<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 2000
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 (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
THE ZURICH CENTRE, SECOND FLOOR
90 PITTS BAY ROAD
PEMBROKE HM 08, 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 Zurich Centre, Second Floor, 90 Pitts Bay Road, Pembroke HM 08,
Bermuda. The executive offices of Tyco's principal United States subsidiaries
are located at One Tyco Park, Exeter, New Hampshire 03833. The telephone number
there is (603) 778-9700.
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ABBE L. DIENSTAG, ESQ. ALAN D. SCHNITZER, ESQ.
KRAMER LEVIN NAFTALIS & FRANKEL LLP SIMPSON THACHER & BARTLETT
919 THIRD AVENUE 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017-2502
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE AND ALL OTHER
CONDITIONS TO THE MERGER CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER, DATED
AS OF JUNE 28, 2000, DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS INCLUDED IN
THIS REGISTRATION STATEMENT HAVE BEEN SATISFIED OR WAIVED.
------------------------------
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
COMMON SHARES, PAR VALUE $0.20 PER SHARE.... 96,610,150(1) $N/A $3,268,814,003(2) $862,967(3)
</TABLE>
(1) Represents the estimated maximum number of Tyco common shares to be
delivered to shareholders of Mallinckrodt Inc. upon consummation of the
merger of Mallinckrodt with a subsidiary of the Registrant, assuming the
exercise of all outstanding options and other rights to purchase or acquire
shares of Mallinckrodt common stock prior to the consummation of the merger.
The exact number of shares to be issued will be calculated based upon a
specified average trading price of Tyco common shares over a specified
period prior to the consummation of the merger. The Registrant does not
expect the number of Tyco common shares actually issued to exceed this
number.
(2) 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 $43.4375, the average of the high and low prices of the
Mallinckrodt common stock on the New York Stock Exchange on July 10, 2000,
multiplied by 75,253,272, the maximum number of shares of Mallinckrodt
common stock to be acquired in the merger, which number includes 7,648,525
shares of Mallinckrodt common stock subject to issuance pursuant to
outstanding Mallinckrodt stock options.
(3) .000264 of the Proposed Maximum Aggregate Offering Price.
------------------------
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 JULY 12, 2000
[INSERT MALLINCKRODT LOGO]
, 2000
Dear Mallinckrodt Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Mallinckrodt Inc. which will be held on , 2000, at a.m., , at
.
At the meeting, you will be asked to adopt a merger agreement that
Mallinckrodt has entered into with subsidiaries of Tyco International Ltd. The
merger agreement provides for the merger of Mallinckrodt with a Tyco subsidiary,
as a result of which Mallinckrodt will become an indirect Tyco subsidiary and
holders of Mallinckrodt common stock will become Tyco shareholders. Tyco has
guaranteed the obligations of its subsidiaries under the merger agreement.
In the merger, Mallinckrodt shareholders will receive Tyco common shares for
each share of Mallinckrodt common stock they own based upon an exchange ratio
which is designed to give Mallinckrodt shareholders $47.50 in market value of
Tyco common shares for each of their shares of Mallinckrodt common stock. Under
certain circumstances described in the accompanying Proxy Statement/Prospectus,
Mallinckrodt shareholders could receive less than $47.50 in value of Tyco common
shares. Mallinckrodt's 4% cumulative preferred stock will remain outstanding and
will be redeemed by Mallinckrodt following the merger.
The accompanying Proxy Statement/Prospectus provides a detailed description
of the proposed merger and the merger consideration, as well as the effects of
the merger on you as a shareholder and on Mallinckrodt. I urge you to read the
enclosed materials carefully.
AFTER CAREFUL CONSIDERATION, MALLINCKRODT'S BOARD OF DIRECTORS HAS
UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
MALLINCKRODT AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE 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 the
enclosed proxy card and mailing it to us.
Sincerely,
[LOGO]
C. Ray Holman
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF ISSUES WHICH SHOULD
BE CONSIDERED BY SHAREHOLDERS 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 , 2000 and first mailed to
shareholders on or about , 2000.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 12, 2000
MALLINCKRODT INC.
675 MCDONNELL BOULEVARD
ST. LOUIS, MISSOURI 63134
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2000
To the Shareholders of
MALLINCKRODT INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Mallinckrodt Inc. will be held on , 2000, at a.m., Time,
at , for the following purpose:
To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of June 28, 2000, among Mallinckrodt, Tyco Acquisition Corp. VI
(NV), a Nevada corporation and a wholly-owned first tier subsidiary of Tyco
International Ltd., a Bermuda company, and EVM Merger Corp., a New York
corporation and a wholly-owned first tier subsidiary of Tyco Acquisition,
pursuant to which, among other things, Mallinckrodt would become an indirect
subsidiary of Tyco and holders of Mallinckrodt common stock would become Tyco
shareholders.
Only holders of record of Mallinckrodt common stock and 4% cumulative
preferred stock at the close of business on , 2000 are entitled to
notice of and to vote at the special meeting or any adjournment or postponement
thereof.
All shareholders 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,
[LOGO]
Roger A. Keller
SECRETARY
St. Louis, Missouri
, 2000
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 Mallinckrodt 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 Mallinckrodt 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 Mallinckrodt 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 Mallinckrodt for the special meeting of
Mallinckrodt shareholders. 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 Mallinckrodt 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 Mallinckrodt have previously filed with the SEC. These documents contain
important information about Tyco and Mallinckrodt and their finances.
<TABLE>
<CAPTION>
TYCO SEC FILINGS (FILE NO. 001-13836) PERIOD
------------------------------------- ------
<S> <C>
Annual Report on Forms 10-K and 10-K/A....... Fiscal year ended September 30, 1999
Quarterly Reports on Forms 10-Q and 10-Q/A... Quarterly periods ended December 31, 1999 and
March 31, 2000
Current Reports on Form 8-K.................. Filed on December 9, 1999, December 10, 1999
and January 20, 2000
The description of Tyco common shares as set
forth in its Registration Statement
on Form 8-A/A................................ Filed on March 1, 1999
</TABLE>
<TABLE>
<CAPTION>
MALLINCKRODT SEC FILINGS (FILE NO. 1-483) PERIOD
----------------------------------------- ------
<S> <C>
Annual Report on Form 10-K................... Fiscal year ended June 30, 1999
Quarterly Reports on Form 10-Q............... Quarterly periods ended September 30, 1999,
December 31, 1999 and March 31, 2000
Current Reports on Form 8-K.................. Filed on December 17, 1999, May 16, 2000,
June 15, 2000, June 21, 2000 and July 10,
2000
The description of Mallinckrodt common stock
as
set forth in its Registration Statement
on Form 8-A.................................. Filed on April 10, 1987
</TABLE>
Tyco and Mallinckrodt 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 Mallinckrodt shareholders.
Tyco has supplied all information contained or incorporated by reference in
this document relating to Tyco, and Mallinckrodt has supplied all such
information relating to Mallinckrodt.
Documents incorporated by reference are available from Tyco and Mallinckrodt
without charge. Exhibits to the documents will not be sent, however, unless
those exhibits have specifically been incorporated by reference in this
document. Shareholders may obtain documents incorporated by reference in this
i
<PAGE>
document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
TYCO INTERNATIONAL LTD. MALLINCKRODT INC.
THE ZURICH CENTRE, SECOND FLOOR 675 MCDONNELL BOULEVARD
90 PITTS BAY ROAD ST. LOUIS, MISSOURI 63134
PEMBROKE HM 08, BERMUDA (314) 654-2000
(441) 292-8674
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM TYCO OR MALLINCKRODT, PLEASE DO
SO BY , 2000 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 MALLINCKRODT
HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED , 2000.
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 SHAREHOLDERS NOR THE DELIVERY OF TYCO COMMON SHARES IN CONNECTION
WITH THE MERGER WILL CREATE ANY IMPLICATION TO THE CONTRARY.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
WHERE TO FIND MORE INFORMATION.............................. i
QUESTIONS AND ANSWERS ABOUT THE TYCO/MALLINCKRODT MERGER.... 1
SUMMARY..................................................... 3
The Companies............................................. 3
The Special Meeting....................................... 4
The Merger................................................ 4
RISK FACTORS................................................ 8
FORWARD LOOKING INFORMATION................................. 10
SELECTED FINANCIAL DATA OF TYCO AND MALLINCKRODT............ 11
Selected Consolidated Historical Financial Data of Tyco... 12
Selected Consolidated Historical Financial Data of
Mallinckrodt............................................ 15
Selected Tyco and Mallinckrodt Unaudited Pro Forma
Combined Financial Information.......................... 16
Comparative Per Share Information......................... 17
Comparative Market Value Information...................... 18
MALLINCKRODT INC. SPECIAL MEETING........................... 19
Date, Time and Place...................................... 19
Purpose of the Mallinckrodt Special Meeting............... 19
Record Date; Voting Rights; Quorum; Required Vote......... 19
Recommendation of the Board of Directors of
Mallinckrodt............................................ 20
Proxies; Revocation....................................... 20
Solicitation of Proxies................................... 20
THE MERGER.................................................. 21
Background of the Merger.................................. 21
Exchange of Financial Forecasts........................... 23
Recommendation of the Board of Directors of Mallinckrodt;
Reasons of Mallinckrodt for the Merger.................. 24
Opinions of Financial Advisors to Mallinckrodt............ 26
Reasons of Tyco for the Merger............................ 43
Interests of Certain Persons in the Merger................ 43
Material U.S. Federal Income Tax and Bermuda Tax
Consequences............................................ 46
Accounting Treatment...................................... 50
Certain Legal Matters..................................... 50
U.S. Federal Securities Law Consequences.................. 51
Dividends................................................. 52
Stock Exchange Listing.................................... 52
Dissenters' Rights........................................ 52
CERTAIN PROVISIONS OF THE MERGER AGREEMENT.................. 53
General................................................... 53
The Merger................................................ 53
Effective Time............................................ 53
Merger Consideration...................................... 53
Exchange of Mallinckrodt Common Stock..................... 55
Survival and Redemption of Preferred Stock................ 56
Representations and Warranties............................ 56
Conduct of Business by Mallinckrodt....................... 56
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Conduct of Business by Tyco............................... 57
No Solicitation........................................... 58
Certain Other Covenants................................... 59
Conditions to the Merger.................................. 62
Additional Conditions to Obligations of Tyco Acquisition
and EVM................................................. 62
Additional Conditions to Obligations of Mallinckrodt...... 63
Termination............................................... 64
Amendment and Waiver; Parties in Interest................. 67
Guarantee................................................. 67
COMPARATIVE PER SHARE PRICES AND DIVIDENDS.................. 68
Tyco...................................................... 68
Mallinckrodt.............................................. 69
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION............................................... 70
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION............................................... 74
COMPARISON OF RIGHTS OF SHAREHOLDERS OF MALLINCKRODT AND
SHAREHOLDERS OF TYCO...................................... 75
LEGAL MATTERS............................................... 87
EXPERTS..................................................... 87
FUTURE SHAREHOLDER PROPOSALS................................ 87
ANNEXES
Annex A--Agreement and Plan of Merger..................... A-1
Annex B--Opinion of Goldman, Sachs & Co................... B-1
Annex C--Opinion of J.P. Morgan Securities Inc............ C-1
</TABLE>
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE TYCO/MALLINCKRODT MERGER
Q. WHY ARE TYCO AND MALLINCKRODT PROPOSING THE MERGER?
A. Mallinckrodt's lines of respiratory care, diagnostic imaging and pain
relief products are complementary to related products manufactured and marketed
by Tyco's healthcare products group. With the greater resources available to
Tyco, the merger should provide a means to significantly enhance the development
and distribution of Mallinckrodt's products. The merger will also give
Mallinckrodt shareholders the opportunity to participate in a substantially
larger and more diversified public company.
The price offered by Tyco gives Mallinckrodt shareholders a significant
premium for their shares over the value of the Mallinckrodt common stock on
June 27, 2000, the last trading day before the merger was publicly announced.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. If the merger is completed, holders of Mallinckrodt common stock will
receive Tyco common shares in exchange for each of their shares of Mallinckrodt
common stock based upon an exchange ratio which is designed to give Mallinckrodt
shareholders Tyco common shares valued at $47.50 for each of their shares of
Mallinckrodt common stock. Cash will be paid instead of fractional Tyco shares.
Under certain circumstances, Mallinckrodt shareholders could receive less than
$47.50 in value of Tyco common shares.
Mallinckrodt 4% cumulative preferred stock will remain outstanding and will
be redeemed by Mallinckrodt following the merger.
Q. HOW IS THE EXCHANGE RATIO OF TYCO COMMON SHARES FOR MALLINCKRODT COMMON
STOCK DETERMINED?
A. The exchange ratio will equal $47.50 divided by the average share price
of Tyco common shares. The average share price of Tyco common shares will be
computed by taking the average of the daily volume-weighted averages of the per
share selling price of Tyco common shares as reported on the New York Stock
Exchange Composite Transaction Tape over the five consecutive trading days
ending on the trading day immediately preceding the date on which the closing
conditions set forth in the merger agreement have been satisfied or waived.
If the average share price of Tyco common shares is less than $37.00, Tyco's
subsidiary has the right to terminate the merger agreement unless, after Tyco's
subsidiary gives Mallinckrodt written notice of its intention to terminate the
merger agreement, Mallinckrodt agrees to an exchange ratio of 1.2838, the
exchange ratio determined by dividing $47.50 by $37.00. Based on an average
share price that is less than $37.00, this 1.2838 exchange ratio would give
Mallinckrodt shareholders Tyco common shares valued at less than $47.50 for each
share of Mallinckrodt common stock. In this circumstance, Tyco's subsidiary and
Mallinckrodt could also agree to a higher exchange ratio, although neither
Tyco's subsidiary nor Mallinckrodt is under any obligation to do so. If the
average share price of Tyco's common shares is less than $37.00 and Tyco's
subsidiary does not give Mallinckrodt written notice of its intention to
terminate the merger agreement, Mallinckrodt shareholders will receive $47.50 in
value of Tyco common shares for each share of Mallinckrodt common stock based on
the average share price. See the risk factor entitled "MALLINCKRODT SHAREHOLDERS
COULD RECEIVE LESS THAN $47.50 IN VALUE OF TYCO COMMON SHARES FOR EACH SHARE OF
MALLINCKRODT COMMON STOCK" on page 8. See also "Merger Consideration" beginning
on page .
The closing price of Tyco common shares on the New York Stock Exchange on
the date of this document was $ . If this price were the average
share price of Tyco common shares during the pricing period referred to above,
the exchange ratio would be .
Q. HOW WILL I KNOW WHAT THE ACTUAL EXCHANGE RATIO IS?
A. You can call toll free at any time beginning on
, 2000, after the close of business, for the average share price of
Tyco common shares for the preceding five trading days and the exchange ratio
that would be in effect based on that average share price. The actual average
share price
1
<PAGE>
and the actual exchange ratio will be calculated when the closing conditions set
forth in the merger agreement have been satisfied or waived, which will be
shortly before the consummation of the merger. You are urged to call the toll
free number before the Mallinckrodt special meeting.
Q. WILL I KNOW WHAT THE EXCHANGE RATIO IS AT THE TIME THAT I VOTE ON THE
MERGER?
A. Probably not. The exchange ratio will not be known at the earliest until
the close of business on the last trading day before the date of the
Mallinckrodt special meeting. It is also possible that regulatory clearance,
which is a condition to the merger, will not be received until after the meeting
date. In that case, the exchange ratio will not be known until this condition is
satisfied, which could be some time after the meeting date.
Q. WHEN WILL THE MERGER TAKE EFFECT?
A. The merger is expected to take effect after the closing conditions set
forth in the merger agreement, including the adoption of the merger agreement by
the Mallinckrodt shareholders and the receipt of regulatory clearance, have been
satisfied or waived. This is expected to occur during the fall of 2000.
Q. WHAT SHAREHOLDER APPROVAL IS NEEDED?
A. The affirmative vote of the holders of shares representing at least
two-thirds of the outstanding voting power of all Mallinckrodt stock entitled to
vote is required to adopt the merger agreement.
Q. WHAT IF I DON'T VOTE?
A. If you fail to respond, it will have the same effect as a vote against
the merger.
If you respond and do not indicate how you want to vote, your proxy will be
counted as a vote in favor of the merger.
If you respond and abstain from voting, your proxy will have the same effect
as a vote against the merger.
Q. WHAT SHOULD I DO NOW?
A. After carefully reading and considering the information contained in
this document, 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-addressed postage paid envelope. You can also attend the special
meeting and vote in person.
Mallinckrodt's Board of Directors recommends you vote FOR the adoption of
the merger agreement.
You should not send in your share certificates now. After the merger is
completed, you will be sent written instructions for exchanging your share
certificates.
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. IF MY SHARES OF MALLINCKRODT STOCK ARE HELD BY A BANK OR BROKER, HOW CAN
I VOTE?
A. If your shares are held by a bank, broker or other fiduciary, you must
contact the fiduciary to vote on your behalf.
Q. WHAT SHOULD I DO IF I HAVE QUESTIONS?
A. You should call (toll free in the United States and Canada) or
.
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES 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. IN
PARTICULAR, YOU SHOULD READ THE DOCUMENTS ATTACHED TO THIS DOCUMENT, INCLUDING
THE MERGER AGREEMENT AND THE OPINIONS OF GOLDMAN, SACHS & CO. AND J.P. MORGAN,
WHICH ARE ATTACHED AS ANNEXES A, B AND C, RESPECTIVELY.
THE COMPANIES
TYCO INTERNATIONAL LTD.
The Zurich Centre, Second Floor
90 Pitts Bay Road
Pembroke HM 08, Bermuda
(441) 292-8674
Tyco is a diversified manufacturing and service company that, through its
subsidiaries:
- designs, manufactures and distributes disposable medical supplies and
other specialty products, and conducts auto redistribution services;
- designs, manufactures and distributes electrical and electronic components
and designs, manufactures, installs and services undersea cable
communication systems;
- 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 2000 revenues in excess of $28 billion.
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of its markets. It promotes its leadership position by investing in
existing businesses, developing new markets and acquiring complementary
businesses and products. Combining the strengths of its existing operations and
its business acquisitions, Tyco seeks to enhance shareholder value through
increased earnings per share and strong cash flows.
Tyco reviews acquisition opportunities in the ordinary course of business,
some of which may be material and some of which are currently under
investigation, discussion or negotiation. There can be no assurance that any of
such acquisitions will be consummated.
Tyco's common shares are listed on the New York Stock Exchange and the
Bermuda Stock Exchange under the symbol "TYC" and on the London Stock Exchange
under the symbol "TYI".
Tyco's registered and principal executive offices are located at the above
address in Bermuda. The executive offices of Tyco's principal United States
subsidiaries are located at One Tyco Park, Exeter, New Hampshire 03833, and the
telephone number there is (603) 778-9700.
For additional information regarding the business of Tyco, please see Tyco's
Forms 10-K and 10-K/A and other filings of Tyco with the SEC which are
incorporated by reference into this document. See "Where to Find More
Information" on page i.
3
<PAGE>
MALLINCKRODT INC.
675 McDonnell Boulevard
St. Louis, Missouri 63134
(314) 654-2000
Mallinckrodt is a global company serving selected healthcare markets with
products used primarily for respiratory care, diagnostic imaging and pain
relief. Mallinckrodt's products are sold to hospital and alternate care sites,
clinical laboratories, pharmaceutical manufacturers and other customers on a
worldwide basis.
Mallinckrodt has the following three business segments:
- A Respiratory segment that develops and markets products that help
diagnose, monitor and treat respiratory disorders, wherever patients
receive care. Mallinckrodt's respiratory product line consists of
anesthesia and respiratory devices; oximetry, including monitors and
sensors; critical care and portable ventilators; medical gas; oxygen
therapy and asthma management; sleep diagnostics and therapy; and
maintenance services.
- An Imaging segment that manufactures, sells and distributes products used
in radiology, cardiology and nuclear medicine. These products include
Optiray, an X-ray medium used in both radiology and cardiology procedures,
Ultraject, a patented syringe that delivers contrast agents, and
GastroMARK, an oral gastrointestinal bowel marker used in magnetic
resonance imaging procedures.
- A Pharmaceuticals segment that produces analgesics such as acetaminophen
used to control pain and fever; codeine salts, morphine and other
opium-based narcotics and synthetic narcotics used to treat pain and
coughs; and peptides used in many pharmaceuticals. Other products include
laboratory chemicals and other chemicals and reagents used in the
production of pharmaceutical and food products.
Mallinckrodt's common stock is listed on the New York, Chicago and Pacific
Stock Exchanges under the symbol "MKG."
For additional information regarding the business of Mallinckrodt, please
see Mallinckrodt's Form 10-K and other filings of Mallinckrodt which are
incorporated by reference into this document. See "Where to Find More
Information" on page i.
THE SPECIAL MEETING (PAGE )
The special meeting of Mallinckrodt shareholders will be held on
, 2000, at a.m., Time, at .
The record date for Mallinckrodt shareholders entitled to receive notice of
and to vote at the Mallinckrodt special meeting is the close of business on
, 2000. On that date, there were shares of Mallinckrodt
common stock outstanding and 98,330 shares of Mallinckrodt 4% cumulative
preferred stock outstanding.
THE MERGER (PAGE )
SHAREHOLDER VOTE REQUIRED
The affirmative vote of the holders of shares representing at least
two-thirds of the outstanding voting power of all Mallinckrodt stock is required
to adopt the merger agreement.
THE EXCHANGE RATIO; MERGER CONSIDERATION
The exchange ratio is designed to give Mallinckrodt shareholders $47.50 in
value of Tyco common shares for each of their shares of Mallinckrodt common
stock. The value of a Tyco common share for these
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<PAGE>
purposes will be an average share price calculated by taking the average of the
daily volume-weighted averages of the per share selling price of Tyco common
shares as reported on the New York Stock Exchange Composite Transaction Tape
over the five consecutive trading days ending on the trading day immediately
preceding the date on which the closing conditions set forth in the merger
agreement have been satisfied or waived.
If the average share price of Tyco common shares is less than a designated
floor price, Tyco Acquisition, one of the two Tyco subsidiaries that is a party
to the merger agreement, has the right to terminate the merger agreement unless,
after Tyco Acquisition gives Mallinckrodt written notice of its intention to
terminate the merger agreement, Mallinckrodt agrees to an exchange ratio
determined by dividing $47.50 by the floor price. Unless Tyco Acquisition agrees
to a lower floor price as described in the following paragraph, the floor price
will be $37.00 and the exchange ratio to which Mallinckrodt would have to agree
to prevent Tyco Acquisition from terminating the merger agreement is 1.2838.
Based on an average share price that is less than $37.00, this 1.2838 exchange
ratio would give Mallinckrodt shareholders Tyco common shares valued at less
than $47.50 for each share of Mallinckrodt common stock. In this circumstance,
Tyco Acquisition and Mallinckrodt could also agree to a higher exchange ratio,
although neither Tyco Acquisition nor Mallinckrodt is under any obligation to do
so. If the average share price of Tyco's common shares is less than the floor
price and Tyco Acquisition does not give Mallinckrodt written notice of its
intention to terminate the merger agreement, Mallinckrodt shareholders will
receive $47.50 in value of Tyco common shares for each share of Mallinckrodt
common stock based on the average share price.
If the average share price of Tyco common shares measured over a five
trading day period ending on the third trading day prior to the Mallinckrodt
special meeting is less than $37.00, Tyco Acquisition may at that time
irrevocably reduce the floor price to this average share price. If that were the
case,
- Tyco Acquisition could not give Mallinckrodt notice of its intention to
terminate the merger agreement as described in the previous paragraph
unless the average share price of Tyco common shares for the purposes of
determining the exchange ratio was below this lower floor price; and
- if Tyco Acquisition were entitled to, and did, give notice of termination,
the exchange ratio to which Mallinckrodt must agree to prevent Tyco
Acquisition from terminating the merger agreement would be $47.50 divided
by such lower floor price. This exchange ratio would be higher than
1.2838.
See the risk factor entitled "MALLINCKRODT SHAREHOLDERS COULD RECEIVE LESS
THAN $47.50 IN VALUE OF TYCO COMMON SHARES FOR EACH SHARE OF MALLINCKRODT COMMON
STOCK" on page 8. Also see the information under "Basis of Mallinckrodt's
Determination to Adjust the Exchange Ratio if the Average Share Price is Less
Than $37.00" beginning on page for a discussion of some of the factors
Mallinckrodt may consider in deciding whether to agree to adjust the exchange
ratio.
DISSENTERS' RIGHTS
Under New York law, which governs the merger agreement, Mallinckrodt
shareholders will not have any dissenters' rights as a result of the merger.
RESTRICTIONS ON THE ABILITY TO SELL TYCO COMMON SHARES
All Tyco common shares received by shareholders of Mallinckrodt in
connection with the merger will be freely transferable except for shareholders
who are considered to be "affiliates" of either Mallinckrodt or Tyco under the
Securities Act. Tyco common shares received by affiliates of Mallinckrodt or
Tyco in the merger may only be sold pursuant to a registration statement or an
exemption under the Securities Act.
5
<PAGE>
TAX TREATMENT
The receipt of Tyco common shares in the merger will generally be tax-free
to Mallinckrodt shareholders for United States federal income tax purposes,
except for tax on cash received in lieu of fractional Tyco shares.
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 Mallinckrodt's Board of Directors in
favor of the merger, shareholders should be aware that members of Mallinckrodt's
Board of Directors and Mallinckrodt management will receive benefits as a result
of the merger that will be in addition to or different from benefits received by
Mallinckrodt shareholders generally. For example, options to purchase shares of
Mallinckrodt common stock that are held by Mallinckrodt's directors and members
of its management generally will become fully vested and exercisable at the
consummation of the merger. In addition, under certain qualifying circumstances,
members of Mallinckrodt management will be entitled to receive severance
benefits upon actual or constructive termination of their employment within
certain time periods following the merger. Also, these members of Mallinckrodt
management will be eligible to receive retention bonuses if they do not
terminate their employment with Mallinckrodt prior to the second anniversary of
the merger. See "Interests of Certain Persons in the Merger" beginning on page
.
CONDITIONS TO THE MERGER
The consummation of the merger depends upon satisfaction of a number of
conditions, including:
- adoption of the merger agreement by the Mallinckrodt shareholders;
- the absence of legal restraints to the consummation of the merger,
including the receipt of all necessary U.S. and European regulatory
clearances; and
- receipt of opinions regarding the tax-free nature of the merger in respect
of the Tyco common shares received.
For further details, see "Conditions to the Merger" beginning on page .
TERMINATION OF THE MERGER
Either Mallinckrodt or Tyco Acquisition may terminate the merger agreement
if:
- both parties consent in writing;
- the merger is not consummated by December 31, 2000 through no fault of the
party seeking to call off the merger;
- the Mallinckrodt shareholders do not adopt the merger agreement;
- there are legal restraints preventing the merger;
- any representation or warranty of a party is untrue when made or becomes
untrue, if such failure would reasonably be expected to have a material
adverse effect and the failure is not or cannot be remedied; or
- the other party breaches any covenant or agreement and that breach is not
or cannot be remedied.
In addition, if the average share price of Tyco common shares used for
purposes of determining the exchange ratio is less than the floor price, Tyco
Acquisition may terminate the merger agreement unless,
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<PAGE>
after Tyco Acquisition gives Mallinckrodt written notice of its intention to
terminate the merger agreement, Mallinckrodt agrees to adjust the exchange ratio
to $47.50 divided by the floor price. See "The Exchange Ratio; Merger
Consideration" above.
Tyco Acquisition may also terminate the merger agreement if Mallinckrodt's
Board of Directors withdraws or adversely modifies its approval, adoption or
recommendation of the merger agreement, recommends an alternative acquisition
transaction with a third party or fails to include its recommendation of the
merger agreement in this Proxy Statement/Prospectus or to solicit proxies in
favor of the merger agreement.
Subject to certain conditions, Mallinckrodt may terminate the merger
agreement to accept an acquisition proposal that is financially more favorable
to Mallinckrodt shareholders than the proposed merger with Tyco Acquisition.
For further details, see "Termination" beginning on page .
NO SOLICITATION PROVISIONS; TERMINATION FEE AND EXPENSES
Mallinckrodt has agreed that it will not solicit or encourage the initiation
of any inquiries or proposals regarding any alternative acquisition transactions
with third parties. Mallinckrodt may respond to unsolicited transaction
proposals if required by the Mallinckrodt Board's fiduciary duties. Mallinckrodt
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,
Mallinckrodt may be required to pay a termination fee of $110 million to Tyco
and/or pay reasonable out-of-pocket expenses of up to $3 million to Tyco and
Tyco Acquisition. Tyco Acquisition may be required to pay to Mallinckrodt up to
$3 million of Mallinckrodt's reasonable out-of-pocket expenses if the merger is
terminated under certain circumstances.
See "Fees and Expenses" beginning on page for a discussion of the
circumstances in which the fee and expenses are payable.
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 Mallinckrodt 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.
OPINIONS OF MALLINCKRODT'S FINANCIAL ADVISORS
In determining that the merger is fair to and in the best interests of
Mallinckrodt and its shareholders, Mallinckrodt's Board of Directors considered
the opinions of its financial advisors, Goldman, Sachs & Co. and J.P. Morgan
Securities Inc., that, as of June 28, 2000 and based on and subject to the
matters referred to in the opinions, the consideration to be received for shares
of Mallinckrodt common stock in the merger was fair from a financial point of
view to the holders of the shares. See "Opinions of Financial Advisors to
Mallinckrodt" beginning on page . Among other things, these opinions assume
that Mallinckrodt does not agree to adjust the exchange ratio if the price of
Tyco common shares during the pricing period is lower than the $37.00 floor
price (or a lower floor price agreed to by Tyco Acquisition). The full text of
the written opinions of Goldman, Sachs & Co. and J.P. Morgan is attached as
Annexes B and C, respectively, to this document. YOU SHOULD READ THESE OPINIONS
IN THEIR ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN DELIVERING THESE OPINIONS.
7
<PAGE>
RISK FACTORS
In evaluating the merger and the merger agreement, Mallinckrodt shareholders
should take into account the following risk factors:
MALLINCKRODT SHAREHOLDERS COULD RECEIVE LESS THAN $47.50 IN VALUE OF TYCO
COMMON SHARES FOR EACH SHARE OF MALLINCKRODT COMMON STOCK.
Although the merger is designed to give Mallinckrodt shareholders $47.50 in
value of Tyco common shares for each of their shares of Mallinckrodt common
stock, the market value of the Tyco common shares received by Mallinckrodt
shareholders could be less than $47.50. The merger agreement values the Tyco
common shares that Mallinckrodt shareholders will receive based upon the average
share price of the Tyco common shares. The average share price of Tyco common
shares will be computed by taking the average of the daily volume-weighted
averages of the per share selling price of Tyco common shares as reported on the
New York Stock Exchange Composite Transaction Tape over the five consecutive
trading days ending on the trading day immediately preceding the date on which
the closing conditions set forth in the merger agreement have been satisfied or
waived. At the time of the merger, and at any time after the merger, the market
price of a Tyco common share could be more or less than the average share price
used in calculating the exchange ratio. If it is less, the value of the Tyco
common shares that a Mallinckrodt shareholder receives in the merger would be
less than $47.50. The market value of Tyco shares fluctuates based upon general
market and economic conditions, Tyco's business and prospects and other factors.
Mallinckrodt shareholders should also note that they will receive less than
$47.50 in value of Tyco common shares, calculated on the basis of the average
share price, if the average share price is less than a floor price of $37.00 (or
a lower floor price agreed to by Tyco Acquisition) and either Mallinckrodt
agrees to adjust the exchange ratio in order to prevent Tyco Acquisition from
terminating the merger agreement or Mallinckrodt and Tyco agree to a different
ratio. Any such agreement to an exchange ratio that would provide less than
$47.50 in value for each share of Mallinckrodt common stock would take place
after the date on which the Mallinckrodt shareholders vote to adopt the merger
agreement, and Mallinckrodt shareholders would not have another opportunity to
vote on the transaction after the adjustment to the exchange ratio.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT MALLINCKRODT'S STOCK
PRICE AND FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed, Mallinckrodt may be subject to the following
material risks:
- Mallinckrodt may be required to pay Tyco a termination fee of $110
million, plus up to $3 million of expenses incurred by Tyco,
- the price of Mallinckrodt common stock may decline to the extent that the
current market price of Mallinckrodt common stock reflects a market
assumption that the merger will be completed, and
- costs related to the merger, such as legal, accounting and certain
financial advisor fees, must be paid even if the merger is not completed.
If the merger agreement is terminated and Mallinckrodt's Board of Directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than that which would be paid in the merger. In addition,
while the merger agreement is in effect and subject to the limited exceptions
described on page of this Proxy Statement/Prospectus, Mallinckrodt is
prohibited from directly or indirectly soliciting or encouraging the initiation
of any inquiries or proposals regarding certain extraordinary transactions, such
as a merger, sale of assets or similar transactions with any party other than
Tyco.
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<PAGE>
THE OPINIONS OBTAINED BY MALLINCKRODT FROM ITS FINANCIAL ADVISORS WILL NOT
REFLECT CHANGES IN CIRCUMSTANCES PRIOR TO THE MERGER.
If the exchange ratio is not adjusted to prevent Tyco Acquisition from
terminating the merger agreement, as described above, Mallinckrodt does not
intend to obtain updated opinions from Goldman, Sachs & Co. and J.P. Morgan,
Mallinckrodt's financial advisors. Changes in the operations and prospects of
Tyco or Mallinckrodt, general market and economic conditions and other factors
which are beyond the control of Tyco, Mallinckrodt, or Mallinckrodt's financial
advisors, and on which the opinions of Goldman, Sachs & Co. and J.P. Morgan are
based, may alter the value of Tyco or Mallinckrodt or their respective stock
prices by the time the merger is completed. As a result of the foregoing,
Mallinckrodt shareholders should be aware that the opinions of Goldman, Sachs &
Co. and J.P. Morgan do not address the fairness of the merger consideration at
the time the merger will be completed. If the exchange ratio is adjusted to
prevent Tyco Acquisition from terminating the merger agreement, Mallinckrodt has
not yet considered whether it will seek revised opinions from its financial
advisors. See also "Basis of Mallinckrodt's Determination to Adjust the Exchange
Ratio if the Average Share Price is less than $37.00" beginning on page .
THE PRICE OF TYCO COMMON SHARES MIGHT DECREASE AFTER THE MERGER.
Following the merger, holders of Mallinckrodt common stock will become
shareholders of Tyco. Tyco common shares could decline in value after the
merger. As discussed above, the market price of Tyco shares fluctuates based
upon general market and economic conditions, Tyco's operations and prospects and
other factors.
THE RIGHTS OF SHAREHOLDERS OF TYCO UNDER BERMUDA LAW IN SOME WAYS ARE NOT AS
FAVORABLE AS THE RIGHTS OF SHAREHOLDERS OF MALLINCKRODT UNDER NEW YORK LAW.
- Shareholders may not be able to obtain jurisdiction over Tyco outside
Bermuda, so that certain remedies available to shareholders of
Mallinckrodt, such as class action lawsuits under United States federal
and New York law, might not be available to Tyco shareholders.
- The right to bring a derivative action in the name of a company for a
wrong to the company committed by present or former directors of the
company is more limited under Bermuda law than under New York 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 are entitled
to propose a resolution at a Tyco general meeting. Tyco's Board of
Directors can waive these requirements, and the staff of the SEC has taken
the position that the SEC's proxy rules may require Tyco to include in its
proxy materials proposals of shareholders who do not satisfy such
requirements. Mallinckrodt shareholders do not have to satisfy such
requirements to propose a resolution at a Mallinckrodt shareholders
meeting.
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<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 and other results of operations, 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 Mallinckrodt,
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 Mallinckrodt into Tyco's operations,
- overall economic and business conditions,
- the demand for Tyco's and Mallinckrodt's goods and services,
- competitive factors in the industries in which Tyco and Mallinckrodt
compete,
- changes in government regulation,
- changes in tax requirements, including tax rate changes, new tax laws and
revised tax law interpretations,
- results of litigation,
- 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 timing of construction and the successful operation of the TyCom
Global Network.
10
<PAGE>
SELECTED FINANCIAL DATA OF TYCO AND MALLINCKRODT
The following information is being provided to assist you in analyzing the
financial aspects of the merger. The information for Tyco for the six months
ended March 31, 2000 and 1999 was derived from the unaudited Consolidated
Financial Statements included in Tyco's Quarterly Report on Form 10-Q/A for the
quarterly period ended March 31, 2000. The data presented for Tyco for the six
months ended March 31, 2000 and 1999 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, 2000 are not necessarily indicative of the results to be
expected for the fiscal year ending September 30, 2000. The information for Tyco
for the years ended September 30, 1999 and 1998 and the nine months ended
September 30, 1997 was derived from the audited Consolidated Financial
Statements included in Tyco's Annual Report on Form 10-K/A filed on June 26,
2000. The selected financial information for the six months ended March 31, 2000
and 1999 and the fiscal year ended September 30, 1999 have been restated to
reflect the revision discussed in Note 1 to the Consolidated Financial
Statements included in Tyco's Quarterly Report on Form 10-Q/A and its Annual
Report on Form 10-K/A, both of which were filed on June 26, 2000. The
information for Tyco for the year ended December 31, 1996 was derived from the
audited Consolidated Financial Statements included in Tyco's Current Report on
Form 8-K filed on June 3, 1999.
