject to awards granted
pursuant to the 1993 Plan or pursuant to any other plan or agreement of the
Company, including but not limited to "Performance Restricted Shares," in
accordance with the terms of such plans and agreements as in effect on the date
hereof, shall become immediately vested and free
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of restrictions as of the Effective Time and each such award shall be converted
into the number of Tyco Common Shares calculated by multiplying (A) the sum of
(1) the number of restricted Shares subject to such award plus (2) the number of
phantom Shares credited to the awardee's "Dividend Reinvestment Account" by (B)
the Exchange Ratio. Notwithstanding the immediately preceding sentence, awards
of Performance Restricted Shares granted to an employee who is party to an
"Executive Severance Agreement" with the Company, in accordance with the terms
of such Executive Severance Agreement as in effect on the date hereof, shall, as
of the Effective Time, become immediately vested and free of restrictions as of
consummation of the Merger, and such award shall be converted into a number of
Tyco Common Shares equal to two times the product of (A) the sum of (1) the
number of restricted Shares subject to such award plus (2) the number of phantom
Shares credited to the awardee's Dividend Reinvestment Account and (B) the
Exchange Ratio.
(iii) BONUS UNITS. Bonus Units subject to awards granted under the Company's
Bonus Plan (Stock plus Cash) (the "Stock Plus Cash Plan"), in accordance with
the terms of such Plan as in effect on the date hereof (but subject to the terms
of any Executive Severance Agreement with the holder of such a Bonus Unit as in
effect on the date hereof), shall, as of the Effective Time, be converted into
Bonus Units relating to Tyco Common Shares. The number of Tyco Common Shares to
be issued in respect of each such award of Bonus Units shall be the result
obtained by (A) calculating the excess, if any, of (1) the "Market Value" (as
defined in the Stock Plus Cash Plan) or the "Fair Market Value" (as defined in
Section 2(a) of the Executive Severance Agreement with the Company), as
applicable to the particular holder (the applicable value being referred to as
the "Market Price") over (2) the per Bonus Unit Designated Value (as defined in
the Stock Plus Cash Plan) of such award; (B) multiplying the result obtained
pursuant to clause (A) by the number of Bonus Units subject to such award; (C)
dividing the product obtained pursuant to clause (B) by the Market Price; and
(D) multiplying the quotient obtained pursuant to clause (C) by the Exchange
Ratio. The Tyco Common Shares so determined shall be issued on the date or dates
set forth under the terms of the agreement evidencing the award of Bonus Units,
subject to the terms of the applicable Executive Severance Agreement as in
effect on the date hereof. In addition, the Cash Bonus (as defined in the Stock
Plus Cash Plan) in respect thereof shall be paid in accordance with the terms of
such Plan as in effect of the date hereof, subject to the terms of the
applicable Executive Severance Agreement as in effect on the date hereof.
Bonus Units subject to awards granted under the 1993 Plan shall be payable
as of the Effective Time in accordance with the terms of such Plan as in effect
on the date hereof, in a number of Tyco Common Shares calculated as follows: the
number of Tyco Common Shares to be issued as of such date shall be the result
obtained by (A) calculating the excess, if any, of (1) the "Fair Market Value"
(as defined in the 1993 Plan) or the "Fair Market Value" (as defined in Section
2(a)) of the Executive Severance Agreement with the Company), as applicable to
the particular holder (the applicable value being referred to as the "Market
Price") over (2) the per Bonus Unit Designated Value (as defined in the 1993
Plan) of such award; (B) multiplying the result obtained pursuant to clause (A)
by the number of Bonus Units subject to such award; (C) dividing the product
obtained pursuant to clause (B) by the Market Price; and (D) multiplying the
quotient obtained pursuant to clause (C) by the Exchange Ratio. In addition, the
Cash Bonus (as defined in such Plan) in respect of such distribution shall be
paid to each holder of such Bonus Units in accordance with the terms of such
Plan as in effect of the date hereof, subject to the terms of the applicable
Executive Severance Agreement as in effect on the date hereof.
(iv) PHANTOM SHARES. The number of phantom Shares credited to a
participant's account under the Company's Deferred Compensation Plan, Deferred
Compensation Plan for Non-Employee Directors and Deferred Stock Accumulation
Plan for Outside Directors, in accordance with the terms of such Plan as in
effect of the date hereof, shall be adjusted by multiplying such number of
phantom Shares by the Exchange Ratio. Such accounts shall otherwise be subject
to the terms of such Plans.
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Beta shall take all action necessary such that Tyco will reserve for
issuance a sufficient number of Tyco Common Shares for delivery upon exercise of
Adjusted Options and distributions in respect to Bonus Units and restricted
stock awards in accordance with this Section 1.06(c). As soon as practicable
following the Effective Time, Beta shall take all action necessary such that
Tyco will register the Tyco Common Shares subject to the Adjusted Options under
the Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission ("SEC") thereunder (the "Securities Act")
pursuant to a registration statement on Form S-8 (or any successor or other
appropriate form) to the extent such registration is required under the
Securities Act, and to use at least such efforts as are applied to Tyco's other
stock options generally to cause the effectiveness of such registration
statement or registration statements (and the current status of the prospectus
or prospectuses contained therein) to be maintained for so long as the Adjusted
Options remain outstanding (subject to interruptions of such effectiveness or
current status as may be reasonably required from time to time, and are
applicable to registration statements of Tyco with respect to its option plans
generally, because of developments affecting Tyco or otherwise).
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, $0.01 par value
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be appropriately
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Tyco Common Shares or Company Common Stock), distribution, exercise or exchange
of Rights (as defined in Section 4.02(d)) or such Rights becoming exercisable,
reorganization, recapitalization, split up, combination or exchange of shares or
other like event with respect to Tyco Common Shares or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
(f) FRACTIONAL SHARES. No certificates or scrip representing less than one
Tyco Common Share shall be issued upon the surrender for exchange of a
certificate or certificates or other evidence for shares issued pursuant to the
Company's direct registration system which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates"). In lieu of any such
fractional share, each holder of Shares who would otherwise have been entitled
to a fraction of a Tyco Common Share upon surrender of Certificates for exchange
shall be paid upon such surrender cash (without interest) in an amount equal to
such fraction multiplied by the last reported sale price per Tyco Common Share
on the NYSE Composite Transaction Tape on the last trading day prior to the date
of the Effective Time.
SECTION 1.07. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. At or prior to
the Effective Time, Beta shall cause to be supplied to or for such bank or trust
company as shall be designated by Beta and shall be reasonably acceptable to the
Company (the "Exchange Agent"), in trust for the benefit of the holders of
Company Common Stock, for exchange in accordance with this Section 1.07 through
the Exchange Agent, certificates evidencing the Tyco Common Shares issuable
pursuant to Section 1.06(a) and the cash to be paid in lieu of fractional shares
in exchange for outstanding Shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Beta will cause the Exchange Agent to mail to each holder of
record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Beta may reasonably
specify), and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing Tyco Common Shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor solely (A) certificates evidencing that
number of whole Tyco Common Shares which such holder has the right
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to receive in accordance with the Exchange Ratio in respect of the Shares
formerly evidenced by such Certificate and (B) cash in respect of fractional
shares as provided in Section 1.06(f) (the Tyco Common Shares and cash in
respect of fractional shares being, collectively, the "Merger Consideration").
The holder of such Certificate, upon its exchange for Tyco Common Shares, shall
also receive any dividends or other distributions to which such holder is
entitled pursuant to Section 1.07(c). Certificates surrendered pursuant to this
Section 1.07(b) shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company as of the Effective Time, Merger Consideration, dividends or
distributions may be issued and paid in accordance with this Article I to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 1.07(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented Shares of
Company Common Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends or other distributions,
to evidence the ownership of the number of full Tyco Common Shares, and cash in
respect of fractional shares, into which such shares of the Company Common Stock
shall have been so converted. The provisions of this Section 1.07 shall be
appropriately adjusted to the extent necessary to preserve and implement the
intent of this section with respect to Certificates issued pursuant to the
direct registration system.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the Effective Time with respect to Tyco
Common Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Tyco Common Shares
he is entitled to receive until the holder of such Certificate shall surrender
such Certificate in accordance with the provisions of Section 1.07(b). Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole Tyco Common
Shares issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Tyco Common
Shares.
(d) TRANSFERS OF OWNERSHIP. If any certificate for Tyco Common Shares is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Beta or any agent designated by it any transfer or other taxes required
by reason of the issuance of a certificate for Tyco Common Shares in any name
other than that of the registered holder of the certificate surrendered, or
establish to the satisfaction of Beta or any agent designated by it that such
tax has been paid or is not payable.
(e) ESCHEAT. Neither Beta, Merger Sub nor the Company nor any of their
respective affiliates shall be liable to any holder of Company Common Stock for
any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. The Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock and from any cash dividends or
other distributions that the holder is entitled to receive under Section
1.07(c), such amounts as the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or non-United States tax law. To the extent that amounts are so
withheld by the Exchange Agent, such portion of the Merger Consideration and
other such amounts payable under Section 1.07(c) that are withheld shall be
treated for all purposes of this Agreement as having been received by the holder
of the Shares in respect of which such deduction and withholding was made by the
Exchange Agent.
(g) UNDISTRIBUTED CERTIFICATES. Any portion of the certificates evidencing
the Tyco Common Shares and the cash to be paid in lieu of fractional shares
supplied to the Exchange Agent which remains
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undistributed to the holders of the Certificates for one year after the
Effective Time shall be delivered to Beta, upon demand, and any holders of the
Certificates who have not theretofore complied with this Section 1.07 shall
thereafter look only to Beta for payment of their claim for Merger Consideration
and any dividends or distributions with respect to Tyco Common Shares.
SECTION 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 1.09. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
SECTION 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such Tyco Common
Shares as may be required pursuant to Section 1.06(a); PROVIDED, HOWEVER, that
Beta may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Tyco, Beta or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
SECTION 1.11. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and the regulations promulgated thereunder and (ii)
subject to applicable accounting standards, qualify for accounting treatment as
a pooling of interests. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
SECTION 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Beta,
Merger Sub and the Company will take all such reasonable and lawful actions as
may be necessary or appropriate in order to effectuate the Merger and the other
transactions contemplated by this Agreement in accordance with this Agreement as
promptly as possible. If, at any time after the Effective Time, any such further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company and
Merger Sub, the officers and directors of the Company and Merger Sub immediately
prior to the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
SECTION 1.13. MATERIAL ADVERSE EFFECT. When used in connection with the
Company or any of its subsidiaries or Tyco or any of its subsidiaries, as the
case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is or would reasonably be expected to be materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and its subsidiaries or Tyco and its
subsidiaries, as the case may be, in each case taken as a whole; provided,
however, that effects of changes that are applicable to (A) the United States
economy generally or (B) the United States securities markets generally shall be
excluded from the definition of "Material Adverse Effect" and from any
determination as to whether a Material Adverse Effect has occurred or may occur.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Beta and Merger Sub as
follows:
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power or authority
would not reasonably be expected to have a Material Adverse Effect. Each of the
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have a Material Adverse Effect. A true and complete
list of all of the Company's "significant" subsidiaries, as defined in
Regulation S-X, is included as an exhibit to the Company's 1997 Annual Report on
Form 10-K (the "Company Significant Subsidiaries"). The Company has furnished or
will furnish to Beta a list of all subsidiaries of the Company together with the
jurisdiction of incorporation of each such subsidiary and the percentage of each
such subsidiary's outstanding capital stock owned by the Company or another
subsidiary of the Company in Section 2.01of the written disclosure schedule
previously delivered by the Company to Beta (the "Company Disclosure Schedule")
or in Section 2.01 of the supplement to the Company Disclosure Schedule to be
delivered to Beta not later than 14 days from the date of this Agreement (the
"Supplemental Company Disclosure Schedule"). Except as set forth in Section 2.01
of the Company Disclosure Schedule or the Company SEC Reports (as defined in
Section 2.07 below), the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), with respect to which interest the Company has
invested (and currently owns) or is required to invest $10,000,000 or more,
excluding securities in any publicly-traded company held for investment by the
Company and comprising less than five percent of the outstanding stock of such
company.
SECTION 2.02. ARTICLES OF INCORPORATION AND BYLAWS. The Company has
heretofore made available to Beta a complete and correct copy of its Restated
Articles of Incorporation and Bylaws as amended to date (the "Company Charter
Documents"), and will make available to Beta , as promptly as practicable, the
Articles of Incorporation and Bylaws (or equivalent organizational documents) of
each of its subsidiaries reasonably requested by Beta (the "Subsidiary
Documents"). Such Company Charter Documents and Subsidiary Documents are in full
force and effect. Neither the Company nor any of the Company Significant
Subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents, except for
violations of the documents which do not and are not reasonably likely to
materially interfere with the operations of such entity. Neither the Company nor
any of its subsidiaries is in violation of any of the provisions of its Articles
of Incorporation or Bylaws or equivalent organizational documents, except for
violations of such documents which, individually or in the aggregate, do not and
would not reasonably be expected to have a Material Adverse Effect.
SECTION 2.03. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 700,000,000 shares of Company Common Stock. As of November
18, 1998, 218,789,869 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable
(excluding shares which are issued but not outstanding all of which are not
entitled to vote), (iii) no shares of Company Common Stock were held by
subsidiaries of the Company,
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(iv) 9,260,282 shares of Company Common Stock were reserved for existing grants
and 739,758 shares were reserved for future grants pursuant to the Company Stock
Option Plans, (v) 3,000,000 shares of Company Common Stock were reserved and
available for future issuance pursuant to the Company's 1998 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), and (vi) 25,000,000 shares of Company
Common Stock were reserved and available for issuance pursuant to the Company's
proposed "Flexitrust Agreement" (the "Flexitrust") described in Amendment No. 20
to the Company's 14D-9, filed with the SEC on September 28, 1998. Except as set
forth in Section 2.03 of the Company Disclosure Schedule, no change in such
capitalization has occurred since November 18, 1998, except for changes
resulting from the exercise of Stock Options. Except as set forth in Section
2.01, this Section 2.03 or Section 2.11 or in Section 2.03 or Section 2.11 of
the Company Disclosure Schedule or the Company SEC Reports or as contemplated by
the Stock Option Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character binding on the Company
or any of its subsidiaries relating to the issued or unissued capital stock of
the Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any of its subsidiaries. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully-paid and nonassessable. Except
as disclosed in Section 2.03 of the Company Disclosure Schedule or the Company
SEC Reports, there are no obligations, contingent or otherwise, of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of Company Common Stock or the capital stock of any subsidiary. Except as
disclosed in Section 2.03 of the Company Disclosure Schedule or the Company SEC
Reports, there are no obligations, contingent or otherwise, of the Company or
any of its subsidiaries to provide funds to or make any investment (in the form
of a loan, capital contribution or otherwise) in any such subsidiary or any
other entity other than guarantees of bank obligations of subsidiaries entered
into in the ordinary course of business and other than obligations in amounts
less than $3,000,000 individually and $25,000,000 in the aggregate. Except as
set forth in Sections 2.01 and 2.03 of the Company Disclosure Schedule, all of
the outstanding shares of capital stock (other than directors' qualifying
shares) of each of the Company's subsidiaries are duly authorized, validly
issued, fully-paid and nonassessable, and all such shares (other than directors'
qualifying shares and a de minimis number of shares owned by employees of such
subsidiaries) are owned by the Company or another subsidiary free and clear of
all security interests, liens, claims, pledges, agreements, limitations in the
Company's voting rights, charges or other encumbrances of any nature whatsoever.
(b) The Company's Board of Directors has rescinded all authority of the
Company to repurchase any of its securities and has resolved to terminate the
Company's tender for shares of Company Common Stock pursuant to its Offer to
Purchase, dated October 9, 1998 (the "Company's Tender Offer"), immediately upon
the execution of this Agreement and without having purchased or accepted for
purchase any shares of Company Common Stock, and the Company has no obligation
to purchase or accept for purchase any such shares pursuant thereto or any other
securities of the Company. The Company will publicly announce such termination
by 9:00 a.m. E.S.T. on November 23, 1998.
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT AND STOCK OPTION
AGREEMENT. The Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement and to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Stock Option Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or the Stock Option Agreement or to consummate the transactions so contemplated
(other than the approval of the Merger and this Agreement by the Company's
shareholders in accordance with the PBCL and the Company's Charter Documents).
As of the date hereof, the Board of Directors
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of the Company has determined that it is advisable and in the best interest of
the Company's shareholders for the Company to enter into this Agreement and the
Stock Option Agreement and to consummate the Merger upon the terms and subject
to the conditions of this Agreement and have adopted resolutions so that
Subchapters 25F and Section 2538 of the PBCL are not applicable to Tyco or any
of its affiliates or to the Merger or the other transactions contemplated by
this Agreement. This Agreement and the Stock Option Agreement have been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Tyco, Beta and Merger Sub of each such
agreement and/or the guarantee thereof, as applicable, each constitutes a legal,
valid and binding obligation of the Company.
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
2.05(a) of the Company Disclosure Schedule includes, as of the date hereof, a
list of (i) other than intercompany, all loan agreements, indentures, mortgages,
pledges, conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit, equipment leases
or lease purchase agreements, each in an amount equal to or exceeding
$15,000,000 to which the Company or any of its subsidiaries is a party or by
which any of them is bound; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which the Company or any of its subsidiaries
is a party or by which any of them or any of their respective properties or
assets are bound or affected, but excluding contracts, agreements, commitments
or other understandings or arrangements entered into in the ordinary course of
business and involving, in the case of any such contact, agreement, commitment,
or other understanding or arrangement, individual payments or receipts by the
Company or any of its subsidiaries of less than $15,000,000 over the term of
such contract, commitment, agreement, or other understanding or arrangement; and
(iii) all agreements which are required to be filed as "material contracts" with
the SEC pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, and the SEC's rules and regulations thereunder (the "Exchange Act") but
have not been so filed with the SEC.
(b) Except as set forth in Section 2.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement and the Stock Option
Agreement by the Company does not, and the performance of this Agreement and the
Stock Option Agreement by the Company will not, (i) conflict with or violate the
Restated Articles of Incorporation or Bylaws of the Company, (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default), or impair the Company's or any of its subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on (including a right to
purchase) any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
is bound or affected, except, in the case of clauses (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(c) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each, a
"Governmental Authority"), except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, state securities laws ("Blue Sky Laws"),
the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
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thereunder (the "HSR Act"), filings under the Exon-Florio Act, filings and
consents under any applicable foreign laws intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade ("Foreign Monopoly Laws"), filings and consents as may be required under
any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and the filing and recordation of
appropriate merger or other documents as required by the PBCL, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay the Company
from performing its material obligations under this Agreement or the Stock
Option Agreement, or would not otherwise reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, or (iii) as to which any
necessary consents, approvals, authorizations, permits, filings or notifications
have heretofore been obtained or filed, as the case may be, by the Company.
SECTION 2.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
2.06(a) of the Company Disclosure Schedule or the Company SEC Reports, neither
the Company nor any of its subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which its or any of
their respective properties is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.06(b) of the Company Disclosure
Schedule or the Company SEC Reports, the Company and its subsidiaries hold all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company and its subsidiaries taken as a whole
as it is now being conducted (collectively, the "Company Permits"), except where
the failure to hold such Company Permits would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except as described in the Company SEC Reports or where the failure to so comply
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 2.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed
all forms, reports and documents required to be filed with the SEC since
December 31, 1995 (collectively, the "Company SEC Reports"). Except as disclosed
in Section 2.07 of the Company Disclosure Schedule, the Company SEC Reports (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or in the Company SEC Reports), and each fairly
presents in all material respects the consolidated financial position of the
Company and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are
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subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.08 of the Company Disclosure Schedule or the Company SEC Reports or
actions (other than actions of the type prohibited by Section 4.01) relating to
the unsolicited efforts of AlliedSignal, Inc. ("AlliedSignal") to acquire the
Company, since September 30, 1998, the Company has conducted its business in the
ordinary course and there has not occurred: (i) any changes, effects or
circumstances constituting, individually or in the aggregate, a Material Adverse
Effect; (ii) any amendments or changes in the Restated Articles of Incorporation
or Bylaws of the Company; (iii) any damage to, destruction or loss of any asset
of the Company (whether or not covered by insurance) that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
(iv) any material change by the Company in its accounting methods, principles or
practices; or (v) other than in the ordinary course of business, any sale of a
material amount of assets of the Company.
SECTION 2.09. NO UNDISCLOSED LIABILITIES. Except as set forth in Section
2.09 of the Company Disclosure Schedule or the Company SEC Reports, neither the
Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise), except liabilities (a) in the aggregate adequately
provided for in the Company's unaudited balance sheet (including any related
notes thereto) as of September 30, 1998 included in the Company's Quarterly
Report of Form 10-Q for the quarter ended September 30, 1998 (the "1998 Balance
Sheet"), (b) incurred in the ordinary course of business and not required under
GAAP to be reflected on the 1998 Balance Sheet, (c) incurred since September 30,
1998 in the ordinary course of business, (d) incurred in connection with this
Agreement or the Merger or the other transactions contemplated hereby, (e) for
fees and expenses relating to AlliedSignal's unsolicited efforts to acquire the
Company or with respect to the Company's Tender Offer, or (f) which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.10. ABSENCE OF LITIGATION. Except as set forth in Section 2.10 and
Section 2.19(c) of the Company Disclosure Schedule or the Company SEC Reports or
arising out of transactions contemplated by this Agreement, there are no claims,
actions, suits, proceedings or investigations pending or, to the knowledge of
the Company, overtly threatened against the Company or any of its subsidiaries,
or any properties or rights of the Company or any of its subsidiaries, before
any court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
2.11(a) of the Company Disclosure Schedule lists all employee pension benefit
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), all employee welfare benefit plans (as defined
in Section 3(1) of ERISA), and all other bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar fringe or employee benefit plans, programs or arrangements (including
those which contain change of control provisions or pending change of control
provisions), and any employment, executive compensation or severance agreements
(including those which contain change of control provisions or pending change of
control provisions), written or otherwise, as amended, modified or supplemented,
for the benefit of, or relating to, any former or current employee, officer,
director or consultant (or any of their beneficiaries) of the Company or any
other entity (whether or not incorporated) which is a member of a controlled
group including the Company or which is under common control with the Company
within the meaning of Sections 414(b), (c), (m) or (o) of the Code or Section
4001(a) (14) or (b) of ERISA (a "Company ERISA Affiliate"), or any subsidiary of
the Company, as well as each plan with respect to which the Company or a Company
ERISA Affiliate could incur liability under Title IV of ERISA or Section 412 of
the Code (together for the purposes of this Section 2.11, the "Company Employee
Plans"); provided, however, that a list of (i) all Company International Plans
(as defined in Section
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2.11(g) hereof) not currently set forth on Section 2.11(a) of the Company
Disclosure Schedule and (ii) all individual employment, incentive or
compensation arrangements with non-officers of the Company not currently set
forth on Section 2.11(a) of the Company Disclosure Schedule shall be provided by
the Company to Beta on Section 2.11(a) of the Supplemental Company Disclosure
Schedule. To the Company's knowledge, failure to satisfy its obligations under
the Company Employee Plans referred to in clauses (i) and (ii) of the
immediately preceding sentence would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect. The Company has made
available to Beta, prior to the date of this Agreement, or the Company will make
available not later than 30 days after the date of this Agreement, copies of (i)
each such written Company Employee Plan (or a written description of any Company
Employee Plan which is not written) and all related trust agreements, insurance
and other contracts (including policies), summary plan descriptions, summaries
of material modifications and communications distributed to plan participants,
(ii) the three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Company Employee Plan
required to make such a filing, (iii) the most recent actuarial valuation for
each Company Employee Plan subject to Title IV of ERISA, (iv) the latest reports
which have been filed with the Department of Labor with respect to each Company
Employee Plan required to make such filing and (v) the most recent favorable
determination letters issued for each Company Employee Plan and related trust
which is intended to be qualified under Section 401(a) of the Code (and, if an
application for such determination is pending, a copy of the application for
such determination). For purposes of this Section 2.11, the term "material,"
when used with respect to (i) any Company Employee Plan, shall mean that the
Company or a Company ERISA Affiliate has incurred or may incur obligations in an
amount exceeding $1,250,000 with respect to such Company Employee Plan, and (ii)
any liability, obligation, breach or non-compliance, shall mean that the Company
or a Company ERISA Affiliate has incurred or may incur obligations in an amount
exceeding $750,000, with respect to any one such or series of liabilities,
obligations, breaches, defaults, violations or instances of non-compliance.
