<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
BERMUDA 7382 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------------
THE GIBBONS BUILDING
10 QUEEN STREET, SUITE 301
HAMILTON HM 11 BERMUDA
(441) 292-8674*
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
MARK H. SWARTZ
C/O TYCO INTERNATIONAL (US) INC.
ONE TYCO PARK
EXETER, NEW HAMPSHIRE 03833
(603) 778-9700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
* Tyco International Ltd. maintains its registered and principal executive
offices at The Gibbons Building, 10 Queen Street, Suite 301, Hamilton HM 11
Bermuda. The executive offices of Tyco's principal United States subsidiary,
Tyco International (US) Inc., are located at One Tyco Park, Exeter, New
Hampshire 03833. The telephone number there is (603) 778-9700.
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JOSHUA M. BERMAN, ESQ. CHRISTOPHER D. DILLON, ESQ.
ABBE L. DIENSTAG, ESQ. SHEARMAN & STERLING
KRAMER LEVIN NAFTALIS & FRANKEL LLP 1550 EL CAMINO REAL
919 THIRD AVENUE MENLO PARK, CALIFORNIA 94025
NEW YORK, NEW YORK 10022
</TABLE>
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY OFFERING PRICE
<S> <C> <C> <C>
Common Shares, par value $0.20 per share (1)............. (2)17,601,143 $N/A $1,402,989,588(3)
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Shares, par value $0.20 per share (1)............. $390,032
</TABLE>
(1) With attached rights to purchase preferred or additional common shares in
certain circumstances.
(2) Represents the estimated maximum number of Tyco common shares issuable upon
consummation of the merger of Raychem Corporation with a subsidiary of the
Registrant, assuming (A) that the 77,704,650 shares of Raychem common stock
outstanding as of June 4, 1999 are outstanding at the effective time of the
merger, (B) the issuance of approximately 275,000 shares of Raychem common
stock on July 31, 1999 pursuant to Raychem's Employee Stock Purchase Plan
and (C) the exercise of options or other rights to purchase or acquire up to
7,050,022 additional shares of Raychem common stock, representing all such
options or other rights exercisable prior to November 30, 1999.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 promulgated under the Securities Act of 1933, as amended, on the
basis of $35.00, the average of the high and low prices of the Raychem
common stock on the New York Stock Exchange on June 10, 1999, less $18.50,
the amount of cash consideration per share of Raychem common stock that will
be paid in the merger, multiplied by 85,029,672, the maximum number of
shares of Raychem common stock to be acquired in the merger.
(4) .000278 of the Proposed Maximum Aggregate Offering Price.
------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Agreement and Plan of Merger and
Reorganization, dated as of May 19, 1999, described in the Proxy
Statement/Prospectus included in this Registration Statement, have been
satisfied or waived.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION DATED JUNE 11, 1999
[RAYCHEM LOGO]
July , 1999
Dear Raychem Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Raychem Corporation, which will be held on August , 1999 at 300 Constitution
Drive, Menlo Park, California 94025 at 10:00 a.m. Pacific Time.
At the meeting, you will be asked to approve and adopt the Agreement and
Plan of Merger and Reorganization, dated as of May 19, 1999, among Raychem, Tyco
International Ltd. and Tyco International (PA) Inc., a wholly owned subsidiary
of Tyco. The merger agreement provides for, among other things, the merger of
Raychem with Tyco (PA).
If this merger is approved, all of the outstanding shares of Raychem common
stock will be exchanged for the aggregate consideration of approximately $
in cash and million Tyco shares, based on the number of outstanding shares
of Raychem common stock as of July , 1999. You will be able to elect to
receive your pro rata share of the merger consideration in either cash, Tyco
shares or a combination of cash and shares. If more stockholders elect cash than
can be paid with the available aggregate cash consideration, cash electing
stockholders will receive a combination of cash and shares according to a
proration formula. Similarly, if more stockholders elect Tyco shares than can be
paid with the available aggregate Tyco share consideration, share electing
stockholders will receive a combination of shares and cash according to a
proration formula. The accompanying Proxy Statement/ Prospectus provides a
detailed description of the proposed merger, the merger consideration and the
proration mechanisms, as well as the effects of the merger on you as a
stockholder and on Raychem. I urge you to read the enclosed materials carefully.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF RAYCHEM AND
ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the meeting,
please take the time to vote on the proposal submitted to you by completing and
mailing the enclosed proxy card to us.
Sincerely,
Richard A. Kashnow
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF ISSUES WHICH
SHOULD BE CONSIDERED BY STOCKHOLDERS WITH RESPECT TO THE MERGER.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Tyco common shares to be issued in
the merger or determined if this Proxy Statement/Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Proxy Statement/Prospectus dated July , 1999 and first mailed to stockholders
on or about July , 1999.
<PAGE>
RAYCHEM CORPORATION
300 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST , 1999
To the Stockholders of
RAYCHEM CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Raychem
Corporation will be held on August , 1999 at 300 Constitution Drive, Menlo
Park, California 94025, commencing at 10:00 a.m. Pacific Time, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger and Reorganization, dated as of May 19, 1999,
among Raychem, Tyco International Ltd., a Bermuda corporation, and Tyco
International (PA) Inc., a Nevada corporation and a wholly-owned subsidiary
of Tyco, pursuant to which, among other things,
(a) Raychem will be merged with Tyco (PA), and
(b) each outstanding share of common stock, par value $1.00 per
share, of Raychem will be converted into the right to receive a
fraction of a common share, nominal value US$0.20 per share, of
Tyco, cash or a combination thereof as provided in the merger
agreement.
2. To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
Only holders of Raychem common stock of record at the close of business on
July , 1999 are entitled to notice of and to vote at the special meeting or
any adjournment or postponement thereof.
All stockholders are cordially invited to attend the special meeting.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
By Order of the Board of Directors,
Karen O. Cottle
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Menlo Park, California
July , 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
WHERE TO FIND MORE INFORMATION
Tyco and Raychem 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 Raychem 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 Raychem 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 Raychem for the special meeting of
Raychem stockholders. 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 Raychem 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
Raychem have previously filed with the SEC. These documents contain important
information about Tyco and Raychem 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 Fiscal year ended September 30, 1998
II, Items 6, 7, 7A and 8
Quarterly Reports on Form 10-Q Quarters ended December 31, 1998 and March 31, 1999
Current Reports on Form 8-K and 8-K/A Filed on May 13, 1998, December 10, 1998, December 11,
1998, April 15, 1999 and June 3, 1999
The description of Tyco's common shares as set forth in Filed on March 1, 1999
its Registration Statement on Form 8-A/A
</TABLE>
<TABLE>
<CAPTION>
RAYCHEM SEC FILINGS (FILE NO. 2-15299) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended June 30, 1998
Quarterly Reports on Form 10-Q Quarters ended September 30, 1998, December 31, 1998 and
March 31, 1999
Current Reports on Form 8-K Filed on August 19, 1998, October 23, 1998, December 14,
1998 and June 1, 1999
</TABLE>
Tyco and Raychem 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 meeting of Raychem's stockholders.
Tyco has supplied all information contained or incorporated by reference in
this document relating to Tyco, and Raychem has supplied all such information
relating to Raychem.
If you are a stockholder of Tyco and/or Raychem, you may have previously
received some of the documents incorporated by reference, but you can obtain any
of them through Tyco, Raychem or the SEC. Documents incorporated by reference
are available from Tyco and Raychem without charge.
i
<PAGE>
Exhibits to the documents will not be sent, however, unless those exhibits have
specifically been incorporated by reference in this document. Stockholders 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. Raychem Corporation
The Gibbons Building 300 Constitution Drive
10 Queen Street, Suite 301 Menlo Park, California 94025
Hamilton HM 11 Bermuda (650) 361-3333
(441) 292-8674
</TABLE>
If you would like to request documents from Tyco or Raychem, please do so by
August , 1999 to receive them before the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE MERGER. NEITHER TYCO NOR RAYCHEM HAS
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED JULY , 1999. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THIS DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO
STOCKHOLDERS NOR THE DELIVERY OF TYCO COMMON SHARES PURSUANT TO THE MERGER SHALL
CREATE ANY IMPLICATION TO THE CONTRARY.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE TO FIND MORE INFORMATION........
QUESTIONS AND ANSWERS ABOUT THE
TYCO/RAYCHEM MERGER.................
SUMMARY...............................
The Companies.......................
The Special Meeting.................
The Merger Consideration............
The Merger..........................
RISK FACTORS..........................
FORWARD LOOKING INFORMATION...........
SELECTED FINANCIAL DATA OF TYCO AND
RAYCHEM.............................
Selected Consolidated Historical
Financial Data of Tyco............
Selected Consolidated Historical
Financial Data of Raychem.........
Selected Tyco and Raychem Unaudited
Pro Forma Combined Financial
Information.......................
Comparative Per Share Information...
Comparative Market Value
Information.......................
RAYCHEM SPECIAL MEETING...............
Purpose of the Raychem Special
Meeting...........................
Solicitation of Proxies.............
Record Date; Voting Rights; Proxies;
Required Vote.....................
Quorum..............................
Other Information...................
Attendance at the Meeting...........
THE MERGER............................
Background of the Merger............
Exchange of Financial Forecasts.....
Recommendation of the Board of
Directors of Raychem; Reasons of
Raychem for the Merger............
Opinion of Financial Advisor to
Raychem...........................
Reasons of Tyco for the Merger......
Interests of Certain Persons in the
Merger............................
Material U.S. Federal Income Tax and
Bermuda Tax Consequences..........
Accounting Treatment................
Certain Legal Matters...............
U.S. Federal Securities Law
Consequences......................
Dividends...........................
Stock Exchange Listing..............
Appraisal Rights....................
THE MERGER AGREEMENT..................
General.............................
Effective Time......................
Merger Consideration................
Treatment of Raychem-Equity Based
Awards............................
Representations and Warranties......
Conduct of Business by Raychem......
Conduct of Business by Tyco.........
No Solicitation.....................
Certain Other Covenants.............
Conditions to the Merger............
Termination.........................
Amendment and Waiver; Parties in
Interest..........................
COMPARATIVE PER SHARE PRICES AND
DIVIDENDS...........................
Tyco................................
Raychem.............................
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION...............
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF RAYCHEM AND SHAREHOLDERS OF
TYCO................................
OTHER MATTERS.........................
LEGAL MATTERS.........................
EXPERTS...............................
FUTURE STOCKHOLDER PROPOSALS..........
ANNEXES...............................
Annex A--Agreement and Plan of
Merger and Reorganization
Annex B--Opinion of Morgan Stanley &
Co. Incorporated
Annex C--Section 262 of the Delaware
General Corporation Law
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE TYCO/RAYCHEM MERGER
Q. WHY ARE TYCO AND RAYCHEM PROPOSING TO MERGE?
A. Tyco and Raychem are engaged in a number of complementary businesses,
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. The goal
is to create increased value for stockholders through higher earnings per share.
Based on current market prices for Tyco shares, all Raychem stockholders
will receive a significant premium for their shares over the value of the
Raychem common stock on May 18, 1999, the day before the merger was publicly
announced. Raychem stockholders who receive Tyco shares in the merger will have
an interest in a larger and more diversified manufacturing and service company.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. You will receive cash, a fraction of a Tyco common share or a
combination of cash and a fraction of a Tyco common share, in each case having a
value of $18.50 plus the value of 0.2070 of a Tyco common share for each of your
shares of Raychem common stock. The cash and Tyco shares payable to you in the
merger will be allocated in accordance with the election and proration
procedures described later in this document.
Q. WHAT SHOULD I DO NOW?
A. VOTING. You should cast your vote on the merger by completing, signing
and dating your proxy card. The completed proxy card should be returned in the
enclosed self-addresed postage paid envelope. You can also attend the special
meeting and vote in person.
THE BOARD OF DIRECTORS OF RAYCHEM RECOMMENDS YOU VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
ELECTION FORMS. If you have a preference for receiving cash, Tyco shares or
a particular combination of cash and shares for your shares of Raychem common
stock, complete the enclosed election form indicating your preference. The
certificates representing your shares of Raychem stock must accompany the
election form. Your completed election form and your stock certificates should
be returned in the enclosed self-addressed postage paid envelope.
Q. WHEN SHOULD I SEND IN MY PROXY CARD? CAN I CHANGE MY VOTE?
A. You should send in your proxy card as soon as possible so that your
shares will be voted at the meeting. You can change your vote at any time prior
to the special meeting by submitting a later- dated signed proxy card. You can
also change your vote by attending the special meeting and voting in person.
Q. BY WHEN MUST I SEND IN MY ELECTION FORM? CAN I CHANGE OR REVOKE MY
ELECTION?
A. Your election form must be returned no later than the election deadline,
which is the business day before the merger takes effect. The merger is expected
to take effect on the date Raychem stockholders approve and adopt the merger
agreement. Therefore, regardless of how you vote, if you wish to make an
election, you should make sure that the exchange agent receives your election
form no later than p.m. on August , 1999. You may change your election by
delivering a later-dated election form to the exchange agent before the election
deadline. You may revoke your election by written notice of revocation to the
exchange agent before the election deadline.
Q. IF MY SHARES OF RAYCHEM COMMON STOCK ARE HELD BY A BANK OR BROKER, HOW
CAN I VOTE AND MAKE AN ELECTION?
A. If your shares are held by a bank, broker or other fiduciary, you must
contact the fiduciary to vote and make the election on your behalf.
Q. AM I REQUIRED TO COMPLETE AN ELECTION FORM IN ORDER TO RECEIVE MY MERGER
CONSIDERATION?
A. No. If you do not make an election, you will still receive the merger
consideration. However, if you have a preference for a specific form or mix of
merger consideration and do not make an election, we will not take your
preference into consideration and you will receive merger consideration in
whatever form or mix remains after giving effect to the preferences of the
Raychem stockholders that make elections.
Q. WHAT SHOULD I DO IF I HAVE QUESTIONS?
A. You should call at (toll free in the United
States) or (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 fiber optic
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 operates in more than 80 countries around the world and has expected
fiscal 1999 revenues in excess of $22 billion.
On April 2, 1999, Tyco acquired AMP Incorporated, which designs,
manufactures and markets a broad range of electronic, electrical and
electro-optic connection devices, and associated application tools and machines.
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 additional information regarding the business of Tyco, please see Tyco's
Form 10-K and other filings of Tyco with the SEC incorporated by reference. See
"Where to Find More Information" on page i.
RAYCHEM CORPORATION
300 Constitution Drive
Menlo Park, California 94025
(650) 361-3333
Raychem, founded in 1957, is a broadly based materials science company
serving both domestic and international markets. Raychem utilizes its expertise
in materials science, electronics and process engineering to develop,
manufacture and market a variety of high-performance products for electronic
original equipment manufacturers (OEMs) and telecommunications, energy and
industrial applications.
Raychem's electronic OEM components business segment serves OEMs in
aerospace, automotive, communications, defense, information processing and other
industries. Raychem designs, manufactures and distributes products such as
circuit protection devices, heat-shrinkable tubing and molded parts, wire and
cable and computer touchscreens. Raychem's products for this segment help
improve the performance and reliability of customer products.
Raychem's telecommunications, energy and industrial business segment serves
telephone operating companies, utilities, industrial plants, and other customers
who build and maintain the world's commercial and industrial infrastructure.
1
<PAGE>
For this segment, Raychem designs and manufactures products such as telecom
fiber optic and copper cable accessories, energy cable accessories and
heat-tracing products and provides design, engineering and installation
services.
For additional information regarding the business of Raychem, please see
Raychem's Form 10-K and other filings of Raychem with the SEC incorporated by
reference. See "Where to Find More Information" on page i.
THE SPECIAL MEETING (PAGE )
The special meeting of the Raychem stockholders will be held on August ,
1999 at 300 Constitution Drive, Menlo Park, California 94025 at 10:00 a.m.
Pacific Time.
The record date for Raychem stockholders entitled to receive notice of and
to vote at the Raychem special meeting is the close of business on July ,
1999. On that date, there were shares of Raychem common stock
outstanding.
THE MERGER CONSIDERATION (PAGE )
Each share of Raychem common stock will be exchanged in the merger for cash,
a fraction of a Tyco common share or a combination of cash and a fraction of a
Tyco common share, in each case having a value of $18.50 plus the value, at the
time of the merger, of 0.2070 Tyco common shares. This value is referred to as
the "per share value of the merger consideration." Raychem stockholders may
elect to receive cash, Tyco common shares or a combination of cash and Tyco
common shares for their Raychem common stock. However, the total amount of cash
that Tyco will pay in the merger is fixed at $18.50 multiplied by the number of
shares of Raychem common stock outstanding at the time of the merger. Also, the
total number of Tyco common shares that Tyco will deliver to Raychem
stockholders in the merger is fixed at 0.2070 multiplied by the number of shares
of Raychem stock outstanding at the time of the merger. Therefore, if more cash
consideration is elected than the amount of cash available for payment, there
will be proration, and the Raychem common stock with respect to which cash is
elected will be exchanged for a combination of cash and Tyco shares. Similarly,
if more stock consideration is elected than the number of Tyco common shares
available for payment, there will be proration, and the Raychem common stock
with respect to which stock is elected will be exchanged for a combination of
Tyco common shares and cash. For a description of the proration rules, see
"Merger Consideration--The Proration Rules" on page . Shares restricted
Raychem common stock that do not vest on or before the merger will receive only
Tyco common shares for their Raychem common stock.
The value of a Tyco common share at the time of the merger for purposes of
allocating the merger consideration will be determined by taking the volume
weighted average sale prices per Tyco common share on the New York Stock
Exchange on the three consecutive trading days beginning on the date of the
merger.
The following table illustrates the allocation of the merger consideration
for different values of a Tyco common share at the time of the merger and for
three different divisions between the percentage of Raychem common stock
electing cash and the percentage of Raychem common stock electing stock. For
simplicity, the table assumes that all Raychem stockholders have made elections.
The table also assumes that no Raychem stockholders have exercised appraisal
rights.
2
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF RAYCHEM SHARES ELECTING TO RECEIVE CASH AND STOCK
----------------------------------------------------------------------------------------------
50% CASH ELECTING SHARES 40% CASH ELECTING SHARES
50% STOCK ELECTING SHARES 60% STOCK ELECTING SHARES
---------------------------------------------- ----------------------------------------------
EACH CASH EACH STOCK EACH CASH EACH STOCK
VALUE OF ELECTING SHARE ELECTING SHARE ELECTING SHARE ELECTING SHARE
THE MERGER WILL RECEIVE WILL RECEIVE WILL RECEIVE WILL RECEIVE
CONSIDERATION ---------------------- ---------------------- ---------------------- ----------------------
AVERAGE PRICE ($18.50 + .2070 TYCO TYCO TYCO TYCO
OF A OF A COMMON COMMON COMMON COMMON
TYCO SHARE(A) TYCO SHARE) CASH SHARES CASH SHARES CASH SHARES CASH SHARES
- --------------- --------------- --------- ----------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 106.00 $ 40.44 $ 37.00 0.0325 $ -- 0.3815 $ 40.44 -- $ 3.87 0.3450
104.00 40.03 37.00 0.0291 -- 0.3849 40.03 -- 4.15 0.3450
102.00 39.61 37.00 0.0256 -- 0.3884 39.61 -- 4.43 0.3450
100.00 39.20 37.00 0.0220 -- 0.3920 39.20 -- 4.70 0.3450
98.00 38.79 37.00 0.0182 -- 0.3958 38.79 -- 4.98 0.3450
96.00 38.37 37.00 0.0143 -- 0.3997 38.37 -- 5.25 0.3450
94.00 37.96 37.00 0.0102 -- 0.4038 37.96 -- 5.53 0.3450
92.00 37.54 37.00 0.0059 -- 0.4081 37.54 -- 5.81 0.3450
91.00 37.34 37.00 0.0037 -- 0.4103 37.34 -- 5.94 0.3450
90.00 37.13 37.00 0.0014 -- 0.4126 37.13 -- 6.08 0.3450
89.375(B) 37.00 37.00 -- -- 0.4140 37.00 -- 6.17 0.3450
89.00 36.92 36.92 -- .08 0.4140 36.92 -- 6.22 0.3450
88.00 36.72 36.72 -- .28 0.4140 36.72 -- 6.36 0.3450
87.00 36.51 36.51 -- .49 0.4140 36.51 -- 6.50 0.3450
85.00 36.10 36.10 -- .91 0.4140 36.10 -- 6.77 0.3450
83.00 35.68 35.68 -- 1.32 0.4140 35.68 -- 7.05 0.3450
81.00 35.27 35.27 -- 1.73 0.4140 35.27 -- 7.32 0.3450
79.00 34.85 34.85 -- 2.15 0.4140 34.85 -- 7.60 0.3450
77.00 34.44 34.44 -- 2.56 0.4140 34.44 -- 7.87 0.3450
75.00 34.03 34.03 -- 2.98 0.4140 34.03 -- 8.15 0.3450
<CAPTION>
60% CASH ELECTING SHARES
40% STOCK ELECTING SHARES
------------------------------------------------
EACH CASH EACH STOCK
ELECTING SHARE ELECTING SHARE
WILL RECEIVE WILL RECEIVE
---------------------- ------------------------
AVERAGE PRICE TYCO TYCO
OF A COMMON COMMON
TYCO SHARE(A) CASH SHARES CASH SHARES
- --------------- --------- ----------- ----- -----------
<S> <C> <C> <C> <C>
$ 106.00 $ 30.83 0.0906 $ -- 0.3815
104.00 30.83 0.0884 -- 0.3849
102.00 30.83 0.0861 -- 0.3884
100.00 30.83 0.0837 -- 0.3920
98.00 30.83 0.0811 -- 0.3958
96.00 30.83 0.0785 -- 0.3997
94.00 30.83 0.0758 -- 0.4038
92.00 30.83 0.0729 -- 0.4081
91.00 30.83 0.0715 -- 0.4103
90.00 30.83 0.0700 -- 0.4126
89.375(B 30.83 0.0690 -- 0.4140
89.00 30.83 0.0684 -- 0.4149
88.00 30.83 0.0668 -- 0.4172
87.00 30.83 0.0652 -- 0.4196
85.00 30.83 0.0619 -- 0.4246
83.00 30.83 0.0584 -- 0.4299
81.00 30.83 0.0547 -- 0.4354
79.00 30.83 0.0509 -- 0.4412
77.00 30.83 0.0468 -- 0.4473
75.00 30.83 0.0426 -- 0.4537
</TABLE>
- ------------------------------
(A) The average price of a Tyco share is equal to the volume weighted average
sales prices per Tyco common share on the NYSE on the three consecutive
trading days beginning on the date of the merger.
(B) The closing price of a Tyco share on the NYSE on May 18, 1999, the day
before the merger agreement was announced, was $89.375.
3
<PAGE>
PROCEDURE FOR MAKING AN ELECTION
Raychem stockholders can make their election to receive cash or Tyco common
shares by delivering to the exchange agent a completed election form included
with this document together with the certificates representing their shares and
any other required documentation specified in the election form. The election
form, certificates and other documentation must be received by the exchange
agent no later than the close of business on the last business day before the
effective time of the merger. Tyco and Raychem anticipate that the merger will
be consummated on the date that it is approved by Raychem stockholders.
Accordingly, stockholders who wish to make an election must assure that their
materials are received by the exchange agent no later than August , 1999, the
day before the special meeting. Raychem stockholders that hold their shares in
"street name" and who wish to make an election will have to instruct their
broker, dealer, bank or other financial institution that holds their shares to
make an election on their behalf. For a more detailed description of the
election procedures, see "Merger Consideration--Making the Election" on page .
THE MERGER (PAGE )
STOCKHOLDER VOTE REQUIRED
The holders of a majority of the outstanding shares of Raychem common stock
must vote for the approval and adoption of the merger agreement to approve the
merger.
APPRAISAL RIGHTS
Under Delaware law, any stockholder who does not wish to accept the
consideration provided for in the merger agreement has the right to demand
appraisal of, and to be paid the fair market value for, his or her shares of
Raychem common stock. The value of the Raychem common stock for this purpose
will exclude any element of value arising from the accomplishment or expectation
of the merger.
In order for any Raychem stockholder to exercise his or her right to an
appraisal, the stockholder must deliver to Raychem before the special meeting a
written demand for an appraisal of his or her shares of Raychem common stock as
provided by Delaware law. Annex C contains the pertinent provisions of Delaware
law addressing appraisal rights.
Raychem stockholders should particularly note the following:
- simply voting against the approval and adoption of the merger agreement
will not be considered a demand for appraisal rights;
- a stockholder who fails to send a demand to the Corporate Secretary of
Raychem at MS 120-1A, 300 Constitution Drive, Menlo Park, California
94025, will lose his or her right to an appraisal; and
- stockholders who vote for the approval and adoption of the merger
agreement will not have appraisal rights.
TAX TREATMENT
It is a condition to the merger that Tyco and Raychem each receive an
opinion that the merger will qualify as a reorganization for United States
federal income tax purposes. Qualification as a reorganization depends in part
on the value of the Tyco common shares at the time the merger is effective
relative to the value of the overall merger consideration. If either tax opinion
is not rendered, Raychem may elect to require Tyco to proceed with the
acquisition of Raychem on a taxable basis.
Provided the merger qualifies as a reorganization, in general for United
States federal income tax purposes:
- Raychem stockholders who receive solely cash generally will recognize gain
or loss with respect to their Raychem common stock exchanged;
- Raychem stockholders who receive solely Tyco common shares will not
recognize gain or loss in the merger, other than with respect to cash
received in lieu of fractional shares; and
- Raychem stockholders who receive cash and Tyco common shares, other than
with
4
<PAGE>
respect to cash received in lieu of fractional shares, will not recognize
loss, but will recognize gain, if any, but not in excess of the cash
received.
If the acquisition of Raychem is consummated on a taxable basis, for United
States federal income tax purposes, Raychem stockholders will recognize gain or
loss with respect to their Raychem common stock exchanged.
To review tax consequences of the merger in greater detail, see "Material
U.S. Federal Income Tax and Bermuda Tax Consequences" beginning on page .
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the Raychem Board in favor of the
merger, stockholders should be aware that members of the Raychem Board and
Raychem management will receive benefits as a result of the merger that will be
in addition to or different from benefits received by Raychem stockholders
generally. For example, options held by members of the Raychem Board will become
vested in connection with the merger and options and restricted stock held by
Raychem management that were scheduled to vest within the 12-month period
following consummation of the merger will become vested upon consummation of the
merger. In addition, under certain qualifying circumstances, members of Raychem
management will be entitled to receive severance benefits upon actual or
constructive termination of their employment following the merger. See
"Interests of Certain Persons in the Merger" beginning on page .
CONDITIONS OF THE MERGER
The consummation of the merger depends upon satisfaction of a number of
conditions, including:
- approval and adoption of the merger agreement by the Raychem stockholders;
- the absence of legal restraints to the consummation of the merger; and
- receipt of opinions regarding the tax-free nature of the merger in respect
of the Tyco common shares received. Raychem can elect to proceed with the
acquisition on a taxable basis notwithstanding the failure to satisfy this
condition. For further details, see "Conditions to the Merger--Failure to
Deliver Tax Opinions" on page .
TERMINATION OF THE MERGER
Either Raychem or Tyco may call off the merger if:
- both parties consent in writing;
- the merger is not completed by November 30, 1999 through no fault of the
party seeking to call off the merger;
- there exist legal restraints preventing the merger;
- the Raychem stockholders do not approve and adopt the merger agreement; 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
Raychem withdraws or adversely modifies its approval or recommendation of the
merger or recommends an alternative acquisition transaction with a third party.
Subject to certain conditions, Raychem may terminate the merger to accept an
acquisition proposal that is more favorable to Raychem and its stockholders than
the proposed merger with Tyco.
For further details, see "Termination" beginning on page .
NO-SOLICITATION PROVISIONS; TERMINATION FEE AND EXPENSES
Raychem has agreed that it will not solicit or encourage the initiation of
any inquiries or proposals regarding any alternative acquisition transactions
with third parties. Raychem may respond to unsolicited transaction proposals if
required by the Raychem Board's fiduciary
5
<PAGE>
duties. Raychem must promptly notify Tyco if it receives proposals for any such
alternative acquisition transactions. If the merger is terminated under
specified circumstances, generally involving an alternative acquisition
transaction, Raychem may be required to pay a termination fee of $100 million to
Tyco and pay reasonable out-of-pocket expenses of up to $7.5 million to Tyco and
Tyco (PA). Tyco may be required to pay to Raychem up to $7.5 million of
Raychem's reasonable out-of-pocket expenses if the merger is terminated under
certain circumstances.
See "Termination--Fees and Expenses" beginning on page for a discussion of
the circumstances in which the fee and expenses are payable.
In addition, Raychem may not redeem or amend its rights plan to permit or
facilitate an alternative acquisition transaction unless the merger agreement
has been terminated. See "No Solicitation" beginning on page .
The termination fee and the no-solicitation provisions may have the effect
of discouraging persons who might be interested in entering into an acquisition
transaction with Raychem from proposing an alternative acquisition transaction.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase by Tyco in accordance with
United States generally accepted accounting principles.
OPINION OF RAYCHEM'S FINANCIAL ADVISOR
In determining that the merger is fair to and in the best interests of
Raychem and its stockholders, the Raychem Board considered an opinion from its
financial advisor, Morgan Stanley & Co. Incorporated, that, as of the date of
such opinion, the consideration to be received by the holders of Raychem common
stock pursuant to the merger agreement is fair from a financial point of view to
such holders. See "Opinion of Financial Advisor to Raychem" on page . The full
text of the written opinion of Morgan Stanley & Co. Incorporated is attached as
Annex B. WE ENCOURAGE YOU TO READ THIS OPINION.
6
<PAGE>
RISK FACTORS
In evaluating the merger and the merger agreement, Raychem stockholders
should take into account the following factors:
FACTORS THAT RELATE TO THE MERGER CONSIDERATION
THE VALUE OF THE MERGER CONSIDERATION THE RAYCHEM STOCKHOLDERS WILL RECEIVE
WILL DEPEND ON THE VALUE OF TYCO COMMON SHARES AT THE TIME OF THE MERGER.
In the merger, stockholders will receive cash, Tyco common shares or a
combination of cash and shares in exchange for their Raychem stock. Whether a
stockholder receives cash, stock or a combination of cash and stock as merger
consideration, the value of the merger consideration will equal $18.50 plus the
value of 0.2070 Tyco common shares for each share of Raychem stock. The market
value of Tyco shares fluctuates based upon general market and economic
conditions, Tyco's business and prospects and other factors. Because the value
of the merger consideration depends on the value of a Tyco common share at the
time of the merger, the value that Raychem stockholders will receive in the
merger cannot now be determined. In particular, this value may be less than or
greater than $37.00 per share of Raychem stock, which is the value of the merger
consideration based upon the closing Tyco common share price of $89.375 on May
18, 1999, the last full trading day prior to the execution of the merger
agreement.
THE FORM OR MIX OF CONSIDERATION--CASH AND/OR STOCK--THAT A RAYCHEM
STOCKHOLDER RECEIVES AS MERGER CONSIDERATION MAY BE DIFFERENT THAN THE FORM OR
MIX OF CONSIDERATION THAT A STOCKHOLDER HAS ELECTED TO RECEIVE. RAYCHEM
STOCKHOLDERS WILL NOT KNOW THE ACTUAL FORM OR MIX OF CONSIDERATION THAT THEY
WILL RECEIVE AT THE TIME THEY VOTE ON THE MERGER.
The total amount of cash and stock that will be paid to all Raychem
stockholders is fixed and will be allocated among stockholders according to
formulas discussed under "Merger Consideration--The Proration Rules" on page .
The amount of cash, stock or combination of cash and stock that a Raychem
stockholder receives in the merger will depend on whether the stockholder has
submitted an election form, what the stockholder has elected to receive and the
elections made by all other stockholders. It will also depend on the volume
weighted average sale price per Tyco common share on the New York Stock Exchange
for the three consecutive trading days beginning on the day the merger is
effective. Accordingly, the form or mix of merger consideration that a Raychem
stockholder receives may be different than the form or mix that he has elected
to receive. A stockholder that has elected to receive only cash could receive a
combination of cash and stock, and a stockholder that has elected to receive
only stock could receive a combination of stock and cash. For U.S. federal
income tax purposes, a Raychem stockholder that has elected to receive only
stock, but receives a combination of cash and stock, will recognize gain, if
any, to the extent of the cash received, and a Raychem stockholder that has
elected to receive only cash, but receives a combination of cash and stock, will
not recognize loss, if any. Also, as discussed below, the allocation of the
merger consideration cannot be determined until after the three trading days
beginning on the date of the merger. Therefore, Raychem stockholders will not
know the actual form or mix of consideration they will receive at the time they
vote on the merger.
THE VALUE THAT ALL RAYCHEM STOCKHOLDERS ARE ENTITLED TO RECEIVE IS INTENDED
TO BE THE SAME, REGARDLESS OF WHETHER THEY RECEIVE CASH OR STOCK. HOWEVER, THE
VALUE OF THE CONSIDERATION RECEIVED BY STOCKHOLDERS MAY DIFFER AT THE TIME THE
MERGER CONSIDERATION IS ACTUALLY PAID BECAUSE OF FLUCTUATION IN THE TYCO SHARE
PRICE.
The value of the merger consideration Raychem stockholders receive is
intended to be the same whether a stockholder receives cash, Tyco common shares
or a combination of cash and Tyco shares. This equivalence is based upon the
three trading day volume weighted average value of Tyco common shares referred
to above. The market value of a Tyco common share on the date the merger
consideration is paid to a Raychem stockholder is likely to be different than
this volume weighted
7
<PAGE>
average value. Thus, the value of the merger consideration, as determined on the
dates that Raychem stockholders actually receive the merger consideration, is
likely to differ depending upon the mix of cash and/or stock received by each
stockholder.
RAYCHEM COULD ELECT TO REQUIRE TYCO TO PROCEED WITH THE ACQUISITION OF
RAYCHEM EVEN THOUGH IT WOULD NOT QUALIFY FOR TAX-FREE TREATMENT WITH RESPECT TO
THE STOCK CONSIDERATION.
The merger is intended to qualify as a reorganization for U.S. federal
income tax purposes, resulting in tax-free treatment with respect to the stock
consideration received. Qualification as a reorganization depends in part on the
value of the Tyco common shares at the time the merger becomes effective
relative to the value of the overall merger consideration. If the tax advisor to
either Tyco or Raychem cannot deliver its opinion that the merger will qualify
as a reorganization, Raychem may nonetheless elect to require Tyco to proceed
with the acquisition of Raychem on a taxable basis. Whether the tax advisors are
prepared to deliver their opinions may not be known at the time of the
stockholder vote on the merger. Raychem does not expect to submit its
determination on whether to proceed with the acquisition by Tyco in the absence
of the tax opinions to a separate vote of stockholders. If Raychem elects to
proceed even though Tyco's acquisition of Raychem does not qualify as a
reorganization, Raychem stockholders will recognize all of the gain or loss with
respect to their Raychem common stock exchanged in the acquisition, even though
such stockholders may receive Tyco common shares in the exchange.
OTHER FACTORS
THE RIGHTS OF SHAREHOLDERS OF TYCO UNDER BERMUDA LAW IN SOME WAYS ARE NOT AS
FAVORABLE AS THE RIGHTS OF STOCKHOLDERS OF RAYCHEM UNDER DELAWARE LAW.
- Shareholders may not be able to obtain jurisdiction over Tyco outside
Bermuda, so that certain remedies available to stockholders of Raychem,
such as class action lawsuits under United States federal and Delaware
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 Delaware 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. Raychem stockholders do not have to
satisfy these requirements to propose a resolution at a Raychem
stockholders meeting.
8
<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 Raychem, 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 Raychem into Tyco's operations,
- overall economic and business conditions,
- the demand for Tyco's and Raychem's goods and services,
- competitive factors in the industries in which Tyco and Raychem 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 Raychem, 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
Raychem's operations and business environment which could cause actual results
to differ, reference is made to the section entitled "Forward Looking Statements
and Risk Factors" in Raychem's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999.
DISCUSSIONS WITH WILLIAMS PLC.
On June 7, 1999, Tyco issued a press release which confirmed Tyco's
continuing exploratory discussions with Williams Plc. about a range of options
for the combination of their respective fire and security businesses. Williams
is a United Kingdom based international fire and security services group with
1998 total annual sales of approximately L2.5 billion. There can be no certainty
at this stage that these discussions will result in an offer for Williams by
Tyco.