The information for Mallinckrodt has been derived from Mallinckrodt's
audited Consolidated Financial Statements for the years ended June 30, 1995
through 1999 and Mallinckrodt's unaudited Condensed Consolidated Financial
Statements for the nine months ended March 31, 2000 and 1999. The data presented
for Mallinckrodt for the nine months ended March 31, 2000 and 1999 are unaudited
but include all adjustments which Mallinckrodt's management considers necessary
for a fair presentation of the results of operations for the interim periods
presented. These adjustments are of a normal recurring nature. Interim results
are not necessarily indicative of the results to be expected for the year ended
June 30, 2000. Certain amounts in the prior year were reclassified to conform to
the current year presentation.
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 Mallinckrodt 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.
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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TYCO(1)
<TABLE>
<CAPTION>
(UNAUDITED) NINE MONTHS
SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
----------------------- ---------------------- ------------- -----------------------
2000(2) 1999(2) 1999(3) 1998(4) 1997(5)(6) 1996(7)(8) 1995(7)(9)
---------- ---------- ---------- --------- ------------- ---------- ----------
(RESTATED) (RESTATED) (RESTATED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Net sales................ $13,708.7 $10,452.2 $22,496.5 $19,061.7 $12,742.5 $14,671.0 $13,152.1
Operating income......... 2,530.2 500.9 2,190.8 1,948.1 125.8 587.4 1,447.5
Income (loss) from
continuing
operations............. 1,612.7 74.7 1,067.7 1,168.6 (348.5) 49.4 755.5
Income (loss) from
continuing operations
per common share(10):
Basic.................. 0.95 0.05 0.65 0.74 (0.24) 0.02 0.55
Diluted................ 0.94 0.05 0.64 0.72 (0.24) 0.02 0.54
Cash dividends per common
share(10).............. See (11) below.
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............. $36,209.2 $32,344.3 $23,440.7 $16,960.8 $14,686.2 $13,143.8
Long-term debt........... 10,807.8 9,109.4 5,424.7 2,785.9 2,202.4 2,229.7
Shareholders' equity..... 13,764.7 12,369.3 9,901.8 7,478.7 7,022.6 6,792.1
</TABLE>
------------------------
(1) 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, which were accounted for
under the pooling of interests method, are more fully described in Notes 1
and 2 to the historical Consolidated Financial Statements contained in
Tyco's Annual Report on Form 10-K/A filed on June 26, 2000, which is
incorporated by reference in this document.
(2) Operating income in the six months ended March 31, 2000 includes a net
credit of $74.4 million, consisting of a credit of $107.4 million
representing a revision of estimates for accrued merger, restructuring and
other non-recurring charges recorded in prior periods, offset by
restructuring and other non-recurring charges of $33.0 million, primarily
related to the exiting of US Surgical's interventional cardiology business,
charges associated with US Surgical's suture business and restructuring
activities in AMP's Brazilian operations. Operating income for this period
also includes a charge of $99.0 million for the impairment of long-lived
assets primarily related to the exiting of US Surgical's interventional
cardiology business. Operating income in the six months ended March 31, 1999
includes net charges of $681.6 million, consisting of charges of
$275.3 million related to AMP's profit improvement plan and charges of
$414.6 million primarily related to the merger with US Surgical, offset by a
credit of $8.3 million representing a revision of estimates related to
Tyco's 1997 merger, restructuring and other non-recurring accruals.
Operating income for this period also includes a charge of $312.7 million
for the impairment of long-lived assets related to the merger with US
Surgical and costs associated with AMP's profit improvement plan. See Notes
6 and 7 to the unaudited Consolidated Financial Statements contained in
Tyco's Quarterly Report on Form 10-Q/A for the quarterly period ended
March 31, 2000, which is incorporated by reference in this document.
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<PAGE>
(3) Operating income in the fiscal year ended September 30, 1999 includes
charges of $1,035.2 million for merger, restructuring and other
non-recurring charges and charges of $507.5 million for the impairment of
long-lived assets primarily related to the mergers with US Surgical and AMP
and AMP's profit improvement plan. See Notes 12 and 16 to the Consolidated
Financial Statements contained in Tyco's Annual Report on Form 10-K/A filed
on June 26, 2000.
(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, AMP
recorded restructuring charges of $185.8 million in connection with its
profit improvement plan and a credit of $21.4 million to restructuring
charges representing a revision of estimates related to its 1996
restructuring activities. See Note 16 to the Consolidated Financial
Statements contained in Tyco's Annual Report on Form 10-K/A filed on
June 26, 2000.
(5) 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.
(6) 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 12 and 16 to the Consolidated Financial Statements
contained in Tyco's Annual Report on Form 10-K/A filed on June 26, 2000. 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.
(7) 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, 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 $2,460.1 million and
$136.4 million, respectively.
(8) Operating income in 1996 includes non-recurring charges of $744.7 million
related to the adoption of Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets to be Disposed
Of," $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.
(9) 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.
(10) 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 (1.92532 after giving effect
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<PAGE>
to the subsequent stock splits) effected on July 2, 1997; and two-for-one
stock splits distributed on October 22, 1997 and October 21, 1999, both of
which were effected in the form of a stock dividend.
(11) Tyco has paid a quarterly dividend of $0.0125 per common share since
July 2, 1997, the date of the Former Tyco/ADT merger. Prior to the merger
with ADT, Former Tyco paid a quarterly cash dividend of $0.0125 per share of
common stock since January 1992. ADT had not paid any dividends on its
common shares since 1992. US Surgical paid quarterly dividends of $0.04 per
share in the fiscal year ended September 30, 1998 and the nine months ended
September 30, 1997 and aggregate dividends of $0.08 per share in 1996 and
1995. AMP paid dividends of $0.27 per share in the first two quarters of the
year ended September 30, 1999, $0.26 per share in the first quarter and
$0.27 per share in the last three quarters of the year ended September 30,
1998, $0.26 per share in each of the three quarters of the nine months ended
September 30, 1997, aggregate dividends of $1.00 per share in 1996 and $0.92
per share in 1995. The payment of dividends by Tyco in the future will be
determined by Tyco's Board of Directors and will depend on business
conditions, Tyco's financial condition and earnings and other factors.
14
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF MALLINCKRODT
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
MARCH 31, JUNE 30,
------------------- -------------------------------------------------------
2000(1) 1999 1999 1998(2) 1997 1996 1995
-------- -------- -------- -------- --------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales...................... $1,954.9 $1,905.9 $2,581.2 $2,367.0 $1,698.1 $1,596.9 $1,433.8
Operating income (loss)........ 231.4 240.4 337.9 (163.0) 297.5 279.5 252.8
Income (loss) from continuing
operations................... 142.4 120.9 172.9 (268.4) 175.2 143.6 127.0
Income (loss) from continuing
operations per common share:
Basic........................ 2.05 1.68 2.41 (3.69) 2.37 1.90 1.65
Diluted...................... 2.04 1.68 2.40 (3.69) 2.33 1.88 1.63
Cash dividends per common
share........................ 0.50 0.45 0.66(3) 0.66 0.65 0.61 0.55
BALANCE SHEET DATA:
Total assets................... $3,424.8 $3,657.4 $3,873.1 $2,975.4 $3,017.6 $2,488.6
Long-term debt................. 541.4 742.5 944.5 544.3 556.8 482.7
Shareholders' equity........... 1,077.3 1,060.4 1,005.9 1,251.2 1,232.2 1,171.5
</TABLE>
------------------------
(1) During the nine months ended March 31, 2000, Mallinckrodt recorded charges
of $14.8 million to cost of goods sold for severance costs and the write-off
of assets, primarily inventory, associated with a manufacturing
consolidation plan within the Respiratory segment. In addition, Mallinckrodt
recorded a gain of $44.3 million to nonoperating income (expense) related to
the sale of its medical gas business and blood analysis product line which
were part of the Respiratory segment. Mallinckrodt also recorded a charge of
$10.5 million to nonoperating income (expense) associated with the
write-down of an equity investment.
(2) In August 1997, Mallinckrodt acquired Nellcor Puritan Bennett Incorporated
("Nellcor"). The acquisition was accounted for under the purchase method of
accounting and, accordingly, the results of Nellcor have been included in
the Mallinckrodt financial statements since September 1, 1997. In
conjunction with the allocation of the purchase price, purchased research
and development of $306.3 million, which had no tax benefit, and the sale of
Nellcor inventories, which were stepped up to fair value by $74.4 million,
or $46.1 million net of taxes, decreased earnings. In addition, during the
1998 fiscal year, Mallinckrodt recorded a pre-tax charge of $19.1 million
associated with exiting certain activities related to Mallinckrodt's
operations in connection with the combination of Mallinckrodt and Nellcor.
Mallinckrodt also recorded a pre-tax charge of $49.5 million related to
employee transition costs, an increase in asset valuation reserves and other
integration costs.
(3) Includes a $0.05 per share rights redemption payment.
15
<PAGE>
SELECTED TYCO AND MALLINCKRODT UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
2000(1) 1999(1)
--------------- -------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales................................................. $15,049.5 $25,077.7
Operating income.......................................... 2,651.8 2,456.1
Income from continuing operations(2)...................... 1,681.1 1,168.0
Income from continuing operations per common share(2)(3)
Basic................................................... 0.96 0.68
Diluted................................................. 0.94 0.67
Cash dividends per common share........................... See (4) below
CONSOLIDATED BALANCE SHEET DATA:
Total assets.............................................. 41,810.9
Long-term debt............................................ 11,349.2
Total shareholders' equity................................ 16,968.9
</TABLE>
------------------------
(1) Tyco has a September 30 fiscal year end. Mallinckrodt has a June 30 fiscal
year end. For purposes of the unaudited pro forma combined statements of
operations data, operating results for the six months ended March 31, 2000
have been combined using the results of Tyco and Mallinckrodt for such
period, and the operating results for the fiscal year ended September 30,
1999 have been combined using the results of Tyco for its fiscal year ended
September 30, 1999 and the results of Mallinckrodt for its fiscal year ended
June 30, 1999. For purposes of the unaudited pro forma combined balance
sheet data, the financial position at March 31, 2000 combines the balance
sheets of Tyco and Mallinckrodt as of such date.
(2) See Notes (2) and (3) to "Selected Consolidated Historical Financial Data of
Tyco" on page 12 for information on certain non-recurring items and
Note (1) to "Selected Consolidated Historical Financial Data of
Mallinckrodt" on page 15.
(3) The unaudited pro forma combined per share data are based on Mallinckrodt
shareholders receiving 1.0040 Tyco common shares for each share of
Mallinckrodt common stock held. This rate is equal to $47.50 divided by
47.3125, the closing price of Tyco common shares on the New York Stock
Exchange on June 27, 2000, the day prior to the announcement of the merger.
For purposes of the unaudited pro forma combined financial information, the
number of shares of Mallinckrodt common stock outstanding on June 27, 2000
of 67,224,459 was used.
(4) Tyco has paid a quarterly dividend of $0.0125 per common share since
July 2, 1997, the date of the Former Tyco/ADT Merger. See Note (11) to
"Selected Consolidated Historical Financial Data of Tyco" on page 14 for
further information on Tyco's cash dividends per common share. Mallinckrodt
paid dividends of $0.33 per share in the six months ended March 31, 2000 and
$0.66 per share (including a $0.05 per share rights redemption payment) in
the fiscal year ended June 30, 1999.
16
<PAGE>
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
TYCO HISTORICAL TYCO AND MALLINCKRODT
PER SHARE UNAUDITED PRO FORMA MALLINCKRODT EQUIVALENT
DATA MALLINCKRODT HISTORICAL COMBINED UNAUDITED PRO FORMA
(RESTATED) PER SHARE DATA(1) PER SHARE DATA(2) PER SHARE DATA(2)
--------------- ----------------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED MARCH 31,
2000 (UNAUDITED)
Income from continuing
operations per common
share(3):
Basic.................... $0.95 $1.52 $0.96 $0.96
Diluted.................. 0.94 1.51 0.94 0.95
Cash dividends per common
share.................... See (4) below
Book value per common
share.................... 8.15 15.86 9.66 9.70
YEAR ENDED SEPTEMBER 30,
1999
Income from continuing
operations per common
share(3):
Basic.................... 0.65 2.41 0.68 0.69
Diluted.................. 0.64 2.40 0.67 0.68
Cash dividends per common
share.................... See (4) below
Book value per common
share.................... 7.32 14.84 8.85 8.89
</TABLE>
------------------------
(1) See Note (1) to "Selected Tyco and Mallinckrodt Unaudited Pro Forma Combined
Financial Information" on page 16 for information on Mallinckrodt's fiscal
year end.
(2) The unaudited pro forma combined income and book value per common share are
based on Mallinckrodt shareholders receiving 1.0040 Tyco common shares for
each share of Mallinckrodt common stock held. The Mallinckrodt equivalent
pro forma per share data are calculated by multiplying the unaudited pro
forma combined per share data by 1.0040.
(3) See Notes (2) and (3) to "Selected Consolidated Historical Financial Data of
Tyco" on page 12 and Note (1) to "Selected Consolidated Historical Financial
Data of Mallinckrodt" on page 15 for information on certain non-recurring
items.
(4) See Note (4) to "Selected Tyco and Mallinckrodt Unaudited Pro Forma Combined
Financial Information" on page 16 for information on cash dividends per
common share.
17
<PAGE>
COMPARATIVE MARKET VALUE INFORMATION
The following table sets forth:
- the closing prices per share and aggregate market values of Tyco common
shares and of Mallinckrodt common stock on the New York Stock Exchange on
June 27, 2000, the last trading day prior to the public announcement of
the proposed merger, and on , 2000, the most recent date for which
prices were available prior to printing this document; and
- the equivalent price per share and equivalent market value of Mallinckrodt
common stock, based on the exchange ratio that would apply if the average
share price during the pricing period were equal to the Tyco closing price
on the New York Stock Exchange on , 2000.
<TABLE>
<CAPTION>
TYCO MALLINCKRODT MALLINCKRODT
HISTORICAL HISTORICAL EQUIVALENT(1)
--------------- -------------- --------------
<S> <C> <C> <C>
On June 27, 2000
Closing price per common share.......... $ 47.3125 $ 28.7500 $ 47.5000
Market value of common shares(2)........ $79,849,434,609 $1,932,703,196 $3,193,161,803
On , 2000
Closing price per common share.......... $ $ $
Market value of common shares(2)........ $ $ $
</TABLE>
------------------------
(1) The Mallinckrodt equivalent data for June 27, 2000 corresponds to an
exchange ratio of 1.0040, and the Mallinckrodt equivalent data for ,
2000 corresponds to an exchange ratio of 0. .
(2) Market value based on 1,687,702,713 Tyco common shares and 67,224,459 shares
of Mallinckrodt common stock outstanding as of June 27, 2000, and
Tyco common shares and shares of Mallinckrodt common
stock outstanding as of excluding shares held in treasury or by
subsidiaries.
Market values are likely to differ from values based on the average share
price. See the risk factor entitled "MALLINCKRODT SHAREHOLDERS COULD RECEIVE
LESS THAN $47.50 IN VALUE OF TYCO COMMON SHARES FOR EACH SHARE OF MALLINCKRODT
COMMON STOCK" on page 8.
18
<PAGE>
MALLINCKRODT INC. SPECIAL MEETING
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is being furnished to Mallinckrodt
shareholders in connection with the solicitation of proxies by Mallinckrodt's
Board of Directors in connection with the proposed merger.
This Proxy Statement/Prospectus is first being furnished to Mallinckrodt
shareholders on or about [ ], 2000.
DATE, TIME AND PLACE
The special meeting of Mallinckrodt shareholders will be held on ,
, 2000, at a.m., Time, at .
PURPOSE OF THE MALLINCKRODT SPECIAL MEETING
At the special meeting, Mallinckrodt shareholders will consider and vote
upon a proposal to adopt the Agreement and Plan of Merger, dated as of June 28,
2000, among Mallinckrodt and two of Tyco's subsidiaries, Tyco Acquisition and
EVM. Adoption of the merger agreement will also constitute approval of the
merger and the other transactions contemplated by the merger agreement. The
merger agreement provides, among other things, that EVM will be merged with and
into Mallinckrodt, each outstanding share of Mallinckrodt common stock will be
converted into the right to receive Tyco common shares, and each outstanding
share of Mallinckrodt 4% cumulative preferred stock will remain outstanding and
will be redeemed by the surviving corporation promptly following the
consummation of the merger in accordance with the redemption provisions of the
4% cumulative preferred stock. The obligations of Tyco Acquisition and EVM under
the merger agreement are guaranteed by Tyco.
Mallinckrodt is not proposing any matters other than the adoption of the
merger agreement at the Mallinckrodt special meeting.
RECORD DATE; VOTING RIGHTS; QUORUM; REQUIRED VOTE
The close of business on , 2000 is the record date for
determining the holders of Mallinckrodt stock who are entitled to receive notice
of and to vote at the special meeting or at any adjournment of the special
meeting.
Mallinckrodt has two classes of capital stock outstanding: 4% cumulative
preferred stock, par value $100 per share, and common stock, par value $1.00 per
share. Each holder of 4% cumulative preferred stock and each holder of common
stock is entitled to one vote for each share held. The holders of a majority of
the outstanding shares of Mallinckrodt stock entitled to vote must be present at
the special meeting, in person or by proxy, to constitute a quorum to transact
business.
The affirmative vote of the holders of shares representing at least
two-thirds of the outstanding voting power of all Mallinckrodt stock entitled to
vote is required to adopt the merger agreement. On the record date, shares
of Mallinckrodt common stock were outstanding, excluding shares held in
treasury, and were held by approximately holders of record. On the record
date, 98,330 shares of Mallinckrodt 4% cumulative preferred stock were
outstanding and were held by approximately holders of record.
Mallinckrodt's executive officers and directors, including their affiliates,
have voting power with respect to an aggregate of approximately shares of
Mallinckrodt common stock or approximately % of Mallinckrodt's total voting
power, outstanding as of the record date.
Votes cast by proxy or in person at the Mallinckrodt special meeting will be
tabulated and will determine whether or not a quorum is present. Abstentions
will be treated as shares present in determining whether Mallinckrodt has a
quorum for the special meeting, but abstentions will have the same effect
19
<PAGE>
as a vote against adoption of the merger agreement. 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 adoption of the merger agreement. A broker or other
record holder or nominee will vote shares of Mallinckrodt stock only if the
holder of such shares provides instructions on how to vote by following the
instructions provided by such broker, record holder or nominee.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF MALLINCKRODT
Mallinckrodt's Board of Directors has unanimously determined that the merger
is fair to and in the best interests of Mallinckrodt and its shareholders and
unanimously recommends that you vote for the adoption of the merger agreement.
See "Recommendation of the Board of Directors of Mallinckrodt; Reasons of
Mallinckrodt for the Merger" beginning on page and "Interests of Certain
Persons in the Merger" beginning on page .
PROXIES; REVOCATION
A proxy card is enclosed for use by Mallinckrodt shareholders.
Mallinckrodt's Board of Directors requests that shareholders 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
RETAINED BY MALLINCKRODT, AT THE FOLLOWING ADDRESS AND TELEPHONE NUMBER:
All properly executed proxies that are not revoked will be voted at the
special meeting as instructed on those proxies. A shareholder 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 Mallinckrodt, 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 adoption of the merger agreement, unless
the proxy is revoked before the vote is taken.
SOLICITATION OF PROXIES
Management of Mallinckrodt may 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. Mallinckrodt 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. Mallinckrodt and Tyco
Acquisition will share equally the expenses incurred in connection with the
printing and mailing of this proxy statement/prospectus.
20
<PAGE>
THE MERGER
This section, as well as the next section "Certain Provisions of the Merger
Agreement," describe the material aspects of the proposed merger, including the
merger agreement. These discussions are qualified in their entirety by reference
to the merger agreement, which is attached as Annex A 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
On April 18 and 19, 2000, the management of Mallinckrodt gave a presentation
to Mallinckrodt's Board of Directors indicating its desire to explore strategic
alternatives for Mallinckrodt. As part of this process of evaluating strategic
alternatives, Mallinckrodt's Board of Directors instructed Mallinckrodt's
management to explore the level of interest of third parties in acquiring the
entire company. Following the April 19 meeting, Mallinckrodt formally retained
Goldman, Sachs & Co. and J.P. Morgan as its financial advisors to evaluate such
interest. During the next several weeks, Goldman, Sachs & Co., J.P. Morgan and
Mallinckrodt contacted various parties whom they believed might be interested in
a strategic transaction with Mallinckrodt.
In May 2000, J.P. Morgan contacted L. Dennis Kozlowski, Tyco's Chairman of
the Board and Chief Executive Officer, to discuss a possible strategic
combination of Mallinckrodt and Tyco. After receiving an indication of interest
from Tyco, J.P. Morgan delivered to Tyco a confidentiality agreement containing
customary terms and conditions. Tyco executed and delivered the confidentiality
agreement to Mallinckrodt on May 22, 2000.
On May 19, 2000, Mr. Kozlowski called C. Ray Holman, Mallinckrodt's Chairman
of the Board and Chief Executive Officer, and offered to meet with Mr. Holman.
On May 23, 2000, Messrs. Kozlowski and Holman met at Mallinckrodt's headquarters
in St. Louis to discuss the possible acquisition of Mallinckrodt by Tyco. Based
upon Tyco's review of publicly available information about Mallinckrodt, Mr.
Kozlowski indicated that Tyco would be willing to pay between $40 and $45 in
Tyco common shares for each share of Mallinckrodt common stock, subject to
Tyco's due diligence review of Mallinckrodt, negotiation of definitive
agreements and approval by Tyco's Board of Directors. On May 25, 2000,
Mr. Holman telephoned Mr. Kozlowski and told him that Mallinckrodt was willing
to continue talks with Tyco, although the consideration offered by Tyco was too
low. Mr. Holman invited representatives of Tyco to Mallinckrodt's headquarters
to discuss the businesses of Mallinckrodt and Tyco, and to obtain information to
assist Tyco in the valuation of Mallinckrodt and due diligence activities. On
May 26, 2000, Mr. Irving Gutin, Senior Vice President of Tyco International (US)
Inc., telephoned Mr. Holman to accept Mr. Holman's invitation to pursue further
negotiations in St. Louis.
On June 1 and 2, 2000, representatives of Tyco met with members of
Mallinckrodt's management in St. Louis. The group preliminarily determined in
their discussions that Mallinckrodt'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, among other things, result from a business
combination of Mallinckrodt and Tyco.
On June 6, 2000, a third party also reviewed a limited amount of non-public
information of Mallinckrodt.
On June 7, 2000, Mr. Kozlowski contacted Mr. Holman to further discuss the
possible acquisition transaction. During this conversation, Mr. Kozlowski
indicated that Tyco would be willing to pay $47.50 in Tyco common shares for
each share of Mallinckrodt common stock, subject to Tyco's continued due
diligence review of Mallinckrodt, negotiation of definitive agreements and
approval by Tyco's Board of Directors. After several subsequent conversations,
Mr. Holman informed Mr. Kozlowski that he would be
21
<PAGE>
willing to ask Mallinckrodt's Board of Directors to consider $47.50 per share if
Tyco agreed to a fixed value transaction.
Between June 13 and June 15, 2000, representatives of Tyco went to
St. Louis and numerous other operating sites where they conducted a
comprehensive business, financial, accounting and legal due diligence review of
Mallinckrodt. In the course of their investigation, Tyco personnel reviewed
documentation and conducted discussions with Mallinckrodt's management
concerning Mallinckrodt's financial condition, facilities, operations, human
resources programs, intellectual property, tax posture, environmental compliance
and other business and legal matters. At this time, Tyco delivered to
Mallinckrodt an initial draft of a merger agreement. Tyco's due diligence of
Mallinckrodt continued through the execution of the definitive agreements.
On June 14, 2000, Mallinckrodt executed and delivered to Tyco a
confidentiality agreement containing customary terms and conditions.
Mallinckrodt's representatives then started to conduct a due diligence review of
Tyco. At a meeting held on June 15, 2000, Mallinckrodt's Board of Directors,
with the assistance of Mallinckrodt's outside financial and legal advisors,
considered the benefits to Mallinckrodt and its shareholders of various
strategic options, the results of the due diligence to date and the terms of the
proposed merger agreement.
Beginning on June 18, 2000, legal representatives of Mallinckrodt 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 structure of the transaction, the
treatment of Mallinckrodt's employee benefit plans, the identification of
required regulatory filings and the tax treatment of the proposed transaction.
On June 19 and June 20, 2000, Mallinckrodt's senior management and
representatives of Mallinckrodt met with Tyco's senior management to conduct
further due diligence. Mallinckrodt and its advisors conducted further due
diligence through June 27, 2000.
On June 19, 2000, Mallinckrodt received a non-binding indication of interest
for one of Mallinckrodt's divisions.
At a meeting held on June 22, 2000, Tyco's Board of Directors determined
that the acquisition of Mallinckrodt 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.
On June 24, 2000 and June 28, 2000, Mallinckrodt's Board of Directors met
again to continue its discussions regarding the merger and to further review the
terms and conditions of the proposed merger with its outside financial and legal
advisors. At the June 28 meeting, Goldman, Sachs & Co. and J.P. Morgan each
rendered its oral opinion, subsequently confirmed in writing, that, as of that
date and based upon and subject to the matters referred to in their respective
opinions, the consideration to be received for shares of Mallinckrodt common
stock in the merger was fair from a financial point of view to the holders of
shares of Mallinckrodt common stock. Among other things, the opinions assume
that Mallinckrodt will not agree to adjust the exchange ratio if the price of
Tyco common shares during the pricing period is lower than the $37.00 floor
price (or a lower floor price agreed to by Tyco Acquisition). Each of Goldman,
Sachs & Co. and J.P. Morgan also provided Mallinckrodt's Board of Directors with
the financial analyses serving as a basis for its opinion and responded to
questions raised by Mallinckrodt's Board of Directors regarding their respective
analyses and opinions. Following this discussion, Mallinckrodt's outside legal
counsel reviewed with Mallinckrodt's Board of Directors the proposed terms of
the merger agreement. Mallinckrodt's Board of Directors then engaged in a full
discussion of the terms of the proposed merger, including the strategic benefits
of the combination, the terms and conditions of the proposed merger agreement
and the analyses and opinions of Goldman Sachs and J.P. Morgan. Mallinckrodt's
Board of Directors concluded that the proposed merger and merger agreement were
fair to and in
22
<PAGE>
the best interests of Mallinckrodt and its shareholders. Mallinckrodt's Board of
Directors then adopted the merger agreement and resolved to recommend that
Mallinckrodt's shareholders vote to adopt the merger agreement. Mallinckrodt's
Board of Directors then authorized management to proceed with the final
negotiation and execution of the merger agreement.
On the afternoon of June 28, the parties executed the definitive merger
agreement and issued a joint press release announcing the transaction.
EXCHANGE OF FINANCIAL FORECASTS
As part of their respective business planning cycles, management of each of
Mallinckrodt and Tyco 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," Mallinckrodt
and Tyco each provided certain of these internal forecasts to the other and the
other's financial advisors.
The internal financial forecasts regarding Mallinckrodt prepared by
Mallinckrodt's management reflected the forecasted information as set forth
below. The forecast includes Mallinckrodt's results through April 30, 2000 and
the expected results for the balance of fiscal 2000, excluding restructuring and
other non-recurring gains and charges.
<TABLE>
<CAPTION>
FISCAL YEAR SALES EBITDA NET INCOME EPS
----------- -------- -------- ---------- --------
(IN MILLIONS, EXCEPT EPS)
<S> <C> <C> <C> <C>
2000...................................... $2,629 $539 $186 $2.68
2000 Adjusted*............................ $2,569 $522 $176 $2.54
2001...................................... $2,746 $600 $219 $3.25
</TABLE>
------------------------
* Adjusted for the effects of the businesses divested during the course of the
fiscal year.
The internal forecasts of Tyco prepared by Tyco's management reflected the
forecasted information for Tyco's fiscal year 2000 set forth below. The forecast
includes Tyco's results through March 31, 2000 and the expected results for the
balance of fiscal 2000, excluding restructuring and other non-recurring charges.
<TABLE>
<CAPTION>
SALES NET INCOME EPS
----- ---------- ---
<S> <C> <C>
$28.5 billion $3.7 billion $2.16
</TABLE>
Mallinckrodt'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 management of Mallinckrodt 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 10. Accordingly, actual results may differ
materially from those forecasted.
The inclusion of the forecasts in this document should not be regarded as a
representation by Mallinckrodt or Tyco that such forecasts are or will prove to
be correct. As a matter of course, neither Mallinckrodt 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 Mallinckrodt nor Tyco intends to make publicly available any update or
other revisions to any of the forecasts to reflect circumstances existing after
the date of preparation of such forecasts.
23
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS OF MALLINCKRODT; REASONS OF
MALLINCKRODT FOR THE MERGER
Mallinckrodt's Board of Directors, after careful consideration, has
unanimously:
1. determined that the merger is fair to and in the best interests of
Mallinckrodt and its shareholders;
2. approved the merger and adopted the merger agreement; and
3. recommended that Mallinckrodt shareholders vote for the adoption of the
merger agreement.
At meetings held on June 15, June 24, and June 28, 2000, Mallinckrodt's
Board of Directors, with the assistance of Mallinckrodt's outside financial and
legal advisors, considered the legal, financial and other terms of the merger.
The strategic factors considered by Mallinckrodt's Board of Directors in
approving the merger and adopting the merger agreement included, without
limitation, the following:
- SYNERGIES. Mallinckrodt's Board of Directors believes that following the
merger additional cash flow will be generated by cost savings and
incremental revenues. Through the elimination of duplication in corporate
and administrative programs, greater efficiencies in operations and
business processes, cost savings are expected in purchasing, in redundant
non-personnel corporate expenses, and in distribution of products.
- SCALE. Mallinckrodt will become part of a diversified company which is
significantly larger than Mallinckrodt on a stand-alone basis. As
competition intensifies within the industries in which Mallinckrodt
operates, Mallinckrodt's Board of Directors believes that scale will be
one parameter that will contribute to overall business success. Scale has
importance in many areas, including operations, product development,
advertising and corporate services. A combination with Tyco will provide
Mallinckrodt with access to significantly greater financial and operations
resources than Mallinckrodt would have on a stand-alone basis, thereby
enabling Mallinckrodt to better fund its research and product development
programs. It is the Board's belief that the post-merger combined
businesses of Mallinckrodt and Tyco would provide greater opportunity for
the development and commercial exploitation of Mallinckrodt's products by
utilizing Tyco's broader geographic scope and client base, thus allowing
Mallinckrodt to both attract Tyco's customers as new customers for
Mallinckrodt products and to offer Tyco products to Mallinckrodt's current
customers.
- OTHER BENEFITS. Mallinckrodt's Board of Directors also believes that the
merger will create other benefits. The Board expects the two companies to
learn from each other. The combination of the two companies should
accelerate the development of product ideas and create opportunities for
new efficiencies. This relationship is expected to allow each company to
enhance its skill base, competitiveness, marketability, product quality
and profitability. Furthermore, it is expected that the cost of future
research and development activities can be spread over a larger base and
that the combined research and development efforts of the two companies
will promote enhanced creativity.
In determining that the merger is fair to and in the best interests of
Mallinckrodt and its shareholders, Mallinckrodt's Board of Directors considered
a number of factors and potential benefits, including, without limitation, the
following:
- The amount of consideration to be received by Mallinckrodt shareholders in
the merger relative to the earnings and cash flow of Mallinckrodt, the
value of Mallinckrodt's component businesses, historical market prices and
trading patterns of Mallinckrodt common stock, comparable precedent
transactions, public market prices of companies in businesses comparable
to Mallinckrodt's businesses, and the premium of this price over the
market price of Mallinckrodt common stock before the announcement of the
merger;
24
<PAGE>
- The fact that as long as Tyco's common share price does not decrease below
the floor price of $37.00 (or a lower floor price agreed to by Tyco
Acquisition), Mallinckrodt shareholders should receive in the merger Tyco
common shares valued at $47.50 (based on the average share price for Tyco
common shares during the pricing period);
- The financial presentations to Mallinckrodt's Board of Directors in
connection with the Board's consideration of the merger by Goldman,
Sachs & Co. and J.P. Morgan including the opinions of Goldman, Sachs & Co.
and J.P. Morgan delivered to the Board that as of June 28, 2000 and based
upon and subject to the matters referred to in the opinions, the
consideration to be received for the shares of Mallinckrodt common stock
in the merger was fair from a financial point of view to the holders of
the shares. We have attached the full text of the Goldman, Sachs & Co. and
the J.P. Morgan written opinions dated as of June 28, 2000 as Annexes B
and C to this document. Mallinckrodt shareholders are urged to read these
opinions carefully and in their entirety;
- The qualification of the merger as a reorganization for U.S. federal
income tax purposes, which will permit Mallinckrodt shareholders to
receive Tyco common shares in a tax-free exchange;
- The experience and high rate of success of Tyco in structuring and closing
transactions similar to the merger, which should benefit Mallinckrodt
shareholders who retain Tyco common shares after the merger;
- The financial condition, results of operations and businesses of
Mallinckrodt and Tyco, on both a historical and prospective basis, and
current industry, economic and market conditions. Mallinckrodt's Board of
Directors also considered the possible strategic growth opportunities that
might be available to Mallinckrodt absent the merger. Based on its review
of such opportunities, including the possibility of continuing to operate
Mallinckrodt as an independent company, as well as the risks and
uncertainties associated with such opportunities, it is the Board's
judgement that Mallinckrodt shareholders would benefit from the potential
business combination with Tyco. Mallinckrodt's Board of Directors believes
in this regard that, after the merger, Mallinckrodt shareholders will be
able to participate in the growth of the businesses conducted by both Tyco
and Mallinckrodt and to benefit from the potential appreciation in the
value of 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 Mallinckrodt common
stock, which would provide Mallinckrodt shareholders the opportunity to
gain greater liquidity in their investment;
- The review of, and discussions with, Mallinckrodt's senior management and
legal and financial advisors regarding the business, financial, legal and
accounting aspects of the merger, the results of legal and financial due
diligence on Tyco in connection with the receipt by Mallinckrodt
shareholders of Tyco common shares and a review of the terms of, and
conditions to, the merger;
- The analysis and recommendation of Mallinckrodt's management that the
merger agreement be adopted, including, without limitation, a discussion
of the complementary nature of certain product lines of Mallinckrodt and
Tyco;
- The conclusion of Mallinckrodt's Board of Directors that, based on
presentations by Mallinckrodt's legal and financial advisors, the terms,
conditions, covenants and representations contained in the merger
agreement, including the limited conditions to Tyco's obligation to close
the merger and the ability of Mallinckrodt to consider proposed
alternative business combinations under certain circumstances, are
generally customary for transactions such as the merger; and
- The long-term interests of Mallinckrodt and its shareholders, as well as
the interests of Mallinckrodt's employees, customers, creditors, suppliers
and the communities in which Mallinckrodt operates.
25
<PAGE>
Mallinckrodt's Board of Directors 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
below the floor price of $37.00 per share (or a lower floor price agreed
to by Tyco Acquisition), which could either permit Tyco Acquisition to
terminate the merger agreement or result in less value being paid to
Mallinckrodt shareholders;
- the risk to the value of Tyco common shares presented by the previously
announced informal inquiry being conducted by the Division of Enforcement
of the Securities and Exchange Commission and previously announced
litigation pending against Tyco;
- the risks associated with integrating Mallinckrodt's existing operations
with those of Tyco, including the potential loss of key personnel of
Mallinckrodt and difficulty in integrating corporate, accounting,
financial reporting and management information systems of Mallinckrodt
with those of Tyco;
- the fact that Mallinckrodt shareholders will not receive the full benefit
of any future growth in the value of their equity that Mallinckrodt may
have achieved as an independent company, and the potential disadvantage to
Mallinckrodt shareholders in the event that Tyco does not perform as well
in the future as Mallinckrodt may have performed as an independent
company;
- the substantial management time and effort that will be required to
consummate the merger and integrate the operation 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
Mallinckrodt from pursuing such an opportunity; and
- other matters described under "Risk Factors" beginning on page 8.
After detailed consideration of these factors, Mallinckrodt's Board of
Directors concluded that the potential benefits of the merger outweighed these
considerations.
The above discussion of the information and factors considered by
Mallinckrodt's Board of Directors is not exhaustive and does not include all
factors considered by the Board. Each member of Mallinckrodt's Board of
Directors may also have considered different factors. In view of a variety of
factors considered in connection with its evaluation of the merger,
Mallinckrodt's Board of Directors did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the different factors. Based on
the factors outlined above, Mallinckrodt's Board of Directors determined that
the merger is fair to and in the best interests of Mallinckrodt and its
shareholders.
MALLINCKRODT'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER
IS FAIR TO AND IN THE BEST INTERESTS OF MALLINCKRODT AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
See "Background of the Merger" beginning on page , "Opinions of Financial
Advisors to Mallinckrodt" below, "Material U.S. Federal Income Tax and Bermuda
Tax Consequences" beginning on page and "Comparative Per Share Prices and
Dividends" beginning on page .
OPINIONS OF FINANCIAL ADVISORS TO MALLINCKRODT
OPINION OF GOLDMAN, SACHS & CO.