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule or the Company SEC Reports, (i) none of the Company Employee Plans
promises or provides retiree medical or other retiree welfare benefits to any
person, and none of the Company Employee Plans is a "multiemployer plan" as such
term is defined in Section 3(37) of ERISA; (ii) no party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code) has at any time engaged in a transaction with respect to any Company
Employee Plan which could subject the Company or any Company ERISA Affiliate,
directly or indirectly, to a material tax, penalty or other material liability
for prohibited transactions under ERISA or Section 4975 of the Code; (iii) no
fiduciary of any Company Employee Plan has breached any of the responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA, which breach
would reasonably be expected to result in any material liability to the Company
or any Company ERISA Affiliate; (iv) all Company Employee Plans have been
established and maintained substantially in accordance with their terms and have
operated in compliance in all material respects with the requirements of
applicable law, and may by their terms be amended and/or terminated at any time
subject to applicable law and the terms of each Company Employee Plan, and the
Company and each of its subsidiaries have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any default or violation
by any other party to, any of the Company Employee Plans; (v) each Company
Employee Plan which is intended to be qualified under Section 401(a) of the Code
is the subject of a favorable determination letter from the IRS, and, to the
Company's knowledge, nothing has occurred which may reasonably be expected to
impair such determination; (vi) all contributions required to be made with
respect to any Company Employee Plan pursuant to Section 412 of the Code, or the
terms of the Company Employee Plan or any collective bargaining agreement, have
been made on or before their due dates (including any extensions thereof); (vii)
with respect to each Company Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding
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any such event for which the 30 day notice requirement has been waived under the
regulations to Section 4043 of ERISA) has occurred for which there is any
material outstanding liability to the Company or any Company ERISA Affiliate nor
would the consummation of the transactions contemplated hereby (including the
execution of this Agreement) constitute a reportable event for which the 30-day
requirement has not been waived; and (viii) neither the Company nor any Company
ERISA Affiliate has incurred or reasonably expects to incur any material
liability under Title IV of ERISA including, without limitation, with respect to
an event described in Section 4062, 4063 or 4041 of ERISA (other than liability
for premium payments to the Pension Benefit Guaranty Corporation (the "PBGC")
arising in the ordinary course).
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds (i) any option to purchase Company
Common Stock as of the date hereof, together with the number of shares of
Company Common Stock subject to such option, the option price of such option (to
the extent determined as of the date hereof), whether such option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code (an "ISO"), and the expiration date of such option; (ii) any shares of
Company Common Stock that are restricted; and (iii) any other right, directly or
indirectly, to receive Company Common Stock, together with the number of shares
of Company Common Stock subject to such right.
(d) To the extent not already included and so labelled in Section 2.11(a) of
the Company Disclosure Schedule, Section 2.11(d) of the Company Disclosure
Schedule sets forth a true and complete list of (i) all employment agreements
with officers of the Company or any of its subsidiaries; (ii) all agreements
with consultants who are individuals obligating the Company or any of its
subsidiaries to make annual cash payments in an amount exceeding $375,000; (iii)
all agreements with respect to the services of independent contractors or leased
employees whether or not they participate in any of the Company Employee Plans
obligating the Company or any of its subsidiaries to make annual cash payments
in the aggregate exceeding $375,000; (iv) all officers of the Company or any of
its subsidiaries who have executed a non-competition agreement with the Company
or any of its subsidiaries; (v) all severance agreements, programs and policies
of the Company or any of its subsidiaries with or relating to its employees, in
each case with outstanding commitments exceeding $375,000, excluding programs
and policies required to be maintained by law; and (vi) all plans, programs,
agreements and other
arrangements of the Company which contain change of control provisions.
(e) Except as set forth in Section 2.11(e) of the Company Disclosure
Schedule: (i) the PBGC has not instituted proceedings to terminate any Company
Employee Plan that is subject to Title IV of ERISA (each, a "Company Defined
Benefit Plan"); (ii) the Company Defined Benefit Plans have no accumulated or
waived funding deficiencies within the meaning of Section 412 of the Code nor
have any extensions of any amortization period within the meaning of Section 412
of the Code or 302 of ERISA been applied for with respect thereto; (iii) as of
January 1, 1998, the present value of the benefit liabilities (within the
meaning of Section 4041 of ERISA) of the Company Defined Benefit Plans,
determined on an ongoing basis using the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan's most recently completed fiscal year, does not exceed
by more than $2,500,000 the value of the Company Defined Benefit Plans' assets
and to the knowledge of the Company, nothing has occurred since the end of the
most recently completed fiscal year that would adversely affect the funding
status of such plans; (iv) all applicable premiums required to be paid to the
PBGC with respect to the Company Defined Benefit Plans have been paid; (v) no
facts or circumstances exist with respect to any Company Defined Benefit Plan
which would give rise to a lien on the assets of the Company under Section 4068
of ERISA or otherwise; and (vi) as of the date hereof, substantially all of the
assets of the Company Defined Benefit Plans are readily marketable securities or
insurance contracts.
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(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule or in the Company SEC Reports, (i) the Company has never maintained an
employee stock ownership plan (within the meaning of Section 4975(e)(7) of the
Code) or any other Company Employee Plan that invests in Company stock; (ii)
since December 31, 1997, the Company has not proposed nor agreed to any increase
in benefits under any Company Employee Plan (or the creation of new benefits) or
change in employee coverage which would materially increase the expense of
maintaining any Company Employee Plan; (iii) the consummation of the
transactions contemplated by this Agreement will not result in an increase in
the amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits or compensation payable in respect of any employee; and
(iv) no person will be entitled to any severance benefits under the terms of any
Company Employee Plan solely by reason of the consummation of the transactions
contemplated by this Agreement.
(g) Each Company Employee Plan covering non-U.S. employees (a "Company
International Plan") has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable laws
(including any special provisions relating to registered or qualified plans
where such Company International Plan was intended to so qualify) and has been
maintained in good standing with applicable regulatory authorities. Except as
set forth on Section 2.11(g) of the Company Disclosure Schedule, the fair market
value of the assets of each funded Company International Plan, if any, (or the
liability of each funded Company International Plan funded through insurance) is
sufficient to procure or provide for the benefits accrued thereunder through the
Effective Time according to the actuarial assumptions and valuations most
recently used to determine employer contributions to the Company International
Plan.
(h) The Company has fiduciary liability insurance of at least $1,500,000 in
effect covering the fiduciaries of the Company Employee Plans (including the
Company) with respect to whom the Company may have liability.
SECTION 2.12. LABOR MATTERS. Except as set forth in Section 2.12 of the
Company Disclosure Schedule or the Company SEC Reports, (i) there are no
controversies pending or, to the knowledge of the Company, threatened, between
the Company or any of its subsidiaries and any of their respective employees,
which controversies have had, or would reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect; (ii) neither the Company
nor any of its United States subsidiaries is in breach of any material
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its United States subsidiaries which would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, nor does the Company or any of its United States subsidiaries
know of any activities or proceedings of any labor union to organize any
significant number of such employees; and (iii) neither the Company nor any of
its subsidiaries is in breach of any material collective bargaining agreement or
other labor union contract, nor has any knowledge of any activities or
proceedings of any labor unions to organize employees, or of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or any of its subsidiaries which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
SECTION 2.13. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
Subject to the accuracy of the representations of Beta in Section 3.13, the
information supplied by the Company in writing specifically for inclusion in the
Registration Statement (as defined in Section 3.13) shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
information supplied by the Company for inclusion in the joint proxy
statement/prospectus to be sent to the shareholders of the Company in connection
with the meeting of the shareholders of the Company to consider the Merger (the
"Company Shareholders Meeting"), and to the shareholders of Tyco in connection
with the meeting of the shareholders of Tyco to consider the issuance of the
Tyco Common
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Shares in connection with the Merger (the "Tyco Shareholders Meeting" and,
together with the Company Shareholders Meeting, the "Shareholders Meetings")
(such proxy statement/prospectus as amended or supplemented is referred to
herein as the "Joint Proxy Statement/Prospectus") will not, on the date the
Joint Proxy Statement/Prospectus (or any amendment thereof or supplement
thereto) is first mailed to shareholders or at the time of the Shareholders
Meetings contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made therein not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Shareholders Meetings which
has become false or misleading. If at any time prior to the Effective Time any
event relating to the Company or any of its respective affiliates, officers or
directors should be discovered by the Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, the Company shall promptly inform Beta and Merger Sub. The
Joint Proxy Statement/Prospectus shall comply in all material respects with the
requirements of the Securities Act and the Exchange Act. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Tyco, Beta or Merger Sub which is contained or
incorporated by reference in, or furnished in connection with the preparation
of, the Joint Proxy Statement/Prospectus.
SECTION 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this Agreement
or as set forth in Section 2.14 of the Company Disclosure Schedule or the
Company SEC Reports, to the best of the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or would reasonably be expected to have the effect
of prohibiting or impairing the conduct of business by the Company or any of its
subsidiaries as currently conducted by the Company or such subsidiary, except
for any prohibition or impairment as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.15. TITLE TO PROPERTY. Except as set forth in Sections 2.15 and
2.19(b) of the Company Disclosure Schedule or the Supplemental Company
Disclosure Schedule, the Company and each of its subsidiaries have good title to
all of their real properties and other assets, free and clear of all liens,
charges and encumbrances, except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially
interfere with the present use of the property affected thereby or which would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, and except for liens which secure indebtedness reflected in the
1998 Balance Sheet; and, to the knowledge of the Company, all leases pursuant to
which the Company or any of its subsidiaries lease from others material amounts
of real or personal property, are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the knowledge of
the Company, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.16. TAXES. Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:
(a) The Company and each of its subsidiaries has timely and accurately
filed, or caused to be timely and accurately filed, all material Tax Returns (as
hereinafter defined) required to be filed by it, and has paid, collected or
withheld, or caused to be paid, collected or withheld, all material amounts of
Taxes (as hereinafter defined) required to be paid, collected or withheld, other
than such Taxes for which adequate reserves in the 1998 Balance Sheet have been
established or which are being contested in good faith. Except as set forth in
Section 2.16(a) of the Company Disclosure Schedule, there are no material claims
or assessments pending against the Company or any of its subsidiaries for any
alleged deficiency in any Tax, there are no pending or threatened audits or
investigations for or relating to any
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liability in respect of any Taxes, and the Company has not been notified in
writing of any proposed Tax claims or assessments against the Company or any of
its subsidiaries (other than in each case, claims or assessments for which
adequate reserves in the 1998 Balance Sheet have been established or which are
being contested in good faith or are immaterial in amount). Neither the Company
nor any of its subsidiaries has executed any waivers or extensions of any
applicable statute of limitations to assess any material amount of Taxes. There
are no outstanding requests by the Company or any of its subsidiaries for any
extension of time within which to file any material Tax Return or within which
to pay any material amounts of Taxes shown to be due on any Tax Return. To the
best knowledge of the Company, there are no liens for material amounts of Taxes
on the assets of the Company or any of its subsidiaries except for statutory
liens for current Taxes not yet due and payable. Other than with respect to the
Company and its subsidiaries, neither the Company nor any of its subsidiaries is
liable for Taxes of any other Person, or is currently under any contractual
obligation to indemnify any person with respect to Taxes (except for customary
agreements to indemnify lenders or security holders in respect of taxes other
than income taxes), or is a party to any tax sharing agreement or any other
agreement providing for payments by the Company or any of its subsidiaries with
respect to Taxes.
(b) For purposes of this Agreement, the term "Tax" shall mean any United
States federal, state, local, non-United States or provincial income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
alternative or add-on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge imposed
by any Governmental Authority, together with any interest or penalty imposed
thereon. The term "Tax Return" shall mean a report, return or other information
(including any attached schedules or any amendments to such report, return or
other information) required to be supplied to or filed with a Governmental
Authority with respect to any Tax, including an information return, claim for
refund, amended return or declaration or estimated Tax.
SECTION 2.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
2.17(a) to the Company Disclosure Schedule or in the Company SEC Reports or as
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, the operations and properties of the Company and its
subsidiaries are in compliance with the Environmental Laws (as hereinafter
defined), which compliance includes the possession by the Company and its
subsidiaries of all permits and governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof.
(b) Except as set forth in Section 2.17(b) of the Company Disclosure
Schedule or the Company SEC Reports or as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, there are
no Environmental Claims (as hereinafter defined), including claims based on
"arranger liability," pending or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries or against any person
or entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed.
(c) Except as set forth on Section 2.17(c) of the Company Disclosure
Schedule or in the Company SEC Reports, there are no past or present actions,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Materials of Environmental Concern (as
hereinafter defined), that are reasonably likely to form the basis of any
Environmental Claim against the Company or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries have retained or assumed, except for such Environmental
Claims that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d)
of the Company Disclosure Schedule or the Company SEC Reports, (i) there are no
off-site locations where the Company or any of its subsidiaries
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has stored, disposed or arranged for the disposal of Materials of Environmental
Concern which have been listed on the National Priority List, CERCLIS, or state
Superfund site list, and the Company and its subsidiaries have not been notified
that any of them is a potentially responsible party at any such location; (ii)
there are no underground storage tanks located on property owned or leased by
the Company or any of its subsidiaries; (iii) there is no friable asbestos
containing material contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries; and (iv) there are no polychlorinated biphenyls (PCBs)
or PCB-containing items contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries.
(e) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any person or entity alleging potential
liability (including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from the
presence, or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by the Company or any
of its subsidiaries.
(ii) "Environmental Laws" means all United States federal, state, local and
non-United States laws, regulations, codes and ordinances, relating to pollution
or protection of human health and the environment (including ambient air,
surface water, ground water, land surface or sub-surface strata), including laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern, including, but not limited to CERCLA, RCRA, TSCA, OSHA,
the Clean Air Act, the Clean Water Act, each as amended or supplemented, and any
applicable transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous materials, hazardous substances and hazardous wastes,
medical waste, toxic substances, petroleum and petroleum products,
asbestos-containing materials, polychlorinated biphenyls, and any other
chemicals, pollutants or substances regulated under any Environmental Law.
SECTION 2.18. BROKERS. No broker, finder or investment banker (other than
Credit Suisse First Boston ("CSFB") and Donaldson, Lufkin & Jenrette ("DLJ"),
the fees and expenses of each of whom will be paid by the Company) is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Beta a
complete and correct copy of all agreements between the Company and CSFB and DLJ
pursuant to which such firms would be entitled to any payment relating to the
transactions contemplated hereunder.
SECTION 2.19. INTELLECTUAL PROPERTY. (a) As used herein, the term
"Intellectual Property Assets" shall mean all worldwide intellectual property
rights, including, without limitation, patents, trademarks, service marks and
copyrights, and registrations and applications therefor, trade names, know-how,
trade secrets, computer software programs and proprietary information. As used
herein, "Company Intellectual Property Assets" shall mean the Intellectual
Property Assets used or owned by the Company or any of its subsidiaries.
(b) Except as set forth in Section 2.19(b) of the Company Disclosure
Schedule or the Supplemental Company Disclosure Schedule, the Company and/or
each of its subsidiaries owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property Assets that are used in and
otherwise material to the business of the Company and its subsidiaries as
currently conducted, without conflict with the rights of others.
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(c) Except as disclosed in Section 2.19(c) of the Company Disclosure
Schedule or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of the Company, are threatened by any person with
respect to the Company Intellectual Property Assets, or (ii) are, to the
knowledge of the Company, currently pending or threatened by any person with
respect to the Intellectual Property Assets of a third party (the "Third Party
Intellectual Property Assets") to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Assets by
or through the Company or any of its subsidiaries.
(d) Except as disclosed in Section 2.19(d) of the Company Disclosure
Schedule or as would not reasonably be expected to have a Material Adverse
Effect, neither the Company nor any of its subsidiaries knows of any valid
grounds for any bona fide claim to the effect that the manufacture, sale,
licensing or use of any product now used, sold or licensed or proposed for use,
sale, license by the Company or any of its subsidiaries infringes on any Third
Party Intellectual Property Assets.
(e) Section 2.19(e) of the Company Disclosure Schedule or the Supplemental
Company Disclosure Schedule sets forth or will set forth a list of (i) all
patents and patent applications owned by the Company and/or each of its
subsidiaries worldwide; (ii) all trademark and service mark registrations and
all trademark and service mark applications, material common law trademarks,
material trade dress and material slogans, and all trade names owned by the
Company and/or each of its subsidiaries worldwide; (iii) all copyright
registrations and copyright applications owned by the Company and/or each of its
subsidiaries worldwide; and (iv) all licenses owned by the Company and/or each
of its subsidiaries in which the Company and/or each of its subsidiaries is (A)
a licensor with respect to any of the patents, trademarks, service marks, trade
names or copyrights listed in Section 2.19(e) of the Company Disclosure Schedule
or the Supplemental Company Disclosure Schedule; or (B) a licensee of any other
person's patents, trade names, trademarks, service marks or copyrights material
to the Company except for any licenses of software programs that are
commercially available "off the shelf." Except as disclosed in Section
2.19(e)(v) of the Company Disclosure Schedule or the Supplemental Company
Disclosure Schedule, the Company and/or each of its subsidiaries has made all
necessary filings and recordations to protect and maintain its interest in the
patents, patent applications, trademark and service mark registrations,
trademark and service mark applications, copyright registrations and copyright
applications and licenses set forth in Section 2.19(e) of the Company Disclosure
Schedule or the Supplemental Company Disclosure Schedule, except where the
failure to so protect or maintain would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect.
(f) To the knowledge of the Company, except as set forth in Section
2.19(e)(v) or 2.19(f) of the Company Disclosure Schedule or the Supplemental
Company Disclosure Schedule or the Company SEC Reports: (i) each patent, patent
application, trademark or service mark registration, and trademark or service
mark application and copyright registration or copyright application of the
Company and/or each of its subsidiaries is valid and subsisting and (ii) each
material license of Company Intellectual Property Assets listed on Section
2.19(e) of the Company Disclosure Schedule or the Supplemental Company
Disclosure Schedule is valid, subsisting and enforceable.
(g) Except as set forth in Section 2.19(g) of the Company Disclosure
Schedule, to the Company's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Company's Intellectual Property
Assets by any third party, including any employee, former employee, independent
contractor or consultant of the Company or any of its subsidiaries which would
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(h) Except as set forth in Section 2.19(h) of the Company Disclosure
Schedule, the disclosure under the heading "YEAR 2000" contained in the
Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998
is accurate and in compliance with applicable law in all material respects.
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SECTION 2.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
2.20 of the Company Disclosure Schedule or the Company SEC Reports or for events
as to which the amounts involved do not, in the aggregate, exceed $300,000,
since the Company's proxy statement dated March 16, 1998, no event has occurred
that would be required to be reported as a Certain Relationship or Related
Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 2.21. INSURANCE. Except as disclosed in Section 2.21 of the Company
Disclosure Schedule or the Company SEC Reports, all material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by the Company or any of its
subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of the Company and its
subsidiaries and their respective properties and assets and are in character and
amount appropriate for the businesses conducted by the Company, except as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.22. PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 2.22(a) of the Company Disclosure Schedule or the Company SEC Reports,
the Company is not aware of any claim, pending or threatened, against the
Company or any of its subsidiaries for injury to person or property of employees
or any third parties suffered as a result of the sale of any product or
performance of any service by the Company or any of its subsidiaries, including
claims arising out of the defective or unsafe nature of its products or
services, which would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.22(b) of the Company Disclosure
Schedule or the Company SEC Reports, there is no pending or, to the knowledge of
the Company, overtly threatened recall or investigation of any product sold by
the Company, which recall or investigation would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.23. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has been advised by its financial advisor, CSFB, to the effect that in
its opinion, as of the date of this Agreement, the Exchange Ratio is fair to the
holders of Shares from a financial point of view.
SECTION 2.24. POOLING MATTERS. To the Company's knowledge and based upon
consultation with its independent accountants, the Company has provided to Beta
and its independent accountants all information concerning actions taken or
agreed to be taken by the Company or any of its affiliates on or before the date
of this Agreement that, if taken, might reasonably be expected to affect
adversely the ability of Tyco to account for the business combination to be
effected by the Merger as a pooling of interests, and the Company has no
knowledge that such business combination cannot be accounted for in that manner.
For purposes of this Section 2.24, references to "knowledge" mean to the actual
knowledge of the Company's Chairman and Chief Executive Officer, Chief Financial
Officer or Controller.
SECTION 2.25. TAX MATTERS. The representations, statements and covenants set
forth in paragraph 2 through 14 of Section 2.25 of the Company Disclosure
Schedule are true and correct in all material respects.
SECTION 2.26. RIGHTS AGREEMENT. The Board of the Directors of the Company
has authorized and approved an amendment to the Rights Agreement (as defined in
Section 4.02(d)) to the effect that (i) none of Beta, Merger Sub and their
affiliates, either individually or as a group, shall become an "Acquiring
Person" (as defined in the Rights Agreement), (ii) no Distribution Date, Section
11(a)(ii) Event, Section 13 Event, Stock Acquisition Date or Triggering Event
(as each such term is defined in the Rights Agreement) (each a "Rights Event")
shall occur, and (iii) an Unsolicited Acquisition Proposal (as defined in the
Rights Agreement) shall not be deemed to have been announced, with respect to
each of clauses (i), (ii) and (iii), by reason of the approval, execution or
delivery of this
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Agreement, the Stock Option Agreement, the consummation of the transactions
contemplated hereby and thereby or any announcement of the same. The Company and
the Rights Agent (as defined in the Rights Agreement) shall execute such
amendment to the Rights Agreement no later than the second business day
following the date hereof.