9
<PAGE>
SELECTED FINANCIAL DATA OF TYCO AND RAYCHEM
The following information is being provided to assist in analyzing the
financial aspects of the merger. The selected consolidated financial data for
Tyco reflect the combined results of operations and financial position of Tyco,
United States Surgical Corporation, which was acquired by Tyco on October 1,
1998, and AMP Incorporated, which was acquired by Tyco on April 2, 1999,
restated for all periods presented pursuant to the pooling of interests method
of accounting. The data presented for Tyco for the six months ended March 31,
1999 and 1998 are unaudited and, in the opinion of Tyco's management, include
all adjustments, consisting of normal recurring adjustments, necessary for the
fair presentation of such data. Tyco's results for the six months ended March
31, 1999 are not necessarily indicative of the results to be expected for the
fiscal year ending September 30, 1999. The information for Tyco for the six
months ended March 31, 1999 and 1998, the year ended September 30, 1998, the
nine months ended September 30, 1997, and the year ended December 31, 1996 was
derived from the supplemental consolidated financial statements included in
Tyco's Current Report on Form 8-K filed on June 3, 1999. The information for
Tyco for the years ended December 31, 1995 and 1994 was derived from the
historical financial statements of Tyco, US Surgical and AMP. The information
for Raychem has been derived from Raychem's audited financial statements for the
years ended June 30, 1994 through 1998 and Raychem's unaudited financial
statements for the nine months ended March 31, 1999 and 1998. 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 Raychem 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 FINANCIAL DATA OF TYCO
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED MARCH YEAR NINE MONTHS
31, ENDED ENDED YEAR ENDED DECEMBER 31,
---------------------- SEPTEMBER 30, SEPTEMBER 30, -------------------------------------
1999(3) 1998(3) 1998(4) 1997(1)(5) 1996(2)(6) 1995(2)(7) 1994(2)
--------- ----------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Net sales............................. $10,452.3 $ 9,000.6 $19,061.7 $12,742.5 $14,671.0 $13,152.1 $11,519.2
Operating income...................... 472.3 1,253.0 1,948.1 125.8 587.4 1,447.5 1,314.4
Income (loss) from continuing
operations.......................... 54.3 778.0 1,168.6 (348.5) 49.4 755.5 699.4
Income (loss) from continuing
operations per common share(8):
Basic............................... 0.07 1.00 1.48 (0.48) 0.04 1.10 1.03
Diluted............................. 0.07 0.98 1.45 (0.48) 0.04 1.09 1.01
Cash dividends per common share
share(8)(9) See 9 below
CONSOLIDATED BALANCE SHEET DATA:
Total assets.......................... $26,681.5 $23,440.7 $16,960.8 $14,686.2 $13,143.8 $12,245.1
Long-term debt........................ 8,037.2 5,424.7 2,785.9 2,202.4 2,229.7 2,282.6
Shareholders' equity.................. 9,829.0 9,901.8 7,478.7 7,072.6 6,792.1 6,146.5
</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 is presented.
(2) On July 2, 1997, Tyco, formerly called ADT Limited, merged with Tyco
International Ltd., a Massachusetts Corporation ("Former Tyco"). On August
27, 1997, August 29, 1997, October 1, 1998 and April 2, 1999, Tyco merged
with INBRAND Corporation, Keystone International, Inc., US Surgical and AMP,
respectively. These five combinations are more fully
10
<PAGE>
described in Notes 1 and 2 to the Supplemental Consolidated Financial
Statements contained in Tyco's Current Report on Form 8-K filed on June 3,
1999, which is incorporated in this document by reference. Prior to their
respective mergers, ADT, Keystone, US Surgical and AMP had December 31
fiscal year ends and Former Tyco had a June 30 fiscal year end. The selected
consolidated financial data have been combined using a December 31 fiscal
year end for ADT, Keystone, Former Tyco, US Surgical and AMP for the year
ended December 31, 1996. For 1995 and 1994, the results of operations and
financial position reflect the combination of ADT, Keystone, US Surgical and
AMP 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 six months ended March 31, 1999 includes charges of
$434.9 million for merger, restructuring and other non-recurring charges and
$76.0 million for the impairment of long-lived assets primarily related to
the merger with US Surgical, and $406.1 million for merger, restructuring
and other non-recurring charges and $67.6 million for the impairment of
long-lived assets related to AMP's Profit Improvement Plan. Operating income
in the six months ended March 31, 1998 includes a credit of $21.4 million to
restructuring charges related to AMP's 1996 restructuring activities and a
charge of $12.0 million related to US Surgical's cost cutting objectives.
See Notes 7 and 8 to the March 31, 1999 Supplemental Consolidated Financial
Statements contained in Tyco's Current Report on Form 8-K filed on June 3,
1999.
(4) Operating income in the fiscal year ended September 30, 1998 includes
charges of $80.5 million primarily related to costs to exit certain
businesses in US Surgical's operations and restructuring charges of $12.0
million related to the operations of US Surgical. In addition, Tyco recorded
restructuring charges of $185.8 million in connection with AMP's profit
improvement plan and a credit of $21.4 million to restructuring charges
related to the execution of AMP's 1996 restructuring plans. See Note 16 to
the Supplemental Consolidated Financial Statements contained in Tyco's
Current Report on Form 8-K filed on June 3, 1999.
(5) Operating income 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 16 to the Supplemental Consolidated Financial
Statements contained in Tyco's Current Report on Form 8-K filed on June 3,
1999. 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.
(6) Operating income 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, $98.0 million to exit various product lines and manufacturing
operations associated with AMP's operations 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 16 to the Supplemental
Consolidated Financial Statements contained in Tyco's Current Report on Form
8-K filed on June 3, 1999.
(7) 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.
(8) Per share amounts have been retroactively restated to give effect to the
mergers with Former Tyco, Keystone, INBRAND, US Surgical and AMP, 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.
(9) 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. 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. AMP paid
dividends of $0.27 per share in the quarter ended March 31, 1999 and 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>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF RAYCHEM
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
-------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998(1) 1998(1)(2) 1997(3) 1996(4) 1995(5) 1994
--------- --------- ----------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales............................................ $ 1,343.0 $ 1,367.3 $ 1,798.5 $ 1,764.7 $ 1,671.6 $ 1,530.6 $ 1,461.5
Operating income..................................... 173.9 223.3 250.2 218.8 180.2 101.8 53.5
Income (loss) from continuing operations............. 103.1 157.0 179.1 253.3 147.9 (21.4) 1.7
Income (loss) from continuing operations per common
share:
Basic.............................................. 1.31 1.85 2.12 2.85 1.67 (0.25) 0.02
Diluted............................................ 1.29 1.81 2.07 2.77 1.61 (0.25) 0.02
Cash dividends per common share...................... 0.25 0.22 0.30 0.24 0.18 0.16 0.16
CONSOLIDATED BALANCE SHEET DATA:
Total assets......................................... $ 1,801.2 $ 1,619.4 $ 1,509.3 $ 1,550.6 $ 1,454.7 $ 1,399.0
Long-term debt....................................... 547.9 151.5 164.0 148.4 263.6 244.7
Stockholders' equity................................. 751.1 859.6 845.0 841.2 749.7 732.9
</TABLE>
- ------------------------
(1) During the nine months ended March 31, 1998, Raychem recorded a
non-recurring charge of $12.0 million reflecting the write-off of assets
related to a minority investment.
(2) In the fourth quarter of fiscal year 1998, Raychem recorded restructuring
charges of $27.6 million associated with moving certain manufacturing
facilities to lower-cost locations.
(3) In fiscal year 1997, Raychem recorded restructuring charges of $52.8 million
related to streamlining operations and eliminating approximately 500
positions. In addition, Raychem recorded a gain of $23 million to other
expense (income), net from the sale of intellectual property.
(4) In fiscal year 1996, Raychem recorded restructuring charges of $43.6 million
related to simplifying operations, reducing costs and severing approximately
680 employees associated with its European operations and a charge of $2.1
million on the reorganization of the Ericsson Raynet joint venture. Raychem
also recorded to other expense (income), net a gain of $7 million from an
insurance settlement and a gain of $3 million from the sale of its shape
memory metals components business. In addition, the 1996 income from
continuing operations includes $27.3 million of equity in net losses of
Ericsson Raynet.
(5) In fiscal year 1995, Raychem recorded restructuring charges of $23.9 million
primarily related to severing employees in its telecommunications business
and a charge of $32.0 million on the reorganization/formation of the
Ericsson Raynet joint venture and other Raynet items. Raychem also recorded
to other expense (income), net a gain of $5 million from the sale of its
minority interest in Menlo Care, Inc. In addition, the 1995 loss from
continuing operations includes $84.8 million of equity in net losses of
Ericsson Raynet.
12
<PAGE>
SELECTED TYCO AND RAYCHEM UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1999(1) 1998(1)
----------------- -------------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales................................................................... $ 11,350.4 $ 20,860.2
Operating income............................................................ 566.7 2,144.1
Income from continuing operations(2)........................................ 73.2 1,245.6
Income from continuing operations per common share(2)(3)
Basic..................................................................... 0.09 1.54
Diluted................................................................... 0.09 1.51
Cash dividends per common share(4).......................................... See 4 below.
CONSOLIDATED BALANCE SHEET DATA:
Total assets................................................................ $ 30,650.5
Long-term debt.............................................................. 10,020.4
Total shareholders' equity.................................................. 11,262.6
</TABLE>
- ------------------------
(1) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. Raychem has a June 30 fiscal year end. For purposes of the pro
forma combined statements of operations data, operating results for the six
months ended March 31, 1999 have been combined using the results of Tyco for
the six months ended March 31, 1999 and the results of Raychem for the six
months ended December 31, 1998, and the operating results for the fiscal
year ended September 30, 1998 have been combined using the results of Tyco
for the fiscal year ended September 30, 1998 and results of Raychem for its
fiscal year ended June 30, 1998. For purposes of the pro forma combined
balance sheet data, the financial position at March 31, 1999 combines the
balance sheets of Tyco and Raychem as of such date.
(2) See Notes (3) and (4) to "Selected Consolidated Financial Data of Tyco" on
page 11 and Notes (1) and (2) to "Selected Consolidated Historical Financial
Data of Raychem" on page 12 for information on certain non-recurring items.
(3) The unaudited pro forma combined per share data are based on Raychem
stockholders receiving 0.2070 of a Tyco common share for each share of
Raychem common stock held. For purposes of the pro forma combined financial
information, the number of Raychem common shares outstanding on May 18, 1999
of 77,585,116 was used.
(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.
Raychem paid dividends of $0.16 per share in the six months ended December
31, 1998 and $0.30 per share in the fiscal year ended June 30, 1998.
13
<PAGE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
TYCO AND
RAYCHEM
UNAUDITED RAYCHEM
TYCO RAYCHEM PRO FORMA EQUIVALENT
HISTORICAL PER HISTORICAL COMBINED PRO FORMA
SHARE DATA PER SHARE DATA(1) PER SHARE DATA(2) PER SHARE DATA(2)
--------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED MARCH 31, 1999
Income from continuing operations per
common share(3):
Basic.................................. $ 0.07 $ 0.88 $ 0.09 $ 0.02
Diluted................................ 0.07 0.87 0.09 0.02
Cash dividends per common share.......... See 4 below.
Book value per common share.............. 12.01 9.73 13.51 2.80
YEAR ENDED SEPTEMBER 30, 1998
Income from continuing operations per
common share(3):
Basic.................................. 1.48 2.12 1.54 0.32
Diluted................................ 1.45 2.07 1.51 0.31
Cash dividends per common share.......... See 4 below.
Book value per common share.............. 12.22 10.37 13.72 2.84
</TABLE>
- ------------------------
(1) See Note (1) to "Selected Tyco and Raychem Unaudited Pro Forma Combined
Financial Information" on page 13 for information on Raychem's fiscal year
end.
(2) The unaudited pro forma combined income and book value per common share are
based on Raychem shareholders receiving 0.2070 of a Tyco common share for
each share of Raychem common stock held. The Raychem equivalent pro forma
per share data are calculated by multiplying the unaudited pro forma
combined per share data by 0.2070.
(3) See Notes (3) and (4) to "Selected Consolidated Financial Data of Tyco" on
page 11 and Notes (1) and (2) to "Selected Consolidated Historical Financial
Data of Raychem" on page 12 for information on certain non-recurring items.
(4) See Note (4) to "Selected Tyco and Raychem Unaudited Pro Forma Combined
Financial Information" on page 13 for information on cash dividends per
common share.
14
<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 Raychem common stock on the NYSE on May 18, 1999, the last trading
day prior to the public announcement of the proposed merger, and on
, the most recent date for which prices were available prior to
printing this document; and
2. the equivalent price per share and equivalent market value of Raychem
common stock, based on a value per share of Raychem stock of (x) $18.50 plus (y)
0.2070 multiplied by the closing price of Tyco shares on that day.
<TABLE>
<CAPTION>
TYCO RAYCHEM RAYCHEM
HISTORICAL HISTORICAL EQUIVALENT
----------------- ---------------- ----------------
<S> <C> <C> <C>
On May 18, 1999
Closing price per common share......................... $ 89.375 $ 31.125 $ 37.00
Market value of common shares (1)...................... $ 73,677,204,226 $ 2,414,836,736 $ 2,870,649,292
On , 1999
Closing price per common share......................... $ $ $
Market value of common shares (1)...................... $ $ $
</TABLE>
- ------------------------
(1) Market value based on 824,360,327 Tyco common shares and 77,585,116 shares
of Raychem common stock outstanding as of May 18, 1999, and Tyco
common shares and shares of Raychem common stock outstanding as
of , excluding shares held in treasury.
Market values are likely to differ from values based on the average share price.
See "Risk Factors--THE VALUE OF THE MERGER CONSIDERATION THE RAYCHEM
STOCKHOLDERS WILL RECEIVE WILL DEPEND ON THE VALUE OF THE TYCO COMMON SHARES AT
THE TIME OF THE MERGER" on page .
15
<PAGE>
RAYCHEM SPECIAL MEETING
DATE, PLACE, AND TIME
The special meeting of Raychem's stockholders will be held at 10:00 a.m.
Pacific Time on August , 1999 at 300 Constitution Drive, Menlo Park,
California 94025.
PURPOSE OF THE RAYCHEM SPECIAL MEETING
At the special meeting, Raychem stockholders will consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger and
Reorganization, dated as of May 19, 1999, among Raychem, Tyco and Tyco (PA). The
merger agreement provides, among other things, that Raychem will be merged with
Tyco (PA), and each outstanding share of Raychem common stock will be converted
into the right to receive a fraction of a Tyco common share, cash or a
combination of shares and cash.
RECORD DATE; VOTING RIGHTS; QUORUM; REQUIRED VOTE
The close of business on July , 1999 is the record date for determining
the holders of Raychem common stock who are entitled to receive notice of and to
vote at the special meeting or at any adjournment of the special meeting.
Raychem has only one class of capital stock outstanding, which is common
stock, par value $1.00 per share. Each holder of Raychem common stock
outstanding on the record date is entitled to one vote for each share held. The
holders of a majority of the outstanding shares of Raychem common stock entitled
to vote must be present at the special meeting, in person or by proxy, to
constitute a quorum to transact business.
The holders of a majority of the outstanding shares of Raychem common stock
must vote for the approval and adoption of the merger agreement to approve the
merger. On the record date, shares of Raychem common stock were
outstanding, held by approximately holders of record.
The Raychem Board has unanimously approved the merger. The Tyco Board has
approved the merger and the issuance of Tyco common shares in the merger. See
"Background of the Merger" on page . Bermuda law does not require that Tyco
shareholders approve the merger. Tyco, as the sole shareholder of Tyco (PA), has
approved the merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF RAYCHEM
THE BOARD OF DIRECTORS OF RAYCHEM HAS UNANIMOUSLY DETERMINED THAT THE MERGER
IS FAIR TO AND IN THE BEST INTERESTS OF RAYCHEM AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. See "Recommendation of the Board of Directors of Raychem" beginning
on page and "Interests of Certain Persons in the Merger" beginning on page .
PROXIES; REVOCATION
A proxy card is enclosed for use by Raychem stockholders. The Board of
Directors of Raychem requests that stockholders SIGN AND RETURN THE PROXY CARD
IN THE ACCOMPANYING ENVELOPE. No postage is required if mailed within the United
States. IF YOU HAVE QUESTIONS OR REQUESTS FOR ASSISTANCE IN COMPLETING AND
SUBMITTING PROXY CARDS, PLEASE CONTACT , A FIRM THAT PROVIDES
PROFESSIONAL PROXY SOLICITING SERVICES THAT RAYCHEM HAS RETAINED, AT THE
FOLLOWING ADDRESS AND TELEPHONE NUMBER:
Telephone:
16
<PAGE>
All properly executed proxies that are not revoked will be voted at the
special meeting as instructed on those proxies. A stockholder who executes and
returns a proxy may revoke it at any time before it is voted, but only by
executing and returning a proxy bearing a later date, by giving written notice
of revocation to an officer of Raychem, or by attending the special meeting and
voting in person. A proxy that has been properly executed, but has otherwise
been left blank, will be voted for the approval and adoption of the merger
agreement, unless the proxy is revoked before the vote is taken. Abstentions
will be treated as shares present in determining whether Raychem has a quorum
for the special meeting, but abstentions will have the same effect as a vote
against approval of the merger. If a broker or other record holder or nominee
indicates on a proxy that it does not have direction or authority to vote
certain shares, those shares will be considered present at the special meeting
for purposes of determining a quorum but will have the same effect as a vote
against approval of the merger.
SOLICITATION OF PROXIES
The solicitation of the enclosed proxies from Raychem stockholders is made
on behalf of the Board of Directors of Raychem. The expenses of the solicitation
of proxies, including preparing, handling, printing and mailing the proxy
soliciting material, will be borne by Raychem. Solicitation will be made by
mail, by electronic telecommunications or in person. Raychem has retained the
services of to assist in the solicitation of proxies for a fee
estimated at $ plus out-of-pocket expenses. Management of Raychem 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. Raychem 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.
17
<PAGE>
THE MERGER
This section, as well as the next section "The Merger Agreement," describe
the material aspects of the proposed merger. These discussions are qualified in
their entirety by reference to the merger agreement, which is attached as an
Annex 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
Richard A. Kashnow, Chairman of the Board and Chief Executive Officer of
Raychem, and L. Dennis Kozlowski, Chairman of the Board and Chief Executive
Officer of Tyco, have known each other since 1994 and since that time have been
members of the Board of Directors of Applied Power, Inc. As a result, in
December 1998 and January 1999, Messrs. Kashnow and Kozlowski discussed various
matters relating to the businesses of Raychem and AMP. In November 1998, a
subsidiary of Tyco entered into a merger agreement to acquire AMP.
Following such discussions, in early March 1999, Messrs. Kashnow and
Kozlowski agreed to meet to discuss on a preliminary basis whether Tyco and
Raychem should explore a possible business combination transaction.
On March 21 and 22, 1999, Messrs. Kashnow and Kozlowski, together with
Raymond J. Sims, Chief Financial Officer of Raychem, and Mark H. Swartz, Chief
Financial Officer of Tyco, met to discuss Raychem's and Tyco's businesses. The
group preliminarily determined in their discussions that Raychem's and Tyco's
businesses were complementary in nature and that cost savings and the ability to
market a broader line of products to their customers might result from, among
other things, a business combination of Raychem and Tyco. Messrs. Kashnow and
Kozlowski concluded that they would ask Tyco and Raychem representatives to
further explore the benefits and risks of a possible combination. On March 21,
1999, Raychem and Tyco entered into a confidentiality agreement on customary
terms and conditions.
On March 24, 1999, the Raychem Board met and, among other things, received a
report from Dr. Kashnow on the meetings.
During the last week of March, representatives of Raychem and Tyco met to
discuss their respective business and operations and potential cost savings and
synergies that might result from a business combination. Based on such
discussions, Messrs. Kashnow and Kozlowski determined that it was advisable to
continue to explore whether a business combination was in the best interests of
Raychem's and Tyco's stockholders.
Messrs. Kashnow and Kozlowski continued discussions in early April 1999 with
a view to exploring preliminary transaction structures, the form of
consideration to be received by the holders of Raychem common stock and a range
of values to be paid by Tyco for the shares of Raychem common stock.
On April 7, 1999, the Raychem Board met and Dr. Kashnow updated the board on
the status of the exploratory discussions. Also, at such meeting, the Raychem
Board continued its periodic review of Raychem's general strategic alternatives.
To assist the Raychem Board in its review, Morgan Stanley & Co. Incorporated,
financial advisor to Raychem, made a presentation to the Raychem Board relating
principally to Raychem's general business, financial performance and general
strategic alternatives.
On April 14, 1999, Messrs. Kashnow and Kozlowski met further to discuss the
potential transaction and instructed representatives of Raychem and Tyco,
respectively, to coordinate due diligence reviews. During the middle of April
1999, representatives of Raychem and Tyco planned due diligence reviews
18
<PAGE>
of the respective companies and began comprehensive business, financial,
accounting and legal due diligence reviews of the other company.
On April 29, 1999, the Raychem Board met and, among other things, discussed
the progress of the due diligence reviews and the status of the parties' efforts
to determine whether a business combination was desirable. Due diligence reviews
continued during early May 1999. In the course of their investigation, Tyco
personnel reviewed documentation and conducted discussions with Raychem, its
accountants and other Raychem representatives concerning Raychem's financial
condition, facilities, operations, human resources programs, intellectual
property, tax posture, environmental compliance and other business and legal
matters. Raychem's representatives conducted a similar due diligence review of
Tyco.
On May 7, 1999, the Raychem Board met again and received a report from Dr.
Kashnow concerning the status of the due diligence reviews and the preliminary
discussions between Tyco and Raychem regarding the possible structures and terms
of a business combination transaction. On May 11, 1999, the Raychem Board met to
review the status of the discussions with Tyco. Dr. Kashnow described the
transaction structures, the form of consideration and the range of per share
consideration values being discussed by Raychem, Tyco and their respective
representatives.
Messrs. Kashnow and Kozlowski, together with representatives of Tyco and
Raychem, met on May 11, 1999 to discuss, among other things, possible
transaction structures, the form of consideration to be paid to Raychem
stockholders and the per share value to be paid to holders of Raychem common
stock.
On May 12, 1999, with due diligence continuing, Tyco delivered to Raychem an
initial draft of a merger agreement. On that same day, Tyco's Board of Directors
met in Bermuda to discuss a potential transaction with Raychem. The Tyco Board
determined a merger transaction with Raychem was in the best interests of Tyco's
shareholders and authorized Tyco's officers to complete the transaction within
certain parameters. Beginning on May 14, 1999, legal representatives of Raychem
and Tyco held numerous discussions regarding the terms and conditions of the
proposed merger agreement and various other legal, financial, accounting and
regulatory issues including, among other things, the treatment of Raychem's
employee benefit plans, the identification of required regulatory filings and
the tax treatment of the proposed transaction. These discussions continued
through May 16, 1999. Also, during such period, representatives of Tyco and
Raychem discussed on a number of occasions a range of values to be paid on a per
share basis to holders of Raychem common stock.
During the morning of May 17, 1999, the Raychem Board met to review the
terms of the proposed merger. Representatives of Morgan Stanley made a
presentation regarding the financial terms of the proposed merger and discussed,
among other things, with the Raychem Board the financial performance of Raychem
and Tyco. Raychem's outside legal counsel also reviewed with the Raychem Board
certain legal matters, including a detailed review of the merger agreement, and
discussed with the Raychem Board the Board's fiduciary duties in the context of
the proposed transaction and other relevant aspects of applicable law. Following
such presentations and discussions, the Raychem Board authorized senior
management to continue to pursue the proposed merger.
Throughout the day on May 17, 1999, the management teams of Raychem and
Tyco, together with their advisors, continued to discuss various issues,
including those relating to employee benefits, the rights of a party to
terminate the merger agreement and whether any payment would be due as a result
of a termination of the merger agreement under certain circumstances.
The Raychem Board met again on May 18, 1999 to continue its discussions
regarding the merger and to further review the terms and conditions of the
proposed merger with senior management, outside legal counsel and Morgan
Stanley. During this meeting, the Raychem Board received the opinion of Morgan
Stanley that, as of such date, the consideration to be received by the holders
of
19
<PAGE>
Raychem common stock pursuant to the merger agreement is fair from a financial
point of view to such holders. Following further discussions, the Raychem Board
unanimously determined that the merger is fair to, and in the best interests of,
Raychem and its stockholders, approved the merger and the merger agreement, and
resolved to recommend that the stockholders of Raychem vote to approve and adopt
the merger agreement.
The merger agreement was signed by Raychem and Tyco early in the morning on
May 19, 1999. Later that morning, prior to commencement of trading on the NYSE,
the companies issued a joint press release announcing the execution of the
merger agreement.
EXCHANGE OF FINANCIAL FORECASTS
As part of their respective business planning cycles, management of each of
Tyco and Raychem 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," each of Tyco and Raychem
provided certain of these internal forecasts to the other and to the other's
financial advisor.
The internal financial forecasts regarding Raychem prepared by Raychem's
management reflected the following forecasted information, prior to
restructuring charges announced on June 9, 1999 and expenses related to the
merger:
<TABLE>
<CAPTION>
FISCAL YEAR SALES EBITDA NET INCOME EPS
- ------------- ----------------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
1999...... $ 1,788 million $ 319 million $ 136 million $ 1.71
2000...... 1,892 million 378 million 172 million 2.17
</TABLE>
The internal financial forecasts regarding Tyco prepared by Tyco's
management reflected the following forecasted information for Tyco's fiscal year
1999. The forecast includes Tyco stand-alone results through March 31, 1999 and
the expected results including AMP for the balance of fiscal 1999:
<TABLE>
<CAPTION>
SALES NET INCOME EPS
- --------------- ------------- ---------
<S> <C> <C>
$ 19.4 billion $ 2.3 billion $ 3.00
</TABLE>
Raychem'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 Raychem or Tyco.
These include the impact of general economic and business conditions, the
competitive environment in which each operates and other factors. See
"Forward-Looking Information" on page . Accordingly, actual results may differ
materially from those forecasted.
The inclusion of the forecasts herein should not be regarded as a
representation by Raychem, Tyco or any other person that such forecasts are or
will prove to be correct. As a matter of course, neither Raychem 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 Raychem 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.
20
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS OF RAYCHEM; REASONS OF RAYCHEM FOR THE
MERGER
The Raychem Board, after careful consideration, has unanimously:
1. determined that the merger is fair to and in the best interests of
Raychem and its stockholders;
2. approved the merger and the merger agreement; and
3. recommended that holders of shares of Raychem common stock vote for the
approval and adoption of the merger agreement.
At a meeting held on May 18, 1999, the Raychem Board, with the assistance of
Raychem's outside financial and legal advisors, considered the legal, financial
and other terms of the merger.
In determining that the merger is fair to and in the best interests of
Raychem and its stockholders, the Raychem Board considered a number of factors
and potential benefits, including, without limitation, the following:
- the opportunity for Raychem stockholders to receive a significant premium
over the existing market price for shares of Raychem common stock prior to
the public announcement of the merger;
- the ability of Raychem stockholders to continue to participate in the
growth of the business conducted by Tyco and Raychem after the merger and
to benefit from the potential appreciation in the value of Tyco common
shares by electing to receive Tyco common shares;
- the qualification of the merger as a reorganization for U.S. federal
income tax purposes, which will permit Raychem stockholders to receive
Tyco common shares in a tax-free exchange;
- the financial condition, results of operations and business of Raychem and
Tyco, on both an historical and prospective basis, and current industry,
economic and market conditions;
- the historical market prices and recent trading patterns of Raychem common
stock and Tyco common shares and market prices, recent trading patterns
and financial data relating to other companies engaged in the same
business as Raychem and Tyco;
- the possible strategic growth opportunities that might be available to
Raychem absent the merger and the belief, based on review of such
opportunities, that stockholders of Raychem would benefit most from the
potential business combination with Tyco to the extent they receive Tyco
common shares;
- the larger public float and trading volume of Tyco common shares compared
to the public float and trading volume of shares of Raychem common stock,
which would provide Raychem stockholders the opportunity to gain greater
liquidity in their investment to the extent they receive Tyco common
shares;
- the review of, and discussions with, Raychem senior management, legal and
financial advisors, 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;
- the analysis and recommendation of Raychem's management that the merger be
approved, including without limitation, a discussion of the complementary
nature of certain product lines of Raychem and Tyco;
- the belief, based on presentations by Raychem's legal and financial
advisors, that the terms of the merger agreement, including the limited
conditions to Tyco's obligation to close the merger
21
<PAGE>
and the ability of Raychem to consider proposed alternative business
combinations under certain circumstances, are generally customary for
transactions such as the merger; and
- the fairness opinion of Morgan Stanley & Co. Incorporated to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated therein, the consideration to be received by the holders of
shares of Raychem common stock pursuant to the merger agreement was fair
from a financial point of view to such holders.
The Raychem Board also considered and balanced against the potential
benefits of the merger a number of potentially negative factors, including,
without limitation, the following:
- the risk that the merger would not be consummated;
- the possibility that the market value of Tyco common shares might decrease
which would result in less aggregate value paid to Raychem stockholders;
- the fact that stockholders of Raychem will not receive the full benefit of
any future growth in the value of their equity that Raychem may have
achieved as an independent company, and the potential disadvantage to
Raychem stockholders who receive Tyco common shares in the event that Tyco
does not perform as well in the future as Raychem may have performed as an
independent company;
- 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, among others, the no solicitation and termination fee payment
provisions of the merger agreement, might have the effect of discouraging
other persons potentially interested in merging with or acquiring Raychem
from pursuing such an opportunity or, if pursued, from consummating such a
transaction prior to November 30, 2000;
- the possibility that the tax-free treatment with respect to the exchange
of shares of Raychem common stock may not be available under certain
circumstances; and
- other matters described under "Risk Factors" on page .
After detailed consideration of these factors, the Raychem Board concluded
that the potential benefits of the merger outweighed these considerations and
determined that the merger was fair to and in the best interests of Raychem and
its stockholders.
The above discussion of the information and factors considered by the
Raychem Board is not exhaustive and does not include all factors considered by
the Raychem Board. In view of the variety of factors considered in connection
with its evaluation of the merger, the Raychem 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 the Raychem Board may have given different weights to different
factors. Based on the factors outlined above, the Raychem Board determined that
the merger is fair to and in the best interests of Raychem and its stockholders.
THE RAYCHEM BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF RAYCHEM AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
See "Background of the Merger" on page , "Opinion of Financial Advisor to
Raychem" on page , "Material U.S. Federal Income Tax and Bermuda Tax
Consequences" on page and "Comparative Stock Prices and Dividends" on page .
22
<PAGE>
OPINION OF FINANCIAL ADVISOR TO RAYCHEM
Pursuant to a letter agreement dated as of March 24, 1999, Morgan Stanley
was engaged to provide Raychem with financial advisory services and a financial
fairness opinion in connection with the merger. Morgan Stanley was selected by
the Raychem Board to act as Raychem's financial advisor based on Morgan
Stanley's qualifications, expertise and reputation and its knowledge of the
business and affairs of Raychem. At the meeting of the Raychem Board on May 18,
1999, Morgan Stanley rendered its oral opinion, subsequently confirmed in
writing, that as of May 18, 1999, based upon and subject to the various
considerations set forth in the opinion, the consideration to be received by
holders of Raychem common stock pursuant to the merger agreement was fair from a
financial point of view to the holders of Raychem common stock.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY, DATED MAY 18, 1999,
WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY
MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX B TO THIS
DOCUMENT. RAYCHEM STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION
CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE
RAYCHEM BOARD AND ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE
RECEIVED BY HOLDERS OF RAYCHEM COMMON STOCK PURSUANT TO THE MERGER AGREEMENT
FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION; IT DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY HOLDER OF RAYCHEM COMMON STOCK AS TO HOW TO VOTE AT THE RAYCHEM SPECIAL
MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS DOCUMENT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of Raychem and Tyco;
- reviewed certain internal financial statements and other financial and
operating data concerning Raychem prepared by the management of Raychem;
- reviewed certain internal financial statements and other financial and
operating data concerning Tyco prepared by the management of Tyco;
- analyzed certain financial projections prepared by the management of
Raychem;
- analyzed certain financial projections prepared by the management of Tyco;
- discussed the past and current operations and financial condition and the
prospects of Raychem, including information relating to certain strategic,
financial and operational benefits anticipated from the merger, with
senior executives of Raychem;
- discussed the past and current operations and financial condition and the
prospects of Tyco, including information relating to certain strategic,
financial and operational benefits anticipated from the merger, with
senior executives of Tyco;
- reviewed the reported prices and trading activity for Raychem common stock
and Tyco common shares;
- compared the financial performance of Raychem and Tyco and the prices and
trading activity of Raychem common stock and Tyco common shares with that
of certain other publicly-traded companies and their securities;
- reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions;
- analyzed the pro forma impact of the merger on Tyco's earnings per share;
23
<PAGE>
- reviewed the merger agreement and certain related agreements; and
- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
Morgan Stanley has assumed and relied upon, without independent
verification, the accuracy and completeness of the information reviewed by it
for the purposes of this opinion. With respect to the internal financial
statements and other financial and operating data and discussions relating to
strategic, financial and operational benefits anticipated from the merger
provided by Raychem, Morgan Stanley has assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the prospects of Raychem. Morgan Stanley has relied upon, without
independent verification, the following:
- the assessment by the management of Raychem of the cost savings and
benefits expected to result from the merger; and
- the assumption that the merger will be consummated in accordance with the
terms set forth in the merger agreement, including, among other things,
that the exchange of Raychem common stock for Tyco common shares will be
tax-free for United States federal income tax purposes.
Morgan Stanley did not make any independent valuation or appraisal of the
assets or liabilities of Raychem, nor has it been furnished with any such
appraisals. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of its opinion.
The following is a brief summary of certain of the analyses performed by
Morgan Stanley in connection with its oral opinion and the preparation of its
opinion letter dated May 18, 1999. Certain of these summaries of financial
analyses include information presented in tabular format. In order to fully
understand the financial analyses used by Morgan Stanley, 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.
COMPARATIVE STOCK PRICE PERFORMANCE.
Morgan Stanley reviewed the stock price performance of Raychem during the
period from May 18, 1998 to May 11, 1999 and compared such performance with the
means of the following groups of companies for the period from May 18, 1998 to
May 17, 1999.
<TABLE>
<CAPTION>
COMPANIES STOCK PRICE PERFORMANCE
- ---------------------------------------------------------------------- ---------------------------
<S> <C>
Raychem............................................................... (37%)
Specialty Chemical Companies.......................................... (3%)
Telecom Equipment Companies........................................... 47%
Connectors Companies.................................................. 16%
Tyco.................................................................. 63%
Tyco Comparable Companies............................................. 27%
</TABLE>
24
<PAGE>
These groups include the following companies:
<TABLE>
<CAPTION>
TELECOM EQUIPMENT
SPECIALTY CHEMICAL COMPANIES COMPANIES CONNECTORS COMPANIES
- ---------------------------- ---------------------------------------- -------------------------------
<S> <C> <C>
Fuller Co. Motorola Inc. Flextronics International
Great Lakes Chemical Lucent Technologies Inc. Molex Inc.
Corporation Tellabs Inc. Commscope Inc.
W.R. Grace & Co. Advanced Fibre Communications, Inc. Thomas & Betts Corporation
Ethyl Corporation Nortel Networks Corporation Amphenol Corporation
Nalco Chemical Co. Newbridge Networks Corporation
Cable Design Technology ADC Telecommunications Inc.
General Cable Corporation Adtran Inc.
Hubbell Inc. Vishay Intertechnology
Superior Telecom
<CAPTION>
SPECIALTY CHEMICAL COMPANIES TYCO COMPARABLE COMPANIES
- ---------------------------- ------------------------------
<S> <C>
Fuller Co. Allied Signal Inc.
Great Lakes Chemical Emerson Electric Company
Corporation General Electric Company
W.R. Grace & Co. ITT Industries Inc.
Ethyl Corporation Textron Inc.
Nalco Chemical Co. United Technologies Corp.
Cable Design Technology
General Cable Corporation
Hubbell Inc.
Superior Telecom
</TABLE>
Morgan Stanley observed that the market price of Raychem common stock during the
period from May 18, 1998 to May 11, 1999 decreased 37% compared with a decrease
of 3% for the Specialty Chemical Companies, an increase of 47% for the Telecom
Equipment Companies and an increase of 16% for the Connectors Companies during
the period from May 18, 1998 to May 17, 1999. Morgan Stanley also observed that
over the period from May 18, 1998 to May 17, 1999, the market price of Tyco
common stock increased 63% compared with an increase of 27% for the Tyco
Comparable Companies during the same period.
PEER GROUP COMPARISON.
Morgan Stanley compared certain financial information of Raychem and Tyco
with publicly available information for the Specialty Chemical Companies, the
Telecom Equipment Companies and the Connectors Companies. For this analysis,
Morgan Stanley examined median estimates from securities research analysts,
where appropriate. The following table presents, as of May 17, 1999, the median
for these groups of the following statistics:
- the ratio of price to calendar year 2000 estimated earnings per share,
commonly known as EPS;
- the ratio of aggregate value, defined as market capitalization plus total
debt less cash and cash equivalents, to:
1. latest twelve months of revenue,
2. estimated calendar year 1999 revenue,
3. last twelve months of earnings before interest, taxes, depreciation and
amortization, commonly known as EBITDA;
4. estimated calendar year 1999 EBITDA; and
- five year projected EPS growth rates.