Mallinckrodt retained Goldman, Sachs & Co. pursuant to a letter agreement,
dated April 24, 2000, to act as financial advisor in connection with the
possible sale of all or a portion of Mallinckrodt. Goldman,
26
<PAGE>
Sachs & Co. is a nationally recognized investment banking firm and was selected
by Mallinckrodt based on the firm's reputation and experience in investment
banking in general and its recognized expertise in the valuation of businesses
as well as its prior investment banking relationships with Mallinckrodt.
On June 28, 2000, at the meeting of Mallinckrodt's Board of Directors,
Goldman, Sachs & Co. delivered to Mallinckrodt's Board of Directors its oral
opinion (which was subsequently confirmed in a written opinion as of the same
date) that, as of that date and based upon and subject to the matters set forth
in the opinion and such other matters as Goldman, Sachs & Co. considered
relevant, the consideration to be received for the shares of Mallinckrodt common
stock in the merger was fair, from a financial point of view, to the holders of
Mallinckrodt common stock.
You should consider the following when reading the discussion of the opinion
of Goldman, Sachs & Co. in this Proxy Statement/Prospectus:
- We urge you to read carefully the entire opinion of Goldman, Sachs & Co.,
which is included as Annex B in this Proxy Statement/Prospectus and is
incorporated herein by reference;
- Goldman, Sachs & Co.'s advisory services and opinion were provided to
Mallinckrodt's Board of Directors for the information and assistance of
Mallinckrodt's Board of Directors in connection with its consideration of
the transaction contemplated by the merger agreement and was directed only
to the fairness, from a financial point of view, to the holders of
Mallinckrodt common stock of the consideration to be received for the
shares of Mallinckrodt common stock in the merger;
- Goldman, Sachs & Co.'s opinion does not constitute a recommendation as to
how holders of Mallinckrodt common stock should vote with respect to the
merger agreement; and
- Goldman, Sachs & Co. expressed no opinion as to the prices at which shares
of Tyco common stock may be traded in the future.
Although Goldman, Sachs & Co. evaluated the fairness, from a financial point
of view, to the holders of Mallinckrodt common stock of the consideration to be
received for the shares of Mallinckrodt common stock in the merger, the
consideration itself was determined by Mallinckrodt and Tyco through arm's-
length negotiations. Mallinckrodt did not provide specific instructions to, or
place any limitations on, Goldman, Sachs & Co. with respect to the procedures to
be followed or factors to be considered by Goldman, Sachs & Co. in performing
its analyses or providing its opinion.
In connection with its opinion, Goldman, Sachs & Co. reviewed, among other
things, the following:
- The merger agreement;
- Annual reports to stockholders and annual reports on Form 10-K of
Mallinckrodt and Tyco for the five fiscal years ended June 30 and
September 30, 1999, respectively;
- Certain interim reports to stockholders and quarterly reports on
Form 10-Q of Mallinckrodt and Tyco;
- Certain other communications from Mallinckrodt and Tyco to their
respective stockholders; and
- Certain internal financial analyses and forecasts for Mallinckrodt and
Tyco prepared by their respective managements, including certain cost
savings and operating synergies projected by the management of
Mallinckrodt to result from the transaction contemplated by the merger
agreement.
Goldman, Sachs & Co. also held discussions with members of the managements
of Mallinckrodt and Tyco regarding the strategic rationale for, and the
potential benefits of, the transaction contemplated by the merger agreement and
the past and current business operations, financial condition and future
prospects of their respective companies, including discussions with members of
the management of Mallinckrodt as to the attainability of its forecasts.
Additionally, Goldman, Sachs & Co. held discussions with Mallinckrodt's
independent accountants and the management of Tyco concerning the informal
inquiry
27
<PAGE>
being conducted by the Division of Enforcement of the Securities and Exchange
Commission. In addition, Goldman, Sachs & Co.:
- reviewed the reported price and trading activity for the shares of
Mallinckrodt common stock and the shares of Tyco common stock;
- compared certain financial and stock market information for Mallinckrodt
and Tyco with similar information for certain other companies the
securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the specialty chemicals and healthcare industries specifically and in
other industries generally; and
- performed such other studies and analyses as Goldman, Sachs & Co.
considered appropriate.
Goldman, Sachs & Co. relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In addition, Goldman,
Sachs & Co. did not make an independent evaluation or appraisal of the assets
and liabilities of Mallinckrodt or Tyco or any of their respective subsidiaries
and Goldman, Sachs & Co. was not furnished with any such evaluation or
appraisal. Goldman, Sachs & Co. assumed that the exchange ratio in the merger
will not be adjusted as provided in section 7.01(j) of the merger agreement
(that is, that the exchange ratio will not be fixed at less than the ratio
determined by dividing $47.50 by the average price of Tyco common shares during
the pricing period).
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Goldman,
Sachs & Co. is familiar with Mallinckrodt, having acted as its financial advisor
in connection with the acquisition by Mallinckrodt of Nellcor Puritan Bennett
Incorporated in August 1997 and the divestiture of Mallinckrodt's 50% interest
in Tastemaker Inc. in March 1997 and having acted as Mallinckrodt's financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman, Sachs & Co. is also
familiar with Tyco, having acted as Tyco's financial advisor in connection with
the acquisition by Tyco of Raychem Corporation in August 1998, having acted as
co-managing underwriter of Tyco's 6.875% Notes due September 5, 2002 in
August 1998, and having been selected as co-lead underwriter in Tyco's planned
initial public offering of its TyCom business. Goldman, Sachs & Co. may provide
investment banking services to Tyco and its subsidiaries in the future. Goldman,
Sachs & Co. provides a full range of financial advisory and securities services
and, in the course of its normal trading activities, may from time to time
effect transactions and hold securities, including derivative securities, of
Mallinckrodt or Tyco for its own account and for the accounts of customers.
The following is a summary of the material financial analyses used by
Goldman, Sachs & Co. in reaching its opinion and does not purport to be a
complete description of the analyses performed by Goldman, Sachs & Co. The
following quantitative information, to the extent it is based on market data, is
based on market data as it existed at or about June 28, 2000 and is not
necessarily indicative of current market conditions. You should understand that
the order of analyses and the results derived from these analyses described
below do not represent relative importance or weight given to these analyses by
Goldman, Sachs & Co. The summary of the financial analyses includes information
presented in tabular format. In order to understand fully the financial analyses
used by Goldman, Sachs & Co., these tables must be read together with the text
of each summary. The tables alone do not describe completely the financial
analyses.
HISTORICAL STOCK PERFORMANCE. Goldman, Sachs & Co. reviewed the monthly
prices and trading volume of Mallinckrodt common stock during the period from
May 31, 1995 to May 31, 2000, the daily trading volume of Mallinckrodt common
stock at specific prices during the period from June 22, 1995 to June 22, 2000
and the monthly prices of Mallinckrodt common stock as compared to market and
other
28
<PAGE>
indices during the period from June 30, 1995 to June 22, 2000. Goldman, Sachs &
Co. also reviewed the monthly prices and trading volume of Tyco common shares
during the period from May 31, 1995 to May 31, 2000, the daily prices and
trading volume of Tyco common shares during the period from June 22, 1999 to
June 22, 2000, the monthly prices of Tyco common shares as compared to market
and other indices during the period from May 31, 1995 to May 31, 2000, and the
daily prices of Tyco common shares as compared to market and other indices
during the period from June 1 to June 22, 2000.
In addition, Goldman, Sachs & Co. reviewed:
- monthly ratios of stock price to estimated next-twelve months ("NTM")
earnings per share ("EPS") for Mallinckrodt during the period from
June 1995 to May 2000, as compared to the corresponding ratio on June 23,
2000; and
- monthly ratios of stock price to estimated NTM EPS to estimated long-term
growth rate for Mallinckrodt during the period from May 1995 to May 2000,
as compared to the corresponding ratio on June 23, 2000.
The analysis was based on consensus earnings estimates reported by the
Institutional Brokers Estimate System ("IBES"). Goldman, Sachs & Co. observed
the following ratios:
<TABLE>
<CAPTION>
STOCK PRICE/ESTIMATED
STOCK PRICE/ESTIMATED NTM EPS/LONG-TERM
NTM EPS GROWTH RATE
--------------------- ---------------------
<S> <C> <C>
Current(1).............................................. 9.2x 0.8x
1-year Average.......................................... 11.2 1.1
3-year Average.......................................... 13.0 1.2
5-year Average.......................................... 13.6 1.2
</TABLE>
------------------------
(1) As of June 23, 2000.
PRESENT VALUE OF IMPLIED FUTURE STOCK PRICES ANALYSIS. Goldman, Sachs & Co.
calculated present values of future stock prices of Mallinckrodt based on
earnings projections furnished by Mallinckrodt management for fiscal years 2001,
2002 and 2003. Goldman, Sachs & Co. calculated implied future stock prices as
projected earnings per share multiplied by historical ratios of stock price to
estimated NTM EPS. From the implied future stock prices and expected future
dividend payments based on historical periodical dividends paid by Mallinckrodt,
Goldman, Sachs & Co. derived present values of Mallinckrodt common stock using
an assumed discount rate of 14%. The analysis yielded the following results:
<TABLE>
<CAPTION>
IMPLIED FUTURE STOCK PRICE
------------------------------
HISTORICAL STOCK PRICE TO ESTIMATED NTM EPS FY 2001 FY 2002 FY 2003
------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Current(1).................................................. $29.90 $30.09 $32.13
1-year Average.............................................. 36.40 36.64 39.11
3-year Average.............................................. 42.25 42.52 45.40
5-year Average.............................................. 44.20 44.49 47.50
</TABLE>
------------------------
(1) As of June 23, 2000.
PRICE/EARNINGS MULTIPLE COMPARISON. Goldman, Sachs & Co. compared ratios of
stock price to estimated 2000 EPS, based on stock prices and earnings estimates
reported by IBES as of June 23, 2000, for Mallinckrodt and each of the following
companies, which Goldman, Sachs & Co. selected because they are publicly traded
companies that were identified by Mallinckrodt management as being comparable to
Mallinckrodt for purposes of financial analysis:
- Bausch & Lomb;
29
<PAGE>
- Beckman Coulter;
- Becton Dickson;
- C. R. Bard;
- Nycomed Amersham;
- ResMed;
- Respironics;
- St. Jude Medical; and
- Syncor International.
Goldman, Sachs & Co. observed that the ratio of stock price to estimated 2000
EPS for Mallinckrodt was 9.5, compared to corresponding average, high and low
ratios for the selected comparable companies of 22.5, 32.2 and 14.7,
respectively.
SELECTED COMPANIES ANALYSIS. Goldman, Sachs & Co. reviewed and compared
certain financial information and ratios and public market multiples relating to
Mallinckrodt to corresponding financial information and ratios and public market
multiples for the selected comparable companies set forth above. Based on stock
prices and equity and levered market capitalizations as of June 23, 2000,
Goldman, Sachs & Co. calculated or observed the following metrics:
- Stock price as a percentage of the highest closing price during the
preceding 52-week period;
- Enterprise value as a multiple of latest-twelve month ("LTM") sales;
- Enterprise value as a multiple of LTM earnings before interest expense,
income taxes and depreciation and amortization ("EBITDA");
- Enterprise value as a multiple of LTM earnings before interest expense and
income taxes ("EBIT");
- LTM EBITDA as a percentage of LTM sales;
- LTM EBIT as a percentage of LTM sales;
- LTM research and development expense ("R&D") as a percentage of LTM sales;
- Stock price as a multiple of estimated 2000 EPS;
- Stock price as a multiple of estimated 2001 EPS;
- Long-term growth rate; and
- Stock price to estimated 2001 EPS to long-term growth rate.
Goldman, Sachs & Co.'s analyses resulted in values for Mallinckrodt and mean,
median, high and low values for the group of selected comparable companies as
follows:
<TABLE>
<CAPTION>
CALENDAR
YEAR
ENTERPRISE VALUE P/E
MULTIPLES OF LTM LTM MARGINS MULTIPLES(1)
------------------------------ ------------------------------ -------------------
SALES EBITDA EBIT EBITDA EBIT R&D 2000E 2001E
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mallinckrodt.......................... 0.9x 4.6x 6.7x 18.6% 12.9% 4.6% 9.5x 8.7x
Mean.................................. 2.9 12.4 17.5 22.5 16.3 7.6 22.5 19.3
Median................................ 2.5 12.0 17.3 22.9 15.1 7.1 23.1 19.0
High.................................. 6.5 19.2 22.5 33.8 28.8 11.4 32.2 26.9
Low................................... 1.5 7.6 12.4 11.8 8.0 4.6 14.7 13.0
<CAPTION>
LONG-
TERM 2001
GROWTH P/E TO
RATE(2) GROWTH
-------- --------
<S> <C> <C>
Mallinckrodt.......................... 12.0% 0.7x
Mean.................................. 16.3 1.3
Median................................ 15.0 1.2
High.................................. 26.0 2.5
Low................................... 10.5 0.8
</TABLE>
----------------------------------------
(1) IBES median calendar year estimates as of June 23, 2000.
(2) Source: IBES.
30
<PAGE>
Goldman, Sachs & Co. further observed that on June 23, 2000, the Mallinckrodt
common stock closed at 71.8% of its highest closing price during the preceding
52-week period, compared to corresponding high and low percentages for the
selected comparable companies of 96.7% and 60.6%.
Goldman, Sachs & Co. also reviewed and compared certain financial
information and ratios and public market multiples relating to Tyco to
corresponding financial information and ratios and public market multiples for
each of the following companies, which Goldman, Sachs & Co. selected because
they are publicly traded diversified industrial companies that may be considered
comparable to Tyco for purposes of financial analysis:
- Emerson Electric;
- General Electric;
- Honeywell; and
- United Technologies.
Based on stock prices, equity market capitalizations and enterprise values as of
June 23, 2000, Goldman, Sachs & Co. calculated or observed the following
metrics:
- Stock price as a percentage of the highest closing price during the
preceding 52-week period;
- Enterprise value as a multiple of LTM sales;
- Enterprise value as a multiple of LTM EBITDA;
- Enterprise value as a multiple of LTM EBIT;
- Stock price as a multiple of estimated 2000 EPS;
- Stock price as a multiple of estimated 2001 EPS;
- 5-year growth rate;
- Stock price to estimated 2000 EPS to 5-year growth rate;
- Stock price to estimated 2001 EPS to 5-year growth rate;
- LTM EBITDA as a percentage of LTM sales; and
- LTM EBIT as a percentage of LTM sales.
Goldman, Sachs & Co.'s analyses resulted in values for Tyco and mean, median,
high and low values for the group of selected comparable companies as follows:
<TABLE>
<CAPTION>
CALENDAR
YEAR P/E TO
ENTERPRISE VALUE P/E 5-YEAR
MULTIPLES OF LTM(1) MULTIPLES(2) 5-YEAR GROWTH
------------------------------------ ---------------------- GROWTH --------
SALES EBITDA EBIT 2000 2001 RATE(2) 2000
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Tyco................. 3.3x 14.5x 19.3x 19.0x 15.6x 20.0% 1.0x
Mean................. 3.1 13.4 18.7 18.6 18.6 13.8 1.6
Median............... 1.7 11.8 17.4 17.1 15.0 14.5 1.4
High................. 7.6 19.8 27.0 39.9 34.6 15.0 2.9
Low.................. 1.3 10.2 12.9 11.0 9.6 11.0 0.7
<CAPTION>
P/E TO
5-YEAR
GROWTH LTM MARGINS(1)
-------- ----------------------
2001 EBITDA EBIT
-------- -------- --------
<S> <C> <C> <C>
Tyco................. 0.8x 22.9% 17.1%
Mean................. 1.4 20.4 15.0
Median............... 1.2 16.7 12.6
High................. 2.5 38.1 28.0
Low.................. 0.6 10.2 6.7
</TABLE>
----------------------------------------
(1) Source: Latest publicly available financial statements.
(2) Source: IBES median estimates.
Goldman, Sachs & Co. further observed that on June 23, 2000, the Tyco common
shares closed at 81.2% of their highest closing price during the preceding
52-week period, compared to corresponding high and low percentages for the
selected comparable companies of 91.2% and 51.2%.
31
<PAGE>
ANALYSIS OF TRANSACTION PREMIUM AND MULTIPLES. Goldman, Sachs & Co.
reviewed the premium and certain financial multiples and other information
implied in the transaction price, on the assumption that each share of
Mallinckrodt common stock will be exchanged for a number of Tyco common shares
equivalent to $47.50. On this assumption, Goldman, Sachs & Co. calculated an
implied transaction premium of 78% over the closing price of Mallinckrodt common
stock on June 23, 2000 and diluted equity consideration in the transaction of
$3.3 billion, implying a Mallinckrodt enterprise value of $4.4 billion. To
calculate enterprise value, Goldman, Sachs & Co. used information furnished by
Mallinckrodt management relating to net debt and a cash restructuring charge.
Based on Mallinckrodt management estimates for fiscal years 2000, 2001 and 2002
as of June 14, 2000, Goldman, Sachs & Co. derived the following transaction
multiples:
- Enterprise value as a multiple of estimated revenue;
- Enterprise value as a multiple of estimated EBITDA;
- Enterprise value as a multiple of estimated earnings before interest
expense, income taxes and amortization ("EBITA");
- Enterprise value as a multiple of estimated EBIT; and
- Diluted equity consideration as a multiple of estimated net income.
The results of these analyses are as follows:
<TABLE>
<CAPTION>
TRANSACTION MULTIPLE
--------------------
<S> <C> <C>
REVENUES
FY 2000E............................................... $2,569 1.7x
FY 2001E............................................... 2,746 1.6
FY2002E................................................ 3,000 1.5
EBITDA(1)
FY 2000E............................................... $ 530 8.4x
FY 2001E............................................... 606 7.3
FY 2002E............................................... 665 6.7
EBITA(1)
FY 2000E............................................... $ 410 10.8x
FY 2001E............................................... 476 9.3
FY 2002E............................................... 440 10.1
NET INCOME(1)
FY 2000E............................................... $ 176 18.8x
FY 2001E............................................... 219 15.1
FY 2002E............................................... 246 13.5
</TABLE>
------------------------------
(1) Based on EBIT adjustment so as to match Mallinckrodt management's EPS
projections.
DISCOUNTED CASH FLOW ANALYSIS. Goldman, Sachs & Co. estimated the equity
value of Mallinckrodt based on:
- for each of Mallinckrodt's respiratory, imaging and pharmaceuticals
business segments, the present value of (i) future cash flows projected by
Mallinckrodt management for the segment plus (ii) the terminal value of
the segment; and
- the capitalized estimated 2000 operating expenses for Mallinckrodt's
headquarters.
32
<PAGE>
Present values of cash flows and terminal values were calculated for projected
cash flows through 2001 and 2003. Goldman, Sachs & Co. used a 10% discount rate
and used exit EBITDA multiples of 6.0 for Mallinckrodt's respiratory segment,
5.0 for Mallinckrodt's imaging segment, and 8.0 for Mallinckrodt's
pharmaceuticals segment. To calculate implied equity value, Goldman, Sachs & Co.
used information furnished by Mallinckrodt management relating to net debt and a
cash restructuring charge. The analysis indicated equity values and equity
values per share of Mallinckrodt for the respective terminal years as follows:
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW IMPLIED EQUITY VALUE
TERMINAL YEAR IMPLIED EQUITY VALUE (IN MILLIONS) PER SHARE(1)
-------------------- ---------------------------------- --------------------
<S> <C> <C>
2001............................................ $2,560 $35.10
2003............................................ $3,100 $46.10
</TABLE>
------------------------------
(1) Rounded to the nearest $0.10.
In addition, Goldman, Sachs & Co. calculated implied equity values per share
based on cash flows through 2002, 2004 and 2005. Goldman, Sachs & Co. assumed
that cash flows through 2003 will be as projected by Mallinckrodt management and
further assumed, as directed by Mallinckrodt management, that 2004 and 2005 cash
flows will be the same as 2003 cash flow. Based on this analysis, Goldman,
Sachs & Co. observed implied equity values per share of $42.10, $44.80 and
$43.50 for 2002, 2004 and 2005 terminal year cash flows, respectively.
Goldman, Sachs & Co. also demonstrated the sensitivity of Mallinckrodt's
implied equity value per share to:
- Changes by 1 point in the discount rate and 1 point in the terminal
multiple of estimated 2003 EBITDA; and
- Changes by 1 point in the sales growth rate and 1 point in EBIT margin.
The sensitivity analysis for changes in the discount rate and the terminal
multiple of estimated 2003 EBITDA showed the following incremental equity values
per share of Mallinckrodt:
<TABLE>
<CAPTION>
INCREMENTAL IMPLIED EQUITY
VALUE PER SHARE(1)
--------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN DISCOUNT RATE
<CAPTION>
-1.0% 0.0% 1.0%
-------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN (1.0)X (7.10) (8.60) (9.90)
TERMINAL 0.0X 1.80 0.00 (1.60)
MULTIPLE OF 2003E EBITDA 1.0X 10.60 8.70 6.90
</TABLE>
------------------------
(1) Rounded to the nearest $0.10.
The sensitivity analysis for changes in sales growth and EBIT margin showed the
following incremental equity values per share of Mallinckrodt:
<TABLE>
<CAPTION>
INCREMENTAL IMPLIED EQUITY
VALUE PER SHARE(1)
--------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN SALES GROWTH
<CAPTION>
-1.0% 0.0% 1.0%
-------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN EBIT -1.0% (4.60) (3.10) (1.60)
MARGIN 0.0% (1.60) 0.00 1.60
1.0% 1.40 3.00 4.70
</TABLE>
------------------------
(1) Rounded to the nearest $0.10.
33
<PAGE>
BREAKUP SEGMENT VALUATION ANALYSIS. Goldman, Sachs & Co. calculated the
implied breakup segment valuations for each of the Mallinckrodt business
segments. The following table shows implied value ranges and per-share value
ranges derived from this analysis:
<TABLE>
<CAPTION>
VALUE
(IN MILLIONS)(1) VALUE PER SHARE(2)
--------------------- ---------------------
<S> <C> <C>
Respiratory................................................. $ 2,100--$2,300 $ 31.30--$34.20
Imaging(3).................................................. 700--1,200 10.40--17.90
Pharmaceuticals............................................. 1,500--1,700 22.30--25.30
Headquarters................................................ (100) (1.50)
--------------------- ---------------------
Enterprise Value............................................ $ 4,200--$5,100 $ 62.50--$75.90
Net Debt(4)................................................. 1,120 16.60
--------------------- ---------------------
Equity Value before Capital Gains Tax....................... $ 3,080--$3,980 $ 45.90--$59.30
Capital Gains Tax(5)........................................ (360)--(660) (5.40)--(9.90)
--------------------- ---------------------
Equity Value after Capital Gains Tax........................ $ 2,720--$3,320 $ 40.50--$49.40
</TABLE>
------------------------------
(1) Rounded to the nearest $10 million.
(2) Rounded to the nearest $0.10.
(3) Top end of range for imaging segment based on a third-party bid.
(4) Based on information furnished by Mallinckrodt management relating to net
debt and a cash restructuring charge.
(5) Based on certain assumptions regarding the tax rates and tax bases
applicable to gains resulting from a sale of Mallinckrodt's respiratory and
imaging segments.
PRO FORMA COMBINED EARNINGS ANALYSIS. Goldman, Sachs & Co. analyzed certain
pro forma effects of the business combination of Mallinckrodt and Tyco. Goldman,
Sachs & Co. calculated the number of Tyco common shares issuable in connection
with the business combination, including shares issuable upon exercise of Tyco
stock options issuable upon conversion of Mallinckrodt stock options, and the
resulting percentage ownership of Mallinckrodt shareholders in the combined
entity. Based on projected 2001 and 2002 EPS, Goldman, Sachs & Co. calculated
the accretive or dilutive effect on Tyco shareholders--that is, the addition or
reduction to projected earnings per common share of Tyco on a stand-alone basis.
The analysis was based on the assumption that weighted-average Tyco stock prices
of $34.60, $36.76, $38.93, $41.09 and $43.25, or 80%, 85%, 90%, 95% and 100% of
the Tyco stock price on June 23, 2000, will determine the number of Tyco common
shares exchangeable for outstanding shares of Mallinckrodt common stock.
Goldman, Sachs & Co. observed that, without synergies, the business combination
would have a dilutive effect on Tyco shareholders for each of the assumed stock
prices. Goldman, Sachs & Co. also demonstrated the amount of pre-tax synergies
necessary to compensate the dilutive effects. The results of these analyses were
as follows:
<TABLE>
<CAPTION>
ASSUMED TYCO STOCK PRICE DETERMINING EXCHANGE RATIO
----------------------------------------------------------------
$34.60 $36.76 $38.93 $41.09 $43.25
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NEW TYCO SHARES
ISSUABLE--DILUTED (MM)................... 95.7 90.1 85.1 80.6 76.6
MALLINCKRODT RELATIVE OWNERSHIP.......... 5.3% 5.0% 4.7% 4.5% 4.3%
ACCRETION/(DILUTION)
2001E.................................. (2.9)% (2.6)% (2.4)% (2.1)% (1.9)%
2002E.................................. (2.7) (2.4) (2.2) (1.9) (1.7)
PRE-TAX SYNERGIES TO BREAKEVEN ($MM)
2001E.................................. $202.6 $181.2 $162.2 $145.2 $129.8
2002E.................................. 226.5 201.0 178.3 158.0 139.8
</TABLE>
34
<PAGE>
CONTRIBUTION ANALYSIS. Goldman, Sachs & Co. analyzed the relative
contributions of Mallinckrodt and Tyco to the pro forma income statement of the
combined entity resulting from the business combination, before taking into
account any of the possible benefits that may be realized from the business
combination, for fiscal years 2000 and 2001, taking into account Mallinckrodt
management estimates and data from published analyst research reports relating
to:
- Sales;
- EBITDA;
- EBITA;
- EBIT; and
- Net income.
Goldman, Sachs & Co. compared the results to the relative contributions of
Mallinckrodt and Tyco to the combined entity's equity market capitalization and
enterprise value, based on the assumption that Tyco weighted-average stock
prices of $43.25, $37.00 and $34.60 will determine the number of Tyco common
shares exchangeable for outstanding shares of Mallinckrodt common stock.
Goldman, Sachs & Co. selected these assumed prices because they represent,
respectively, the Tyco closing price on June 23, 2000, the unadjusted floor
price below which the Tyco weighted-average stock price during the pricing
period would have to fall for Tyco to have the right to end the merger agreement
unless Mallinckrodt agrees to a fixed exchange ratio, and a 20% discount to the
Tyco closing price on June 23, 2000. The analysis showed
35
<PAGE>
that on a pro forma combined basis Mallinckrodt and Tyco would account for
approximately the following percentages of the combined entity on an equity
contribution basis, adjusting for net debt:
<TABLE>
<CAPTION>
IMPLIED PERCENTAGE
CONTRIBUTION
---------------------------
TYCO MALLINCKRODT
-------- ------------
<S> <C> <C>
SALES(1)
FY 2000E.................................................. 91.6% 4.9%
FY 2001E.................................................. 91.8 8.2
EBITDA(1)
FY 2000E.................................................. 93.1% 6.9%
FY 2001E.................................................. 93.1 6.9
EBITA(1)
FY 2000E.................................................. 93.6% 6.4%
FY 2001E.................................................. 93.7 6.3
EBIT(1)
FY 2000E.................................................. 94.4% 5.6%
FY 2001E.................................................. 94.4 5.6
NET INCOME(1)
FY 2000E.................................................. 95.1% 4.9%
FY 2001E.................................................. 95.2 4.8
COMBINED EQUITY MARKET
CAPITALIZATION--DILUTED
At $43.25 Tyco Stock Price................................ 95.7% 4.3%
At $37.00 Tyco Stock Price................................ 95.0 5.0
At $34.60 Tyco Stock Price................................ 94.7 5.3
COMBINED ENTERPRISE VALUE
At $43.25 Tyco Stock Price................................ 95.1 4.9
At $37.00 Tyco Stock Price................................ 94.4 5.6
At $34.60 Tyco Stock Price................................ 94.1 5.9
</TABLE>
------------------------------
(1) Based on EBIT adjustment so as to match Mallinckrodt management's EPS
projections.
OTHER FACTORS AND ANALYSES. In its presentation to Mallinckrodt's Board of
Directors, Goldman, Sachs & Co. reviewed other factors and analyses, including:
- For each of Mallinckrodt and Tyco, a comparison of monthly IBES
fiscal-year-end earnings estimates and actual earnings reported by IBES,
during the period from May 1990 to May 2000 for Mallinckrodt and the
period from January 1993 to May 2000 for Tyco; and
- Published research analyst views and comments regarding Mallinckrodt and
Tyco, as reported by IBES.
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying Goldman, Sachs & Co.'s opinion. In arriving at
its fairness determination, Goldman, Sachs & Co. considered the results of all
these analyses and did not attribute any particular weight to any factor or
analysis considered by it; rather,
36
<PAGE>
Goldman, Sachs & Co. made its determination as to fairness on the basis of its
experience and professional judgment after considering the results of all these
analyses. No company or transaction used in the above analyses is directly
comparable to Mallinckrodt or Tyco or the contemplated transaction. The analyses
were prepared solely for purposes of Goldman, Sachs & Co. providing its opinion
to Mallinckrodt's Board of Directors as to the fairness, from a financial point
of view, to the holders of Mallinckrodt common stock of the consideration to be
received for the shares of Mallinckrodt common stock in the merger and do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based on forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Mallinckrodt, Tyco, Goldman, Sachs & Co. or any other person
assumes responsibility if future results are materially different from those
forecasts. As described above, the opinion of Goldman, Sachs & Co. to
Mallinckrodt's Board of Directors was among many factors taken into
consideration by Mallinckrodt's Board of Directors in making its determination
to approve the merger agreement.
Pursuant to the terms of the engagement letter, Mallinckrodt agreed to pay
Goldman, Sachs & Co. (i) a retainer fee of $250,000 payable in cash on
September 1, 2000 and (ii) a transaction fee of 0.45% of the total consideration
paid in a transaction such as the combination of Mallinckrodt and Tyco under the
merger agreement, plus the principal amount of all indebtedness for borrowed
money of Mallinckrodt. The retainer fee will be credited against the transaction
fee. Mallinckrodt also agreed to reimburse Goldman, Sachs & Co. for reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of its
legal counsel, and to indemnify Goldman, Sachs & Co. and related parties against
certain liabilities arising out of or in connection with Goldman, Sachs & Co.'s
engagement.
OPINION OF J.P. MORGAN SECURITIES INC.
Pursuant to an engagement letter dated June 15, 2000, Mallinckrodt retained
J.P. Morgan as its financial advisor in connection with the proposed merger.
Mallinckrodt's Board of Directors selected J.P. Morgan to act as its financial
advisor due to J.P. Morgan's qualifications, expertise and reputation, as well
as J.P. Morgan's experience and familiarity with Mallinckrodt.
At the meeting of Mallinckrodt's Board of Directors on June 28, 2000, J.P.
Morgan rendered its oral opinion, subsequently confirmed in writing, to the
Board that, as of that date and based upon and subject to the various
considerations set forth in the opinion, the consideration proposed to be paid
to the holders of Mallinckrodt common stock in the merger was fair, from a
financial point of view, to such holders. Mallinckrodt's Board of Directors did
not limit J.P. Morgan in any way in the investigations it made or the procedures
it followed in rendering its opinions.
The full text of J.P. Morgan's written opinion is attached as Annex C to
this document. This opinion sets forth the assumptions made, matters considered
and limits on the review undertaken. J.P. Morgan's opinion is incorporated into
this document by reference. J.P. Morgan's written opinion is addressed to
Mallinckrodt's Board of Directors, is directed only to the consideration
proposed to be paid in the merger to the holders of Mallinckrodt common stock
and does not constitute a recommendation to any shareholder of Mallinckrodt as
to how such stockholder should vote at Mallinckrodt's special meeting. The
summary of the opinion of J.P. Morgan set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of such opinion. Mallinckrodt's stockholders are urged to, and should, read the
opinion carefully and in its entirety.
In arriving at its opinion, J.P. Morgan reviewed:
- the merger agreement;
37
<PAGE>
- certain publicly available information concerning the business of
Mallinckrodt and of certain other companies engaged in businesses
comparable to those of Mallinckrodt, and the reported market prices for
certain other companies' securities deemed comparable;
- publicly available terms of certain transactions involving businesses
comparable to those of Mallinckrodt and the consideration received for
such businesses;
- current and historical market prices of the common stock of Mallinckrodt
and Tyco;
- the audited financial statements of Mallinckrodt for the fiscal year ended
June 30, 1999, the audited financial statements of Tyco for the fiscal
year ended September 30, 1999, and the unaudited financial statements of
Mallinckrodt and Tyco, respectively, for the period ended March 31, 2000;
- certain agreements with respect to outstanding indebtedness or obligations
of Mallinckrodt and Tyco, respectively;
- certain internal financial analyses and forecasts prepared by Mallinckrodt
and Tyco and their respective managements; and
- the terms of other business combinations that J.P. Morgan deemed relevant.
J.P. Morgan also held discussions with certain members of the management of
Mallinckrodt and Tyco with respect to certain aspects of the merger, and the
past and current business operations of Mallinckrodt and Tyco, the financial
condition and future prospects and operations of Mallinckrodt and Tyco, the
effects of the merger on the financial condition and future prospects of
Mallinckrodt and Tyco, and certain other matters J.P. Morgan believed necessary
or appropriate to its inquiry. In addition, J.P. Morgan reviewed other financial
studies and analyses and considered such other information as it deemed
appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by Mallinckrodt and Tyco or otherwise reviewed by J.P.
Morgan. J.P. Morgan has not assumed any responsibility or liability for that
information. J.P. Morgan has not conducted any valuation or appraisal of any
assets or liabilities, nor have any valuations or appraisals been provided to
J.P. Morgan. In relying on financial analyses and forecasts provided to J.P.
Morgan, J.P. Morgan assumed that they had been reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of Mallinckrodt and Tyco to which such analyses or forecasts relate.
J.P. Morgan assumed that the merger will have the tax and accounting
consequences described in discussions with, and materials furnished to J.P.
Morgan by, representatives of Mallinckrodt, and that the exchange ratio will not
be adjusted pursuant to Section 7.01(j) of the merger agreement. J.P. Morgan
relied as to all legal matters relevant to rendering its opinion upon the advice
of counsel.
J.P. Morgan based its opinion on economic, market and other conditions as in
effect on, and the information made available to J.P. Morgan as of, the date of
the opinion. Subsequent developments may affect J.P. Morgan's opinion, and J.P.
Morgan does not have any obligation to update, revise, or reaffirm its opinion.
J.P. Morgan expressed no opinion as to the price at which Tyco's common shares
will trade in the future.
The terms of the proposed merger were determined through negotiations
between Mallinckrodt and Tyco and were approved by Mallinckrodt's Board of
Directors. Although J.P. Morgan provided advice to Mallinckrodt during the
course of these negotiations, the decision to enter into the merger was solely
that of Mallinckrodt's Board of Directors. As described above, the opinion of
J.P. Morgan and its presentation to Mallinckrodt's Board of Directors
constituted only one of a number of factors taken into consideration by
Mallinckrodt's Board of Directors in making its determination to approve the
proposed merger.
38
<PAGE>
In keeping with customary investment banking practice, J.P. Morgan employed
generally accepted valuation methods in reaching its opinion. The following is a
summary of the material financial analyses used by J.P. Morgan in providing its
opinion. We have presented some of the summaries of financial analyses in
tabular format. In order to understand the financial analyses used by J.P.
Morgan more fully, you should read the tables together with the text of each
summary. The tables do not constitute a complete description of J.P. Morgan's
financial analyses.
SELECTED PUBLIC TRADING MULTIPLES: TOTAL COMPANY. Using publicly available
information, J.P. Morgan compared selected financial data of Mallinckrodt with
similar data for selected publicly traded companies engaged in businesses which
J.P. Morgan judged to be analogous. The selected companies were:
<TABLE>
<S> <C>
Arrow International
Beckman Coulter
C. R. Bard
Instrumentarium
Invacare
Resmed
Respironics
St. Jude
Sulzer Medica
Vital Signs
</TABLE>
J.P. Morgan selected these companies because they engage in businesses
reasonably comparable to those of Mallinckrodt. J.P. Morgan used publicly
available financial projections by equity analysts covering each comparable
company to determine the ratio of market capitalization to projected net income,
the ratio of enterprise value (i.e., market capitalization plus net debt) to
projected EBIT, and the ratio of enterprise value to projected EBITDA. The
following table presents a comparison of the median, low and high multiples of
the comparable companies based on the foregoing ratios.
<TABLE>
<CAPTION>
MEDIAN LOW HIGH
-------- -------- --------
<S> <C> <C> <C>
Market capitalization to 2000 net income.................... 16.9x 9.8x 37.4x
Market capitalization to 2001 net income.................... 13.5x 8.2x 30.7x
Enterprise value to 2000 EBIT............................... 12.4x 5.9x 26.3x
Enterprise value to 2001 EBIT............................... 11.1x 4.9x 22.1x
Enterprise value to 2000 EBITDA............................. 8.0x 5.1x 23.6x
Enterprise value to 2001 EBITDA............................. 7.4x 4.3x 20.2x
</TABLE>
These multiples were then applied to Mallinckrodt's projected calendar year
2000 and 2001 net income, EBIT and EBITDA, respectively, yielding implied equity
values of approximately $40.00 to $50.00 per share for Mallinckrodt's common
stock.