SECTION 2.27. SUPPLEMENTAL COMPANY DISCLOSURE SCHEDULE. No disclosure which
will be made on the Supplemental Company Disclosure Schedule will be of a matter
which would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BETA AND MERGER SUB
Beta and Merger Sub hereby, jointly and severally, represent and warrant to
the Company as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Tyco and
its subsidiaries is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized and existing or to
have such power or authority would not reasonably be expected to have a Material
Adverse Effect. Each of Tyco and its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not reasonably be expected to have a Material Adverse
Effect. A true and complete list of all of Tyco's subsidiaries, together with
the jurisdiction of incorporation of each subsidiary and the percentage of each
subsidiary's outstanding capital stock owned by Tyco or another subsidiary of
Tyco, is set forth in Section 3.01 of the written disclosure schedule previously
delivered by Beta to the Company (the "Beta Disclosure Schedule"). Except as set
forth in Section 3.01 of the Beta Disclosure Schedule or the Tyco SEC Reports
(as defined in Section 3.07 below), Tyco does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), with respect to which Tyco has invested and
currently owns or is required to invest $7,500,000 or more, excluding securities
in any publicly traded company held for investment by Tyco and comprising less
than five percent of the outstanding capital stock of such company.
SECTION 3.02. MEMORANDUM OF ASSOCIATION AND BYE-LAWS. Beta has heretofore
made available to the Company a complete and correct copy of Tyco's Memorandum
of Association and Bye-Laws, as amended to date (the "Tyco Charter Documents").
Such Tyco Charter Documents are in full force and effect. Neither Tyco, Beta nor
Merger Sub is in violation of any of the provisions of its Memorandum of
Association (or Articles of Incorporation) or bye-laws (or by-laws).
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of Tyco
consists of 1,503,750,000 Tyco Common Shares and 125,000,000 Preference Shares,
$1.00 par value per share ("Tyco Preferred Shares"). (i) As of November 6, 1998,
(I) 647,323,419 Tyco Common Shares were issued and outstanding, all of which are
validly issued, fully paid and non-assessable, (II) no Tyco Preferred Shares
were outstanding and (III) no more than 10,000,000 Tyco Common Shares and no
Tyco Preferred Shares were held by subsidiaries of Tyco (excluding such Tyco
Common Shares held or to be held by Beta for delivery to the shareholders of the
Company as Merger Consideration); (ii) as of September 30, 1998, warrants to
purchase 157,778 Tyco Common Shares were outstanding; and (iii) as of October
21, 1998, approximately 29,500,000 Common Shares were reserved for issuance upon
exercise of stock options issued under Tyco's stock option plans. No material
change in such capitalization has occurred since such dates, respectively, other
than as a result of the exercise of options or warrants outstanding as of such
dates. Except as set forth in Section 3.03 of the Beta Disclosure Schedule or
the Tyco SEC Reports or as contemplated by this Agreement, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character binding on Tyco or any of its subsidiaries relating to the issued or
unissued capital stock of Tyco or any of its subsidiaries or obligating Tyco or
any of its subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, Tyco or any of its subsidiaries. Except as set forth
in Section 3.01 or 3.03 of the Beta Disclosure Schedule, all of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Tyco's
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subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and all such shares (other than directors' qualifying shares) are owned by Tyco
or another subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations in Tyco's voting rights, charges or other
encumbrances of any nature whatsoever.
(b) The Tyco Common Shares to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid and nonassessable and shall be listed,
upon official notice of issuance, for trading on the NYSE.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT AND THE STOCK OPTION
AGREEMENT. Each of Tyco, Beta and Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement and the Stock Option
Agreement, as applicable, and the Tyco guarantees hereof and thereof, as
applicable, and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement, and the Tyco
guarantees thereof, by Tyco, Beta and Merger Sub, as applicable, and the
consummation by Tyco, Beta and Merger Sub of the transactions, contemplated
hereby and thereby, as applicable, have been duly and validly authorized by all
necessary corporate action on the part of Tyco, Beta and Merger Sub, as
applicable, and no other corporate proceedings on the part of Tyco, Beta or
Merger Sub are necessary to authorize this Agreement or the Stock Option
Agreement or to consummate the transactions so contemplated (other than the
approval of the issuance of the Tyco Common Shares in connection with the Merger
by a majority of the votes cast on a proposal to such effect, provided that the
total votes cast on such proposal represent over 50% of the interest of all
securities entitled to vote on such proposal, in accordance with the rules and
regulations of the NYSE, the Companies Act of 1981, as amended, and the Tyco
Charter Documents). The respective Boards of Directors of Tyco and Beta, as
applicable, have each determined that it is advisable and in the best interest
of Tyco's and Beta's shareholders, as applicable, for Beta to enter into this
Agreement and the Stock Option Agreement, for Tyco to guarantee Beta's
obligations hereunder and thereunder, and for Beta to consummate the Merger upon
the terms and subject to the conditions of this Agreement. This Agreement, the
Stock Option Agreement and/or the Tyco guarantees thereof have been duly and
validly executed and delivered by Tyco, Beta and Merger Sub, as applicable, and,
assuming due authorization, execution and delivery by the Company, constitute
the legal, valid and binding obligations of Tyco, Beta and Merger Sub, as
applicable.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section
3.05(a) of the Beta Disclosure Schedule includes, as of the date hereof, a list
of (i) other than intercompany, all loan agreements, indentures, mortgages,
pledges, conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, standby letters of credit, equipment leases
or lease purchase agreements to which Tyco or any of its subsidiaries is a party
or by which any of them is bound, each in an amount exceeding $25,000,000; (ii)
all contracts, agreements, commitments or other understandings or arrangements
to which Tyco or any of its subsidiaries is a party or by which any of them or
any of their respective properties or assets are bound or affected, but
excluding contracts, agreements, commitments or other understandings or
arrangements entered into in the ordinary course of business and involving, in
each case, payments or receipts by Tyco or any of its subsidiaries of less than
$20,000,000 in any single instance; and (iii) all agreements which, as of the
date hereof, are required to be filed with the SEC pursuant to the requirements
of the Exchange Act as "material contracts" but have not been so filed with the
SEC.
(b) Except as set forth in Section 3.05(b) of the Beta Disclosure Schedule,
the execution and delivery of this Agreement, the Stock Option Agreement and
guarantees thereof by Tyco, Beta and Merger Sub, as applicable, do not, and the
performance of this Agreement, the Stock Option Agreement and the guarantees
thereof by Tyco, Beta and Merger Sub, as applicable, will not, (i) conflict with
or violate the Memorandum of Association (or Articles of Incorporation) or
bye-laws (or by-laws) of Tyco, Beta or Merger Sub, (ii) conflict with or violate
any law, rule, regulation, order, judgment or
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decree applicable to Tyco or any of its subsidiaries or by which its or their
respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or impair Tyco's or any of its subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance (including a right to purchase)
on any of the properties or assets of Tyco or any of its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Tyco or any of its
subsidiaries is a party or by which Tyco or any of its subsidiaries or its or
any of their respective properties are bound or affected, except, in the case of
clauses (ii) or (iii), for any such conflicts, violations, breaches, defaults or
other occurrences that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(c) The execution and delivery of this Agreement, the Stock Option Agreement
and the guarantees thereof by Tyco, Beta and Merger Sub, as applicable, do not,
and the performance of this Agreement, the Stock Option Agreement and the
guarantees thereof by Tyco, Beta and Merger Sub, as applicable, will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky
Laws, the pre-merger notification requirements of the HSR Act, filings under the
Exon-Florio Act, Foreign Monopoly Laws, and the filing and recordation of
appropriate merger or other documents as required by the PBCL, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay Tyco, Beta
or Merger Sub from performing their respective material obligations under this
Agreement, the Stock Option Agreement and the guarantees thereof, and would not
otherwise be reasonably expected, individually or in the aggregate, to have a
Material Adverse Effect or (iii) as to which any necessary consents, approvals,
authorizations, permits, filings or notifications have heretofore been obtained
or filed, as the case may be, by Tyco, Beta or Merger Sub.
SECTION 3.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
3.06(a) of the Beta Disclosure Schedule or the Tyco SEC Reports, neither Tyco
nor any of its subsidiaries is in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to Tyco or
any of its subsidiaries or by which its or any of their respective properties is
bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Tyco or any of its subsidiaries is a party or by which Tyco or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Except as disclosed in Section 3.06(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports, Tyco and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business of Tyco and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Tyco Permits") except where the failure to hold
such Tyco Permits would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Tyco and its subsidiaries are in
compliance with the terms of the Tyco Permits, except as described in the Tyco
SEC Reports or where the failure to so comply would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Tyco has filed all
forms, reports and documents required to be filed with the SEC since December
31, 1995 (collectively, the "Tyco SEC Reports"). The Tyco SEC Reports (i) were
prepared in all material respects in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
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time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Except as set
forth in Section 3.07(a) of the Beta Disclosure Schedule, none of Tyco's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Tyco SEC Reports has been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Tyco SEC
Reports), and each fairly presents in all material respects the consolidated
financial position of Tyco and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.08 of the Beta Disclosure Schedule or the Tyco SEC Reports, since June
30, 1998, Tyco has conducted its business in the ordinary course and there has
not occurred: (i) any changes, effects or changed circumstances constituting,
individually or in the aggregate, a Material Adverse Effect; (ii) any amendments
or changes in the Tyco Charter Documents; (iii) any damage to, destruction or
loss of any assets of Tyco (whether or not covered by insurance) that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; (iv) any material change by Tyco in its accounting methods; or
(v) any sale of a material amount of assets of Tyco, except in the ordinary
course of business.
SECTION 3.09. NO UNDISCLOSED LIABILITIES. Except as set forth in Section
3.09 of the Beta Disclosure Schedule or the Tyco SEC Reports, neither Tyco nor
any of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) in the aggregate adequately provided for in
Tyco's unaudited balance sheet (including any related notes thereto) as of June
30, 1998 included in Tyco's Quarterly Report on Form 10-Q for the fiscal period
ended June 30, 1998 (the "1998 Tyco Balance Sheet"), (b) incurred in the
ordinary course of business and not required under GAAP to be reflected on the
1998 Balance Sheet, (c) incurred since June 30, 1998 in the ordinary course of
business, (d) incurred in connection with this Agreement, or the Merger or the
other transactions contemplated hereby, or (e) which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth in Section 3.10 and
3.19(b) of the Beta Disclosure Schedule or the Tyco SEC Reports or arising out
of transactions contemplated by this Agreement, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Beta,
threatened against Tyco or any of its subsidiaries, or any properties or rights
of Tyco or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, that would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section
3.11(a) of the Beta Disclosure Schedule lists all employee pension benefit plans
(as defined in Section 3(2) of ERISA), all employee welfare benefit plans (as
defined in Section 3(1) of ERISA), and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any employment, executive compensation or severance agreements, written or
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any former or current employee, officer, director or consultant (or any of
their beneficiaries) of Tyco or any entity (whether or not incorporated) which
is a member of a controlled group including Tyco or which is under common
control with Tyco within the meaning of
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Section 414(b), (c), (m) or (o) of the Code or Section 4001(a) (14) or (b) of
ERISA ("Tyco ERISA Affiliate"), or any subsidiary of Tyco, as well as each plan
with respect to which Tyco or a Tyco ERISA Affiliate could incur liability under
Title IV of ERISA or Section 412 of the Code (together for the purposes of this
Section 3.11, the "Tyco Employee Plans"). For purposes of this Section 3.11, the
term "material," when used with respect to (i) any Tyco Employee Plan, shall
mean that Tyco or a Tyco ERISA Affiliate has incurred or may incur obligations
in an amount exceeding $5,000,000 with respect to such Tyco Employee Plan, and
(ii) any liability, obligation, breach or non-compliance, shall mean that Tyco
or a Tyco ERISA Affiliate has incurred or may incur obligations in an amount
exceeding $3,000,000, with respect to any one such or series of liabilities,
obligations, breaches, defaults, violations or instances of non-compliance.
(b) Except as set forth in Section 3.11(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports, (i) none of the Tyco Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, and
none of the Tyco Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (ii) no party in interest or disqualified
person (as defined in Section 3(14) of ERISA and Section 4975 of the Code) has
at any time engaged in a transaction with respect to any Tyco Employee Plan
which could subject Tyco or any Tyco ERISA Affiliate, directly or indirectly, to
a material tax, penalty or other material liability for prohibited transactions
under ERISA or Section 4975 of the Code; (iii) no fiduciary of any Tyco Employee
Plan has breached any of the responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA, which breach would reasonably be expected to
result in any material liability to Tyco or any Tyco ERISA Affiliate; (iv) all
Tyco Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance in all material
respects with the requirements of applicable law, and may by their terms be
amended and/or terminated at any time subject to applicable law and the terms of
each Tyco Employee Plan, and Tyco and each of its subsidiaries have performed
all material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
default or violation by any other party to, any of the Tyco Employee Plans; (v)
each Tyco Employee Plan which is intended to be qualified under Section 401(a)
of the Code is the subject of a favorable determination letter from the IRS,
and, to Beta's knowledge, nothing has occurred which may reasonably be expected
to impair such determination; (vi) all contributions required to be made with
respect to any Tyco Employee Plan pursuant to Section 412 of the Code, or the
terms of the Tyco Employee Plan or any collective bargaining agreement, have
been made on or before their due dates (including any extensions thereof); (vii)
with respect to each Tyco Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30 day
notice requirement has been waived under the regulations to Section 4043 of
ERISA) has occurred for which there is any material outstanding liability to
Tyco or any Tyco ERISA Affiliate nor would the consummation of the transaction
contemplated hereby (including the execution of this agreement) constitute a
reportable event for which the 30-day requirement has not been waived; and
(viii) neither Tyco nor any Tyco ERISA Affiliate has incurred or reasonably
expects to incur any material liability under Title IV of ERISA including,
without limitation, with respect to an event described in Section 4062, 4063 or
4041 of ERISA (other than liability for premium payments to the PBGC arising in
the ordinary course).
(c) Section 3.11(c) of the Beta Disclosure Schedule sets forth a true and
complete list of the aggregate number of (i) options to purchase Tyco Common
Shares as of the date hereof, together with the number of Tyco Common Shares
subject to such options, the option prices of such options (to the extent
determined as of the date hereof), whether such options are intended to qualify
as ISOs, and the expiration date of such options; (ii) any Tyco Common Shares
that are restricted; and (iii) any other rights, directly or indirectly, to
receive Tyco Common Shares, together with the number of Tyco Common Shares
subject to such rights, held by each current or former employee, officer or
director of Tyco or any of its subsidiaries.
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(d) To the extent not already included and so indicated in Section 3.11(a)
of the Company Disclosure Schedule, Section 3.11(d) of the Beta Disclosure
Schedule sets forth a true and complete list of (i) all employment agreements
with officers of Tyco or any of its subsidiaries; (ii) all agreements with
consultants who are individuals obligating Tyco or any of its subsidiaries to
make annual cash payments in an amount exceeding $1,500,000; (iii) all
agreements with respect to the services of independent contractors or leased
employees whether or not they participate in any of the Tyco Employee Plans
obligating Tyco or any of its subsidiaries to make annual cash payments in the
aggregate exceeding $1,500,000; (iv) all officers of Tyco or any of its
subsidiaries who have executed a non-competition agreement with Tyco or any of
its subsidiaries; (v) all severance agreements, programs and policies of Tyco or
any of its subsidiaries with or relating to its employees, in each case with
outstanding commitments exceeding $1,500,000, excluding programs and policies
required to be maintained by law; and (vi) all plans, programs, agreements and
other arrangements of Company which contain change in control provisions.
(e) Except as set forth in Section 3.11(e) of the Beta Disclosure Schedule:
(i) the PBGC has not instituted proceedings to terminate any Tyco Employee Plan
that is subject to Title IV of ERISA (each, a "Tyco Defined Benefit Plan"); (ii)
the Tyco Defined Benefit Plans have no accumulated or waived funding
deficiencies within the meaning of Section 412 of the Code nor have any
extensions of any amortization period within the meaning of Section 412 of the
Code or 302 of ERISA been applied for with respect thereto; (iii) as of January
1, 1998, the present value of the benefit liabilities (within the meaning of
Section 4041 of ERISA) of the Company Defined Benefit Plans, determined on an
ongoing basis using the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such plan's actuary with respect to
such plan's most recently completed fiscal year, does not exceed by more than
$10,000,000 the value of the Tyco Defined Benefit Plans' assets and to the
knowledge of Beta, nothing has occurred since the end of the most recently
completed fiscal year that would adversely affect the funding status of such
plans; (iv) all applicable premiums required to be paid to the PBGC with respect
to the Tyco Defined Benefit Plans have been paid; (v) no facts or circumstances
exist with respect to any Tyco Defined Benefit Plan which would give rise to a
lien on the assets of Tyco under Section 4068 of ERISA or otherwise; and (vi)
substantially all the assets of the Tyco Defined Benefit Plans are readily
marketable securities or insurance contracts.
(f) Except as set forth in Schedule 3.08 or 3.11(f) of the Beta Disclosure
Schedule, Tyco does not maintain an employee stock ownership plan (within the
meaning of Section 4975(e)(7) of the Code) or any other Tyco Employee Plan that
invests in Beta stock.
(g) Each Tyco Employee Plan covering non-U.S. employees (a "Tyco
International Plan") has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable laws
(including any special provisions relating to registered or qualified plans
where such Tyco International Plan was intended to so qualify) and has been
maintained in good standing with applicable regulatory authorities. The benefit
liabilities of the Tyco International Plans are adequately provided for on the
consolidated financial statements of Tyco.
(h) Tyco and its affiliates have, in the aggregate, fiduciary liability
insurance of at least $15,000,000 in effect covering the fiduciaries of the Tyco
Employee Plans (including Tyco) with respect to whom Tyco may have liability.
SECTION 3.12. LABOR MATTERS. Except as set forth in Section 3.12 of the Beta
Disclosure Schedule or the Tyco SEC Reports, (i) there are no controversies
pending or, to the knowledge of Tyco or any of its subsidiaries, threatened,
between Tyco or any of its subsidiaries and any of their respective employees,
which controversies have or would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; (ii) neither Tyco nor any of its
United States subsidiaries is in breach of any material collective bargaining
agreement or other labor union contract applicable to persons employed by Tyco
or its United States subsidiaries which would reasonably be expected,
individually or in the
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aggregate, to have a Material Adverse Effect, nor does Tyco or any of its United
States subsidiaries know of any activities or proceedings of any labor union to
organize any significant number of such employees; and (iii) neither Tyco nor
any of its subsidiaries is in breach of any material collective bargaining
agreement or other labor union contract, nor has any knowledge of any strikes,
activities or proceedings of any labor union to organize employees, or of any
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of Tyco or any of its subsidiaries, which would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.13. REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
Subject to the accuracy of the representations of the Company in Section 2.13,
the registration statement on Form S-4 (or on such other form as shall be
appropriate) (as it may be amended, the "Registration Statement") pursuant to
which the Tyco Common Shares to be issued in connection with the Merger will be
registered with the SEC shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements included therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by Tyco, Beta or Merger Sub in writing specifically for
inclusion in the Joint Proxy Statement/Prospectus will not, on the date the
Joint Proxy Statement/Prospectus is first mailed to shareholders or at the time
of the Shareholders Meetings, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Shareholders
Meetings which has become false or misleading. If at any time prior to the
Effective Time any event relating to Tyco, Beta, Merger Sub or any of their
respective affiliates, officers or directors should be discovered by Tyco, Beta
or Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/ Prospectus, Beta or
Merger Sub will promptly inform the Company. The Registration Statement and
Joint Proxy Statement/Prospectus shall comply in all material respects with the
requirements of the Securities Act, the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, Beta and Merger Sub make
no representation or warranty with respect to any information supplied by the
Company which is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Registration Statement or the Joint
Proxy Statement/Prospectus.
SECTION 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, to the best of Beta's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon Tyco or any of its subsidiaries which
has or would reasonably be expected to have the effect of prohibiting or
materially impairing the conduct of business by Tyco or any of its subsidiaries
as currently conducted by Tyco or such Subsidiary, except for any prohibition or
impairment as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 3.15. TITLE TO PROPERTY. Tyco and each of its subsidiaries have good
title to all of their real properties and other assets, free and clear of all
liens, charges and encumbrances, except liens for taxes not yet due and payable
and such liens or other imperfections of title, if any, as do not materially
interfere with the present use of the property affected thereby or which would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, and except for liens which secure indebtedness reflected in the
1998 Balance Sheet; and, to Beta's knowledge, all leases pursuant to which Tyco
or any of its subsidiaries lease from others material amounts of real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of Tyco, under any of
such leases, any existing material default or event of default (or event which
with notice or lapse of time, or both, would constitute a material default),
except where the lack of such good standing, validity and effectiveness, or the
existence of such default or event of
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default would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 3.16. TAXES. Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:
Tyco and each of its subsidiaries has timely and accurately filed, or caused
to be timely and accurately filed, all material Tax Returns required to be filed
by it, and has paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes required to be paid, collected or
withheld, other than such Taxes for which adequate reserves in the September
1998 Tyco Balance Sheet have been established or which are being contested in
good faith. There are no material claims or assessments pending against Tyco or
any of its subsidiaries for any alleged deficiency in any Tax, except as set
forth in Section 3.16 of the Beta Disclosure Schedule, there are no pending or
threatened audits or investigations for or relating to any liability in respect
of any Taxes, and Tyco has not been notified in writing of any proposed Tax
claims or assessments against Tyco or any of its subsidiaries (other than in
each case, claims or assessments for which adequate reserves in the 1998 Tyco
Balance Sheet have been established or which are being contested in good faith
or are immaterial in amount). Neither Tyco nor any of its subsidiaries has
executed any waivers or extensions of any applicable statute of limitations to
assess any material amount of Taxes. There are no outstanding requests by Tyco
or any of its subsidiaries for any extension of time within which to file any
material Tax Return or within which to pay any material amounts of Taxes shown
to be due on any Tax Return. To the best knowledge of Beta, there are no liens
for material amounts of Taxes on the assets of Tyco or any of its subsidiaries
except for statutory liens for current Taxes not yet due and payable. Other than
with respect to Tyco and its subsidiaries, neither Tyco nor any of its
subsidiaries is liable for Taxes of any other Person, or is currently under any
contractual obligation to indemnify any person with respect to Taxes (except for
customary agreements to indemnify lenders or security holders in respect of
taxes other than income taxes), or is a party to any tax sharing agreement or
any other agreement providing for payments by Tyco or any of its subsidiaries
with respect to Taxes.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
3.17(a) of the Beta Disclosure Schedule or the Tyco SEC Reports or as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, the operations and properties of Tyco and its subsidiaries are
in compliance with the Environmental Laws, which compliance includes the
possession by Tyco and its subsidiaries of all permits and governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof.
(b) Except as set forth in Section 3.17(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports or as would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, there are no Environmental
Claims, including claims based on "arranger liability," pending or, to the best
knowledge of Tyco, threatened against Tyco or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim Tyco or any of
its subsidiaries has retained or assumed.