<TABLE>
<CAPTION>
AGGREGATE VALUE
--------------------------------------------------
LAST 12 LAST 12
MONTHS CY1999E MONTHS CY1999E
COMPANY CY2000E P/E REVENUES REVENUES EBITDA EBITDA
- --------------------------------------------------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Raychem............................................ 13.4x 1.5x 1.4x 9.4x 7.9x
Specialty Chemical Companies....................... 14.8 1.0 1.0 7.9 7.7
Telecom Equipment Companies........................ 27.6 3.2 3.0 18.9 16.3
Connectors Companies............................... 21.9 1.6 1.3 8.7 8.5
Tyco............................................... 21.8 5.8 3.5 26.2 15.4
Tyco Comparable Companies.......................... 20.5 2.1 1.9 12.1 11.4
<CAPTION>
5 YEAR
PROJECTED
EPS GROWTH
COMPANY RATE
- --------------------------------------------------- ---------------
<S> <C>
Raychem............................................ 15.0%
Specialty Chemical Companies....................... 11.0
Telecom Equipment Companies........................ 25.0
Connectors Companies............................... 17.0
Tyco............................................... 20.0
Tyco Comparable Companies.......................... 13.5
</TABLE>
The analyses reflected in the table above show that as of May 17, 1999:
25
<PAGE>
- Raychem's common stock price was 13.4 times estimated calendar year 2000
EPS, as compared to the comparable ratios for the Specialty Chemical,
Telecom Equipment and Connectors groups of 14.8, 27.6 and 21.9,
respectively;
- Raychem's aggregate value was 1.5 times its last twelve months of revenue,
as compared to the comparable ratios for the Specialty Chemical, Telecom
and Connectors groups of 1.0, 3.2 and 1.6, respectively;
- Raychem's aggregate value was 1.4 times management's estimated revenue for
calendar year 1999, as compared to the comparable ratios for the Specialty
Chemical, Telecom and Connectors groups of 1.0, 3.0 and 1.3, respectively;
- Raychem's aggregate value was 9.4 times its last twelve months of EBITDA,
as compared to the comparable ratios for the Specialty Chemical, Telecom
and Connectors groups of 7.9, 18.9 and 8.7, respectively.
- Raychem's aggregate value was 7.9 times its EBITDA for calendar year 1999
as compared to the comparable ratios for the Specialty Chemical, Telecom
and Connectors groups of 7.7, 16.3 and 8.5, respectively; and
- Raychem's projected EPS growth rate over the next five years was 15% as
compared to the median projected EPS growth rates for the Specialty
Chemical, Telecom and Connectors groups of 11%, 25% and 17%, respectively.
Such analyses also showed that as of May 17, 1999, the Tyco common share price
to estimated calendar year 2000 earnings was 21.8 times, compared to a median of
20.5 times for the Tyco Comparable Companies. Tyco's aggregate value was 5.8
times last twelve months of revenue, compared to a median of 2.1 for the Tyco
Comparable Companies, and Tyco's aggregate value was 3.5 times estimated
calendar year 1999 revenue compared to a median of 1.9 times for Tyco Comparable
Companies. Tyco's aggregate value was 28.4 times last twelve months of EBITDA,
compared to a median of 12.1 for the Tyco Comparable Companies, and Tyco's
aggregate value was 15.4 times calendar year 1999 EBITDA compared to a median of
11.4 times for the Tyco Comparable Companies. Lastly, Tyco's projected growth
rate was 20.0%, compared to a median of 13.5% for the Tyco Comparable Companies.
No company utilized in the peer group comparison analysis as a comparison is
identical to either Raychem or Tyco. In evaluating the peer groups, Morgan
Stanley made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of either Raychem or Tyco, such as the
impact of competition on the business of Raychem or Tyco and the industries in
which they operate generally, industry growth and the absence of any adverse
material change in the financial condition and prospects of either Raychem or
Tyco or the industries in which they operate or in the financial markets in
general. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using peer group data.
26
<PAGE>
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS.
As part of its analysis, Morgan Stanley reviewed the following transactions,
referred to in this section as the Selected Precedent Transactions.
<TABLE>
<CAPTION>
SELECTED PRECEDENT TRANSACTIONS
- ------------------------------------------------
<S> <C>
ACQUISITION OF BY
- ------------------ ----------------------------
Reltec GEC Marconi
AMP Tyco
BTR Siebe
Coltec BF Goodrich
Elsag Bailey ABB Asea Brown Boveri
Berg Electronics FCI
General Signal SPX
US Surgical Tyco
Eurotherm BTR Siebe
Thermo King Ingersoll Rand
APV Siebe
Keystone Tyco
BW/IP Durco
Goulds Pumps ITT Industries
Measurex Honeywell
Amphenol KKR
Augat Thomas & Betts
Unitech Siebe
</TABLE>
Morgan Stanley compared the publicly available statistics for the Selected
Precedent Transactions listed above to the relevant financial statistics for the
merger based on the consideration to be received by the holders of Raychem's
common stock, assuming Tyco's closing common share price as of May 18, 1999. The
following table presents, the median for the Selected Precedent Transactions
described above and the Raychem/Tyco merger of the following statistics:
- the ratio of estimated aggregate value, defined as market capitalization
plus total debt less cash and cash equivalent, to:
1. last twelve months of revenue, and
2. last twelve months EBITDA;
- merger consideration to estimated next 12 months EPS; and
- premium to unaffected stock price, defined, with respect to the merger,
the Raychem stock price as of May 11, 1999, and with respect to the
Selected Precedent Transactions, the stock price one month prior to
commencement of the transactions.
<TABLE>
<CAPTION>
MERGER
CONSIDERATION TO
AGGREGATE VALUE TO AGGREGATE VALUE TO NEXT 12 MONTHS
LAST 12 MONTHS LAST TWELVE MONTHS ESTIMATED PREMIUM TO UNAFFECTED
TRANSACTIONS REVENUES EBITDA EPS STOCK PRICE
- --------------------------------- --------------------- --------------------- ----------------- -------------------------
<S> <C> <C> <C> <C>
Raychem/Tyco Merger.............. 1.8x 11.4x 18.1x 45.5%
Selected Precedent
Transactions................... 1.4 11.4 17.9 31.6
</TABLE>
27
<PAGE>
The analysis of the Selected Precedent Transactions showed:
- a median multiple of aggregate value to latest twelve months' revenue of
1.4 times,
- a median multiple of 11.4 times last twelve months EBITDA,
- a median multiple of equity value to next twelve months' earnings, based
on estimates from securities research analysts, of 17.9 times, and
- a median premium to unaffected price of 31.6%.
Based on the consideration to be received by the holders of Raychem's common
stock, assuming Tyco's closing common stock price as of May 18, 1999 these
statistics compared to:
- a multiple of Raychem's aggregate value to latest twelve months' revenue
of 1.8 times,
- a multiple of Raychem's aggregate value to latest twelve months' EBITDA of
11.4 times,
- a multiple of Raychem's equity value to next twelve months' earnings, as
estimated by Raychem's management, of 18.1 times, and
- a premium of Raychem's unaffected price of 45.5%.
No company utilized in the precedent transactions analysis as a comparison
is identical to Raychem. In evaluating the Selected Precedent Transactions,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Raychem and Tyco, such as
the impact of competition on the business of Raychem or Tyco and the industries
in which they operate generally, industry growth and the absence of any adverse
material change in the financial condition and prospects of Raychem or Tyco or
the industries in which they operate or in the financial markets in general.
Mathematical analysis, such as determining the average or median, is not in
itself a meaningful method of using precedent transactions data.
DISCOUNTED EQUITY VALUE.
Morgan Stanley performed an analysis of the present value per share of the
implied value of Raychem on a standalone basis based on Raychem's assumed future
trading price. Morgan Stanley observed that, based on a range of Raychem
earnings estimates for the calendar year 2001, illustrative multiples of
earnings ranging from 10.0 times to 18.0 times and an illustrative discount rate
of 14.0%, the present value of Raychem on a standalone basis ranged from $18.42
to $39.46 per share of Raychem common stock. This compared with an implied
assumed future trading price, assuming consummation of the merger pursuant to
the terms of the merger agreement, based on Tyco's earnings estimates of
securities research analysts for the calendar year 2001, illustrative multiples
of earnings estimates of 20.0 times to 30.0 times and an illustrative discount
rate of 13.0%, the present value of the combined entity on a share of Raychem
common stock equivalent basis ranged from $35.16 to $46.27. Morgan Stanley also
performed an analysis of the present value per share of the implied value of
Tyco on a standalone basis based on Tyco's future trading price. Morgan Stanley
observed that, based on a range of Tyco earnings estimates for the calendar year
2001, illustrative multiples of earnings ranging from 20.0 times to 30.0 times
and an illustrative discount rate of 13.0%, the present value of Tyco on a
standalone basis ranged from $79.65 to $132.74 per Tyco share.
DISCOUNTED CASH FLOW ANALYSIS.
Morgan Stanley performed a discounted cash flow analysis of Raychem to
determine a range of present values for Raychem based on the financial
projections prepared by the management of Raychem. Morgan Stanley calculated
unlevered free cash flow as the after-tax operating earnings of Raychem
excluding any interest income and interest expense plus depreciation and
amortization, plus
28
<PAGE>
deferred taxes, plus or minus net changes in non-cash working capital, minus
capital expenditures. Morgan Stanley calculated terminal values by applying a
range of multiples to EBITDA in fiscal year 2004 from 5.5 to 7.5 times. Morgan
Stanley then discounted the unlevered free cash flows and terminal values to
present values using a discount rate of 11.5%. Based on this analysis and the
assumptions set forth, Morgan Stanley calculated per share equity value
estimates of Raychem ranging from approximately $24 to $31, excluding any
potential operational benefits to be realized from the merger. Morgan Stanley
noted that as of May 11, 1999, which reflects an unaffected share price and
excludes the effect of rumors in the market the price per share of Raychem
common stock was $25.44.
PRO FORMA MERGER ANALYSIS.
Morgan Stanley analyzed the pro forma impact of the merger on the combined
company's projected earnings per share for Tyco's fiscal year 2000. Such
analysis was based on earnings and synergies projections prepared by the
management of Raychem for Raychem and earnings projections for Tyco by
securities research analysts for Tyco. Morgan Stanley observed that the merger
would result in earnings per share accretion for Tyco in fiscal year 2000.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Morgan Stanley believes that selecting any
portion of its analyses, without considering all analyses, would create an
incomplete view of the process underlying its opinion. In addition, Morgan
Stanley may have given various analyses and factors more or less weight than
other analyses and factors, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Raychem or Tyco. In performing its
analyses, Morgan Stanley made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Raychem or Tyco. Any estimates contained in
Morgan Stanley's analyses are not necessarily indicative of future results or
actual values, which may be significantly more or less favorable than those
suggested by such estimates.
The analyses performed were prepared solely as part of Morgan Stanley's
analysis of the fairness of the consideration to be received by the holders of
Raychem common stock pursuant to the merger agreement from a financial point of
view to such holders and were conducted in connection with the delivery of the
Morgan Stanley opinion. The analyses do not purport to be appraisals or to
reflect the prices at which Raychem or Tyco might actually be sold. The
consideration to be received by the holders of Raychem common stock pursuant to
the merger agreement was determined through arm's-length negotiations between
Raychem and Tyco and was approved by the Raychem Board. Morgan Stanley provided
advice to Raychem during such negotiations; however, Morgan Stanley did not
recommend any specific consideration to Raychem or that any specific
consideration constituted the only appropriate consideration for the merger. In
addition, as described above, Morgan Stanley's opinion and presentation to the
Raychem Board was one of many factors taken into consideration by Raychem's
Board in making its decision to approve the merger. Consequently, the Morgan
Stanley analyses as described above should not be viewed as determinative of the
opinion of the Raychem Board with respect to the consideration or of whether the
Raychem Board would have been willing to agree to a different consideration.
The Raychem Board retained Morgan Stanley based upon Morgan Stanley's
qualifications, experience and expertise. Morgan Stanley is an internationally
recognized investment banking and advisory firm. Morgan Stanley, as part of its
investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private
29
<PAGE>
placements and valuations for corporate, estate and other purposes. In the past,
Morgan Stanley and its affiliates have provided financial advisory services for
Raychem and Tyco and have received fees for the rendering of these services. In
the ordinary course of Morgan Stanley's trading and brokerage activities, Morgan
Stanley or any of its affiliates may at any time hold long or short positions,
may trade or otherwise effect transactions, for its own account or for the
account of customers in the equity securities of Raychem or Tyco.
Pursuant to the engagement letter, Morgan Stanley provided financial
advisory services and a financial fairness opinion in connection with the
merger, and Raychem agreed to pay Morgan Stanley a customary fee in connection
therewith. In addition, Raychem has also agreed to indemnify Morgan Stanley and
its affiliates, their respective directors, officers, agents and employees and
each person, if any, controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities under the
federal securities laws, arising out of Morgan Stanley's engagement.
REASONS OF TYCO FOR THE MERGER
At a meeting of the Tyco Board held on May 12, 1999, the Tyco Board
determined that the merger with Raychem was in keeping with its 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.
In reaching its decision to approve the merger, Tyco's Board considered the
following material factors:
- the expectation that Raychem's businesses could be readily integrated with
Tyco's businesses, primarily its AMP, flow control and Polyken tape and
adhesives businesses;
- 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;
- the belief of Tyco's management that there are prospects for reduction of
Raychem corporate costs, possible elimination of facilities of the
combined company and potential cost reductions for purchased materials and
services;
- the prospect of utilization of some of Raychem's business as a platform
for further growth in the markets served by Raychem; and
- Tyco's history of growth through acquisitions, including its substantial
experience integrating acquired businesses with existing operations and
thereby achieving synergies and cost savings.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL
Certain Raychem executive officers and certain members of the Raychem Board
will receive benefits as a result of the merger that will be in addition to or
different from their interests as stockholders of Raychem 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 Raychem Board was aware of these
interests and considered them, among other matters, in approving the merger
agreement and the merger.
STOCK OWNERSHIP
Raychem's directors and executive officers collectively beneficially own as
of July , 1999 shares of Raychem common stock, not including
options, which are described below.
30
<PAGE>
RAYCHEM EQUITY-BASED INCENTIVE AWARDS
Pursuant to the terms of the merger agreement, at the time the merger is
completed, each outstanding option to purchase a share of Raychem common stock
issued to employees and directors of Raychem will be converted into an option to
acquire 0.4140 of a Tyco share. Shares of restricted stock of Raychem that have
vested prior to the merger or that will vest upon completion of the merger will
be treated the same in the merger as shares of unrestricted Raychem common
stock. Each unvested restricted share of Raychem common stock that does not vest
upon completion of the merger will be converted into 0.4140 of an unvested
restricted Tyco common share. In addition, Raychem's Key Employee Retention and
Severance Plan provides for:
- all outstanding Raychem options and restricted stock held by participants
in that plan that were scheduled to vest during the 12 month period
commencing on the date of the merger to be immediately vested upon
completion of the merger; and
- full acceleration of vesting of unvested Raychem options and restricted
stock upon termination of employment under certain qualifying
circumstances within two years after the merger.
Under Raychem's two non-employee director option plans, the non-employee
directors' options will become fully vested upon the the approval and adoption
of the merger agreement by the Raychem stockholders. The other terms and
conditions applicable immediately prior to the merger of each Raychem option and
each share of Raychem restricted stock, will continue to apply after the merger.
The conversion of Raychem options into options to acquire Tyco shares pursuant
to the merger agreement is more fully described below in "Treatment of Raychem
Equity-Based Awards."
As of July , 1999, directors and executive officers of Raychem owned an
aggregate of shares of Raychem restricted stock and Raychem options,
of which shares of restricted stock and options were unvested.
Approximately shares of Raychem restricted stock and Raychem options
held by directors and executive officers will become vested as a result of the
merger.
SEVERANCE BENEFITS UNDER THE KEY EMPLOYEE RETENTION AND SEVERANCE PLAN
The Raychem Key Employee Retention and Severance Plan provides that, if an
executive officer's employment is actually or constructively terminated under
certain qualifying circumstances within two years following a change of control
of Raychem, the executive officer will be entitled to:
- a pro-rated bonus for the year in which the termination of employment
occurred, based on the executive officer's target bonus and the portion of
the year worked;
- a lump sum cash severance payment equal to 2.5 times the sum of the
executive officer's base salary and target bonus;
- full vesting of all outstanding unvested options and restricted stock; and
- continued medical and dental benefits under Raychem's plans for the
shorter of 2.5 years or until the executive officer obtains coverage under
another employer's plans.
Certain other severance benefits will be available to terminated officers
under Raychem's Executive Termination Compensation Policy.
RETENTION AND NON-COMPETITION AGREEMENT WITH RICHARD KASHNOW
If the merger is completed, Dr. Kashnow will serve in the capacity of
Executive Vice President of Tyco International (US) Inc. pursuant to the terms
of a retention and non-competition agreement executed by Dr. Kashnow and Tyco at
the time of the execution of the merger agreement. The term of the agreement is
three years. Under the agreement, Dr. Kashnow will be entitled to receive an
annual
31
<PAGE>
salary of $900,000 and an annual incentive bonus determined on a basis
consistent with those of other similarly situated Tyco executives. Upon
completion of the merger, Tyco will grant Dr. Kashnow 90,000 shares of
restricted stock and 90,000 options which will vest pro rata over three years.
Vesting of the restricted stock will be subject to the satisfaction of certain
performance criteria. Dr. Kashnow will be entitled to receive other benefits
which are no less favorable than those provided to other Tyco executives.
If Dr. Kashnow's employment terminates under certain qualifying
circumstances, including his resignation, he will receive certain severance
payments. In addition, Dr. Kashnow has agreed that during the two-year period
following his termination, he will not compete against the surviving corporation
and will not solicit employees of the surviving corporation, Tyco or their
subsidiaries.
INDEMNIFICATION
The surviving corporation in the merger will provide to the individuals who
have served as officers or directors of Raychem, for at least six years after
the merger, indemnification as set forth by the certificate of incorporation and
by-laws of Raychem prior to the effective time of the merger. Tyco has also
agreed to provide, for at least six years after the merger, a directors and
officers insurance and indemnification policy that is no less favorable than the
existing policy provided by Raychem with respect to acts occurring prior to or
at the effective time of the merger.
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<PAGE>
MATERIAL U.S. FEDERAL INCOME TAX AND BERMUDA TAX CONSEQUENCES
U.S. FEDERAL INCOME TAX CONSEQUENCES
In the opinions of PricewaterhouseCoopers LLP and Shearman & Sterling, tax
advisors to Tyco and Raychem respectively, the following discussion is a summary
of the material U.S. federal income tax consequences of the exchange of Raychem
common stock for Tyco common shares and/or cash 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 Raychem common stock and will hold
Tyco common shares as capital assets. The tax treatment of a Raychem stockholder
may vary depending upon such stockholder's particular situation, and certain
stockholders may be subject to special rules not discussed below. Such
stockholders would include, for example, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, and individuals who
received Raychem 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 Raychem stockholder who will own 5% or more of either
the total voting power or the total value of the outstanding Tyco common shares
after the merger, determined after 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 Raychem 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 beneficial owner of Raychem
common stock who exchanges Raychem common stock for Tyco common shares and/or
cash 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
(1) 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 or
(2) that has a valid election in effect under applicable U.S. treasury
regulations to be treated as a U.S. person.
As used in this section, a non-U.S. Holder is a holder of Raychem common
stock who exchanges Raychem common stock for Tyco common shares and/or cash and
who is not a U.S. Holder.
1. CONSEQUENCES OF THE MERGER
REORGANIZATION TREATMENT.
Consummation of the merger is conditioned upon the receipt of opinions of
PricewaterhouseCoopers LLP and Shearman & Sterling, which will be rendered as of
the time the merger becomes effective, that the merger will constitute a
reorganization for U.S. federal income tax purposes. The tax opinions will be
based on facts existing as of the consummation of the merger and on certain
representations as to factual matters made by Tyco, Tyco (PA) and Raychem. Such
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representations, if incorrect in certain material respects, could jeopardize the
conclusions reached in the opinions. No ruling has been or will be obtained from
the U.S. Internal Revenue Service with respect to the merger. The opinions of
the tax advisors are not binding on the U.S. Internal Revenue Service or the
courts, and no assurance can be given that the U.S. Internal Revenue Service
would not be able to successfully challenge the conclusions expressed in such
opinions.
For the merger to qualify as a reorganization for United States federal
income tax purposes, among other requirements, the Tyco common shares delivered
in the merger must represent a substantial portion of the overall consideration
received by Raychem stockholders. Based on the closing trading prices for Tyco
common shares on the day preceding the date the merger agreement was signed and
on the day immediately prior to the date hereof, the Tyco common shares
represented by value 50%, of the total merger consideration. If the value of the
Tyco common shares at the effective date constitutes less than 40% of the
overall merger consideration, and it may not be possible to render the tax
opinions. If a tax opinion cannot be delivered, Raychem may elect to require
Tyco to proceed with the acquisition of Raychem on a taxable basis. Both
PricewaterhouseCoopers LLP and Shearman & Sterling are of the opinion that,
based on facts existing as of the date hereof and on representations made as of
the date hereof by Tyco, Tyco (PA) and Raychem, and provided the value of the
Tyco common shares at the date the merger becomes effective constitutes a
substantial portion of the overall merger consideration received by Raychem
stockholders, the merger will qualify as a reorganization. Except as otherwise
noted, the remainder of the discussion assumes that the merger will qualify as a
reorganization.
RECEIPT ONLY OF CASH.
In general, a Raychem stockholder who receives only cash in exchange for its
Raychem common stock in the merger will recognize capital gain or loss equal to
the difference between the amount of cash received and such stockholder's
adjusted tax basis in the shares of Raychem common stock surrendered, except to
the extent the stockholder actually or constructively owns Tyco common shares
and, as a result, the receipt of cash is treated as a distribution of a dividend
for U.S. federal income tax purposes, see generally below "--Receipt of Tyco
common shares and cash". Such gain or loss will be long-term capital gain or
loss if, as of the effective date of the merger, the holding period for such
shares is more than one year.
RECEIPT ONLY OF TYCO COMMON SHARES.
A Raychem stockholder who receives only Tyco common shares in the merger
will not recognize any gain or loss upon such exchange, except to the extent
cash is received in lieu of a fractional Tyco common share, which will be taxed
as discussed below. The aggregate adjusted tax basis of Tyco common shares
received in such exchange, including any fractional interest in a Tyco common
share for which cash is received, will be equal to the aggregate adjusted tax
basis of the shares surrendered therefor. The holding period of the Tyco common
shares will include the holding period of the Raychem common stock surrendered
therefor.
RECEIPT OF TYCO COMMON SHARES AND CASH.
A Raychem stockholder who receives a combination of cash and Tyco common
shares in the merger will recognize gain, if any, with respect to the shares so
exchanged but only to the extent of the lesser of (a) the amount of gain
realized with respect to the Raychem common stock or (b) the amount of cash
received, other than cash received in lieu of a fractional share, which is
discussed below. The amount of gain realized with respect to the exchanged
Raychem common stock will equal the excess, if any, of the cash, including cash
received in lieu of a fractional share, and the fair market value of the Tyco
common shares received over such stockholder's adjusted tax basis in the Raychem
common stock exchanged therefor. No loss will be recognized by a Raychem
stockholder who receives a combination
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of cash and Tyco common shares in the merger, except in connection with cash
received in lieu of a fractional share as discussed below. The determination of
gain, which is recognized, or loss, which is not, is to be made on a share by
share basis. That is, each Raychem share, or block of shares acquired at the
same price, will be treated as exchanged for a pro rata portion of cash and Tyco
common shares.
Any gain recognized will be treated as capital gain unless, as discussed
below, the receipt of the cash has the effect of the distribution of a dividend
for U.S. federal income tax purposes, in which case such gain will be treated as
ordinary dividend income to the extent of such shareholder's ratable share of
Raychem's accumulated earnings and profits. Any capital gain will be long-term
capital gain if, as of the date of the exchange, the holding period for such
shares is more than one year.
The adjusted tax basis of the Tyco common shares received in such exchange,
including any fractional interest in a Tyco common share for which cash is
received, generally will be equal to the tax basis of the shares surrendered
therefor, decreased by the amount of cash received and increased by the amount
of gain or dividend income recognized, if any. The holding period of the Tyco
common shares received will include the holding period of the Raychem common
stock exchanged therefor. As a result of these "substitute" basis rules, in
general, any inherent gain or loss with respect to Raychem common stock that is
not recognized in the exchange will be reflected as the difference between the
basis and the value of the Tyco common shares received therefor, after making
basis adjustments, described above.
In determining whether gain recognized with respect to cash received by a
Raychem stockholder pursuant to the merger will be treated as a dividend, a
Raychem stockholder will be treated as if the portion of the Raychem common
stock exchanged for cash in the merger had been instead exchanged for Tyco
common shares, followed immediately by a redemption of such hypothetical shares
by Tyco for cash, referred to in this document as the "hypothetical redemption".
A Raychem stockholder will recognize capital gain rather than dividend income
with respect to the cash received if the hypothetical redemption is "not
essentially equivalent to a dividend" or is "substantially disproportionate"
with respect to such shareholder, taking into account in each case the
shareholder's actual and constructive ownership of Tyco common shares.
The hypothetical redemption would be "not essentially equivalent to a
dividend" with respect to a Raychem stockholder if, based on all the facts and
circumstances, it results in a "meaningful reduction" in such stockholder's
percentage ownership of Tyco common shares. The United States Internal Revenue
Service has indicated in a published ruling that a shareholder in a
publicly-held corporation whose relative stock interest in the corporation is
minimal and who exercises no control over corporate affairs is generally treated
as having had a meaningful reduction in his or her stock after a redemption
transaction if his or her percentage stock ownership in the corporation has been
reduced to any extent, taking into account the shareholder's actual and
constructive ownership before and after the hypothetical redemption. In that
ruling, a reduction from .0001118% to .0001081% was held to be a meaningful
reduction.
The hypothetical redemption transaction would be "substantially
disproportionate," and therefore would not have the effect of a distribution of
a dividend, with respect to a Raychem stockholder, if the percentage of Tyco
common shares actually and constructively owned by such stockholder immediately
after the hypothetical redemption is less than 80% of the percentage of Tyco
common shares actually, hypothetically and constructively owned by such
stockholder immediately after both the actual and deemed receipt of the Tyco
common shares but before the hypothetical redemption.
Raychem stockholders should consult their tax advisors as to the possibility
that all or a portion of any cash received in exchange for their Raychem common
stock will be treated as a dividend and with respect to the consequences
thereof, including the eligibility of Raychem stockholders that are corporations
for a dividends-received-deduction and treatment of the dividend as an
"extraordinary dividend" under section 1059 of the U.S. Internal Revenue Code.
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CASH RECEIVED IN LIEU OF A FRACTIONAL TYCO COMMON SHARE.
A Raychem stockholder who receives cash in lieu of a fractional Tyco common
share will be treated as having received such fractional share pursuant to the
merger and then as having exchanged such fractional share for cash in a
redemption by Tyco. Such a deemed redemption will be treated as a sale of the
fractional share, provided that it either is "not essentially equivalent to a
dividend" or is "substantially disproportionate" with respect to the Raychem
stockholder, as discussed in the preceding section. If the deemed redemption is
treated as a sale of a fractional share, a Raychem stockholder will recognize
gain or loss equal to the difference between the amount of cash received and the
portion of the basis of the Tyco common shares allocable to such fractional
share interest. Such gain or loss will be long-term capital gain or loss if, as
of the date of the exchange, the holding period for such shares is more than one
year.
TAXABLE ACQUISITION.
If, as discussed above, one or both tax opinions is not rendered and Raychem
elects to require Tyco to proceed with the acquisition of Raychem on a taxable
basis, Raychem stockholders will recognize capital gain or loss equal to the
difference between the amount of cash and the fair market value of the Tyco
common shares received and their adjusted tax bases in the Raychem common stock
exchanged. The gain or loss will be long-term capital gain or loss if, as of the
effective date of the merger, the holding period for such shares is more than
one year. The basis of the Tyco common shares received will be equal to their
fair market value at the effective time and the holding period of such shares
will begin on the day following the time the merger becomes effective.
NON-U.S. HOLDERS.
Non-U.S. Holders who receive cash in the merger will not be subject to
United States income or withholding tax except as set forth in paragraph 3.b
below, applied with respect to Raychem common stock, or unless the receipt of
the cash is taxable as a dividend, as discussed above, in which case such amount
may be subject to withholding at a 30% rate, or at such lower rate set forth in
an applicable treaty.
CONSEQUENCES TO RAYCHEM, TYCO AND TYCO (PA).
No income, gain or loss will be recognized by Raychem, Tyco or Tyco (PA),
whether the merger is consummated as a reorganization or whether Raychem elects,
pursuant to the merger agreement, to require Tyco to proceed with the
acquisition of Raychem on a taxable basis.
2. TRANSFER TAXES
In the event that any state or local transfer taxes are imposed on Raychem
stockholders as a result of the merger, Raychem will pay all such transfer
taxes, if any, directly to state and local taxing authorities on behalf of all
Raychem stockholders. Any such payments by Raychem made on behalf of the Raychem
stockholders may result in dividend income to each Raychem stockholder on behalf
of whom such payment is made. The amount of such dividend income attributable to
each share of Raychem common stock cannot be determined at this time, but is not
expected to be material.
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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" or
"financial services" 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 recognized 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 recognized generally will be United States source.
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. federal 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.
4. INFORMATION REPORTING AND BACKUP WITHHOLDING.
Certain U.S. Holders may be subject to information reporting with respect to
the receipt of cash in the merger and 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.
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Holders should consult their tax advisors regarding the imposition of backup
withholding and information reporting with respect to the receipt of cash in the
merger and with respect to distributions on, and dispositions of, Tyco common
shares.
If the Raychem common stock is 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 the receipt
of cash in the merger. 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 Raychem
common stock or 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 the receipt of cash in the merger and 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 the delivery of Tyco common shares and/or cash to Raychem
stockholders in exchange for Raychem 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. RAYCHEM STOCKHOLDERS 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.
ACCOUNTING TREATMENT
The merger will be treated as a purchase for accounting and financial
reporting purposes. Under this method of accounting, the assets and liabilities
of Raychem will be recorded on Tyco's books at their estimated fair market value
with the remaining purchase price reflected as goodwill. For more information,
see the notes to the Unaudited Pro Forma Combined Condensed Financial
Information beginning on page .
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CERTAIN LEGAL MATTERS
Tyco, Tyco (PA) and Raychem have committed 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,
Tyco (PA) and Raychem 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. Even after the waiting period expires or
terminates, the FTC or the Antitrust Division could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking divestiture of substantial assets of Tyco or Raychem. 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. Neither Tyco, Tyco (PA) nor
Raychem 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, Tyco (PA) and Raychem do not believe that any additional material
governmental filings in the United States or the European Economic Area, other
than the Articles of Merger in Nevada and Certificate of Merger in Delaware, are
required with respect to the merger. In addition to the United States and the
European Economic Area, Tyco and Raychem 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 Raychem 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 Raychem prior to the merger may only sell shares they receive
in the merger in transactions permitted by the resale provisions of Rule 145
under the Securities Act, or as otherwise permitted under the Securities Act.
Individuals or entities that control, are controlled by, or are under common
control with, Raychem, including directors and certain officers of Raychem, are
typically considered to be affiliates.
In general, under Rule 145, for one year following the consummation of the
merger, Raychem affiliates will be subject to the following restrictions on the
public sale of Tyco common shares acquired in the merger:
- a Raychem 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 a Raychem 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
- a Raychem 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, a Raychem
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 Raychem affiliate is
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not then an affiliate of Tyco. Two years after the consummation of the merger,
an affiliate of Raychem 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 Raychem 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.
APPRAISAL RIGHTS
If the merger is consummated, a holder of record of shares of Raychem common
stock who objects to the terms of the merger may seek an appraisal under
Delaware law of the fair value of such holder's shares. The following is a
summary of the material provisions of Delaware law. This discussion is qualified
in its entirety by reference to Section 262 of the Delaware General Corporation
Law. A copy of this provision is attached to this document as Annex C. If you
fail to take any action required by Delaware law, your rights to an appraisal
will be waived or terminated.
ELECTING APPRAISAL RIGHTS.
To exercise appraisal rights, the record holder of Raychem common stock must
- deliver a written demand for appraisal to Raychem before the Raychem
stockholders vote on the merger agreement, and
- not vote to approve and adopt the merger agreement.
A stockholder demanding appraisal rights must do so by a separate written
demand. This demand must reasonably inform Raychem of the identity of the holder
of record and that the stockholder demands appraisal of his or her shares of
Raychem common stock. A PROXY OR VOTE AGAINST THE MERGER AGREEMENT DOES NOT
CONSTITUTE A DEMAND.
If you deliver a proxy that has been left blank, the proxy will be voted FOR
the approval and adoption of the merger agreement, unless the proxy is revoked
before the vote is taken. Therefore, if you intend to exercise your appraisal
rights and you vote by proxy, you must not leave the proxy blank. You should
either vote AGAINST the merger or ABSTAIN from voting for or against the
approval and adoption of the merger agreement.
A demand for appraisal must be delivered to the Corporate Secretary, Raychem
Corporation, MS 120-1A, 300 Constitution Drive, Menlo Park, California 94025.
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RECORD HOLDERS MUST DEMAND APPRAISAL RIGHTS.
Only the record holder of the Raychem common stock is entitled to demand
appraisal rights. The demand must be executed by or for the record holder, fully
and correctly, as the holder's name appears on the holder's stock certificates.
- If the Raychem common stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, the demand should be executed
in that capacity.
- If the Raychem common stock is owned of record by more than one person, as
in a joint tenancy or tenancy in common, the demand should be executed by
or for all owners.
- An authorized agent, including one of two or more joint owners, may
execute the demand for appraisal for a holder of record. The agent must
identify the owner or owners of record and expressly disclose the fact
that, in executing the demand, the agent is acting as agent for the owner
or owners of record.
- A holder of record, such as a broker, who holds common stock as nominee
for beneficial owners, may exercise a holder's right of appraisal with
respect to common stock held for all or less than all of such beneficial
owners. In that case, the written demand should set forth the number of
shares of common stock covered by the demand. Where no number of shares of
common stock is expressly mentioned, the demand will be presumed to cover
all shares of common stock standing in the name of the record holder.
NOTIFICATION OF MERGER'S EFFECTIVENESS
Within 10 days after the effective time of the merger, the surviving
corporation in the merger will send notice of the effectiveness of the merger to
each person who satisfied the foregoing conditions.
COURT PETITION MUST BE FILED.
Within 120 days after the effective time of the merger, the surviving
corporation in the merger or any stockholder who has satisfied the foregoing
conditions may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the Raychem common stock. Tyco (PA) does not
intend to file a petition with the court. Stockholders seeking to exercise
appraisal rights should initiate all necessary action to perfect their appraisal
rights within the time periods prescribed by Delaware law.
NOTIFICATION REGARDING SHARES NOT VOTED FOR MERGER.
Within 120 days after the effective time of the merger, any stockholder who
has complied with the requirements for exercise of appraisal rights is entitled,
upon written request, to receive a statement setting forth the aggregate number
of shares of common stock not voted in favor of the merger and with respect to
which demands for appraisal have been made and the aggregate number of holders
of such stock. The surviving corporation in the merger is required to mail this
statement within ten days after it receives the written request.
APPRAISAL PROCEEDING BY DELAWARE COURT.
If a petition for an appraisal is timely filed, after a hearing on the
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights. The court will appraise the common stock owned by
the stockholders and determine its fair value. In determining fair value, the
court may consider a number of factors including market values of Raychem's
stock, asset values and other generally accepted valuation considerations, but
will exclude any element of value arising from the accomplishment and
expectation of the merger. The court will also determine the amount of
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interest, if any, to be paid upon the value of the common stock to the
stockholders entitled to appraisal.
The value determined by the court for Raychem common stock could be more
than, less than, or the same as the merger consideration. The court may also
order that all or a portion of any stockholder's expenses incurred in connection
with an appraisal proceeding, including reasonable attorneys' fees and fees and
expenses of experts utilized in the appraisal proceeding, be charged against the
value of all common stock entitled to appraisal.
EFFECT OF APPRAISAL DEMAND ON VOTING AND RIGHT TO DIVIDENDS.
Any stockholder who has duly demanded an appraisal in compliance with
Delaware law will not, after the effective time of the merger, be entitled to
vote the shares subject to the demand for any purpose. The shares subject to the
demand will not be entitled to dividends or other distributions, other than
those payable or deemed to be payable to stockholders of record as of a date
prior to the effective time.
LOSS, WAIVER, OR WITHDRAWAL OF APPRAISAL RIGHTS.
Holders of Raychem common stock lose the right to appraisal if no petition
for appraisal is filed within 120 days after the effective time of the merger. A
stockholder will also lose the right to an appraisal by delivering to the
surviving corporation a written withdrawal of such stockholder's demand for an
appraisal and an acceptance of the merger. In addition, any attempt to withdraw
that is made more than 60 days after the effective time requires the written
approval of the surviving corporation. If appraisal rights are not perfected or
a demand for appraisal rights is withdrawn, a stockholder will be entitled to
receive the consideration otherwise payable pursuant to the merger. Whether such
stockholder receives Tyco shares, cash or a combination of shares and cash will
be determined at such time by Tyco (PA). The value of any Tyco shares paid to
such stockholder will be based on the same average price used to determine the
allocation of the merger consideration to the other Raychem stockholders,
regardless of what the market price of Tyco shares may be at the time. An
election form of a stockholder that seeks appraisal rights will have no force
and effect.
DISMISSAL OF APPRAISAL PROCEEDING.
If an appraisal proceeding is timely instituted, such proceeding may not be
dismissed as to any stockholder who has perfected a right of appraisal without
the approval of the court.
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THE MERGER AGREEMENT
GENERAL
This section describes the material provisions of the merger agreement. This
description is not complete, and stockholders are encouraged to read the full
text of the merger agreement which is annexed to this document. In addition,
important information about the merger agreement and the merger is provided in
the previous sections entitled "The Merger" beginning on page .
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the conditions to the merger
set forth in the merger agreement:
1. Tyco (PA) will file Articles of Merger with the Secretary of State of
the State of Nevada, as prescribed by Nevada Law; and
2. Raychem will file a Certificate of Merger with the Secretary of State of
the State of Delaware, as prescribed by Delaware law.