It should be noted that no company utilized in the analysis above is
identical to Mallinckrodt. In evaluating companies identified by J.P. Morgan as
comparable to Mallinckrodt, J.P. Morgan 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
Mallinckrodt, such as the impact of competition on the businesses of
Mallinckrodt and the industry generally, industry growth and the absence of any
material change in the financial condition and prospects of Mallinckrodt or the
industry or in the financial markets in general.
SELECTED PUBLIC TRADING MULTIPLES: SUM-OF-THE-PARTS. Using publicly
available information, J.P. Morgan also compared selected financial data of
Mallinckrodt's respiratory and pharmaceuticals divisions with similar data for
selected publicly traded companies engaged in businesses which J.P. Morgan
judged to be
39
<PAGE>
analogous to Mallinckrodt's respiratory and pharmaceuticals divisions,
respectively. The selected companies were:
<TABLE>
<CAPTION>
RESPIRATORY DIVISION PHARMACEUTICALS DIVISION
----------------------------- ---------------------------------------------------------
<S> <C> <C>
Invacare Cambrex
Resmed Clariant
Respironics DSM
Vital Signs Great Lakes
Ivax
King
Teva
Watson
</TABLE>
These companies were selected because they engage in businesses reasonably
comparable to those of Mallinckrodt's divisions. J.P. Morgan used publicly
available financial projections by equity analysts covering each comparable
company to determine the ratio of enterprise value to projected EBIT and the
ratio of enterprise value to projected EBITDA. The following table presents a
comparison of the median, low and high multiples of the comparable companies
based on the foregoing ratios.
RESPIRATORY DIVISION:
<TABLE>
<CAPTION>
MEDIAN LOW HIGH
-------- -------- --------
<S> <C> <C> <C>
Enterprise value to 2000 EBIT............................... 10.4x 5.9x 26.3x
Enterprise value to 2001 EBIT............................... 9.0x 4.9x 22.1x
Enterprise value to 2000 EBITDA............................. 7.5x 5.1x 23.6x
Enterprise value to 2001 EBITDA............................. 6.5x 4.3x 20.2x
</TABLE>
PHARMACEUTICALS DIVISION:
<TABLE>
<CAPTION>
MEDIAN LOW HIGH
-------- -------- --------
<S> <C> <C> <C>
Enterprise value to 2000 EBIT............................... 13.8x 7.4x 26.7x
Enterprise value to 2001 EBIT............................... 12.0x 6.9x 23.0x
Enterprise value to 2000 EBITDA............................. 10.8x 4.2x 21.6x
Enterprise value to 2001 EBITDA............................. 9.4x 4.0x 19.1x
</TABLE>
These multiples were then applied to the projected calendar year 2000 and
2001 EBIT and EBITDA for Mallinckrodt's respiratory and pharmaceuticals
divisions, respectively. Due to a lack of publicly traded comparable companies
for Mallinckrodt's imaging division, J.P. Morgan estimated the value of
Mallinckrodt's imaging division by applying estimated multiples of 9.5x 2001
EBIT and 7.0x 2001 EBITDA. This sum-of-the-parts analysis yielded implied equity
values of approximately $41.00 to $52.00 per share for Mallinckrodt's common
stock.
It should be noted that no company utilized in the analysis above is
identical to the respiratory or pharmaceuticals division of Mallinckrodt. In
evaluating companies identified by J.P. Morgan as comparable to the divisions,
J.P. Morgan 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 Mallinckrodt, such as the impact of
competition on the business of Mallinckrodt and the industry generally, industry
growth and the absence of any material change in the financial condition and
prospects of Mallinckrodt's divisions or the industry or in the financial
markets in general.
40
<PAGE>
COMPARABLE TRANSACTION ANALYSIS. Using publicly available information, J.P.
Morgan examined selected transactions with respect to Mallinckrodt's respiratory
and pharmaceuticals divisions. Specifically, J.P. Morgan reviewed the following
transactions (acquiror/target):
<TABLE>
<CAPTION>
RESPIRATORY DIVISION PHARMACEUTICALS DIVISION
-------------------- --------------------------------------------------
<S> <C>
Tyco International/U.S. Surgical Eastman Chemical/McWhorter Technologies
Tyco International/Kendall International Watson/Schein
Koninklijke Philips Electronics/ATL Ultrasound BASF/AHP Cyanamid (agricultural products)
Respironics/Healthdyne Technologies Hercules-Lehman Fund/Kelco
Mallinckrodt/Nellcor Puritan Bennett Clariant AG/BTP
Baxter International/Research Medical King/Medco
Millipore Corp/Amicon Inc. (National Medical Care) Morgan Grenfell/Ciba Speciality Chemicals
Solutia/Vianova Resins
BASF/Rohm & Haas (industrial coatings)
Cookson Group/Asarco (specialty chemicals
division)
BASF/Chemdal International
Saint-Gobain/Furon
Ascot/Chirotech
RPM/DAP Products
Shire/Roberts
Suez Lyonnaise (Degremont)/Nalco
PPG Industries/Akzo Nobel's coatings business
Great Lakes Chemical/FMC's process additives
business
Cinven-Investcorp/Zeneca specialties chemicals
Rhodia/Albright & Wilson
Royster-Clark/IMC Global-agribusiness
Eastman Chemical/Lawter International
Rohm & Haas/Morton
DuPont/Herberts (Hoechst)
Laporte/Inspec Group
GenCorp/Sequa Chemicals
Hercules/BetzDearborn
Akzo Nobel/Courtaulds
Engelhard/Mallinckrodt-catalyst businesses
DSM/Gis-Brocades
Ciba Specialty Chemicals/Allied Colloids
Yule Catto/Holliday Chemical
DuPont/Protein Technologies International
Cambrex/BioWhittaker
VEBA/Degussa
ICI/Unilever Speciality Chemicals
Roche/Tastemaker
</TABLE>
41
<PAGE>
J.P. Morgan applied a range of multiples derived from such analysis to the
last twelve months' revenues and the last twelve months' EBIT of the respiratory
and pharmaceuticals divisions, respectively. Due to a lack of public comparable
transactions for Mallinckrodt's imaging division, J.P. Morgan estimated a change
of control pre-tax value of Mallinckrodt's imaging division to be between
$1.0 billion and $1.4 billion. Based on the above transaction analysis for
Mallinckrodt's three businesses, J.P. Morgan arrived at an estimated range of
equity values of approximately $43.00 to $48.00 per share for Mallinckrodt's
common stock.
DISCOUNTED CASH FLOW ANALYSIS. J.P. Morgan conducted a discounted cash flow
analysis for the purpose of estimating the fully diluted equity value per share
for Mallinckrodt's common stock. J.P. Morgan estimated the free cash flows that
Mallinckrodt is expected to generate during fiscal years 2000 through 2005 based
upon financial projections prepared by the management of Mallinckrodt through
the year ended 2003 (Management Case) and upon publicly available financial
projections of equity analysts through the year ended 2002 (Street Case). J.P.
Morgan derived projections for 2004-2005 for the Management Case and for
2003-2005 for the Street Case by keeping sales growth and operating margins flat
and taking into consideration the expiration of an Oximetry Sensor patent in
2003. J.P. Morgan also calculated a range of terminal asset values of
Mallinckrodt at the end of the five-year period ending June 30, 2005 by applying
a perpetual growth rate ranging from 2.5% to 3.5% of the free cash flow of
Mallinckrodt during the final year of the five-year period. The free cash flows
and the range of terminal asset values were then discounted to present values
using a range of discount rates from 10.0% to 11.0%. The discount rate range was
calculated by estimating the cost of debt financing and the cost of equity
financing for Mallinckrodt, taking into account such variables as company size,
industry risk, and debt and equity market conditions. The present value of the
free cash flows and the range of terminal asset values were then adjusted for
Mallinckrodt's June 30, 2000 quarter-end estimated excess cash and total debt.
Based on the Street Case projections and the indicated discount rate range, the
discounted cash flow analysis indicated a range of equity values of
approximately $34.00 to $40.00 per share for Mallinckrodt's common stock. Based
on the Management Case projections and the indicated discount rate range, the
discounted cash flow analysis indicated a range of equity values of
approximately $44.00 to $52.00 per share for Mallinckrodt's common stock.
The summary set forth above does not purport to be a complete description of
the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that one must consider its
opinion, the summary set forth above and its analyses as a whole. Selecting
parts of the summary, without considering all of the analyses, could create an
incomplete view of the processes underlying the analyses and opinion. In
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and industry-
specific factors. The other principal assumptions upon which J.P. Morgan based
its analyses are set forth above under the description of each such analysis.
J.P. Morgan's analyses are not necessarily indicative of actual values or actual
future results. Actual values may be higher or lower than those indicated.
Moreover, J.P. Morgan's analyses are not appraisals and do not reflect the
prices at which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
For services rendered in connection with the Merger, Mallinckrodt has agreed
to pay J.P. Morgan (i) a retainer fee of $125,000 and (ii) a transaction fee of
0.20% of the transaction value (consideration received by the holders of
Mallinckrodt common stock plus the net debt of Mallinckrodt). The retainer fee
will be
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credited against the transaction fee. In addition, Mallinckrodt has agreed to
reimburse J.P. Morgan for its expenses incurred in connection with its services,
including the fees and disbursements of counsel, and will indemnify J.P. Morgan
against certain liabilities, including liabilities arising under the Federal
securities laws.
J.P. Morgan and its affiliates maintain banking and other business
relationships with Mallinckrodt and Tyco and their affiliates, respectively, for
which J.P. Morgan receives customary fees. In the ordinary course of their
businesses, J.P. Morgan and its affiliates may actively trade the debt and
equity securities of Mallinckrodt or Tyco for their own accounts or for the
accounts of customers and, accordingly, they may at any time hold long or short
positions in such securities.
REASONS OF TYCO FOR THE MERGER
At a meeting held on June 22, 2000, Tyco's Board of Directors determined
that the acquisition of Mallinckrodt 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 adopt the merger agreement, Tyco's Board of
Directors considered the following material factors:
- the expectation that Mallinckrodt's business could be readily integrated
with Tyco's healthcare products business, enabling Tyco to broaden its
line of product offerings;
- 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
Mallinckrodt 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 Mallinckrodt's businesses as a
platform for further growth in the markets served by Mallinckrodt; 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 executive officers and directors of Mallinckrodt, in their
capacities as such, may be deemed to have interests in the merger that are in
addition to or different from their interests as shareholders of Mallinckrodt
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. Mallinckrodt's Board of Directors
was aware of these interests and considered them, among other matters, in
approving the merger agreement and the transactions contemplated thereby.
The following table lists, with respect to each of Mallinckrodt's executive
officers, (1) the number of shares of Mallinckrodt common stock issuable to such
officer upon exercise of stock options, all of which will be immediately
exercisable upon consummation of the merger and which will be converted into
options to acquire Tyco common shares based upon the exchange ratio and (2) the
approximate amount of cash payments receivable in the event that either (i) the
executive officer's employment is terminated under qualifying circumstances
within two years after completion of the merger or (ii) the executive continues
to be employed by Mallinckrodt on the second anniversary of the effective date
of the merger.
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The plans and agreements governing these awards and payments are summarized
below. Under circumstances described under "Agreements With Executives" below,
the executive officers may be entitled to additional cash payments. Neither
Mallinckrodt nor Tyco has determined whether the employment of any of these
individuals will be terminated following the merger. Figures with respect to
options are current as of , 2000, the most recent date for which accurate
figures are available.
<TABLE>
<CAPTION>
MALLINCKRODT
OPTION CASH
NAME OF EXECUTIVE OFFICER SHARES(1) PAYMENTS(2)
------------------------- ------------ -------------
<S> <C> <C>
Barbara A. Abbett................................ 47,100 $1,319,400
Ashok Chawla..................................... 109,700 $2,253,555
Michael J. Collins............................... 103,600 $1,982,250
Bruce K. Crockett................................ 61,500 $1,681,470
Bradley J. Fercho................................ 42,850 $1,539,225
Douglass B. Given................................ 23,900 $1,793,251
John Q. Hesemann................................. 66,125 $1,943,400
C. Ray Holman.................................... 452,950 $7,482,750
Roger A. Keller.................................. 109,800 $2,032,275
Douglas A. McKinney.............................. 66,200 $ 855,520
Adeoye Y. Olukotun............................... 50,000 $1,655,370
Michael A. Rocca................................. 128,000 $2,405,745
William B. Stone................................. 97,100 $1,838,070
Frank A. Voltolina............................... 48,400 $ 756,956
Forrest Whittaker................................ 24,000 $1,917,000
</TABLE>
------------------------
(1) The number of Tyco common shares issuable upon exercise of the options
following the merger will equal the number of Mallinckrodt option shares
multiplied by the exchange ratio.
(2) Excludes pension, welfare benefits and tax gross-up, if any.
The following table lists, with respect to each of Mallinckrodt's
non-employee directors, the number of shares of Mallinckrodt common stock
issuable to each director upon exercise of options, all of which will be
immediately exercisable upon consummation of the merger and which will be
converted into options to acquire Tyco common shares based upon the exchange
ratio.
<TABLE>
<CAPTION>
MALLINCKRODT
OPTION
NAME OF NON-EMPLOYEE DIRECTOR SHARES(1)
----------------------------- ------------
<S> <C>
Raymond E. Bentele..................................... 10,500
William L. Davis....................................... 5,250
Ronald G. Evens........................................ 15,000
Peter B. Hamilton...................................... 1,500
Roberta S. Karmel...................................... 13,500
Claudine B. Malone..................................... 9,000
Brian M. Rushton....................................... 9,000
Anthony Viscusi........................................ 7,500
Barry W. Wilson........................................ 0(2)
</TABLE>
------------------------
(1) The number of Tyco common shares issuable upon exercise of the options
following the merger will equal the number of Mallinckrodt option shares
multiplied by the exchange ratio.
(2) In lieu of options, Mr. Wilson received an award that is based on the value
of 1,500 shares of Mallinckrodt common stock, as described under
"Equity-Based Awards" below.
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AGREEMENTS WITH EXECUTIVES
Mallinckrodt has entered into retention agreements with all of its executive
officers which supersede the employment agreements (with certain limited
exceptions) and the change in control agreements Mallinckrodt previously entered
into with these executive officers. The agreements provide for the benefits
described below in return for the executives' continued employment with
Mallinckrodt and their agreement not to compete with Mallinckrodt for a period
of two years following the termination of the executive's employment with
Mallinckrodt (other than a termination that is a nonqualifying termination (as
defined in the retention agreements) or that occurs following the third
anniversary of the effective date of the merger). The agreements provide that,
to the extent not already provided under Mallinckrodt's equity plans, any
unvested stock options shall become vested and exercisable upon the effective
date of the merger. The agreements also provide that if either the executive is
employed by Mallinckrodt on the second anniversary of the effective date of the
merger or the employment of the executive is either terminated by Mallinckrodt
without cause or by the executive for good reason (as defined in the retention
agreements) prior to the second anniversary of the effective date of the merger,
then the executive shall receive a lump sum cash amount equal to a multiple of
the sum of the executive's base salary plus the executive's target bonuses under
Mallinckrodt's annual incentive plans for the year in which the merger occurs
or, if greater, for the preceding year. For each of Mallinckrodt's executive
officers, this amount is shown in the table above under the column "Cash
Payments." In addition, if the executive is either terminated by Mallinckrodt
without cause or terminates employment for good reason prior to the third
anniversary of the effective date of the merger, then the executive shall
receive:
- a lump sum payment equal to the executive's pro rata target bonuses under
Mallinckrodt's annual incentive plans for the year of termination and the
target award or target bonus under any long-term incentive plan of
Mallinckrodt,
- three years' credited service under the Mallinckrodt's Supplemental
Executive Retirement Plan and, with respect to Mr. Chawla and
Mr. Hesemann or any other executive who is 55 years or older on the date
of termination, an unreduced normal retirement benefit under the SERP,
- continued participation in welfare insurance benefits for life, with
respect to Mr. Chawla and Mr. Hesemann or any other executive who is 55
years or older on the date of termination, or a 24 month period, if the
executive is less than 55 years old on the date of termination (other than
Mr. Chawla and Mr. Hesemann),
- either, at the election of the executive, a cash payment equal to $75,000
or outplacement services for three years, not to exceed $75,000, and
- the right to retain all rights to indemnification and coverage under
Mallinckrodt's director and officers liability insurance.
In the event the payments to any executive under the retention agreement or
otherwise are subject to the 20% parachute payment excise tax under Section 4999
of the Internal Revenue Code, Mallinckrodt will reimburse the executive in an
amount sufficient to enable the executive to retain his benefits as if the
excise tax had not applied.
EQUITY-BASED AWARDS
Pursuant to the terms of the merger agreement, upon consummation of the
merger, all stock options under the stock option and stock incentive plans of
Mallinckrodt will become immediately vested and exercisable. In addition,
Mr. Barry Wilson, one of Mallinckrodt's non-employee directors, was granted an
option on 1,500 phantom shares of Mallinckrodt common stock, that will be fully
exercisable immediately prior to the consummation of the merger. Upon exercise
of a phantom share, Mr. Wilson will be entitled to a cash payment equal to the
product of the excess of (x) the fair market value of the number of Tyco common
shares received by Mallinckrodt's shareholders for each share of Mallinckrodt
common stock in connection with the merger over (y) the closing price of the
Mallinckrodt common stock on June 23, 2000.
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MANAGEMENT INCENTIVE PLANS
Mallinckrodt maintains an Executive Incentive Compensation Plan and a
Management Incentive Compensation Plan that provide for incentive awards based
in part upon the price of the Mallinckrodt common stock. In connection with the
merger, both the EICP and the MICP for fiscal year 2000 were amended to provide
that, for purposes of the stock indexing of target awards under the plans, the
stock price for the current fiscal year would equal $27.50, adjusted to equal
the price received by shareholders in the merger if the merger is consummated.
RABBI TRUST AGREEMENT
Mallinckrodt maintains a rabbi trust that provides for the funding of
certain employee benefits plans upon the consummation of a change of control,
including as a result of the merger, unless Mallinckrodt's Board of Directors
otherwise provides. In connection with the merger, the rabbi trust agreement was
amended to eliminate the discretion of Mallinckrodt's Board of Directors to not
fund the trust and to provide for the funding of the retention agreements, the
staff change in control severance plan, all nonqualified retirement plans and
all deferred compensation plans.
EMPLOYMENT OF C. RAY HOLMAN
If the merger is consummated, Mr. Holman will serve as Senior Vice President
of Tyco International (U.S.) Inc., reporting to L. Dennis Kozlowski, Tyco's
Chairman and Chief Executive Officer, and will serve as the Chairman of the
Board of Mallinckrodt until December 31, 2002. During Mr. Holman's employment he
will receive annual salary, annual and long-term incentive bonus opportunities
and benefits at the same level as immediately prior to the consummation of the
merger, with annual increases of cash compensation of at least 5% per year.
Mr. Holman will be entitled to participate in all employee benefit plans and
equity arrangements made available to any other employee on a basis which is no
less favorable than made available to any other employee. In addition,
Mr. Holman will be entitled to certain perquisites comparable to those to which
he presently is entitled. Upon Mr. Holman's termination of employment for any
reason, Mr. Holman will be entitled to all the benefits provided under his
retention agreement as if he was terminated by Mallinckrodt without cause or he
resigned with good reason prior to the third anniversary of the effective date
of the merger.
INDEMNIFICATION OF DIRECTORS
Mallinckrodt entered into a letter agreement that provides for the
indemnification, to the full extent permitted by applicable law, of the members
of Mallinckrodt's Board of Directors for any action or proceeding against a
director by reason of the fact that they were a director of Mallinckrodt.
Mallinckrodt will not indemnify a director, however, if it is established that
(i) the director acted in bad faith or (ii) the director personally gained a
financial profit or other advantage to which he or she was not legally entitled.
MATERIAL U.S. FEDERAL INCOME TAX AND BERMUDA TAX CONSEQUENCES
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material U.S. federal income
tax consequences of the exchange of Mallinckrodt common stock for Tyco common
shares in the merger and the ownership of Tyco common shares. The discussion
which follows is based on the U.S. Internal Revenue Code of 1986, as amended,
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. Any such change could alter
the tax consequences discussed in this document. The discussion below is also
based on representations made by Tyco, Mallinckrodt and Tyco Acquisition. If any
of these representations is inaccurate, the tax consequences of the merger could
differ from those described in this document.
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<PAGE>
The discussion below is for general information only and, except where
specifically noted, does not address the effects of any state, local or
non-United States tax laws. In addition, the discussion below relates to persons
who hold Mallinckrodt common stock and will hold Tyco common shares as capital
assets. The tax treatment of a Mallinckrodt shareholder may vary depending upon
such shareholder's particular situation, and certain shareholders may be subject
to special rules not discussed below. Such shareholders would include, for
example, partners of partnerships that hold Mallinckrodt common stock or will
hold Tyco common shares, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, and individuals who received
Mallinckrodt 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 Mallinckrodt shareholder who will own 5% or more of either
the total voting power or the total value of the outstanding Tyco common shares
after the merger, determined after there is taken into account ownership under
the applicable attribution rules of the U.S. Internal Revenue Code and
applicable Treasury Regulations, or non-U.S. Holders, defined below, who have
held more than 5% of the Mallinckrodt 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
Mallinckrodt common stock who exchanges Mallinckrodt common stock for Tyco
common shares and who is, for U.S. federal income tax purposes:
- a citizen or resident of the U.S.;
- a corporation, partnership or other entity, other than a trust, created or
organized in or under the laws of the U.S. or any political subdivision
thereof;
- an estate whose income is subject to U.S. federal income tax regardless of
its source; or
- a trust
(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 Mallinckrodt
common stock who exchanges Mallinckrodt common stock for Tyco common shares and
who is not a U.S. Holder.
1. CONSEQUENCES OF THE MERGER
PricewaterhouseCoopers LLP and Simpson Thacher & Bartlett expect to render
opinions as of the effective date of the registration statement of which this
document is a part to the effect that:
- The merger will constitute a reorganization within the meaning of
Section 368 of the U.S. Internal Revenue 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 a Mallinckrodt shareholder
that is a "5% transferee shareholder" within the meaning of U.S. Treasury
Regulation Section 1.367(a)-3(c)(5)(ii)); and
- Each of Tyco, Tyco Acquisition and Mallinckrodt will be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Based on those conclusions, the following additional material U.S. federal
income tax consequences will result from the merger (other than with respect to
Mallinckrodt shareholders that are 5% transferee shareholders):
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<PAGE>
a. Mallinckrodt shareholders will not recognize any income, gain or loss on
the exchange of Mallinckrodt common stock for Tyco common shares in the
merger (except for cash received in lieu of fractional shares).
b. The tax basis to a Mallinckrodt shareholder of the Tyco common shares
received in exchange for Mallinckrodt common stock pursuant to the
merger, including any fractional share interest in Tyco common shares for
which cash is received, will equal such Mallinckrodt shareholder's tax
basis in the Mallinckrodt common stock surrendered in exchange therefor.
c. The holding period of a Mallinckrodt shareholder for the Tyco common
shares received pursuant to the merger will include the holding period of
the Mallinckrodt common stock surrendered in exchange therefor.
d. A Mallinckrodt shareholder who is a U.S. Holder and who receives cash in
lieu of a fractional share interest in Tyco common shares pursuant to the
merger will be treated as having received such cash in exchange for such
fractional share interest and generally will recognize capital gain or
loss on such deemed exchange in an amount equal to the difference between
the amount of cash received and the basis of the Mallinckrodt stock
allocable to such fractional share. Non-U.S. Holders who receive cash in
lieu of a fractional share interest in Tyco common shares will not be
subject to United States income or withholding tax except as set forth in
paragraph 3.b below.
e. No income, gain or loss will be recognized by Tyco, Tyco Acquisition,
Mallinckrodt or EVM as a result of the transfer to Mallinckrodt
shareholders of the Tyco common shares provided by Tyco to Tyco
Acquisition pursuant to the merger.
Consummation of the merger is conditioned upon the receipt of opinions to
the same effect as those described above as of the consummation of the merger.
If delivery of such opinions is waived and there is a material change in the tax
consequences of the merger, Mallinckrodt and Tyco will recirculate proxy
materials regarding the merger and resolicit proxies. Such opinions will be
based on, among other things, facts existing as of the effective date of the
registration statement of which this document is a part and as of the
consummation of the merger, certain representations as to factual matters made
by Tyco, Tyco Acquisition and Mallinckrodt and the assumption that the merger is
consummated in accordance with the terms of the merger agreement. Such
representations or assumption, if incorrect in certain material respects, could
jeopardize the conclusions reached in the opinions. Such opinions are not
binding on the U.S. Internal Revenue Service or the courts.
2. TRANSFER TAXES
In the event that any state or local transfer taxes are imposed on
Mallinckrodt shareholders as a result of the merger, Mallinckrodt will pay all
such transfer taxes, if any, directly to state and local taxing authorities on
behalf of all Mallinckrodt shareholders. Any such payments by Mallinckrodt made
on behalf of the Mallinckrodt shareholders may result in dividend income to each
Mallinckrodt shareholder on behalf of whom such payment is made. The amount of
such dividend income attributable to each share of Mallinckrodt common stock
cannot be determined at this time, but is not expected to be material.
3. OWNERSHIP OF TYCO COMMON SHARES
a. U.S. Holders
DISTRIBUTIONS
Distributions made to U.S. Holders of Tyco common shares will be treated as
dividends and taxable as ordinary income to the extent that such distributions
are made out of Tyco's current or accumulated earnings and profits as determined
for U.S. federal income tax purposes. To the extent that the amount of any
distribution exceeds Tyco's current and accumulated earnings and profits for a
taxable year, the excess
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<PAGE>
will be treated as a tax-free return of capital which reduces such U.S. Holder's
tax basis in the Tyco common shares to the extent thereof, and thereafter as
capital gain from the sale or exchange of property. The U.S. federal income tax
treatment described in the immediately preceding sentence applies whether or not
such distributions are treated as a return of capital for non-tax purposes.
Amounts taxable as dividends generally will be treated as foreign source
"passive" income for foreign tax credit purposes. The amount of any distribution
of property other than cash will be the fair market value of such property on
the date of distribution by Tyco. U.S. Holders of Tyco common shares that are
corporations generally will not be entitled to claim a dividends received
deduction with respect to distributions by Tyco, because Tyco is a foreign
corporation.
DISPOSITION
Gain or loss 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.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Certain U.S. Holders may be subject to information reporting with respect to
payments of dividends on, and the proceeds of the disposition of, Tyco common
shares. U.S. Holders who are subject to information reporting and who do not
provide appropriate information when requested may be subject to backup
withholding at a 31% rate. The amount of any backup withholding from a payment
to a U.S. Holder will be allowable as a refund or credit against such holder's
U.S. federal income tax liability, provided that the required information or
appropriate claim for refund is furnished to the U.S. Internal Revenue Service.
U.S. Holders should consult their tax advisors regarding the imposition of
backup withholding and information reporting with respect to distributions on,
and dispositions of, Tyco common shares.
b. Non-U.S. Holders
DISTRIBUTIONS AND DISPOSITION
In general, and subject to the discussion below under "Information Reporting
and Backup Withholding," a non-U.S. Holder will not be subject to U.S. federal
income or withholding tax on income from distributions with respect to, or gain
upon the disposition of, Tyco common shares, unless either (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.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
If the Tyco common shares are held by a non-U.S. Holder through a non-U.S.,
and non-U.S. related, broker or financial institution, information reporting and
backup withholding generally would not be required with respect to distributions
on and dispositions of Tyco common shares. Information reporting, and possibly
backup withholding, may apply if the Tyco common shares are held by a non-U.S.
Holder through a U.S., or U.S. related, broker or financial institution and the
non-U.S. Holder fails to provide appropriate information. The amount of any
backup withholding from a payment to a non-U.S. Holder will be allowable as a
refund or credit against such holder's U.S. federal income tax liability
provided that the requested information or appropriate claim for refund is
furnished to the U.S. Internal Revenue Service. Non-U.S. Holders should consult
their tax advisors regarding the imposition of backup withholding and
information reporting with respect to distributions on and dispositions of Tyco
common shares.
BERMUDA TAX CONSEQUENCES
In the opinion of Appleby Spurling & Kempe, attorneys in Bermuda for Tyco,
there will be no Bermuda income, corporation or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty or inheritance tax payable
in respect of the delivery of Tyco common shares to Mallinckrodt shareholders in
exchange for Mallinckrodt 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 adoption of the merger agreement.
Mallinckrodt shareholders are urged to consult their tax advisors concerning the
United States federal, state, local and non-United States tax consequences of
the merger to them.
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 Mallinckrodt 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 .
CERTAIN LEGAL MATTERS
Each of Tyco Acquisition and Mallinckrodt have committed to use, and Tyco
Acquisition has committed to cause Tyco to use, its 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 and
Mallinckrodt 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. Tyco and Mallinckrodt have filed their Premerger
Notification and Report Forms pursuant to the HSR Act with the FTC and the
Antitrust Division. The applicable waiting
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period began on , 2000. Tyco and Mallinckrodt expect that the applicable
waiting period will expire on , 2000, although the waiting period could be
extended if the FTC or the Antitrust Division requests additional information.
Even once the waiting period expires or has terminated, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking divestiture of
substantial assets of Tyco or Mallinckrodt.
The merger is also subject to notification to, and approval by, the
Commission of the European Communities under Council Regulation (EEC)
No. 4064/89 of 21 December 1989 on the control of concentrations. Tyco and
Mallinckrodt filed the appropriate notification with the Commission on
, 2000. In general, the Commission has one month following
notification to approve the merger or initiate an investigation to examine the
merger more closely, which could take up to an additional four months.
Neither Tyco nor Mallinckrodt believes that the consummation of the merger
will result in a violation of any applicable antitrust laws. However, there can
be no assurance that a challenge to the merger on antitrust grounds will not be
made or, if such a challenge is made, of the result.
Tyco and Mallinckrodt do not believe that any additional material
governmental filings in the United States or the European Economic Area, other
than the certificate of merger in New York, are required with respect to the
merger. In addition to the United States and the European Economic Area, Tyco
and Mallinckrodt 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 Mallinckrodt 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
Mallinckrodt shareholders who receive Tyco common shares in the merger can
freely transfer such shares, except that persons who are deemed to be
"affiliates," as such term is defined under the United States Securities Act of
1933, of Mallinckrodt 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, Mallinckrodt, including directors and certain officers of
Mallinckrodt, are considered to be affiliates.
In general, under Rule 145, for one year following the consummation of the
merger, Mallinckrodt affiliates will be subject to the following restrictions on
the public sale of Tyco common shares acquired in the merger:
- a Mallinckrodt 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 Tyco common shares a Mallinckrodt affiliate may sell,
together with certain related persons and certain persons acting in
concert, within any three-month period may not exceed the greater of 1% of
the outstanding Tyco common shares or the average weekly trading volume of
such shares during the four calendar weeks preceding such sale, and
- a Mallinckrodt 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
Mallinckrodt 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 Mallinckrodt affiliate is
not then an affiliate of Tyco. Two years after the consummation of the merger,
an affiliate of Mallinckrodt 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.
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DIVIDENDS
Although the payment of dividends by Tyco in the future will depend on
business conditions, Tyco's financial condition and earnings and other factors,
Tyco expects to declare regularly scheduled dividends consistent with its past
practices. The merger agreement restricts each of Mallinckrodt 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 New York Stock Exchange authorize
for listing the Tyco common shares to be delivered in connection with the merger
and to be issued upon exercise of the Mallinckrodt options (as adjusted pursuant
to the merger agreement).
DISSENTERS' RIGHTS
Holders of Mallinckrodt stock will not have dissenters' rights under the New
York Business Corporation Law by reason of the merger agreement and the
consummation of the merger.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT
GENERAL
This section describes the material provisions of the merger agreement and
Tyco's guarantee of Tyco Acquisition's and EVM's obligations under the merger
agreement. This description is not complete, and shareholders are encouraged to
read the full text of the merger agreement which is attached as Annex A to this
document. In addition, important information about the merger agreement and the
merger is provided in the previous section entitled "The Merger" beginning on
page .
THE MERGER
At the effective time of the merger, upon the terms and subject to the
conditions of the merger agreement and the applicable provisions of the New York
Business Corporation Law, EVM will be merged with and into Mallinckrodt, the
separate corporate existence of EVM will cease, and Mallinckrodt will continue
as the surviving corporation.
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the closing conditions set
forth in the merger agreement, Mallinckrodt and EVM will file a certificate of
merger with the Secretary of State of the State of New York, as prescribed by
New York Business Corporation Law. The effect of this filing is that EVM will
merge with and into Mallinckrodt, and Mallinckrodt will become an indirect
subsidiary of Tyco. However, if the average share price of the Tyco common
shares is less than the $37.00 floor price (or such lower floor price agreed to
by Tyco Acquisition), Tyco Acquisition gives Mallinckrodt written notice of its
intent to terminate the merger agreement, and Mallinckrodt prevents Tyco
Acquisition from terminating the merger agreement by agreeing to an exchange
ratio of 1.2838 (or such higher ratio agreed to by Tyco Acquisition), then the
merger will not be consummated prior to the fourth business day following the
date on which the closing conditions set forth in the merger agreement have been
satisfied or waived.
MERGER CONSIDERATION
GENERAL
As a result of the merger, all outstanding shares of Mallinckrodt common
stock will be converted into Tyco common shares based on an exchange ratio
calculated in accordance with the terms of the merger agreement. Upon
consummation of the merger, each outstanding share of Mallinckrodt 4% cumulative
preferred stock will remain outstanding and will be redeemed by the surviving
corporation promptly following the consummation of the merger in accordance with
the redemption provisions of the 4% cumulative preferred stock.
THE EXCHANGE RATIO
The exchange ratio is designed to give Mallinckrodt shareholders $47.50 in
value of Tyco common shares for each of their shares of Mallinckrodt common
stock. The value of a Tyco common share for these purposes will be an average
share price calculated by taking the average of the daily volume-weighted
averages of the per share selling price of Tyco common shares as reported on the
New York Stock Exchange Composite Transaction Tape over the five consecutive
trading days ending on the trading day immediately preceding the date on which
the closing conditions set forth in the merger agreement have been satisfied or
waived. The exchange ratio is determined by dividing $47.50 by this average
share price.
If the average share price of Tyco common shares is less than a designated
floor price, Tyco Acquisition has the right to terminate the merger agreement
unless, after Tyco Acquisition gives Mallinckrodt written notice of its
intention to terminate the merger agreement, Mallinckrodt agrees to an exchange
ratio determined by dividing $47.50 by the floor price. Unless Tyco Acquisition
agrees to a lower
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price as described in the following paragraph, the floor price will be $37.00
and the exchange ratio to which Mallinckrodt would have to agree to prevent Tyco
Acquisition from terminating the merger agreement is 1.2838. Based on an average
share price that is less than $37.00, this 1.2838 exchange ratio would give
Mallinckrodt shareholders Tyco common shares valued at less than $47.50 for each
share of Mallinckrodt common stock. In this circumstance, Tyco Acquisition and
Mallinckrodt could also agree to a higher exchange ratio, although neither Tyco
Acquisition nor Mallinckrodt is under any obligation to do so. If the average
share price of Tyco's common shares is less than the floor price and Tyco
Acquisition does not give Mallinckrodt written notice of its intention to
terminate the merger agreement, Mallinckrodt shareholders will receive $47.50 in
value of Tyco common shares for each share of Mallinckrodt common stock based on
the average share price.
If the average share price of Tyco common shares measured over a five
trading day period ending on the third trading day prior to the Mallinckrodt
special meeting is less than $37.00, Tyco Acquisition may at that time
irrevocably reduce the floor price to this average share price. If that were the
case,
- Tyco Acquisition could not give Mallinckrodt notice of its intention to
terminate the merger agreement as described in the previous paragraph
unless the average share price of Tyco common shares for the purposes of
determining the exchange ratio was below this lower floor price;
- if Tyco were entitled to, and did, give notice of termination, the
exchange ratio to which Mallinckrodt must agree to prevent Tyco
Acquisition from terminating the merger agreement would be $47.50 divided
by such lower floor price. This exchange ratio would be higher than
1.2838; and
- Mallinckrodt may postpone the special shareholders meeting for up to three
business days.
See the risk factor entitled "MALLINCKRODT SHAREHOLDERS COULD RECEIVE LESS
THAN $47.50 IN VALUE OF TYCO COMMON SHARES FOR EACH SHARE OF MALLINCKRODT COMMON
STOCK" on page 8. Also see the information under "Basis of Mallinckrodt's
Determination to Adjust the Exchange Ratio if the Average Share Price is Less
Than $37.00" below for a discussion of some of the factors Mallinckrodt may
consider in deciding whether to agree to adjust the exchange ratio.
FRACTIONAL TYCO SHARES
A Mallinckrodt shareholder will not receive a fraction of a Tyco common
share in the merger. A Mallinckrodt shareholder who would otherwise have been
entitled to a fraction of a Tyco common share will instead receive a cash
payment (without interest) determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by the average share
price of Tyco common shares.