(c) Except as set forth on Section 3.17(c) of the Beta Disclosure Schedule
or in the Tyco SEC Reports, there are no past or present actions, circumstances,
conditions, events or incidents, including the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern, that is
reasonably likely to form the basis of any Environmental Claim against Tyco or
any of its subsidiaries or against any person or entity whose liability for any
Environmental Claim Tyco or any of its subsidiaries have retained or assumed,
except for such Environmental Claims that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 3.17(d)
of the Beta Disclosure Schedule or the Tyco SEC Reports: (i) there are no
off-site locations where Tyco or any of its subsidiaries has stored,
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disposed or arranged for the disposal of Materials of Environmental Concern
which have been listed on the National Priority List, CERCLIS, state Superfund
site list, and Tyco and its subsidiaries have not been notified that any of them
is a potentially responsible party at any such location; (ii) there are no
underground storage tanks located on property owned or leased by Tyco or any of
its subsidiaries; (iii) there is no friable asbestos containing material
contained in or forming part of any building, building component, structure or
office space owned, leased or operated by Tyco or any of its subsidiaries; and
(iv) there are no polychlorinated biphenyls (PCBs) or PCB-containing items
contained in or forming part of any building, building component, structure or
office space owned, leased or operated by Beta or any of its subsidiaries.
SECTION 3.18. BROKERS. No broker, finder or investment banker (other than
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman Brothers Inc., the
fees and expenses of whom will be paid by Beta) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Tyco.
SECTION 3.19. INTELLECTUAL PROPERTY. (a) Tyco and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use all Tyco Intellectual Property Assets that are used in the
business of Tyco and its subsidiaries as currently conducted without conflict
with the rights of others except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. As used
herein, "Tyco Intellectual Property Assets" shall mean the Intellectual Property
Assets used or owned by Tyco or any of its subsidiaries.
(b) Except as disclosed in Section 3.19(b) of the Beta Disclosure Schedule
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, no claims (i) are currently pending or, to the
knowledge of Beta, threatened by any person with respect to the Tyco
Intellectual Property Assets, or (ii) are, to the knowledge of Beta, currently
pending or threatened by any person with respect to Third Party Intellectual
Property Assets to the extent arising out of any use, reproduction or
distribution of such Third Party Intellectual Property Assets by or through Tyco
or any of its subsidiaries.
(c) Except as set forth in Section 3.19(c) of the Beta Disclosure Schedule
or the Tyco SEC Reports or as could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, each patent, patent
application, trademark or service mark registration, and trademark or service
mark application and copyright registration or copyright application of Beta
and/or each of its subsidiaries is valid and subsisting.
(d) Except as set forth in Section 3.19(d) of the Beta Disclosure Schedule,
to Tyco's knowledge, there is no material unauthorized use, infringement or
misappropriation of any of Tyco's Intellectual Property Assets by any third
party, including any employee, former employee, independent contractor or
consultant of Tyco or any of its subsidiaries which would reasonably be
expected, individually or in the aggregate, to result in Material Adverse
Effect.
(e) The disclosure under the heading "Year 2000 Compliance" as set forth in
Section 3.19(e) of the Beta Disclosure Schedule is accurate and would comply in
all material respects with the legal requirements for disclosure of such matters
if included in Tyco's periodic reports filed with the SEC pursuant to the
Exchange Act.
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
3.20 of the Beta Disclosure Schedule or the Tyco SEC Reports, since Tyco's proxy
statement dated February 20, 1998, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction, pursuant to
Item 404 of Regulation S-K promulgated by the SEC.
SECTION 3.21. INSURANCE. Except as disclosed in Section 3.21 of the Beta
Disclosure Schedule or the Tyco SEC Reports, all material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by Tyco or any of its subsidiaries
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are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Tyco and its subsidiaries and their
respective properties and assets and are in character and amount appropriate for
the businesses conducted by Tyco, except as would not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.22. PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 3.22(a) of the Beta Disclosure Schedule or the Tyco SEC Reports, Tyco is
not aware of any claim, pending or threatened, against Tyco or any of its
subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or per-formance of any service
by Tyco or any of its subsidiaries, including claims arising out of the
defective or unsafe nature of its products or services, which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(b) Except as disclosed in Section 3.22(b) of the Beta Disclosure Schedule
or the Tyco SEC Reports, there is no pending or, to the knowledge of Tyco,
overtly threatened, recall or investigation of any product sold by Tyco, which
recall or investigation would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 3.23. OWNERSHIP OF BETA AND MERGER SUB; NO PRIOR ACTIVITIES.
(a) Merger Sub is a direct, wholly-owned subsidiary of Beta and was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement.
(b) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by or undertaken in
connection with this Agreement, Merger Sub has not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
SECTION 3.24. POOLING MATTERS. To Beta's knowledge and based upon
consultation with its independent accountants, Tyco has provided to the Company
and its independent accountants all information concerning actions taken or
agreed to be taken by Tyco or any of its affiliates on or before the date of
this Agreement that, if taken, might reasonably be expected to affect adversely
the ability of Tyco to account for the business combination to be effected by
the Merger as a pooling of interests, and Beta has no knowledge that such
business combination cannot be accounted for in that manner. For purposes of
this Section 3.24, references to "knowledge" mean to the actual knowledge of L.
Dennis Kozlowski and Mark H. Swartz.
SECTION 3.25. TAX MATTERS. The representations, statements, and covenants
set forth in paragraph 2 through 26 of Section 3.25 of the Beta Disclosure
Schedule hereto are true and correct in all material respects.
SECTION 3.26. PBCL SECTION 2538. Other than by reason of this Agreement or
the transactions contemplated hereby, Beta is not an "interested shareholder" of
the Company, as that term is defined in Section 2538 of the PBCL.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Beta shall otherwise agree in writing, and except
as set forth in Section 4.01 of the Company Disclosure Schedule, the Company
shall conduct its business and shall cause the businesses of its subsidiaries to
be conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use reasonable commercial efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, neither the Company nor any of its subsidiaries
shall, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, and
except as set forth in Section 4.01 of the Company Disclosure Schedule, directly
or indirectly do, or propose to do, any of the following without the prior
written consent of Beta, which will not be unreasonably withheld or delayed:
(a) amend or otherwise change the Company's Restated Articles of
Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) in the Company, any of its subsidiaries or affiliates (except for
the issuance of shares of Company Common Stock issuable pursuant to Stock
Options under the Company Stock Option Plans, which options are outstanding
on the date hereof, or pursuant to the Company Stock Purchase Plan as in
effect on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $20,000,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly-owned
subsidiary of the Company may declare and pay a dividend to its parent,
except in no case may the aggregate of such intercompany cross-border
dividends exceed $10,000,000, and except that the Company may declare and
pay prior to the Effective Time quarterly cash dividends of $0.27 per share
consistent with past practice, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) except as required by the terms of any security as in
effect on the date hereof and set forth in Section 4.01(d) of the Company
Disclosure Schedule, amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any
subsidiary to amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire, any of its securities or
any securities of its subsidiaries, including, without limitation, shares of
Company Common Stock, or any option, warrant or right, directly or
indirectly, to acquire any such securities, or propose to do any of the
foregoing, or (iv) settle, pay or discharge any claim, suit or other action
brought or
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threatened against the Company with respect to or arising out of a
shareholder equity interest in the Company;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof other than those listed on Section 4.01(e) of the Company
Disclosure Schedule; (ii) incur any indebtedness for borrowed money, except
for borrowings and reborrowing under the Company's existing credit
facilities or other borrowings not in excess of $15,000,000 plus the amount,
if any, used under such credit facilities as required to fund the Company's
Rabbi Trust in the aggregate or issue any debt securities or assume,
guarantee (other than guarantees of the Company's subsidiaries entered into
in the ordinary course of business) or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or make
any loans or advances, except in the ordinary course of business consistent
with past practice; or (iii) authorize any capital expenditures or purchases
of fixed assets which are, in the aggregate, in excess of $500,000,000 over
the next 12 month period; or (iv) enter into or materially amend any
contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.01(e);
(f) except as set forth in Section 4.01(f) of the Company Disclosure
Schedule, increase the compensation or severance payable or to become
payable to its directors, officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries in
accordance with past practices, or grant any severance or termination pay
(except to make payments required to be made under obligations existing on
the date hereof in accordance with the terms of such obligations) to, or
enter into any employment or severance agreement, with any new employee of
the Company or any of its subsidiaries, except for an agreement entered into
in the ordinary course of business and providing for annual base and bonus
compensation not to exceed $200,000, or establish, adopt, enter into or
amend any collective bargaining agreement, Company Employee Plan (within the
meaning of Section 2.11 of this Agreement), trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees or any of their beneficiaries, except, in each case, as may be
required by law or as would not result in a material increase in the cost of
maintaining such collective bargaining agreement, Company Employee Plan,
trust, fund, policy or arrangement.
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable) except as required by a change in GAAP occurring after the date
hereof;
(h) make any material tax election inconsistent with past practice or
settle or compromise any material United States federal, state, local or
non-United States tax liability, except to the extent the amount of any such
settlement has been reserved for in the financial statements contained in
the Company SEC Reports filed prior to the date of this Agreement or other
settlements not in excess of $10,000,000 in the aggregate;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $10,000,000 in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports filed prior to the date of
this Agreement or incurred in the ordinary course of business and consistent
with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (i) above, or any action which would
make any of the representations or warranties of the Company contained in
this Agreement or the Stock Option Agreement untrue or incorrect or prevent
the Company from performing or cause the Company not to perform its
covenants hereunder or under the Stock Option Agreement.
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SECTION 4.02. NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of its subsidiaries, solicit or encourage the initiation of
(including by way of furnishing information) any inquiries or proposals
regarding any merger, sale of assets, sale of shares of capital stock (including
without limitation by way of a tender offer) or similar transactions involving
the Company or any subsidiaries of the Company that if consummated would
constitute an Alternative Transaction (as defined in Section 7.01) (any of the
foregoing inquiries or proposals being referred to herein as an "Acquisition
Proposal"). Nothing contained in this Agreement shall prevent the Board of
Directors of the Company from (i) furnishing information to a third party which
has made a BONA FIDE Acquisition Proposal that is a Superior Proposal (as
defined below) not solicited in violation of this Agreement, provided that such
third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between the Company and Tyco or
(ii) subject to compliance with the other terms of this Section 4.02, including
Sections 4.02(c) and (d), considering and negotiating a bona fide Acquisition
Proposal that is a Superior Proposal not solicited in violation of this
Agreement; provided that, as to each of clauses (i) and (ii), (x) such actions
occur at a time prior to approval of the Merger and this Agreement at the
Company Shareholders Meeting and (y) the Board of Directors of the Company
reasonably determines in good faith (after due consultation with independent
counsel, which may be Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden,
Arps"), Pepper Hamilton LLP and/or Harkins Cunningham), that it is or is
reasonably likely to be required to do so in order to discharge properly its
fiduciary duties. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means
any proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, all of the equity securities
of the Company entitled to vote generally in the election of directors or all or
substantially all the assets of the Company, on terms which the Board of
Directors of the Company reasonably believes (i) (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable from
a financial point of view to its shareholders than the Merger and the
transactions contemplated by this Agreement taking into account at the time of
determination any changes to the financial terms of this Agreement proposed by
Beta and (ii) to be more favorable to the Company than the Merger and the
transactions contemplated by this Agreement after taking into account all
pertinent factors deemed relevant by the Board of Directors of the Company under
the laws of the Commonwealth of Pennsylvania.
(b) The Company shall immediately notify Beta after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Beta shall be made orally and in writing, and shall indicate the
identity of the person making the Acquisition Proposal or intending to make an
Acquisition Proposal or requesting non-public information or access to the books
and records of the Company, the terms of any such Acquisition Proposal or
modification or amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the Company as provided in Section 4.02(a). The
Company shall also immediately notify Beta, orally and in writing, if it enters
into negotiations concerning any Acquisition Proposal.
(c) Unless this Agreement shall have been terminated in accordance with its
terms, neither the Company nor the Board of Directors of the Company shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Beta, the approval by such Board of Directors of this Agreement or the Merger.
(d) Prior to November 6, 1999, without the prior written consent of Beta,
the Company and the Board of Directors of the Company shall not (i) redeem the
rights (the "Rights") issued under the
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Rights Agreement, dated as of October 25, 1989, as amended, between the Company
and ChaseMellon Shareholder Services L.L.C., as Successor Rights Agents (the
"Rights Agreement"), or waive or amend any provision of the Rights Agreement, in
any such case to permit or facilitate the consummation of any Acquisition
Proposal or Alternative Transaction, or (ii) enter into any agreement with
respect to, or otherwise approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or Alternative Transaction, unless the
Merger Agreement is terminated prior to such time pursuant to Sections 7.01(b),
7.01(c), 7.01(d)(ii) or 7.01(i) or is terminated prior to such time by the
Company pursuant to Sections 7.01(f), 7.01(g) or 7.01(h). It is understood and
agreed that a deferral of the distribution of Rights following the commencement
of a tender offer or exchange offer shall not be prohibited hereunder.
(e) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its shareholders a position required by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to its
shareholders required by applicable law, rule or regulation.
(f) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Beta and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality and
standstill provisions of any agreement to which the Company is a party.
(g) The Company shall ensure that the officers and directors of the Company
and the Company Significant Subsidiaries and any investment banker or other
advisor or representative retained by the Company are aware of the restrictions
described in this Section 4.02.
SECTION 4.03. CONDUCT OF BUSINESS BY TYCO PENDING THE MERGER. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Beta covenants and agrees
that, except as set forth in Section 4.03 of the Beta Disclosure Schedule or
unless the Company shall otherwise agree in writing, Beta shall take all action
necessary so that (i) Tyco shall conduct its business, and cause the businesses
of its subsidiaries to be conducted, in the ordinary course of business and
consistent with past practice, other than actions taken by Tyco or its
subsidiaries in contemplation of the Merger, and (ii) Tyco shall not directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise change Tyco's Charter Documents;
(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person, or dispose of any assets, which, in any
such case, would materially delay or prevent the consummation of the Merger and
the other transactions contemplated by this Agreement;
(c) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of Tyco may
declare and pay a dividend to its parent, and except that Tyco may declare and
pay quarterly cash dividends on the Tyco Common Shares of $0.025 per share
consistent with past practice;
(d) take any action to change its accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable) except as
required by a change in GAAP occurring after the date hereof; or
(e) take or agree in writing or otherwise to take any action that would make
any of the representations or warranties of Beta contained in this Agreement
untrue or incorrect or prevent Beta from performing or cause Beta not to perform
its covenants hereunder.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company shall
prepare and file, and Beta shall take all action necessary such that Tyco will
prepare and file, with the SEC preliminary proxy materials which shall
constitute the Joint Proxy Statement/Prospectus and, if the parties so agree at
the time, the Registration Statement. As promptly as practicable after comments
are received from the SEC thereon and after the furnishing by the Company and
Tyco of all information required to be contained therein, the Company shall
file, and Beta shall take all action necessary such that Tyco will file, with
the SEC the definitive Joint Proxy Statement/Prospectus and the Registration
Statement (or, if the Registration Statement has been previously filed, an
amendment thereto) relating to the adoption of this Agreement and approval of
the transactions contemplated hereby by the shareholders of the Company pursuant
to this Agreement, and the approval by the shareholders of Tyco of the issuance
of the Tyco Common Shares in connection with the Merger, and shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable.
SECTION 5.02. COMPANY SHAREHOLDERS MEETING. The Company shall call the
Company Shareholders Meeting as promptly as practicable for the purpose of
voting upon the approval of the Merger, and the Company shall use its reasonable
best efforts to hold the Company Shareholders Meeting as soon as practicable
after the date on which the Registration Statement becomes effective. The Joint
Proxy Statement/Prospectus shall include the recommendation of the Board of
Directors of the Company in favor of this Agreement and the Merger. The Company
shall solicit from its shareholders proxies in favor of approval of this
Agreement and the Merger and shall take all other reasonable action necessary or
advisable to secure the vote or consent of shareholders in favor of such
approval.
SECTION 5.03. TYCO SHAREHOLDERS MEETING. Beta shall take all action
necessary such that Tyco will call the Tyco Shareholders Meeting as promptly as
practicable for the purpose of voting upon the approval of the issuance of the
Tyco Common Shares in connection with the Merger, and Beta shall take all action
necessary such that Tyco will use its reasonable best efforts to hold the Tyco
Shareholders Meeting as soon as practicable after the date on which the
Registration Statement becomes effective. Unless otherwise required under the
applicable fiduciary duties of the directors of Tyco, as determined by such
directors in good faith after consultation with and based upon the advice of
independent legal counsel, (i) the Joint Proxy Statement/Prospectus shall
include the recommendation of the Board of Directors of Tyco in favor of the
issuance of Tyco Common Shares in connection with the Merger and the other
matters contemplated hereby requiring approval of the shareholders of Tyco; and
(ii) Beta shall take all action necessary such that Tyco will solicit from its
shareholders proxies in favor of approval of the issuance of Tyco Common Shares
in connection with the Merger and the other matters contemplated hereby
requiring approval of the shareholders of Tyco and take all other reasonable
action necessary or advisable to secure the vote or consent of shareholders in
favor of such approval.
SECTION 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use reasonable efforts to be
released), the Company shall (and shall cause its subsidiaries to) and Beta
shall take all action necessary such that Tyco shall (i) afford to the officers,
employees, accountants, counsel and other representatives of the other,
reasonable access, during the period after the execution and delivery of this
Agreement and prior to the Effective Time, to its properties, books, contracts,
commitments and records and, (ii) during such period, furnish promptly to the
other all information concerning its business, properties and personnel as such
other party may reasonably request, and each shall make available to the other
the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as
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either Beta or the Company may reasonably request. Each party shall keep such
information confidential in accordance with the terms of the confidentiality
letters, dated November 16, 1998 (the "Confidentiality Letters"), between Tyco
and the Company.
SECTION 5.05. CONSENTS; APPROVALS. The Company and Beta shall each use its
reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States and
non-United States governmental and regulatory rulings and approvals), and the
Company and Beta shall make (or Beta shall take all action necessary such that
Tyco will make) all filings (including, without limitation, all filings with
United States and non-United States governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Beta and the consummation by them of the
transactions contemplated hereby. The Company and Beta shall furnish (or Beta
shall take all action necessary such that Tyco will furnish) all information
required to be included in the Joint Proxy Statement/Prospectus and the
Registration Statement, or for any application or other filing to be made
pursuant to the rules and regulations of any United States or non-United States
governmental body in connection with the transactions contemplated by this
Agreement.
SECTION 5.06. AGREEMENTS WITH RESPECT TO AFFILIATES. (a) The Company shall
deliver to Beta, prior to the date the Registration Statement becomes effective
under the Securities Act, a letter (the "Company Affiliate Letter") identifying
all persons who are anticipated to be "affiliates" of the Company at the time of
the Company Shareholders Meeting for purposes of Rule 145 under the Securities
Act ("Rule 145"), or the rules and regulations of the SEC relating to pooling of
interests accounting treatment for merger transactions (the "Pooling Rules").
The Company shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Affiliate Letter to deliver to Beta, no less
than 35 days prior to the date of the Company Shareholders Meeting, a written
agreement (an "Affiliate Agreement") restricting the sales of securities by such
affiliates in accordance with the restrictions on affiliates under Rule 145 and
the Pooling Rules, in a form mutually agreeable to the Company and Beta.
(b) Beta shall deliver to the Company, prior to the date the Registration
Statement becomes effective under the Securities Act, a letter (the "Beta
Affiliate Letter") identifying all persons who are anticipated to be
"affiliates" of Tyco at the Effective Time for purposes of the Pooling Rules.
Beta shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Beta Affiliate Letter to deliver to Beta, no
less than 35 days prior to the date of the Effective Time, a written agreement
restricting the sales of securities by such affiliates in accordance with the
restrictions on affiliates under the Pooling Rules, in a form mutually agreeable
to the Company and Beta.
SECTION 5.07. INDEMNIFICATION AND INSURANCE. (a) The Articles of
Incorporation and Bylaws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the Restated Articles of
Incorporation and the Bylaws of the Company, which provisions shall not be
amended, modified or otherwise repealed for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
as of the Effective Time of individuals who at the Effective Time were
directors, officers, employees or agents of the Company, unless such
modification is required after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Articles of Incorporation or
Bylaws, indemnify and hold harmless, each present and former director, officer
or employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the
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Company's Restated Articles of Incorporation or Bylaws or any applicable
contract or agreement as in effect on the date hereof, in each case for a period
of six years after the date hereof. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time) and subject to the specific terms of any indemnification contract, (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time shall be reasonably satisfactory to the Surviving Corporation, (ii) after
the Effective Time, the Surviving Corporation shall pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received and
(iii) the Surviving Corporation will cooperate in the defense of any such
matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld); and PROVIDED, FURTHER, that, in the event that any
claim or claims for indemnification are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm to represent them in each
applicable jurisdiction with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties, in which
case each Indemnified Person with respect to whom such a conflict exists (or
group of such Indemnified Persons who among them have no such conflict) may
retain one separate law firm in each applicable jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements and employment
agreements (the employee parties under such agreements being referred to as the
"Officer Employees") with the Company's directors and officers existing at or
before the Effective Time.
(d) In addition, Beta will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring at or prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; PROVIDED, HOWEVER, that Beta and the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 200% of
the annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much such coverage as possible for such amount.
(e) From and after the Effective Time, Beta shall unconditionally guarantee
the timely payment of all funds owing by, and the timely performance of all
other obligations of, the Surviving Corporation under this Section 5.07.
(f) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns of
the Surviving Corporation and shall be enforceable by the Indemnified Parties.
SECTION 5.08. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Beta, and Beta shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would reasonably be expected to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate, or (ii) any
failure of the Company, Beta or Merger Sub, as the case may be, materially to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and PROVIDED FURTHER
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 6.02(b) or 6.03(b) unless the failure to give such
notice results in material prejudice to the other party.
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SECTION 5.09. FURTHER ACTION/TAX TREATMENT. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. The foregoing covenant shall not include any obligation by
Tyco to agree to divest, abandon, license or take similar action with respect to
any assets (tangible or intangible) of Tyco or the Company or any of their
subsidiaries. Each of Beta, Merger Sub and the Company shall use its reasonable
best efforts to cause the Merger to qualify, and will not (either before or
after consummation of the Merger) take any actions, or fail to take any action,
that might reasonably be expected to prevent the Merger from qualifying as a
reorganization under the provisions of Section 368 of the Code that is not
subject to Section 367(a)(1) of the Code pursuant to Treasury Regulation Section
1.367(a)-(3)(c) (other than with respect to Company shareholders who are or will
be "5% transferee shareholders" within the meaning of Treasury Regulation
Section 1.367(a)-3(c)(5)(ii)). Beta shall, and shall use its reasonable best
efforts to cause the Surviving Corporation and Tyco, to report, to the extent
required by the Code, the Merger for United States federal income tax purposes
as a reorganization within the meaning of Section 368 of the Code.