The effect of these filings is that Raychem will merge with and into Tyco
(PA). Tyco (PA) is a wholly-owned subsidiary of Tyco.
MERGER CONSIDERATION
GENERAL.
In the merger, Raychem's stockholders will receive, in the aggregate, merger
consideration consisting of:
1. cash equal to $18.50 multiplied by the number of shares of Raychem
common stock outstanding at the effective time of the merger; and
2. Tyco common shares equal to 0.2070 multiplied by the number of shares of
Raychem common stock outstanding at the effective time of the merger.
Based on the number of shares of Raychem common stock outstanding as of May 18,
1999, approximately $1.4 billion and 16.1 million Tyco shares will be delivered
to Raychem's stockholders in the aggregate. This cash and Tyco shares will be
apportioned so that Raychem stockholders will receive for each of their shares
of Raychem common stock, merger consideration having a value, sometimes referred
to in this document as the "per share value of the merger consideration," of
$18.50 plus the value of 0.2070 of a Tyco share. The value of a Tyco common
share for these purposes will be the weighted average sales price per Tyco
common share on the New York Stock Exchange on the three consecutive trading
days beginning on the closing date of the merger.
A Raychem stockholder will not receive a fraction of a Tyco common share in
the merger. All Tyco common shares that a Raychem stockholder is entitled to
receive will be aggregated. Any fractional Tyco common share resulting from the
aggregation will be paid in cash equal to the fraction multiplied by the market
value of a Tyco common share at the time of the merger.
MAKING THE ELECTION.
Tyco (PA) has selected ChaseMellon Shareholder Services LLC, which is the
transfer agent for Tyco, to serve as the exchange agent for purposes of
effecting the election and proration procedures. An election form is included
with this document. The election form is used to make the election to
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receive Tyco shares, cash or a combination of Tyco shares and cash as merger
consideration. To make an election, Raychem stockholders should:
1. submit a properly completed and signed election form accompanied by the
certificates representing the shares of Raychem stock as to which the
election is being made; or
2. in the case of Raychem stockholders whose shares are held in book-entry
form, instruct the broker, dealer, bank or other financial institution
that holds the shares to make an election on their behalf by:
- transferring their shares of Raychem common stock to an account
established by ChaseMellon for this purpose at the Depository Trust
Company, and
- transmitting a message through DTC to ChaseMellon setting forth the
stockholder's election being made with respect to his shares of Raychem
common stock.
The deadline for Raychem stockholders to make their elections is the close
of business on the last business day before the date that the merger is
effected. Tyco and Raychem expect the merger to be consummated on the day that
the Raychem stockholders vote to approve and adopt the merger agreement.
Accordingly, Raychem stockholders who wish to make an election should do so by
the close of business on August , 1999.
Any stockholder may change his election prior to the election deadline by:
- submitting to the exchange agent a properly completed and signed revised
election form; or
- in the case of stockholders whose shares are held in book-entry form, by
causing a new message with revised election information to be transmitted
through DTC to the exchange agent.
Any holder of Raychem common stock may revoke its election at any time prior
to the election deadline.
- by written notice to the exchange agent, or
- in the case of stockholders whose shares are held in book-entry form, by
causing a new message to be transmitted through DTC to the exchange agent
withdrawing the shares previously deposited and specifying the name and
number of the account at DTC to be credited.
As soon as practicable after the election deadline, the exchange agent will
determine the number of cash electing shares, stock electing shares and
non-electing shares, and will notify the surviving corporation of its
determination. Promptly after such notification, Tyco and the surviving
corporation shall issue a press release announcing in reasonable detail the
allocation of the merger consideration.
Raychem stockholders having a preference as to the form of consideration to
be received for their shares of Raychem common stock should make an election.
None of Tyco, Tyco (PA), Raychem or the Raychem Board makes any recommendation
as to whether stockholders should elect to receive cash, Tyco shares or a
combination of cash and Tyco shares. Each holder of Raychem common stock must
make his or her own decision whether to make an election and if so, what
election to make.
The allocation of the merger consideration among the Raychem stockholders
depends upon the elections made by the stockholders and the volume weighted
average value of Tyco common shares referred to above. The election forms may be
submitted until the day before the merger is effective, and it may take some
time before the exchange agent can verify the election forms and tabulate the
election results. The average stock price cannot be determined until the close
of trading on the third trading day beginning on the date the merger is
consummated. Therefore, there will be a period of time following the
consummation of the merger before the allocation of the merger consideration can
be determined. Consequently, the payment of the merger consideration to all
Raychem stockholders will be delayed.
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THE PRORATION RULES.
These are the proration rules that will govern the allocation of the cash
and stock consideration in the merger.
CASE 1: MORE CASH CONSIDERATION IS ELECTED THAN THE AMOUNT OF CASH AVAILABLE
FOR PAYMENT
In this case, Tyco will calculate a proration factor for the shares of
Raychem common stock making a cash election. This proration factor will equal
(1) the total amount of cash available for payment divided by (2) the total cash
that would have to be paid if all cash elections were honored in full. This
latter amount is determined by multiplying the number of shares of Raychem
common stock electing cash by the per share value of the merger consideration.
- Each share of Raychem common stock electing Tyco shares will be exchanged
for a fraction of a Tyco common share having a value equal to the per
share value of the merger consideration;
- Each share of Raychem common stock as to which no election has been made
will be exchanged for a fraction of a Tyco common share having a value
equal to the per share value of the merger consideration; and
- Each share of Raychem common stock electing cash will be exchanged for:
1. cash equal to the per share value of the merger consideration
multiplied by the proration factor; and
2. a fraction of a Tyco common share having a value equal to the per share
value of the merger consideration less the amount of the cash.
<TABLE>
<S> <C> <C>
Example: In this and the examples that follow, assume:
(a) there are 80,000,000 shares of Raychem common stock outstanding at
the time of the merger. The total amount of cash that would be paid in
the merger, assuming there are no dissenting shares, is:
$18.50 X 80,000,000 = $1,480,000,000,
and the total number of shares that would be delivered is:
0.2070 X 80,000,000 = 16,560,000 shares;
(b) the volume weighted average trading price of a Tyco common share for
the three days beginning on the date of the merger is $89.375, so that
the per share value of the merger consideration is $37.00 and the
fraction of a Tyco common share having a value equal to the per share
value of the merger consideration is:
$37.00 DIVIDED BY $89.375 = 0.4140.
Assume for this example that cash is elected with respect to 60% of the
shares of Raychem common stock. The cash proration factor will be:
$1,480,000,000 DIVIDED BY (48,000,000 X $37.00) = 0.8333.
Each share of Raychem common stock as to which an election has been made
to receive Tyco shares or as to which no election has been made will
receive 0.4140 of a Tyco common share. Each share of Raychem common
stock as to which a cash election has been made will receive:
- cash in the amount of 0.8333 X $37.00 = $30.83, and
</TABLE>
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<TABLE>
<S> <C> <C>
- a fraction of a Tyco common share having a value equal to the
balance of the per share value of the merger consideration, or
($37.00 - $30.83) DIVIDED BY $89.375 = 0.0690 of a Tyco common
share.
</TABLE>
CASE 2: MORE STOCK CONSIDERATION IS ELECTED THAN THE NUMBER OF TYCO COMMON
SHARES AVAILABLE FOR DELIVERY
In this case, Tyco will calculate a proration factor for the shares of
Raychem common stock making a stock election. This proration factor will equal
(1) the total number of Tyco common shares available for payment divided by (2)
the total number of Tyco common shares that would have to be delivered if all
stock elections were honored in full. This latter number is determined by
multiplying the number of shares of Raychem common stock electing stock by the
fraction of a Tyco common share having a value at the time of the merger equal
to the per share value of the merger consideration.
- Each share of Raychem common stock electing cash will be exchanged for
cash in the amount of the per share value of the merger consideration;
- Each share of Raychem common stock as to which no election has been made
will be exchanged for cash in the amount of the per share value of the
merger consideration; and
- Each share of Raychem common stock electing Tyco shares will be exchanged
for:
1. a fraction of a Tyco common share having a value equal to the per share
value of the merger consideration multiplied by the proration factor;
and
2. cash equal to the per share value of the merger consideration less the
value of the fraction of a Tyco common share referred to in clause 1.
<TABLE>
<S> <C> <C>
Example: Assume for this example that stock is elected with respect to 60% of the
shares of Raychem common stock. The stock proration factor will be:
16,560,000 DIVIDED BY (48,000,000 X 0.4140) = 0.8333.
Each share of Raychem common stock as to which an election has been made
to receive cash or as to which no election has been made will receive
$37.00 in cash. Each share of Raychem common stock as to which a share
election has been made will receive:
- 0.4140 X 0.8333 = 0.3450 of a Tyco common share, and
- cash equal to the per share value of the merger consideration less
the value of this fraction of a Tyco common share, or
$37.00 - ($89.375 X 0.3450) = $6.17.
</TABLE>
CASE 3: THE NUMBER OF SHARES AS TO WHICH NO ELECTION IS MADE IS SUFFICIENTLY
LARGE SO THAT THE CASH CONSIDERATION ELECTED IS LESS THAN THE CASH AVAILABLE
FOR PAYMENT AND THE STOCK CONSIDERATION ELECTED IS LESS THAN THE NUMBER OF
TYCO COMMON SHARES AVAILABLE FOR DELIVERY
In this case, Tyco will calculate a proration factor for the shares that
make no election. This proration factor will equal (1) the difference between
the total number of shares of Raychem common stock that must receive cash less
the total number of Raychem shares that have elected cash divided by (2) the
total number of shares of Raychem common stock as to which no election has been
made. The total number of shares that must receive cash is determined by
dividing the total cash available for payment by the per share value of the
merger consideration.
- Each share of Raychem common stock electing cash will be exchanged for
cash in the amount of the per share value of the merger consideration;
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- Each share of Raychem common stock electing stock will be exchanged for a
fraction of a Tyco common share having a value equal to the per share
value of the merger consideration; and
- Each share of Raychem common stock as to which no election has been made
will be exchanged for:
1. cash equal to the per share value of the merger consideration
multiplied by the proration factor; and
2. a fraction of a Tyco common share having a value equal to the per share
value of the merger consideration less the amount of cash.
<TABLE>
<S> <C> <C>
Example: Assume for this example that cash is elected with respect to 40% of the
shares of Raychem common stock, Tyco shares are elected with respect to
40% of the Raychem shares and no election is made with respect to 20% of
the Raychem shares. The non-electing share proration factor will be:
(($1,480,000,000 DIVIDED BY $37.00) - 32,000,000) DIVIDED BY
16,000,000 = 0.5.
Each share of Raychem common stock as to which a cash election has been
made will be exchanged for $37.00. Each share of Raychem common stock as
to which a stock election has been made will be exchanged for 0.4140 of
a Tyco common share. Each share as to which no election has been made
will be exchanged for:
- cash equal to $37.00 X 0.5 = $18.50, and
- a fraction of a Tyco common share equal to
($37.00 - $18.50) DIVIDED BY $89.375 = 0.2070.
</TABLE>
UNVESTED RESTRICTED STOCK.
Unvested shares of Raychem restricted stock held by Raychem employees that
do not vest at the time of the merger will not be exchanged for the merger
consideration in the manner described above. Instead, these shares will be
converted in the merger into the right to receive Tyco common shares only, at an
exchange ratio of 0.4140 Tyco common shares for each Raychem share, and the
restrictions applicable to the Raychem shares will continue to apply to the Tyco
common shares. Restricted Raychem shares that vest at the time of the merger
will be treated the same as all other shares of Raychem common stock outstanding
at the time of the merger.
DISSENTING SHARES.
If any Raychem stockholders properly exercise their right to seek appraisal
for their shares, these stockholders will not receive the merger consideration.
In such case, the amount of cash available for payment to Raychem stockholders
in the merger will be reduced by the number of Raychem shares as to which
appraisal rights have been exercised multiplied by the per share value of the
merger consideration. For a description of appraisal procedures, see "Appraisal
Rights" on page .
NON-ELECTING SHARES.
MERGER CONSIDERATION. Raychem stockholders who do not submit an election
form prior to the election deadline shall be deemed to hold non-electing shares.
If the surviving corporation or the exchange agent determine that any election
was not properly made, such election will have no force and effect, and the
shares with respect to which such election was made will be deemed to be
non-electing shares. Neither Tyco (PA) nor the exchange agent have any
obligation to inform any Raychem stockholder of any defect in the making of an
election.
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EXCHANGE OF NON-ELECTING SHARES OF RAYCHEM COMMON STOCK. Raychem
stockholders having a preference as to the form of consideration to be received
for their shares of Raychem common stock should make an election. However, as
soon as reasonably practicable after the consummation of the merger, the
surviving corporation will instruct the exchange agent to mail to each holder of
record of non-electing shares a letter of transmittal and instructions on
surrendering their certificates of Raychem common stock in exchange for the
merger reconsideration they are entitled to receive.
Holders of certificates previously representing Raychem common stock will
not be paid dividends or distributions on the Tyco common shares they are
entitled to receive, if any, and will not be paid cash in lieu of a fractional
Tyco common share until such certificates are surrendered 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 Raychem common stock prior to the
consummation of the merger will represent, from and after the consummation of
the merger, the merger consideration into which such shares of Raychem common
stock are actually converted in the merger.
The exchange agent will deliver the merger consideration in exchange for
lost, stolen or destroyed certificates if the owner of such certificates signs
an affidavit of loss, theft or destruction, as appropriate. The surviving
corporation 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 the surviving corporation, Tyco or
the exchange agent with respect to alleged lost, stolen or destroyed
certificates.
REGISTRATION OF TYCO COMMON SHARES.
Tyco will reserve for issuance enough Tyco common shares for delivery upon
exercise of the outstanding Raychem stock options in accordance with the merger
agreement. As soon as practicable following consummation of the merger, Tyco
will register the Tyco common shares subject to the Raychem stock options with
the SEC to the extent such registration is required. Tyco 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 Raychem stock options remain
outstanding.
TREATMENT OF RAYCHEM EQUITY-BASED AWARDS
The merger agreement provides that each option to purchase shares of Raychem
common stock issued to employees and directors of Raychem and outstanding at the
time the merger is completed will constitute an option to acquire the number of
Tyco shares, rounded down to the nearest whole Tyco share, determined by
multiplying the number of shares of Raychem common stock subject to such option
by 0.4140. In addition, the exercise price per Tyco share of such option will be
determined by dividing the exercise price per share of Raychem common stock
underlying such option by 0.4140, rounded up to a whole cent. At the time the
merger is completed, each holder of unvested Raychem restricted stock that does
not vest at the time of the merger will receive 0.4140 Tyco restricted shares
for each share of Raychem restricted stock held by such individual. Raychem
restricted stock which becomes vested as a result of the merger pursuant to the
terms of Raychem's Key Employee Retention and Severance Plan will be treated the
same as other outstanding Raychem common stock, and will receive the
consideration described above in "Merger Consideration."
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REPRESENTATIONS AND WARRANTIES
Tyco, Tyco (PA) and Raychem have made various customary mutual
representations and warranties in the merger agreement about themselves and
their subsidiaries.
In addition, Raychem represented that the Raychem Board of Directors, prior
to the execution of the merger agreement, authorized an amendment to the Raychem
Rights Agreement to render the Raychem Rights Agreement inapplicable to the
merger agreement and the transactions contemplated thereby. Raychem
appropriately amended the Raychem Rights Agreement on May 19, 1999.
CONDUCT OF BUSINESS BY RAYCHEM
Raychem has agreed that, prior to the consummation of the merger, Raychem
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 Raychem
will use reasonable commercial efforts to preserve substantially intact the
business organization of Raychem and its subsidiaries, to keep available the
services of the present officers, employees and consultants of Raychem and its
subsidiaries and to preserve the present relationships of Raychem and its
subsidiaries with customers, suppliers and other persons with which Raychem 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 Raychem, Raychem 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 Raychem's Amended and Restated Certificate 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 Raychem or any of its subsidiaries
or affiliates, subject to certain exceptions in the case of Raychem's
equity-based incentive plans;
3. dispose of or encumber any assets of Raychem 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 Raychem
arising out of a stockholder equity interest in Raychem;
5. - make any acquisitions,
- incur any indebtedness other than pursuant to credit facilities
previously disclosed to Tyco,
- authorize capital expenditures or purchases of fixed assets which are,
in the aggregate, in excess of $50 million, or
- enter into or amend any contract, agreement, commitment or arrangement
to do any of the above;
6. - increase the compensation or severance payable or to become payable to
its directors, officers or employees except in accordance with past
practice,
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- grant severance or termination pay to any director, officer or
employee,
- enter into any employment or severance agreement with any new employee
of Raychem which provides for annual base and bonus compensation in
excess of $200,000,
- enter into or modify any agreement with a director of Raychem, 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 tax election or settle or compromise any United States federal,
state, local or non-United States tax liability;
9. satisfy claims, liabilities or obligations out of the ordinary course of
business;
10. make any loan to any director, officer, employee or independent
contractor of Raychem, except to effect a cashless exercise of a Raychem
stock option; or
11. 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 Raychem contained in the merger agreement untrue or
incorrect or prevent Raychem from performing its covenants under the
merger agreement.
CONDUCT OF BUSINESS BY TYCO
Tyco has agreed 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, including actions taken by Tyco or
its subsidiaries in contemplation of the merger, and will not, without the prior
written consent of Raychem:
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 and Tyco (PA) contained in the
merger agreement untrue or incorrect or prevent Tyco from performing its
covenants under the merger agreement.
NO SOLICITATION
Raychem 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 Raychem's equity securities or in the outstanding equity of the
surviving entity in a merger with Raychem or would acquire more than 20% of the
fair market value of Raychem'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."
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Until the Raychem stockholders approve and adopt the merger agreement, if
the Raychem Board, following consultation with independent legal counsel,
determines that such action is reasonably likely to be required to discharge
properly its fiduciary duties, the Raychem Board, after notice to Tyco, is
permitted to:
1. furnish information to a third party which has made, but was not
solicited to make in violation of the merger agreement, a "Superior Proposal." A
"Superior Proposal is defined as a BONA FIDE Acquisition Proposal to acquire for
cash and/or securities, all of the voting equity securities of Raychem or all or
substantially all of Raychem's assets, on terms which the Raychem Board
reasonably believes are more favorable than the merger:
- from a financial point of view to Raychem stockholders, 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 Raychem, taking into account all pertinent factors deemed relevant by
the Raychem Board under the laws of Delaware; and
2. consider and negotiate such Superior Proposal.
Notwithstanding the foregoing points 1 and 2, Raychem and the Raychem Board,
except to the extent that the Raychem Board reasonably determines in good faith
and after consultation with independent legal counsel that it is reasonably
likely to be required to act to the contrary in order to properly discharge its
fiduciary duties, may not in any circumstance withdraw or modify in a manner
adverse to Tyco or Tyco (PA) the Raychem Board's approval of the merger.
In addition, unless the merger agreement has been terminated in accordance
with its terms, the merger agreement must be submitted for approval and adoption
by the Raychem stockholders at the Raychem special meeting, and the Raychem
Board may not recommend that stockholders vote against approval of the merger
and adoption of the merger agreement.
The merger agreement expressly provides that the foregoing covenants shall
not prohibit Raychem from taking or disclosing to its stockholders a position
regarding an Alternative Transaction or Acquisition Proposal or from making any
disclosure to its stockholders required by law.
Raychem has agreed
1. to cease any discussions or negotiations with any third party that were
ongoing at the time of the execution of the merger agreement;
2. not to release any third party from the confidentiality and standstill
provisions of any agreement to which Raychem is a party; and
3. not redeem the rights under, or waive or amend any provisions of, the
Raychem Rights Agreement that would facilitate the consummation of any
Acquisition Proposal or Alternative Transaction.
Raychem will ensure that the officers and directors of Raychem and its
subsidiaries and any investment banker or other advisor or representative
retained by Raychem are aware of the no-solicitation restrictions described in
the merger agreement.
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CERTAIN OTHER COVENANTS
CONSENTS; APPROVALS.
Tyco, Tyco (PA) and Raychem will each use its reasonable best efforts to
obtain all consents, waivers, approvals, authorizations or orders, and Tyco,
Tyco (PA) and Raychem 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 Raychem have agreed that for six years following consummation
of the merger, the Articles of Incorporation and By-laws of Tyco (PA) will
contain the same indemnification provisions as currently in the Certificate of
Incorporation of Raychem and such provisions will not be modified in any manner
adverse to those individuals who were directors, officers or employees of
Raychem at the consummation of the merger.
After consummation of the merger, Tyco (PA) will, to the fullest extent
permitted under applicable law or under its Articles of Incorporation or
By-laws, indemnify and hold harmless each present and former director, officer
or employee of Raychem 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 Raychem's Articles
of Incorporation or By-laws or any applicable contract or agreement as in effect
on the date of the merger agreement, in each case for a period of six years
after the date of the merger agreement.
Following the merger, Tyco (PA) will continue to honor in all respects
Raychem's obligations under the indemnification agreements and employment
agreements with Raychem's officers and directors existing at or before
consummation of the merger.
Tyco will provide, or cause Tyco (PA) to provide, for a period of not less
than six years after consummation of the merger, Raychem'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 Raychem's
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Tyco and Tyco
(PA) will not be required to pay an annual insurance premium in excess of 200%
of the annual premium currently paid by Raychem for such insurance, but in such
case will purchase as much coverage as possible for such amount.
NOTIFICATION OF CERTAIN MATTERS.
Tyco, Tyco (PA) and Raychem 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, Tyco (PA) and Raychem will 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
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<PAGE>
satisfy or cause to be satisfied all conditions precedent to each of their
obligations under the merger agreement. However, Tyco is under no obligation to
agree to divest, abandon, license or take similar action with respect to any
material assets of Tyco or Raychem. The merger agreement defines "material" for
these purposes as any assets to which are attributable annual sales in an amount
equal to 1% or more of Raychem's annual sales in fiscal year 1998. In addition,
Tyco (PA) and Raychem 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. Raychem has the option of proceeding with the acquisition by Tyco
even if the merger does not so qualify as a reorganization. See "Conditions to
the Merger--Failure to Deliver Tax Opinions" on page .
PUBLIC ANNOUNCEMENTS.
Tyco and Raychem will not issue any press release or make any public written
statement with respect to the merger or the merger agreement without the prior
consent of the other party, which consent will not be unreasonably withheld,
except as required by law or the regulations of the NYSE.
TYCO COMMON SHARES.
Tyco has agreed 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
Raychem stockholders in the merger. Tyco has also agreed to use its best efforts
to list on the NYSE the Tyco common shares to be delivered in the merger.
EMPLOYEE MATTERS.
Subject to the limitations contained in the merger agreement, Tyco, Tyco
(PA) and Raychem have respectively agreed to a number of covenants regarding the
treatment of employee and retiree benefits following the consummation of the
merger, including the following:
- Raychem will terminate its stock purchase plans as of the consummation of
the merger.
- Through June 30, 2000, Tyco and Tyco (PA) will provide:
1. those persons who, immediately prior to the merger, were employees of
Raychem or its subsidiaries, and who continue their employment with the
surviving corporation following the merger, employee welfare and
retirement benefits that in the aggregate are substantially equivalent to
those benefits provided by Raychem immediately prior to the merger. For
this purpose, service accrued by these employees with Raychem or its
subsidiaries prior to the merger will be recognized except to the extent
necessary to prevent duplication of benefits.
2. any person who immediately prior to the merger is a retiree under a
Raychem retiree medical program with retiree medical benefits that in the
aggregate are substantially equivalent to those provided by Raychem
immediately prior to the merger.
Subject to 1 and 2 above, Tyco (PA) can amend any Raychem retiree benefit
plan, with respect to any Raychem employee, upon consummation of the merger,
and with respect to any Raychem retiree, effective July 1, 2000.
- Tyco and Tyco (PA) will assume and maintain Raychem's Key Employee
Retention and Severance Policy and will assume, and through June 30, 2000,
will maintain, a Raychem severance plan and lay off plan and the Executive
Termination Compensation Policy providing severance benefits under certain
qualifying circumstances.
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<PAGE>
- Tyco and Tyco (PA) have agreed to honor deferral elections made on or
prior to June 30, 1999 under Raychem's deferred compensation plans. Tyco
and Tyco (PA) have further agreed to continue and maintain Raychem's loan
program through June 30, 2000 and to honor the terms of loans previously
made under this program.
The merger agreement provides that the foregoing provisions are not enforceable
by persons not parties to the merger agreement.
RIGHTS AGREEMENT.
The Raychem Board has agreed to take all necessary action to render the
rights under the Raychem Rights Agreement inapplicable to the merger agreement
and the merger.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
Each of Tyco's, Tyco (PA)'s and Raychem'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. STOCKHOLDER APPROVAL. The Raychem stockholders have approved and adopted the
merger agreement;
3. ANTITRUST. All waiting periods applicable to the consummation of the merger
under the 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 Raychem, 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 Raychem 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 Raychem 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; and
6. TAX OPINIONS. Raychem and Tyco (PA) have received the respective written
opinions of Shearman & Sterling and of PricewaterhouseCoopers LLP, tax
advisors to Raychem and Tyco, respectively, in form and substance reasonably
satisfactory to them, with respect to:
- the merger constituting a reorganization within the meaning of Section 368
of the U.S. Internal Revenue Code; and
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<PAGE>
- the transfer of Raychem common stock for Tyco common shares qualifying for
an exemption under Section 1.367(a)-3 of the United States treasury
regulations, as specified in the merger agreement.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF TYCO AND TYCO (PA).
The obligations of Tyco and Tyco (PA) 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 Raychem, the representations and
warranties of Raychem 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 and Tyco (PA) have received a
certificate to such effect signed by the Chief Executive Officer or Chief
Financial Officer of Raychem;
2. AGREEMENTS AND COVENANTS. Raychem has performed or complied in all material
respects with all agreements and covenants required by the merger agreement,
and Tyco and Tyco (PA) have received a certificate to such effect signed by
the Chief Executive Officer or Chief Financial Officer of Raychem;
3. CONSENTS OBTAINED. Raychem has obtained all material consents, waivers,
approvals, authorizations or orders required to be obtained, and has made
all filings required by Raychem 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 Raychem or Tyco; and
4. RIGHTS AGREEMENT. A Distribution Date, as defined in the Raychem Rights
Agreement, has not occurred under the Raychem Rights Agreement.
ADDITIONAL CONDITIONS TO OBLIGATION OF RAYCHEM.
The obligation of Raychem 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 and Tyco (PA), the representations
and warranties of Tyco and 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 Raychem has received a certificate to
such effect signed by the President or Chief Financial Officer of Tyco;
2. AGREEMENTS AND COVENANTS. Tyco and Tyco (PA) have performed or complied in
all material respects with all agreements and covenants required by the
merger agreement, and Raychem has received a certificate to such effect
signed by the President or Chief Financial Officer of Tyco and the President
or Vice President of Tyco (PA);
3. CONSENTS OBTAINED. Tyco and Tyco (PA) have obtained all material consents,
waivers, approvals, authorizations or orders required to be obtained, and
have made all filings required for the authorization, execution and delivery
of the merger agreement and the consummation by them of the transactions
contemplated except as would not reasonably be expected to have a material
adverse effect on Raychem or Tyco;
4. LISTING. The NYSE has authorized for listing the Tyco common shares issuable
in connection with the merger; and
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<PAGE>
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.
FAILURE TO DELIVER TAX OPINIONS
In the event that:
- PricewaterhouseCoopers LLP notifies Tyco and Tyco (PA) that it cannot
render the Tyco tax opinion, or
- Shearman & Sterling notifies Raychem that it cannot render the Raychem tax
opinion,
Raychem, within three business days of receipt of such notice, may elect to
require Tyco to proceed with the acquisition of Raychem on a taxable basis. In
such event, the condition of receiving tax opinions shall be deemed waived by
Tyco, Tyco (PA) and Raychem. Tyco, Tyco (PA) and Raychem will then take all
necessary steps to effectuate a merger of a wholly-owned subsidiary of Tyco,
referred to as "new merger sub" with and into Raychem, as the surviving
corporation, in accordance with the provisions of the Delaware General
Corporation Law. Except as may be necessary to reflect the change in the
structure to the merger and the jurisdiction of the new merger sub, the terms of
the merger agreement will still govern.
TERMINATION
CONDITIONS TO TERMINATION.
The merger agreement may be terminated at any time prior to the consummation
of the merger, notwithstanding the approval of the merger and adoption by the
Raychem stockholders of the merger agreement:
1. by mutual written consent duly authorized by the Boards of Directors of
both Raychem and Tyco;
2. by either of Tyco or Raychem, if the merger has not been consummated by
November 30, 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 any of its obligations under the merger agreement caused the
merger not to be consummated before November 30, 1999;
3. by either of Tyco or Raychem, 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 or Raychem, if a meeting of Raychem's stockholders to
vote on the merger agreement is not held by November 30, 1999 or if the Raychem
stockholders do not approve and adopt the merger agreement at the Raychem
special meeting;
5. by Tyco, if, whether or not permitted to do so by the merger agreement,
Raychem or the Raychem Board:
- withdraws or changes its approval or recommendation of the merger
agreement or the merger in a manner adverse to Tyco,
- approves or recommends to the stockholders of Raychem an Acquisition
Proposal or Alternative Transaction,
- approves or recommends that the Raychem stockholders tender their shares
in any tender offer or exchange offer that is an Alternative Transaction,
or
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<PAGE>
- takes any position or makes any disclosures required by law that has the
effect of any of the foregoing;
6. by Raychem, in order to accept a Superior Proposal, provided that:
- the merger agreement has not already been approved and adopted by the
Raychem stockholders at the Raychem special meeting,
- the Raychem Board reasonably determines in good faith, following
consultation with independent legal counsel, that it is reasonably likely
to be required to accept such proposal in order to discharge properly its
fiduciary duties,
- Raychem in fact accepts the Superior Proposal, and
- Raychem complies in all material respects with its no solicitation
obligations as described on page ;
7. by either of Tyco or Raychem:
- 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 described above under "Conditions to the Merger" would
not be satisfied, PROVIDED THAT, if such misrepresentation or breach is curable
prior to November 30, 1999 and the party in breach exercises its reasonable best
efforts to cure the same, the merger agreement may not be terminated under this
clause while such party continues to exercise such efforts; or
8. by Tyco, if any representation or warranty of Raychem shall have become
untrue such that Tyco's and Tyco (PA)'s condition to its obligation to complete
the merger would not be satisfied, or by Raychem, if any representation or
warranty of Tyco and Tyco (PA) shall have become untrue such that Raychem'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 November 30, 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.
FEES AND EXPENSES.
Except as set forth below, each of Tyco, Tyco (PA) or Raychem 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 and Raychem
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.
Raychem will pay Tyco a fee of $100 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 $7.5 million, upon the first to occur of any of the following
events:
1. the termination of the merger agreement by Tyco or Raychem because the
meeting of stockholders of Raychem to approve and adopt the merger agreement has
not been held by November 30, 1999, or due to the failure of the Raychem
stockholders to approve and adopt the
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<PAGE>
merger agreement at the Raychem special meeting; PROVIDED, that such fee and
expenses shall only be payable upon the failure of the stockholders to approve
the merger agreement if,
- at the time of the Raychem special meeting, an Acquisition Proposal is
made directly to the Raychem stockholders or otherwise becomes publicly
known or a credible third party has announced a BONA FIDE intention to
make such an Acquisition Proposal, or
- within 12 months following the date of termination of the merger
agreement, an Alternative Transaction is publicly announced by Raychem or
any third party and such transaction is at any time thereafter consummated
on substantially the terms previously announced.
2. the termination of the merger agreement by Tyco due to the Raychem
Board's approval or recommendation of an Acquisition Proposal or Alternative
Transaction or its approval or recommendation to Raychem stockholders to tender
their shares in an Alternative Transaction;
3. the termination of the merger agreement by Raychem due to the Raychem
Board accepting a Superior Proposal as permitted by the merger agreement and
described in paragraph 6 under "Conditions to Termination" above.
4. the termination of the merger agreement by Tyco due to Raychem's willful
breach of a covenant or agreement set forth in the merger agreement; PROVIDED,
that such fee and expenses shall only be payable if,
- at the time of the breach by Raychem an Acquisition Proposal is made
directly to the Raychem stockholders or otherwise becomes publicly known
or a credible third party has announced a BONA FIDE intention to make such
an Acquisition Proposal, or
- within 12 months following the date of termination of the merger
agreement, an Alternative Transaction is publicly announced by Raychem or
any third party and such transaction is at any time thereafter consummated
on substantially the terms previously announced.
Raychem is required to pay to Tyco and Tyco (PA) their respective expenses
relating to the merger, but in no event more than $7.5 million upon a
termination of the merger agreement by Tyco as a result of a representation or
warranty of Raychem being untrue when made, as described in paragraph 7 under
"Conditions to Termination" above.
Tyco (PA) is required to pay to Raychem the expenses of Raychem relating to
the merger, but in no event more than $7.5 million, upon termination of the
merger agreement by Raychem as a result of a representation or warranty by Tyco
or Tyco (PA), being untrue when made, as described in paragraph 7 under
"Conditions to Termination" above.
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, representations or warranties under the merger agreement.
The fee payable under certain circumstances by Raychem to Tyco is intended,
among other things, to compensate Tyco for its costs, including lost opportunity
costs, if certain actions or inactions by Raychem or its stockholders 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 Raychem by
increasing the cost of any such acquisition.
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<PAGE>
AMENDMENT AND WAIVER; PARTIES IN INTEREST
Tyco, Tyco (PA) and Raychem 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 stockholders of Raychem, 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, any of Tyco, Tyco (PA) and
Raychem 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, remedy or obligation, other than:
- certain indemnification, employment and insurance obligations of Tyco (PA)
and Raychem following consummation of the merger which are intended for
the benefit of certain specified officers, directors and employees of
Raychem and may be enforced by such individuals, and
- other than Raychem's obligation to pay fees and expenses to Tyco in
certain circumstances.
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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 DIVIDENDS
-------------------- PER
HIGH LOW SHARE(1)
--------- --------- -----------
<S> <C> <C> <C>
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.............................................. $ 79.9375 $ 67.5000 $ 0.025
Second Quarter (through , 1999)
</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 for recent Tyco common
share price information. Shareholders are urged to obtain current market
quotations. See also "Risk Factors--THE VALUE OF THE MERGER CONSIDERATION THE
RAYCHEM STOCKHOLDERS WILL RECEIVE WILL DEPEND ON THE VALUE OF TYCO COMMON SHARES
AT THE TIME OF THE MERGER" on page .
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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RAYCHEM
Raychem common stock is listed and traded on the NYSE. The following table
sets forth the high and low sales prices per share of Raychem common stock as
reported in the NYSE Composite Transaction Tape, and the dividends paid on such
Raychem common stock, for the quarterly calendar periods presented below. The
price and the dividends have been adjusted for a two-for-one stock split
effective November 17, 1997 and for the adoption of Financial Accounting
Standard 128. Although Raychem's fiscal year end is June 30, the information
presented here is on a calendar year basis.
<TABLE>
<CAPTION>
RAYCHEM COMMON STOCK
--------------------
HIGH LOW DIVIDENDS
--------- --------- -----------
<S> <C> <C> <C>
1996:
First quarter............................................... $ 34.8750 $ 26.0000 $ 0.05
Second quarter.............................................. 40.2500 31.5000 0.05
Third quarter............................................... 38.2500 29.5000 0.05
Fourth quarter.............................................. 43.1875 35.1875 0.05
1997:
First quarter............................................... $ 44.7500 $ 39.5000 $ 0.07
Second quarter.............................................. 41.8750 30.2500 0.07
Third quarter............................................... 49.7188 36.2813 0.07
Fourth quarter.............................................. 48.5000 40.2500 0.07
1998:
First quarter............................................... $ 44.2500 $ 35.2500 $ 0.08
Second quarter.............................................. 41.5000 29.5625 0.08
Third quarter............................................... 32.6250 24.3750 0.08
Fourth quarter.............................................. 35.8750 21.0000 0.08
1999:
First Quarter............................................... $ 33.125 $ 21.8125 $ 0.09
Second Quarter (through , 1999)
</TABLE>
See "Comparative Market Value Information" on page for recent Raychem
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 $0.09 per share of Raychem common stock, Raychem 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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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The merger is to be accounted for in accordance with the purchase 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 purchase 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 September 30, 1998 supplemental consolidated financial
statements, including the accounting policies and notes thereto, and Tyco's
unaudited March 31, 1999 supplemental consolidated financial statements and
notes thereto, both of which are included in Tyco's Current Report on Form
8-K filed on June 3, 1999,
2. Raychem's audited consolidated financial statements, including the
accounting policies and notes thereto, included in its annual report on Form
10-K for the fiscal year ended June 30, 1998, and
3. Raychem's unaudited consolidated financial statements and notes
thereto included in its quarterly reports on Form 10-Q for the quarterly
periods ended September 30, 1998, December 31, 1998 and March 31, 1999.
The following unaudited pro forma combined condensed financial information
sets forth the results of operations for the fiscal year ended September 30,
1998 and the six months ended March 31, 1999, as if the merger had occurred at
the beginning of fiscal 1998 and the financial position as of March 31, 1999 as
if the merger had occurred as of that date. Raychem has a June 30 fiscal year
end, which differs from Tyco's September 30 fiscal year end. The unaudited pro
forma combined condensed statements of continuing operations for the fiscal year
ended September 30, 1998 and the six months ended March 31, 1999 include the
historical results of operations for Raychem for the fiscal year ended June 30,
1998 and the six months ended December 31, 1998, respectively. The unaudited pro
forma combined balance sheet includes the financial position of Raychem at March
31, 1999.