BASIS OF MALLINCKRODT'S DETERMINATION TO ADJUST THE EXCHANGE RATIO IF THE
AVERAGE SHARE PRICE IS LESS THAN $37.00
The average share price will not be known until the close of trading on the
trading day immediately preceding the date on which the closing conditions set
forth in the merger agreement will be satisfied or waived. Mallinckrodt has made
no decision as to whether it would agree to a lower exchange ratio if the
average share price were less than the floor price and Tyco Acquisition gave
Mallinckrodt written notice of its intention to terminate the merger agreement
as described in "The Exchange Ratio" above. In the event such decision is
required to be made, Mallinckrodt's Board of Directors would consult with its
management and legal and financial advisors and take into account, consistent
with its fiduciary duties, all relevant facts and circumstances that exist at
such time, including:
- the amount of the decrease in the value of Tyco common shares to be
received in the merger if the exchange ratio is adjusted;
- general market, economic and business conditions;
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- management's assessment of the potential benefits expected to be realized
by combining the operations of Mallinckrodt and Tyco;
- other opportunities available to Mallinckrodt; and
- whether the proposed merger continues to be in the best interests of
Mallinckrodt and its shareholders.
Adoption of the merger agreement by the Mallinckrodt shareholders will
constitute approval of the decision by Mallinckrodt's Board of Directors to
adjust the exchange ratio as provided in the merger agreement. Mallinckrodt
shareholders will also be deemed to approve any adjustment to the exchange ratio
agreed upon by Mallinckrodt and Tyco Acquisition that exceeds the ratio of
$47.50 divided by the floor price (1.2838 if the floor price is $37.00). If
Mallinckrodt so adjusts the exchange ratio, it does not intend to resolicit
proxies and has not yet considered whether it will seek revised opinions from
its financial advisors.
STOCK OPTIONS
Upon the consummation of the merger, each outstanding option to purchase
shares of Mallinckrodt common stock, whether or not then exercisable, will
continue to be subject to the same terms and conditions as were applicable to
such option immediately prior to the consummation of the merger, except that:
- upon the consummation of the merger, all Mallinckrodt options (other than
options granted after the date of the merger agreement) will be 100%
vested and exercisable;
- each outstanding Mallinckrodt option will be exercisable for that number
of whole Tyco common shares equal to the product of the number of shares
of Mallinckrodt common stock issuable upon exercise of such option
immediately prior to the consummation of the merger multiplied by the
exchange ratio, rounded to the nearest whole number of Tyco common shares;
- the per share exercise price for the Tyco common shares issuable upon
exercise of Mallinckrodt options will be equal to the quotient determined
by dividing the exercise price per share of the Mallinckrodt common stock
at which the Mallinckrodt options were exercisable immediately prior to
the consummation of the merger by the exchange ratio, rounded to the
nearest whole cent; and
- Tyco Acquisition or Mallinckrodt will take all necessary actions to enable
the holders of Mallinckrodt options to effect a "brokered cashless
exercise" of their options as of the consummation of the merger or
promptly thereafter.
EXCHANGE OF MALLINCKRODT COMMON STOCK
As soon as reasonably practicable after the consummation of the merger, Tyco
Acquisition will instruct ChaseMellon Shareholder Services LLC, as exchange
agent, to mail to each holder of record of Mallinckrodt common stock a letter of
transmittal and instructions as to how to surrender certificates of Mallinckrodt
common stock in exchange for certificates representing Tyco common shares and
payment for any fractional Tyco shares. MALLINCKRODT SHAREHOLDERS SHOULD NOT
RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Holders of certificates previously representing Mallinckrodt common stock
will not be paid dividends or distributions on the Tyco common shares and will
not be paid cash in lieu of a fractional Tyco common share until such
certificates are surrendered to ChaseMellon for exchange. When such certificates
are surrendered, any unpaid dividends declared by Tyco after the consummation of
the merger and any cash in lieu of a fractional Tyco common share will be paid
without interest. For all other corporate purposes, certificates that
represented shares of Mallinckrodt common stock prior to the consummation of the
merger will represent, from and after the consummation of the merger, the number
of Tyco common
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shares and cash in respect of fractional Tyco shares into which such shares of
Mallinckrodt common stock are actually converted in the merger.
ChaseMellon will deliver Tyco common shares in exchange for lost, stolen or
destroyed certificates if the owner of such certificates signs an affidavit of
loss, theft or destruction, as appropriate. Tyco Acquisition may also, in its
discretion, require the holder of such lost, stolen or destroyed certificates to
deliver a bond in a reasonable sum as indemnity against any claim that might be
made against Tyco, Tyco Acquisition or ChaseMellon with respect to alleged lost,
stolen or destroyed certificates.
SURVIVAL AND REDEMPTION OF PREFERRED STOCK
Upon the consummation of the merger, each outstanding share of Mallinckrodt
4% cumulative preferred stock will remain outstanding.
The surviving corporation will redeem all of the outstanding shares of 4%
cumulative preferred stock promptly following the consummation of the merger in
accordance with the redemption provisions of the 4% cumulative preferred stock.
Those provisions require the surviving corporation to mail a notice of
redemption to the holders of the preferred stock at least 30 days in advance of
the redemption date. The redemption proceeds are payable out of Mallinckrodt's
assets. Tyco Acquisition and its affiliates (other than a subsidiary of the
surviving corporation) will not reimburse the surviving corporation for these
redemption payments.
REPRESENTATIONS AND WARRANTIES
Mallinckrodt and Tyco Acquisition have made various customary mutual
representations and warranties in the merger agreement about themselves and
their respective subsidiaries, as well as, in the case of Tyco Acquisition, Tyco
and its other subsidiaries. Tyco Acquisition's representations and warranties
have been unconditionally guaranteed by Tyco.
CONDUCT OF BUSINESS BY MALLINCKRODT
Mallinckrodt has agreed that, prior to the consummation of the merger,
Mallinckrodt 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 Mallinckrodt will use reasonable commercial efforts to preserve
substantially intact the business organization of Mallinckrodt and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of Mallinckrodt and its subsidiaries and to preserve the present
relationships of Mallinckrodt and its subsidiaries with customers, suppliers and
other persons with which Mallinckrodt or any of its subsidiaries has significant
business relations. In particular, subject to certain exceptions, Mallinckrodt
has agreed that neither it nor any of its subsidiaries, without the prior
written consent of Tyco Acquisition, will:
1. amend or otherwise change Mallinckrodt's Restated Certificate of
Incorporation or By-laws;
2. issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock
of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock or any other
ownership interest in Mallinckrodt or any of its subsidiaries or
affiliates, subject to certain exceptions in the case of Mallinckrodt's
equity-based incentive plans;
3. sell, pledge, dispose of or encumber any assets of Mallinckrodt or any
of its subsidiaries, other than sales of assets in the ordinary course of
business and in a manner consistent with past practice or pursuant to
other limited exceptions;
4. - declare, set aside, make or pay any dividend or other distribution in
respect of any of its capital stock, other than quarterly dividends of
up to $0.17 per share consistent with past practice,
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- split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock,
- amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, or permit any subsidiary to
amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, any of its or its
subsidiaries' securities,
- settle, pay or discharge any claim, suit or other action brought or
threatened against Mallinckrodt with respect to or arising out of a
shareholder equity interest in Mallinckrodt, or
- make any cross-border capital contributions to a subsidiary;
5. - make any acquisitions,
- incur any indebtedness for borrowed money, other than pursuant to
existing credit facilities,
- issue any debt securities or assume, guarantee or endorse or otherwise
become responsible for, the obligations of any person, or make any
loans or advances (including loans and advances to employees of
Mallinckrodt to fund the exercise price of Mallinckrodt options or
otherwise to purchase shares of Mallinckrodt common stock), other than
in the ordinary course of business consistent with past practice,
- authorize any capital expenditures or purchases of fixed assets which
are, in the aggregate, in excess of $30 million over the 12 months from
the date of the merger agreement, or
- enter into or materially amend any contract, agreement, commitment or
arrangement to effect any of the above;
6. - increase the compensation or severance payable or to become payable to
its directors, officers, employees or consultants except in accordance
with past practice,
- grant any severance or termination pay to, or enter into or amend any
employment or severance agreement with, any current or prospective
employee of Mallinckrodt or any of its subsidiaries, or
- establish, adopt, enter into or amend any collective bargaining
agreement, benefit plan (including any plan that provides for the
payment of bonuses or incentive compensation), trust, fund, policy or
arrangement for the benefit of any current or former directors,
officers, employees or consultants or any of their beneficiaries;
7. change accounting policies or procedures;
8. make any tax election or settle or compromise any United States federal,
state, local or non-United States tax liability;
9. pay, discharge or satisfy any claims, liabilities or obligations out of
the ordinary course of business in excess of $5 million in the aggregate;
or
10. take, or agree in writing or otherwise to take, any of the actions
described in (1) - (9) above or any action which would make any of the
representations or warranties of Mallinckrodt contained in the merger
agreement untrue or incorrect or prevent Mallinckrodt from performing or
cause Mallinckrodt not to perform its covenants under the merger
agreement.
CONDUCT OF BUSINESS BY TYCO
Tyco Acquisition has agreed that, prior to the consummation of the merger,
it will take all action necessary to cause Tyco to conduct its business and that
of its subsidiaries in the ordinary course of
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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 Mallinckrodt:
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 merger and the other
transactions contemplated by the merger agreement;
3. declare, set aside, make or pay any dividend or other distribution on
any of its capital stock, other than the regular quarterly cash dividends
and other than a dividend to Tyco by a wholly-owned subsidiary of Tyco;
4. change accounting policies or procedures; or
5. take, or agree in writing or otherwise to take, any action which would
make any of the representations or warranties of Tyco Acquisition
contained in the merger agreement untrue or incorrect or prevent Tyco
Acquisition from performing or cause Tyco Acquisition not to perform its
covenants under the merger agreement.
NO SOLICITATION
Mallinckrodt has agreed that it will not solicit or encourage the initiation
of any inquiries or proposals regarding any merger, sale of assets, sale of
shares of capital stock or similar transactions involving Mallinckrodt or any of
its subsidiaries that if consummated would constitute an "Alternative
Transaction." An Alternative Transaction means:
- any transaction pursuant to which any third party acquires more than 25%
of the outstanding shares of any class of Mallinckrodt's equity
securities, whether from Mallinckrodt or pursuant to a tender offer or
exchange offer or otherwise,
- a merger or other business combination involving Mallinckrodt pursuant to
which any third party acquires more than 25% of the outstanding equity
securities of Mallinckrodt or the entity surviving such merger or business
combination,
- any transaction pursuant to which any third party acquires more than 25%
of the fair market value of all of the assets of Mallinckrodt and its
subsidiaries, taken as a whole, immediately prior to such transaction, or
- any other consolidation, business combination, recapitalization or similar
transaction involving Mallinckrodt or any of its significant subsidiaries,
other than transactions contemplated by the merger agreement.
Any inquiry or proposal by a third party to effect an Alternative
Transaction is referred to as an "Acquisition Proposal."
Until the Mallinckrodt shareholders adopt the merger agreement, if
Mallinckrodt's Board of Directors, following consultation with independent legal
counsel, determines in good faith that such action is reasonably likely to be
required to discharge properly its fiduciary duties, Mallinckrodt's Board of
Directors, after notice to Tyco Acquisition, is permitted to:
- furnish information to a third party which has made, but was not solicited
to make in violation of the merger agreement, a BONA FIDE Acquisition
Proposal that Mallinckrodt's Board of Directors concludes in good faith
after consulting with a nationally recognized investment banking firm
would, if consummated, constitute a "Superior Proposal." A Superior
Proposal means any proposal made by a third party to acquire, directly or
indirectly, for cash and/or securities all of Mallinckrodt's common stock
or all or substantially all of Mallinckrodt's assets on terms which
Mallinckrodt's Board of Directors reasonably believes (after consultation
with a nationally recognized
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financial advisor) to be more favorable from a financial point of view to
Mallinckrodt shareholders than the merger and the transactions
contemplated by the merger agreement taking into account at the time of
determination any changes to the financial terms of the merger proposed by
Tyco Acquisition, and
- consider and negotiate a BONA FIDE Acquisition Proposal that
Mallinckrodt's Board of Directors concludes in good faith after consulting
with a nationally recognized investment banking firm would, if
consummated, constitute a Superior Proposal not solicited in violation of
the merger agreement.
Neither Mallinckrodt nor Mallinckrodt's Board of Directors may withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Tyco
Acquisition or EVM, the Mallinckrodt Board's adoption of the merger agreement or
its approval of the merger, except to the extent that Mallinckrodt's Board of
Directors reasonably determines in good faith and after consultation with
independent legal counsel that it is or is reasonably likely to be required to
do so in order to discharge properly its fiduciary duties.
In addition, unless the merger agreement has been terminated in accordance
with its terms, Mallinckrodt and Mallinckrodt's Board of Directors may not enter
into any agreement (other than a confidentiality agreement) with respect to, or
otherwise approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or Alternative Transaction.
The merger agreement expressly provides that the foregoing covenants shall
not prohibit Mallinckrodt from taking and disclosing to its shareholders a
position regarding an Alternative Transaction or Acquisition Proposal required
by the Exchange Act or from making any disclosure to its shareholders required
by applicable law or by the New York Stock Exchange.
Mallinckrodt has agreed:
- to immediately cease and cause to be terminated any existing discussions
or negotiations with any third party (other than Tyco Acquisition and EVM)
that were ongoing at the time of the execution of the merger agreement;
and
- not to release any third party from the confidentiality and standstill
provisions of any agreement to which Mallinckrodt is a party.
Mallinckrodt will ensure that the officers and directors of Mallinckrodt and
its subsidiaries and any investment banker or other advisor or representative
retained by Mallinckrodt are aware of the no-solicitation restrictions described
in the merger agreement.
CERTAIN OTHER COVENANTS
CONSENTS; APPROVALS
Tyco Acquisition and Mallinckrodt will each use its reasonable best efforts
(and Tyco Acquisition will cause Tyco to use its reasonable best efforts) to
obtain, and to cooperate with each other in order to obtain, all consents,
waivers, approvals, authorizations or orders, and Tyco Acquisition and
Mallinckrodt will make (and Tyco Acquisition will cause Tyco to make) all
filings required in connection with the authorization, execution and delivery of
the merger agreement and the consummation by them of the transactions
contemplated thereby.
INDEMNIFICATION AND INSURANCE
For six years following the consummation of the merger, the certificate of
incorporation and by-laws of the surviving corporation will contain the same
indemnification provisions as are currently set forth in Mallinckrodt's Restated
Certificate of Incorporation and By-laws, and such provisions will not be
amended, modified or otherwise repealed in any manner that would adversely
affect the rights thereunder
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of individuals who were directors, officers, employees or agents of Mallinckrodt
at the consummation of the merger unless otherwise required by law.
After the consummation of the merger, the surviving corporation will, to the
fullest extent permitted under applicable law or under its certificate of
incorporation or by-laws, indemnify and hold harmless each present and former
director, officer or employee of Mallinckrodt 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 Mallinckrodt's Restated Certificate of Incorporation or By-laws or
any applicable contract or agreement as in effect on the date of the merger
agreement, in each case for a period of six years following the consummation of
the merger.
Following the merger, the surviving corporation will honor and fulfill in
all respects Mallinckrodt's obligations under the indemnification agreements and
employment agreements with Mallinckrodt's officers and directors existing at or
before the consummation of the merger.
In addition, Tyco Acquisition will provide, or cause the surviving
corporation to provide, for a period of not less than six years after the
consummation of the merger, Mallinckrodt's current directors and officers with
an insurance and indemnification policy that provides coverage for events
occurring at or prior to the consummation of the merger that is no less
favorable than Mallinckrodt's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; PROVIDED,
HOWEVER, that Tyco Acquisition and the surviving corporation will not be
required to pay an annual insurance premium in excess of 200% of the annual
premium currently paid by Mallinckrodt for such insurance, but in such case will
purchase as much coverage as possible for such amount.
NOTIFICATION OF CERTAIN MATTERS
Tyco Acquisition and Mallinckrodt will each give each other prompt notice of
the occurrence or nonoccurrence of any event which would reasonably be expected
to cause any representation or warranty contained in the merger agreement to be
materially untrue or inaccurate, or any failure of Mallinckrodt, Tyco
Acquisition or EVM, as the case may be, materially to comply with or satisfy any
covenant, condition or agreement contained in the merger agreement.
FURTHER ACTION/TAX TREATMENT
The parties to the merger agreement will use all reasonable efforts to, and
Tyco Acquisition will cause Tyco to use all reasonable efforts to, take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by the merger agreement, to obtain in
a timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to each of their obligations under the merger
agreement. The foregoing covenant includes Tyco's obligation to agree to divest,
abandon, license, hold separate or take similar action with respect to any
assets which are not material to Tyco or Mallinckrodt (but does not include any
obligation by Tyco to divest, abandon, license or take similar action with
respect to any material assets of Tyco or Mallinckrodt). In addition, Tyco
Acquisition, EVM and Mallinckrodt will, and Tyco Acquisition will cause Tyco to,
use its 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, either before or after
the consummation of the merger, take any actions which might reasonably be
expected to prevent the merger from so qualifying.
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PUBLIC ANNOUNCEMENTS
Tyco Acquisition and Mallinckrodt will not issue any press release or make
any written public statement with respect to the merger or the merger agreement
without the prior consent of the other party, which consent will not be
unreasonably withheld, except as required by law or the regulations of the New
York Stock Exchange.
TYCO COMMON SHARES
Tyco has guaranteed to take all actions necessary to transfer to Tyco
Acquisition the Tyco common shares to be delivered by Tyco Acquisition to the
Mallinckrodt shareholders in the merger. Tyco also has guaranteed to use its
best efforts to list on the New York Stock Exchange the Tyco common shares to be
delivered in the merger and to be issued upon exercise of the Mallinckrodt
options (as adjusted pursuant to the merger agreement).
CERTAIN EMPLOYEE BENEFITS
During the period from the effective time of the merger through June 30,
2001, the surviving corporation will provide each person who was an employee of
the Mallinckrodt or its subsidiaries at the effective time with employee
benefits that are comparable in the aggregate to those provided to such
employees immediately prior to the effective time. During this same period, the
surviving corporation will maintain severance plans, policies and programs for
the benefit for these employees that are substantially comparable to the
severance plans, policies and programs of Mallinckrodt as in effect for such
employees immediately prior to the effective time of the merger. The surviving
corporation will also maintain Mallinckrodt's income deferral program during
this period. After this period, the surviving corporation will provide these
employees with employee benefits that are comparable in the aggregate to those
provided to similarly situated employees of subsidiaries of Tyco. The surviving
corporation will recognize service accrued by Mallinckrodt employees prior to
the effective time for purposes of eligibility, vesting and benefit accrual
under employee benefit plans, will waive pre-existing condition limitations and
eligibility waiting periods under any group health plan and will give credit for
amounts paid prior to the effective time for purposes of applying deductibles,
co-payments and out-of-pocket maximums.
These provisions are subject to certain limitations and qualifications set
forth in the merger agreement. These provisions may not be enforced against the
surviving corporation by any employee of Mallinckrodt, and they do not prevent
the surviving corporation or any other subsidiary of Tyco from amending or
modifying any employee benefit plan, program or arrangement in any respect or
terminating or modifying the terms and conditions of employment or other service
of any person.
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CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER
The obligations of Tyco Acquisition, EVM and Mallinckrodt to consummate the
merger are subject to the satisfaction of the following conditions:
1. EFFECTIVENESS OF REGISTRATION STATEMENT. The registration statement of
which this document is a part has become effective under the Securities
Act and the SEC has not issued any stop order suspending the
effectiveness of such registration statement of which this document is a
part, nor has it started or threatened any proceedings for that purpose
or in respect of this document;
2. SHAREHOLDER ADOPTION. The Mallinckrodt shareholders have adopted the
merger agreement;
3. ANTITRUST. All waiting periods applicable to the consummation of the
merger under the HSR Act have expired or been terminated, and all
necessary clearances and approvals for the merger under any non-U.S.
antitrust laws have been obtained, other than for clearances or approvals
under any non-U.S. antitrust laws which, if not obtained, would not be
reasonably expected to have a material adverse effect on Mallinckrodt,
Tyco or Tyco's Healthcare Group;
4. GOVERNMENTAL ACTIONS. No action or proceeding has been instituted,
pending or threatened by any governmental authority or administrative
agency or 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 the consummation of the merger, prohibits or
seeks to prohibit or limits or seeks to limit Tyco Acquisition from
exercising all material rights and privileges pertaining to its ownership
of the surviving corporation 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 the surviving corporation and its
subsidiaries following the merger, or compels or seeks to compel Tyco or
any of its subsidiaries (including the surviving corporation and its
subsidiaries) to dispose of or hold separate assets which are material to
Tyco or Mallinckrodt, 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. Mallinckrodt has received a written opinion of Simpson
Thacher & Bartlett, counsel to Mallinckrodt, and Tyco Acquisition has
received the written opinion of PricewaterhouseCoopers LLP, tax advisors
to Tyco Acquisition, in form and substance reasonably satisfactory to
each of them, with respect to the tax-free nature of the merger as
specified in the merger agreement.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF TYCO ACQUISITION AND EVM
The obligations of Tyco Acquisition and EVM to complete the merger are also
subject to the following conditions:
1. REPRESENTATIONS AND WARRANTIES. Except as set forth in the merger
agreement and except as would not reasonably be expected to have a
material adverse effect on Mallinckrodt, the representations and
warranties of Mallinckrodt in the merger agreement are true and correct
in all respects, without giving effect to qualifications of materiality
contained in those representations and warranties, 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
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Acquisition and EVM have received a certificate to such effect signed by
the Chief Executive Officer or Chief Financial Officer of Mallinckrodt;
2. AGREEMENTS AND COVENANTS. Mallinckrodt has performed or complied in all
material respects with all agreements and covenants required by the
merger agreement to be performed or complied with by it on or prior to
the consummation of the merger, and Tyco Acquisition and EVM have
received a certificate to such effect signed by the Chief Executive
Officer or Chief Financial Officer of Mallinckrodt;
3. CONSENTS OBTAINED. Mallinckrodt has obtained all material consents,
waivers, approvals, authorizations or orders required to be obtained, and
has made all filings required to be made by Mallinckrodt for the
authorization, execution and delivery of the merger agreement and the
consummation by it of the transactions contemplated by the merger
agreement, except as would not reasonably be expected to have a material
adverse effect on Mallinckrodt, Tyco Acquisition or Tyco; and
4. AFFILIATE AGREEMENTS. Tyco Acquisition has received an agreement from
each person who is identified as an "affiliate" of Mallinckrodt that he
or she will only dispose of Tyco common shares received in the merger in
compliance with the securities laws.
ADDITIONAL CONDITIONS TO OBLIGATION OF MALLINCKRODT
The obligation of Mallinckrodt to complete the merger is also subject to the
following conditions:
1. REPRESENTATIONS AND WARRANTIES. Except as set forth in the merger
agreement and except as would not reasonably be expected to have a
material adverse effect on Tyco Acquisition and EVM, the representations
and warranties of Tyco Acquisition and EVM contained in the merger
agreement are true and correct in all respects, without giving effect to
qualifications of materiality contained in those representations and
warranties, on 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 Mallinckrodt has received a certificate to such effect
signed by the President or Chief Financial Officer of Tyco Acquisition;
2. AGREEMENTS AND COVENANTS. Tyco Acquisition and EVM have performed or
complied in all material respects with all agreements and covenants
required by the merger agreement to be performed or complied with by them
on or prior to the consummation of the merger, and Mallinckrodt has
received a certificate to such effect signed by the President or Chief
Financial Officer of Tyco Acquisition;
3. CONSENTS OBTAINED. Tyco Acquisition and EVM have obtained all material
consents, waivers, approvals, authorizations or orders required to be
obtained, and have made all filings required to be made by Tyco
Acquisition or EVM for the authorization, execution and delivery of the
merger agreement and the guarantee and the consummation by them of the
transactions contemplated by the merger agreement and the guarantee,
except as would not reasonably be expected to have a material adverse
effect on Mallinckrodt, Tyco Acquisition or Tyco; and
4. LISTING. The New York Stock Exchange has authorized for listing the
Tyco common shares issuable in connection with the merger and upon
exercise of the Mallinckrodt options (as adjusted pursuant to the merger
agreement).
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TERMINATION
CONDITIONS TO TERMINATION
The merger agreement may be terminated at any time prior to the consummation
of the merger, notwithstanding the adoption of the merger agreement by the
Mallinckrodt shareholders:
1. by mutual written consent duly authorized by the Boards of Directors of
Mallinckrodt and Tyco Acquisition;
2. by either Tyco Acquisition or Mallinckrodt, if the merger has not been
consummated by December 31, 2000, other than for reasons set forth in 3
below; PROVIDED, HOWEVER, that the right to terminate the merger
agreement is not available to any party whose failure to fulfill any
obligation under the merger agreement has been the cause of, or resulted
in, the failure of the merger to be consummated on or before
December 31, 2000;
3. by either Tyco Acquisition or Mallinckrodt, if Mallinckrodt shareholders
do not adopt the merger agreement at the Mallinckrodt special meeting;
PROVIDED, HOWEVER, that this right to terminate is not available to
Mallinckrodt if Mallinckrodt fails to call the Mallinckrodt special
meeting;
4. by either Tyco Acquisition or Mallinckrodt, 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 nonappealable final action which permanently restrains, enjoins
or otherwise prohibits the merger;
5. by Tyco Acquisition, if, whether or not permitted to do so by the merger
agreement, Mallinckrodt or Mallinckrodt's Board of Directors:
- withdraws, modifies or changes its approval, adoption or recommendation
of the merger agreement or the merger in a manner adverse to Tyco
Acquisition or has resolved to do so,
- approves or recommends to Mallinckrodt shareholders an Acquisition
Proposal or Alternative Transaction,
- approves or recommends that Mallinckrodt shareholders tender their
shares in any tender or exchange offer that is an Alternative
Transaction,
- fails to include the recommendation of Mallinckrodt's Board of
Directors in favor of adoption of the merger agreement or fails to
solicit from Mallinckrodt's shareholders proxies in favor of adoption
of the merger agreement and all other reasonable action necessary or
advisable to secure the vote or consent of Mallinckrodt's shareholders
in favor of such adoption, or
- takes any public position or makes any disclosures to Mallinckrodt
shareholders that has the effect of any of the foregoing (it being
understood and agreed that a communication by Mallinckrodt's Board of
Directors to Mallinckrodt's shareholders pursuant to Rule 14d-9(f)(3)
of the Securities Exchange Act or any similar communication regarding
the making or amendment of a tender offer shall not be deemed to
constitute a basis of termination).
6. by either Tyco Acquisition or Mallinckrodt:
- if any representation or warranty of the other party set forth in the
merger agreement was untrue when made or has become untrue, 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 December 31, 2000 and the
party in breach
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exercises its reasonable best efforts to cure the same, the merger
agreement may not be terminated under this clause while such party
continues to exercise such efforts;
7. by Mallinckrodt, if:
- Mallinckrodt's Board of Directors has authorized Mallinckrodt to enter
into a definitive agreement with respect to a Superior Proposal,
- Mallinckrodt has notified Tyco Acquisition in writing that it intends
to enter into a definitive agreement with respect to a Superior
Proposal,
- within two full business days of receipt of Mallinckrodt's written
notification, Tyco Acquisition has not made an offer that
Mallinckrodt's Board of Directors determines, in good faith after
consultation with its financial advisors, is at least as favorable,
from a financial point of view, to the Mallinckrodt shareholders as the
Superior Proposal,
- Mallinckrodt has paid Tyco Acquisition the fees and expenses required
to be paid pursuant to the merger agreement,
- the merger agreement has not already been adopted by the Mallinckrodt
shareholders at the Mallinckrodt special meeting, and
- Mallinckrodt has complied in all material respects with its no
solicitation obligations as described on page .
8. by Tyco Acquisition, if the average share price of the Tyco common
shares for the five consecutive trading days ending on the trading day
immediately preceding the date on which the closing conditions set forth
in the merger agreement have been satisfied or waived is less than the
$37.00 floor price (or such lower floor price agreed to by Tyco
Acquisition, as described above under "The Exchange Ratio"), subject to
the following conditions:
- Tyco Acquisition must give Mallinckrodt written notice of its intention
to terminate the merger agreement prior to 5:00 p.m. New York City time
on the business day following the date on which the closing conditions
set forth in the merger agreement have been satisfied or waived; and
- by 5:00 p.m. New York City time on the third business day following the
date on which the closing conditions have been satisfied or waived,
Mallinckrodt has not delivered a notice to Tyco Acquisition agreeing
that the exchange ratio will equal $47.50 divided by the floor price
(1.2838, unless Tyco agrees to a floor price below $37.00).
If Mallinckrodt agrees to adjust the exchange ratio, then the
merger agreement will not terminate and will remain in effect in
accordance with its terms (except that the exchange ratio will be
adjusted accordingly).
FEES AND EXPENSES
Except as set forth below, each of Tyco Acquisition, EVM and Mallinckrodt
will pay its own fees and expenses incurred in connection with the merger
agreement and the transactions contemplated by the merger agreement, whether or
not the merger is consummated, provided that Tyco Acquisition and Mallinckrodt
will share equally (1) all filing fees and printing expenses incurred in
connection with the printing and filing of this document and the related
registration statement and (2) all conveyance and similar taxes required to be
paid or which Tyco Acquisition has agreed should be paid prior to the
consummation of the merger.
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Mallinckrodt will pay Tyco a fee of $110 million, and will pay the actual,
documented and reasonable out-of-pocket expenses of Tyco and Tyco Acquisition
relating to the merger of up to $3 million, upon the first to occur of any of
the following events:
1. the termination of the merger agreement by Tyco Acquisition or
Mallinckrodt following the failure of the Mallinckrodt shareholders to
adopt the merger agreement at the Mallinckrodt special meeting, if
- Mallinckrodt or any third party publicly announces an Alternative
Transaction within 12 months following the date of termination of the
merger agreement and such transaction is at any time thereafter
consummated on substantially the terms previously announced;
- the average of the daily volume-weighted averages of the per share
selling price of Tyco common shares as reported on the New York Stock
Exchange Composite Transaction Tape over the five consecutive trading
days ending on the third trading day prior to the Mallinckrodt special
meeting is equal to or greater than the $37.00 floor price (or such
lower floor price agreed to by Tyco Acquisition, as described above
under "The Exchange Ratio"); and
- the fair market value of the consideration for the Alternative
Transaction is greater than $47.50 for each share of Mallinckrodt
common stock;
2. the termination of the merger agreement by Tyco Acquisition as permitted
in the merger agreement and described in paragraph 5 under "Conditions to
Termination" above; or
3. the termination of the merger agreement by Mallinckrodt due to the
acceptance by Mallinckrodt's Board of Directors of a Superior Proposal as
permitted by the merger agreement and described in paragraph 7 under
"Conditions to Termination" above.
If Tyco Acquisition terminates the merger agreement because Mallinckrodt has
breached a covenant or agreement (as described in paragraph 6 under "Conditions
to Termination" above), Mallinckrodt must pay Tyco and Tyco Acquisition their
respective expenses relating to the transactions contemplated by the merger
agreement in an amount not to exceed $3 million. In addition, Mallinckrodt must
pay Tyco a fee of $110 million if such breach was willful and Mallinckrodt or
any third party publicly announces an Alternative Transaction within 12 months
following the date of termination of the merger agreement and such transaction
is at any time thereafter consummated on substantially the terms previously
announced.
As used in this section, the definition of Alternative Transaction is the
same as the definition of Alternative Transaction used under "No Solicitation"
above, except that such definition is modified to replace "25%" with "40%".
If Tyco Acquisition terminates the merger agreement because a representation
or warranty of Mallinckrodt was untrue when made (as described in paragraph 6
under "Conditions to Termination" above), Mallinckrodt must pay Tyco and Tyco
Acquisition their respective expenses in an amount not to exceed $3 million.
If Mallinckrodt terminates the merger agreement because Tyco Acquisition or
EVM breached a covenant or agreement or because a representation or warranty of
Tyco Acquisition or EVM was untrue when made (as described in paragraph 6 under
"Conditions to Termination" above), Tyco Acquisition must pay Mallinckrodt its
expenses in an amount not to exceed $3 million.
The fee and/or expenses described above are payable within one business day
after a demand for payment following the occurrence of the event requiring such
payment; PROVIDED THAT, in no event will Tyco Acquisition or Mallinckrodt be
required to pay such fee and/or expenses to the other if, immediately prior to
the termination of the merger agreement, the other party was in material breach
of its obligations under the merger agreement. In addition, Mallinckrodt will
not be required to pay such fee and/or expenses if, immediately prior to the
termination of the merger agreement, EVM was in material breach of its
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obligations under the merger agreement or Tyco was in material breach of its
obligations under the guarantee.
The fee payable under certain circumstances by Mallinckrodt to Tyco is
intended, among other things, to compensate Tyco and Tyco Acquisition for their
respective costs, including lost opportunity costs, if certain actions or
inactions by Mallinckrodt or its shareholders lead to the abandonment of the
merger. This may have the effect of increasing the likelihood that the merger
will be consummated in accordance with the terms of the merger agreement. The
fee may also have the effect of discouraging persons from making an offer to
acquire all of or a significant interest in Mallinckrodt by increasing the cost
of any such acquisition.
AMENDMENT AND WAIVER; PARTIES IN INTEREST
The parties to the merger agreement may amend the merger agreement in
writing by action taken by or on behalf of their respective Boards of Directors
at any time prior to the consummation of the merger. However, after adoption of
the merger agreement by the Mallinckrodt shareholders, the merger agreement
cannot be amended without shareholder approval if shareholder approval of such
amendment is required by law.
At any time prior to the consummation of the merger, any party to the merger
agreement may extend the time for the performance of any of the obligations or
other acts by the other, waive any inaccuracies in the representations and
warranties contained in the merger agreement or in any document delivered
pursuant to the merger agreement, or waive compliance with any of the agreements
or conditions contained in the merger agreement. Any such extension or waiver
will be valid if set forth in writing by the party or parties granting such
extension or waiver.
The merger agreement is binding upon and inures solely to the benefit of the
parties thereto, and nothing in the merger agreement, express or implied,
confers upon any other person any right, benefit or remedy of any nature
whatsoever, other than certain indemnification, employment and insurance
obligations of Tyco Acquisition and Mallinckrodt following the consummation of
the merger which are intended for the benefit of certain specified officers,
directors and employees of Mallinckrodt and may be enforced by such individuals
and other than certain obligations of the parties to pay certain fees and
expenses.
GUARANTEE
Tyco has fully and unconditionally guaranteed the representations,
warranties, covenants, agreements and other obligations of Tyco Acquisition and
EVM under the merger agreement.
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COMPARATIVE PER SHARE PRICES AND DIVIDENDS
TYCO
Tyco common shares are listed and traded on the New York Stock Exchange, 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 on the
New York Stock Exchange Composite Transaction Tape, and the dividends paid on
such shares, for the quarterly periods presented below. The price and dividends
for the Tyco common shares have been restated to reflect the two-for-one stock
split effected in the form of a stock dividend which was distributed on
October 21, 1999. Although Tyco's fiscal year end is September 30, the
information is presented on a calendar year basis.
<TABLE>
<CAPTION>
TYCO COMMON SHARES
------------------- DIVIDENDS
HIGH LOW PER SHARE
-------- -------- ---------
<S> <C> <C> <C>
1998:
First Quarter................................ $28.7188 $21.1875 $0.0125
Second Quarter............................... 31.5313 25.7188 0.0125
Third Quarter................................ 34.5000 25.0000 0.0125
Fourth Quarter............................... 39.5938 20.1563 0.0125
1999:
First Quarter................................ $39.9688 $33.7500 $0.0125
Second Quarter............................... 47.4063 35.1875 0.0125
Third Quarter................................ 52.9375 47.1250 0.0125
Fourth Quarter............................... 53.8750 23.0625 0.0125
2000:
First Quarter................................ $53.2500 $32.0000 $0.0125
Second Quarter............................... 51.3750 41.0000 0.0125
Third Quarter (through July 7, 2000)......... 48.9375 45.5625
</TABLE>
See "Comparative Market Value Information" on page 18 for recent Tyco common
share price information. Shareholders are urged to obtain current market
quotations. See also the risk factor entitled "MALLINCKRODT SHAREHOLDERS COULD
RECEIVE LESS THAN $47.50 IN VALUE OF TYCO COMMON SHARES FOR EACH SHARE OF
MALLINCKRODT COMMON STOCK" on page 8.
Under the terms of the merger agreement, other than its regularly scheduled
quarterly dividend of $0.0125 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's
Board of Directors and will depend on business conditions, Tyco's financial
condition and earnings and other factors.
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MALLINCKRODT
Mallinckrodt common stock is listed and traded on the New York Stock
Exchange, the Pacific Stock Exchange and the Chicago Stock Exchange. The
following table sets forth the high and low sales prices per share of
Mallinckrodt common stock, as reported on the New York Stock Exchange Composite
Transaction Tape, and the dividends paid on such shares, for the quarterly
periods presented below. Although Mallinckrodt's fiscal year end is June 30, the
information presented here is on a calendar year basis.
<TABLE>
<CAPTION>
MALLINCKRODT
COMMON STOCK
------------------- DIVIDENDS
HIGH LOW PER SHARE
-------- -------- ---------
<S> <C> <C> <C>
1998:
First Quarter.................................... $40.063 $34.688 $0.165
Second Quarter................................... 39.750 29.000 0.165
Third Quarter.................................... 30.938 19.750 0.165
Fourth Quarter................................... 33.438 19.750 0.165
1999:
First Quarter.................................... $36.375 $25.563 $0.165(1)
Second Quarter................................... 37.563 25.688 0.165
Third Quarter.................................... 37.188 28.938 0.165
Fourth Quarter................................... 35.813 29.000 0.165
2000:
First Quarter.................................... $33.313 $22.188 $0.165
Second Quarter................................... 44.875 25.750 0.165
Third Quarter (through July 7, 2000)............. 44.313 43.375
</TABLE>
------------------------
(1) Includes a $0.05 per share rights redemption payment.