SECTION 5.10. PUBLIC ANNOUNCEMENTS. Beta and the Company shall consult with
each other before issuing any press release or making any written public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which shall not be unreasonably withheld; PROVIDED, HOWEVER,
that either party may, without the prior consent of the other, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the rules and regulations of the NYSE if it has used all
reasonable efforts to consult with the other party.
SECTION 5.11. TYCO COMMON SHARES. (a) Prior to the Effective Time, Beta
shall obtain from Tyco, and shall take all action necessary so that Tyco shall
transfer to Beta, the Tyco Common Shares to be delivered by Beta to the holders
of Company Common Stock in the Merger.
(b) Beta will take all action necessary so that Tyco will use its best
efforts to cause the Tyco Common Shares to be delivered by Beta to the holders
of Company Common Stock in the Merger and upon exercise of the Adjusted Options
to be listed, upon official notice of issuance, on the NYSE prior to the
Effective Time.
SECTION 5.12. CONVEYANCE TAXES. Beta and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time, and the Company shall be
responsible for the payment of all such taxes and fees. In no event shall Beta
or any affiliate thereof (other than a subsidiary of the Company) reimburse the
Company for the payment of such taxes and fees.
SECTION 5.13. OPTION PLANS AND BENEFITS, ETC. (a) Prior to the Effective
Time, the parties to this Agreement shall take all such actions as shall be
necessary to effectuate the provisions of Section 1.06(c).
(b) The Company shall take such action as is necessary to cause the ending
date of the then current offering period under the Stock Purchase Plan to be
prior to the Effective Time and to terminate such plan as of the Effective Time.
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(c) Beta agrees that, effective as of the Effective Time, and through
December 31, 1999, Beta shall, or shall cause the Surviving Corporation and its
subsidiaries and successors to, provide those persons who, immediately prior to
the Effective Time, were employees of the Company or its subsidiaries ("Retained
Employees") with employee welfare and retirement plans and programs which
provide benefits that are, in the aggregate, substantially similar to those
provided to such Retained Employees immediately prior to the date hereof. With
respect to such benefits, (i) service accrued by such Retained Employees during
employment with the Company and its subsidiaries prior to the Effective Time
shall be recognized for all purposes, except to the extent necessary to prevent
duplication of benefits, (ii) any and all pre-existing condition limitations (to
the extent such limitations did not apply to a pre-existing condition under the
applicable Company Employee Plan (as defined in Section 2.11(a)) and eligibility
waiting periods under any group health plan shall be waived with respect to such
Retained Employees and their eligible dependents, and (iii) Retained Employees
shall be given credit for amounts paid under any Company Employee Plan during
the same period for purposes of applying deductibles, co-payments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the employee welfare plans maintained by Tyco or its
subsidiaries. Without limiting the generality of the foregoing, Beta shall, or
shall cause the Surviving Corporation and its subsidiaries and successors to,
provide to any person who, immediately prior to the Effective Time, is a retiree
under the terms of the Company's retiree medical program retiree medical
benefits in accordance with the Company's current practice.
(d) Beta agrees to assume, honor, maintain and perform, and cause the
Surviving Corporation to assume, honor, maintain and perform in accordance with
their respective terms, without deductions, counterclaims, interruptions or
deferments (other than withholding under applicable law), the Company's employee
Severance Plan and all other employment and severance agreements and
arrangements, as amended through the date hereof or as contemplated hereby, with
respect to employees and former employees and directors and former directors of
the Company, including, but not limited to, those agreements and arrangements
set forth on Section 5.13 of the Company Disclosure Schedule (collectively, the
"Severance Agreements") and any other Company Benefit Plan, agreement or
arrangement which provides for the payment or acceleration of benefits to
employees, former employees or directors or former directors of the Company upon
or in connection with a change of control of the Company.
(e) It is expressly agreed that the provisions of this Section 5.13 are not
intended to be for the benefit of or otherwise be enforceable by any third
party, including, without limitation, any Retained Employee or any collective
bargaining unit or employee organization.
(f) Nothing herein shall prevent Beta or the Surviving Corporation from
amending or modifying any employee benefit plan, program or arrangement in any
respect or terminating or modifying the terms and conditions of employment of
any particular Retained Employee or any other person.
SECTION 5.14. RIGHTS AGREEMENT. The Board of Directors of the Company shall
take all further action (in addition to that referred to in Section 2.26), if
any, necessary in order to render the Rights inapplicable to the Merger and the
other transactions contemplated by this Agreement and the Stock Option
Agreement.
SECTION 5.15. ACCOUNTANT'S LETTERS. Upon reasonable notice from the other,
the Company shall use its best efforts to cause Arthur Andersen LLP to deliver
to Beta, and Beta shall use its best efforts to cause PricewaterhouseCoopers to
deliver to the Company, a letter covering such matters as are reasonably
requested by Beta or the Company, as the case may be, and as are customarily
addressed in accountants' "comfort letters."
SECTION 5.16. POOLING ACCOUNTING TREATMENT. (a) Beta and the Company each
agrees to use its best efforts not to take, and to cause their respective
affiliates not to take, any action that, if taken,
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might reasonably be expected to affect adversely the ability of Tyco to account
for the business combination to be effected by the Merger as a pooling of
interests, and Beta and the Company each agrees to use its best efforts to take
such action, and to cause their respective affiliates to take such action, as
may be reasonably required to negate the impact of any past actions by Beta, the
Company or their respective affiliates which might reasonably be expected to
impact adversely the ability of Tyco to treat the Merger as a pooling of
interests. The taking by Beta or the Company or by their respective affiliates
of any action prohibited by the previous sentence, or the failure of Beta or the
Company to use its best efforts to take, or to cause to be taken, any action
required by the previous sentence, if the Merger is not able to be accounted for
as a pooling of interests because of such action or failure to take action,
shall constitute a breach of this Agreement by such party for the purposes of
Section 7.01(h).
(b) Beta shall use its best efforts to obtain an opinion of
PricewaterhouseCoopers, independent public accountants, to the effect that the
Merger, to the best of their knowledge after due inquiry, qualifies for pooling
of interests accounting treatment if consummated in accordance with this
Agreement, and the Company shall use its best efforts to obtain an opinion of
Arthur Andersen LLP, independent public accountants, to the effect that the
Company, to the best of their knowledge after due inquiry, qualifies as an
entity that may be party to a business combination for which pooling of
interests method of accounting would be available.
SECTION 5.17. COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES. The Company
agrees that it shall use its reasonable commercial efforts to comply promptly
with all requirements of applicable state property transfer laws as may be
required by the relevant state agency and shall take all action necessary to
cause the transactions contemplated hereby to be effected in compliance with
applicable state property transfer laws. The Company, after consultation with
Beta, shall determine which actions must be taken prior to or after the
Effective Time to comply with applicable state property transfer laws. The
Company agrees to provide Beta with any documents required to be submitted to
the relevant state agency prior to submission, and the Company shall not take
any action to comply with applicable state property transfer laws without Beta's
prior consent, which consent shall not be unreasonably withheld or delayed. Beta
shall provide, and shall take all action necessary such that Tyco shall provide,
to the Company any assistance reasonably requested by the Company with respect
to such compliance.
SECTION 5.18. DIRECTOR APPOINTMENT. Subject to the applicable fiduciary
obligations of Tyco's Board of Directors, Beta shall use its best efforts to
have the Board of Directors of Tyco (i) propose at Tyco's Shareholders Meeting
to increase the size of Tyco's Board of Directors from eleven to twelve members;
(ii) nominate Robert Ripp, the Company's current Chairman and Chief Executive
Officer, to fill such newly created vacancy; and (iii) recommend to Tyco's
Shareholders that they elect Mr. Ripp to Tyco's Board of Directors.
SECTION 5.19. TERMINATION OF FLEXITRUST. The Company will cause, at or prior
to the Effective Time, the termination of the Stock Purchase Agreement, dated
September 28, 1998, between the Company and Wachovia Bank N.A., as trustee (the
"Trustee"), relating to the creation of the Flexitrust, prior to the closing
thereunder and without the issuance or sale of any shares of Company Common
Stock pursuant thereto and without any material liability resulting from such
termination.
SECTION 5.20. CHARITIES. After the Effective Time, Beta shall cause the
Company to provide charitable contributions and community support within the
communities in which the Company and each of its commercial business units are
located and do business at levels substantially comparable to the levels of
charitable contributions and community support provided by the Company and its
commercial business units within such areas for the two-year period immediately
prior to the Effective Time. Section 5.20 of the Company Disclosure Schedule
sets forth all of such charitable contributions and community support provided
by the Company for the two-year period immediately prior to the Effective Date.
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose and no similar proceeding in respect of the Joint Proxy
Statement/Prospectus shall have been initiated or threatened by the SEC;
(b) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the requisite vote of the shareholders of the Company, and the
issuance of the Tyco Common Shares in connection with the Merger shall have
been approved in accordance with the rules of the NYSE by the requisite vote
of the shareholders of Tyco;
(c) ANTITRUST. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and all
clearances and approvals required to be obtained in respect of the Merger
prior to the Effective Time under any Foreign Monopoly Laws shall have been
obtained, except where the failure to have obtained any such clearances or
approvals with respect to any Foreign Monopoly Laws would not reasonably be
expected to have a Material Adverse Effect on the Company, Tyco or Tyco's
electrical and electronic component business;
(d) GOVERNMENTAL ACTIONS. There shall not have been instituted, pending
or threatened any action or proceeding (or any investigation or other
inquiry that is reasonably likely to result in such an action or proceeding)
by any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, United States or non-United States, that is reasonably likely
to result in an order, nor shall there be in effect any judgment, decree or
order of any governmental authority, administrative agency or court of
competent jurisdiction, or any other legal restraint (i) preventing or
seeking to prevent consummation of the Merger, (ii) prohibiting or seeking
to prohibit or limiting or seeking to limit, Beta from exercising all
material rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Tyco or any of its subsidiaries
of all or a material portion of the business or assets of the Surviving
Corporation and its subsidiaries, or (iii) compelling or seeking to compel
Tyco or any of its subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of Tyco or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as
a result of the Merger or the transactions contemplated by this Agreement;
(e) ILLEGALITY. No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal;
(f) TAX OPINIONS. The Company shall have received a written opinion of
Skadden, Arps, and Beta shall have received a written opinion of
PricewaterhouseCoopers LLP, in form and substance reasonably satisfactory to
each of them, to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and (ii) the
transfer of Company Common Stock by Company shareholders pursuant to the
Merger, other than Company shareholders who are or will be "5% transferee
shareholders" within the meaning of Treasury Regulation Section
1.367(a)-3(c)(5)(ii), will qualify for an exception under Treasury
Regulation Section 1.367(a)-3
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and, accordingly, Tyco will be treated as a corporation for United States
federal income tax purposes. Each party agrees to make all reasonable
representations and covenants in connection with the rendering of such
opinions; and
(g) OPINION OF ACCOUNTANT. Beta shall have received an opinion of
PricewaterhouseCoopers, independent public accountants, to the effect that
the Merger, to the best of their knowledge after due inquiry, qualifies for
pooling of interests accounting treatment if consummated in accordance with
this Agreement. Such opinion shall be in form and substance reasonably
satisfactory to Beta and the Company.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF BETA AND MERGER SUB.
The obligations of Beta and Merger Sub to effect the Merger are also subject to
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects on and as of the Effective Time, with the same force and effect as
if made on and as of the Effective Time, except for (i) changes contemplated
by this Agreement, (ii) those representations and warranties which address
matters only as of a particular date (which shall have been true and correct
as of such date, subject to clause (iii)), or (iii) where the failure to be
true and correct would not reasonably be expected, individually or in the
aggregate with all other such failures, to have a Material Adverse Effect,
and Beta and Merger Sub shall have received a certificate of the Company to
such effect signed by the Chief Executive Officer or Chief Financial Officer
of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Beta and Merger Sub shall have received a certificate to
such effect signed by the Chief Executive Officer or Chief Financial Officer
of the Company;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Company for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company, except where the
failure to receive such consents, waivers, approvals, authorizations or
orders would not reasonably be expected, individually or in the aggregate
with all other such failures, to have a Material Adverse Effect on the
Company or Beta;
(d) AFFILIATE AGREEMENTS. Tyco shall have received from each person who
is identified in the Affiliate Letter as an "affiliate" of the Company an
Affiliate Agreement, and such Affiliate Agreement shall be in full force and
effect; and
(e) RIGHTS AGREEMENT. A Distribution Date shall not have occurred under
the Rights Agreement.
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Beta and Merger Sub contained in this Agreement shall be true and correct
in all respects on and as of the Effective Time, with the same force and
effect as if made on and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations and warranties
which address matters only as of a particular date (which shall have been
true and correct as of such date, subject to clause (iii)), or (iii) where
the failure to be true and correct could not reasonably be expected,
individually or in the aggregate with all other such failures, to have a
Material
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Adverse Effect, and the Company shall have received a certificate to such
effect signed by the President or Chief Financial Officer of Beta;
(b) AGREEMENTS AND COVENANTS. Beta and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and the Company shall have received a
certificate of Beta to such effect signed by the President or Chief
Financial Officer of Beta;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Beta or Merger Sub for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Beta or Merger Sub,
except where the failure to receive such consents, waivers, approvals,
authorizations or orders would not reasonably be expected, individually or
in the aggregate with all other such failures, to have a Material Adverse
Effect on the Company or Beta;
(d) LISTING. The Tyco Common Shares issuable in connection with the
Merger and upon exercise of the Adjusted Options shall have been authorized
for listing on the NYSE upon official notice of issuance; and
(e) SHAREHOLDER RIGHTS PLAN. A Distribution Date shall not have occurred
under Tyco's Shareholder Rights Plan dated November 6, 1996, as amended.
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ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company or approval of the issuance of the Tyco Common
Shares in connection with the Merger by the shareholders of Tyco:
(a) by mutual written consent duly authorized by the Boards of Directors
of Beta and the Company; or
(b) by either Beta or the Company if the Merger shall not have been
consummated by July 31, 1999 (other than for the reasons set forth in clause
(d) below); PROVIDED, HOWEVER, that the right to terminate this Agreement
under this Section 7.01(b) shall not be available to any party whose failure
to fulfill any obligation under this agreement has been the cause of, or
resulted in, the failure of the Merger to be consummated on or prior to such
date; or
(c) by either Beta or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(d) by either Beta or the Company (i) if the requisite vote of the
shareholders of the Company shall not have been obtained by July 31, 1999,
or if the shareholders of the Company shall not have approved the Merger and
this Agreement at the Company Shareholders Meeting, or (ii) if the requisite
vote of the shareholders of Tyco shall not have been obtained by July 31,
1999 or if the shareholders of Tyco shall not have approved the issuance of
the Tyco Common Shares in connection with the Merger at the Tyco
Shareholders Meeting; or
(e) by Beta, if, whether or not permitted to do so by this Agreement,
the Board of Directors of the Company or the Company shall (x) (i) withdraw,
modify or change its approval or recommendation of this Agreement or the
Merger in a manner adverse to Beta, (ii) approve or recommend to the
shareholders of the Company an Acquisition Proposal or Alternative
Transaction; or (iii) approve or recommend that the shareholders of the
Company tender their shares in any tender or exchange offer that is an
Alternative Transaction or (y) take any position or make any disclosures to
the Company's shareholders permitted pursuant to Section 4.02(e) which has
the effect of any of the foregoing; or
(f) by Beta or the Company, if any representation or warranty of the
Company, or Beta and Merger Sub, respectively, set forth in this Agreement
shall be untrue when made, such that the conditions set forth in Sections
6.02(a) or 6.03(a), as the case may be, would not be satisfied (a
"Terminating Misrepresentation"); PROVIDED, that, if such Terminating
Misrepresentation is curable prior to July 31, 1999 by the Company or Beta,
as the case may be, through the exercise of its reasonable best efforts and
for so long as the Company or Beta, as the case may be, continues to
exercise such reasonable best efforts, neither Beta nor the Company,
respectively, may terminate this Agreement under this Section 7.01(f); or
(g) by Beta, if any representation or warranty of the Company shall have
become untrue such that the condition set forth in Section 6.02(a) would not
be satisfied (a "Company Terminating Change"), or by the Company, if any
representation or warranty of Beta and Merger Sub shall have become untrue
such that the condition set forth in Section 6.03(a) would not be satisfied
(a "Beta Terminating Change" and together with a Company Terminating Change,
a "Terminating Change"), in either case other than by reason of a
Terminating Breach (as hereinafter defined); PROVIDED that, if any such
Terminating Change is curable prior to July 31, 1999 by the Company or Beta,
as the case may be, through the exercise of its reasonable best efforts, and
for so long as the
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Company or Beta, as the case may be, continues to exercise such reasonable
best efforts, neither Beta nor the Company, respectively, may terminate this
Agreement under this Section 7.01(g); or
(h) by Beta or the Company, upon a breach of any covenant or agreement
on the part of the Company or Beta, respectively, set forth in this
Agreement such that the conditions set forth in Sections 6.02(b) or 6.03(b),
as the case may be, would not be satisfied (a "Terminating Breach");
PROVIDED, THAT, except for any breach of the Company's obligations under
Section 4.02, if such Terminating Breach is curable prior to July 31, 1999
by the Company or Beta, as the case may be, through the exercise of its
reasonable best efforts and for so long as the Company or Beta, as the case
may be, continues to exercise such reasonable best efforts, neither Beta nor
the Company, respectively, may terminate this Agreement under this Section
7.01(h); or
(i) by Beta prior to the time of the Company Shareholder Meeting, if (x)
the Average Stock Price is less than $60.00 and (y) on or before the second
trading day prior to the date of the Company Shareholders Meeting, the
Company has not agreed by notice to Beta in writing to an Exchange Ratio
equal to 0.8500; PROVIDED that, in the event of such notice, the Exchange
Ratio shall thereafter, for all purposes of this Agreement, be deemed to be
such ratio.
As used herein, "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Beta or its
affiliates (a "Third Party") acquires or would acquire more than 20% of the
outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 20% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination (iii) any transaction pursuant to which any Third Party acquires or
would acquire control of assets (including for this purpose the outstanding
equity securities of subsidiaries of the Company and securities of the entity
surviving any merger or business combination including any of the Company's
subsidiaries) of the Company, or any of its subsidiaries having a fair market
value (as determined by the Board of Directors of the Company in good faith)
equal to more than 20% of the fair market value of all the assets of the Company
and its subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any other consolidation, business combination, recapitalization or
similar transaction involving the Company or any of the Company Significant
Subsidiaries, other than the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that the term Alternative Transaction shall not include any
acquisition of securities by a broker dealer in connection with a bona fide
public offering of such securities.
SECTION 7.02. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.01, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or shareholders (i) except that the Company or
Beta or Merger Sub may have liability as set forth in Section 7.03 and Section
8.01 hereof, and (ii) nothing herein shall relieve the Company, Beta or Merger
Sub from liability for any willful material breach hereof (it being understood
that the mere existence of a Material Adverse Effect, by itself, shall not
constitute such a willful material breach).
SECTION 7.03. FEES AND EXPENSES. (a) Except as set forth in this Section
7.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that Beta
and the Company shall share equally all SEC filing fees and printing expenses
incurred in connection with the printing and filing of the Joint Proxy
Statement/Prospectus (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
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(b) The Company shall pay Tyco a fee of $300 million (the "Fee"), and shall
pay Tyco's and Beta's respective actual, documented and reasonable out-of-pocket
expenses, relating to the transactions contemplated by this Agreement
(including, but not limited to, fees and expenses of counsel and accountants and
out-of-pocket expenses (but not fees) of financial advisors) ("Expenses", as
applicable to Tyco, Beta or the Company), such payment of Expenses not to exceed
$30 million, upon the first to occur of any of the following events (it being
understood that for these purposes this Agreement shall be deemed to be
terminated by Beta pursuant to Section 7.01(d)(i), Section 7.01(e), Section
7.01(g) or Section 7.01(h), as the case may be, if at the time this Agreement is
terminated it could have been terminated pursuant to the appropriate Section):
(i) the termination of this Agreement by Beta or the Company
pursuant to Section 7.01(d)(i) as a result of the failure to receive the
requisite vote for approval of the Merger and this Agreement by the
shareholders of the Company by July 31, 1999 or of the failure of the
shareholders of the Company to approve the Merger and this Agreement at
the Company Shareholders Meeting, provided that, prior to or during the
Company Shareholders Meeting an Acquisition Proposal (other than the
proposal by AlliedSignal on its currently pending or any less favorable
terms and conditions), including any improved proposal by AlliedSignal,
shall have been made directly to the shareholders of the Company or
otherwise become publicly known or any credible third party shall have
announced a bona fide intention to make an Acquisition Proposal (in each
case whether or not conditional and whether or not such proposal shall
have been rejected or shall have been withdrawn prior to the time of such
termination or meeting); or
(ii) the termination of this Agreement by Beta pursuant to Section
7.01(e); or
(iii) the termination of this Agreement by Beta pursuant to Section
7.01(g) or (h), provided that, prior to such termination an Acquisition
Proposal (other than the proposal by AlliedSignal on its currently
pending or any less favorable terms and conditions), including any
improved proposal by AlliedSignal, shall have been made directly to the
shareholders of the Company or otherwise become publicly known or any
credible third party shall have announced a bona fide intention to make
an Acquisition Proposal (in each case whether or not conditional and
whether or not such proposal shall have been rejected or shall have been
withdrawn prior to the time of such termination); or
(iv) the Company shall approve or recommend, or propose to approve
or recommend, an Acquisition Proposal, or redeem the Rights under the
Rights Plan or waive or amend any provision of the Rights Plan to permit
or facilitate the consummation of any Acquisition Proposal or Alternative
Transaction, or enter into an agreement with respect to any Acquisition
Proposal, or an Alternative Transaction shall be consummated, during the
period ending prior to one year following termination of this Agreement,
provided that at the time of any such termination, (x) Beta was not in
breach of this Agreement such that the condition set forth in Section
6.03(b) would not be satisfied and (y) if the Tyco Shareholders Meeting
shall have occurred prior to termination of the Agreement, the
shareholders of Tyco shall not have declined to approve the issuance of
the Tyco Common Shares, and provided further, that this Agreement has not
been terminated pursuant to Section 7.01(c), 7.01(d)(ii) or 7.01(i) or
terminated by the Company pursuant to Section 7.01(f), 7.01(g) or
7.01(h); or
(v) the termination of this Agreement (other than pursuant to
Section 7.01(c), 7.01(d)(ii) or 7.01(i) or a termination by the Company
pursuant to Section 7.01(f), 7.01(g) or 7.01(h)), if prior to such
termination the shareholders of the Company elect as a majority of the
Board of Directors of the Company persons who (x) are not Continuing
Directors (as defined in the Rights Agreement as in effect on the date
hereof), (y) were not initially nominated by the incumbent directors or
(z) even if nominated by the incumbent directors,
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were proposed by or are affiliated with AlliedSignal or any other third
party that has made an Acquisition Proposal or who at the time of
election publicly supported any Acquisition Proposal or Alternative
Transaction other than the Merger and the other transactions contemplated
hereby.