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.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO RAYCHEM ADJUSTMENTS COMBINED
---------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales.................................................. $ 10,452.3 $ 898.1 $ -- $ 11,350.4
Cost of sales.............................................. (6,789.5) (481.3) (48.9)(3) (7,319.7)
Research and development................................... -- (48.9) 48.9(3) --
Selling, general and administrative expenses............... (2,205.9) (246.4) (27.1)(8) (2,479.4)
Merger, restructuring and other non-recurring charges(6)... (841.0) -- -- (841.0)
Charges for the impairment of long-lived assets(6)......... (143.6) -- -- (143.6)
---------- ----------- ------ ----------
Operating income........................................... 472.3 121.5 (27.1) 566.7
Interest income............................................ 27.2 -- 4.2(3) 31.4
Interest expense........................................... (265.7) (12.0) (4.2)(3) (318.7)
(36.8)(9)
Other expenses, net........................................ -- (2.0) -- (2.0)
---------- ----------- ------ ----------
Income from continuing operations before income taxes...... 233.8 107.5 (63.9) 277.4
Income taxes............................................... (179.5) (37.6) 12.9 (10 (204.2)
---------- ----------- ------ ----------
Income from continuing operations.......................... $ 54.3 $ 69.9 $ (51.0) $ 73.2
---------- ----------- ------ ----------
---------- ----------- ------ ----------
Income from continuing operations per common share (2):
Basic.................................................... $ 0.07 $ 0.88 $ 0.09
---------- ----------- ----------
---------- ----------- ----------
Diluted(4)............................................... $ 0.07 $ 0.87 $ 0.09
---------- ----------- ----------
---------- ----------- ----------
Weighted average number of common shares(2):
Basic.................................................... 813.3 79.7 829.4
---------- ----------- ----------
---------- ----------- ----------
Diluted(4)............................................... 830.8 80.7 846.9
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
63
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS
OF CONTINUING OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998(1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO RAYCHEM ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................................... $ 19,061.7 $ 1,798.5 $ -- $ 20,860.2
Cost of sales........................................... (12,694.8) (930.3) (108.2)(3) (13,733.3)
Research and development................................ -- (108.2) 108.2(3) --
Selling, general and administrative expenses............ (4,161.9) (470.2) (54.2)(8) (4,686.3)
Merger, restructuring and other non-recurring
charges(7)............................................ (256.9) (39.6) -- (296.5)
----------- ---------- ----------- -----------
Operating income........................................ 1,948.1 250.2 (54.2) 2,144.1
Interest income......................................... 62.6 -- 4.2(3) 66.8
Interest expense........................................ (307.9) (12.5) (4.2)(3) (398.3)
(73.7)(9)
Other expenses, net..................................... -- (5.1) -- (5.1)
----------- ---------- ----------- -----------
Income from continuing operations before income taxes... 1,702.8 232.6 (127.9) 1,807.5
Income taxes............................................ (534.2) (53.5) 25.8 (10 (561.9)
----------- ---------- ----------- -----------
Income from continuing operations....................... $ 1,168.6 $ 179.1 $ (102.1) $ 1,245.6
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Income from continuing operations per common share(2):
Basic................................................. $ 1.48 $ 2.12 $ 1.54
----------- ---------- -----------
----------- ---------- -----------
Diluted(4)............................................ $ 1.45 $ 2.07 $ 1.51
----------- ---------- -----------
----------- ---------- -----------
Weighted average number of common shares(2):
Basic................................................. 791.7 84.6 807.8
----------- ---------- -----------
----------- ---------- -----------
Diluted(4)............................................ 812.4 86.5 828.5
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information
64
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AT MARCH 31, 1999(1)
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO RAYCHEM ADJUSTMENTS COMBINED
---------- --------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 1,454.4 $ 211.0 $ -- $ 1,665.4
Accounts receivable, net................................ 3,880.0 369.8 -- 4,249.8
Contracts in process.................................... 588.7 -- -- 588.7
Inventories............................................. 2,864.9 256.9 -- 3,121.8
Deferred income taxes................................... 775.3 -- 40.1(3) 815.4
Prepaid expenses and other current assets............... 544.2 149.3 (40.1 (3) 653.4
---------- --------- ------------- ----------
Total current assets................................ 10,107.5 987.0 -- 11,094.5
---------- --------- ------------- ----------
Property, plant and equipment, net...................... 6,428.7 498.6 -- 6,927.3
Goodwill and other intangibles, net..................... 8,605.8 -- 56.3(3) 10,829.9
2,167.8 (11
Long-term investments................................... 215.7 -- 24.7(3) 240.4
Deferred income taxes................................... 545.8 186.1 -- 731.9
Other assets............................................ 778.0 129.5 (81.0 (3) 826.5
---------- --------- ------------- ----------
Total assets........................................ $ 26,681.5 $ 1,801.2 $ 2,167.8 $ 30,650.5
---------- --------- ------------- ----------
---------- --------- ------------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable and current portion of long-term debt..... $ 690.7 $ 59.4 $ -- $ 750.1
Accounts payable........................................ 1,906.2 83.7 -- 1,989.9
Accrued expenses and other current liabilities.......... 3,236.9 160.4 (1.1 (3) 3,446.2
50.0 (12
Contracts in process-billings in excess of cost......... 567.3 -- -- 567.3
Deferred revenue........................................ 277.6 -- .3(3) 277.9
Income taxes payable.................................... 863.6 68.1 -- 931.7
Deferred income taxes................................... 36.7 -- .8(3) 37.5
---------- --------- ------------- ----------
Total current liabilities........................... 7,579.0 371.6 50.0 8,000.6
---------- --------- ------------- ----------
Long-term debt.......................................... 8,037.2 547.9 1,435.3 (13 10,020.4
Other long-term liabilities............................. 1,098.4 106.6 -- 1,205.0
Deferred income taxes................................... 137.9 24.0 -- 161.9
---------- --------- ------------- ----------
Total liabilities................................... 16,852.5 1,050.1 1,485.3 19,387.9
---------- --------- ------------- ----------
Retained earnings....................................... 2,978.0 734.8 (734.8 15) 2,978.0
Other shareholders' equity.............................. 6,851.0 16.3 1,435.3 (14 8,284.6
(16.3 15)
(1.7 16)
---------- --------- ------------- ----------
Total shareholders' equity.......................... 9,829.0 751.1 682.5 11,262.6
---------- --------- ------------- ----------
Total liabilities and shareholders' equity.......... $ 26,681.5 $ 1,801.2 $ 2,167.8 $ 30,650.5
---------- --------- ------------- ----------
---------- --------- ------------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
65
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
(1) Raychem has a June 30 fiscal year end, which differs from Tyco's September
30 fiscal year end. The pro forma results of operations for the fiscal year
ended September 30, 1998 and the six months ended March 31, 1999 include the
historical results of Raychem for the fiscal year ended June 30, 1998 and
the six months ended December 31, 1998, respectively. The pro forma balance
sheet includes the financial position of Raychem at March 31, 1999.
(2) The pro forma combined per share amounts are based on the pro forma combined
weighted average number of common shares which equals Tyco's weighted
average number of common shares outstanding for the period plus the total
number of Tyco common shares that will be delivered to Raychem stockholders
in the merger. The number of shares to be delivered in the merger is fixed
at 0.2070 multiplied by the number of Raychem common shares outstanding at
the time of the merger. For purposes of the pro forma combined condensed
financial information, 77,585,116 Raychem common shares outstanding as of
May 18, 1999 was assumed.
(3) Certain reclassifications, none of which affects income from continuing
operations, have been made to the Raychem statements of operations in the
pro forma combined condensed statements of continuing operations to classify
research and development expenses and interest income on a consistent basis.
The pro forma adjustments to the balance sheet were required to classify on
a consistent basis goodwill and other intangibles, long-term investments,
deferred income taxes and deferred revenue.
(4) 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 $56.7 million for the six months ended March 31, 1999 and
$1,175.8 million for the year ended September 30, 1998.
(5) There were no material transactions between Tyco and Raychem during any of
the periods presented.
(6) During the six months ended March 31, 1999, Tyco recorded $841.0 million of
merger, restructuring and other non-recurring charges, consisting of $434.9
million primarily related to the merger with US Surgical and $406.1 million
related to AMP's operations. In addition, Tyco recorded $143.6 million for
the impairment of long-lived assets, consisting of $76.0 million primarily
related to the merger with US Surgical and $67.6 million related to AMP's
operations.
(7) During the fiscal year ended September 30, 1998, Tyco recorded charges of
$80.5 million primarily related to costs to exit certain businesses in US
Surgical's operations and restructuring charges of $12.0 million related to
the operations of US Surgical. In addition, Tyco recorded restructuring
charges of $185.8 million in connection with AMP's profit improvement plan
and a credit of $21.4 million to restructuring charges related to the
execution of AMP's 1996 restructuring plans. During the fiscal year ended
June 30, 1998, Raychem recorded restructuring charges of $27.6 million
associated with moving certain manufacturing facilities to lower-cost
locations. In addition, Raychem recorded a non-recurring charge of $12.0
million reflecting the write-off of assets related to a minority investment.
(8) The allocation of the purchase price to the fair value of assets and
liabilities of Raychem has not yet been determined. Therefore, for purposes
of the pro forma combined condensed financial information, the excess of the
purchase price over the book value of net assets acquired of Raychem is
being recorded as goodwill, which is amortized over a period of 40 years to
selling, general and administrative expenses.
66
<PAGE>
(9) Increase in interest expense due to the borrowing of long-term debt used to
make the cash payment of approximately $1.44 billion to acquire Raychem,
calculated using Tyco's average borrowing rate of 5.13%.
(10) Income tax benefit associated with the interest expense adjustment in (9)
above, calculated at the statutory income tax rate of 35%.
(11) Excess of the purchase price over the net assets acquired of Raychem. See
(8) above for further discussion.
(12) Increase in accrued expenses for direct transaction costs incurred related
to the merger.
(13) Increased borrowings used to make the cash payment to acquire Raychem.
(14) Increase in shareholders' equity for shares to be issued in the merger
based on 77,585,116 Raychem common shares outstanding on May 18, 1999
multiplied by 0.2070 multiplied by $89.375, the closing price of Tyco common
shares on May 18, 1999.
(15) Elimination of Raychem's equity accounts.
(16) Decrease in equity for deferred compensation related to restricted Tyco
common shares issued to replace unvested restricted stock of Raychem.
(17) Accrued purchase liabilities, inventory valuation adjustments and property,
plant and equipment write-downs are expected to be recorded in connection
with the merger with Raychem, but such amounts are not determinable at this
time.
67
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF RAYCHEM AND SHAREHOLDERS OF TYCO
Raychem is a Delaware corporation, and the rights of Raychem's stockholders
are governed by Raychem's Certificate of Incorporation and Bylaws and by
Delaware law. Upon the consummation of the merger, stockholders of Raychem, to
the extent that they receive Tyco common shares, will become shareholders of,
Tyco and their rights will be governed by Tyco's Memorandum of Association and
Bye-laws and by Bermuda law.
The following is a summary comparison of the material differences between
the rights of a Raychem stockholder and a Tyco shareholder arising from the
differences between the corporate laws of Delaware and of Bermuda and the
governing instruments of the two companies. The summary is not a complete
description of those laws or governing instruments.
Copies of Tyco's Memorandum of Association and Bye-laws and Raychem's
Certificate of Incorporation and Bylaws have been filed with the SEC and will be
sent to holders of Raychem common stock upon request. See "Where You Can Find
More Information" on page .
<TABLE>
<CAPTION>
DELAWARE LAW AND CURRENT BERMUDA LAW AND CURRENT
GOVERNING DOCUMENTS OF RAYCHEM GOVERNING DOCUMENTS OF TYCO
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
SPECIAL MEETINGS OF SHAREHOLDERS
- - Raychem stockholders may not call a special meeting of - Tyco shareholders holding at least 10% of the paid-up
stockholders. capital of Tyco may require Tyco to call a special
meeting.
<CAPTION>
QUORUM
<S> <C>
- - The presence of the holders of a majority of the stock - The presence of any two Tyco shareholders at a
entitled to vote at a stockholders meeting constitutes shareholders meeting will generally constitute a
a quorum for all purposes. quorum.
<CAPTION>
VOTING RIGHTS
<S> <C>
- - Raychem stockholders are entitled to one vote for each - Any proposal at a general meeting may be decided by a
share of common stock held by the stockholder. show of hands of the shareholders present in person or
by proxy, unless a poll is demanded. Where a poll has
been demanded, shareholders are entitled to one vote
for each common share held by the shareholder.
- The Tyco Bye-laws provide that a Tyco shareholder will
lose voting rights:
(1) for the period the shareholder fails to comply with
a notice from Tyco requesting specified information
regarding such person's interest in Tyco shares,
plus an additional ninety days;
(2) if such shareholder fails to make a takeover offer
in accordance with the City Code on Takeovers and
Mergers of the United Kingdom as applied by or in
accordance with the Tyco Bye-laws;
(3) for a period of 180 days if such shareholder
acquires three percent or more of the
</TABLE>
68
<PAGE>
<TABLE>
<S> <C>
issued share capital of any class of Tyco shares and
fails to notify Tyco of such acquisition within two
days; or
(4) for a period of 180 days if such shareholder holds
three percent or more of the issued share capital of
any class of Tyco shares and 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.
<CAPTION>
SHAREHOLDER NOMINATIONS AND PROPOSALS
<S> <C>
- - Any Raychem stockholder may nominate a director for - Any Tyco shareholder may nominate a director for
election or submit a stockholder proposal. election. Only Tyco shareholders holding not less than
1/20th of the total voting rights or 100 or more in
number may submit a shareholder proposal.
<CAPTION>
DERIVATIVE ACTIONS
<S> <C>
- - Raychem stockholders do not have a direct and - Tyco shareholders may not generally initiate an action
individual right to enforce rights which could be for a wrongdoing to the company. In certain limited
asserted by Raychem, but may do so only derivatively circumstances, however, Tyco shareholders may proceed
on behalf of Raychem. either in a derivative action.
- - Under Delaware law, the complaint must - The Bermuda courts would ordinarily follow English
(1) state that the plaintiff was a stockholder at the precedent, which permits a shareholder to commence
time of the transaction of which the plaintiff a derivative action only if:
complains or that the plaintiff's shares (1) the act complained of is alleged to be beyond the
thereafter devolved on the plaintiff by operation of corporate power of the company or illegal;
law, and (2) the act complained of is alleged to constitute a
(2) (a) allege with particularity the efforts made by fraud against the minority shareholders by the
the plaintiff to obtain the action the plaintiff majority shareholders who have used their
desires from the directors or controlling position to prevent the company
(b) state the reasons for the plaintiff's failure from taking action against the wrongdoers;
to obtain the action or for not making the (3) an act requires approval by a greater percentage of
effort. the company's shareholders than actually approved it;
Additionally, the plaintiff must remain a stockholder or
through the duration of the derivative suit. The action (4) there is an absolute necessity to waive the general
will not be dismissed or compromised without the rule that a shareholder may not bring a derivative
approval of the Delaware Court of Chancery. action so that the company's memorandum of
association or bye-laws are not violated.
- Under Bermuda law, a shareholder who complains that
the affairs of a company are being or have been
conducted in a manner oppressive or prejudicial to
some of the shareholders may petition the court for
relief, and the court has a wide discretion to grant
</TABLE>
69
<PAGE>
<TABLE>
<S> <C>
relief if it is satisfied that the complaint is so
justified and that:
(1) to wind up the company would not unfairly prejudice
those shareholders, and
(2) the facts otherwise justify a winding up order on
just and equitable grounds.
Traditionally, such relief has been granted in
relatively limited circumstances.
<CAPTION>
BOARD OF DIRECTORS
<S> <C>
- - Raychem's Bylaws provide that the Board of Directors - The Tyco Bye-laws provide that the number of directors
must have not less than eight or more than 12 will be determined by the shareholders at a general
directors, as the Board will designate from time to meeting, provided that there are at least two
time. directors. The Tyco Bye-laws require a director to be
a shareholder.
<CAPTION>
REMOVAL OF DIRECTORS
<S> <C>
- - A director of Raychem may be removed with or without - A director of Tyco may be removed with or without
cause by the Raychem stockholders. cause by the shareholders or by written resolution
signed by all the other directors.
<CAPTION>
AMENDMENTS TO CHARTER DOCUMENTS AND BY-LAWS
<S> <C>
- - Under Delaware law, an amendment to the certificate of - Bermuda law provides that a company may alter its
incorporation requires: memorandum of association by resolution passed at a
(1) the recommendation of the Board of Directors; general meeting of shareholders of which due
(2) the affirmative vote of a majority of the notice has been given and, where required, with
outstanding stock entitled to vote thereon; and the consent of the Minister of Finance.
(3) the affirmative vote of a majority of the - Holders of at least 20% of any class of the company's
outstanding stock of each class entitled to vote share capital may apply to the Bermuda Supreme
thereon as a class. Court to annul any alteration. Upon such
application, the alteration will not have effect
until it is confirmed by the Court.
- The Tyco Bye-laws provide that, if Tyco has two or
more classes of shares, 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. Certain
procedural rules of such a separate meeting differ
from the rules of a Tyco general meeting.
- 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
</TABLE>
70
<PAGE>
<TABLE>
<S> <C>
may apply to the Bermuda Supreme Court to annul any
variation in the rights attached to the class of
shares. Upon such application, the variation will not
have effect until it is confirmed by the Court.
- - The Raychem Bylaws provide that the Bylaws may be - The Tyco Bye-laws may only be amended by the Tyco
amended or repealed, and new Bylaws may be adopted, by Board and such amendment will become effective only
the Board of Directors at any meeting or by the after confirmation by the Tyco shareholders.
stockholders at any meeting.
<CAPTION>
SHARE PURCHASES
<S> <C>
- - Generally, Raychem may repurchase its stock, provided - Generally, Tyco may repurchase its shares for
that if Raychem's series A preferred stock or Series cancellation.
RP preferred stock dividends are in arrears, Raychem - A subsidiary of Tyco may also purchase Tyco shares.
may not Tyco shares owned by a subsidiary of Tyco may be voted
(1) redeem, purchase or otherwise acquire for on all matters on which shareholders are entitled
consideration shares of any stock ranking junior to vote and counted for quorum purposes.
to the series A preferred stock or series RP
preferred stock;
(2)redeem, purchase or otherwise acquire for
consideration shares of any stock ranking on parity
with the series A preferred stock, or the series RP
preferred stock unless it is acquired in exchange
for stock of Raychem ranking junior to the series A
preferred stock or the series RP preferred stock;
or
(3) purchase or otherwise acquire for consideration
any shares of series A preferred stock, or series
RP preferred stock or any shares of stock ranking
on a parity with the series A preferred stock or
the series RP preferred stock, except in
accordance with a purchase offer made in writing
or by publication to all holders of such shares
upon such terms as the board of directors
determines will result in fair and equitable
treatment among the respective series or classes.
- - The Raychem Certificate of Incorporation prohibits any
of its subsidiaries from purchasing or otherwise
acquiring for consideration any shares of stock of
Raychem unless Raychem could acquire such shares
itself. Raychem stock which is owned, directly or
indirectly, by Raychem may be voted or counted for
quorum purposes.
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS
<S> <C>
- - Generally, under Delaware law, the merger, - Under Bermuda law, a company's shareholders
consolidation, sale, lease or exchange of are not generally required to approve a
all or substantially all of Raychem's sale, lease or exchange of all or
assets or dissolution requires: substantially all of a company's property
(1) approval of the Board of Directors, and and assets or the acquisition of another
(2) the affirmative vote of the holders of company or its assets in a merger or similar
a majority of the outstanding stock transaction. However, Bermuda law
entitled to vote thereon. requires shareholders to approve
certain forms of mergers and
reconstructions.
- A compromise or arrangement in connection
with a scheme for the reconstruction of the
company on terms which include the transfer
of all or part of the undertaking or the
property of the company to another company
requires the approval of a majority in
number representing three-fourths in value
of the 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, the amalgamation
of Tyco and one or more companies requires
the vote of three-fourths of the
shareholders of each such company present
and voting in person or by proxy at a
meeting called for the purpose. 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.
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
SHARE ACQUISITIONS, BUSINESS COMBINATIONS AND RELATED PROVISIONS
<S> <C>
- - Section 203 of the Delaware General - The Tyco Bye-laws permit the Tyco Board to
Corporation Law prohibits "business make applicable to Tyco certain rules of
combinations," including mergers, sales and the City Code on Takeovers and Mergers
leases of assets, issuances of securities issued by the Panel on Takeovers and
and similar transactions by a corporation Mergers in the United Kingdom.
or a subsidiary with an "interested - The City Code on Takeovers and Mergers
stockholder" who beneficially owns 15% or requires any person or group acting in
more of a corporation's voting stock, concert which acquires shares, which
within three years after the person or together with shares previously owned by
entity becomes an interested stockholder, it, have 30% or more of the voting power of
unless: a company, to make an offer to purchase all
(1) the transaction that will cause the equity shares of the company and any of
person to become an interested the company's voting non-equity capital
stockholder is approved by the board of shares of the type held by such person
directors of the target corporation or group. The offer price must not be
prior to the transaction; less than the highest price paid in the
(2) after completion of the transaction in preceding 12 months for shares of the
which the person becomes an interested same class by such person or anyone in
stockholder, the interested stockholder such group and must be made in cash or
holds at least 85% of the voting stock include a cash alternative.
of the corporation, not including (a) - If a person or group owns 30% or more of
shares held by officers and directors the Tyco shares, and the Tyco board
of interested stockholders and (b) determines that an offer under the City
shares held by specified employee Code is not expedient or the person or
benefit plans; or group is required to make such an offer
(3) after the person becomes an interested but fails to do so, the Tyco Board may
stockholder, the business combination by notice require such a person or
is approved by the board of directors group to make an offer which:
and holders of at least 66 2/3% of the (1) includes all shares of every class of
outstanding voting stock, excluding share capital of Tyco, and the Tyco Board may
shares held by the interested also require that the offer include all
stockholder. securities of Tyco convertible into Tyco
shares;
(2) is in cash or includes a cash
alternative;
(3) is made within 30 days of the Tyco
Board's notice;
(4) remains open for at least 14 days after
the offer becomes unconditional;
(5) requires payment to be made within 21
days after the offer becomes unconditional;
and
(6) is at a price not less than that highest
price paid in the preceding 12 months for
shares of the same class by the person or
any member of the group, or if the price
is unavailable or inappropriate, then at
a price fixed by the Tyco board. The
purchase price for convertible securities
must be on terms the Tyco Board considers
fair and reasonable.
</TABLE>
73
<PAGE>
<TABLE>
<S> <C>
- The Rules Governing Substantial
Acquisitions of Shares issued by the Takeover
Panel provide, subject to certain
exceptions, that a person or 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 and may require
any person or group to dispose of any Tyco
shares acquired in violation of these
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 business days after the relevant event.
In determining the percentage interest of
any person for these purposes and for the
purposes of Tyco Bye-Law 104, interests of
persons acting in concert may be
aggregated.
<CAPTION>
REQUIRED PURCHASE AND SALE OF SHARES
<S> <C>
- - No similar provision. - 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, within
two months after the expiration of the four
month period, the transferee company may
give notice to any dissenting shareholder
that it desires to acquire his or her
shares. Such transferee company will 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.
</TABLE>
74
<PAGE>
<TABLE>
<S> <C>
- 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.
<CAPTION>
DISSENTER'S RIGHTS
<S> <C>
- - Generally, Delaware law provides - Under Bermuda law, a properly dissenting
stockholders of a corporation involved in a shareholder who did not vote in favor of an
merger the right to demand and receive amalgamation and who is not satisfied that
payment of the fair value of their stock in he or she has been offered fair value for
certain mergers. his or her shares may apply to the court to
- - However, appraisal rights are not available appraise the fair value of his or her
to holders of shares: shares. If the court appraised value is
(1) listed on a national securities greater than the value received or to be
exchange; received in the amalgamation, the company
(2) designated as a national market system must pay the court appraised value to
security on an interdealer quotation the dissenting shareholder within one
system operated by the National month of the appraisal.
Association of Securities Dealers, - Bermuda law additionally provides a right
Inc.; or of appraisal in respect of the situation in
(3) held of record by more than 2,000 which a holder of not less than 95% of the
stockholders. shares or any class of shares in the
- - Notwithstanding the foregoing, stockholders company proposes to acquire the remaining
do have appraisal rights, if they are shares.
required to accept in the merger anything
other than any combination of:
(1) shares of stock or depositary receipts
of the surviving corporation in the
merger;
(2) shares of stock or depositary receipts
of another corporation that, at the
effective date of the merger, will be
either:
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<S> <C>
(a) listed on a national securities
exchange;
(b) designated as a national market
system security on an interdealer
quotation system operated by the
National Association of Securities
Dealers, Inc.; or
(c) held of record by more than 2,000
holders; or
(3) cash in lieu of fractional shares of
the stock or depositary receipts
received.
- - In addition, appraisal rights are not
available to the stockholders of the
surviving corporation in the merger, if the
merger does not require the approval of the
stockholders of that corporation.
<CAPTION>
SHAREHOLDER RIGHTS PLAN
<S> <C>
- - On December 11, 1998, Raychem adopted a - Prior to the merger of Former Tyco and ADT
Shareholder Rights Agreement under which on July 2, 1997, ADT (now Tyco) adopted a
each right, other than those rights owned Shareholder Rights Plan which was amended
by an Acquiring Person, as defined, will in March and July of 1997. Under the plan,
become exercisable a specified period of each right, other than those rights owned
time after any person becomes the by an Acquiring Person, as defined, will
beneficial owner of 15% or more of Raychem become exercisable a specified period of
common stock, or commences a tender offer time after any person becomes the
or exchange offer which, if consummated, beneficial owner of 15% or more of Tyco
would result in any person becoming the shares, or commences a tender offer or
beneficial owner of 15% or more of the exchange offer which, if consummated, would
Raychem shares. Each right entitles its result in any person becoming the
holder, among other things, beneficial owner of 15% or more of the Tyco
(1) to purchase Raychem common stock from shares. Each right entitles its holder,
Raychem at a 50% discount from the among other things, to purchase Tyco
market price of Raychem common stock on shares from Tyco at a 50% discount from
the Distribution Date, as defined, in the market price of Tyco shares on the
the event that a person becomes an Distribution Date, as defined, in the
Acquiring Person; and event that a person becomes an
(2) to purchase common stock of an Acquiring Person.
Acquiring Person at a 50% discount from - The Tyco Board may redeem the rights prior
the market price of such stock after the to their becoming exercisable; provided,
Shares Acquisition Date, as defined, in the however, that the Tyco Board may not redeem
event that Raychem is merged with, or more the rights if a majority of the directors
than 50% of the assets are sold to, an on the board have been changed as a result
Acquiring Person. of a proxy or consent solicitation or other
- - The Raychem Board may redeem the rights shareholder initiative by a person who has
prior to their becoming exercisable. stated, or Tyco determines in good faith,
- - On May 19, 1999, the Raychem Board amended that such person intends to take such
the Raychem rights agreement so that it actions which would result in such person
would be inapplicable to the merger, the becoming an Acquiring Person, unless such
merger agreement and the transactions redemption has been authorized by a
contemplated thereby. majority of the Continuing Directors, as
defined.
</TABLE>
76
<PAGE>
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 Raychem stockholders
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 Raychem by
Shearman & Sterling, San Francisco, California.
EXPERTS
The historical 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 (Houston) and Deloitte & Touche LLP. The
historical 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.
The supplemental consolidated financial statements of Tyco as of September
30, 1998 and 1997 and for the year ended September 30, 1998, the nine months
ended September 30, 1997 and the year ended December 31, 1996 included in Tyco's
Current Report on Form 8-K filed on June 3, 1999 and incorporated by reference
in this document give retroactive effect to the merger between Tyco
International Ltd. and AMP Incorporated 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 (Philadelphia), Deloitte & Touche LLP
and Arthur Andersen LLP (Houston). The supplemental consolidated financial
statements referred to above have been incorporated herein in reliance upon said
reports given upon the authority of such firms as experts in accounting and
auditing. Upon publication of Tyco's consolidated financial statements for a
period which includes April 2, 1999, the date of the consummation of the AMP
merger, the supplemental consolidated financial statements will become the
historical financial statements of Tyco.
The consolidated financial statements incorporated in this document by
reference from the Raychem Annual Report on Form 10-K for the year ended June
30, 1998 have been so incorporated in
77
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reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
FUTURE SHAREHOLDER PROPOSALS
Due to the contemplated consummation of the merger, Raychem does not
currently expect to hold a 1999 Annual Meeting of Stockholders because Raychem
will be merged with Tyco (PA), a wholly owned subsidiary of Tyco. In the event
the merger is not consummated, proposals of Raychem stockholders to be included
in the proxy statement to be mailed to all Raychem stockholders entitled to vote
at the 1999 Annual Meeting of Raychem stockholders must be received at Raychem's
principal executive offices not later than August 11, 1999 or earlier than July
12, 1999.
78
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
TYCO INTERNATIONAL LTD.
TYCO INTERNATIONAL (PA) INC.
AND
RAYCHEM CORPORATION
DATED AS OF MAY 19, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER............................................................................ A-2
Section THE MERGER.......................................................... A-2
1.01.
Section EFFECTIVE TIME...................................................... A-2
1.02.
Section EFFECT OF THE MERGER................................................ A-2
1.03.
Section ARTICLES OF INCORPORATION; BY-LAWS.................................. A-2
1.04.
Section DIRECTORS AND OFFICERS.............................................. A-3
1.05.
Section EFFECT ON SECURITIES, ETC........................................... A-3
1.06.
Section EXCHANGE OF SHARES.................................................. A-10
1.07.
Section STOCK TRANSFER BOOKS................................................ A-12
1.08.
Section NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK................. A-12
1.09.
Section LOST, STOLEN OR DESTROYED CERTIFICATES.............................. A-12
1.10.
Section TAX CONSEQUENCES.................................................... A-12
1.11.
Section TAKING OF NECESSARY ACTION; FURTHER ACTION.......................... A-12
1.12.
Section DISSENTING SHARES................................................... A-13
1.13.
Section MATERIAL ADVERSE EFFECT............................................. A-13
1.14.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... A-13
Section ORGANIZATION AND QUALIFICATION; SUBSIDIARIES........................ A-13
2.01.
Section CERTIFICATE OF INCORPORATION AND BYLAWS............................. A-14
2.02.
Section CAPITALIZATION...................................................... A-14
2.03.
Section AUTHORITY RELATIVE TO THIS AGREEMENT................................ A-15
2.04.
Section MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS...... A-16
2.05.
Section COMPLIANCE; PERMITS................................................. A-17
2.06.
Section SEC FILINGS; FINANCIAL STATEMENTS................................... A-18
2.07.
Section ABSENCE OF CERTAIN CHANGES OR EVENTS................................ A-18
2.08.
Section NO UNDISCLOSED LIABILITIES.......................................... A-18
2.09.
Section ABSENCE OF LITIGATION............................................... A-19
2.10.
Section EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS....................... A-19
2.11.
Section LABOR MATTERS....................................................... A-23
2.12.
Section REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.................. A-23
2.13.
Section RESTRICTIONS ON BUSINESS ACTIVITIES................................. A-24
2.14.
Section TITLE TO PROPERTY................................................... A-24
2.15.
Section TAXES............................................................... A-24
2.16.
Section ENVIRONMENTAL MATTERS............................................... A-25
2.17.
Section BROKERS............................................................. A-27
2.18.
Section INTELLECTUAL PROPERTY............................................... A-27
2.19.
Section INTERESTED PARTY TRANSACTIONS....................................... A-29
2.20.
Section INSURANCE........................................................... A-29
2.21.
Section PRODUCT LIABILITY AND RECALLS....................................... A-29
2.22.
Section OPINION OF FINANCIAL ADVISOR........................................ A-29
2.23.
Section RIGHTS AGREEMENT.................................................... A-29
2.24.
Section SUPPLEMENTAL COMPANY DISCLOSURE SCHEDULE............................ A-30
2.25.
</TABLE>
A-i
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................... A-30
Section ORGANIZATION AND QUALIFICATION; SUBSIDIARIES........................ A-30
3.01.
Section MEMORANDUM OF ASSOCIATION AND BYE-LAWS.............................. A-30
3.02.
Section CAPITALIZATION...................................................... A-31
3.03.
Section AUTHORITY RELATIVE TO THIS AGREEMENT................................ A-31
3.04.
Section MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS...... A-32
3.05.
Section COMPLIANCE; PERMITS................................................. A-33
3.06.
Section SEC FILINGS; FINANCIAL STATEMENTS................................... A-33
3.07.
Section ABSENCE OF CERTAIN CHANGES OR EVENTS................................ A-34
3.08.
Section NO UNDISCLOSED LIABILITIES.......................................... A-34
3.09.
Section ABSENCE OF LITIGATION............................................... A-34
3.10.
Section EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS....................... A-34
3.11.
Section LABOR MATTERS....................................................... A-36
3.12.
Section REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.................. A-36
3.13.
Section RESTRICTIONS ON BUSINESS ACTIVITIES................................. A-37
3.14.
Section TITLE TO PROPERTY................................................... A-37
3.15.
Section TAXES............................................................... A-37
3.16.
Section ENVIRONMENTAL MATTERS............................................... A-37
3.17.
Section BROKERS............................................................. A-38
3.18.
Section INTELLECTUAL PROPERTY............................................... A-38
3.19.
Section INTERESTED PARTY TRANSACTIONS....................................... A-39
3.20.
Section INSURANCE........................................................... A-39
3.21.
Section PRODUCT LIABILITY AND RECALLS....................................... A-39
3.22.
Section OWNERSHIP OF PARENT AND MERGER SUB.................................. A-40
3.23.
Section DGCL SECTION 203.................................................... A-40
3.24.
Section NO VOTE REQUIRED.................................................... A-40
3.25.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER................................................ A-40
Section CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER............... A-40
4.01.
Section NO SOLICITATION..................................................... A-43
4.02.
Section CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER.................... A-45
4.03.
</TABLE>
A-ii
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<S> <C> <C>
ARTICLE V
ADDITIONAL AGREEMENTS................................................................. A-46
Section PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.................. A-46
5.01.
Section COMPANY STOCKHOLDERS MEETING........................................ A-46
5.02.
Section ACCESS TO INFORMATION; CONFIDENTIALITY.............................. A-46
5.03.
Section CONSENTS; APPROVALS................................................. A-47
5.04.
Section AGREEMENTS WITH RESPECT TO AFFILIATES............................... A-47
5.05.
Section INDEMNIFICATION AND INSURANCE....................................... A-47
5.06.
Section NOTIFICATION OF CERTAIN MATTERS..................................... A-49
5.07.
Section FURTHER ACTION/TAX TREATMENT........................................ A-49
5.08.
Section PUBLIC ANNOUNCEMENTS................................................ A-49
5.09.
Section PARENT COMMON SHARES................................................ A-50
5.10.
Section CONVEYANCE TAXES.................................................... A-50
5.11.
Section OPTION PLANS AND BENEFITS, ETC...................................... A-50
5.12.
Section RIGHTS AGREEMENT.................................................... A-52
5.13.
Section ACCOUNTANT'S LETTERS................................................ A-52
5.14.
Section COMPLIANCE WITH STATE PROPERTY TRANSFER LAWS........................ A-52
5.15.
Section CHARITIES........................................................... A-52
5.16.
ARTICLE VI
CONDITIONS TO THE MERGER.............................................................. A-53
Section CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER......... A-53
6.01.
Section ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB....... A-54
6.02.
Section ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY.................. A-55
6.03.
Section FAILURE TO DELIVER TAX OPINIONS..................................... A-56
6.04.
ARTICLE VII
TERMINATION........................................................................... A-56
Section TERMINATION......................................................... A-56
7.01.
Section EFFECT OF TERMINATION............................................... A-58
7.02.
Section FEES AND EXPENSES................................................... A-59
7.03.
</TABLE>
A-iii
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ARTICLE VIII
GENERAL PROVISIONS.................................................................... A-60
Section EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS......... A-60
8.01.
Section NOTICES............................................................. A-61
8.02.
Section CERTAIN DEFINITIONS................................................. A-62
8.03.
Section AMENDMENT........................................................... A-63
8.04.
Section WAIVER.............................................................. A-63
8.05.
Section HEADINGS............................................................ A-63
8.06.
Section SEVERABILITY........................................................ A-63
8.07.
Section ENTIRE AGREEMENT.................................................... A-64
8.08.
Section ASSIGNMENT.......................................................... A-64
8.09.
Section PARTIES IN INTEREST................................................. A-64
8.10.
Section FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE............... A-64
8.11.
Section GOVERNING LAW; JURISDICTION......................................... A-64
8.12.
Section COUNTERPARTS........................................................ A-65
8.13.
Section WAIVER OF JURY TRIAL................................................ A-65
8.14.
Section PERFORMANCE OF OBLIGATIONS.......................................... A-65
8.15.