See "Comparative Market Value Information" on page 18 for recent
Mallinckrodt common stock price information. Shareholders are urged to obtain
current market quotations.
Under the terms of the merger agreement, other than its regularly scheduled
quarterly dividends of up to $0.17 per share of Mallinckrodt common stock,
Mallinckrodt 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, 1999 Consolidated Financial Statements,
including the accounting policies and notes thereto, included in its
Annual Report on Form 10-K/A filed on June 26, 2000,
2. Tyco's unaudited Consolidated Financial Statements and notes thereto
included in its Quarterly Report on Form 10-Q/A for the quarterly period
ended March 31, 2000,
3. Mallinckrodt's audited Consolidated Financial Statements, including the
notes thereto, included in its Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, and
4. Mallinckrodt's unaudited Consolidated Financial Statements and notes
thereto included in its Quarterly Reports on Form 10-Q for the quarterly
periods ending on September 30, 1999, December 31, 1999 and March 31,
2000.
The following unaudited pro forma combined condensed financial information
sets forth the results of operations for the fiscal year ended September 30,
1999 and the six months ended March 31, 2000, as if the merger had occurred at
the beginning of fiscal 1999, and the financial position as of March 31, 2000,
as if the merger had occurred as of that date. Mallinckrodt 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, 1999 and the six months ended March 31, 2000 include
the historical results of operations for Mallinckrodt for the fiscal year ended
June 30, 1999 and the six months ended March 31, 2000, respectively. The
unaudited pro forma combined balance sheet includes the financial position of
Mallinckrodt at March 31, 2000.
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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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF CONTINUING
OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000(1)(5)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO MALLINCKRODT ADJUSTMENTS COMBINED
---------- ------------ ----------- ---------
(RESTATED)
<S> <C> <C> <C> <C>
Net sales..................................... $13,708.7 $1,340.8 $ -- $15,049.5
Cost of sales................................. (8,647.2) (756.0) (72.3)(3) (9,475.5)
Research and development...................... -- (72.3) 72.3 (3) --
Selling, general and administrative
expenses.................................... (2,507.7) (354.6) (36.3)(6) (2,898.6)
Merger, restructuring and other non-recurring
credits, net................................ 75.4 -- -- 75.4
Charge for the impairment of long-lived
assets...................................... (99.0) -- -- (99.0)
--------- -------- ------ ---------
Operating income.............................. 2,530.2 157.9 (36.3) 2,651.8
Interest expense, net......................... (370.9) (35.7) -- (406.6)
Nonoperating income, net...................... -- 33.4 -- 33.4
--------- -------- ------ ---------
Income from continuing operations before
income taxes................................ 2,159.3 155.6 (36.3) 2,278.6
Income taxes.................................. (546.6) (50.9) -- (597.5)
--------- -------- ------ ---------
Income from continuing operations............. $ 1,612.7 $ 104.7 $(36.3) $ 1,681.1
========= ======== ====== =========
Income from continuing operations per common
Share(2):
Basic....................................... $ 0.95 $ 1.52 $ 0.96
========= ======== =========
Diluted(4).................................. $ 0.94 $ 1.51 $ 0.94
========= ======== =========
Weighted average number of common shares(2):
Basic....................................... 1,690.1 68.8 $ 1,757.6
========= ======== =========
Diluted(4).................................. 1,713.8 69.1 $ 1,781.3
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
71
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF CONTINUING
OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999(1)(5)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO MALLINCKRODT ADJUSTMENTS COMBINED
---------- ------------ ----------- ---------
(RESTATED)
<S> <C> <C> <C> <C>
Net sales....................................... $22,496.5 $2,581.2 $ -- $25,077.7
Cost of sales................................... (14,433.1) (1,379.9) (152.2)(3) (15,965.2)
Research and development........................ -- (152.2) 152.2 (3) --
Selling, general and administrative expenses.... (4,436.3) (722.5) (72.6)(6) (5,231.4)
Merger, restructuring and other non-recurring
charges....................................... (928.8) -- -- (928.8)
Charge for the impairment of long-lived
assets........................................ (507.5) -- -- (507.5)
Other operating income, net..................... -- 11.3 -- 11.3
--------- -------- ------- ---------
Operating income................................ 2,190.8 337.9 (72.6) 2,456.1
Interest income................................. 61.5 3.1 64.6
Interest expense................................ (547.1) (85.0) -- (632.1)
Nonoperating loss, net.......................... (1.6) (1.6)
--------- -------- ------- ---------
Income from continuing operations before income
taxes......................................... 1,705.2 254.4 (72.6) 1,887.0
Income taxes.................................... (637.5) (81.5) -- (719.0)
--------- -------- ------- ---------
Income from continuing operations............... $ 1,067.7 $ 172.9 $ (72.6) $ 1,168.0
========= ======== ======= =========
Income from continuing operations per common
share(2):
Basic......................................... $ 0.65 $ 2.41 $ 0.68
========= ======== =========
Diluted(4).................................... $ 0.64 $ 2.40 $ 0.67
========= ======== =========
Weighted average number of common shares(2):
Basic......................................... 1,641.3 71.6 1,708.8
========= ======== =========
Diluted(4).................................... 1,674.8 71.9 1,742.3
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
72
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEETS AT MARCH 31, 2000(1)
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TYCO MALLINCKRODT ADJUSTMENTS COMBINED
---------- ------------ ----------- ---------
(RESTATED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,139.6 $ 33.2 $ -- $ 1,172.8
Accounts receivable, net............................ 5,257.3 452.5 -- 5,709.8
Contracts in process................................ 328.6 -- -- 328.6
Inventories......................................... 3,480.5 484.7 -- 3,965.2
Deferred income taxes............................... 559.6 78.2 -- 637.8
Prepaid expenses and other current assets........... 940.1 64.4 -- 1,004.5
--------- -------- ----------- ---------
Total current assets.............................. 11,705.7 1,113.0 -- 12,818.7
Property, plant and equipment, net.................. 7,927.9 827.7 -- 8,755.6
Goodwill and other intangibles, net................. 14,793.8 1,390.0 2,176.9 (7) 18,360.7
Long-term investments............................... 461.4 -- 78.2 (3) 539.6
Deferred income taxes............................... 608.3 4.1 -- 612.4
Other assets........................................ 712.1 90.0 (78.2)(3) 723.9
--------- -------- ----------- ---------
Total assets...................................... $36,209.2 $3,424.8 $ 2,176.9 $41,810.9
========= ======== =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable and current portion of long-term
debt.............................................. $ 1,431.6 $ 481.6 $ -- $ 1,913.2
Accounts payable.................................... 2,643.0 202.1 -- 2,845.1
Accrued expenses and other current liabilities...... 3,500.3 376.1 50.0 (8) 3,926.4
Contracts in process-billings in excess of cost..... 898.6 -- -- 898.6
Deferred revenue.................................... 279.5 -- -- 279.5
Income taxes payable................................ 900.2 80.5 -- 980.7
Deferred income taxes............................... 2.2 0.9 -- 3.1
--------- -------- ----------- ---------
Total current liabilities......................... 9,655.4 1,141.2 50.0 10,846.6
Long-term debt...................................... 10,807.8 541.4 -- 11,349.2
Other long-term liabilities......................... 1,259.4 324.7 -- 1,584.1
Deferred income taxes............................... 721.9 340.2 -- 1,062.1
--------- -------- ----------- ---------
Total liabilities................................. 22,444.5 2,347.5 50.0 24,842.0
--------- -------- ----------- ---------
Retained earnings................................... 5,562.4 1,296.5 (1,296.5)(10) 5,562.4
Other shareholders' equity.......................... 8,202.3 (219.2) 3,193.2 (9) 11,406.5
230.2 (10)
--------- -------- ----------- ---------
Total shareholders' equity........................ 13,764.7 1,077.3 2,126.9 16,968.9
--------- -------- ----------- ---------
Total liabilities and shareholders' equity........ $36,209.2 $3,424.8 $ 2,176.9 $41,810.9
========= ======== =========== =========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
73
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
(1) Mallinckrodt has a June 30 fiscal year end, which differs from Tyco's
September 30 fiscal year end. The unaudited pro forma results of operations
for the fiscal year ended September 30, 1999 and the six months ended
March 31, 2000 include the historical results of Mallinckrodt for the fiscal
year ended June 30, 1999 and the six months ended March 31, 2000,
respectively. The unaudited pro forma balance sheet includes the financial
position of Mallinckrodt at March 31, 2000. The unaudited pro forma results
of operations for the six months ended March 31, 2000 for Mallinckrodt
exclude the results of operations for the first fiscal quarter ended
September 30, 1999. Net sales were $614.1 million, operating income was
$73.5 million and income from continuing operations was $37.7 million for
the quarter ended September 30, 1999.
(2) The unaudited 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 Mallinckrodt
shareholders in the merger. The number of shares to be delivered in the
merger is based on Mallinckrodt shareholders receiving 1.0040 Tyco common
shares for each share of Mallinckrodt common stock held, which assumes an
average share price equal to the closing price of Tyco common shares on the
New York Stock Exchange on June 27, 2000 of $47.3125. The actual average
share price may be higher or lower than this value. For purposes of the
unaudited pro forma combined condensed financial information, it was assumed
that 67,224,459 shares of Mallinckrodt common stock were outstanding as of
June 27, 2000.
(3) Certain reclassifications, none of which affects income from continuing
operations, have been made to the Mallinckrodt statements of operations in
the unaudited pro forma combined condensed statements of continuing
operations to classify research and development expenses on a consistent
basis. Certain reclassifications have been made to Mallinckrodt's unaudited
balance sheets to classify long-term investments on a consistent basis.
(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 $1,613.5 million for the six months ended March 31, 2000 and
$1,071.6 million for the fiscal year ended September 30, 1999.
(5) There were no material transactions between Tyco and Mallinckrodt during any
of the periods presented.
(6) The allocation of the purchase price to the fair value of assets and
liabilities of Mallinckrodt has not yet been determined. Therefore, for
purposes of the unaudited pro forma combined condensed financial
information, the excess of the purchase price over the book value of net
assets acquired of Mallinckrodt is being recorded as goodwill and amortized
over an estimated composite 30 year life to selling, general and
administrative expenses.
(7) Excess of the purchase price over the net assets acquired of Mallinckrodt.
See (6) above for further discussion.
(8) Increase in accrued expenses for direct transaction costs incurred related
to the merger.
(9) Increase in shareholders' equity for shares to be issued in the merger based
on 67,224,459 shares of Mallinckrodt common stock outstanding on June 27,
2000 multiplied by 1.0040 multiplied by $47.3125, the closing price of Tyco
common shares on June 27, 2000.
(10) Elimination of Mallinckrodt's equity accounts, with the exception of $11.0
million of 4% cumulative preferred stock which will remain outstanding and
will be redeemed by the surviving corporation after the consummation of the
merger.
(11) Accrued purchase liabilities and adjustments related to the integration of
operations are expected to be recorded in connection with the merger with
Mallinckrodt, but such amounts are not determinable at this time.
74
<PAGE>
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF MALLINCKRODT AND SHAREHOLDERS OF TYCO
Mallinckrodt is a New York corporation, and the rights of Mallinckrodt's
shareholders are governed by Mallinckrodt's Restated Certificate of
Incorporation and By-laws. Upon the consummation of the merger, holders of
Mallinckrodt common stock 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 of material differences between the rights of a
holder of Mallinckrodt common stock and the rights of a Tyco shareholder arising
from differences between the corporate laws of New York and Bermuda and the
governing instruments of the two companies. This summary is not a complete
description of those laws or governing instruments.
Copies of Tyco's Memorandum of Association and Bye-laws and Mallinckrodt's
Restated Certificate of Incorporation and By-laws have been filed with the SEC
and will be sent to shareholders of Mallinckrodt upon request. See "Where to
Find More Information" on page i.
<TABLE>
<CAPTION>
<S> <C>
NEW YORK LAW AND CURRENT BERMUDA LAW AND CURRENT
GOVERNING DOCUMENTS OF MALLINCKRODT GOVERNING DOCUMENTS OF TYCO
------------------------------------------------------------------------------------------
SPECIAL MEETINGS OF SHAREHOLDERS
------------------------------------------------------------------------------------------
- Under New York law, a special meeting of - Under Bermuda law and Tyco's Bye-Laws, a
the shareholders may be called by the special general meeting of shareholders
board of directors or by such other may be called at any time by Tyco's Board
persons as may be so authorized by the of Directors.
certificate of incorporation or by-laws. - Tyco shareholders holding at least 10% of
- In addition, under New York law, if, for the paid-up voting capital of Tyco may
a period of one month after the date require Tyco to call a special general
fixed by the by-laws for the annual meeting.
meeting of shareholders, there is a - Under Bermuda law, if an annual general
failure to elect a sufficient number of meeting is not held within three months
directors to conduct the business of the of the due date or any required number of
corporation, the board of directors must directors is not elected at such a
call a special meeting of shareholders meeting, the Registrar of Companies and,
for the election of directors. If the subject to any order made by the
board of directors fails to do so, Registrar, any creditor or shareholder
holders of 10% of the votes of the shares may apply to the Bermuda Supreme Court
entitled to vote in an election of for the winding up of the company.
directors may demand the call of a
special meeting for the election of
directors.
- Mallinckrodt's by-laws provides that a
special meeting of the shareholders may
be called at any time by the Chairman of
the Board, the President or by a majority
of directors.
QUORUM
-------------------------------------------
- Under New York law, except as set forth - The presence in person or by proxy of any
in a corporation's certificate of two Tyco shareholders at a general
incorporation or by-laws, the presence in meeting will generally constitute a
person or by proxy of a majority of the quorum.
votes of shares entitled to vote
constitutes a quorum; provided, however,
that in no event shall a quorum
</TABLE>
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<TABLE>
<CAPTION>
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GOVERNING DOCUMENTS OF MALLINCKRODT GOVERNING DOCUMENTS OF TYCO
------------------------------------------------------------------------------------------
consist of less than one-third of the
votes of shares entitled to vote at the
meeting.
- Mallinckrodt's by-laws provide that, at
all shareholder meetings, a majority of
the votes of capital stock outstanding
and entitled to vote thereat, either in
person or by proxy, shall constitute a
quorum, except as may otherwise be
provided by law.
VOTING RIGHTS
-------------------------------------------
- Under New York law, directors shall be - Under Bermuda law, any proposal at a
elected by a plurality of the votes cast general meeting may be decided by a
at a meeting of shareholders by the simple majority of the votes cast, except
holders of shares entitled to vote in the where the bye-laws of the company or
election. Any other action to be taken Bermuda law prescribe a different
must be authorized by a majority of the majority.
votes cast in favor of or against such - Any proposal at a general meeting may be
action at a meeting of shareholders by decided by a show of hands of the
the holders of shares entitled to vote shareholders present in person unless a
thereon, except as otherwise provided by poll is demanded. Where a poll is
law or by the certificate of demanded, a shareholder is entitled to
incorporation or by-laws. one vote for each common share held by
the shareholder.
- Mallinckrodt's certificate of - Tyco's Bye-laws provide that a Tyco
incorporation provides that holders of 4% shareholder will lose voting rights:
cumulative preferred stock and holders of (1) for the period the shareholder fails to
common stock are entitled to one vote for comply with a notice from Tyco
each share held. requesting specified information
- Mallinckrodt's certificate of regarding such person's interest in Tyco
incorporation provides that at any time shares, plus an additional ninety days;
when 6 quarterly dividends on the 4% (2) if such shareholder fails after notice
cumulative preferred stock are in by Tyco to make a takeover offer in
default, the holders of 4% cumulative accordance with the City Code on
preferred stock are entitled, at the Takeovers and Mergers of the United
next annual meeting of shareholders for Kingdom as applied by or in accordance
the election of directors, and until with Tyco's Bye-laws;
payment of or provision for all (3) upon notice by the directors, for
dividends then in default, voting as a period of 180 days if such shareholder
class and excluding holders of acquires 3% or more of the issued share
Mallinckrodt common stock or series capital of any class of Tyco shares and
preferred stock, to vote for and elect fails to notify Tyco of such
two members of Mallinckrodt's Board of acquisition within two days; or
Directors. Subject to the voting rights (4) upon notice by the directors, for a
of any series of series preferred stock period of 180 days if such shareholder
(no shares of which are outstanding on holds 3% or more of the issued share
the date hereof), the holders of common capital of any class of Tyco shares and
stock, voting as a class and excluding fails to notify Tyco of a change in the
the holders of 4% cumulative preferred shareholder's interests amounting to 1%
stock, are entitled to vote for and or more of the share capital of any
elect the balance of the Board of class.
Directors.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
NEW YORK LAW AND CURRENT BERMUDA LAW AND CURRENT
GOVERNING DOCUMENTS OF MALLINCKRODT GOVERNING DOCUMENTS OF TYCO
------------------------------------------------------------------------------------------
SHAREHOLDER NOMINATIONS AND PROPOSALS
-------------------------------------------
- Mallinckrodt's by-laws provide that a - Any Tyco shareholder may nominate a
shareholder may nominate a director for director for election. Under Bermuda law,
election at an annual or special meeting only Tyco shareholders holding not less
of shareholders or may bring up any other than 5% of the total voting rights or 100
matter for consideration at an annual or more in number may require a proposal
meeting of shareholders if the to be submitted to an annual general
shareholder delivers written notice to meeting. Generally, notice of such a
the secretary of Mallinckrodt no less proposal must be deposited at the
than 90 days and no more than 120 days registered office of Tyco not less than
before the date of the meeting. If notice six weeks before the date of the meeting,
or public disclosure of the date of the unless the meeting is subsequently called
shareholder meeting is given less than for a date six weeks or less after the
100 days prior to the meeting, a notice has been deposited. Tyco's Board
shareholder's notice will be timely given of Directors can waive these
if it is received by the secretary of requirements, and the staff of the SEC
Mallinckrodt no later than the close of has taken the position that the SEC's
business on the tenth day following the proxy rules may require Tyco to include
day on which such notice or prior public in its proxy materials proposals of
disclosure of the meeting date was made. shareholders who do not satisfy these
requirements.
DERIVATIVE ACTIONS
-------------------------------------------
- Mallinckrodt shareholders do not have a - Tyco shareholders may not generally
direct and individual right to enforce initiate an action for a wrongdoing to the
rights which could be asserted by company. In certain limited
Mallinckrodt, but may do so only circumstances, however, Tyco shareholders
derivatively on behalf of Mallinckrodt. may proceed in a derivative action.
- Under New York law, in order to proceed - The Bermuda courts would ordinarily
in a derivative action against a follow English precedent, which permits a
corporation: shareholder to commence a derivative
(1) the plaintiff must be a shareholder action only if:
of the corporation at the time the (1) the act complained of is alleged to be
action is brought; beyond the corporate power of the
(2) the plaintiff must have been a company or to be illegal;
shareholder of the corporation at (2) the act complained of is alleged to
the time of the transaction of which constitute a fraud against the minority
the plaintiff complains, or shareholders by the majority
plaintiff's shares must have devolved shareholders who have used their
on the plaintiff by operation of law; controlling position to prevent the
and company from taking action against
(3) the complaint must set forth with the wrongdoers;
particularity the efforts of the (3) an act requires approval by a greater
plaintiff to secure the action the percentage of the company's
plaintiff desires from the shareholders than actually approved it;
corporation's board of directors or or
the plaintiff's reasons for not making
the effort.
</TABLE>
77
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<TABLE>
<CAPTION>
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------------------------------------------------------------------------------------------
- In certain circumstances, the (4) there is an absolute necessity to waive
plaintiff may be required to post a the general rule that a shareholder may
bond. not bring a derivative 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, including himself,
may petition the Bermuda Supreme Court
for relief, and the court has a wide
discretion to grant relief if it is
satisfied that the complaint is so
justified and that:
(1) to wind up the company would unfairly
prejudice those shareholders, but
(2) the facts otherwise would justify a
winding up order on just and equitable
grounds.
Traditionally, such relief has been granted
in relatively limited circumstances.
BOARD OF DIRECTORS
-------------------------------------------
- Under New York law, a board of directors - Under Bermuda law, a board of directors
shall consist of one or more individuals, must consist of at least two individuals
with the number specified in or fixed in and a maximum number of directors may be
accordance with the by-laws or by action determined by the shareholders in a
of the shareholders or of the board of general meeting or in accordance with the
directors under the specific provisions bye-laws.
of a by-law adopted by the shareholders.
- Mallinckrodt's by-laws provide that the - Tyco's Bye-laws provide that the number
number of directors of Mallinckrodt may of directors will be determined by the
be determined from time to time by shareholders at a general meeting,
resolution adopted by a majority of the provided that there are at least two
entire Board of Directors, except that directors. Tyco's Bye-laws require a
such number shall not be less than 8 or director to be a shareholder.
more than 16 (excluding any directors
elected by the holders of 4% cumulative
preferred stock pursuant to
Mallinckrodt's certificate of
incorporation).
- Under New York law, the certificate of - Bermuda law would permit a classified
incorporation or the specific provisions board of directors, but Tyco's Bye-laws do
of a by-law adopted by the shareholders not provide for one.
may provide that the directors be divided
into either two, three or four classes,
with all
</TABLE>
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<TABLE>
<CAPTION>
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GOVERNING DOCUMENTS OF MALLINCKRODT GOVERNING DOCUMENTS OF TYCO
------------------------------------------------------------------------------------------
classes being as nearly equal in number
as possible.
- Mallinckrodt's certificate of
incorporation provides for three classes
of directors, with at least two directors
per class. Directors are elected on a
rotating basis every three years.
REMOVAL OF DIRECTORS
-------------------------------------------
- Under New York law, any or all of the - Under Bermuda law, a director may,
directors may be removed for cause by subject to the bye-laws, be removed by vote
vote of the shareholders, or, if the of the shareholders at a special general
certificate of incorporation or the meeting called for the purpose.
specific provisions of a by-law adopted
by the shareholders so provide, by the
board of directors. In addition, if the
certificate of incorporation or the
by-laws so provide, any or all of the
directors may be removed without cause by
vote of the shareholders.
- Mallinckrodt's certificate of - A director of Tyco may be removed with or
incorporation provides that directors may without cause by the shareholders or by
be removed at any time by a majority vote written resolution signed by all the
of the shareholders entitled to vote, other directors.
except that directors elected by any
class of stock, voting separately as a
class, may be removed only by a majority
vote of that class, voting separately as
a class, so long as the voting power of
that class continues.
AMENDMENTS TO CHARTER DOCUMENTS AND BY-LAWS
-------------------------------------------
- Generally, under New York law, an - Bermuda law provides that a company may
amendment of the certificate of alter its memorandum of association by
incorporation requires the vote of the resolution passed at a general meeting of
board of directors followed by the vote shareholders of which due notice has been
of a majority of all outstanding shares given and, where required, with the
entitled to vote thereon. consent of the Minister of Finance.
- In its certificate of incorporation, - Holders of at least 20% of any class of
Mallinckrodt reserves the right to amend, the company's share capital may apply to the
alter, change or repeal any provision of Bermuda Supreme Court to annul any
its certificate of incorporation. Certain alteration. Upon such application, the
provisions of Mallinckrodt's certificate alteration will not have effect until it
of incorporation may only be amended by a is confirmed by the Court.
supermajority of all outstanding shares
entitled to vote. For example:
(1) So long as Mallinckrodt's 4% - Tyco's Bye-laws provide that, if Tyco has
cumulative preferred stock is two or more classes of shares, the rights
outstanding, Mallinckrodt cannot, without attached to any class of shares, unless
the affirmative vote or written otherwise provided by the terms of such
class, may be
</TABLE>
79
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<CAPTION>
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GOVERNING DOCUMENTS OF MALLINCKRODT GOVERNING DOCUMENTS OF TYCO
------------------------------------------------------------------------------------------
consent of the holders of at least varied either by the consent in writing
two-thirds thereof, amend its certificate of the holders of three-fourths of the
of incorporation in such a way as to: shares of the class, or by a resolution
(A) alter or change the preferences, passed at a separate meeting of the
special rights or powers of the 4% holders of such class of shares by
cumulative preferred stock so as to holders of three-fourths of the shares of
adversely affect the 4% cumulative such class voting at such separate
preferred stock, (B) increase or decrease meeting. Certain procedural rules of such
the number of shares of 4% cumulative a separate meeting differ from the rules
preferred stock authorized for issuance of a Tyco general meeting.
or (C) increase or decrease the par value
of the 4% cumulative preferred stock.
(2) Article Eleven of Mallinckrodt's - Pursuant to Bermuda law, holders of at
certificate of incorporation, which least 10% of a class of shares in a company
requires a higher vote for certain in which the share capital is divided
business combinations, cannot be amended into different classes may apply to the
or repealed, nor can Mallinckrodt adopt Bermuda Supreme Court to annul any
any provision inconsistent with Article variation in the rights attached to such
Eleven, without the affirmative vote or class of shares. Upon such application,
consent of the holders of 80% of the variation will not have effect until
Mallinckrodt's outstanding voting stock, it is confirmed by the Court.
voting together as a single class.
- Under New York law, a corporation's - Tyco's Bye-laws may only be amended by
by-laws may be adopted, amended or Tyco's Board of Directors and such
repealed by a majority of the votes cast amendment will become effective only
by the shares at the time entitled to after approval by the Tyco shareholders.
vote in the election of any directors.
- Mallinckrodt's by-laws provide that the
by-laws may be amended at any
shareholder's meeting by a majority of
the votes cast at such meeting by the
holders of shares entitled to vote
thereon, represented either in person or
by proxy. In addition, Mallinckrodt's
Board of Directors at any meeting may
make, alter, amend and repeal any by-laws
by a majority vote. Any by-laws made by
Mallinckrodt's Board of Directors may be
altered or repealed by Mallinckrodt's
shareholders.
</TABLE>
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GOVERNING DOCUMENTS OF MALLINCKRODT GOVERNING DOCUMENTS OF TYCO
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SHARE PURCHASES
-------------------------------------------
- Mallinckrodt's certificate of - Tyco's Bye-Laws authorize Tyco's Board of
incorporation expressly authorizes Directors to repurchase Tyco's own shares
Mallinckrodt's Board of Directors to for cancellation, up to an amount
apply in its discretion such portion of authorized by shareholders in a general
Mallinckrodt's net income as it deems meeting.
advisable to redeem or purchase for
retirement Mallinckrodt's 4% cumulative
preferred stock at an amount not to
exceed the redemption price of such
stock, whether or not there are dividends
in arrears on the 4% cumulative preferred
stock and whether or not any dividends
have been paid on Mallinckrodt common
stock.
- Mallinckrodt's certificate of - A subsidiary of Tyco may purchase Tyco
incorporation provides that the shares. Tyco shares owned by a subsidiary
affirmative vote of the holders of not of Tyco may be voted on all matters on
less than a majority of Mallinckrodt's which shareholders are entitled to vote
outstanding voting stock (considered as and counted for quorum purposes.
one class) is required before
Mallinckrodt may purchase any outstanding
shares of its common stock at a price
known by Mallinckrodt to be above "market
price" (as defined in the certificate of
incorporation) from any person or entity
known by Mallinckrodt to be a "selling
shareholder" (as defined in the
certificate of incorporation), unless
Mallinckrodt makes the purchase on the
same terms and as a result of a duly
authorized offer to purchase any and all
outstanding shares of Mallinckrodt common
stock.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS
-------------------------------------------
- Under New York law, the consummation of a - Under Bermuda law, a company's
merger, consolidation, sale, lease, shareholders are not generally required
exchange or other disposition of all or to approve a sale, lease or exchange of
substantially all of the assets of a all or substantially all of a company's
corporation requires the approval of the property and assets. However, Bermuda law
corporation's board of directors and requires shareholders to approve certain
two-thirds of all outstanding shares of forms of mergers and reconstructions.
the corporation entitled to vote thereon. - A compromise or arrangement in connection
The affirmative vote of a majority of all with a scheme for the reconstruction of
outstanding shares entitled to vote the company on terms which include the
thereon is required if: transfer of all or part of the
(1) the corporation was formed after undertaking or the property of the
February 22, 1998; or company to another company requires
(2) the corporation's certificate of the approval of a majority in number
incorporation expressly provides. representing three-fourths in value
of the shareholders or class of
shareholders,
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------------------------------------------------------------------------------------------
- Mallinckrodt was formed before February as the case may be, present and voting
22, 1998 and its certificate of either in person or by proxy at the
incorporation is silent on this issue; meeting, and the sanction of the Bermuda
therefore, two-thirds of all of Supreme Court.
Mallinckrodt's outstanding stock entitled - Pursuant to Bermuda law, the amalgamation
to vote on the merger agreement is of two or more companies requires board
required to adopt the merger agreement. approval and the vote of three-fourths of
the shareholders of each such company.
The required vote of shareholders may be
reduced to not less than a majority by a
company's bye-laws. Tyco's Bye-Laws do
not provide for any such reduced
majority. For purposes of approval of an
amalgamation, all shares, whether or not
otherwise entitled to vote, carry the
right to vote. A separate vote of a class
of shares is required if the rights of
such class would be altered by virtue of
the amalgamation.
SHARE ACQUISITIONS, BUSINESS COMBINATIONS AND RELATED PROVISIONS
-------------------------------------------
- Under New York law, a corporation may not - Tyco's Bye-laws permit Tyco's Board of
engage in any business combination with Directors to make applicable to Tyco
any interested shareholder, defined as certain rules of the City Code on
the beneficial owner of 20% or more of Takeovers and Mergers issued by the Panel
the voting power of a corporation, for a on Takeovers and Mergers in the United
period of five years following the date Kingdom.
that such shareholder became an - The City Code on Takeovers and Mergers
interested shareholder, unless: requires any person or group acting in
(1) prior to such time, the board of concert which acquires shares which,
directors of the corporation together with shares previously owned by
approved either the business it, have 30% or more of the voting
combination or the transaction which power of a company, to make an offer
resulted in the shareholder becoming to purchase all equity shares of the
an interested shareholder; company and any of the company's
(2) it is approved no earlier than five voting non-equity capital shares of
years after the interested the type held by such person or
shareholder's stock acquisition date group. The offer price must not be
by a majority of the shares not less than the highest price paid in
owned by, or by an affiliate of, the the preceding 12 months for shares
interested shareholder; or of the same class by such person or
(3) statutory fair price requirements anyone in such group and must be
are met. made in cash or include a cash
alternative.
- Article Eleven of Mallinckrodt's - If a person or group owns 30% or more of
certificate of incorporation provides the Tyco shares, and Tyco's Board of
that the affirmative vote of the holders Directors determines that an offer under
of at least 80% of the voting power of the City Code is not expedient or the
Mallinckrodt's then outstanding shares of person or group is required to make such
capital stock entitled to vote generally an offer but fails to do so, Tyco's Board
in the election of directors, of Directors may
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voting together as a single class, is by notice require such a person or group
required to approve any transaction or to make an offer which:
contract which involves or includes: (1) includes all shares of every class
(1) any merger or consolidation of of share capital of Tyco, and Tyco's
Mallinckrodt or any subsidiary with Board of Directors may also require
any Interested Shareholder (as that the offer include all
hereinafter defined) or any other securities of Tyco convertible into
corporation which is, or after such Tyco shares;
merger or consolidation would be, an (2) is in cash or includes a cash
Interested Shareholder; or alternative;
(2) any sale, lease, exchange, mortgage, (3) is made within 30 days of Tyco's
pledge, transfer or other Board of Directors' notice;
disposition (in one transaction or (4) remains open for at least 14 days
series of transactions) to or with after the offer becomes unconditional;
any Interested Shareholder of any (5) requires payment to be made within
assets of Mallinckrodt or any 21 days after the offer becomes
subsidiary having an aggregate fair unconditional; and
market value (as defined in the (6) is at a price not less than the
certificate of incorporation) of $50 highest price paid in the preceding 12
million or more; or months for shares of the same class
(3) the issuance or transfer by by the person or any member of the
Mallinckrodt or any subsidiary (in group, or if the price is
one transaction or a series of unavailable or inappropriate, then
transactions) of any securities of at a price fixed by Tyco's Board of
Mallinckrodt or any subsidiary to Directors. The purchase price for
any Interested Shareholder or an convertible securities must be on
affiliate (as defined in the terms Tyco's Board of Directors
certificate of incorporation) of any considers fair and reasonable.
Interest Shareholder in exchange for
cash, securities or other property
(or combination thereof) having an
aggregate fair market value (as
defined in the certificate of
incorporation) of $50 million or
more; or
(4) the adoption of any plan or proposal
for the liquidation or dissolution
of Mallinckrodt proposed by or on
behalf of any Interested Shareholder
or any Affiliate (as defined in the
certificate of incorporation) of any
Interested Shareholder; or
(5) any reclassification of securities
(including any reverse stock split),
or recapitalization of Mallinckrodt,
or any merger or consolidation of
Mallinckrodt with any of its
subsidiaries or any other
transaction (whether or not with or
into or otherwise involving an
Interested
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------------------------------------------------------------------------------------------
Shareholder) which has the effect of
increasing the proportionate share
of the outstanding shares of any
class of Equity Security (as defined
in the certificate of incorporation)
of the corporation or any subsidiary
which is directly or indirectly
owned by any Interested Shareholder
or any Affiliate of any Interested
Shareholder.
Any transaction or contract referred to in
(1)-(5) above is a "Business Combination."
- The provisions of Article Eleven of - The Rules Governing Substantial
Mallinckrodt's certificate of Acquisitions of Shares issued by the
incorporation do not apply if: Takeover Panel provide, subject to
(1) the Business Combination has been certain exceptions, that a person or
approved by Mallinckrodt's Board of group acting in concert may not acquire
Directors in accordance with in a period of seven days shares
Mallinckrodt's certificate of representing 10% or more of the
incorporation; and voting shares of a company if those
(2) the price and procedural shares, when aggregated with shares
requirements set forth in of the company already held by the
Mallinckrodt's certificate of person or group, would carry more
incorporation have been met. than 15%, but less than 30%, of the
total voting rights of the company.
Tyco's Board of Directors 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.
- As used Article Eleven of Mallinckrodt's - Under Tyco's Bye-laws, any person who
certificate of incorporation, an acquires an interest in 3% or more of the
"Interested Shareholder" means any issued share capital of any class of Tyco
individual, firm, corporation or other is required to notify Tyco of that
entity who or which: interest and of any change in that
(1) is the beneficial owner of 20% or person's interest amounting to 1% or more
more of the voting power of of the issued capital of any class.
Mallinckrodt's outstanding Voting Any such notification must be made
Stock (as defined in the certificate within two business days after the
of incorporation); or relevant event. In determining the
(2) is an affiliate of Mallinckrodt percentage interest of any person
within the 2 year period immediately for these and similar purposes,
prior to the date in question was interests of persons acting in
the beneficial owner of 20% or more concert may be aggregated.
of the voting power of
Mallinckrodt's outstanding voting
stock (as defined in the certificate
of incorporation); or
(3) is an assignee of or has otherwise
succeeded to any shares of Voting
Stock which were at any time within
the 2 year period immediately prior
to the
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------------------------------------------------------------------------------------------
date in question beneficially owned
by any Interested Shareholder, if
such assignment or succession shall
have occurred in the course of a
transaction or series of
transactions not involving a public
offering within the meaning of the
Securities Act.
REQUIRED PURCHASE AND SALE OF SHARES; SHORT FORM MERGER
-------------------------------------------
- Under New York law, a New York - Pursuant to Bermuda law, where the
corporation owning at least 90% of the transfer of shares or any class of shares in
outstanding shares of each class of a company to another company, has, within
another New York corporation may merge four months after the making of the offer
the subsidiary into itself without in this regard by the transferee company,
approval of the subsidiary's shareholders been approved by the holders of not less
or merge itself into the subsidiary with than 90% in value of the shares or class
approval of the parent's shareholders. 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
non-approving 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.
- 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
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------------------------------------------------------------------------------------------
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.
- Under Bermuda law, an amalgamation is
only permitted without a shareholder vote
when it is between a parent company and
its wholly-owned subsidiary or between
two or more wholly-owned subsidiaries.
DISSENTERS' RIGHTS
-------------------------------------------
- Under New York law, shareholders of a New - Under Bermuda law, a properly dissenting
York corporation have the right to shareholder who did not vote in favor of
dissent and receive the payment of the an amalgamation and who is not satisfied
fair value of their shares in the case of that he or she has been offered fair
certain amendments or changes to the value for his or her shares may apply to
certificate of incorporation adversely the court to appraise the fair value of
affecting their shares, a merger or his or her shares. If the Bermuda Supreme
consolidation in which the corporation is Court appraised value is greater than the
a constituent corporation, any sale, value received or to be received in the
lease, exchange or other disposition of amalgamation, the company must pay the
all or substantially all of the court appraised value to the dissenting
corporation's assets and certain share shareholder within one month of the
exchanges. Shareholders do not have appraisal, unless it decides to terminate
appraisal rights with respect to mergers, the amalgamation.
consolidations and share exchanges, if - Bermuda law additionally provides a right
their shares are listed on a national of appraisal in respect of the situation
securities exchange or designated as a discussed under "Required Purchase and
Nasdaq National Stock Market security. Sale of Shares" above.