(c) Upon a termination of this Agreement pursuant to Sections 7.01(a),
7.01(b) (provided that, at the time of termination pursuant to Section 7.01(b),
Beta was entitled to terminate the Agreement under Section 7.01(b)) or 7.01(c)
or a termination of this Agreement by Beta pursuant to Section 7.01(d)(i),
7.01(f), 7.01(g) or 7.01(h), under circumstances where Section 7.03(b) does not
apply, the Company shall pay to Tyco and Beta their respective Expenses relating
to the transactions contemplated by this Agreement, but in no event more than
$30 million. Upon termination of this Agreement by the Company pursuant to
Section 7.01(d)(ii), 7.01(f) or 7.01(g), Beta shall pay to the Company the
Expenses of the Company relating to the transactions contemplated by this
Agreement, but in no event more than $30 million.
(d) The Fee and/or Expenses payable pursuant to Section 7.03(b) or Section
7.03(c) shall be paid within one business day after a demand for payment
following the first to occur of any of the events described in Section 7.03(b)
or Section 7.03(c); PROVIDED THAT, in no event shall the Company or Beta, as the
case may be, be required to pay such Fee and/or Expenses to the entities
entitled thereto, if, immediately prior to the termination of this Agreement,
the entity entitled to receive such Fee and/or Expenses was in material breach
of its obligations under this Agreement or, in the case of Tyco, its guarantee
of this Agreement.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as otherwise provided in this Section 8.01, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and Sections 5.07 and 5.09 and any other agreement in this
Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely and those set forth in Section 7.03 and 4.02(d)
shall survive termination indefinitely. The Confidentiality Letters shall
survive termination of this Agreement.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Beta Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Beta Disclosure Schedule
shall not be deemed an admission that such matter is material.
SECTION 8.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Beta or Merger Sub:
Beta Zeno Corp./Alpha Zeno Corp.
One Tyco Park
Exeter, NH 03833
Attn: President and Chief Executive Officer
Telecopy: (603) 778-7700
With a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attn: Mark A. Belnick, Esq.
Telecopy: (603) 778-7700
and
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Joshua M. Berman, Esq.
Telecopy: (212) 715-8000
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(b) If to the Company:
AMP Incorporated
P.O. Box 3608
470 Friendship Road
Harrisburg, PA 17105-3608
Attn: David F. Henschel, Esq.
Telecopy: (717) 564-4022
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: David J. Friedman, Esq.
Telecopy: (212) 735-2000
SECTION 8.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliates" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or
understanding, or (ii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "dollars" or "$" means United States dollars;
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Beta, Tyco or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Beta or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time;
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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.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.06. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. SEVERABILITY. (a) If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
(b) The Company and Beta agree that each of the Fee provided in Section
7.03(b) and the Stock Option Agreement is fair and reasonable in the
circumstances, considering not only the Merger Consideration but also the
outstanding funded indebtedness (including capital leases) of the Company and
its subsidiaries. If a court of competent jurisdiction shall nonetheless, by a
final, non-appealable judgment, determine that the amount of the Fee and/or the
benefits to Beta under the Stock Option Agreement exceeds the maximum amount
permitted by law, then the amount of the Fee and/or the benefits to Beta under
the Stock Option Agreement shall be reduced to the maximum amount permitted by
law in the circumstances, as determined by such court of competent jurisdiction.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement and the Stock Option
Agreement constitute the entire agreement and supersede all prior agreements and
undertakings (other than the Confidentiality Letters, except to the extent
specifically superseded hereby), both written and oral, among the parties, or
any of them, with respect to the subject matters hereof and thereof, except as
otherwise expressly provided herein or therein.
SECTION 8.09. ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise, except that all or any of the rights of Beta and/or Merger
Sub hereunder may be assigned to any wholly-owned subsidiary of Tyco provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.
SECTION 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.07 (which is intended to be for the benefit of the Indemnified Parties
and Officer Employees and may be enforced by such Indemnified Parties and
Officer Employees) and Section 7.03 (which contains provisions intended to be
for the benefit of Tyco and may be enforced by Tyco).
SECTION 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
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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.
(b) Each of the parties hereto submits to the non-exclusive jurisdiction of
the state and federal courts of the United States located in the City of New
York, Borough of Manhattan with respect to any claim or cause of action arising
out of this Agreement or the transactions contemplated hereby.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF BETA, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, Beta, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
BETA ZENO CORP.
By /s/ MARK H. SWARTZ
------------------------------------
Name: Mark H. Swartz
Title: VICE PRESIDENT
ALPHA ZENO CORP.
By /s/ MARK A. BELNICK
------------------------------------
Name: Mark A. Belnick
Title: VICE PRESIDENT
AMP INCORPORATED
By /s/ ROBERT RIPP
------------------------------------
Name: Robert Ripp
Title: CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
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GUARANTEE
Tyco guarantees each and every representation, warranty, covenant, agreement
and other obligation of Beta and Merger Sub, and/or any of their respective
permitted assigns (and where any such representation or warranty is made to the
knowledge of Beta or Merger Sub, such guarantee shall be deemed made to the
knowledge of Tyco), and the full and timely performance of their respective
obligations under the provisions of the foregoing Agreement. This is a guarantee
of payment and performance, and not of collection, and Tyco acknowledges and
agrees that this guarantee is unconditional, and no release or extinguishment of
Beta's and Merger Sub's obligations or liabilities (other than in accordance
with the terms of the Agreement), whether by decree in any bankruptcy proceeding
or otherwise, shall affect the continuing validity and enforceability of this
guarantee, as well as any provision requiring or contemplating performance by
Tyco.
Without limiting in any way the foregoing guarantee, Tyco covenants and
agrees to adhere to the provisions of SECTION 1.06, SECTION 1.07, SECTION 5.01,
SECTION 5.03 AND SECTION 5.11 of the Agreement.
The provisions of ARTICLE VIII of the Agreement are incorporated herein,
mutatis mutandis, except that notices and other communications hereunder to Tyco
shall be delivered to Tyco International Ltd., The Gibbons Building, 10 Queen
Street, Suite 301, Hamilton HM 11 Bermuda, Attn: Secretary, Telecopy No. (441)
295-9647, Confirm No. (441) 292-8674 (with a copy as provided therefor in
Section 8.02(a)).
We understand that the Company is relying on this guarantee in entering into
the Agreement and may enforce this guarantee as if Tyco were a party thereto.
TYCO INTERNATIONAL LTD.
By /s/ MARK A. BELNICK
------------------------------------
Name: Mark A. Belnick
Title: EXECUTIVE VICE PRESIDENT
AND
CHIEF CORPORATE COUNSEL
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ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 22, 1998 (the "Agreement"),
between AMP INCORPORATED, a Pennsylvania corporation ("COMPANY"), and Beta Zeno
Corp., a Pennsylvania corporation ("GRANTEE").
RECITALS
A. Company, Grantee and Alpha Zeno Corp., a Pennsylvania corporation and a
wholly-owned subsidiary of Grantee ("Merger Sub"), have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "MERGER
AGREEMENT"; defined terms used but not defined herein have the meanings set
forth in the Merger Agreement), providing for, among other things, the merger of
Merger Sub with and into Company pursuant to the terms of the Merger Agreement;
and
B. As a condition and inducement to the willingness of Grantee and Merger
Sub to enter into the Merger Agreement, Grantee has requested that Company
agree, and Company has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Company
and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Company hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 43,500,000 shares (the "OPTION SHARES") of common stock, without
par value, of Company, including the associated rights ("COMPANY COMMON STOCK"),
or such lesser number of shares of Company Common Stock constituting 19.9% of
the issued and outstanding shares of Company Common Stock on the date the Option
is first exercised, at an exercise price of $51.00 (as adjusted as set forth
herein) per Option Share (the "EXERCISE PRICE").
2. EXERCISE OF OPTION. (a) Grantee may exercise the Option, with respect to
any or all of the Option Shares at any one time or from time to time, subject to
the provisions of Section 2(c), upon the occurrence of an Exercise Event (as
defined below). Subject to the last sentence of this Section 2(a), the Option
will terminate and be of no further force and effect upon the earliest to occur
of (i) the Effective Time, (ii) termination of the Merger Agreement pursuant to
Section 7.01(c), 7.01(d)(ii) or 7.01(i) of the Merger Agreement or termination
of the Merger Agreement by the Company pursuant to Section 7.01(f), 7.01(g) or
7.01(h) of the Merger Agreement and (iii) the earlier of (x) twelve months after
the date on which an Exercise Event occurs and (y) the third business day
following the first anniversary of termination of the Merger Agreement, but in
no event, in the case of clause (iii)(x) or (y), sooner than eighteen months and
four business days after the date hereof. Any purchase of Option Shares upon
exercise of the Option will be subject to compliance with the HSR Act and the
obtaining or making of any consents, approvals, orders, notifications or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares illegal (the "REGULATORY
APPROVALS") and no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect. "EXERCISE EVENT" means any event as a result of
which Tyco International Ltd. ("TYCO") is entitled to receive the Fee (as
defined in the Merger Agreement) pursuant to Section 7.03 of the Merger
Agreement. Notwithstanding the termination of the Option, Grantee will be
entitled to purchase the Option Shares if it has exercised the Option in
accordance with the terms hereof prior to the termination of the Option, and the
termination of the Option will not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee wishes to exercise the Option, it will send to
Company a written notice (an "EXERCISE NOTICE"; the date of which being herein
referred to as the "NOTICE DATE") to that
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effect which Exercise Notice will also specify the number of Option Shares, if
any, Grantee wishes to purchase pursuant to this Section 2(b), the number of
Option Shares, if any, with respect to which Grantee wishes to exercise its
Cash-Out Right (as defined herein) pursuant to Section 8, the denominations of
the certificate or certificates evidencing the Option Shares which Grantee
wishes to purchase pursuant to this Section 2(b) and a date not earlier than 10
business days nor later than 20 business days from the Notice Date for the
closing (an "OPTION CLOSING") of such purchase (an "OPTION CLOSING DATE"). Any
Option Closing will be at an agreed location and time in New York, New York on
the applicable Option Closing Date or at such later date as may be necessary so
as to comply with Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b), and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Company agrees to use its reasonable
best efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise its
Cash-Out Right pursuant to Section 8 with respect to the Option Shares for which
such Regulatory Approval will not be issued or granted or has not been issued or
granted.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At any Option Closing, Grantee
will pay to Company an amount equal to the Exercise Price multiplied by the
number of Option Shares to be purchased at such Option Closing, at Grantee's
sole election (but subject to applicable restrictions under the HSR Act and
compliance with other applicable laws), (i) in immediately available funds by
wire transfer to a bank account designated in writing by Company or (ii) in
shares of common stock, par value $0.20 per share, of Tyco ("TYCO COMMON
SHARES"), valued at the average of the reported closing prices for Tyco Common
Shares on the New York Stock Exchange for the five trading days ending on the
trading day before exercise. If Grantee notifies Company of its desire to use
Tyco Common Shares as provided above, Company shall make promptly all filings,
required by applicable law.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds or Tyco Common Shares as provided in Section 3(a), Company will
deliver to Grantee a certificate or certificates (or other appropriate evidence
under the direct registration system) representing the Option Shares to be
purchased at such Option Closing, which Option Shares will be free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever. If at the
time of issuance of Option Shares pursuant to an exercise of the Option
hereunder, Company shall have issued any rights or similar securities under the
Rights Agreement or any similar plan or arrangement ("SHAREHOLDER RIGHTS"), then
each Option Share issued pursuant to such exercise will also represent such
rights or similar securities with terms substantially the same as and at least
as favorable to Grantee as are provided under the Rights Agreement or any
similar plan or arrangement then in effect.
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(c) Certificates (or other appropriate evidence under the direct
registration system) for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993, AND MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF
ANY EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY
OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF AMP INCORPORATED AT
ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), in the
above legend will be removed by delivery of substitute certificate(s) (or other
appropriate evidence under the direct registration system) without such
reference if such Option Shares have been sold in compliance with the
registration and prospectus delivery requirements of the Securities Act, such
Option Shares have been sold in reliance on and in accordance with Rule 144
under the Securities Act, or Grantee has delivered to Company a copy of a letter
from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Company and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the reference
to restrictions pursuant to this Agreement in the above legend will be removed
by delivery of substitute certificate(s) (or other appropriate evidence under
the direct registration system) without such reference if the Option Shares
evidenced by certificate(s) containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
4. INCORPORATION OF REPRESENTATIONS AND WARRANTIES OF COMPANY. The
representations and warranties of Company contained in Article II of the Merger
Agreement are hereby incorporated by reference herein with the same force and
effect as though made pursuant to this Agreement.
5. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF COMPANY. Company hereby
represents and warrants to Grantee as follows:
(a) CORPORATE AUTHORIZATION. Company has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Company, and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Company, and assuming this Agreement
constitutes a valid and binding agreement of Grantee, this Agreement
constitutes a valid and binding agreement of Company, enforceable against
Company in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) AUTHORIZED STOCK. Company has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act, to permit it
to issue, and, at all times from the date hereof until the obligation to
deliver Option Shares upon the exercise of the Option terminates, shall have
reserved for issuance, upon exercise of the Option, shares of Company Common
Stock necessary for Grantee to exercise the Option, and Company will take
all necessary corporate action to authorize and reserve for issuance all
additional shares of Company Common Stock or other securities which may be
issued
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pursuant to Section 7 upon exercise of the Option. The shares of Company
Common Stock to be issued upon due exercise of the Option, including all
additional shares of Company Common Stock or other securities which may be
issuable upon exercise of the Option or any other securities which may be
issued pursuant to Section 7, upon issuance pursuant hereto, will be duly
and validly issued, fully paid and nonassessable, and will be delivered free
and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including without limitation any preemptive rights of any
stockholder of Company.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Company that:
(a) CORPORATE AUTHORIZATION. Grantee has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by authority of the Board of Directors of Grantee, and no other
corporate proceedings on the part of Grantee are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Grantee, and assuming this
Agreement constitutes a valid and binding agreement of Company, this
Agreement constitutes a valid and binding agreement of Grantee, enforceable
against Grantee in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies).
(b) PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, and the Option
is not being, acquired by Grantee with a view to the public distribution
thereof. Neither the Option nor any of the Option Shares will be offered,
sold, pledged or otherwise transferred except in compliance with, or
pursuant to an exemption from, the registration requirements of the
Securities Act.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event, on one
or more occasions, of any changes in Company Common Stock by reason of a stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Company Common Stock), distribution,
exercise or exchange of Rights, reorganization, recapitalization, splitup,
division, combination, share exchange or like event, the class and number of
securities subject to the Option, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee will receive upon exercise of the Option the number and class of shares
or other securities or property, cash or other form of consideration that
Grantee would have received with respect to Company Common Stock if the Option
had been exercised immediately prior to such event or the record date therefor,
as applicable. The Exercise Price will also be appropriately adjusted in any
such case.
(b) Without limiting the provisions of clause (a) above or the parties'
relative rights and obligations under the Merger Agreement, in the event that
the Company enters into an agreement (i) to consolidate with or merge with or
into any person, other than Grantee or any other subsidiary of Tyco, and Company
will not be the continuing or surviving corporation in such consolidation or
merger, (ii) to permit any person, other than Grantee or any other subsidiary of
Tyco, to merge with or into Company and Company will be the continuing or
surviving corporation, but in connection with such merger, the shares of Company
Common Stock outstanding immediately prior to the consummation of such merger
will be changed into or exchanged for stock or other securities of Company or
any other person or cash or any other property, or the shares of Company Common
Stock outstanding immediately prior to the consummation of such merger will,
after such merger represent less than 51% of the outstanding voting securities
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or any other
subsidiary of Tyco, then, and in each such case, the agreement governing such
transaction will make proper provision so that the
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Option will, upon the consummation of any such transaction and upon the terms
and condition set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class of
shares or other securities or property that Grantee would have received in
respect of Company Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale, or transfer, or the record date
therefor, as applicable and make any other necessary adjustments. If the holders
of the Company Common Stock may elect from choices the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer, then for the purpose of this Section 7(b) the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer shall be the available choice with the greatest
aggregate value. For purposes of this Option, the term "merger" shall be deemed
to include a share exchange pursuant to Section 1931 of the Pennsylvania
Business Corporation Law of 1988 ("PBCL") or division pursuant to Section 1951
et seq. of the PBCL.
8. CASH-OUT RIGHT. If, at any time during the period when the Option is
exercisable in accordance with Section 2, Grantee sends to Company an Exercise
Notice indicating Grantee's election to exercise its right (the "CASH-OUT
RIGHT") pursuant to this Section 8, then Company shall pay to Grantee in
exchange for the cancellation of the Option with respect to such number of
Option Shares as Grantee specifies in the Exercise Notice, an amount in cash
equal to such number of Option Shares multiplied by the difference between (i)
the average closing price for the ten NYSE trading days commencing on the NYSE
trading day immediately preceding the Notice Date, per share of Company Common
Stock as reported on the NYSE Composite Transactions Tape (or, if not listed on
the NYSE, as reported on any other national securities exchange or national
securities quotation system on which Company Common Stock is listed or quoted,
as reported in The Wall Street Journal (Northeast edition), or, if not reported
thereby, any other authoritative source) or, if Company is at the time of such
exercise no longer a Registered Corporation (as defined in Section 2502 of the
PBCL), the price per share paid to the shareholders of the Company in the
transaction which caused the Company Common Stock to cease being required to be
registered under the Securities Exchange Act of 1934 (the "CLOSING PRICE") and
(ii) the Exercise Price. Notwithstanding the termination of the Option, Grantee
will be entitled to exercise its rights under this Section 8 if it has exercised
such rights in accordance with the terms hereof prior to the termination of the
Option.
9. PROFIT LIMITATIONS. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Total Option Profit (as hereinafter defined)
exceed in the aggregate $301 million minus any Fee actually received by Tyco
pursuant to the terms of the Merger Agreement (such amount, the "PROFIT LIMIT")
and, if any payment to be made to Grantee otherwise would cause such aggregate
amount to be exceeded, the Grantee, at its sole election, shall either (i)
reduce the number of shares of Company Common Stock subject to this Option, (ii)
deliver to the Company for cancellation Option Shares previously purchased by
Grantee, (iii) pay cash to Company, (iv) deliver the undertaking described in
Section 9(f) or (v) any combination thereof, so that the Total Option Profit
shall not exceed the Profit Limit after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares of Company Common Stock as would, as of
the date of exercise, result in a Notional Total Option Profit (as hereinafter
defined) which would exceed in the aggregate the Profit Limit and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall on
or prior to the date of exercise either (i) reduce the number of shares of
Company Common Stock subject to such exercise, (ii) deliver to Company for
cancellation Option Shares previously purchased by Grantee, (iii) pay cash to
Company, (iv) deliver the undertaking described in Section 9(f) or (v) any
combination thereof, so that the Notional Total Option Profit shall not exceed
the Profit Limit after taking into account the foregoing actions, provided that
this paragraph (b) shall not be construed as to restrict any exercise of the
Option that is not prohibited hereby on any subsequent date.
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(c) As used herein and subject to Section 9(f), the term "TOTAL OPTION
PROFIT" shall mean the aggregate amount (before taxes) of the following: (i) any
amount received by Grantee pursuant to the Cash-Out Right and (ii) (x) the net
consideration, if any, received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, valuing any non-cash consideration at its
fair market value (as defined below), LESS (y) the Exercise Price and any cash
paid by Grantee to Company pursuant to Section 9(a)(iii) or Section 9(b)(iii),
as the case may be.
(d) As used herein and subject to Section 9(f), the term "NOTIONAL TOTAL
OPTION PROFIT" with respect to any number of shares of Company Common Stock as
to which Grantee may propose to exercise the Option shall be the aggregate of
(i) the Total Option Profit determined under paragraph (c) above with respect to
prior exercises and (ii) Total Option Profit with respect to such number of
shares of Company Common Stock as to which Grantee proposes to exercise and all
other Option Shares held by Grantee and its affiliates as of such date, assuming
that all such shares were sold for cash at the closing market price for Company
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions or underwriting discounts).
(e) As used herein, the "FAIR MARKET VALUE" of any non-cash consideration
consisting of:
(i) securities listed on the national securities exchange or traded
on the NASDAQ shall be equal to the average closing price per share of
such security as reported on such exchange or NASDAQ for the five trading
days after the date of determination; and
(ii) consideration which is other than cash or securities of the
form specified in clause (i) above shall be determined by a nationally
recognized independent investment banking firm mutually agreed upon by
the parties within five business days of the event requiring selection of
such banking firm, provided that if the parties are unable to agree
within two business days after the date of such event as to the
investment banking firm, then the parties shall each select one firm, and
those firms shall select a third nationally recognized independent
investment banking firm, which third firm shall make such determination.
(f) Total Option Profit and Notional Total Option Profit shall be reduced by
any amount that is subject to recapture by the Company pursuant to Subchapter H
of the PBCL if Grantee pays such amount or such obligation has matured and
Grantee acknowledges its liability. In addition, if in connection with an
exercise, Grantee elects, at its sole discretion, to undertake to return to the
Company any profit realized by Grantee with respect to any Option Shares covered
by such exercise, if any, when realized (whether or not subject to Subchapter H
at the time of realization), then in all calculations of Total Option Profit and
Notional Total Option Profit the Total Option Profit and Notional Total Option
Profit related to such Option Shares shall be zero. Any undertaking delivered
pursuant to the preceding sentence shall also include an undertaking by Grantee
to dispose of the related Option Shares within nine months after the earliest of
(i) the date of exercise or (ii) the later of (x) the first anniversary of the
termination of the Merger Agreement and (y) the first anniversary of the date on
which the Exercise Event occurred, or, if not legally permitted to do so within
such period, at such time as it is so legally permitted, and to treat as part of
the profits realized any dividends or other distributions received with respect
to such Option Shares.
10. GRANTEE REGISTRATION RIGHTS.
(a) Grantee may by written notice (a "GRANTEE REGISTRATION NOTICE") to
Company request Company to register under the Securities Act all or any part
of the Option Shares or other securities acquired by Grantee pursuant to
this Agreement (collectively, the "COMPANY REGISTRABLE SECURITIES") in order
to permit the sale or other disposition of such securities pursuant to a
bona fide, firm commitment underwritten public offering in which Grantee,
and the underwriters shall effect as wide a distribution of such Company
Registrable Securities as is reasonably practicable
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and shall use reasonable efforts to prevent any person or group from
purchasing through such offering shares representing more than 3% of the
shares of Company Common Stock then outstanding on a fully-diluted basis.