</TABLE>
A-iv
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of May 19, 1999
(this "Agreement"), among Tyco International Ltd. , a Bermuda company
("Parent"), Tyco International (PA) Inc., a Nevada corporation and a direct,
wholly-owned subsidiary of Parent ("Merger Sub"), and Raychem Corporation, a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective shareholders, and consistent with and in furtherance of their
respective business strategies and goals, for Parent to acquire all of the
outstanding shares of the Company through the merger of the Company with Merger
Sub or such other entity as provided in Section 6.04 upon the terms and subject
to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "Merger")
of the Company with Merger Sub or such other entity as provided in Section 6.04,
in accordance with the applicable provisions of the Nevada General Corporation
Law (the "NGCL") and the Delaware General Corporation Law (the "DGCL"), or such
other jurisdiction as appropriate in accordance with the provisions of Section
6.04, and upon the terms and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368 of the United States 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 except as otherwise provided in Section 6.04; and
WHEREAS, pursuant to the Merger, each outstanding share (together with the
preferred stock purchase right associated therewith, a "Share") of the Company's
Common Stock, par value $1.00 (the "Company Common Stock"), other than shares
owned directly or indirectly by the Parent, Merger Sub or the Company and other
than Dissenting Shares (as defined in Section 1.13) will be converted into the
right to receive the Merger Consideration (as defined in Section 1.07(b)), upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
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, the
NGCL and the DGCL, the Company shall be merged with and into Merger Sub, the
separate corporate existence of the Company shall cease and Merger Sub shall
continue as the surviving corporation. Merger Sub as the surviving corporation
after the Merger is 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
(a) filing articles of merger as contemplated by the NGCL (the "Articles of
Merger") and (b) filing a certificate of merger as contemplated by the DGCL (the
"Certificate of Merger"), each, together with any required related certificates,
with the Secretaries of State of the States of Nevada and Delaware, as
appropriate, in such forms as required by, and executed in accordance with, the
relevant provisions of the NGCL and the DGCL, respectively. The Merger shall
become effective at the time of the later to
<PAGE>
occur of such filings or at such later time as agreed to by each of the parties
hereto in writing, which will be as soon as reasonably practicable, specified in
the Articles of Merger and Certificate of Merger (the "Effective Time"). Prior
to such filings, 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, the
Certificate of Merger and the applicable provisions of the NGCL and the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.04. ARTICLES OF INCORPORATION; BY-LAWS. (a) Articles of
Incorporation. Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Articles of Incorporation of Merger Sub, 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 NGCL and such Articles of Incorporation.
(b) Bylaws. Subject to the provisions of Section 5.06(a), the By-Laws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
By-Laws of the Surviving Corporation until thereafter amended as provided by the
NGCL, the Articles of Incorporation of the Surviving Corporation and such
By-Laws.
Section 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of
Merger Sub 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. (a) Conversion of Securities.
(i) Definitions. As used in this Agreement, the following terms shall have
the meanings specified below:
"AVERAGE SHARE PRICE" means the average of the Daily Share Prices for
the three consecutive trading days beginning on (and including) the date of
the Effective Time.
"CASH DEFICIENCY RATIO," as used in Section 1.06(a)(vi) below, means a
fraction (x) whose numerator is the difference between the Number of Cash
Paid Shares and the number of Cash Electing Shares and (y) whose denominator
is the number of Non-Electing Shares.
"CASH ELECTING SHARES" means the shares of Company Common Stock as to
which an election has been made to receive cash.
"CASH PRORATION FACTOR," as used in 1.06(a)(iv) below, means (x) the
Number of Cash Paid Shares divided by (y) the number of Cash Electing
Shares.
"CLOSING PER SHARE AMOUNT" means (x) $18.50 (the "Cash Amount") plus (y)
the Average Share Price multiplied by 0.2070 (such fraction, the "Share
Ratio").
"DAILY SHARE PRICE" for any trading day means the volume weighted
average of the per share selling prices on the New York Stock Exchange, Inc.
(the "NYSE") of Parent Common Shares (as reported in the NYSE Composite
Transactions Tape) for that day.
A-2
<PAGE>
"NON-ELECTING SHARES" means the shares of Company Common Stock as to
which no election has been made to receive either cash or Parent Common
Shares.
"NUMBER OF CASH PAID SHARES" means (x) (I) $18.50 multiplied by the
number of shares of Company Common Stock outstanding at the Effective Time
(but not including any non-vesting Restricted Shares, as defined in Section
1.06(c)(ii)) divided by (II) the Closing Per Share Amount less (y) the
number of Dissenting Shares.
"NUMBER OF SHARE EXCHANGE SHARES" means (x) the product of (I) the
number of shares of Company Common Stock outstanding at the Effective Time
(but not including any non-vesting Restricted Shares), (II) 0.2070 and (III)
the Average Share Price divided by (y) the Closing Per Share Amount.
"PARENT COMMON SHARE" means a common share, nominal value US$0.20 per
share, of Parent.
"STOCK ELECTING SHARES" means the shares of Company Common Stock as to
which an election has been made to receive Parent Common Shares.
"STOCK PRORATION FACTOR," as used in Section 1.06(a)(v) below, means (x)
the Number of Share Exchange Shares divided by (y) the number of Stock
Electing Shares.
"STOCK DEFICIENCY RATIO," as used in Section 1.06(a)(vi) below, means a
fraction (x) whose numerator equals the difference between the Number of
Share Exchange Shares and the number of Stock Electing Shares and (y) whose
denominator is the number of Non-Electing Shares.
(ii) General. (A) At and as of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Company Common
Stock or any shares of capital stock of Merger Sub, except as otherwise provided
in this Section 1.06, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares) shall be
converted into the right to receive from Merger Sub a fraction of a Parent
Common Share, cash or a combination of a fraction of a Parent Common Share and
cash as hereinafter provided.
(B) The total amount of cash that Merger Sub will pay to Company
stockholders in the Merger under this Section 1.06(a) is the product of $18.50
multiplied by the number of shares of Company Common Stock outstanding at the
Effective Time, less an amount equal to the product of the number of Dissenting
Shares multiplied by the Closing Per Share Amount. The total number of Parent
Common Shares that Merger Sub will transfer to Company stockholders in the
Merger under this Section 1.06(a) is 0.2070 multiplied by the number of shares
of Company Common Stock outstanding at the Effective Time.
(C) Shares of restricted stock that do not vest as a result of the
consummation of the Merger are treated separately in Section 1.06(c) and are not
treated as outstanding and are not included in determining the number of shares
of Company Common Stock outstanding at the Effective Time for all purposes of
this Section 1.06(a).
(iii) Elections. Subject to Section 1.06(a)(iv), (v) and (vi) below, each
holder of Company Common Stock shall be entitled, with respect to each share of
Company Common Stock held by such holder, to elect to receive either:
(1) cash equal to the Closing Per Share Amount; or
(2) a fraction of a Parent Common Share equal to the Closing Per Share
Amount divided by the Average Share Price.
A-3
<PAGE>
(iv) Excess of Cash Electing Shares. If the number of Cash Electing Shares
exceeds the Number of Cash Paid Shares,
(1) each Stock Electing Share shall be converted into a fraction of a
Parent Common Share equal to the Closing Per Share Amount divided by the
Average Share Price;
(2) each Cash Electing Share shall be converted into the right to
receive (I) cash equal to the Closing Per Share Amount multiplied by the
Cash Proration Factor and (II) a fraction of a Parent Common Share equal to
(x) the Closing Per Share Amount divided by the Average Share Price
multiplied by (y) one minus the Cash Proration Factor; and
(3) each Non-Electing Share shall be converted into the right to receive
a fraction of a Parent Common Share equal to the Closing Per Share Amount
divided by the Average Share Price.
(v) Excess of Stock Electing Shares. If the number of Stock Electing Shares
exceeds the Number of Share Exchange Shares,
(1) each Cash Electing Share shall be converted into the right to
receive cash equal to the Closing Per Share Amount;
(2) each Stock Electing Share shall be converted into the right to
receive (I) a fraction of a Parent Common Share equal to (x) the Closing Per
Share Amount divided by the Average Share Price multiplied by (y) the Stock
Proration Factor and (II) cash equal to (x) the Closing Per Share Amount
multiplied by (y) one minus the Stock Proration Factor; and
(3) each Non-Electing Share shall be converted into the right to receive
cash equal to the Closing Per Share Amount.
(vi) No Excess of Cash Electing or Stock Electing Shares. In the event that
neither Section 1.06(a)(iv) nor 1.06(a)(v) above is applicable,
(1) each Cash Electing Share shall be converted into the right to
receive cash equal to the Closing Per Share Amount;
(2) each Stock Electing Share shall be converted into the right to
receive a fraction of a Parent Common Share equal to the Closing Per Share
Amount divided by the Average Share Price; and
(3) each Non-Electing Share shall be converted into the right to receive
(I) cash in the amount of (x) the Closing Per Share Amount multiplied by (y)
the Cash Deficiency Ratio and (II) a fraction of a Parent Common Share equal
to (x) the Closing Per Share Amount divided by the Average Stock Price
multiplied by (y) the Stock Deficiency Ratio.
(vii) Exercise of Election. All elections in accordance with this Section
1.06(a) shall be made on a form designed for that purpose and mutually
acceptable to the Company and Merger Sub (which shall specify that risk of loss
of accompanying Certificates shall pass only upon delivery thereof to the
Exchange Agent and that title thereto shall pass following such delivery if and
when the Effective Time shall occur) (a "Form of Election") and mailed to
holders of record of Company Common Stock as of the record date for the Company
Stockholders Meeting (as defined in Section 2.13) or such other date as Merger
Sub and the Company shall mutually agree (the "Election Form Record Date") or,
in the case of shares of Common Company Stock held in book-entry form, through
transmission of an Agent's Message (as hereinafter defined). Merger Sub and the
Company shall make available one or more Forms of Election as may be reasonably
requested by all persons who become holders (or beneficial owners) of Company
Common Stock between the Election Form Record Date and the close of business on
the day prior to the Election Deadline (as defined below). Elections shall be
made by submitting to the Exchange Agent in accordance with Section
1.06(a)(viii) either (A) a properly
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completed and signed Form of Election accompanied by the certificates
representing the shares of Company Common Stock as to which the election is
being made (or an appropriate guarantee of delivery by an Eligible Guarantor
Institution, as that term is defined in Rule 17Ad-15 promulgated pursuant to the
Exchange Act (as defined in Section 2.05)) or (B) in the case of shares of
Company Common Stock held in book-entry form, by the transfer of such shares to
an account established by the Exchange Agent for this purpose at the Depository
Trust Company ("DTC") and the timely receipt by the Exchange Agent of an Agent's
Message transmitted through DTC's Automated Tender Offer Program ("ATOP")
(either of (A) or (B), an "Election"). The term "AGENT'S MESSAGE" means a
message transmitted by DTC and received by the Exchange Agent and forming part
of the confirmation of a book-entry transfer which states that DTC has received
an express acknowledgment from a participant transmitting the shares of Company
Common Stock, sets forth the election being made with respect to such shares and
states that such participant has agreed to be bound by the terms of the Form of
Election with respect to such shares. Merger Sub will have the discretion, which
it may delegate in whole or in part to the Exchange Agent, to reasonably
determine whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of Election,
or, in the case of shares of Company Common Stock held in book-entry form,
whether an Agent's Message has properly been received or whether any
modifications of the procedures set forth in this Section 1.06(a)(vii) or in
Section 1.06(a)(viii) are necessary to comply with the requirements of DTC. The
decision of Merger Sub (or the Exchange Agent) in such matters shall be
conclusive and binding on the holders of Company Common Stock.
(viii) Election Deadline. An Election must be received by the Exchange Agent
by the close of business on the last business day prior to the Effective Time
(such time hereinafter referred to as the "Election Deadline") in order to be
effective. Any holder of Company Common Stock who has made an Election may at
any time prior to the Election Deadline change such holder's election by
submitting a revised Form of Election, properly completed and signed, that is
received by the Exchange Agent prior to the Election Deadline or, in the case of
shares of Company Common Stock held in book-entry form, by causing there to be
transmitted and received by the Exchange Agent prior to the Election Deadline a
properly transmitted "Request Message" through ATOP. Any holder of Company
Common Stock may at any time prior to the Election Deadline revoke its election
and withdraw its certificates representing shares of Company Common Stock
deposited with the Exchange Agent by written notice to the Exchange Agent
received prior to the Election Deadline or, in the case of shares of Company
Common Stock held in book-entry form, withdraw its shares of Company Common
Stock transferred to the Exchange Agent by a properly transmitted "Request
Message" through ATOP prior to the Election Deadline specifying the name and
number of the account at DTC to be credited. As soon as practicable after the
Election Deadline, the Exchange Agent shall determine the number of Cash
Electing Shares, Stock Electing Shares and Non-Electing Shares, and shall notify
Merger Sub of its determination. Promptly after such notification, Parent and
Merger Sub shall issue a press release announcing in reasonable detail the
allocation of the Merger Consideration.
(ix) Deemed Non-Election. For the purposes hereof, the shares of a holder of
Company Common Stock who does not submit an Election prior to the Election
Deadline shall be deemed to be Non-Electing Shares. If Merger Sub or the
Exchange Agent shall determine that any purported election was not properly
made, such purported election shall be deemed to be of no force and effect, and
the shares with respect to which such purported election was made shall, for
purposes hereof, be deemed to be Non-Electing Shares. Neither Merger Sub nor the
Exchange Agent shall have any obligation to inform any holder of Company Common
Stock of any defect in the making of an election.
(x) Return of Company Common Stock. In the event that this Agreement is
terminated without the Merger having been consummated, Merger Sub shall instruct
the Exchange Agent to return all shares of Company Common Stock submitted or
transferred to the Exchange Agent pursuant to Section 1.06(a)(vii).
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(b) Cancellation. Each Share held in the treasury of the Company and each
Share owned by Parent, Merger Sub or any direct or indirect, wholly-owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) 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 Executive Long Term Incentive Plan, (B) the Company's Amended
and Restated 1987 Directors Stock Option Plan, (C) the Company's Amended and
Restated 1990 Incentive Plan (the "1990 PLAN"), (D) the Company's 1996
Directors Stock Option Plan, (E) the Company's Bonus Deferral Plan (the
"Bonus Deferral Plan"), (F) the 1981 Stock Option Plan or (G) any other
written or otherwise binding stock option plan or agreement of the Company
except the Company's 1984 Employee Stock Purchase Plan, the 1985 Employee
Stock Purchase Plan and the Amended and Restated Raychem Corporation Limited
Employee Stock Purchase Plan (the "Stock Purchase Plans") (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 to such Stock Option prior to the Effective Time (but taking
account of the Merger), the number of Parent Common Shares (rounded down to
a whole Parent Common Share) determined by multiplying (x) the number of
shares of Company Common Stock subject to such Stock Options immediately
prior to the Effective Time by (y) 0.4140, at a price per share (rounded up
to a whole cent) equal to (u) the per share exercise price for Company
Common Stock otherwise purchasable pursuant to such Stock Option divided by
(v) 0.4140. The other terms of each such Stock Option, and the Company Stock
Option Plans under which they were issued, shall continue to apply in
accordance with their terms, including, to the extent provided therein or
under the Company's Key Employee Retention and Severance Plan, the
acceleration of vesting of such Stock Options in connection with the
transactions contemplated hereby or upon the termination of employment of a
holder of an Adjusted Option. As soon as practicable after the Effective
Time, Merger Sub 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 stating 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)). Parent shall comply
with the terms of all such Adjusted Options and ensure, to the extent
required by, and subject to the provisions of, the Company Stock Option
Plans, that Adjusted Options which qualified as incentive stock options
under Section 422(b) of the Code ("ISOS") prior to the Effective Time
continue to qualify as ISOs after the Effective Time to the extent
permissible under governing law. Nothing in this paragraph is intended to or
shall amend or modify the terms of any Stock Option, including any provision
for its expiration, cancellation or forfeiture in a transaction such as the
Merger.
(ii) Restricted Shares. As of the Effective Time, each holder of an
outstanding share of restricted stock (each, a "Restricted Share") under any
Company stock incentive plan, the terms of which do not provide for its
vesting in a transaction such as the Merger, shall receive 0.4140 of a
Parent Common Share in exchange for such Restricted Share. Any such Parent
Common Share so received shall be subject to all the terms and conditions of
the plans and agreements under which the Restricted Share was issued and the
Company's Key Employee Retention and Severance Plan but only to the extent
such plan specifically modifies one or more terms of such Restricted Share,
MUTATIS MUTANDIS, including acceleration of vesting of such Restricted Share
in connection with the transactions contemplated hereby or upon the
termination of employment of any holder of a Restricted Share. The terms of
Section 1.06(f) shall apply to the Parent Common Shares issued in
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exchange for such Restricted Shares. Restricted Shares that vest upon
consummation of the Merger shall be exchanged in the Merger as provided in
Section 1.06(a).
(iii) Amendment, Modification or Termination. Nothing in this Section
1.06(c) is intended to or shall be construed as limiting in any respect
Parent's or Merger Sub's right to amend, modify or terminate after the
Effective Time any equity-based plan of the Company to the extent Parent or
Merger Sub is otherwise permitted to do so.
(iv) Registration. Parent shall reserve for issuance a sufficient number
of Parent Common Shares for delivery upon exercise of Adjusted Options in
accordance with this Section 1.06(c). Either on or as soon as practicable
following the Effective Time, Parent will register the Parent Common Shares
subject to the Adjusted Options under the United States Securities Act of
1933, as amended, and the rules and regulations of the United States
Securities and Exchange Commission ("SEC") thereunder (the "Securities Act")
pursuant to a registration statement on Form S-4 or 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 Parent's other stock options generally to cause the effectiveness
of such registration statement or registration statements (and the current
status of the prospectus or prospectuses contained therein) to be maintained
for so long as the Adjusted Options remain outstanding (subject to
interruptions of such effectiveness or current status as may be reasonably
required from time to time, and are applicable to registration statements of
Parent with respect to its option plans generally, because of developments
affecting Parent or otherwise).
(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 constitute 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 Cash Amount and the Share Ratio shall
be appropriately adjusted to reflect fully the effect of any stock split,
reverse split or stock dividend (including any dividend or distribution of
securities convertible into Parent Common Shares or Company Common Stock); any
distribution, exercise or exchange of Rights (as defined in Section 5.13) or
such Rights becoming exercisable; or any reorganization, recapitalization, split
up, combination or exchange of shares, or other like event with respect to
Parent Common Shares (in the case of the Share Ratio) or Company Common Stock
(in the case of both the Share Ratio and the Cash Amount), occurring after the
date hereof and prior to the Effective Time.
(f) Fractional Shares. No certificates or scrip representing less than one
Parent Common Share shall be issued in exchange for Shares upon the surrender
for exchange of a certificate which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") or pursuant to any
book-entry transfer. In lieu of any such fractional share, each holder of Shares
who would otherwise have been entitled to a fraction of a Parent Common Share
shall be paid upon such surrender cash (without interest) in an amount equal to
such fraction multiplied by the Average Share Price.
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Section 1.07. EXCHANGE OF SHARES. (a) Exchange Agent. At or prior to the
Effective Time, and, to the extent required, from time to time thereafter,
Merger Sub shall cause to be supplied to or for such bank or trust company as
shall be designated by Merger Sub and shall be reasonably acceptable to the
Company (the "Exchange Agent"), in trust for the benefit of the holders of
Company Common Stock (other than Dissenting Shares), for exchange in accordance
with this Section 1.07 through the Exchange Agent, (i) certificates evidencing
the Parent Common Shares issuable pursuant to Section 1.06(a), (ii) the cash
payable pursuant to Section 1.06(a) and (iii) cash payable in lieu of fractional
shares pursuant to Section 1.06(f) (such certificates for Parent Common Shares
and cash being referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Merger Sub will cause the Exchange Agent to mail to each holder
of record of Certificates who has not submitted (or who has submitted and
withdrawn) such holders' Certificates to the Exchange Agent in accordance with
Section 1.06(a)(vii) (other than Certificates representing Dissenting Shares)
(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 Merger Sub may reasonably specify) and
(ii) instructions to effect the surrender of the Certificates in exchange for
the certificates evidencing Parent Common Shares and cash. A holder that has
submitted and not withdrawn Shares as provided in Section 1.06(a)(vii) or that
surrenders Certificates for cancellation to the Exchange Agent, together with a
duly executed letter of transmittal, and other required documents as provided in
this Section 1.07(b), shall be entitled to receive in exchange therefor solely
(A) certificates evidencing that number of whole Parent Common Shares which such
holder has the right to receive in accordance with Section 1.06(a) in respect
thereof and/or (B) the cash which such holder has the right to receive in
accordance with Section 1.06(a) in respect thereof, together with any cash in
respect of fractional shares as provided in Section 1.06(f) (such Parent Common
Shares and cash being referred to, collectively, as the "Merger Consideration"),
except that Shares held at the Effective Time in book-entry form shall be
exchanged for Merger Consideration in accordance with the customary procedures
of DTC. The holder of Shares upon their exchange, in whole or in part, for
Parent Common Shares shall also receive any dividends or other distributions
declared or made with a record date after the Effective Time with respect to
such Parent Common Shares. Certificates surrendered pursuant to this Section
1.07(b) or Section 1.06(a)(vii) shall forthwith be canceled following the
Effective Time. 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, the
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 represent only the right to receive upon such
surrender the applicable Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Common Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Common Shares
entitled to be received therefor until the holder of such Certificate shall
surrender such Certificate in accordance with the provisions of Section 1.07(b).
Subject to applicable law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole Parent
Common Shares issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Parent
Common Shares.
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(d) Transfers of Ownership. If any Merger Consideration is to be issued and
paid to a person other than the person in whose name the Certificate surrendered
in exchange therefor is registered, it will be a condition of the payment
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 Merger Sub or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for Parent
Common Shares in any name other than that of the registered holder, or payment
of cash to any person other than the registered holder, of the Certificate
surrendered, or establish to the satisfaction of Merger Sub or any agent
designated by it that such tax has been paid or is not payable.
(e) Escheat. Neither Parent, 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 issuable or 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(b) or (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(b) or (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) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates one year after the
Effective Time shall be delivered to Merger Sub, upon demand, and any holders of
the Certificates who have not theretofore complied with this Section 1.07 shall
thereafter look only to Merger Sub for payment of their claim for Merger
Consideration and any dividends or distributions with respect to Parent 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, the
Parent or the Exchange Agent 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
pay and/or issue in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof, such cash
and/or Parent Common Shares as may be required pursuant to Section 1.06(a);
PROVIDED, HOWEVER, that Merger Sub may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
Section 1.11. TAX CONSEQUENCES. Subject to Section 6.04, it is intended by
the parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Code and the regulations promulgated thereunder.
The parties hereto hereby adopt this Agreement as a "plan of
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reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
Section 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful 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. DISSENTING SHARES. Notwithstanding any other provisions of
this Agreement to the contrary, shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such Shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders shall be entitled to receive
payment of the appraised value of such shares of Company Common Stock held by
them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Company Common Stock under such Section 262 shall thereupon be deemed
to have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, cash, Parent
Common Shares or a combination of cash and Parent Common Shares, in the sole
discretion of Merger Sub, such that (x) the sum of (I) such cash and (II) the
number of such Parent Common Shares multiplied by the Average Share Price equals
(y) (I) the number of shares of Company Common Stock so converted multiplied
(II) by the Closing Per Share Amount, together with any dividends or other
distributions to which such stockholders are entitled pursuant to Section
1.07(c), except that cash will be paid in lieu of any fractional Parent Common
Shares pursuant to Section 1.06(f).
Section 1.14. MATERIAL ADVERSE EFFECT. When used in connection with the
Company or any of its subsidiaries or Parent or any of its subsidiaries, as the
case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is or 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 Parent and its
subsidiaries, as the case may be, in each case taken as a whole; PROVIDED,
HOWEVER, that effects of changes that result from (A) any changes in economic,
regulatory or political conditions generally, (B) the United States securities
markets, (C) this Agreement or the transactions contemplated by this Agreement
or the announcement hereof or (D) with respect to the Company, any changes
affecting the construction, electronic components, telecommunications or energy
infrastructure industries 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 Parent and Merger Sub as
follows:
Section 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate or other 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 1998 Annual Report on
Form 10-K (the "Company Significant Subsidiaries"). The Company has furnished to
Parent a list of all subsidiaries of the Company together with the jurisdiction
of incorporation or organization 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 2.01 of the written disclosure schedule
previously delivered by the Company to Parent (the "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), neither
the Company nor any of its subsidiaries directly or indirectly owns 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 or a
subsidiary has invested (and currently owns) or is required to invest $2,000,000
or more, excluding securities in any publicly-traded company held for investment
by the Company and comprising less than five percent of the outstanding stock of
such company.
Section 2.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
heretofore made available to Parent and Merger Sub complete and correct copies
of (i) its Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws, each as amended to date (the "Company's Charter Documents"),
and (ii) the Certificate of Incorporation and Bylaws (or equivalent
organizational documents) (with respect to any subsidiary of the Company, the
"Subsidiary Documents") of each of its subsidiaries that account for more than
10% of the assets or sales of the Company on a consolidated basis. Within 30
days of the date of this Agreement, the Company will deliver to Parent the
Subsidiary Documents of each other active subsidiary of the Company. All such
Company Charter Documents and Subsidiary Documents are in full force and effect.
Neither the Company nor any of its subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents, except for immaterial violations of the documents
which do not and are not reasonably likely to materially interfere with the
operations of such entity.
Section 2.03. CAPITALIZATION. The authorized capital stock of the Company
consists of 150,000,000 shares of Company Common Stock and 15,000,000 shares of
the Company's Preferred Stock (the "Company Preferred Stock"), par value $1.00
per share, of which 150,000 shares have been designated as Series RP Preferred
Stock. As of May 17, 1999, (i) 77,585,116 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) 12,778,879 shares were held in treasury, (iii) no shares of
Company Preferred Stock were outstanding or held in treasury, (iv) no shares of
Company Common Stock or Company Preferred Stock were held by
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subsidiaries of the Company, (v) 10,966,914 shares of Company Common Stock were
issuable upon the exercise of outstanding options granted under the Company's
Stock Option Plans and (vi) 2,311,000 shares of Company Common Stock were
subject to future issuance pursuant to the Stock Purchase Plans. Except as set
forth in Section 2.03 of the Company Disclosure Schedule, no change in such
capitalization has occurred as of the date hereof, except for changes resulting
from the exercise of Stock Options and for issuances in accordance with the
terms of the Stock Purchase Plans. Except as set forth in Section 2.01, this
Section 2.03 or Section 2.11, Section 2.03 or Section 2.11 of the Company
Disclosure Schedule or for rights granted pursuant to the Company's Rights
Agreement (as defined in Section 2.24), 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. Except as set
forth in Section 2.01 or 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.
Section 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
approval of the Merger and the adoption of this Agreement by the Company's
stockholders in accordance with the DGCL and the Company's Charter Documents and
the filing and recording of appropriate merger documents as required by the NGCL
and the DGCL). As of the date hereof, the Board of Directors of the Company has
declared that it is advisable and in the best interests of the Company's
stockholders for the Company to enter into this Agreement and to consummate the
Merger upon the terms and subject to the conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub
of this Agreement, constitutes a legal, valid and binding obligation of the
Company.
Section 2.05. MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS. (a) Except as provided below, 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, guaranties, standby
letters of credit (to which the Company or any subsidiary is the responsible
party), equipment leases or lease purchase agreements, each in an amount equal
to or exceeding $10,000,000 to which the Company or any of its subsidiaries is
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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 contract,
agreement, commitment, or other understanding or arrangement, payments or
receipts by the Company or any of its subsidiaries of less than $10,000,000 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 United States 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. Notwithstanding the foregoing,
the Company may omit from Section 2.05 of the Company Disclosure Schedule and
instead include in Section 2.05 of a supplement to the Company Disclosure
Schedule, to be delivered to Parent not later than 14 days from the date of this
Agreement (the "Supplemental Company Disclosure Schedule"), any contract
referred to in clauses (i) and (ii) of the preceding sentence that, because of
time constraints, the Company is, in good faith, unable to list in Section 2.05
of the Company Disclosure Schedule and which does not relate to agreements or
arrangements for money borrowed. With regard to agreements for the purchase or
sale of goods and inventory in the ordinary course of business and licensing
arrangements, the threshold referred to in clause (ii) of the second preceding
sentence shall refer to payments or receipts measured on an annual basis.
(b) Except as set forth in Section 2.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Company's Charter Documents or the Subsidiary Documents, (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 clause (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, United States or non-United States
(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 United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), filings under the United States
Exon-Florio Act (the "Exon-Florio Act"), filings and consents under any
applicable non-United States laws intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade
("Non-U.S. Monopoly Laws"), filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and the filing and recordation of
appropriate merger or other documents as required by the DGCL or the NGCL, (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such
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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 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 through the date of this Agreement (collectively, the "Company
SEC Reports"). Except as disclosed in Section 2.07 of the Company Disclosure
Schedule, the Company SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or in the Company SEC Reports), and each fairly
presents in all material respects the consolidated financial position of the
Company and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
Section 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.08 of the Company Disclosure Schedule or the Company SEC Reports,
since June 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 Company's Charter Documents; (iii) any damage
to, destruction or loss
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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 (other than those required by GAAP subsequent
to the date of this Agreement); 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 March 31, 1999 included in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999 (the "1999 Company Balance
Sheet"), (b) incurred in the ordinary course of business and not required under
GAAP to be reflected on the 1999 Company Balance Sheet, (c) incurred since March
31, 1999 in the ordinary course of business, (d) incurred in connection with
this Agreement or the Merger or the other transactions contemplated hereby, (e)
disclosed in the Company Disclosure Schedule 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, 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 body
or Governmental Authority, 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 "Pension Plans" (as defined
in Section 3(2) of the United States 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
subsidiary of the Company, as well as each plan with respect to which the
Company, a subsidiary 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 Section 414(b), (c), (m) or (o)
of the Code or Section 4001(a)(14) or (b) of ERISA (a "Company ERISA Affiliate")
could incur liability under Section 4980B of the Code or Part 6 of Subtitle B of
Title I of ERISA (hereinafter, "COBRA"), Title IV of ERISA or Section 412 of the
Code (together for the purposes of this Section 2.11, the "Company Employee
Plans") that are maintained in the United States (the "U.S.") or cover primarily
U.S. employees. Not later than 30 days after the date of this Agreement, the
Company shall provide to Merger Sub and Parent a supplemental list (the
"Supplemental Benefits Disclosure Schedule"), which shall contain the names of
all Company Employee Plans maintained outside the U.S. and covering primarily
non-U.S. employees (each, a "Non-U.S. Company Plan"), PROVIDED that any such
plan, agreement or arrangement described in Section 2.11(d) of this Agreement
shall be listed only if it is (x) an employment agreement with the three most
highly compensated officers or employees of the Company in each non-U.S.
jurisdiction or any other material employment agreement, (y) a plan, program,
agreement, policy or arrangement of the Company which contains one or more
change-in-control provisions which could result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits
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or compensation payable in respect of any non-U.S. Company employee or (z) a
severance plan, program, policy or agreement which provides nonstatutory
benefits. Except as provided in Section 2.11(d), the Company has made available
to Parent prior to the date of this Agreement, or, with respect to any Non-U.S.
Company Plan other than the Company's International Pension Plan and the defined
benefit pension plans maintained in the United Kingdom, Belgium and Germany, not
later than 30 days after the date of this Agreement will make available, 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 that are inconsistent with any Company Employee Plan or any
provision under any Company Employee Plan or which could result in any
additional liability to the Company or such plan (including, but not limited to,
any communications that have not expressly reserved the right of the Company to
amend, terminate or otherwise modify any Company Employee Plan), (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).
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule: (i) none of the Company Employee Plans promises or provides medical or
other welfare benefits to any director, officer, employee or consultant (or any
of their beneficiaries) after their service with the Company terminates, other
than as required by COBRA, or any similar state laws; (ii) none of the Company
Employee Plans is a "multiemployer plan" as such term is defined in Section
3(37) of ERISA; (iii) to the Company's knowledge, 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; (iv) to the
Company's knowledge, 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, any Company ERISA Affiliate or any subsidiary thereof;
(v) 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 (including, but
not limited to, the applicable notification and other requirements of COBRA, the
Health Insurance Portability and Accountability Act of 1996, the Newborns' and
Mothers' Health Protection Act of 1996, the Mental Health Parity Act of 1996,
and the Women's Health and Cancer Rights Act of 1998), and may in accordance
with their terms be amended and/or terminated at any time subject to applicable
law, 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 material
default or violation by any other party to, any of the Company Employee Plans;
(vi) 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
United States Internal Revenue Service (the "IRS"), and, to the Company's
knowledge, nothing has occurred which may reasonably be expected to impair such
determination; (vii) all material contributions required to be made with respect
to any Company Employee Plan (pursuant to the terms of such plan, Section 412 of
the Code, any collective bargaining agreement or otherwise pursuant to
applicable law) have been made on or before their due dates (including any
extensions thereof); (viii) with respect to each Company Employee Plan,
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no "reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the 30-day notice requirement has been waived under the
regulations to Section 4043 of ERISA) has occurred for which there is any
material outstanding liability to the Company or any Company ERISA Affiliate nor
would the consummation of the transactions contemplated hereby (including the
execution of this Agreement) constitute a reportable event for which the 30-day
requirement has not been waived; (ix) none among the Company, any Company ERISA
Affiliate or any subsidiary thereof 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); (x) other than routine claims for
benefits made in the ordinary course of the operation of the Company Employee
Plans, there are no material pending, nor to the Company's knowledge any
threatened, claims, investigations or causes of action with respect to any
Company Employee Plan, whether made by a participant or beneficiary of such a
plan, a governmental agency or otherwise, against the Company, any Company
director, officer or employee, any Company Employee Plan or any fiduciary of a
Company Employee Plan.
(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 as of the close of business on May
14, 1999 (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 exercise price of such option (to the extent determined as of the
date hereof), whether such option is intended to qualify as 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. No option to purchase Company Common Stock has been
granted between May 14, 1999 and the date of this Agreement. Section 2.11(c) of
the Supplemental Benefits Disclosure Schedule shall update Section 2.11(c) of
the Company Disclosure Schedule.
(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 or employees of the Company or any of its subsidiaries who perform
services in the U.S., other than any offer letter or similar agreement that does
not alter the at-will nature of the individual's employment with the Company or
any subsidiary; (ii) all agreements with consultants who are former employees or
directors; (iii) all agreements with respect to the services of independent
contractors performing personal services for the Company or its subsidiaries or
leased employees, whether or not they participate in any of the Company Employee
Plans; (iv) all officers or other employees 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 and
under which there is a current or contingent obligation with the exception of
statutory plans maintained outside the U.S.; and (vi) all plans, programs,
agreements and other arrangements of the Company which contain change of control
provisions providing any benefits to any employees, directors or independent
contractors of the Company or any of its subsidiaries who perform services
primarily in the United States. If and to the extent any agreement described in
this Section 2.11(d) that is required to be delivered under Section 2.11(a) has
been entered into by the Company and one or more individuals pursuant to one or
more standard forms, the Company shall be required to deliver one example of
each such standard form, together with a schedule specifying each individual who
has entered into an agreement with the Company using such standard form, the
expiration date of the agreement and any material non-standardized terms
included in the agreement. Agreements described in Section 2.11(d)(iii) that
must be delivered under Section 2.11(a) which by their terms expire within six
months of the date on which they are entered into shall not be required to be
delivered until seven days from the date hereof.
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(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) no Company Defined Benefit Plan has an accumulated or
waived funding deficiency 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 Section 302 of ERISA been applied for with respect thereto; (iii)
the present value of the benefit liabilities (within the meaning of Section 4041
of ERISA) of each Company Defined Benefit Plan, determined on an ongoing basis
using the actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by each such plan's actuary with respect to that
plan's most recently completed fiscal year, does not exceed the value of that
Company Defined Benefit Plan's assets and, to the knowledge of the Company,
nothing has occurred since the end of the most recently completed fiscal year
that would materially adversely affect the funding status of such plans; (iv)
all applicable premiums required to be paid to the PBGC with respect to the
Company Defined Benefit Plans have been paid; (v) no facts or circumstances
exist with respect to any Company Defined Benefit Plan which would give rise to
a lien on the assets of the Company under Section 4068 of ERISA or otherwise;
and (vi) as of the date hereof, substantially all of the assets of the Company
Defined Benefit Plans are readily marketable securities or insurance contracts.
(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule, (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, provides for investment in or provides benefits
in or by reference to the value of Company stock; and (ii) since June 30, 1998,
the Company has not proposed nor agreed to any material increase in benefits
under any Company Employee Plan (or the creation of material new benefits) or
change in employee coverage which would materially increase the expense of
maintaining any Company Employee Plan other than in the renewal of any insured
employee welfare plans in the ordinary course of business.
(g) Except as set forth in Section 2.11(g) of the Company Disclosure
Schedule, (i) 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 (ii) 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.
(h) Each Non-U.S. Company 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 Non-U.S. Company 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(h) of the Company Disclosure Schedule, each Non-U.S.
Company Plan which is required by contract or under applicable local law to be
funded has been funded at least to the extent so required; if and to the extent
any Non-U.S. Company Plan is not funded, the obligations under such Non-U.S.
Company Plan are reflected on the books and records of the entity maintaining
the plan and on the consolidated financial statements of the Company.