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LEGAL MATTERS
The validity of the Tyco common shares to be issued to Mallinckrodt
shareholders in connection with the merger will be passed upon by Appleby
Spurling & Kempe, Hamilton, Bermuda, special counsel to Tyco. Certain other
legal matters in connection with the merger will be passed upon for Tyco by
Kramer Levin Naftalis & Frankel LLP, New York, New York, and by Appleby
Spurling & Kempe. Michael L. Jones, secretary of Tyco, is a partner in Appleby
Spurling & Kempe. Joshua M. Berman, a director and vice president of Tyco, is
counsel to Kramer Levin Naftalis & Frankel LLP and beneficially owns 148,180
Tyco common shares. Certain federal income tax matters in connection with the
merger will be passed upon for Mallinckrodt by Simpson Thacher & Bartlett, New
York, New York.
EXPERTS
The Consolidated Financial Statements and financial statement schedule of
Tyco as of September 30, 1999 and 1998 and for the years ended September 30,
1999 and 1998 and the nine months ended September 30, 1997 included in Tyco's
Annual Report on Form 10-K/A filed June 26, 2000, and incorporated by reference
in this document, 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 Deloitte & Touche LLP (as
it relates to the consolidated statements of operations, changes in
stockholders' equity and cash flows of United States Surgical Corporation and
its subsidiaries for the nine months ended September 30, 1997 and the related
financial statement schedule for the nine months ended September 30, 1997) and
Arthur Andersen LLP (as it relates to the consolidated balance sheet of AMP
Incorporated and its subsidiaries as of September 30, 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for the
year ended September 30, 1998 and the nine months ended September 30, 1997). The
Consolidated Financial Statements and financial statement schedule referred to
above have been incorporated herein in reliance on said reports given on the
authority of such firms as experts in auditing and accounting.
The Consolidated Financial Statements of Mallinckrodt appearing in
Mallinckrodt's Annual Report on Form 10-K for the year ended June 30, 1999 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
Consolidated Financial Statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
FUTURE SHAREHOLDER PROPOSALS
Mallinckrodt does not currently expect to hold a 2000 Annual Meeting of
Shareholders because upon consummation of the merger Mallinckrodt will become an
indirect wholly-owned subsidiary of Tyco. In the event the merger is not
consummated, proposals of Mallinckrodt shareholders to be included in the proxy
statement to be mailed to all Mallinckrodt shareholders entitled to vote at the
2000 Annual Meeting of Mallinckrodt shareholders must be received at
Mallinckrodt's principal executive offices not later than , 2000.
87
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TYCO ACQUISITION CORP. VI (NV),
EVM MERGER CORP.
AND
MALLINCKRODT INC.
INCLUDING
GUARANTEE
OF
TYCO INTERNATIONAL LTD.
JUNE 28, 2000
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ARTICLE I THE MERGER.................................................. A-4
Section 1.01 THE MERGER.................................................. A-4
Section 1.02 EFFECTIVE TIME.............................................. A-4
Section 1.03 EFFECT OF THE MERGER........................................ A-5
Section 1.04 CERTIFICATE OF INCORPORATION; BYLAWS........................ A-5
Section 1.05 DIRECTORS AND OFFICERS...................................... A-5
Section 1.06 EFFECT ON SECURITIES, ETC................................... A-5
Section 1.07 EXCHANGE OF SHARES.......................................... A-6
Section 1.08 STOCK TRANSFER BOOKS........................................ A-8
Section 1.09 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK......... A-8
Section 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES...................... A-8
Section 1.11 TAX CONSEQUENCES............................................ A-8
Section 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION.................. A-8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-9
Section 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; MATERIAL
ADVERSE EFFECT.............................................. A-9
Section 2.02 CERTIFICATE OF INCORPORATION AND BY-LAWS.................... A-10
Section 2.03 CAPITALIZATION.............................................. A-10
Section 2.04 AUTHORITY RELATIVE TO THIS AGREEMENT........................ A-11
Section 2.05 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS.................................................... A-11
Section 2.06 COMPLIANCE; PERMITS......................................... A-12
Section 2.07 SEC FILINGS; FINANCIAL STATEMENTS........................... A-13
Section 2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS........................ A-13
Section 2.09 NO UNDISCLOSED LIABILITIES.................................. A-13
Section 2.10 ABSENCE OF LITIGATION....................................... A-14
Section 2.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS............... A-14
Section 2.12 EMPLOYMENT AND LABOR MATTERS................................ A-18
Section 2.13 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.......... A-18
Section 2.14 RESTRICTIONS ON BUSINESS ACTIVITIES......................... A-19
Section 2.15 TITLE TO PROPERTY........................................... A-19
Section 2.16 TAXES....................................................... A-19
Section 2.17 ENVIRONMENTAL MATTERS....................................... A-20
Section 2.18 BROKERS..................................................... A-21
Section 2.19 INTELLECTUAL PROPERTY....................................... A-21
Section 2.20 INTERESTED PARTY TRANSACTIONS............................... A-22
Section 2.21 INSURANCE................................................... A-23
Section 2.22 PRODUCT LIABILITY AND RECALLS............................... A-23
Section 2.23 OPINION OF FINANCIAL ADVISOR................................ A-23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... A-23
Section 3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES................ A-23
Section 3.02 CAPITALIZATION.............................................. A-24
Section 3.03 AUTHORITY RELATIVE TO THIS AGREEMENT........................ A-24
Section 3.04 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS................. A-25
Section 3.05 COMPLIANCE.................................................. A-25
Section 3.06 SEC FILINGS; FINANCIAL STATEMENTS........................... A-26
Section 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS........................ A-26
Section 3.08 NO UNDISCLOSED LIABILITIES.................................. A-26
Section 3.09 ABSENCE OF LITIGATION....................................... A-26
Section 3.10 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.......... A-27
Section 3.11 BROKERS..................................................... A-27
Section 3.12 OWNERSHIP OF PARENT AND MERGER SUB.......................... A-27
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Section 3.13 NO PRIOR ACTIVITIES......................................... A-27
Section 3.14 OWNERSHIP INTEREST IN THE COMPANY........................... A-27
Section 3.15 NO VOTE REQUIRED............................................ A-28
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER...................... A-28
Section 4.01 CONDUCT OF BUSINESS BY THE COMPANY.......................... A-28
Section 4.02 NO SOLICITATION............................................. A-30
Section 4.03 CONDUCT OF BUSINESS BY GUARANTOR............................ A-32
ARTICLE V ADDITIONAL AGREEMENTS....................................... A-32
Section 5.01 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.......... A-32
Section 5.02 COMPANY SHAREHOLDERS MEETING................................ A-33
Section 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY...................... A-34
Section 5.04 CONSENTS; APPROVALS......................................... A-34
Section 5.05 AGREEMENTS WITH RESPECT TO AFFILIATES....................... A-35
Section 5.06 INDEMNIFICATION AND INSURANCE............................... A-35
Section 5.07 NOTIFICATION OF CERTAIN MATTERS............................. A-36
Section 5.08 FURTHER ACTION/TAX TREATMENT................................ A-36
Section 5.09 PUBLIC ANNOUNCEMENTS........................................ A-37
Section 5.10 GUARANTOR COMMON SHARES..................................... A-37
Section 5.11 STOCK OPTIONS AND ESPP...................................... A-37
Section 5.12 CERTAIN EMPLOYEE BENEFITS................................... A-38
Section 5.13 REDEMPTION OF THE COMPANY PREFERRED STOCK................... A-39
Section 5.14 ACCOUNTANTS LETTERS......................................... A-39
Section 5.15 COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES............ A-39
Section 5.16 CONVEYANCE TAXES............................................ A-39
ARTICLE VI CONDITIONS TO THE MERGER.................................... A-39
Section 6.01 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER...................................................... A-39
Section 6.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB......................................................... A-40
Section 6.03 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY.......... A-41
ARTICLE VII TERMINATION................................................. A-42
Section 7.01 TERMINATION................................................. A-42
Section 7.02 EFFECT OF TERMINATION....................................... A-43
Section 7.03 FEES AND EXPENSES........................................... A-44
ARTICLE VIII GENERAL PROVISIONS.......................................... A-45
Section 8.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.................................................. A-45
Section 8.02 NOTICES..................................................... A-45
Section 8.03 CERTAIN DEFINITIONS......................................... A-46
Section 8.04 AMENDMENT................................................... A-47
Section 8.05 WAIVER...................................................... A-47
Section 8.06 HEADINGS.................................................... A-47
Section 8.07 SEVERABILITY................................................ A-47
Section 8.08 ENTIRE AGREEMENT............................................ A-47
Section 8.09 ASSIGNMENT.................................................. A-48
Section 8.10 PARTIES IN INTEREST......................................... A-48
Section 8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....... A-48
Section 8.12 GOVERNING LAW; JURISDICTION................................. A-48
Section 8.13 COUNTERPARTS................................................ A-48
Section 8.14 WAIVER OF JURY TRIAL........................................ A-48
Section 8.15 PERFORMANCE OF OBLIGATIONS.................................. A-48
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of June 28, 2000, among Tyco Acquisition Corp. VI (NV) ("PARENT"), a
Nevada corporation and a wholly owned first tier subsidiary of Tyco
International Ltd., a Bermuda company ("GUARANTOR"), EVM Merger Corp., a New
York corporation and a wholly owned first-tier subsidiary of Parent ("MERGER
SUB"), and Mallinckrodt Inc., a New York 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 Merger Sub with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each adopted this Agreement providing
for the merger (the "MERGER") of Merger Sub with and into the Company in
accordance with the applicable provisions of the Business Corporation Law of the
State of New York (the "NYBCL"), 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(a) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "CODE") and that the
transactions contemplated by this Agreement be undertaken pursuant to such plan;
WHEREAS, Parent, Merger Sub and the Company intend that the Merger be
accounted for as a purchase for financial reporting purposes;
WHEREAS, pursuant to the Merger, each outstanding share (a "SHARE") of the
Company's common stock, par value $1.00 per share (the "COMPANY COMMON STOCK"),
shall be converted into the right to receive the Merger Consideration (as
defined in Section 1.07(b)), upon the terms and subject to the conditions set
forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition to the Company's willingness to enter into this Agreement,
Guarantor has agreed fully and unconditionally to guarantee the representations,
warranties, covenants, agreements and other obligations of Parent and Merger Sub
in this Agreement (the "GUARANTEE");
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:
DEFINITIONS:
"ACQUISITION PROPOSAL" is defined in Section 4.02(a).
"ADJUSTED OPTION" is defined in Section 1.06.
"ADJUSTMENT ELECTION" is defined in Section 7.01(j).
"AFFILIATE" is defined in Section 8.03.
"AFFILIATE PLAN" is defined in Section 2.11(a)
"AGREEMENT" is defined in preamble.
A-1
<PAGE>
"ALTERNATIVE TRANSACTION" is defined in Section 4.02(a).
"ALTERNATIVE TRANSACTION CONDITION" is defined in Section 7.03(b).
"AVERAGE SHARE PRICE" is defined in Section 1.06(a)
"2000 BALANCE SHEET" is defined in Section 2.09.
"BUSINESS DAY" is defined in Section 8.03.
"CERTIFICATES" is defined in Section 1.06(f).
"CERTIFICATE OF MERGER" is defined in Section 1.02.
"CLOSING CONDITIONS SATISFACTION DATE" is defined in Section 1.06(a).
"COBRA" is defined in Section 2.11(b).
"CODE" is defined in the preamble.
"COMPANY" is defined in the preamble.
"COMPANY CHARTER DOCUMENTS" is defined in Section 2.02.
"COMPANY COMMON STOCK" is defined in preamble.
"COMPANY DISCLOSURE SCHEDULE" is defined in Section 2.01.
"COMPANY EMPLOYEE PLAN" is defined in Section 2.11(a).
"COMPANY FINANCIAL ADVISORS" is defined in Section 2.18.
"COMPANY ESPP" is defined in Section 1.06(c).
"COMPANY INTELLECTUAL PROPERTY ASSETS" is defined in Section 2.19(a)
"COMPANY OPTION PLANS" is defined in Section 1.06(c).
"COMPANY PERMITS" is defined in Section 2.06(b).
"COMPANY PREFERRED STOCK" is defined in Section 2.03.
"COMPANY SEC DOCUMENTS" is defined in Section 2.03.
"COMPANY SHAREHOLDERS MEETING" is defined in Section 2.04(c).
"COMPANY STOCK OPTIONS" is defined in Section 1.06(c).
"CONFIDENTIALITY AGREEMENTS" is defined in section 5.03.
"CONTROL" is defined in Section 8.3.
"COVERED PERSONS" is defined in Section 5.06(c).
"D&O INSURANCE" is defined in Section 5.06(d).
"DAILY PER SHARE PRICE" is defined in Section 1.06(a).
"DEFINED BENEFIT PLAN" is defined in Section 2.11(e).
"DOL" is defined in Section 2.11(a).
"DOLLARS" or "$" is defined in Section 8.3.
"EMPLOYEE BENEFITS SUPPLEMENTAL DISCLOSURE SCHEDULE" is defined in
Section 2.11(a).
"ERISA" is defined in Section 2.11(a).
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"EXCHANGE ACT" is defined in Section 2.05.
"EXCHANGE AGENT" is defined in Section 1.07(a).
"EXCHANGE RATIO" is defined in Section 1.06(a).
"EFFECTIVE TIME" is defined in Section 1.02.
"ENVIRONMENTAL CLAIM" is defined in Section 2.17(e).
"ENVIRONMENTAL LAW" is defined in Section 2.17(e).
"ENVIRONMENTAL HEALTH AND SAFETY LAWS" is defined in Section 2.05(c).
"EXPENSES" is defined in section 7.03(b).
"FLOOR PRICE" is defined in Section 7.03(b)(i)(B)
"FEE" is defined in section 7.03(b).
"GAAP" is defined in Section 2.07(b).
"GOVERNMENTAL AUTHORITY" is defined in Section 2.05(c).
"GUARANTEE" is defined in the preamble.
"GUARANTOR" is defined in the preamble.
"GUARANTOR CHARTER DOCUMENTS" is defined in Section 3.01(a).
"GUARANTOR COMMON SHARES" is defined in Section 1.06.
"GUARANTOR PREFERRED SHARES" is defined in Section 3.02(a).
"GUARANTOR 1999 FORM 10-K" is defined in Section 3.01(b).
"GUARANTOR SEC DOCUMENTS" is defined in Section 3.05.
"2000 GUARANTOR BALANCE SHEET" is defined in Section 3.08.
"HSR ACT" is defined in Section 2.05(c).
"INDEMNIFIED PARTIES" is defined in section 5.06(b).
"INTELLECTUAL PROPERTY ASSETS" is defined in Section 2.19(a).
"IRS" is defined in Section 2.11(b).
"ISO" is defined in Section 2.11(c).
"KNOWLEDGE" is defined in Section 8.03.
"MATERIAL ADVERSE EFFECT" is defined in Section 2.01(b).
"MATERIALS OF ENVIRONMENTAL CONCERN" is defined in Section 2.17(e).
"MEETING AVERAGE SHARE PRICE" is defined in Section 7.03(b).
"MERGER" is defined in the preamble.
"MERGER CONSIDERATION" is defined in Section 1.07(b).
"MERGER SUB" is defined in the preamble.
"NON-U.S. MONOPOLY LAWS" is defined in Section 2.05(c).
"NYBCL" is defined in the preamble.
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"NYSE" is defined in Section 1.06(a).
"PARENT" is defined in the preamble.
"PARENT DISCLOSURE SCHEDULE" is defined in Section 3.01(b).
"PBGC" is defined in Section 2.11(b).
"PERSON" is defined in Section 8.03.
"PROXY STATEMENT PROSPECTUS" is defined in Section 2.13(a).
"REGISTRATION STATEMENT" is defined in Section 2.13.
"SEC" is defined in Section 2.03.
"SECURITIES ACT" is defined in Section 2.05(c).
"SERIES PREFERRED STOCK" is defined in Section 2.03.
"SHARE" is defined in the preamble.
"SUBSIDIARY DOCUMENTS" is defined in Section 2.02.
"SUPERIOR PROPOSAL" is defined in Section 4.02(a).
"SURVIVING CORPORATION" is defined in Section 1.01.
"SURVIVING COMPANY PREFERRED STOCK" is defined in Section 1.06(a)(ii).
"TAX" is defined in Section 2.16(b).
"TAX RETURN" is defined in Section 2.16(b).
"TERMINATING BREACH" is defined in Section 7.01(h).
"TERMINATING CHANGE" is defined in Section 7.01(g).
"TERMINATING MISREPRESENTATION" is defined in Section 7.01(f).
"TERMINATION NOTICE" is defined in Section 7.01(j).
"THIRD PARTY" is defined in Section 4.02(a).
"THIRD PARTY INTELLECTUAL PROPERTY ASSETS" is defined in Section 2.19(c).
ARTICLE I
THE MERGER
Section 1.01 THE MERGER. (a) At the Effective Time, and subject to and
upon the terms and conditions of this Agreement and the NYBCL, Merger Sub shall
be merged with and into the Company, the separate corporate existence of Merger
Sub shall cease, and the Company shall continue as the surviving corporation
(hereinafter sometimes referred to as the "SURVIVING CORPORATION").
Section 1.02 EFFECTIVE TIME. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01, as promptly as practicable (and in any event within
two business days) after the satisfaction or waiver of the conditions set forth
in Article VI, the parties hereto shall cause the Merger to be consummated by
filing a properly executed agreement or certificate of merger as contemplated by
the NYBCL (the "CERTIFICATE OF MERGER"), together with any required related
certificates, with the Secretary of State of the State of New York, in such form
as required by, and executed in accordance with the relevant provisions of, the
NYBCL; provided, however, that, unless the parties shall agree otherwise, if the
Average Share Price is less than the Floor Price and
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Parent delivers a Termination Notice, the Merger shall not be consummated prior
to the fourth business day following the Closing Conditions Satisfaction Date.
The Merger shall become effective at the time of such filing or at such later
time, which will be as soon as reasonably practicable, specified in the
Certificate of Merger (the "EFFECTIVE TIME"). Prior to such filing, a closing
shall be held at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third
Avenue, New York, NY, unless another time or place is agreed to in writing by
the parties hereto, for the purpose of confirming the satisfaction or waiver, as
the case may be, of the conditions set forth in Article VI.
Section 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the NYBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.04 CERTIFICATE OF INCORPORATION; BYLAWS. (a) At the Effective
Time, the Restated Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation of the Surviving Corporation;
PROVIDED, HOWEVER, that at the Effective Time, Article Ninth of the Certificate
of Incorporation of the Surviving Corporation shall be amended to read in its
entirety: "The number of directors of the Corporation, exclusive of directors,
if any, to be elected by holders of 4% Cumulative Preferred Stock or the holders
of one or more series of Series Preferred Stock pursuant to the provisions of
Paragraph 2 of Section (a) or Paragraph 3 of Section (b), respectively of
ARTICLE THIRD herein, shall not be less than three nor more than nine."; and
Article Tenth and Article Eleventh of the Certificate of Incorporation of the
Company shall be deleted.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
Section 1.05 DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
Section 1.06 EFFECT ON SECURITIES, ETC. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any securities of the Company:
(a) CONVERSION OF SECURITIES. (i) Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares to be canceled
pursuant to Section 1.06(b)) shall be converted, subject to Sections 1.06
(e) and (f), into the right to receive from Parent that number of fully paid and
nonassessable common shares of Guarantor, par value U.S. $0.20 per share (the
"GUARANTOR COMMON SHARES") equal to the Exchange Ratio.
For purposes of this Agreement:
"AVERAGE SHARE PRICE" means the average (rounded to the nearest 1/10,000) of
the Daily Per Share Prices for the five consecutive trading days ending on the
trading day immediately preceding the date (the "CLOSING CONDITIONS SATISFACTION
DATE") on which all the conditions (excluding conditions that, by their terms,
cannot be satisfied until immediately prior to the Effective Time, so long as it
is reasonably apparent that such conditions will be able to be satisfied at or
prior to the Effective Time) set forth in Article VI shall have been satisfied
or waived.
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"DAILY PER SHARE PRICE" for any trading day means the volume-weighted
average (rounded to the nearest 1/10,000) of the per share selling price of
Guarantor Common Shares for that day, as reported on the Composite Transaction
Tape of the NYSE.
"EXCHANGE RATIO" means $47.50 divided by the Average Share Price, subject to
adjustment as provided in Section 7.01(j).
"NYSE" means the New York Stock Exchange.
(ii) Each issued and outstanding share of the Company Preferred Stock shall
from and after the Effective Time, represent a fully paid and non-assessable
share of 4% Cumulative Preferred Stock of the Surviving Corporation, par value
$100 per share (the "SURVIVING COMPANY PREFERRED STOCK").
(b) CANCELLATION. Each Share held in the treasury of the Company and each
Share owned by Guarantor, Parent, Merger Sub or any direct or indirect,
wholly-owned subsidiary of the Company or Guarantor 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) STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN. At the Effective Time,
all options or rights ("COMPANY STOCK OPTIONS") to purchase Company Common Stock
then outstanding, whether under (i) the Company's 1973 Stock Option Plan, as
amended, (ii) the Company's 1981 Stock Option Plan, as amended, (iii) the
Company's Directors' Stock Option Plan, (iv) the Company's Equity Incentive
Plan, (iv) the Company's Nellcor Incorporated 1994 Equity Incentive Plan or
(vi) otherwise (together, the "COMPANY OPTION PLANS"), shall be treated in
accordance with Section 5.11 of this Agreement. Rights outstanding under the
Company's Employee Stock Purchase Plan or any similar U.S. or non-U.S. plan (the
"COMPANY ESPP") shall be treated as set forth in Section 5.11 of this Agreement.
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, $0.01 par
value per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for 700,000 issued, fully
paid and nonassessable shares of common stock, par value $1.00 per share, of the
Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO ETC. If, during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Guarantor or the Company shall occur, including by
reason of any reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, or any stock dividend thereon with a record
date during such period, the Exchange Ratio, Floor Price, the Merger
Consideration and any other amounts payable pursuant to the Merger or otherwise
pursuant to this Agreement shall be appropriately adjusted.
(f) FRACTIONAL SHARES. No certificates or scrip representing less than one
Guarantor 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"). In lieu of any such
fractional share, each holder of Shares who would otherwise have been entitled
to a fraction of a Guarantor Common Share upon surrender of Certificates for
exchange shall be paid upon such surrender (and after taking into account all
certificates surrendered by such holder) cash (without interest) in an amount
equal to such fraction multiplied by the Average Share Price.
Section 1.07 EXCHANGE OF SHARES. (a) EXCHANGE AGENT. Parent shall cause to
be supplied to or for such bank or trust company as shall be designated by
Parent and shall be reasonably acceptable to the Company (the "Exchange Agent"),
in trust for the benefit of the holders of Company Common Stock, as needed for
exchange and payment in accordance with this Section 1.07 through the Exchange
Agent, certificates evidencing the Guarantor Common Shares issuable pursuant to
Section 1.06(a), the cash to be paid in lieu of fractional shares in exchange
for outstanding Shares pursuant to Section 1.06(f) and the cash or other
property in respect of any dividends or other distributions payable pursuant to
Section 1.07(c).
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Each certificate representing shares of Company Preferred Stock after the
Effective Time shall represent an equal number of Surviving Company Preferred
Stock without any additional action by the holder thereof.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will cause the Exchange Agent to mail to each holder of
record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify), and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing Guarantor Common Shares and cash in
lieu of fractional shares. Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive in exchange therefor
solely (A) certificates evidencing that number of whole Guarantor Common Shares
which such holder has the right to receive in accordance with Section 1.06(a) in
respect of the Shares formerly evidenced by such Certificate and (B) cash in
respect of fractional shares as provided in Section 1.06(f) (the Guarantor
Common Shares and cash in respect of fractional shares 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 the Depository Trust Company.
The holder of such Certificate, upon its exchange for Guarantor Common
Shares, shall also receive any dividends or other distributions to which such
holder is entitled pursuant to Section 1.07(c). Certificates surrendered 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 and
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
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends or other distributions, to evidence the
ownership of the number of full Guarantor Common Shares, and cash in respect of
fractional shares, into which such Shares shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Guarantor Common Shares with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
Guarantor Common Shares such holder is entitled to receive until the holder of
such Certificate shall surrender such Certificate in accordance with the
provisions of Section 1.07(b). Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole Guarantor 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 Guarantor Common Shares.
(d) TRANSFERS OF OWNERSHIP. If any certificate for Guarantor Common Shares
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it will be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for Guarantor
Common Shares in any name other than that of the registered holder of the
Certificate surrendered, or establish to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
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(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 payable pursuant to this
Agreement to any holder of Company Common Stock, and from any cash dividends or
other distributions that the holder is entitled to receive under
Section 1.07(c), such amounts as the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or non-United States tax law. To the extent that
amounts are so withheld by the Exchange Agent, such portion of the Merger
Consideration and other such amounts payable under Section 1.07(c) that are
withheld shall be treated for all purposes of this Agreement as having been
received by the holder of the Shares in respect of which such deduction and
withholding was made by the Exchange Agent.
(g) UNDISTRIBUTED CERTIFICATES. Any portion of the certificates evidencing
the Guarantor Common Shares, the cash to be paid in lieu of fractional shares
and the cash or other property in respect of dividends or other distributions
supplied to the Exchange Agent which remains undistributed to the holders of the
Certificates for one year after the Effective Time shall be delivered to Parent,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Section 1.07 shall thereafter look only to Parent for payment
of their claim for Merger Consideration and any dividends or distributions with
respect to Guarantor Common Shares.
Section 1.08 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
Section 1.09 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
Section 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such Merger
Consideration and any dividends or other distributions as may be required
pursuant to this Article I; PROVIDED, HOWEVER, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Guarantor, Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
Section 1.11 TAX CONSEQUENCES. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
Section 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take, and cause their affiliates to 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
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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.
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; MATERIAL ADVERSE
EFFECT
(a) Each of the Company and its subsidiaries is an entity duly organized,
validly existing and (to the extent the concept of good standing exists in the
applicable jurisdiction) in good standing under the laws of the jurisdiction of
its organization 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 subsidiaries is
included as an exhibit to the Company's 1999 Annual Report on Form 10-K. A list
of all subsidiaries of the Company together with the jurisdiction of
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 the case of any non-U.S. subsidiaries, without
giving effect to any qualifying share ownerships of less than 1%) is contained
in Section 2.01 of the written disclosure schedule previously delivered by the
Company to the Parent (the "COMPANY DISCLOSURE SCHEDULE"). Except as set forth
in Section 2.01 of the Company Disclosure Schedule or the Company SEC Documents,
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
$5 million 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.
(b) When used in connection with the Company or any of its subsidiaries or
Guarantor or any of its subsidiaries, as the case may be, the term "MATERIAL
ADVERSE EFFECT" means any change, effect or circumstance that is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operations of the Company
and its subsidiaries or Guarantor and its subsidiaries, as the case may be, in
each case taken as a whole; PROVIDED, HOWEVER, that the following shall be
excluded from the definition of Material Adverse Effect and from any
determination as to whether a Material Adverse Effect has occurred or may occur:
changes, effects or circumstances, that are applicable to (A) the healthcare,
pharmaceutical or medical device industries generally, (B) the United States
securities markets generally, (C) personnel and other changes customarily
attendant to transactions of the type contemplated by this Agreement and
(D) changes in economic, regulatory or political conditions generally.
(c) The failure of a representation or warranty to be true and correct,
either individually or together with the failure of other representations or
warranties to be true and correct, or the failure to perform an obligation,
agreement or covenant shall be deemed to have a Material Adverse Effect if
(x) the business, assets (including intangible assets), financial condition, or
results of operations of the Company and its subsidiaries, or of Guarantor and
its subsidiaries, as the case may be, in each case taken as a whole, are or are
reasonably likely to be materially worse than if such representation or warranty
had been true and
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correct or such obligation, agreement or covenant had been performed, excluding,
however, the effects of the changes specified in the proviso set forth in
Section 2.01(b), (y) in the case of the Company, such representation or warranty
materially misstates the capitalization of the Company and/or its subsidiaries
or (z) the failure of such representation or warranty to be true and correct or
the failure to perform such obligation, agreement or covenant materially and
adversely affects the ability of the Company or Parent, Merger Sub and Guarantor
as the case may be, timely to consummate the transactions contemplated by this
Agreement and, in the case of Guarantor, the Guarantee.
Section 2.02 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
heretofore made available to Parent a complete and correct copy of its Restated
Certificate of Incorporation and By-laws as amended to date (the "COMPANY
CHARTER DOCUMENTS"), and will make available to Parent, as promptly as
practicable, the Certificate of Incorporation and By-laws (or equivalent
organizational documents) of each of its subsidiaries reasonably requested by
Parent (the "SUBSIDIARY DOCUMENTS"). 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 By-laws or equivalent organizational documents, except for
violations of the documents which do not and are not reasonably likely to
materially interfere with the operations of such entity.
Section 2.03 CAPITALIZATION. The authorized capital stock of the Company
consists of 300,000,000 shares of the Company Common Stock and 1,400,000 shares
of Series Preferred Stock, par value $1.00 per share (the "SERIES PREFERRED
STOCK") and 100,000 shares of 4% Cumulative Preferred Stock, par value $100 per
share (the "COMPANY PREFERRED STOCK"). As of June 26, 2000, (i) 67,224,459
shares of the Company Common Stock were issued and outstanding, all of which are
duly authorized, validly issued, fully paid and nonassessable (excluding
treasury shares which are issued but not outstanding all of which are not
entitled to vote) and none of which were issued in violation of preemptive or
similar rights, (ii) no shares of the Company Common Stock were held by
subsidiaries of the Company, (iii) 8,028,813 shares of the Company Common Stock
were reserved for existing grants and 4,983,240 shares were reserved for future
grants pursuant to the Company Stock Option Plans, and (iv) 1,479,882 shares of
the Company Common Stock were reserved and available for future issuance
pursuant to the Company ESPP. There are 98,330 shares of the Company Preferred
Stock issued and outstanding, all of which are validly issued, fully paid and
nonassessable and there are no outstanding shares of Series Preferred Stock.
Except as set forth in Section 2.03 of the Company Disclosure Schedule, no
change in such capitalization has occurred since June 26, 2000, except for
changes resulting from the exercise or termination of Company Stock Options or
transactions pursuant to the Company ESPP. Except as set forth in Section 2.01,
this Section 2.03 or Section 2.11 or in Section 2.03 or Section 2.11 of the
Company Disclosure Schedule or the Company SEC Documents, 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 the 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 reports, schedules, forms, statements and other documents (the "COMPANY SEC
DOCUMENTS") filed by the Company with the Securities and Exchange Commission
("SEC") since June 30, 1997 and prior to the date of this Agreement, there are
no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of the
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 Documents,
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
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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.
(a) 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 adoption of this Agreement by the
Company's shareholders in accordance with the NYBCL and the Company Charter
Documents and the filings and recording of appropriate merger documents as
required by the NYBCL).
(b) Assuming the accuracy of the representations and warranties in
Section 3.14, the provisions of Section 912 of the NYBCL and Article 11,
Section 1 of the Company's Restated Certificate of Incorporation will not apply
to the Merger.
(c) As of the date hereof, the Board of Directors of the Company has
unanimously (i) determined that it is advisable and in the best interest of the
Company's shareholders for the Company to enter into this Agreement and to
consummate the Merger upon the terms and subject to the conditions of this
Agreement, (ii) adopted this Agreement in accordance with the applicable
provisions of the NYBCL, and (iii) recommended the adoption of this Agreement by
holders of the Company Common Stock and directed that this Agreement be
submitted for consideration by the Company's shareholders at the meeting of the
shareholders of the Company to consider the Merger Agreement (the "COMPANY
SHAREHOLDERS MEETING"). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Guarantor, Parent and Merger Sub of this Agreement and/or the
Guarantee hereof, as applicable, constitutes a legal, valid and binding
obligation of the Company, enforceable against each of them in accordance with
its terms.
Section 2.05 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS. (a) Subject to the following sentence, 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 a
party or by which any of them is bound; (ii) all contracts, agreements,
commitments or other understandings or arrangements to which the Company or any
of its subsidiaries is a party or by which any of them or any of their
respective properties or assets are bound or affected, but excluding contracts,
agreements, commitments or other understandings or arrangements entered into in
the ordinary course of business and involving, in the case of any such contact,
agreement, commitment, or other understanding or arrangement, individual
payments or receipts by the Company or any of its subsidiaries of less than
$5,000,000 over the term of such contract, commitment, agreement, or other
understanding or arrangement; and (iii) all agreements which are required to be
filed as "material contracts" with the SEC pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, and the SEC's rules and regulations
thereunder (the "EXCHANGE ACT") but have not been so filed with the SEC. With
regard to agreements for the purchase or sale of raw materials or inventory in
the ordinary course of business and licensing or
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royalty arrangements, the threshold referred to in clause (ii) of the preceding
sentence shall be 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 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) under, 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, or cause any, termination, amendment,
redemption, 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, credit facility, 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, administrative or regulatory authority, domestic or
foreign (each, a "GOVERNMENTAL AUTHORITY"), except (i) for applicable
requirements, if any, of the Securities Act of 1933, as amended, and the rules
and regulations of the SEC thereunder (the "SECURITIES ACT"), the Exchange Act,
state securities laws, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"), and the NYSE; 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 ("ENVIRONMENTAL, HEALTH AND SAFETY
LAWS"); and the filing and recordation of appropriate merger or other documents
as required by the NYBCL, (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or materially delay consummation of the Merger, or otherwise
prevent or materially delay the Company from performing its material obligations
under this Agreement, or 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 Documents,
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. To the Company's knowledge,
no investigation by any Governmental Authority with respect to the Company or
any of its subsidiaries is pending or threatened, except as disclosed in the
Company SEC Documents.