(b) Company shall use reasonable best efforts to effect, as promptly as
practicable, but in no event later than 90 days following receipt of the
applicable Grantee Registration Notice, the registration under the Securities
Act of the Company Registrable Securities requested to be registered in the
Grantee Registration Notice; PROVIDED, HOWEVER, that (i) Grantee shall not be
entitled to more than an aggregate of two effective registration statements
hereunder and (ii) Company will not be required to file any such registration
statement during any period of time (not to exceed 40 days after receipt of a
Grantee Registration Notice in the case of clause (A) below, 90 days after
receipt of a Grantee Registration Notice in the case of clause (B) below and 60
days after receipt of a Grantee Registration Notice in case of clause (C) below)
when (A) Company is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, based
upon the advice of outside securities counsel to Company, believes such
information would have to be disclosed if a registration statement were filed at
that time; (B) Company would be required under the Securities Act to include
audited financial statements for any period in such registration statement and
such financial statements are not yet available for inclusion in such
registration statement; or (C) Company determines, in its reasonable judgment,
that such registration would interfere with any financing, acquisition or other
material transaction involving Company or any of its subsidiaries. If the
consummation of the sale of any Company Registrable Securities pursuant to a
registration hereunder does not occur within 90 days after the filing with the
SEC of the initial registration statement therefor, the provisions of this
Section shall again be applicable to any proposed registration, it being
understood that Grantee shall not be entitled to more than an aggregate of two
effective registration statements hereunder. Company will use reasonable efforts
to cause each such registration statement to become effective, to obtain all
consents or waivers of other parties which are required therefor, and to keep
such registration statement effective for such period not in excess of 90
calendar days from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other disposition. Company
shall use reasonable best efforts to cause any Company Registrable Securities
registered pursuant to this Section to be qualified for sale under the
securities or blue sky laws of such jurisdictions as Grantee may reasonably
request and shall continue such registration or qualification in effect in such
jurisdictions; PROVIDED, HOWEVER, that Company shall not be required to qualify
to do business in, or consent to general service of process in, any
jurisdiction.
(c) If Company effects a registration under the Securities Act of Company
Common Stock for its own account or for any other shareholders of Company (other
than on Form S-4 or Form S-8, or any successor form), it will allow Grantee the
right to participate in such registration, and such participation will not
affect the obligation of Company to effect demand registration statements for
Grantee under this Section, except that, if the managing underwriters of such
offering advise Company in writing that in their opinion the number of shares of
Company Common Stock requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
offering, Company will include only the shares requested to be included therein
by Grantee which may be included therein without adversely affecting the
offering.
(d) The registration rights set forth in this Section are subject to the
condition that Grantee shall provide Company with such information with respect
to Company Registrable Securities, the plan for distribution thereof, and such
other information with respect to Grantee as, in the reasonable judgment of
counsel for Company, is necessary to enable Company to include in a registration
statement all material facts required to be disclosed with respect to a
registration hereunder.
(e) A registration effected under this Section shall be effected at
Company's expense, except for underwriting discounts and commissions and the
fees and expenses of Grantee's counsel, and Company shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
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"comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, Grantee and Company agree to enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type.
10A. COMPANY REGISTRATION RIGHTS. (a) In the event Grantee shall elect to
pay the Exercise Price in Tyco Common Shares as permitted pursuant to Section
3(a), Company may by written notice (a "COMPANY REGISTRATION NOTICE") to Grantee
request Grantee to take all action necessary so that Tyco will register under
the Securities Act all or any part of the Tyco Common Shares so received by
Company (collectively, the "TYCO REGISTRABLE SECURITIES") in order to permit the
sale or other disposition of such securities pursuant to a bona fide, firm
commitment underwritten public offering in which Company and the underwriters
shall effect as wide a distribution of such Tyco Registrable Securities as is
reasonably practicably and shall use reasonable efforts to prevent any person or
group from purchasing through such offering shares representing more than 3% of
the Tyco Common Shares then outstanding on a fully-diluted basis.
(b) Grantee shall take all action necessary so that Tyco will use reasonable
best efforts to effect, as promptly as practicable (but in no event later than
90 days following receipt of the applicable Company Registration Notice), the
registration under the Securities Act of the Tyco Registrable Securities
requested to be registered in the Company Registration Notice; PROVIDED,
HOWEVER, that (i) Company shall not be entitled to more than an aggregate of two
effective registration statements hereunder and (ii) Grantee will not be
required to take all action necessary so that Tyco will file any such
registration statement during any period of time (not to exceed 40 days after
receipt of a Company Registration Notice in the case of clause (A) below, 90
days after receipt of a Company Registration Notice in the case of clause (B)
below and 60 days after receipt of a Company Registration Notice in case of
clause (C) below) when (A) Tyco is in possession of material non-public
information which it reasonably believes would be detrimental to be disclosed at
such time and, based upon the advice of outside securities counsel to Tyco,
believes such information would have to be disclosed if a registration statement
were filed at the time; (B) Tyco would be required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) Tyco determines, in its reasonable judgment,
that such registration would interfere with any financing, acquisition or other
material transaction involving Tyco or any of its subsidiaries. If the
consummation of the sale of any Tyco Registrable Securities pursuant to a
registration hereunder does not occur within 90 days after the filing with the
SEC of the initial registration statement therefor, the provisions of this
Section shall again be applicable to any proposed registration, it being
understood that Company shall not be entitled to more than an aggregate of two
effective registration statements hereunder. Grantee will take all action
necessary so that Tyco will use reasonable efforts to cause each such
registration statement to become effective, to obtain all consents or waivers of
other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 90 calendar days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. Grantee shall take all
action necessary so that Tyco will use reasonable best efforts to cause any Tyco
Registrable Securities registered pursuant to this Section to be qualified for
sale under the securities or blue sky laws of such jurisdictions as Company may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; PROVIDED, HOWEVER, that neither Tyco nor Grantee
shall be required to qualify to do business in, or consent to general services
of process in, any jurisdiction.
(c) If Tyco effects a registration under the Securities Act of Tyco Common
Shares for its own account or for any other stockholders of Tyco (other than on
Form S-4 or Form S-8, or any successor form), Grantee shall take all action
necessary so that Tyco will allow Company the right to participate in such
registration, and such participation will not affect the obligation of Grantee
to take all action
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necessary so that Tyco will effect demand registration statements for Company
under this Section, except that if the managing underwriters of such offering
advise Grantee in writing that in their opinion the number of shares of Tyco
Common Shares requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the offering,
Grantee will take all action necessary so that Tyco will include only the shares
requested to be included therein by Company which may be included therein
without adversely affecting the offering.
(d) The registration rights set forth in this Section are subject to the
condition that Company shall provide Tyco with such information with respect to
the Tyco Registrable Securities, the plan for distribution thereof, and such
other information with respect to Company as, in the reasonable judgment of
counsel for Tyco, is necessary to enable Tyco to include in a registration
statement all material facts required to be disclosed with respect to a
registration hereunder.
(e) A registration effected under this Section shall be effected at
Grantee's expense, except for underwriting discounts and commissions and the
fees and expenses of Company's counsel, and Grantee shall provide to the
underwriter such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, Company agrees to, and Grantee agrees to
take all action necessary so that Tyco will, enter into an underwriting
agreement reasonably acceptable to each such party, in form and substance
customary for transactions of this type.
11. TRANSFERS. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) to Tyco or any direct or indirect subsidiary of
Tyco, (ii) in an underwritten public offering as provided in Section 10 or (iii)
to any purchaser or transferee who would not, to the knowledge of the Grantee
after reasonable inquiry, immediately following such sale, assignment, transfer
or disposal beneficially own more than 9.9% of the then-outstanding voting power
of the Company, except that Grantee shall be permitted to sell any Option Shares
if such sale is made pursuant to a tender or exchange offer that has been
approved or recommended by a majority of the members of the Board of Directors
of Company (which majority shall include a majority of directors who were
directors as of the date hereof or any other director approved by such
directors).
12. LISTING. (a) If Company Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the NYSE (or any other
national securities exchange or national securities quotation system), Company,
upon the request of Grantee, will promptly file an application to list the
shares of Company Common Stock or other securities to be acquired upon exercise
of the Option on the NYSE (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to obtain
approval of such listing as promptly as practicable.
(b) If Tyco Common Shares received by Company pursuant to Section 3(a) are
then listed on the NYSE (or any other national securities exchange or national
securities quotation system), Grantee, upon the request of Company, will
promptly take all action necessary so that Tyco will file an application to list
the Tyco Common Shares on the NYSE (and any such other national securities
exchange or national securities quotation system) and will take all action
necessary so that Tyco will use reasonable efforts to obtain approval of such
listing as promptly as practicable.
13. MISCELLANEOUS. (a) EXPENSES. Except as otherwise provided in the Merger
Agreement, each of the parties hereto will pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties.
(c) EXTENSION; WAIVER. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing
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signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise will not constitute a
waiver of such rights.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith) and the
Confidentiality Agreements (i) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement, and (ii) except as
provided in Section 8.10 of the Merger Agreement, are not intended to confer
upon any person other than the parties any rights or remedies.
(e) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(i) If to Company to:
AMP Incorporated
P.O. Box 3608
470 Friendship
Harrisburg, Pennsylvania 17105
Attention: David F. Henschel, Esq.
Telecopy: (717) 592-4022
Confirm: (717) 592-4205
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: David J. Friedman, Esq.
Telecopy: (212) 735-2000
(ii) If to Grantee to:
Beta Zeno Corp.
One Tyco Park
Exeter, New Hampshire 03833
Attention: President and Chief Executive Officer
Telecopy: (603) 778-7700
with a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, New hampshire 03833
Attention: Mark A. Belnick, Esq.
Telecopy: (603) 778-7700
and
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<PAGE>
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Joshua M. Berman, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(g) ASSIGNMENT. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned, transferred or
delegated, in whole or in part, by operation of law or otherwise, by Company or
Grantee without the prior written consent of the other, except that Grantee may
assign its rights and interest under this Agreement to Tyco or any direct or
indirect subsidiary of Tyco. Any assignment, transfer or delegation in violation
of the preceding sentence will be void. Subject to the first and second
sentences of this Section 13(g), this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(h) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Company and Grantee will execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT; CONSENT TO JURISDICTION The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement. Each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any United States
federal or state court located in the City of New York, Borough of Manhattan in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (iii) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a United States federal or state court located in the City of New
York, Borough of Manhattan.
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<PAGE>
IN WITNESS WHEREOF, Company and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
AMP INCORPORATED
By: /s/ ROBERT RIPP
-----------------------------------
Name: Robert Ripp
Title: Chairman and Chief Executive
Officer
BETA ZENO CORP.
By: /s/ MARK A. BELNICK
-----------------------------------
Name: Mark A. Belnick
Title: Vice President
B-12
<PAGE>
GUARANTEE
Tyco International Ltd. ("Tyco") guarantees each and every representation,
warranty, covenant, agreement or other obligation of Grantee, and/or any of its
respective permitted assigns, and the full and timely performance of their
respective obligations under the provisions of the foregoing Agreement. This is
a guarantee of payment and performance, and not of collection, and Tyco
acknowledges and agrees that this guarantee is unconditional, and no release or
extinguishment of Grantee's obligations or liabilities (other than in accordance
with the terms of the Agreement), whether by decree in any bankruptcy proceeding
or otherwise, shall affect the continuing validity and enforceability of this
guarantee.
The provisions of SECTION 13 of the Agreement are incorporated herein,
MUTATIS MUTANDIS, except that notices and other communications hereunder to Tyco
shall be delivered to Tyco International Ltd., The Gibbons Building, 10 Queen
Street, Suite 301, Hamilton HM 11 Bermuda, Attn: Secretary, Telecopy No. (441)
295-9647, Confirm No. (441) 292-8674 (with a copy as provided therefor in
Section 13(f)(ii)). We understand that Company is relying on this guarantee in
entering into the Agreement.
TYCO INTERNATIONAL LTD.
By: /s/ MARK A. BELNICK
-----------------------------------
Name: Mark A. Belnick
Title: Executive Vice President
and
Chief Corporate Counsel
B-13
<PAGE>
ANNEX C
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
November 22, 1998
Board of Directors
AMP Incorporated
470 Friendship Road
Harrisburg, Pennsylvania 17111
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of AMP Incorporated ("AMP") from a financial point of view
of the Exchange Ratio (as defined below) set forth in the Agreement and Plan of
Merger, dated as of November 22, 1998 (the "Merger Agreement"), by and among
Beta Zeno Corp. ("Beta"), a wholly owned subsidiary of Tyco International Ltd.
("Tyco"), Alpha Zeno Corp., a wholly owned subsidiary of Beta ("Merger Sub"),
and AMP. The Merger Agreement provides for, among other things, the merger of
Merger Sub with and into AMP (the "Merger") pursuant to which each outstanding
share of the common stock, without par value, of AMP (the "AMP Common Stock")
will be converted into the right to receive common shares, par value $0.20 per
share, of Tyco (the "Tyco Common Shares") in the ratio provided below (the
"Exchange Ratio"), such that if the Average Stock Price (as defined below) is
(i) greater than $73.50, the Exchange Ratio will be equal to $55.95 divided by
the Average Stock Price, (ii) equal to or greater than $67.00 but less than or
equal to $73.50, the Exchange Ratio will be 0.7612, (iii) equal to or greater
than $60.00 but less than $67.00, the Exchange Ratio will be equal to $51.00
divided by the Average Stock Price, or (iv) less than $60.00, the Exchange Ratio
will be equal to $51.00 divided by the Average Stock Price (subject to certain
termination and notification provisions as more fully described in the Merger
Agreement). As defined in the Merger Agreement, "Average Stock Price" means the
average of the Daily Per Share Prices for the 15 consecutive trading days ending
on the fourth trading day prior to the AMP stockholders' meeting to consider the
Merger and the "Daily Per Share Price" for any trading day means the weighted
average of the per share selling prices on the New York Stock Exchange, Inc.
(the "NYSE") of Tyco Common Shares (as reported in the NYSE Composite
Transactions) for that day.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to AMP
and Tyco. We have also reviewed certain other information relating to AMP and
Tyco, including financial forecasts, provided to or discussed with us by AMP and
Tyco, and have met with the managements of AMP and Tyco to discuss the
businesses and prospects of AMP and Tyco. We have also considered certain
financial and stock market data of AMP and Tyco, and we have compared those data
with similar data for other publicly held companies in businesses similar to AMP
and Tyco, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and we have assumed,
that such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of AMP and Tyco
as to the future financial
C-1
<PAGE>
Board of Directors
AMP Incorporated
November 22, 1998
Page 2
performance of AMP and Tyco and the best currently available estimates and
judgments of the management of AMP as to the operating cost savings (including
the amount, timing and achievability thereof) projected to be realized through
AMP's various cost reduction plans. We also have assumed, with your consent,
that the Merger will be treated as a pooling of interests in accordance with
generally accepted accounting principles and as a tax-free reorganization for
federal income tax purposes. In addition, we have not been requested to make,
and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of AMP or Tyco, nor have we been furnished
with any such evaluations or appraisals. Our opinion is necessarily based upon
information available to us, and financial, economic, market and other
conditions as they exist and can be evaluated, on the date hereof. We are not
expressing any opinion as to the actual value of the Tyco Common Shares when
issued pursuant to the Merger or the prices at which the Tyco Common Shares will
trade subsequent to the Merger. In connection with our engagement, we were
requested to approach, and held discussions with, certain third parties to
solicit indications of interest in a possible business combination with AMP.
We have acted as financial advisor to AMP in connection with the Merger and
will receive a fee for such services, a significant portion of which is
contingent upon the consummation of the Merger. We have in the past provided
financial services to AMP and Tyco, and are currently providing financial
services to AMP, unrelated to the proposed Merger, for which services we have
received compensation. In the ordinary course of business, Credit Suisse First
Boston and its affiliates may actively trade the debt and equity securities of
both AMP and Tyco for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of AMP in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the Merger, and is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of AMP Common Stock from
a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
C-2
<PAGE>
[Merrill Lynch Letter Head]
ANNEX D
November 22, 1998
Board of Directors
Tyco International Ltd.
Gibbons Building
10 Queen Street--Suite 301
Hamilton, HM11, Bermuda
Members of the Board of Directors:
AMP Incorporated (the "Company"), Beta Zeno Corp. ("Beta"), a newly formed,
wholly-owned subsidiary of Tyco International Ltd. ("Tyco") and Alpha Zeno Corp.
("Merger Sub"), a newly formed, wholly-owned subsidiary of Beta, are entering
into an Agreement and Plan of Merger, dated as of November 22, 1998 (the
"Agreement") pursuant to which the Company will be merged with Merger Sub in a
transaction (the "Merger") in which each outstanding share of the Company's
common stock, without par value (together with the common stock purchase rights
associated therewith, the "Company Shares"), will be converted into the right to
receive a number of shares of common stock of Tyco, par value $.20 per share
(the "Tyco Common Shares") in the ratio hereinafter provided (the "Exchange
Ratio") such that if the Average Stock Price (as defined in the Agreement) is:
(i) greater than $73.50, the Exchange Ratio will be equal to $55.95 divided by
the Average Stock Price; (ii) equal to or greater than $67.00 but less than or
equal to $73.50, the Exchange Ratio will be fixed at 0.7612; (iii) equal to or
greater than $60.00 but less than $67.00, the Exchange Ratio will be equal to
$51.00 divided by the Average Stock Price; or (iv) less than $60.00, the
Exchange Ratio will be equal to $51.00 divided by the Average Stock Price
(provided that Beta will have the right to terminate the Agreement by reason of
such Average Stock Price unless the Company has given notice in accordance with
the Agreement that it agrees that the Exchange Ratio will be fixed at 0.8500).
In addition, the Company and Beta are entering into a Stock Option Agreement,
dated as of November 22, 1998 (the "Option Agreement"), pursuant to which the
Company will grant to Beta an option (the "Option") to purchase up to 43,500,000
Company Shares, or such lesser number of Company Shares constituting 19.9% of
the issued and outstanding Company Shares on the date the Option is first
exercised, at an exercise price of $51.00 (subject to adjustment as provided in
the Option Agreement) per Company Share. Tyco is entering into separate
Guarantees (collectively, the
D-1
<PAGE>
"Guarantees") pursuant to which Tyco is guaranteeing the representations,
warranties, covenants, agreements and other obligations of Beta and Merger Sub
under the Agreement and of Beta under the Option Agreement.
You have asked us whether, in our opinion, the consideration to be issued to
the shareholders of the Company in the Merger is fair from a financial point of
view to Tyco.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and Tyco that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company and Tyco, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result from the
Merger (the "Expected Synergies") furnished to us by the Company and
Tyco;
(3) Conducted discussions with members of senior management and
representatives of the Company and Tyco concerning the matters described
in clauses 1 and 2 above, as well as their respective businesses and
prospects before and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Tyco Common Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and Tyco and compared
them with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and Tyco and their financial and legal
advisors;
(8) Reviewed the potential pro forma impact of the Merger;
D-2
<PAGE>
(9) Reviewed the Agreement, the Option Agreement and the Guarantees; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or Tyco or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company or Tyco. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by the Company or Tyco, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's or Tyco's management as to the expected
future financial performance of the Company or Tyco, as the case may be, and the
Expected Synergies. We have further assumed that the Merger will be accounted
for as a pooling of interests under generally accepted accounting principles and
that it will qualify as a tax-free reorganization for U.S. federal income tax
purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
We are acting as financial advisor to Tyco in connection with the Merger and
will receive a fee from Tyco for our services, which is contingent upon the
consummation of the Merger. In addition, Tyco has agreed to indemnify us for
certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory and financing services to Tyco and may continue to
do so and have received, and may receive, fees for the rendering of such
services. In addition, in the ordinary course of our business, we may actively
trade the Company Shares and other securities of the Company, as well as the
Tyco Common Shares and other securities of Tyco, for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
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<PAGE>
This opinion is for the use and benefit of the Board of Directors of Tyco.
Our opinion does not address the merits of the underlying decision by Tyco to
engage in the Merger and does not constitute a recommendation to any shareholder
of Tyco as to how such shareholder should vote on the proposed Merger or any
matter related thereto.
We are not expressing any opinion herein as to the prices at which the Tyco
Common Shares will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the consideration to be issued to the shareholders of the
Company in the Merger is fair from a financial point of view to Tyco. This
opinion confirms our preliminary, oral opinion given to Tyco's Board of
Directors at its meeting in Bermuda on November 20, 1998.
Very truly yours,
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
D-4
<PAGE>
ANNEX E
TYCO INTERNATIONAL LTD. LONG TERM INCENTIVE PLAN
(AS AMENDED APRIL , 1999)
SECTION 1. PURPOSE.
The purposes of this Tyco International Ltd. Long Term Incentive Plan
(the"Plan") are to promote the interest of Tyco International Ltd. (together
with any successor thereto, the "Company") and its shareholders by (i)
attracting and retaining officers, key employees or directors of the Company and
its Subsidiaries (ii) motivating such employees or directors by means of
performance-related incentives to achieve longer-range performance goals, and
(iii) enabling such employees or directors to participate in the long-term
growth and financial success of the Company.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
"ADT MERGER" shall mean the July 2, 1997 merger of Former Tyco with and
into a wholly-owned subsidiary of the Company (formerly called ADT Limited).
"AWARD" shall mean any Option, Stock Appreciation Right, Performance
Award, Dividend Equivalent, or other Stock-Based Award, including any Prior
ADT Option or Prior Tyco Option. "Award Agreement" shall mean any written
agreement, contract or other instrument or document evidencing any Award,
which may, but need not, be executed or acknowledged by a Participant.
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the U.S. Internal Revenue Code of 1986, as amended
from time to time.
"COMMITTEE" shall mean the Board or a committee of the Board designated
by the Board to administer the Plan and composed of not less than the
minimum number of persons from time to time required by Rule 16b-3 or any
applicable law, each of whom, to the extent necessary to comply with Rule
16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3.
"DIRECTOR" shall mean any member of the Board.
"DIVIDEND EQUIVALENT" shall mean any right granted under Section 6(d) of
the Plan.
"EMPLOYEE" shall mean any officer or key employee of the Company or of
any Subsidiary, as determined by the Committee.
"EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean, (A) with respect to any property other
than the Shares, the fair market value of such property determined by such
methods or procedures as shall be established from time to time by the
Committee and (B) with respect to the Shares, as of any date, (i) the last
reported sales price regular way on the New York Stock Exchange or, if not
reported for the New York Stock Exchange, on the Composite Tape, or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked quotations on the New York Stock Exchange, (ii) if the
Shares are not listed on the New York Stock Exchange or no such quotations
are available, the closing price of the Shares as reported by the National
Market System, or similar organization, or if no such quotations are
available, the average of the high bid and low asked quotations in the
over-the-counter market as reported by the National Quotation
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<PAGE>
Bureau Incorporated or similar organization; or (iii) in the event that
there shall be no public market for the Shares, the fair market value of the
Shares as determined (which determination shall be conclusive) in good faith
by the Committee, based upon the value of the Company as a going concern, as
if such Shares were publicly owned stock, but without any discount with
respect to minority ownership.
"FORMER TYCO OPTION" shall mean any option granted with respect to Prior
Tyco Shares by Tyco International Ltd. to its employee, or assumed by Former
Tyco, prior to the ADT Merger.
"FORMER TYCO SHARES" shall mean the shares of common stock of Former
Tyco prior to the ADT Merger.
"INCENTIVE STOCK OPTION" shall mean an option granted under Section 6(a)
of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger dated as
of March 17, 1997 by and among ADT Limited, Limited Apache, Inc. and Former
Tyco.
"OPTION" shall mean an option granted under Section 6(a) of the Plan.
"OTHER STOCK-BASED AWARD" shall mean any right granted under Section
6(e) of the Plan.