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Section 2.12. LABOR MATTERS. Except as set forth in Section 2.12 of the
Company Disclosure Schedule, (i) there are no controversies pending or, to the
knowledge of the Company, threatened between the Company or any of its
subsidiaries and any of their respective employees, which controversies have
had, or would reasonably be expected, individually or in the aggregate, to have,
a Material Adverse Effect; (ii) neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or its subsidiaries, nor does the
Company or any of its subsidiaries know of any activities or proceedings of any
labor union to organize any such employees; and (iii) neither the Company nor
any of its subsidiaries is in breach of any collective bargaining agreement or
other labor union contract, nor has any knowledge of any strikes, slowdowns,
work stoppages, lockouts or threats thereof, by or with respect to any employees
of the Company or any of its subsidiaries which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 2.13. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject
to the accuracy of the representations of Parent in Section 3.13, the
information supplied by the Company in writing specifically for inclusion in the
Registration Statement (as defined in Section 3.13) shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
information supplied by the Company in writing specifically for inclusion in the
proxy statement/ prospectus to be sent to the stockholders of the Company in
connection with the meeting of the stockholders of the Company to consider the
Merger (the "Company Stockholders Meeting") (such proxy statement/prospectus as
amended or supplemented is referred to herein as the "Proxy Statement/
Prospectus") will not, on the date the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to stockholders or at
the time of the Company Stockholders Meeting, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company or any of its respective affiliates, officers or directors should be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Company shall promptly inform Parent and Merger Sub. The Proxy
Statement/Prospectus shall comply in all material respects with the requirements
of the Securities Act and the Exchange Act. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained or incorporated by reference
in, or furnished in connection with the preparation of, the Proxy
Statement/Prospectus.
Section 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, as set forth in Section 2.14 of the Company Disclosure Schedule, the
Company SEC Reports or for those licenses set forth in Section 2.19(e) of the
Company Disclosure Schedule, to the best of the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or would reasonably be expected to have the effect
of prohibiting or impairing the conduct of business by the Company or any of its
subsidiaries as currently conducted by the Company or such subsidiary, except
for any prohibition or impairment as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 2.15. TITLE TO PROPERTY. Except as set forth in Section 2.15 or
2.19(b) of the Company Disclosure Schedule, the Company and each of its
subsidiaries have good title to all of their real properties and other assets,
free and clear of all liens, charges and encumbrances, except liens for taxes
not yet due and payable and such liens or other imperfections of title, if any,
as do not materially
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detract from the value of or 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 1999 Company 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. (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
1999 Company Balance Sheet have been established or which are being contested in
good faith. Except as set forth in Section 2.16(a) of the Company Disclosure
Schedule, there are no material claims or assessments pending against the
Company or any of its subsidiaries for any alleged deficiency in any Tax, there
are no pending or threatened audits or investigations for or relating to any
liability in respect of any Taxes, and the Company has not been notified in
writing of any proposed Tax claims or assessments against the Company or any of
its subsidiaries (other than in each case, claims or assessments for which
adequate reserves in the 1999 Company Balance Sheet have been established or
which are being contested in good faith or are immaterial in amount).
(b) For purposes of this Agreement, the term "Tax" shall mean any United
States or non-United States federal, national, state, provincial, local or other
jurisdictional 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.
(c) Except as set forth in Section 2.16 of the Company Disclosure Schedule,
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. Except as set forth in Section
2.16 of the Company Disclosure Schedule or the Supplemental Company Disclosure
Schedule, there are no outstanding powers of attorney enabling any party to
represent the Company or any subsidiary with respect to tax matters.
Section 2.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
2.17(a) 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, the operations and properties of the Company and its
subsidiaries are in compliance with all 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.
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(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), 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 in Section 2.17(c) of the Company Disclosure
Schedule or the Company SEC Reports, there are no past or present actions,
activities, 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 set forth in Section 2.17(d) of the Company Disclosure
Schedule or the Company SEC Reports, (i) to the knowledge of the Company, there
are no off-site locations where the Company or any of its subsidiaries has
stored, disposed or arranged for the disposal of Materials of Environmental
Concern which have been listed on the United States National Priority List (the
"National Priorities List") or any 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, and (ii) except as would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect, (A) there are no underground storage tanks located on property owned or
leased by the Company or any of its subsidiaries, (B) 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 (C) 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, allegation, accusation,
action, cause of action, investigation or written notice by any person or
entity alleging potential liability (including potential liability for
investigatory costs, cleanup costs, response costs incurred by any
Governmental Authority or other person, 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 and non-United States
federal, national, state, provincial, local or other jurisdictional 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
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern, including, but
not limited to, the United States Comprehensive Environmental Response
Compensation and Liability Act 42 U.S.C. Section 9601 et seq., the United
States Resource Conservation and Recovery Act 42 U.S.C. Section 6901 et
seq., the United States Toxic Substances Control Act 15 U.S.C. Section 2601
et seq., the United States Occupational Safety and Health Act 29 U.S.C.
Section 651 et seq., the United States Clean Air Act 42 U.S.C. Section 7401
et seq., the United States Clean Water Act 33 U.S.C. Section 1251 et seq.,
Proposition 65, as codified in the California Health and Safety Code Section
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25249.5 et seq., and any other analogous state laws, 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
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), the fees and expenses of
which 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 Parent and Merger Sub a complete and correct
copy of all agreements between the Company and Morgan Stanley pursuant to which
such firm 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, common law
marks, 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, 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 are material to the business of the Company and its
subsidiaries as currently conducted, without conflict with the rights of others.
(c) Except as set forth 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 overtly threatened by any
person with respect to the Company Intellectual Property Assets or (ii) are, to
the knowledge of the Company, currently pending or overtly 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 set forth 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 or
licensing or use of any product now used, sold or licensed or proposed for use,
sale or 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 sets 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; (iii) to the extent the Company is
reasonably able to list the following items, material common law trademarks,
material trade dress and material slogans, and all material trade names owned by
the Company and/or each of its subsidiaries worldwide, PROVIDED that if the
Company is not reasonably able to list such items on the Company Disclosure
Schedule but is reasonably able to do so on the Supplemental Company Disclosure
Schedule, it shall do so on the Supplemental Company Disclosure Schedule; (iv)
all copyright registrations and copyright applications owned by the Company
and/or each of its subsidiaries worldwide; and (v) all material 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,
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trademarks, service marks, trade names or copyrights listed in Section 2.19(e)
of the Company Disclosure Schedule or (B) a licensee of any other person's
patents, trade names, trademarks, service marks or copyrights material to the
Company except for any licenses of software programs that are commercially
available "off the shelf." Except as disclosed in Section 2.19(e)(i) of the
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, 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)(i) or 2.19(f) of the Company Disclosure Schedule or the Company SEC
Reports: (i) each patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright registration and
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 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 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 Disclosure" contained in
the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1999
is accurate and in compliance with SEC disclosure requirements in all material
respects.
Section 2.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 2.20 of the Company Disclosure Schedule or the Company SEC Reports,
since the Company's proxy statement dated September 18, 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 set forth in Section 2.21 of the
Company Disclosure Schedule, 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 set forth in
Section 2.22(a) of the Company Disclosure Schedule or the Company SEC Reports,
the Company has no knowledge of any claim, pending or overtly 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 set forth 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.
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Section 2.23. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has been advised by its financial advisor, Morgan Stanley, to the effect
that in its opinion, as of the date of this Agreement, the Merger Consideration
to be received by the holders of Shares is fair to such holders from a financial
point of view.
Section 2.24. RIGHTS AGREEMENT. The Board of Directors of the Company has
authorized and approved an amendment to the Rights Agreement between the Company
and Harris Trust and Savings Bank dated as of December 11, 1998 (the "Rights
Agreement") to the effect that (i) none of Parent, Merger Sub and their
affiliates, either individually or as a group, shall become an "Acquiring
Person" (as defined in the Rights Agreement) and (ii) no Distribution Date,
Section 11.1.2 Event, Section 13 Event, Shares Acquisition Date or Triggering
Event (as each such term is defined in the Rights Agreement) shall occur, with
respect to each of clauses (i) and (ii), by reason of the approval, execution or
delivery of this Agreement, the consummation of the transactions contemplated
hereby 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 2.25. SUPPLEMENTAL COMPANY DISCLOSURE SCHEDULE. No disclosure
which will be made on the Supplemental Company Disclosure Schedule will be of a
matter which could reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company as follows:
Section 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent
and its subsidiaries is an entity duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate or
other power and authority necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized and existing or to
have such power or authority would not reasonably be expected to have a Material
Adverse Effect. Each of Parent and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not reasonably be expected to have a
Material Adverse Effect. A true and complete list of all of Parent's
subsidiaries, together with the jurisdiction of incorporation or organization of
each subsidiary and the percentage of each subsidiary's outstanding capital
stock owned by Parent or another subsidiary of Parent, is set forth in Section
3.01 of the written disclosure schedule previously delivered by Parent to the
Company (the "Parent Disclosure Schedule"). Except as set forth in Section 3.01
of the Parent Disclosure Schedule or the Parent SEC Reports (as defined in
Section 3.07 below), Parent does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity (other than
its wholly-owned subsidiaries), with respect to which Parent 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 Parent and
comprising less than five percent of the outstanding capital stock of such
company.
Section 3.02. MEMORANDUM OF ASSOCIATION AND BYE-LAWS. Parent has
heretofore made available to the Company a complete and correct copy of Parent's
Memorandum of Association and Bye-Laws, as amended to date (the "Parent Charter
Documents"). Such Parent Charter Documents are in full
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force and effect. Neither Parent 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 Parent
consists of 2,500,000,000 Parent Common Shares and 125,000,000 Preference
Shares, $1.00 par value per share ("Parent Preferred Shares"). (i) As of April
2, 1999, (I) 818,453,964 Parent Common Shares were issued and outstanding, all
of which are validly issued, fully paid and non-assessable, (II) no Parent
Preferred Shares were outstanding and (III) no more than 10,000,000 Parent
Common Shares and no Parent Preferred Shares were held by subsidiaries of
Parent; (ii) as of March 31, 1999, warrants to purchase 98,966 Parent Common
Shares were outstanding; and (iii) as of March 31, 1999, approximately
60,607,058 Common Shares were reserved for issuance upon exercise of stock
options issued under Parent'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 Parent Disclosure Schedule or the
Parent 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 Parent or any of its subsidiaries relating to the issued or
unissued capital stock of Parent or any of its subsidiaries or obligating Parent
or any of its subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, Parent or any of its subsidiaries. Except as set
forth in Section 3.01 or 3.03 of the Parent Disclosure Schedule, all of the
outstanding shares of capital stock (other than directors' qualifying shares) of
each of Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and all such shares (other than directors' qualifying shares and
a DE MINIMIS number of shares owned by employees of such subsidiaries) are owned
by Parent or another subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Parent's voting rights, charges or
other encumbrances of any nature whatsoever. The authorized capital stock of
Merger Sub consists of 10,000 shares of common stock, par value $0.01 per share,
all of which are duly authorized, and of which 6,000 shares are issued. All such
issued shares are validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereof and all of the outstanding shares of which
are owned by Parent.
(b) The Parent Common Shares to be issued pursuant to the Merger will be
duly authorized, validly issued, fully paid and nonassessable, and shall be
listed, upon official notice of issuance, for trading on the NYSE.
Section 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, as applicable, and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Merger Sub, and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
so contemplated. The Board of Directors of Parent has determined that it is
advisable and in the best interests of Parent's shareholders for Parent to enter
into this Agreement, and for Parent to consummate the Merger upon the terms and
subject to the conditions of this Agreement. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub, and, assuming due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Parent and Merger Sub.
Section 3.05. MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS. (a) Section 3.05(a) of the Parent 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, guarantees, standby letters of
credit (to which Parent or any subsidiary is the responsible party), equipment
leases or lease purchase agreements to which Parent or any of its subsidiaries
is a party or by which any of them is bound, each in an amount
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exceeding $30,000,000; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which Parent or any of its subsidiaries is a
party or by which any of them or any of their respective properties or assets
are bound or affected, but excluding contracts, agreements, commitments or other
understandings or arrangements entered into in the ordinary course of business
and involving, in each case, payments or receipts by Parent or any of its
subsidiaries of less than $25,000,000 in any single instance; and (iii) all
agreements which 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 Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Memorandum of Association (or Articles of
Incorporation) or bye-laws (or by-laws) of Parent or Merger Sub, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Parent or any of its subsidiaries or by which its or their respective
properties are bound or affected or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or impair Parent's or any of its subsidiaries' rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance (including a right to purchase) on any of the
properties or assets of Parent or any of its subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties are bound or affected, except, in the case of
clause (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 Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky
Laws, the pre-merger notification requirements of the HSR Act, the NYSE, the
Exon-Florio Act, Non-U.S. Monopoly Laws, and the filing and recordation of
appropriate merger or other documents as required by the NGCL or the DGCL, (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay Parent or
Merger Sub from performing their respective material obligations under this
Agreement and would not otherwise be reasonably expected, individually or in the
aggregate, to have a Material Adverse Effect or (iii) as to which any necessary
consents, approvals, authorizations, permits, filings or notifications have
heretofore been obtained or filed, as the case may be, by Parent or Merger Sub.
Section 3.06. COMPLIANCE; PERMITS. (a) Except as disclosed in Section
3.06(a) of the Parent Disclosure Schedule or the Parent SEC Reports, neither
Parent nor any of its subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to Parent or any of its subsidiaries or by which its or any of their
respective properties is bound or affected or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their respective
properties is bound or affected, except for any such conflicts, defaults or
violations which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 3.06(b) of the Parent Disclosure Schedule
or the Parent SEC Reports, Parent and its subsidiaries hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from Governmental Authorities which are material to the
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operation of the business of Parent and its subsidiaries, taken as a whole, as
it is now being conducted (collectively, the "Parent Permits"), except where the
failure to hold such Parent Permits would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. Parent and
its subsidiaries are in compliance with the terms of the Parent Permits, except
as described in the Parent SEC Reports or where the failure to so comply would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC since December
31, 1995 through the date of this Agreement (collectively, the "Parent SEC
Reports"). The Parent SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Except as set forth in Section 3.07(a) of the Parent
Disclosure Schedule, none of Parent'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 Parent SEC Reports has been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Parent SEC
Reports), and each fairly presents in all material respects the consolidated
financial position of Parent and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
Section 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.08 of the Parent Disclosure Schedule or the Parent SEC Reports, since
September 30, 1998, Parent has conducted its business in the ordinary course and
there has not occurred: (i) any changes, effects or changed circumstances
constituting, individually or in the aggregate, a Material Adverse Effect; (ii)
any amendments or changes in the Parent Charter Documents; (iii) any damage to,
destruction or loss of any assets of Parent (whether or not covered by
insurance) that would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect; (iv) any material change by Parent in its
accounting methods, principles or practices (other than as required by GAAP
subsequent to the date of this Agreement); or (v) any sale of a material amount
of assets of Parent, except in the ordinary course of business.
Section 3.09. NO UNDISCLOSED LIABILITIES. Except as set forth in Section
3.09 of the Parent Disclosure Schedule or the Parent SEC Reports, neither Parent
nor any of its subsidiaries has any liabilities (absolute, accrued, contingent
or otherwise), except liabilities (a) in the aggregate adequately provided for
in Parent's unaudited balance sheet (including any related notes thereto) as of
March 31, 1999 included in Parent's Quarterly Report on Form 10-Q for the fiscal
period ended March 31, 1999 (the "1999 Parent Balance Sheet"), (b) incurred in
the ordinary course of business and not required under GAAP to be reflected on
the 1999 Parent Balance Sheet, (c) incurred since March 31, 1999 in the ordinary
course of business, (d) incurred in connection with this Agreement, or the
Merger or the other transactions contemplated hereby, (e) disclosed in the
Parent Disclosure Schedule or (f) 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 Sections 3.10
or 3.19(b) of the Parent Disclosure Schedule or the Parent SEC Reports, there
are no claims, actions, suits, proceedings or investigations pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries, or
any properties or rights of Parent or any of its subsidiaries, before any court,
arbitrator
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or administrative body or Governmental Authority, 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 Parent Disclosure Schedule lists all material: (i) employee
pension benefit plans (as defined in Section 3(2) of ERISA), (ii) employee
welfare benefit plans (as defined in Section 3(1) of ERISA) and (iii) bonus,
stock option, stock purchase, incentive, deferred compensation and supplemental
retirement plans, as amended, modified or supplemented, for the benefit of, or
relating to, any former or current employee, officer, director or consultant (or
any of their beneficiaries) of Parent and any additional plans of Parent or any
entity (whether or not incorporated) which is a member of a controlled group,
including Parent, or which is under common control with Parent within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) or
(b) of ERISA (a "Parent ERISA Affiliate"), with respect to which Parent or a
Parent ERISA Affiliate is reasonably likely to incur material liability under
Title IV of ERISA or Section 412 of the Code (together for the purposes of this
Section 3.11, the "Parent Employee Plans").
(b) Except as set forth in Section 3.11(b) of the Parent Disclosure Schedule
or the Parent SEC Reports, (i) none of the Parent Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
none of the Parent Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (iii) all Parent 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; (iv) each Parent 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 Parent's knowledge, nothing has occurred which may
reasonably be expected to impair such determination; (v) all contributions
required to be made with respect to any Parent Employee Plan (whether pursuant
to the terms of such plan, Section 412 of the Code, any collective bargaining
agreement, or otherwise) have been made on or before their due dates (including
any extensions thereof); (vi) with respect to each Parent 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 Parent or any Parent ERISA Affiliate nor would
the consummation of the transaction contemplated hereby (including the execution
of this Agreement) constitute a reportable event for which the 30-day
requirement has not been waived; and (vii) neither Parent nor any Parent 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) Except as set forth in Section 3.11(c) of the Parent Disclosure
Schedule: (i) the PBGC has not instituted proceedings to terminate any Parent
Employee Plan that is subject to Title IV of ERISA (each, a "Parent Defined
Benefit Plan"); (ii) no Parent Defined Benefit Plan has an accumulated or waived
funding deficiency 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) the present
value of the benefit liabilities (within the meaning of Section 4041 of ERISA)
of each Parent Defined Benefit Plan, determined on an ongoing basis using the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by each such plan's actuary with respect to that plan's most
recently completed fiscal year, does not exceed by more than $10,000,000 the
value of that Parent Defined Benefit Plan's assets and, to the knowledge of
Parent, 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 Parent
Defined Benefit Plans have been paid; and (v) no facts or
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circumstances exist with respect to any Parent Defined Benefit Plan which would
give rise to a lien on the assets of Parent under Section 4068 of ERISA or
otherwise.
(d) Each Parent Employee Plan covering non-U.S. employees (a "Non-U.S.
Parent 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 Non-U.S.
Parent Plan was intended to so qualify) and has been maintained in good standing
with applicable regulatory authorities. The benefit liabilities of the Non-U.S.
Parent Plans are adequately provided for on the consolidated financial
statements of Parent.
Section 3.12. LABOR MATTERS. Except as set forth in Section 3.12 of the
Parent Disclosure Schedule or the Parent SEC Reports: (i) there are no
controversies pending or, to the knowledge of Parent or any of its subsidiaries,
threatened, between Parent or any of its subsidiaries and any of their
respective employees, which controversies have or would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect; (ii)
neither Parent nor any of its subsidiaries is in breach of any material
collective bargaining agreement or other labor union contract applicable to
persons employed by Parent or its subsidiaries which would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
nor does Parent or any of its subsidiaries know of any activities or proceedings
of any labor union to organize any such employees; and (iii) neither Parent nor
any of its subsidiaries has any knowledge of any strikes, 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
Parent or any of its subsidiaries, which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 3.13. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject
to the accuracy of the representations of the Company in Section 2.13, the
registration statement 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 Parent 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 Parent or Merger Sub in writing specifically for
inclusion in the Proxy Statement/Prospectus will not, on the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to stockholders or at the time of the Company Stockholders Meeting,
contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Stockholders Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to Parent, Merger Sub or any of their respective affiliates, officers
or directors should be discovered by Parent or Merger Sub which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Parent or Merger Sub will promptly inform the Company. The
Registration Statement and Proxy Statement/Prospectus shall comply in all
material respects with the requirements of the Securities Act and the Exchange
Act. Notwithstanding the foregoing, Parent and Merger Sub make no representation
or warranty with respect to any information supplied by the Company which is
contained or incorporated by reference in, or furnished in connection with the
preparation of, the Registration Statement or the Proxy Statement/Prospectus.
Section 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, to the best of Parent's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon Parent or any of its subsidiaries which
has or would reasonably be expected to have the effect of prohibiting or
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materially impairing the conduct of business by Parent or any of its
subsidiaries as currently conducted by Parent or such subsidiary, except for any
prohibition or impairment that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 3.15. TITLE TO PROPERTY. Parent and each of its subsidiaries have
good title to all of their real properties and other assets, free and clear of
all liens, charges and encumbrances, except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, which do not
materially detract from the value of or 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 1999 Parent Balance Sheet;
and, to Parent's knowledge, all leases pursuant to which Parent 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 Parent, under any of such leases, any
existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default), except where the
lack of such good standing, validity and effectiveness, or the existence of such
default or event of default, would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 3.16. TAXES. Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, Parent and
each of its subsidiaries have timely and accurately filed, or caused to be
timely and accurately filed, all material Tax Returns required to be filed by
them, and have paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes shown on such Tax Returns. There are no
claims or assessments pending against Parent or any of its subsidiaries for any
alleged deficiency in any Tax, except as set forth in Section 3.16 of the Parent
Disclosure Schedule, there are no pending or threatened audits or investigations
for or relating to any liability in respect of any Taxes, and Parent has not
been notified in writing of any proposed Tax claims or assessments against
Parent or any of its subsidiaries (other than, in each case, claims or
assessments for which adequate reserves in the 1999 Parent Balance Sheet have
been established or which are being contested in good faith or are immaterial in
amount).
Section 3.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
3.17(a) of the Parent Disclosure Schedule or the Parent SEC Reports or as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, the operations and properties of Parent and its subsidiaries are
in compliance with the Environmental Laws, which compliance includes the
possession by Parent 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 Parent Disclosure Schedule
or the Parent SEC Reports or as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect, there are no
Environmental Claims, including claims based on "arranger liability," pending
or, to the best knowledge of Parent, threatened against Parent or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim Parent or any of its subsidiaries has retained or assumed.
(c) Except as set forth on Section 3.17(c) of the Parent Disclosure Schedule
or in the Parent 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
are reasonably likely to form the basis of any Environmental Claim against
Parent or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim Parent or any of its subsidiaries have
retained or assumed, 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 Parent Disclosure Schedule or the
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Parent SEC Reports: (i) there are no off-site locations where Parent or any of
its subsidiaries has stored, disposed or arranged for the disposal of Materials
of Environmental Concern which have been listed on the National Priority List,
or any state Superfund site list, and Parent 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 Parent 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
Parent 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 Parent or any of its subsidiaries.
Section 3.18. BROKERS. No broker, finder or investment banker (other than
Goldman Sachs & Co., the fees and expenses of whom will be paid by Parent) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
Section 3.19. INTELLECTUAL PROPERTY. (a) Parent and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all Parent Intellectual Property Assets that are used in the
business of Parent and its subsidiaries as currently conducted without conflict
with the rights of others except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. As used
herein, "Parent Intellectual Property Assets" shall mean the Intellectual
Property Assets used or owned by Parent or any of its subsidiaries.
(b) Except as disclosed in Section 3.19(b) of the Parent Disclosure Schedule
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, no claims (i) are currently pending or, to the
knowledge of Parent, threatened by any person with respect to the Parent
Intellectual Property Assets or (ii) are, to the knowledge of Parent, 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
Parent or any of its subsidiaries.
(c) Except as set forth in Section 3.19(c) of the Parent Disclosure Schedule
or the Parent SEC Reports or as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect, each patent, patent
application, trademark or service mark registration, and trademark or service
mark application and copyright registration or copyright application of Parent
and/or each of its subsidiaries is valid and subsisting.
(d) Except as set forth in Section 3.19(d) of the Parent Disclosure
Schedule, to Parent's knowledge, there is no unauthorized use, infringement or
misappropriation of any of Parent's Intellectual Property Assets by any third
party, including any employee, former employee, independent contractor or
consultant of Parent or any of its subsidiaries which would reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.
(e) The disclosure under the heading "Year 2000 Compliance" contained in the
Parent's Quarterly Report on Form 10-Q for the period ended March 31, 1999 is
accurate and in compliance with SEC disclosure requirements in all material
respects.
Section 3.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 3.20 of the Parent Disclosure Schedule or the Parent SEC Reports, since
Parent'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.
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Section 3.21. INSURANCE. Except as set forth in Section 3.21 of the Parent
Disclosure Schedule or the Parent SEC Reports, all material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by Parent or any of its subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Parent and its subsidiaries and
their respective properties and assets and are in character and amount
appropriate for the businesses conducted by Parent, except as would not
reasonably be expected to have a Material Adverse Effect.
Section 3.22. PRODUCT LIABILITY AND RECALLS. (a) Except as set forth in
Section 3.22(a) of the Parent Disclosure Schedule or the Parent SEC Reports,
Parent has no knowledge of any claim, pending or threatened, against Parent or
any of its subsidiaries for injury to person or property of employees or any
third parties suffered as a result of the sale of any product or performance of
any service by Parent or any of its subsidiaries, including claims arising out
of the defective or unsafe nature of its products or services, which would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Except as set forth in Section 3.22(b) of the Parent Disclosure Schedule
or the Parent SEC Reports, there is no pending or, to the knowledge of Parent,
overtly threatened, recall or investigation of any product sold by Parent, which
recall or investigation would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
Section 3.23. OWNERSHIP OF PARENT AND MERGER SUB. Merger Sub is a direct,
wholly-owned subsidiary of Parent.
Section 3.24. DGCL SECTION 203. Other than by reason of this Agreement or
the transactions contemplated hereby, Parent is not an "interested stockholder"
of the Company, as that term is defined in Section 203 of the DGCL.
Section 3.25. NO VOTE REQUIRED. No vote of the shareholders of Parent is
required by law, Parent's Charter Documents or otherwise in order for Parent and
Merger Sub to consummate the Merger and the transactions contemplated hereby.
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 Parent shall otherwise agree in writing, and
except as set forth in Section 4.01 of the Company Disclosure Schedule, the
Company shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and the Company and its subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice; and the Company shall use reasonable commercial
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the Company nor
any of its subsidiaries shall, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, and except as set forth in Section 4.01 of the Company
Disclosure Schedule, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Merger Sub, which in the case of
clauses (c), (d)(ii), (d)(v), (e), (f), (h), (i) and (j) will not be
unreasonably withheld or delayed:
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(a) amend or otherwise change the Company's Charter Documents;
(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 (A) the issuance of shares of Company
Common Stock issuable pursuant to Company Stock Options outstanding on the date
hereof, (B) the issuance of shares of Company Common Stock pursuant to the Stock
Purchase Plans in accordance with their terms as in effect on the date hereof or
any employer stock fund under any Company Benefit Plan in accordance with its
terms as in effect on the date hereof, (C) the issuance of Company Stock Options
in the ordinary course and consistent with past practice with prior approval of
Parent and (D) the granting of Company Stock Options pursuant to written offers
of employment that were extended prior to the date hereof);
(c) except as set forth in Section 4.01 of the Company Disclosure Schedule,
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
$3,000,000 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 that is not a cross-border dividend
(except as provided in clause (ii) below), and except that the Company may
declare and pay prior to the Effective Time quarterly cash dividends of $0.09
per share consistent with past practice; (ii) declare or allow any subsidiary of
the Company to declare cross-border dividends, or make or allow any subsidiary
of the Company to make cross-border capital contributions, in an amount that
exceeds $2,000,000 in the aggregate; (iii) 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; (iv) except as required by the terms of any security as in effect
on the date hereof and set forth in Section 4.01 of the Company Disclosure
Schedule, and except to the extent necessary to effect any right of a grantee to
have shares of Company Common Stock withheld to meet minimum tax withholding
obligations in connection with any equity award under any Company Employee Plan
that is outstanding and in effect on the date of this Agreement and provided
that any such withholding is consistent with past practice, 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 (v) settle, pay or discharge any claim, suit or other action
brought or threatened against the Company with respect to or arising out of a
stockholder's 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 of the Company Disclosure
Schedule; (ii) incur any indebtedness for borrowed money, except for borrowings
and reborrowings under the Company's or any of its subsidiaries' existing credit
facilities listed on Section 2.05 of the Company Disclosure Schedule and other
borrowings not in excess of $5,000,000 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; (iii) authorize any capital expenditures or
purchases of fixed assets which are, in the aggregate, in excess of $50,000,000;
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);
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(f) except as set forth in Section 4.01 of the Company Disclosure Schedule,
(i) 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;
(ii) grant any severance or termination pay to any director, officer or employee
of the Company or any of its subsidiaries (except to make payments required to
be made under obligations existing on the date hereof in accordance with the
terms of such obligations); (iii) enter into any employment or severance
agreement with respect to which the total annual compensation or the aggregated
severance payments exceed $200,000 with any prospective officer or employee of
the Company or any of its subsidiaries; (iv) enter into or modify any agreement
with any director of the Company or any of its subsidiaries; (v) establish,
adopt, enter into or amend any collective bargaining agreement, Company Employee
Plan, 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 of this clause, (x) as may be required by law or (y) 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
and would not otherwise impose any material restraint on the business or
operations of the Company or any of its subsidiaries;
(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 tax election or settle or compromise any United States federal,
state, local or non-United States tax liability;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except for
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 and except for any payment, discharge or
satisfaction in an amount not to exceed $4,000,000 in the aggregate which
provides for a complete release for the Company and its subsidiaries and which
imposes no obligation on the Company and its subsidiaries other than the payment
of money as aforesaid;
(j) make any loan to any director, officer, employee or independent
contractor of the Company or any of its subsidiaries pursuant to the Company
Loan Program (as defined in Section 5.12(g)) or otherwise, with the exception of
loans made in order to effect a cashless exercise of any Stock Option in
accordance with its terms or the terms of the plan under which it was granted;
or
(k) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (j) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder.
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
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then in effect between the Company and Parent, or (ii) subject to compliance
with the other terms of this Section 4.02, including Section 4.02(c),
considering and negotiating a bona fide Acquisition Proposal that is a Superior
Proposal not solicited in violation of this Agreement; PROVIDED, HOWEVER, 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 Stockholders Meeting
and (y) the Board of Directors of the Company reasonably determines in good
faith (after due consultation with independent counsel, which may be Shearman &
Sterling) 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 stockholders 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 Parent 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 State of Delaware; PROVIDED, HOWEVER, that a
Superior Proposal may be subject to a due diligence review of confidential
information and to other customary conditions.
(b) The Company shall immediately notify Parent and Merger Sub 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 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 Parent and Merger Sub, orally and in
writing, if it enters into negotiations concerning any Acquisition Proposal.
(c) Except to the extent the Board of Directors of the Company reasonably
determines in good faith (after due consultation with independent counsel, which
may be Shearman & Sterling) that it is or is reasonably likely to be required to
act to the contrary in order to discharge properly its fiduciary duties (and,
with respect to the approval, recommendation or entering into any, Acquisition
Proposal, it may take such contrary action only after the second business day
following Parent's and Merger Sub's receipt of written notice of the Board of
Directors' intention to do so), 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 Parent or Merger Sub, the approval by such Board of Directors
of this Agreement or the Merger; PROVIDED, HOWEVER, that in all events, unless
this Agreement has been terminated in accordance with its terms, the Merger and
this Agreement shall be submitted for approval and adoption by the Company's
stockholders at the Company Stockholders Meeting and the Board of Directors
shall not recommend that stockholders vote against approval of the Merger and
adoption of this Agreement.
(d) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its stockholders a position required by Rule 14d-9 or
14e-2(a) promulgated under the Exchange Act or from making any disclosure to its
stockholders required by applicable law, rule or regulation.
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(e) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality and
standstill provisions of any agreement to which the Company is a party. Unless
this Agreement has been terminated in accordance with its terms, the Company
shall not redeem the Rights or waive or amend any provision of the Rights
Agreement to permit or facilitate the consummation of any Acquisition Proposal
or Alternative Transaction.
(f) 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 PARENT PENDING THE MERGER. Parent
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, except as set forth in Section 4.03 of the Parent Disclosure
Schedule or unless the Company shall otherwise agree in writing, (i) Parent
shall conduct its business, and cause the businesses of its subsidiaries to be
conducted, in the ordinary course of business and consistent with past practice,
including actions taken by Parent or its subsidiaries in contemplation of the
Merger, and (ii) Parent shall not directly or indirectly do, or propose to do,
any of the following without the prior written consent of the Company:
(a) amend or otherwise change Parent's 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 Parent may
declare and pay a dividend to its parent, and except that Parent may declare and
pay quarterly cash dividends on the Parent 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 Parent contained in this Agreement
untrue or incorrect or prevent Parent from performing or cause Parent not to
perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company and
Parent shall prepare and file with the SEC preliminary proxy materials which
shall constitute the 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
Parent of all information required to be contained therein, the Company and
Parent shall file with the SEC the definitive Proxy Statement/Prospectus and the
Registration Statement (or, if the Registration Statement has been
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previously filed, an amendment thereto) relating to the approval of the Merger
and the adoption of this Agreement by the stockholders of the Company pursuant
to this Agreement, and shall use all reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable.
Section 5.02. COMPANY STOCKHOLDERS MEETING. The Company shall call the
Company Stockholders Meeting as promptly as practicable for the purpose of
voting upon the approval of the Merger and adoption of the Merger Agreement, and
the Company shall use its reasonable best efforts to hold the Company
Stockholders Meeting as soon as practicable after the date on which the
Registration Statement becomes effective. The 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 stockholders
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
stockholders in favor of such approval. Notwithstanding anything to the contrary
herein, the Company shall not be obligated to take any of the actions set forth
in the two preceding sentences of this Section 5.02 (but not the first sentence
of this Section 5.02) to the extent that the Board of Directors of the Company
reasonably determines (after due consultation with independent counsel, which
may be Shearman & Sterling) that it is or is reasonably likely that any such
action is inconsistent with the proper discharge of its fiduciary duties;
PROVIDED, HOWEVER, that in no event shall the Board of Directors recommend that
the Company's stockholders vote against approval of the Merger and adoption of
the Merger Agreement at the Company Stockholders Meeting.
Section 5.03. ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements or
court orders to which such party is subject (from which such party shall use
reasonable efforts to be released), the Company and Parent shall (and shall
cause their respective subsidiaries to) (i) afford to the officers, employees,
accountants, counsel and other representatives (collectively the
"Representatives") of the other, reasonable access, during the period after the
execution and delivery of this Agreement and prior to the Effective Time, to its
properties, books, contracts, commitments and records and (ii) during such
period, furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request, and each
shall make available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the other's
business, properties and personnel as either Parent or the Company may
reasonably request. Each party shall keep such information confidential, and
shall cause their respective Representatives to keep such information
confidential in accordance with the terms of the confidentiality letters, dated
April 13, 1999 (the "Confidentiality Letters"), between Parent and the Company.
Section 5.04. CONSENTS; APPROVALS. The Company, Parent and Merger Sub
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, Merger Sub and Parent shall 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, Merger
Sub and Parent and the consummation by them of the transactions contemplated
hereby. The Company, Merger Sub and Parent shall furnish all information
required to be included in the Proxy Statement/Prospectus and the Registration
Statement, or for any application or other filing to be made pursuant to the
rules and regulations of any United States or non-United States governmental
body in connection with the transactions contemplated by this Agreement. The
Company, Merger Sub and Parent shall fully cooperate with each other in order to
obtain all consents, waivers, approvals, authorizations or orders and to make
all required filings in connection therewith.
Section 5.05. AGREEMENTS WITH RESPECT TO AFFILIATES. The Company shall
deliver to Merger Sub, prior to the date the Registration Statement becomes
effective under the Securities Act, a letter (the
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"Company Affiliate Letter") identifying all persons who are anticipated to be
"affiliates" of the Company at the time of the Company Stockholders Meeting for
purposes of Rule 145 under the Securities Act ("Rule 145"). The Company shall
use its reasonable best efforts to cause each person who is identified as an
"affiliate" in the Affiliate Letter to deliver to Parent, prior to the date of
the Company Stockholders 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, in a form mutually agreeable to the
Company and Parent.
Section 5.06. INDEMNIFICATION AND INSURANCE. (a) The Articles of
Incorporation and By-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the Company's Charter
Documents, 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
and then only to the minimum extent required by such law.
(b) The Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Articles of Incorporation or
By-laws, indemnify and hold harmless, each present and former director, officer
or employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, (x)
arising out of or pertaining to the transactions contemplated by this Agreement
or (y) otherwise with respect to any acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the Company's Charter
Documents 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 (including former
directors and officers) existing at or before the Effective Time, PROVIDED such
agreements have not been entered into or modified in violation of Section
4.01(f).
(d) In addition, Parent will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring at or prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the existing policy or, if
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substantially equivalent insurance coverage is unavailable, the best available
coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 200% of
the annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much such coverage as possible for such amount.
(e) From and after the Effective Time, Parent shall unconditionally
guarantee the timely payment of all funds owing by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section 5.06.
(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 and the Officer Employees, shall be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the Indemnified Parties.