"PARTICIPANT" shall mean any Employee or Director granted an Award under
the Plan.
"PERFORMANCE AWARD" shall mean any right granted under Section 6(c) of
the Plan.
"PERSON" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"PRIOR ADT OPTION" shall mean any option granted under the ADT Senior
Executive Share Option Plan, the ADT US Stock Option Plan 1990, the ADT
International Executive Share Option Plan, or this Plan by ADT Limited or
its affiliate with respect to Prior ADT Shares.
"PRIOR ADT SHARES" shall mean the common shares of ADT Limited prior to
the ADT Merger.
"RULE 16B-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act or any successor rule or regulation thereto as in effect from
time to time.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
"SHARES" shall mean the common shares of the Company, U.S. $0.20 par
value, and such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(b) of the Plan.
"STOCK APPRECIATION RIGHT" shall mean any right granted under Section
6(b) of the Plan.
"SUBSIDIARY" shall mean a subsidiary company (wherever incorporated) as
defined by Section 86 of the Companies Act 1981 of Bermuda (as amended).
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Committee. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to (i) designate Participants; (ii) determine the type
or types of Awards to be granted to an eligible Employee or Director; (iii)
determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be
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calculated in connection with, Awards; (iv) determine the terms and conditions
of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or suspended
and the method or methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended, (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan. Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any Subsidiary,
any Participant, any holder or beneficiary of any Award, any shareholder and any
Employee.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE
Subject to adjustment as provided in Section 4(b);
(i) Calculation of Number Shares Available.
The number of Shares with respect to which Awards may be granted under
the Plan shall be 70,000,000. If, during the term of the Plan, any Award is
forfeited, or any Award otherwise terminates or is canceled without the
delivery of Shares or of other consideration, then the Shares covered by
such Award or to which such Award relates, or the number of Shares otherwise
counted against the aggregate number of Shares with respect to which Awards
may be granted, to the extent of any such forfeiture, termination or
cancellation, shall again be, or shall become, Shares with respect to which
Awards may be granted.
(ii) ACCOUNTING FOR AWARDS
For purposes of this Section 4:
(A) if an Award (other than a Dividend Equivalent) is related to or
payable in Shares, the number of Shares covered by such Award, or to
which such Award related, shall be counted on the date of grant of such
Award against the aggregate number of Shares with respect to which Awards
may be granted under the Plan; and
(B) Dividend Equivalents and Awards not related to or payable in
Shares shall be counted against the aggregate number of Shares with
respect to which Awards may be granted under the Plan in such amount and
at such time as the Committee shall determine under procedures adopted by
the Committee consistent with the purposes of the Plan,
provided that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards may be counted or not counted under procedures adopted by
the Committee in order to avoid double counting. Subject to the requirements
of applicable law, any Shares delivered by the Company, or any Shares with
respect to which Awards are made by the Company, or any Shares with respect
to which the Company becomes obligated to make Awards, through the
assumption of, or in substitution for, outstanding awards previously granted
by an acquired company, shall not be counted against the Shares available
for Awards under the Plan.
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(iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS
Any Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or, to the extent permissible under
applicable law, of Shares acquired by any Subsidiary or any other Person
designated by the Company.
(b) ADJUSTMENTS
In the event that the Committee determines that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, subdivision,
consolidation or reduction of capital, reorganization, merger, scheme of
arrangement, split-up, spin-off or combination involving the Company or
repurchase or exchange of Shares or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that any adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or property) with respect
to which Awards may be granted, (ii) the number and type of Shares (or other
securities or property subject to outstanding Awards), and (iii) the grant or
exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award; provided, in
each case that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would cause the
Plan to violate Section 422(b)(1) of the Code or any successor provision
thereto; and provided further, that the number of Shares subject to any Award
denominated in Shares shall always be a whole number.
(c) LIMITATION
No Participant shall be granted Awards for more than 6,000,000 Shares in
1997 or any subsequent calendar year. For purposes of this limitation, neither
the modification of a Prior ADT Option pursuant to Section 7(a) nor the
replacement of a Prior Tyco Option pursuant to Section 7(b) shall be treated as
the grant of an Award.
SECTION 5. ELIGIBILITY.
Any Employee or Director shall be eligible to be designated a Participant.
SECTION 6. AWARDS.
(a) OPTIONS
The Committee is hereby authorized to grant to eligible Employees and
Directors an option to purchase Shares (an "Option") which shall (except as
otherwise provided in Section 7) contain the following terms and conditions and
such additional terms and conditions, which are not inconsistent with the
provisions of the Plan, as the Committee shall determine.
(i) EXERCISE PRICE
The purchase price per Share under an Option shall be not less than the
Fair Market Value of a Share at the date of the grant, except that if the
Award requires the option to be paid for by the Participant, or if any
discount from such Fair Market Value is expressly granted in lieu of a
reasonable amount of salary or cash bonus, the Committee may fix such
purchase price at not less than 85% of such Fair Market Value.
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(ii) TIME AND METHOD OF EXERCISE
The Committee shall determine the time or times at which an Option may
be exercised in whole or in part, and the method or methods by which, and
the form or forms (which may include, without limitation, cash, Shares,
outstanding Awards, other securities or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price) in which, payment of the exercise price with
respect thereto may be deemed to have been made.
(iii) INCENTIVE STOCK OPTIONS
The terms of any Incentive Stock Option granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code, or
any successor provisions, and any regulations promulgated thereunder. The
aggregate fair market value (determined on the date an option is granted) of
shares with respect to which Incentive Stock Options become exercisable by
any Employee in any year shall not exceed $100,000.
(b) STOCK APPRECIATION RIGHTS
The Committee is hereby authorized to grant to eligible Employees and
Directors a "Stock Appreciation Right", which shall consist of a right to
receive the excess of (i) the Fair Market Value of one Share on the date the
right is exercised or, if the Committee shall so determine in the case of any
such right other than one related to any Incentive Stock Option, at any time
during a specified period before or after the date of exercise over (ii) the
grant price (determined in the manner set forth below) of the right. A Stock
Appreciation Right may be granted in tandem with an Option, in addition to an
Option, or free standing and unrelated to an Option.
(i) GRANT PRICE
The grant price of a Stock Appreciation Right shall be not less than the
Fair Market Value of a Share at the date of the grant, except that if the
Award requires the SAR to be paid for by the Participant, or if any discount
from such Fair Market Value is expressly granted in lieu of a reasonable
amount of salary or cash bonus, the Committee may fix such grant price at
not less than 85% of such Fair Market Value.
(ii) OTHER TERMS AND CONDITIONS
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine, at or after the grant of a Stock Appreciation
Right, the term, methods of exercise, methods of settlement, and any other
terms and conditions of any Stock Appreciation Right. Any such determination
by the Committee may be changed by the Committee from time to time and may
govern the exercise of Stock Appreciation Rights granted or exercised prior
to such determination as well as Stock Appreciation Rights granted or
exercised thereafter. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it shall
deem appropriate.
(c) PERFORMANCE AWARDS
The Committee is hereby authorized to grant to eligible Employees and
Directors a "Performance Award", which shall consist of a right, (i) denominated
or payable in cash, Shares, other securities or other property (including
without limitation, restricted securities), and (ii) which shall confer on the
holder thereof rights valued as determined by the Committee and payable to, or
exercisable by, such holder, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee shall
establish. The criteria with respect to which performance goals may be
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established are stock price, market share, sales, earnings, earnings per share,
earnings before income tax, cash flow and return on equity.
(i) TERMS AND CONDITIONS
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award and the amount of any payment or transfer to be made
pursuant to any Performance Award.
(ii) PAYMENT OF PERFORMANCE AWARDS
Performance Awards may be paid in a lump sum or in installments
following the close of the performance period or, in accordance with
procedures established by the Committee, on a deferred basis.
(d) DIVIDEND EQUIVALENTS
The Committee is hereby authorized to grant to eligible Employees and
Directors a "Dividend Equivalent," which shall consist of a right pursuant to
which any such eligible Employee or Director shall be entitled to receive
payments equivalent to dividends with respect to a number of Shares determined
by the Committee, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional Shares or otherwise reinvested.
Subject to the terms of the Plan and any applicable Award Agreement, such Awards
may have such terms and conditions as the Committee shall determine.
(e) OTHER STOCK-BASED AWARDS
The Committee is hereby authorized to grant to eligible Employees and
Directors an "Other Stock-Based Award", which shall consist of a right (i) which
is other than an Award or right described in Section 6(a), (b), (c), or (d)above
and (ii) which is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Committee
to be consistent with the purposes of the Plan. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall determine the terms and
conditions of any such Other Stock-Based Award, which conditions may include
satisfaction of performance goals relating to stock price, market share,
sales,earnings, earnings per share, earnings before income tax, cash flow and
return on equity.
(f) GENERAL
(i) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER
Awards may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for any other Award
granted under the Plan or any award granted under any other plan of the
Company or any Subsidiary. Awards granted in addition to or in tandem with
other Awards or awards granted under any other plan of the Company or any
Subsidiary may be granted either at the same time as or at a different time
from the grant of such other Awards or awards.
(ii) FORMS OF PAYMENT BY COMPANY UNDER AWARDS
Subject to the terms of the Plan and of any applicable Award Agreement
and the requirements of applicable law, payments or transfers to be made by
the Company or a Subsidiary upon the grant, exercise or payment of an Award
may be made in such form or forms as the Committee
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shall determine, including, without limitation, cash, Shares, other
securities, other Awards or other property, or any combination thereof, and
may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable interest
on installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments denominated in
Shares.
(iii) LIMITS ON TRANSFER OF AWARDS
Subject to paragraph (ix) below:
(A) Each Award, and each right under any Award, shall be exercisable
only by the Participant during the Participant's lifetime, or, if
permissible under applicable law, by the Participant's guardian or legal
representative or by a transferee receiving such Award pursuant to a
qualified domestic relations order (a "QDRO") as defined in the Code or
Title I of the U.S. Employee Retirement Income Security Act of 1974
("ERISA"), or the rules thereunder, or any analogous order in any other
relevant jurisdiction.
(B) No Award (prior to the time, if applicable, Shares are issued in
respect of such Award), and no right under any such Award, may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of
descent and distribution (or, in the case of restricted securities, to
the Company) or pursuant to a QDRO, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company or any Subsidiary; provided,
that the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.
(iv) TERMS OF AWARDS
The term of each Award shall be for such period as may be determined by
the Committee; provided, that in no event shall the term of any Incentive
Stock Option exceed a period of ten years from the date of its grant.
(v) RULE 16B-3 SIX-MONTH LIMITATIONS
To the extent required in order to comply with Rule 16b-3 only, any
equity security offered pursuant to the Plan must be held for at least six
months after the date of grant, and with respect to any derivative security
issued pursuant to the Plan at least six months must elapse from the date of
acquisition of such derivative security to the date of disposition (other
than upon exercise or conversion) of the derivative security or its
underlying equity security after the grant thereof. Terms used in the
preceding sentence shall, for the purposes of such sentence only, have the
meanings, if any, assigned to them under Rule 16b-3.
(vi) SHARE CERTIFICATES
All certificates for Shares or other securities of the Company or any
Subsidiary delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the U.S. Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities
are then listed, and any applicable laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. Notwithstanding the foregoing, no action
shall be taken by the Committee which would, under the laws of Bermuda,
cause a separate class of securities other
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than Shares to be created and the Committee shall consult with appropriate
legal counsel in this regard.
(vii) CONSIDERATION FOR GRANTS
Awards may be granted for no cash consideration, for such nominal cash
consideration as may be required by applicable law or for such greater
amount as may be established by the Committee.
(viii) DELIVERY OF SHARES OR OTHER SECURITIES AND PAYMENT BY
PARTICIPANT OF CONSIDERATION
No Shares or other securities shall be delivered pursuant to any Award
until payment in full of any amount required to be paid pursuant to the Plan
or the applicable Award Agreement is received by the Company. Such payment
may be made by such method or methods and in such form or forms as the
Committee shall determine, including, without limitation, cash, Shares,
other securities, other Awards or other property, or any combination
thereof, provided that the combined value, as determined by the Committee,
of all cash and cash equivalent and the Fair Market Value of any such Shares
or other property so tendered to the Company, as of the date of such tender,
is at least equal to the full amount required to be paid pursuant to the
Plan or the applicable Award Agreement to the Company.
(ix) COMMITTEE DISCRETION TO REMOVE OR AMEND RESTRICTIONS ON
TRANSFERABILITY
Notwithstanding the provisions of paragraph (iii) above and any other
restrictions on transferability of Awards referred to in this Plan, the
Committee may, in its discretion, either generally or specifically,
prospectively or retroactively, (a) grant Awards without limits on
transferability thereof or with such limits on transferability as the
Committee may deem appropriate in the circumstances, and (b) waive, amend,
alter, suspend, discontinue, cancel or terminate any limits on
transferability of Awards on such terms as the Committee may deem
appropriate; provided, that any of the acts described in clause (b) of this
paragraph that would impair the rights of any Participant, or any holder or
any beneficiary of any Award theretofore granted, shall not to that extent
be effective without the consent of the affected Participant, holder or
beneficiary.
SECTION 7. MODIFICATION AND REPLACEMENT OF OUTSTANDING OPTIONS.
(a) MODIFICATION OF PRIOR ADT OPTIONS
Each Prior ADT Option outstanding as of the effective date of the ADT Merger
shall be modified, as of that date, as follows:
(i) SHARES TO WHICH OPTION RELATES.
Each Prior ADT Option shall entitle the recipient to purchase a number
of Shares equal to the product of .48133 (subject to adjustment as necessary
to reflect any change in the "Reverse Stock Split Ratio" under the ADT
Merger Agreement) and the number of Prior ADT Shares to which such Prior ADT
Option originally related.
(ii) EXERCISE PRICE.
The exercise price of each Prior ADT Option shall be equal to the
original exercise price of such Prior ADT Option, divided by .48133 (subject
to adjustment as necessary to reflect any change in the "Reverse Stock Split
Ratio" under the ADT Merger Agreement).
Each Prior ADT Option shall continue to have the same term, and shall
otherwise continue to be subject to all of the other terms and conditions, as
applied to such option prior to the ADT Merger. In
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the event of a conflict between the terms of this Plan and the terms of the
Award Agreement by which a Prior ADT Option was originally granted, the terms of
the Award Agreement shall govern.
(b) REPLACEMENT OF PRIOR TYCO OPTIONS
In addition to any other Awards that may be granted under the Plan, Options
("Substitute Options") shall be granted hereunder in replacement of all
outstanding Former Tyco Options, as of the effective date of the ADT Merger. The
number of Shares subject to each Substitute Option issued in respect of a Former
Tyco Option shall be the same as the number of Former Tyco Shares to which such
Former Tyco Option related, and the exercise price of such Substitute Option
shall be the same as the exercise price of such Former Tyco Option. Each
Substitute Option shall have the same term as the original option in respect of
which it is granted, and shall otherwise be subject to all of the other terms
and conditions as applied to such original option. Except to the extent required
to reflect the ADT Merger, in the event of a conflict between the terms of this
Plan and the terms of the Award Agreement by which a Former Tyco Option was
originally granted, the terms of the Award Agreement shall govern.
(c) ALL PRIOR ADT OPTIONS SUBJECT TO PLAN.
From and after the date on which this amended Plan is effective each
outstanding Prior ADT Option will be subject to the terms of this Plan and the
Award Agreement with respect to such Option.
SECTION 8. AMENDMENT AND TERMINATION.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN
The Board may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of any shareholder, Participant, other holder or
beneficiary of an Award, or other Person; provided that any such amendment,
alteration, suspension, discontinuation, or termination that would impair
the rights of any Participant, or any other holder or beneficiary of any
Award theretofore granted, shall not to that extent be effective without the
consent of the affected Participant, holder or beneficiary and provided
further, that notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the shareholders of the Company no such
amendment, alteration, suspension, discontinuation, or termination shall be
made that would:
(i) increase the total number of Shares available for Awards under
the Plan, except as provided in Section 4 of the Plan; or
(ii) otherwise cause the Plan to cease to comply with any applicable
law or regulatory requirement with respect to which the Board determines
compliance is necessary or desirable.
(b) AMENDMENTS TO AWARDS
The Committee may waive any conditions or rights under, amend any terms
of, or alter, suspend, discontinue, cancel or terminate, any Award
theretofore granted, prospectively or retroactively, without the consent of
any relevant Participant or holder or beneficiary of an Award; provided
that, subject to the Committee's right to adjust Awards pursuant to Section
6(f)(ix) and Section 8(c) and (d), (i) any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that
would materially impair the rights of any Participant, or any holder or
beneficiary of any Award theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary; and (ii) without the approval of the
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shareholders of the Company, no such waiver, amendment, alteration,
suspension, discontinuance, cancellation or termination that would
materially increase the rights of any Participant or any holder or
beneficiary of any Award, shall be effective unless the Award, after giving
effect to such waiver, amendment, alteration, suspension, discontinuance,
cancellation or termination, could permissibly have been granted under the
terms of the Plan (without regard to this Section 8(b)).
(c) ADJUSTMENTS OF AWARDS UPON CERTAIN ACQUISITIONS
In the event the Company or any Subsidiary shall assume outstanding
employee awards or the right or obligation to make future employee awards in
connection with the acquisition of another business or another corporation
or business entity, the Committee may make such adjustments, not
inconsistent with the terms of the Plan, in the terms of Awards as it shall
deem appropriate in order to achieve reasonable comparability, or other
equitable relationship between the assumed awards and the Awards as so
adjusted.
(d) ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING
EVENTS
The Committee is hereby authorized to make adjustments in the terms and
conditions of and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described
in Section 4(b) hereof) affecting the Company, any Subsidiary, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, or to be derived by the
Company.
SECTION 9. CHANGE IN CONTROL.
(a) In addition to the Committee's authority set forth in Section 8(d),
in order to maintain the Participants' rights in the event of any Change in
Control, as hereinafter defined, the Committee, as constituted before such
Change in Control, is hereby authorized, and has sole discretion, as to any
Award, either at the time such Award is made hereunder or any time
thereafter, to take any one or more of the following actions: (i) provide
for the acceleration of any time periods relating to the exercise or
realization of such Award so that such Award may be exercised or realized in
full on or before a date fixed by the Committee; (ii) provide for the
purchase of any such Award, upon the Participant's request, for an amount of
cash equal to the amount that could have been attained upon the exercise of
such Award or realization of the Participant's rights had such Award been
currently exercisable or payable; (iii) make such adjustment to any such
Award then outstanding as the Committee deems appropriate to reflect such
Change in Control; or (iv) cause any such Award then outstanding to be
assumed, or new rights substituted therefor, by the acquiring or surviving
corporation after such Change in Control. The Committee may, in its
discretion, include such further provisions and limitations in any Award
Agreement as it may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall mean the occurrence of any of the
following events:
(i) any "person" or "group" (as defined under Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) is
or becomes the direct or indirect "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), of securities
representing 50% or more of the combined voting power of the
Company's then outstanding voting securities;
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(ii) individuals who either:
(A) are Directors of the Company at July 2, 1997 or
subsequently are appointed as Directors of the Company by, or on
the recommendation of, a majority of the Directors in office at
July 2, 1997; or
(B) are subsequently appointed as Directors of the Company
by, or on the recommendation of, a majority of those Directors of
the Company referred to in paragraph (A) above,
cease for any reason, other than death or incapacity of a Director or
his retirement at a general meeting of the Company at which he is
re-elected as a Director (but including as a result of any proxy
contest involving the solicitation of revocable proxies under Section
14(a) of the Exchange Act), to constitute a majority of the Board of
Directors of the Company;
(iii) any "person" or "group" (other than an employee benefit
plan or plans maintained by the Company or its affiliate) comes to
possess, directly or indirectly, the legal right to direct the
management and policies of the Company, whether through the ownership
of securities, by contract or otherwise (other than solely by virtue
of membership on the Board of Directors of the Company or any
committee thereof);
(iv) the Company effects a merger, amalgamation, scheme of
arrangement or other combination in which the Company is not the
surviving entity, or a sale or disposition of all, or substantially
all, of the assets of the Company; or
(v) a merger, amalgamation, scheme of arrangement or other
combination of the Company or any Subsidiary of the Company with or
into another person or any analogous or similar transaction or event
occurs as a result of which the voting rights exercisable at general
meetings of the Company in respect of the shares of the Company in
issue immediately prior to the relevant event no longer represent a
majority of all the voting rights normally exercisable at general
meetings of the Company in respect of the shares of the Company in
issue immediately after such event.
SECTION 10. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS
No Employee, Director, Participant or other Person shall have any claim
to be granted any Award, and there is no obligation for uniformity of
treatment of Employees, Directors, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with
respect to each recipient. No Participant shall have the rights of a
shareholder with respect to any Award unless and until Shares have been
issued in respect of such Award.
(b) DELEGATION
Subject to the terms of the Plan and applicable law, the Committee may
delegate to one or more officers or managers of the Company or any
Subsidiary, or to a committee of such officers or managers, the authority,
subject to the terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Employees who are
not officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
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(c) WITHHOLDING
The Company or any Subsidiary is hereby authorized to withhold from any
Award, from any payment due or transfer made under any Award or under the
Plan or from any compensation or other amount owing to a Participant the
amount (in cash, Shares, other securities, other Awards or other property)
of any applicable withholding taxes in respect of an Award, its exercise, or
any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy
all obligations for the payment of such taxes.
(d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS
Nothing contained in the Plan shall prevent the Company or any
Subsidiary from adopting or continuing in effect other compensation
arrangements (subject to shareholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only
in specific cases.
(e) NO RIGHT TO EMPLOYMENT
The grant of an Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company or any Subsidiary.
Further, the Company or a Subsidiary may at any time dismiss a Participant
from employment, free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement.
(f) GOVERNING LAW
The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
laws of Bermuda. In addition, the Committee may amend the terms of the Plan
and any Awards or Award Agreement in order to comply with the laws of
Bermuda or the laws of any other applicable jurisdiction.
(g) SEVERABILITY
If any provision of the Plan or any Award is or becomes or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be construed
or deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan of the Award, such provision shall be
stricken as to such jurisdiction, Person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.
(h) ADDITIONAL POWERS
The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary.
(i) NO TRUST OR FUND CREATED
Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company or any Subsidiary and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the
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Company or any Subsidiary pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or
any Subsidiary.
(j) NO FRACTIONAL SHARES
No fractional Shares shall be issued or delivered pursuant to the Plan
or any Award, and the Committee shall determine whether cash, other
securities, or other property shall be paid or transferred in lieu of any
fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated or otherwise eliminated.
(k) HEADINGS
Headings are given to the Sections and subsections of the Plan solely as
a convenience to facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or interpretation of the
Plan or any provision thereof.
SECTION 11. EFFECTIVE DATE OF THE PLAN.
This amended Plan shall be effective as of the date of its approval, as
amended, by the shareholders of the Company.
SECTION 12. TERM OF THE PLAN.
No Award shall be granted under the Plan after June 30, 2007. However,unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may, and the authority of the Board or the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Award or to waive any conditions or rights under any such Award shall, extend
beyond such date.
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