Section 5.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub 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 of the notifying party contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Merger Sub, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 5.08. FURTHER ACTION/TAX TREATMENT. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. The foregoing covenant shall not include any obligation by
Parent to agree to divest, abandon, license or take similar action with respect
to any material assets (tangible or intangible) of Parent or the Company or any
of their subsidiaries. The term "material" for purposes of the preceding
sentence means any assets to which are attributable annual sales in an amount
equal to 1% or more of the Company's annual sales for the fiscal year ended June
30, 1998. Subject to Section 6.04, each of Parent, 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) knowingly 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 stockholders who are or will be "5% transferee stockholders" within
the meaning of Treasury Regulation Section 1.367(a)-3(c)(5)(ii)). Subject to
Section 6.04, Parent shall, and shall use its reasonable best efforts to cause
the Surviving Corporation 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 5.09. PUBLIC ANNOUNCEMENTS. Parent 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.
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Section 5.10. PARENT COMMON SHARES. (a) Prior to the Effective Time,
Merger Sub shall obtain from Parent, and Parent shall transfer to Merger Sub,
the Parent Common Shares to be delivered by Merger Sub to the holders of Company
Common Stock in the Merger.
(b) Parent will use its best efforts to cause the Parent Common Shares to be
delivered by Merger Sub to the holders of Company Common Stock in the Merger to
be listed, upon official notice of issuance, on the NYSE prior to the Effective
Time and the Parent Common Shares to be issued upon exercise of the Adjusted
Options to be so listed, as soon as practicable following the Effective Time.
Section 5.11. CONVEYANCE TAXES. Parent, Merger Sub and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time, and the Company shall be responsible for the payment of all such taxes and
fees.
Section 5.12. OPTION PLANS AND BENEFITS, ETC. (a) Prior to the Effective
Time, the parties to this Agreement shall take all such actions as shall be
necessary to effectuate the provisions of Section 1.06(c).
(b) The Company shall take such action as is necessary to cause the ending
date of the then current offering periods under the Stock Purchase Plans to be
prior to the Effective Time and to terminate such plan as of or prior to the
Effective Time.
(c) Benefit Continuation. (i) From the Effective Date through June 30, 2000
(the "Benefits Continuation Period"), Parent and Merger Sub agree to provide
each person who is, as of the Effective Time, an employee of the Company or any
Company subsidiary (a "Company Employee") with employee benefits, including, but
not limited to, retirement, health and welfare benefits that are, in the
aggregate, substantially equivalent to those provided to such Company Employee
immediately prior to the Effective Time, PROVIDED that, Parent and Merger Sub
reserve the right to amend, without limitation, the retiree welfare benefit
plans with respect to the Company Employees effective as of the Effective Time.
(ii) During the Benefit Continuation Period, Parent and Merger Sub agree to
provide each person who is, as of the Effective Time, a retired employee of the
Company or any Company subsidiary participating in any Company Benefit Plan (a
"Company Retiree") with health and welfare benefits that are, in the aggregate,
substantially equivalent to those provided to such Company Retiree immediately
prior to the Effective Time. Parent and Merger Sub reserve the right to amend
the retiree welfare benefit plans with respect to the Company Retirees effective
as of July 1, 2000.
(d) Service Credit. To the extent that service is relevant for eligibility,
vesting and, except as would result in duplication of benefits, calculation of
welfare benefits, under any Parent Employee Plan or subsequently established
employee benefit plan, program or arrangement maintained by Parent or any
subsidiary for which such individual is eligible, such Parent Employee Plan or
other plan, program or arrangement shall credit Company Employees who
participate therein for service on or prior to the Effective Time to the extent
such service was credited under the corresponding (if any) Company Employee Plan
with the Company or any subsidiary or any affiliate or predecessor of any of
them. In addition, Parent and Merger Sub shall (i) waive limitations on benefits
relating to any pre-existing conditions under any welfare benefit plan of Parent
or any subsidiary in which Company Employees may participate and (ii) recognize,
for purposes of annual deductible and out-of-pocket limits under its medical and
dental plans, deductible and out-of-pocket expenses paid by Company Employees
and their respective dependents under the Company's and any subsidiary's medical
and dental plans in the calendar year in which the Effective Time occurs.
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(e) COMPANY RETENTION PLAN. At the Effective Time, Parent and Merger Sub
shall assume the Company's Key Employee Retention and Severance Plan. At the
Effective Time, Parent shall assume, and through June 30, 2000, maintain, the
Company's Executive Termination Compensation Policy and the Company's Lay-off
Benefits Plan. Parent agrees to discharge all its obligations and provide all
benefits which accrue thereunder and to maintain such plans on the same terms
and conditions MUTATIS MUTANDIS. Prior to the Effective Time, the Company shall
amend the Company's Layoff Benefits Plan to limit severance payable thereunder
to a maximum of 104 weeks of pay.
(f) DEFERRED COMPENSATION PROGRAMS. Parent and Merger Sub agree to continue
to maintain, with respect to deferral elections made on or prior to June 30,
1999, the Company's Bonus Deferral Plan, the Company's Executive Deferred
Compensation Plan and the Company's Supplemental Executive Retirement Plan (the
"Deferral Plans"), PROVIDED that investment options with respect to deferred
monies shall be similar to those offered under the Deferral Plans as of the
Effective Date or to those offered under any comparable plan of Parent. Prior to
the Effective Time, the Company shall determine in consultation with Parent and
each of their advisors whether to amend the Executive Deferred Compensation Plan
to eliminate the right of the participants to elect distributions upon the
occurrence of certain corporate reorganizations and to provide the administrator
of such Plan with discretionary powers consistent with those in the Company's
other Deferral Plans. The Company shall communicate, in a written document the
form and substance of which has been agreed to by the Company and Merger Sub, to
each individual who may receive a "Restricted Stock Amount" as defined in
Section 2.16 of the Company's Executive Deferred Compensation Plan, in respect
of any Restricted Share that vests on or after the Effective Date, that any such
share will not become a Restricted Stock Amount in the event that the Merger is
consummated. The Company shall communicate, in a written document the form and
substance of which has been agreed to by the Company and Merger Sub, to each
participant in the Company's Bonus Deferral Plan that stock options are no
longer available with respect to any bonus not paid before the Effective Date.
The Company shall amend the Company's Executive Deferred Compensation Plan, the
1990 Plan and the Bonus Deferral Plan, as agreed upon by the Company and Parent,
in order to effectuate the foregoing. At the Effective Time, Company Employees'
participation in the Deferral Plans shall cease with respect to future deferrals
and Company Employees shall be able to participate in the Parent Deferred
Compensation Plan on the same terms as other comparably situated employees of
Parent.
(g) Company Loan Program. Through June 30, 2000, Parent and Merger Sub agree
to continue to maintain the Company's Loan Program (the "Company Loan Program")
and Parent and Merger Sub acknowledge that neither the consummation of the
transactions contemplated hereby nor any amendment or termination of the Company
Loan Program shall accelerate the maturity date of or otherwise affect in any
way any loans previously made to the Company's executives under the Company Loan
Program.
(h) No Third Party Rights. It is expressly agreed that the provisions of
this Section 5.12 are not intended to be for the benefit of or otherwise be
enforceable by any third party, including, without limitation, any current or
former employee, officer, director, independent contractor or any collective
bargaining unit or employee organization.
Section 5.13. 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 (as defined in the Rights
Agreement) inapplicable to the Merger and the other transactions contemplated by
this Agreement.
Section 5.14. ACCOUNTANT'S LETTERS. Upon reasonable notice from the other,
the Company shall use its best efforts to cause PricewaterhouseCoopers LLP to
deliver to Merger Sub, and Merger Sub shall use its best efforts to cause
PricewaterhouseCoopers to deliver to the Company, a letter covering such matters
as are reasonably requested by Merger Sub or the Company, as the case may be,
and as are customarily addressed in accountants' "comfort letters."
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Section 5.15. COMPLIANCE WITH STATE PROPERTY TRANSFER LAWS. 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
Parent and Merger Sub, 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 Parent and Merger Sub 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 Parent's and Merger Sub's prior consent, which consent
shall not be unreasonably withheld or delayed. Parent and Merger Sub shall
provide to the Company any assistance reasonably requested by the Company with
respect to such compliance.
Section 5.16. CHARITIES. After the Effective Time, Parent shall cause the
Surviving Corporation 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 5.16 of the Company Disclosure
Schedule sets forth all charitable contributions and community support provided
by the Company for the two-year period immediately prior to the date hereof. It
is expressly agreed that the provisions of this Section 5.16 are not intended to
be for the benefit of or otherwise be enforceable by any third party.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that
purpose and no similar proceeding in respect of the Proxy
Statement/Prospectus shall have been initiated or threatened by the SEC;
(b) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company;
(c) Antitrust. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and all
clearances and approvals required to be obtained in respect of the Merger
prior to the Effective Time under any Non-U.S. Monopoly Laws shall have been
obtained, except where the failure to have obtained any such clearances or
approvals with respect to any Non-U.S. Monopoly Laws would not reasonably be
expected to have a Material Adverse Effect on the Company, Parent or
Parent'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
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competent jurisdiction, or any other legal restraint (i) preventing or
seeking to prevent consummation of the Merger, (ii) prohibiting or seeking
to prohibit, or limiting or seeking to limit, Parent from exercising all
material rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Parent or any of its
subsidiaries of all or a material portion of the business or assets of the
Surviving Corporation and its subsidiaries, or (iii) compelling or seeking
to compel Parent or any of its subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of Parent or any of
its subsidiaries (including the Surviving Corporation and its subsidiaries),
as a result of the Merger or the transactions contemplated by this
Agreement;
(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; and
(f) Tax Opinions. Subject to Section 6.04, the Company shall have
received a written opinion of Shearman & Sterling (the "Company Tax
Opinion"), and Merger Sub shall have received a written opinion of
PricewaterhouseCoopers LLP (the "Parent Tax Opinion"), 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 stockholders
pursuant to the Merger, other than Company stockholders who are or will be
"5% transferee stockholders" within the meaning of Treasury Regulation
Section 1.367(a)-3(c)(5)(ii), will qualify for an exception under Treasury
Regulation Section 1.367(a)-3 and, accordingly, Parent will be treated as a
corporation for United States federal income tax purposes. Each party agrees
to make all customary and reasonable representations and covenants to such
counsel in connection with the rendering of such opinions.
Section 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects on and as of the Effective Time, 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 Parent and Merger Sub shall have received a certificate of the Company
to such effect signed by the Chief Executive Officer or Chief Financial
Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate
to such effect signed by the Chief Executive Officer or Chief Financial
Officer of the Company; PROVIDED HOWEVER, that unless the Company knowingly
breaches Section 4.01(k), the Company shall have been deemed to have
complied with Section 4.01(k) unless the failure to comply with such section
would also result in the failure of the condition referred to in Section
6.02(a);
(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 Parent; and
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(d) 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 Parent 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 would not reasonably be
expected, individually or in the aggregate with all other such failures, to
have a Material Adverse Effect, and the Company shall have received a
certificate to such effect signed by the Chief Executive Officer or Chief
Financial Officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and the Company shall have received a
certificate of Parent and Merger Sub to such effect signed by the Chief
Executive Officer or Chief Financial Officer of Parent and the President or
Vice President of Merger Sub;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by Parent or Merger Sub for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Parent or Merger
Sub, except where the failure to receive such consents, 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 Parent;
(d) Listing. The Parent 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 Parent's Shareholder Rights Plan dated November 6, 1996, as amended.
Section 6.04. FAILURE TO DELIVER TAX OPINIONS. In the event that or
PricewaterhouseCoopers LLP notifies Parent and Merger Sub in writing that it
cannot render the Parent Tax Opinion (as reasonably determined by
PricewaterhouseCoopers LLP and concurred in by Shearman & Sterling), or Shearman
& Sterling notifies the Company in writing that it cannot render the Company Tax
Opinion (as reasonably determined by Shearman & Sterling and concurred in by
PricewaterhouseCoopers LLP), the Company, within three business days of receipt
of such notice from Shearman & Sterling or a copy of such PricewaterhouseCoopers
LLP notice, may provide Parent and Merger Sub with written notice that it elects
to proceed to consummate this Agreement notwithstanding the failure to satisfy
the condition set forth in Section 6.01(f) (the "Tax Opinion Condition"). In
such event, and any other provision of this Agreement notwithstanding, the Tax
Opinion Condition shall be deemed waived by the parties to this Agreement, and
Parent, Merger Sub and the Company shall take all steps necessary to effectuate
a merger (the "New Merger") of a wholly-owned direct or indirect subsidiary of
Parent ("New Merger Sub") with and into the Company, with the Company being the
Surviving Corporation, in accordance with the provisions of the DGCL and any
other applicable jurisdiction. Except as may be necessary to reflect the change
in the transaction structure to the New Merger and the jurisdiction of New
Merger Sub, the terms of this Agreement, including the provisions of Section
1.06, shall govern the New Merger, and the references in this Agreement to
Merger Sub, the Surviving Corporation and the
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Merger shall be deemed references, MUTATIS MUTANDIS, to New Merger Sub, the
Company and the New Merger, respectively. The waiver of the Tax Opinion
Condition, in accordance with and in the circumstances contemplated by this
Section, shall not constitute a waiver of any other condition to the Merger or
any other provisions of this Agreement.
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
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by November 30, 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 Parent or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(d) by either Parent or the Company if the Company Stockholders Meeting
has not been held by November 30, 1999, or if the stockholders of the
Company shall not have approved the Merger and adopted this Agreement at the
Company Stockholders Meeting; or
(e) by Parent, 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 Parent; (ii) approve or recommend to the
stockholders of the Company an Acquisition Proposal or Alternative
Transaction; or (iii) approve or recommend that the stockholders 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 stockholders permitted pursuant to Section 4.02(d) which has
the effect of any of the foregoing; or
(f) by the Company, in order to accept a Superior Proposal, provided
that the Merger and this Agreement shall not theretofore have been approved
at the Company Stockholders Meeting; the Board of Directors of the Company
reasonably determines in good faith (after due consultation with independent
counsel, which may be Shearman & Sterling), that it is or is reasonably
likely to be required to accept such proposal in order to discharge properly
its fiduciary duties; the Company shall in fact accept such proposal; and
the Company shall have complied in all respects with the provisions of
Section 4.02; or
(g) by Parent or the Company, if any representation or warranty of the
Company, or Parent and Merger Sub, respectively, set forth in this Agreement
shall be untrue when made, such that the conditions set forth in Section
6.02(a) or 6.03(a), as the case may be, would not be satisfied (in each
case, a "Terminating Misrepresentation"); PROVIDED that, if such Terminating
Misrepresentation is curable prior to November 30, 1999 by the Company or
Parent, as the case may be, through the exercise of its reasonable best
efforts to eliminate, undo or reverse the event or circumstance giving rise
to such Terminating Misrepresentation and for so long as the Company
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or Parent, as the case may be, continues to exercise such reasonable best
efforts, neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(g); or
(h) by Parent, if any representation or warranty of the Company shall
have become untrue such that the condition set forth in Section 6.02(a)
would not be satisfied, or by the Company, if any representation or warranty
of Parent and Merger Sub shall have become untrue such that the condition
set forth in Section 6.03(a) would not be satisfied (in each case, 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 November 30, 1999 by the Company or Parent, as
the case may be, through the exercise of its reasonable best efforts, and
for so long as the Company or Parent, as the case may be, continues to
exercise such reasonable best efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.01(h); or
(i) by Parent or the Company, upon a breach of any covenant or agreement
on the part of the Company or Parent, respectively, set forth in this
Agreement such that the conditions set forth in Section 6.02(b) or 6.03(b),
as the case may be, would not be satisfied (in each case, 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 November
30, 1999 by the Company or Parent, as the case may be, through the exercise
of its reasonable best efforts and for so long as the Company or Parent, as
the case may be, continues to exercise such reasonable best efforts, neither
Parent nor the Company, respectively, may terminate this Agreement under
this Section 7.01(i).
As used herein, "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Parent or its
affiliates (a "Third Party") acquires or would acquire more than 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 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 except that (i) the Company
or Parent 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, Parent
or Merger Sub from liability for any willful material breach hereof (it being
understood that the mere existence of a Material Adverse Effect, by itself,
shall not constitute such a willful material breach).
Section 7.03. FEES AND EXPENSES. (a) Except as set forth in this Section
7.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that
Parent and the Company shall share equally (i) all SEC filing fees and printing
expenses
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incurred in connection with the printing and filing of the Proxy
Statement/Prospectus (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto and (ii) all conveyance and similar taxes
required to be paid prior to the Effective Time under Section 5.11.
(b) The Company shall pay Parent a fee of $100 million (the "Fee"), and
shall pay Parent'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 either Parent or the Company), such payment of Expenses not to
exceed $7.5 million, upon the first to occur of any of the following events:
(i) the termination of this Agreement by Parent or the Company pursuant
to Section 7.01(d), PROVIDED that, if this Agreement is terminated because
the stockholders have not approved and adopted the Merger and this Agreement
at the Company's Stockholders Meeting, the Fee and Expenses shall only be
payable under this clause (i) if there shall occur a Payment Trigger; or
(ii) the termination of this Agreement by Parent pursuant to clause
(x)(ii) or (x)(iii) of Section 7.01(e) or the corresponding application of
clause (y) thereof to clause (x)(ii) or (x)(iii); or
(iii) the termination of this Agreement by the Company pursuant to
Section 7.01(f); or
(iv) the termination of this Agreement by Parent pursuant to Section
7.01(i) as a result of a willful breach by the Company; PROVIDED that the
Fee and Expenses shall only be payable under this clause (iv) if there shall
occur a Payment Trigger.
The term "Payment Trigger" means either (A) at the time of the Company
Stockholders Meeting, in the case of clause (i) above, or at the time of the
Terminating Breach, in the case of clause (iv) above, there shall be outstanding
a bona fide Acquisition Proposal which has been made directly to the
stockholders of the Company or has otherwise become publicly known or there
shall be outstanding an announcement by any credible third party of a bona fide
intention to make an Acquisition Proposal (in each case whether or not
conditional and whether or not such proposal shall have been rejected by the
Board of Directors of the Company) or (B) an Alternative Transaction shall be
publicly announced by the Company or any third party within 12 months following
the date of termination of this Agreement and such transaction shall at any time
thereafter be consummated on substantially the terms theretofore announced.
(c) Upon a termination of this Agreement by Parent pursuant to Section
7.01(g), the Company shall pay to Parent and Merger Sub their respective
Expenses relating to the transactions contemplated by this Agreement, but in no
event more than $7.5 million. Upon termination of this Agreement by the Company
pursuant to Section 7.01(g), Merger Sub shall pay to the Company the Expenses of
the Company relating to the transactions contemplated by this Agreement, but in
no event more than $7.5 million.
(d) The Fee and/or Expenses payable pursuant to Section 7.03(b) or Section
7.03(c) shall be paid within one business day after a demand for payment
following the first to occur of any of the events described in Section 7.03(b)
or Section 7.03(c); PROVIDED that in no event shall the Company or Parent, as
the case may be, be required to pay such Fee and/or Expenses to the entities
entitled thereto, if, immediately prior to the termination of this Agreement,
the other entity was entitled to terminate this Agreement pursuant to Section
7.01(g), Section 7.01(h) or Section 7.01(i).
(e) Each of the Company and Parent agrees that the payments provided for in
Section 7.03(b) or (c), as the case may be, shall be the sole and exclusive
remedies of Parent upon a termination of this Agreement pursuant to Sections
7.01(d), (e) and (f) or a termination pursuant to Section 7.01(g) (but only if
the Terminating Misrepresentation is not intentional), as the case may be, and
such remedies shall be limited to the sums stipulated in Section 7.03(b) or (c),
as the case may be, regardless of the circumstances giving rise to such
termination.
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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 this Article VIII and Sections 5.06 and 5.08 and any
other agreement in this Agreement which contemplates performance after the
Effective Time shall survive the Effective Time indefinitely and those set forth
in Sections 7.02 and 7.03 and this Article VIII shall survive the termination of
this Agreement. 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 Parent Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Parent Disclosure Schedule
shall not be deemed an admission that such matter is material. No statement
contained in any certificate or schedule required to be furnished by any party
hereto pursuant to the provisions of this Agreement, including the Company
Disclosure Schedule and the Parent Disclosure Schedule, shall contain any untrue
statement of material fact or omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make such
party's statements therein not misleading.
Section 8.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent:
Tyco International Ltd.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton, Bermuda HM11
Attn: Secretary
Telecopy: (441) 295-9647
Confirm: (441) 292-8674
With a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attn: Mark A. Belnick, Esq.
Telecopy: (603) 778-7700
Confirm: (603) 778-9700
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If to Merger Sub:
Tyco International (PA) Inc.
c/o Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attn: Mark A. Belnick, Esq.
Telecopy: (603) 778-7700
Confirm: (603) 778-9700
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Joshua M. Berman, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(b) If to the Company:
Raychem Corporation
300 Constitution Drive
Menlo Park, CA 94025
Attn: General Counsel
Telecopy: (650) 361-4536
Confirm: (650) 361-3333
With a copy to:
Shearman & Sterling
1550 El Camino Real
Menlo Park, CA 94025
Attn: Christopher D. Dillon, Esq.
Telecopy: (650) 330-2299
Confirm: (650) 330-2200
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) "Business Day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(c) "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;
(d) "Dollars" or "$" means United States dollars;
(e) "Knowledge" means, with respect to any matter in question, that the
executive officers of the Company or Parent, as the case may be, have or at
any time had actual knowledge of such matters;
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(f) "Person" means an individual, corporation, partnership, limited
liability company, 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, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
Section 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Merger and this Agreement by the stockholders of the Company, no
amendment may be made which by law requires further approval by such
stockholders 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 the transactions contemplated hereby are fulfilled to the extent possible.
(b) The Company and Parent agree that the Fee is fair and reasonable in the
circumstances. If a court of competent jurisdiction shall nonetheless, by a
final, non-appealable judgment, determine that the amount of the Fee exceeds the
maximum amount permitted by law, then the amount of the Fee shall be reduced to
the maximum amount permitted by law in the circumstances, as determined by such
court of competent jurisdiction.
Section 8.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters, 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.
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 Parent
and/or Merger Sub hereunder may be assigned to any wholly-owned, direct or
indirect, subsidiary of Parent, provided that no such assignment shall relieve
the assigning party of its obligations hereunder.
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Section 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 5.06 (which is intended to be for the benefit of the Indemnified
Parties and Officer Employees and may be enforced by such Indemnified Parties
and Officer Employees).
Section 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any 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
Delaware applicable to contracts executed and fully performed within the State
of Delaware.
(b) Each of the parties hereto submits to the exclusive jurisdiction of the
state and federal courts of the United States located in the State of Delaware
with respect to any claim or cause of action arising out of this Agreement or
the transactions contemplated hereby.
(c) Each of the parties to this Agreement (i) consents to submit itself to
the personal jurisdiction of such court in the event that 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 in relation to this Agreement, the
Merger or any of the other transactions contemplated by this Agreement in any
court other than such court in the State of Delaware.
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 PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 8.15. PERFORMANCE OF OBLIGATIONS. Unless otherwise previously
performed, Parent shall cause Merger Sub to perform all of its obligations set
forth in this Agreement.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
A-51
<PAGE>
<TABLE>
<S> <C> <C>
TYCO INTERNATIONAL LTD.
By /s/ MARK H. SWARTZ
-----------------------------------------
Name: Mark H. Swartz
Title: EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
TYCO INTERNATIONAL (PA) INC.
By /s/ J. BRAD MCGEE
-----------------------------------------
Name: J. Brad McGee
Title: VICE PRESIDENT
RAYCHEM CORPORATION
By /s/ RICHARD A. KASHNOW
-----------------------------------------
Name: Richard A. Kashnow
Title: CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
A-52
<PAGE>
ANNEX B
[Letterhead of Morgan Stanley Dean Witter]
May 18, 1999
Board of Directors
Raychem Corporation
300 Constitution Drive
Menlo Park, California 94025
Members of the Board of Directors:
We understand that Raychem Corporation ("Raychem" or the "Company"), Tyco
International Ltd. ("Tyco") and Tyco International (PA) Inc., a wholly owned
subsidiary of Tyco ("Tyco (PA)"), propose to enter into an Agreement and Plan of
Merger and Reorganization, substantially in the form of the draft dated May 18,
1999 (the "Merger Agreement"), which provides, among other things, for the
merger (the "Merger") of Raychem with and into Tyco (PA). Pursuant to the
Merger, each outstanding share of common stock, par value $1.00 per share (the
"Raychem Common Stock"), of Raychem, other than shares held in treasury or held
by Tyco, Tyco (PA) or any affiliate of Tyco or as to which dissenters' rights
have been perfected, will be converted into the right to elect to receive a
certain number of shares of common stock, par value $0.20 per share (the "Tyco
Common Stock"), of Tyco or a certain amount of cash or a combination of Tyco
Common Stock and cash, subject to proration if too many elections with respect
to cash or Tyco Common Stock, as the case may be, are received. The total amount
of cash in aggregate to be received by the holders of shares of Raychem Common
Stock is $18.50 multiplied by the number of shares of Raychem Common Stock
outstanding as of the consummation of the Merger, excluding any shares to which
dissenters' rights have been perfected. The total number of shares of Tyco
Common Stock in aggregate to be received by the holders of shares of Raychem
Common Stock is 0.2070 multiplied by the number of shares of Raychem Common
Stock outstanding as of the consummation of the Merger. The terms and conditions
of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Raychem Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Tyco;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) reviewed certain internal financial statements and other financial and
operating data concerning Tyco prepared by the management of Tyco;
(iv) analyzed certain financial projections prepared by the management of
the Company;
(v) analyzed certain financial projections prepared by the management of
Tyco;
(vi) discussed the past and current operations and financial condition and
the prospects of the Company, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger, with senior executives of the Company;
(vii) discussed the past and current operations and financial condition and
the prospects of Tyco, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger, with senior executives of Tyco;
(viii) reviewed the reported prices and trading activity for the Raychem
Common Stock and the Tyco Common Stock;
<PAGE>
(ix) compared the financial performance of the Company and Tyco and the
prices and trading activity of the Raychem Common Stock and the Tyco
Common Stock with that of certain other comparable publicly-traded
companies and their securities;
(x) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions we deem comparable;
(xi) analyzed the pro forma impact of the Merger on Tyco's earnings per
share;
(xii) reviewed the draft Merger Agreement and certain related documents; and
(xiii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company. We have also relied upon the
assessment by the management of the Company of the cost savings and benefits
expected to result from the Merger. In addition, we have assumed that the Merger
will be consummated in accordance with the terms set forth in the Merger
Agreement, including, among other things, that the Merger will be treated with
respect to the stock consideration as tax-free pursuant to the Internal Revenue
Code of 1986, as amended. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction involving the Company or any of
its assets.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and Tyco and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company in respect of the transaction with the
Securities and Exchange Commission.
In addition, this opinion does not in any manner address the prices at which
Tyco Common Stock will trade following consummation of the Merger, and Morgan
Stanley expresses no opinion or recommendation as to how stockholders of the
Company should vote at the stockholders' meeting held in connection with the
Merger.
Based and subject to the foregoing, we are of the opinion on the date hereof
that the consideration to be received by the holders of shares of Raychem Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders.
Very truly yours,
<TABLE>
<S> <C> <C>
MORGAN STANLEY & CO. INCORPORATED
By: /s/ NICHOLAS DEJ. OSBORNE
------------------------------------------
Nicholas deJ. Osborne
Principal
</TABLE>
2
<PAGE>
ANNEX C
Delaware General Corporation Law
Section 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
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<PAGE>
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each consitutent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constitutent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constitutent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constitutent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation
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<PAGE>
or (ii) the surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constitutent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the notice is
given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or
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<PAGE>
expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
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<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Bye-Law 102 of the Tyco Bye-Laws provides, in part, that Tyco shall
indemnify its directors and other officers for all costs, losses and expenses
which they may incur in the performance of their duties as director or officer,
provided that such indemnification is not otherwise prohibited under the
Companies Act 1981 of Bermuda. Section 98 of the Companies Act 1981 prohibits
such indemnification against any liability arising out of the fraud or
dishonesty of the director or officer. However, such section permits Tyco to
indemnify a director or officer against any liability incurred by him in
defending any proceedings, whether civil or criminal, in which judgment is given
in his favor or in which he is acquitted or when other similar relief is granted
to him.
The Registrant maintains $100,000,000 of insurance to reimburse the
directors and officers of Tyco and its subsidiaries for charges and expenses
incurred by them for wrongful acts claimed against them by reason of their being
or having been directors or officers of the Registrant or any subsidiary
thereof. Such insurance specifically excludes reimbursement of any director or
officer for any charge or expense incurred in connection with various designated
matters, including libel or slander, illegally obtained personal profits,
profits recovered by the Registrant pursuant to Section 16(b) of the Exchange
Act and deliberate dishonesty.
ITEM 21. EXHIBITS
<TABLE>
<C> <C> <S>
2.1 -- Agreement and Plan of Merger and Reorganization, dated as of May 19, 1999, by
and among Tyco International Ltd, Tyco International (PA) Inc. and Raychem
Corporation (included as Annex A to the Proxy Statement/Prospectus which forms a
part of this Registration Statement)
3.1 -- Memorandum of Association of Registrant (previously filed as an Exhibit to the
Annual Report on Form 10-K of ADT Limited for the Year Ended December 31, 1992)
3.2 -- Certificate of Incorporation on Change of Name from ADT Limited to Tyco
International Ltd. (previously filed as an Exhibit to the Registrant's Current
Report on Form 8-K filed July 10, 1997)
3.3 -- Bye-Laws of the Registrant (previously filed as an Exhibit to the Registrant's
Form S-3 filed April 23, 1998)
3.4 -- Articles of Association of the Registrant (previously filed as an Exhibit to the
Registrant's Form S-3 filed April 23, 1998)
4.1 -- Rights Agreement between ADT Limited and Citibank, N.A. dated as of November 6,
1996 (previously filed as an Exhibit to Form 8-A of ADT Limited dated November
12, 1996)
4.2 -- First Amendment between ADT Limited and Citibank, N.A. dated as of March 3, 1997
to Rights Agreement between ADT Limited and Citibank, N.A. dated as of November
6, 1996 (previously filed as an Exhibit to Registrant's Form 8-A/A of ADT
Limited dated March 3, 1997)
4.3 -- Second Amendment between ADT Limited and Citibank, N.A. dated as of July 2, 1997
to Rights Agreement between ADT Limited and Citibank N.A. dated as of November
6, 1996 (previously filed as an Exhibit to Form 8-A/A of ADT Limited dated July
2, 1997)
</TABLE>
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<PAGE>
<TABLE>
<C> <C> <S>
5 -- Opinion of Appleby, Spurling & Kempe regarding the validity of the Tyco common
shares registered hereunder*
8.1 -- Tax Opinion of PricewaterhouseCoopers LLP*
8.2 -- Tax Opinion of Shearman & Sterling*
8.3 -- Tax Opinion of Appleby, Spurling & Kempe*
23.1 -- Consent of PricewaterhouseCoopers
23.2 -- Consent of Arthur Andersen LLP (Houston)
23.3 -- Consent of Deloitte & Touche LLP
23.4 -- Consent of Arthur Andersen LLP (Philadelphia)
23.5 -- Consent of Arthur Andersen LLP (Roseland)
23.6 -- Consent of PricewaterhouseCoopers LLP (San Jose)
23.7 -- Consent of Appleby, Spurling & Kempe (contained in Exhibit 5 and Exhibit 8.3)*
23.8 -- Consent of PricewaterhouseCoopers LLP (contained in Exhibit 8.1)*
23.9 -- Consent of Shearman & Sterling (contained in Exhibit 8.2)*
24.1 -- Power of Attorney
99.1 -- Consent of Morgan Stanley & Co. Incorporated
99.2 -- Form of Proxy Card of Raychem Corporation*
99.3 -- Election Form*
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the maximum aggregate offering price may be reflected in
the form of prospectus filed with the SEC pursuant to Rule 424(b) under
the Securities Act, if in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
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<PAGE>
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Registrant undertakes that, for purposes of determining any liability
under the Securities Act, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
The Registrant undertakes that prior to any public reoffering of the
securities registered hereunder through use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Exeter, State of New Hampshire, on the 11th day of
June, 1999.
<TABLE>
<S> <C> <C>
TYCO INTERNATIONAL LTD.
By: /s/ MARK H. SWARTZ
------------------------------------------
Mark H. Swartz
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints L. DENNIS KOZLOWSKI AND MARK H. SWARTZ, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement (including all pre-effective and
post-effective amendments which incorporate this Registration Statement by
reference), and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on June 11, 1999
in the capacities indicated below.
SIGNATURE TITLE
- ------------------------------ ---------------------------
Chairman of the Board,
/s/ L. DENNIS KOZLOWSKI President, Chief
- ------------------------------ Executive Officer and
L. Dennis Kozlowski Director (Principal
Executive Officer)
/s/ MICHAEL A. ASHCROFT Director
- ------------------------------
Michael A. Ashcroft
/s/ JOSHUA M. BERMAN Director
- ------------------------------
Joshua M. Berman
/s/ RICHARD S. BODMAN Director
- ------------------------------
Richard S. Bodman
/s/ JOHN F. FORT Director
- ------------------------------
John F. Fort
/s/ STEPHEN W. FOSS Director
- ------------------------------
Stephen W. Foss
II-5
<PAGE>
SIGNATURE TITLE
- ------------------------------ ---------------------------
/s/ RICHARD A. GILLELAND Director
- ------------------------------
Richard A. Gilleland
/s/ PHILIP M. HAMPTON Director
- ------------------------------
Philip M. Hampton
/s/ JAMES S. PASMAN, JR. Director
- ------------------------------
James S. Pasman, Jr.
/s/ W. PETER SLUSSER Director
- ------------------------------
W. Peter Slusser
Executive Vice President
/s/ MARK H. SWARTZ and Chief Financial
- ------------------------------ Officer (Principal
Mark H. Swartz Financial and Accounting
Officer)
/s/ FRANK E. WALSH, JR. Director
- ------------------------------
Frank E. Walsh, Jr.
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Tyco International Ltd. of our report dated November 23, 1998, on
our audit of the combination of the historical consolidated financial statements
and consolidated financial statement schedule of Tyco International Ltd. and
United States Surgical Corporation, after restatement for the pooling of
interests as described in Note 1 to the consolidated financial statements, 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, which
report is included in Tyco's Current Report on Form 8-K filed December 10, 1998,
and of our report dated May 28, 1999, on our audit of the combination of the
supplemental consolidated financial statements and the supplemental consolidated
financial statement schedule of Tyco International Ltd. and AMP Incorporated,
after restatement for the pooling of interests as described in Note 1 to the
supplemental consolidated financial statements, 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, which report is included in
Tyco's Current Report on Form 8-K filed June 3, 1999. We also consent to the
reference to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS
Hamilton, Bermuda
June 9, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of Tyco International Ltd.
of our report dated January 31, 1997 on our audit of the consolidated statements
of income, changes in shareholders' investment and cash flows of Keystone
International, Inc. and subsidiaries for the year ended December 31, 1996,
included in the Tyco International Ltd. Current Reports on Form 8-K filed June
3, 1999 and December 10, 1998, and to all references to our Firm included in
this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
June 9, 1999
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Tyco International Ltd. of our report dated September 30, 1998
(relating to the consolidated balance sheet of United States Surgical
Corporation and its subsidiaries as of September 30, 1997, and the consolidated
statements of operations, changes in stockholders' equity and cash flows for the
nine month period ended September 30, 1997, the twelve month period ended
December 31, 1996 and the related financial statement schedule for the nine
month period ended September 30, 1997 and the twelve month period ended December
31, 1996), which report is included in Tyco International Ltd.'s Current Reports
on Form 8-K filed June 3, 1999 and December 10, 1998. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
June 9, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of Tyco International Ltd. on Form S-4
of our report dated May 11, 1998 covering the combined financial statements of
The Sherwood-Davis & Geck Group as of and for the year ended December 31, 1997,
and to all references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
June 9, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of Tyco International Ltd.
of our report dated February 12, 1999 (except with respect to the matter
disclosed in Note 18--Merger with Tyco International Ltd., as to which the date
is April 2, 1999) on our audit of the consolidated balance sheets of AMP
Incorporated and subsidiaries as of September 30, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for the
year ended September 30, 1998, the nine months ended September 30, 1997, and the
year ended December 31, 1996 included in the Tyco International Ltd. Current
Report on Form 8-K filed June 3, 1999, and to all references to our firm
included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
June 9, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Tyco
International Ltd. of our report on the consolidated financial statements of
Raychem Corporation dated July 15, 1998 (except as to the second paragraph of
the "Contingencies" footnote, which is as of August 10, 1998), which appears on
page 17 of Raychem Corporation's Annual Report to Stockholders, which is
incorporated by reference in its Annual Report on Form 10-K for the year ended
June 30, 1998. We also consent to the incorporation by reference of our report
on the financial statement schedule, which appears on page 19 of such Annual
Report on Form 10-K. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
June 11, 1999
<PAGE>
EXHIBIT 99.1
We hereby consent to the use in the Registration Statement of Tyco International
Ltd. on Form S-4 and in the Proxy Statement/Prospectus of Tyco International
Ltd. and Raychem Corporation which is part of the Registration Statement, of our
opinion dated May 18, 1999 appearing as Annex B to such Proxy
Statement/Prospectus and to the description therein of such opinion and to the
references therein to our name. In giving the foregoing consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended (the "Securities Act"), or
the rules and regulations promulgated thereunder, nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act or the rules and
regulations promulgated thereunder.
MORGAN STANLEY & CO. INCORPORATED