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(b) Except as disclosed in Section 2.06(b) of the Company Disclosure
Schedule or the Company SEC Documents, 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 the 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 Documents 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 reports, schedules, forms, statements and other documents (including all
exhibits to the Company SEC Documents) required to be filed with the SEC since
June 30, 1997. Except as disclosed in Section 2.07 of the Company Disclosure
Schedule or the Company SEC Documents, such reports, schedules, forms,
statements and other documents (i) were prepared in all material respects in
accordance with the applicable 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 2.07 of the
Company Disclosure Schedule, 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 Documents 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 Documents), 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 Documents,
since June 30, 1999, 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 Charter Documents; (iii) any
material changes to any Company Employee Plans or other employee benefit
arrangements or agreements, including the establishment of any new such plans,
arrangements or agreements or the extension of coverage under any such plans,
arrangements or agreements to new groups of employees or other individuals;
(iv) any damage to, destruction or loss of any asset of the Company (whether or
not covered by insurance) that would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect; (v) any material change by the
Company in its accounting methods, principles or practices (other than as
required by GAAP subsequent to the date of this Agreement); or (vi) 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 Documents,
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, 2000, included in the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (the "2000 BALANCE
SHEET"), (b) incurred in the ordinary course of business and not required under
GAAP to be reflected on the 2000 Balance Sheet, (c) incurred since March 31,
2000 in the ordinary course of business, (d) incurred in connection with this
Agreement or the Merger or the other
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transactions contemplated hereby, or (e) 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
Documents or arising out of the transactions contemplated by this Agreement,
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of the Company, 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 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) "COMPANY
EMPLOYEE PLANS" shall mean all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), all "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), all non-U.S. non-statutory plans and all other U.S. and non-U.S.
non-statutory 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 a subsidiary of the
Company. The term "Affiliate Plan" shall mean any other such plan, program or
arrangement with respect to which the Company or any subsidiary of the Company
has or could reasonably be expected to have any liability, either as a member of
a controlled group of corporations or trades or businesses as defined under
section 414 of the Code and comparable provisions of ERISA, or by contractual
arrangement. Section 2.11(a) of the Company Disclosure Schedule lists each
Company Employee Plan and each Affiliate Plan. With respect to each plan
included on the Company Disclosure Schedule or the Employee Benefits
Supplemental Disclosure Schedule the Company shall indicate (i) whether such
plan includes a change in control provision, (ii) with respect to employee
benefit welfare plans, whether such plan is fully insured or has a stop-loss
insurance contract and (iii) with respect to the employees set forth on
Exhibit 2.11-A, whether any such employees have entered into an agreement or a
provision of an agreement prohibiting or restricting such employee from
accepting employment or otherwise engaging in activity that is in competition
with the business of the Company or its subsidiaries (other than with respect to
the use of confidential information or trade secrets) after the termination of
such individual's employment with the Company. Notwithstanding the foregoing,
the Company may omit from the Disclosure Schedule and instead include in
Section 2.11 of an employee benefits supplement to the Company Disclosure
Schedule (the "Employee Benefits Supplemental Disclosure Schedule") the
following information, that, because of time constraints, the Company, in good
faith, is not able to list in Section 2.11(a) of the Company Disclosure Schedule
by the date of this Agreement: any non-material employee benefit welfare plan,
any non-U.S. plan and any agreements relating to leased employees or independent
contractors, as well as the information specified in (ii) above. The Employee
Benefits Supplemental Disclosure Schedule shall be delivered to Parent within
30 days after the date hereof. With respect to each Company Employee Plan listed
in Section 2.11(a) of the Company Disclosure Schedule the Company has provided
or made available to Parent (or will provide or make available to Parent as
promptly as practicable, but in no event later than 30 days after the date
hereof) and with respect to each Company Employee Plan to be listed in
Section 2.11(a) of the Employee Benefits Supplemental Disclosure Schedule, the
Company will upon or as soon as practicable following delivery of the Employee
Benefits Supplemental Disclosure Schedule provide or make available to Parent
copies of (i) each such written Company Employee Plan (or a written description
in English of any Company Employee Plan which is not written and with respect to
Company Employee Plans covering 50 or more participants, a written description
in English of any such plan that is written in a language other than English)
and any related trust agreement, insurance and other contract (including a
policy), the most
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recently prepared summary plan description, summary of material modifications
the substance of which is not already incorporated in the corresponding summary
plan description, and communications distributed to plan participants that could
reasonably be expected to materially modify the terms of any Company Employee
Plan, whether through information actually conveyed in the communication or a
failure to convey information, (ii) the three most recent annual reports on
Form 5500 series (or equivalent filing with respect to non-U.S. plans), with
accompanying schedules and attachments, filed with respect to each U.S. or
non-U.S. non-statutory Company Employee Plan required to make such a filing,
(iii) the most recent actuarial valuation, if any, for each Company Employee
Plan and Affiliate Plan subject to Title IV of ERISA and all non-U.S. pension
and post-retirement welfare plans, (iv) the latest reports which have been filed
with the Department of Labor ("DOL") to satisfy the alternative method of
compliance for pension plans for certain selected employees pursuant to DOL
regulation Section 2520.104-23 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 or Affiliate 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
or its subsidiary or affiliate terminates, other than as required by
Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA
(hereinafter, "COBRA"), or any similar state laws (ii) none of the Company
Employee Plans or Affiliate Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA and no non-U.S. Company Employee Plan is a
multiemployer plan and no Company Employee Plan or Affiliate Plan has incurred
any withdrawal liability that remains unsatisfied and the transactions
contemplated herein will not result in the assessment of any withdrawal
liability that could reasonably be expected to have a Material Adverse Effect;
(iii) neither the Company nor any of its subsidiaries has engaged in a
transaction with respect to any Company Employee Plan or Affiliate Plan which
could reasonably be expected to subject the Company or any subsidiary, directly
or indirectly, to a tax, penalty or other liability for prohibited transactions
under ERISA or Section 4975 of the Code and to the knowledge of the Company no
other party in interest or disqualified person (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has engaged in any such transaction that, in
either case, could reasonably be expected to have a Material Adverse Effect;
(iv) neither the Company or any of its subsidiaries, nor any executive of the
Company or one of its subsidiaries as fiduciary of the Company Employee Plans
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 liability to the Company or any subsidiary thereof and to the knowledge of
the Company no other fiduciary of any Company Employee Plan has committed such a
breach, in either case that could reasonably be expected to have a Material
Adverse Effect; (v) all Company Employee Plans and, to the knowledge of the
Company, all Affiliate Plans have been established and maintained substantially
in accordance with their terms and have been operated in compliance in all
material respects with the requirements of applicable law (including, but not
limited to, to the extent applicable, the 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) except for
such failure as could not reasonably be expected to have a Material Adverse
Effect; (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 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 contributions required to be made with respect to any
Company 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) except to the
extent any failure to have made such a contribution on or before its due date
could not reasonably be expected to result in a current or future material
liability of the Company; (viii) with respect to each Company Employee Plan
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and Affiliate 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 with respect
to which the Company or one of its subsidiaries has any material outstanding
liability and no Company action has occurred that resulted or will result in any
adverse liability for any non-U.S. Company Employee Plan that reasonably could
be expected to have a Material Adverse Effect; (ix) none among the Company or
any subsidiary thereof has incurred (or could reasonably be expected to incur)
any liability that remains unsatisfied, or reasonably expects to incur any
liability, under Title IV of ERISA with respect to either a Company Employee
Plan or an Affiliate Plan 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) that, in either case, could reasonably be
expected to have a Material Adverse Effect; (x) other than routine claims for
benefits made in the ordinary course of the operation of the Company Employee
Plans, there are no pending, nor to the Company's knowledge, any threatened,
claims, investigations or causes of action with respect to any U.S. or non-U.S.
non-statutory Company Employee Plan or Affiliate Plan, whether made by a
participant or beneficiary of such a plan, a governmental agency or otherwise,
against the Company or any subsidiary of the Company, any Company director,
officer or employee, any Company Employee Plan, or Affiliate Plan or any
fiduciary of a Company Employee Plan or Affiliate Plan that could reasonably be
expected to have a Material Adverse Effect; and (xi) each Company Employee Plan
that provides for the provision of post-termination or post-retirement welfare
benefits may by its terms be amended or terminated at any time subject to
applicable law.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list of each current or former employee, consultant, officer or
director of the Company or any of its subsidiaries who holds (i) any option to
purchase the Company Common Stock as of the date hereof, together with the
number of shares of the 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 incentive stock option within
the meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of
such option; (ii) any shares of Company Common Stock that are restricted or
subject to performance-based vesting; and (iii) any other award or right
(including share units), directly or indirectly, to receive Company Common Stock
(or any other unit of Company equity) or any amount payable by reference to
Company Common Stock (or any other unit of Company equity), together with the
number of shares of Company Common Stock (or any other unit of Company equity)
subject to such right. To the extent that, because of time constraints, the
Company, in good faith, is unable to make available the detailed information
required in this Section 2.11(c) as of the date hereof, it may be included in
Section 2.11(c) of the Employee Benefits Supplemental Disclosure Schedule if the
aggregate number of shares of Company Common Stock that are covered by
outstanding options as of the date of this agreement has been disclosed to
Parent.
(d) To the extent not already included and so labeled in Section 2.11(a) or
such other section of the Company Disclosure Schedule as is specifically
referenced in Section 2.11(d) of the Company Disclosure Schedule,
Section 2.11(d) of the Company Disclosure Schedule sets forth a true and
complete (i) list of all material outstanding agreements with any consultants
who provide services to the Company or any of its subsidiaries; (ii) list of all
material agreements with respect to the services of independent contractors or
leased employees who provide services to the Company or any of its subsidiaries,
whether or not they participate in any of the Company Employee Plans;
(iii) description of any situation in which a material portion of the workforce
of a component of the Company or its subsidiaries, whether such component is a
subsidiary, unit, work location, line of business or otherwise, is composed of
non-traditional employees, whether consultants, independent contractors or
otherwise, which description shall include, if applicable, representative
samples of agreements with such non-traditional employees and (iv) list of all
worker council agreements of the Company or any of its subsidiaries with or
relating to its employees. To the extent that, because of time constraints, the
Company, in good faith, is unable to make available the information relating to
consultants, leased employees and independent contractors as of the date hereof,
it may be included in Section 2.11(d) of the Employee Benefits Supplemental
Disclosure Schedule and
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provided to the Company within 30 days of the date hereof, PROVIDED, HOWEVER,
that any such agreements that include change in control provisions shall be
included in Section 2.11(d) of the Company Disclosure Schedule and provided as
of the date hereof, to the extent not otherwise so identified in another section
of the Disclosure Schedule. Section 2.11(d) of the Company Disclosure Schedule
shall indicate which, if any, of such agreements includes a change in control
provision.
(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 or, to the knowledge of the Company, an Affiliate Plan, that is
subject to Title IV of ERISA (each, a "DEFINED BENEFIT PLAN"); (ii) no 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) to the knowledge of the Company, since
the date of the most recent actuarial report prepared by each such plan's
actuary with respect to that plan's most recently completed fiscal year, nothing
has occurred that would materially adversely affect the funding status of such
plan; (iv) all applicable premiums required to be paid to the PBGC with respect
to the Defined Benefit Plans have been paid, except for such failures as could
not reasonably be expected to have a Material Adverse Effect; and (v) no facts
or circumstances exist with respect to any Defined Benefit Plan which would give
rise to a material lien on the assets of the Company under Section 4068 of ERISA
or otherwise.
(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule, (i) the Company does not have any outstanding incentive stock options
within the meaning of section 422 of the Code, (ii) the Company has not granted
or awarded any shares of Company Common Stock that, as of the Effective Time,
will be unvested or subject to a repurchase option, risk of forfeiture or other
condition providing that such shares may be forfeited or repurchased by the
Company upon any termination of the shareholder's employment, directorship or
other relationship with the Company or any of its subsidiaries, and (iii) since
March 31, 2000, neither the Company nor any of its subsidiaries has announced,
proposed or agreed to any increase in benefits under any Company Employee Plan
(or to the creation or implementation of new benefits or new plans), any change
in employee coverage which would materially increase the expense of maintaining
any Company Employee Plan, or the grant of any Company Stock Options or other
equity based awards or benefits.
(g) Except as set forth in Section 2.11(g) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement,
either alone or in combination with another event, will not (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or bonus payments or otherwise) becoming due to any current or
former director, officer, employee or consultant of the Company, (ii) result in
any increase in the amount of compensation or benefits payable in respect of any
director, officer, employee or consultant of the Company, (iii) accelerate the
vesting or timing of payment of any benefits or compensation payable in respect
of any director, officer, employee or consultant of the Company.
(h) Each non-U.S. Company Employee Plan has been maintained in material
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 Employee Plan was intended to so
qualify) and has been maintained in good standing with applicable regulatory
authorities except for such a failure as could not reasonably be expected to
have a Material Adverse Effect. Except as set forth on Section 2.11(h) of the
Company Disclosure Schedule, to the knowledge of the Company, since the date of
the most recent actuarial report prepared by each such plan's actuary with
respect to that plan's most recently completed fiscal year, nothing has occurred
that would materially adversely affect the funding status of such plan.
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(i) There are no complaints, charges or claims against the Company or any of
its subsidiaries pending or to the knowledge of the Company threatened to be
brought by or filed with any governmental authority based on, arising out of, in
connection with or otherwise relating to the classification of any individual by
the Company as an independent contractor or "leased employee" (within the
meaning of section 414(n) of the Code) rather than as an employee, and no
conditions exist under which the Company or any of its subsidiaries could incur
any such liability that in each case could reasonably be expected to have a
Material Adverse Effect.
Section 2.12 EMPLOYMENT AND LABOR MATTERS. Except as set forth in
Section 2.11(b) or Section 2.12 of the Company Disclosure Schedule or the
Company SEC Documents or in each case as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:
(a) The Company is in compliance with all applicable U.S. and non-U.S. laws,
agreements and contracts relating to employment practices, terms and conditions
of employment, and the employment of former, current, and prospective employees,
independent contractors and "leased employees" (within the meaning of
Section 414(n) of the Code) of the Company including all such U.S. and non-U.S.
laws, agreements and contracts relating to wages, hours, collective bargaining,
employment discrimination, immigration, disability, civil rights, human rights,
fair labor standards, occupational safety and health, workers' compensation, pay
equity, wrongful discharge and violation of the potential rights of such former,
current, and prospective employees, independent contractors and leased
employees, and has timely prepared and filed all appropriate forms (including
Immigration and Naturalization Service Form I-9) required by any relevant
governmental authority.
(b) 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.
(c) Neither the Company nor any of its subsidiaries is a party to any U.S.
or non-U.S. collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or its subsidiaries, nor, to the
knowledge of the Company, are there any activities or proceedings of any labor
union to organize any employees of the Company or any of its subsidiaries.
(d) Neither the Company nor any of its subsidiaries is in breach of any U.S.
or non-U.S. collective bargaining agreement or labor union contract, or 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.
Section 2.13 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
(a) Subject to the accuracy of the representations of Parent and Merger Sub
in Section 3.10:
(i) the information supplied by the Company for inclusion in the
Registration Statement 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 not misleading; and
(ii) the information supplied by the Company for inclusion in the proxy
statement/prospectus to be sent to the shareholders of the Company in
connection the Company Shareholders Meeting (such proxy statement/prospectus
as amended or supplemented is referred to herein as the "PROXY
STATEMENT/PROSPECTUS") will not, on the date the Proxy Statement/Prospectus
(or any amendment thereof or supplement thereto) is filed with the SEC or
first mailed to shareholders or at the time of the Company Shareholders
Meeting, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact required to
be stated therein or necessary in order to make the statements made therein
not false or misleading, or necessary to correct any statement in any
earlier
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communication with respect to the solicitation of proxies for the Company
Shareholders Meeting which has become false or misleading.
(b) 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.
(c) The Proxy Statement/Prospectus shall comply in all material respects
with the requirements of the Securities Act and the Exchange Act.
(d) Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Guarantor, Parent or Merger
Sub which is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Proxy Statement/Prospectus.
Section 2.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement or as set forth in Section 2.14 of the Company Disclosure Schedule or
the Company SEC Documents, to 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, or
restricting any transactions (including payment of dividends and distributions)
between the Company and its subsidiaries, except for any prohibition or
impairment as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
Section 2.15 TITLE TO PROPERTY. Except as set forth in Sections 2.15 and
2.19(b) of the Company Disclosure Schedule or the Company SEC Documents, the
Company and each of its subsidiaries have good title to all of their owned real
properties and other owned assets, free and clear of all liens, charges and
encumbrances, except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially interfere with the
present use of the property affected thereby or which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and except for liens which secure indebtedness reflected in the 2000 Balance
Sheet; and, to the knowledge of the Company, all leases pursuant to which the
Company or any of its subsidiaries lease from others material amounts of real or
personal property, are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of the Company, under
any of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 2.16 TAXES. Except as set forth in Section 2.16 of the Company
Disclosure Schedule:
(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
required to be filed by it, and has paid, collected or withheld, or caused to be
paid, collected or withheld, all material amounts of Taxes required to be paid,
collected or withheld, other than such Taxes for which adequate reserves in the
2000 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, to the knowledge of the Company, threatened audits or
investigations for or relating to any material liability in respect of any
Taxes, and the Company has not been notified in writing of any proposed material
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 2000
Balance Sheet have been established or which are being contested in good faith).
Neither the Company nor any of its subsidiaries has executed any waivers or
extensions of any applicable statute of limitations to assess any material
amount of Taxes. There are no outstanding
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requests by the Company or any of its subsidiaries for any extension of time
within which to file any material Tax Return or within which to pay any material
amounts of Taxes shown to be due on any Tax Return. To the best knowledge of the
Company, there are no liens for material amounts of Taxes on the assets of the
Company or any of its subsidiaries except for statutory liens for current Taxes
not yet due and payable. There are no outstanding powers of attorney enabling
any party to represent the Company or any of its subsidiaries with respect to
Taxes. 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 and except for provisions in agreements for
the divestiture of subsidiaries, assets or business lines of the Company or its
subsidiaries that require the Company or its subsidiaries (as applicable) to
indemnify a purchaser or purchaser group for material amounts of Taxes of the
Company or its subsidiaries (as applicable) for periods prior to the closing
date under any such agreements or for material amounts of Taxes of the Company
or its subsidiaries (as applicable) in the nature of sales or similar Taxes
incurred as a consequence of any such divestiture transactions), or is a party
to any tax sharing agreement or any other agreement providing for payments by
the Company or any of its subsidiaries with respect to Taxes.
(b) For purposes of this Agreement, the term "TAX" shall mean any United
States federal, 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.
Section 2.17 ENVIRONMENTAL MATTERS. (a) Except as set forth in
Section 2.17(a) to the Company Disclosure Schedule or in the Company SEC
Documents or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, the operations and properties of
the Company and its subsidiaries are in compliance with the Environmental Laws,
which compliance includes the possession by the Company and its subsidiaries of
all permits and governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
(b) Except as set forth in Section 2.17(b) of the Company Disclosure
Schedule or in the Company SEC Documents 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 knowledge of the Company, threatened against the Company or any of
its subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed.
(c) Except as set forth on Section 2.17(c) of the Company Disclosure
Schedule or in the Company SEC Documents, 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 the
Company or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries
have retained or assumed, except for such Environmental Claims that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d)
of the Company Disclosure Schedule or the Company SEC Documents, (i) there are
no off-site locations where the Company or any of its subsidiaries has stored,
disposed or arranged for the disposal of Materials of Environmental Concern
which have been listed on
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the National Priority List, CERCLIS, or state Superfund site list, and the
Company and its subsidiaries have not been notified that any of them is a
potentially responsible party at any such location; (ii) there are no
underground storage tanks located on property owned or leased by the Company or
any of its subsidiaries; (iii) there is no friable asbestos containing material
contained in or forming part of any building, building component, structure or
office space owned, leased or operated by the Company or any of its
subsidiaries; and (iv) there are no polychlorinated biphenyls ("PCBS") or
PCB-containing items contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries.
(e) For purposes of this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice (in each case in writing or, if not in writing, to
the knowledge of the Company) by any person or entity alleging potential
liability (including potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location, whether or not owned or
operated by the Company or any of its subsidiaries.
(ii) "ENVIRONMENTAL LAWS" means, as they exist on the date hereof, all
applicable United States federal, state, local and non-United States laws,
regulations, codes and ordinances, relating to pollution or protection of
human health (as relating to the environment or the workplace) and the
environment (including ambient air, surface water, ground water, land
surface or sub-surface strata), including laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern,
including, but not limited to Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.,
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et
seq., Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.,
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq.,
the Clean Air Act, 33 U.S.C. Section 7401 et seq., the Clean Water Act, 33
U.S.C. Section1251 et seq., each as may have been amended or supplemented,
and any applicable environmental 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
and by-products, asbestos-containing materials, PCBs, and any other
chemicals, pollutants, substances or wastes, in each case regulated under
any Environmental Law.
Section 2.18 BROKERS. No broker, finder or investment banker, other than
Goldman Sachs & Co. and J.P. Morgan & Co. (the "COMPANY FINANCIAL ADVISORS"),
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 a
complete and correct copy of all agreements between the Company and each of the
Company Financial Advisors pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereunder.
Section 2.19 INTELLECTUAL PROPERTY. As used herein, the term "INTELLECTUAL
PROPERTY ASSETS" shall mean all worldwide intellectual property rights,
including, without limitation, patents, trademarks, service marks, copyrights,
and registrations and applications therefor, trade names, Internet domain names
know-how, trade secrets, computer software programs and proprietary information.
As used herein, "COMPANY INTELLECTUAL PROPERTY ASSETS" shall mean the
Intellectual Property Assets used or owned by the Company or any of its
subsidiaries.
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(a) 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 the Company
Intellectual Property Assets that are used in and are material to the business
of the Company and its subsidiaries as currently conducted, without infringing
or violating the rights of others.
(b) Except as disclosed in Section 2.19(c) of the Company Disclosure
Schedule or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of the Company, are threatened by any person with
respect to the Company Intellectual Property Assets, or (ii) are, to the
knowledge of the Company, currently pending or threatened by any person with
respect to the Intellectual Property Assets of a third party (the "THIRD PARTY
INTELLECTUAL PROPERTY ASSETS") to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Assets by
or through the Company or any of its subsidiaries.
(c) Except as disclosed in Section 2.19(d) of the Company Disclosure
Schedule or as would not reasonably be expected to have a Material Adverse
Effect, to the knowledge of the Company, there are no valid grounds for any bona
fide claim to the effect that the manufacture, sale, licensing or use of any
product, system or method now used, sold or licensed or proposed for use, sale
or license by the Company or any of its subsidiaries infringes any Third Party
Intellectual Property Assets.
(d) 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, material common law trademarks,
material trade dress and material slogans, and all trade names owned by the
Company and/or each of its subsidiaries worldwide; (iii) all copyright
registrations and copyright applications owned by the Company and/or each of its
subsidiaries worldwide; (iv) all Internet domain name registrations by the
Company and/or its subsidiaries worldwide; and (v) to the Company's knowledge,
all licenses owned by the Company and/or each of its subsidiaries in which the
Company and/or each of its subsidiaries is (A) a licensor with respect to any of
the patents, trademarks, service marks, trade names, copyrights or Internet
domain names listed in Section 2.19(d) of the Company Disclosure Schedule which
are material to the Company or (B) a licensee of any other person's patents,
trade names, trademarks, service marks, copyrights or Internet domain names
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(d)(v) 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, Internet domain names and licenses set
forth in Section 2.19(d) 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.
(e) To the knowledge of the Company, except as set forth in
Section 2.19(d)(v) or 2.19(e) of the Company Disclosure Schedule or the Company
SEC Documents: (i) each patent, trademark or service mark registration and
copyright registration of the Company and/or each of its subsidiaries is valid
and subsisting and (ii) each material license of the Company Intellectual
Property Assets listed on Section 2.19(e) of the Company Disclosure Schedule is
valid, subsisting and enforceable, except as would not reasonably be expected to
have a Material Adverse Effect.
(f) Except as set forth in Section 2.19(f) of the Company Disclosure
Schedule, to the knowledge of the Company, 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 have a Material
Adverse Effect.
Section 2.20 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 2.20 of the Company Disclosure Schedule or the Company SEC Documents or
for events as to which the amounts involved do
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not, in the aggregate, exceed $300,000, since the Company's proxy statement
dated September 14, 1999, no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction pursuant to Item 404
of Regulation S-K promulgated by the SEC.
Section 2.21 INSURANCE. Except as disclosed in Section 2.21 of the Company
Disclosure Schedule or the Company SEC Documents, 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 adequate
coverage for all normal risks incident to the business of the Company and its
subsidiaries and their respective properties and assets, and are in character
and amount appropriate for the businesses conducted by the Company, except as
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
Section 2.22 PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
Section 2.22(a) of the Company Disclosure Schedule or the Company SEC Documents,
to the Company's knowledge, there is no claim, pending or threatened, against
the Company or any of its subsidiaries for injury to person or property of
employees or any third parties suffered as a result of the sale of any product
or performance of any service by the Company or any of its subsidiaries,
including claims arising out of the defective or unsafe nature of its products
or services, which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.22(b) of the Company Disclosure
Schedule or the Company SEC Documents, there is no pending or, to the knowledge
of the Company, threatened recall or investigation of any product sold by the
Company, which recall or investigation would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 2.23 OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has been advised by the Company Financial Advisors to the effect that in
each Financial Advisor's opinion, as of the date of this Agreement, the Merger
Consideration to be received by the holders of the Shares is fair from a
financial point of view to such holders, in each case assuming no adjustment of
the Exchange Ratio.
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. (a) Each of
Guarantor, Parent and Merger Sub is a corporation duly incorporated, validly
existing and in good standing (to the extent the concept of good standing exists
in the applicable jurisdiction) under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority necessary to
own, lease and operate the properties it purports to own, lease and operate and
to carry on its business as now conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not reasonably be expected to have a Material Adverse Effect. Each of
Guarantor, Parent and Merger Sub 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 make 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. Parent has heretofore
made available to the Company true and complete copies of Guarantor's Memorandum
of Association and Bye-Laws, as amended to date (the "GUARANTOR CHARTER
DOCUMENTS").
(b) Each subsidiary of Guarantor is an entity duly organized, validly
existing and in good standing (to the extent the concept of good standing exists
in the applicable jurisdiction) under the laws of its jurisdiction of
organization, has the requisite corporate or other power and authority necessary
to own, lease and operate the properties it purports to own, lease and operate
and to carry on its business as now
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conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not reasonably be expected to
have a Material Adverse Effect. Each subsidiary of Guarantor is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified or in good standing would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 3.01(b) of the written disclosure schedule previously delivered by
Parent to the Company (the "PARENT DISCLOSURE SCHEDULE"), all of Guarantor's
"significant" subsidiaries, as defined in Regulation S-X, and their respective
jurisdictions of incorporation are identified in Guarantor's Annual report on
Form 10-K for the fiscal year ended September 30, 1999 (the "GUARANTOR 1999
FORM 10-K") or in any of Guarantor's quarterly reports on Form 10-Q filed with
respect to any quarter of the 2000 fiscal year.
Section 3.02 CAPITALIZATION. (a) The authorized capital stock of Guarantor
consists of 2,500,000,000 Guarantor Common Shares and 125,000,000 Preference
Shares, par value $1.00 per share ("GUARANTOR PREFERRED SHARES"). As of June 9,
2000, (i) 1,724,274,982 Guarantor Common Shares were issued and outstanding, all
of which are duly authorized, validly issued, fully paid and non-assessable and
none of which were issued in violation of preemptive or similar rights, (ii) no
Guarantor Preferred Shares were outstanding and (iii) no more than 10,000,000
Guarantor Common Shares and no Guarantor Preferred Shares were held by
subsidiaries of Guarantor. As of May 31, 2000, 99,834,866 Guarantor Common
Shares were reserved for issuance upon exercise of stock options issued under
Guarantor's stock option plans.
(b) Except (i) as set forth in Section 3.02(a), (ii) for changes since
June 9, 2000 resulting from the exercise of stock options or the grant of stock
based compensation to directors or employees or (iii) for changes resulting from
the issuance of stock in connection with a merger or other acquisition or
business combination determined by Guarantor's Board of Directors to be in the
best interests of Guarantor and its shareholders, there are no outstanding
(x) shares of capital stock or voting securities of Guarantor, (y) securities of
Guarantor convertible into or exchangeable for shares of capital stock or voting
securities of Guarantor or (z) options or other rights to acquire from Guarantor
or other obligation of Guarantor to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of Guarantor. There are no outstanding obligations of Guarantor or
any of its subsidiaries to repurchase, redeem or otherwise acquire any of its
equity securities.
(c) The Guarantor Common Shares to be delivered as Merger Consideration have
been duly authorized and, when issued and delivered in accordance with the terms
of this Agreement, will have been validly issued and will be fully paid and
nonassessable, and the issuance thereof is not subject to any preemptive or
other similar right.
Section 3.03 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) The execution,
delivery and performance by Guarantor, Parent and Merger Sub of this Agreement,
the execution, delivery and performance by Guarantor of the Guarantee and the
consummation by Guarantor, Parent and Merger Sub of the transactions
contemplated hereby and thereby, as applicable, are within the respective
corporate powers of Guarantor, Parent and Merger Sub and have been duly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered and constitutes a valid and binding agreement of
each of Parent and Merger Sub enforceable against each of them in accordance
with its terms, and the Guarantee has been duly and validly executed and
delivered and constitutes a valid and binding agreement of Guarantor enforceable
against it in accordance with its terms.
(b) At a meeting duly called and held, or by written consent in lieu of
meeting, the respective Boards of Directors of Parent and Merger Sub, as
applicable, have (i) unanimously determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests of
Parent, Merger Sub and their respective shareholders, as applicable, and
(ii) unanimously adopted this Agreement and approved the transactions
contemplated hereby. At a meeting duly called and held, Guarantor's Board of
Directors has (i) determined that the Guarantee and the transactions
contemplated thereby are fair to
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and in the best interests of Guarantor's shareholders and (ii) approved the
Guarantee and the transactions contemplated thereby and the issuance of the
Guarantor Common Shares to be delivered to the Company shareholders in
connection with the Merger.
Section 3.04 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. (a) The
execution, delivery and performance by Parent and Merger Sub of this Agreement,
the execution, delivery and performance by Guarantor of the Guarantee and the
consummation by Guarantor, Parent and Merger Sub of the Merger and the other
transactions contemplated hereby and thereby, as applicable, require no action
by or in respect of, or filing with, any Governmental Authority, other than
(i) the filing of a Certificate of Merger with respect to the Merger with the
Secretary of State of the State of New York, (ii) compliance with any applicable
requirements of the HSR Act and applicable Non-U.S. Monopoly Laws,
(iii) compliance with any applicable requirements of the Securities Act, the
Exchange Act, any applicable state securities laws, the NYSE, the Bermuda Stock
Exchange and the London Stock Exchange, (iv) compliance with Environmental,
Health and Safety Laws and (v) any actions or filings the absence of which would
not be reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect or materially impair the ability of Parent and Merger Sub to
consummate the Merger and the other transactions contemplated by this Agreement
or the ability of Guarantor to fulfill its obligations under the Guarantee.
(b) The execution, delivery and performance by Parent and Merger Sub of this
Agreement, the execution, delivery and performance by Guarantor of the Guarantee
and the consummation by Guarantor, Parent and Merger Sub of the transactions
contemplated hereby and thereby, as applicable, do not and will not
(i) contravene, conflict with, or result in any violation or breach of any
provision of the Guarantor Charter Documents or the certificate of incorporation
or by-laws of Parent or Merger Sub (or equivalent organizational documents),
(ii) assuming compliance with the matters referred to in Section 3.04(a),
contravene, conflict with or result in a violation or breach of any provision of
any law, rule, regulation, judgment, injunction, order or decree applicable to
Guarantor or any of its subsidiaries, (iii) require any consent or other action
by any Person under, constitute a default under, or cause or permit the
termination, cancellation, acceleration or other change of any right or
obligation or the loss of any benefit to which Guarantor or any of its
subsidiaries is entitled under any provision of any Material Agreement or
instrument binding upon Guarantor or any of its subsidiaries or any material
license, franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Parent and
its subsidiaries; provided that, for purposes of this subsection 3.04(b)(iii),
"Material Agreement" shall mean any agreement identified in Guarantor's 1999
Form 10-K or in any of Guarantor's quarterly reports on Form 10-Q filed with
respect to any quarter of its 2000 fiscal year or any agreement entered into
since the date of Guarantor's latest quarterly report on Form 10-Q that would be
required to be so identified in Guarantor's Annual Report on Form 10-K for the
year ended September 30, 2000 or (iv) result in the creation or imposition of
any encumbrance on any material asset of Guarantor or any of its subsidiaries.
Section 3.05 COMPLIANCE. Except as disclosed in Section 3.05 of the Parent
Disclosure Schedule or the reports, schedules, forms, statements and other
documents (the "GUARANTOR SEC DOCUMENTS") filed by the Guarantor with the SEC
since September 30, 1997 and prior to the date of this Agreement, neither
Guarantor 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 Guarantor 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 Guarantor or any of its subsidiaries is
a party or by which Guarantor 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. To Parent's knowledge, no
investigation by any Governmental Authority with respect to Guarantor or any of
its subsidiaries is pending or threatened, except as disclosed in the Guarantor
SEC Documents.
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Section 3.06 SEC FILINGS; FINANCIAL STATEMENTS. (a) Guarantor has filed
with the SEC all reports, schedules, forms, statements and other documents
(including all exhibits to the Guarantor SEC Documents) required to be filed
with the SEC since September 30, 1997. Except as disclosed in Section 3.06 of
the Parent Disclosure Schedule or the Guarantor SEC Documents, such reports,
schedules, forms statements and other documents were prepared in all material
respects in accordance with the applicable requirements of the Securities Act or
the Exchange Act, as the case may be; and 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. With the exception of Tycom Ltd. which may
become obligated to file such reports, none of the Guarantor's subsidiaries is
required to file with the SEC periodic reports pursuant to the Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Guarantor SEC Documents were
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
Guarantor SEC Documents), and each fairly presents in all material respects, the
consolidated financial position of Guarantor and its consolidated subsidiaries
as at the respective dates thereof and the consolidated results of 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 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 3.07 of the Parent Disclosure Schedule or the Guarantor SEC Documents,
since September 30, 1999, the business of Guarantor and its subsidiaries has
been conducted 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
Guarantor Charter Documents; (iii) any damage to destruction or loss of any
assets of Guarantor (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 Guarantor 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 Guarantor,
except in the ordinary course of business.
Section 3.08 NO UNDISCLOSED LIABILITIES. Except as set forth in
Section 3.08 of the Parent Disclosure Schedule or the Guarantor SEC Documents,
neither Guarantor nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in Guarantor's unaudited balance sheet (including any
related notes thereto) as of March 31, 2000 included in Guarantor's Quarterly
Report on Form 10-Q for the fiscal period ended March 31, 2000 (the "2000
GUARANTOR BALANCE SHEET"), (b) incurred in the ordinary course of business and
not required under GAAP to be reflected on the 2000 Guarantor Balance Sheet,
(c) incurred since March 31, 2000 in the ordinary course of business,
(d) incurred in connection with this Agreement, or the Merger or the other
transactions contemplated hereby, or (e) which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 3.09 ABSENCE OF LITIGATION. Except as set forth in Section 3.09 of
the Parent Disclosure Schedule or the Guarantor SEC Documents or arising out of
the transactions contemplated by this Agreement, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Guarantor,
threatened against Guarantor or any of its subsidiaries, or any properties or
rights of Guarantor or any of its subsidiaries, before any court, arbitrator or
Governmental Authority, that would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
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Section 3.10 REGISTRATION STATEMENT; PROXY
STATEMENT/PROSPECTUS. (a) Subject to the accuracy of the representations of the
Company in Section 2.13:
(i) 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 Guarantor Common Shares to be delivered to the
shareholders of the Company by Parent in connection with the Merger will be
registered with the SEC, shall not, at the respective times the Registration
Statement (including any amendments or supplements thereto) is filed with
the SEC or 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 not misleading; and
(ii) the information supplied by Guarantor, Parent or Merger Sub for
inclusion in the Proxy Statement/Prospectus will not, on the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is
filed with the SEC or first mailed to shareholders or at the time of the
Company Shareholders Meeting, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material
fact required to be stated therein or necessary in order to make the
statements made therein not false or misleading, or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders Meeting which has become false or
misleading.
(b) 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.
(c) The Registration Statement and the Proxy Statement/Prospectus shall
comply in all material respects with the requirements of all applicable laws,
including the Securities Act and the Exchange Act and the rules and regulations
thereunder.
(d) 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 3.11 BROKERS. Other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Bear, Stearns & Co. Inc., there is no investment banker,
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of Parent or Guarantor who might be entitled to any fee or
commission from Parent, Guarantor or any of their respective affiliates in
connection with the transactions contemplated by this Agreement.
Section 3.12 OWNERSHIP OF PARENT AND MERGER SUB. Merger Sub is a direct,
wholly-owned subsidiary of Parent, and Parent is a direct, wholly-owned
subsidiary of Guarantor.
Section 3.13 NO PRIOR ACTIVITIES. (a) Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement.
(b) Except for obligations or liabilities incurred by Merger Sub in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Merger Sub has not
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
Section 3.14 OWNERSHIP INTEREST IN THE COMPANY. Other than by reason of
this Agreement or the transactions contemplated hereby, neither Parent nor any
of its affiliates is an "interested shareholder" of
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the Company, as that term is defined in either of Section 912 of the NYBCL and
Article Eleventh of the Company's Certificate of Incorporation.
Section 3.15 NO VOTE REQUIRED. No vote of the shareholders of Guarantor is
required by law, Guarantor's Charter Documents or otherwise in order for Parent
and Merger Sub to consummate the Merger and the other transactions contemplated
hereby, as applicable.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.01 CONDUCT OF BUSINESS BY THE COMPANY. 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 Parent, which, in the case clauses (c), (d)(iv), (e), (f),
(h) or (i), will not be unreasonably withheld or delayed:
(a) amend or otherwise change the Company 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 the issuance of shares of Company Common
Stock issuable pursuant to Company Stock Options outstanding on the date hereof
or pursuant to the Company ESPP as in effect on the date hereof or pursuant to
the Company's 401(k) Plan as in effect on the date hereof; or the issuance to
newly hired employees of Company Stock Options pursuant to the Company Stock
Option Plans with respect to an aggregate of not more than 25,000 shares of
Company Common Stock, provided that (i) such options become exercisable in a
manner consistent with the Company's past practice, PROVIDED, HOWEVER, that such
options will not become exercisable as a result of the transactions contemplated
herein and will not in any other manner be affected as a result of the
transactions contemplated herein (except as provided herein), (ii) no one
individual shall receive options with respect to more than 3,000 shares of
Company Common Stock, and (iii) the exercise price per share of such options is
the fair market value of a share of Company Common Stock as of the day such
option is granted);
(c) sell, pledge, dispose of or encumber any assets of the Company or any of
its subsidiaries (except for (i) sales of assets in the ordinary course of
business and in a manner consistent with past practice, (ii) dispositions of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $5 million 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
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subsidiary of the Company may declare and pay a dividend to its parent that is
not a cross-border dividend, and except that the Company may declare and pay
prior to the Effective Time quarterly cash dividends of up to $0.17 per share
consistent with past practice, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) except (A) as required by the terms of any security as in
effect on the date hereof and set forth in Section 4.01(d) of the Company
Disclosure Schedule and (B) to the extent necessary to effect withholding to
meet minimum tax withholding obligations in connection with the exercise of any
Company Stock Option, 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, (iv) settle, pay or discharge
any claim, suit or other action brought or threatened against the Company with
respect to or arising out of a shareholder equity interest in the Company, or
(v) make any cross-border capital contributions to a subsidiary;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof other than those listed on Section 4.01(e) of the Company Disclosure
Schedule; (ii) incur any indebtedness for borrowed money, except for
(A) commercial paper in the ordinary course of business and consistent with past
practice, in an amount not to exceed $550 million at any one time outstanding,
(B) to the extent not used to support outstanding commercial paper pursuant to
clause (A) above, borrowings and reborrowings under the Company's or any of its
subsidiaries' existing credit facilities listed on Section 4.01(e) of the
Company Disclosure Schedule not in excess of $50 million, and (C) other
borrowings not in excess of $25 million in the aggregate; (iii) 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 (but not loans or advances to employees of the
Company to fund the exercise price of Company Stock Options or otherwise to
purchase shares of the Company Common Stock) except to the extent required by
contracts in effect on the date hereof; or (iv) authorize any capital
expenditures or purchases of fixed assets which are, in the aggregate, in excess
of $30 million over the next 12 month period; or (v) enter into or materially
amend any contract, agreement, commitment or arrangement to effect any of the
matters prohibited by this Section 4.01(e);
(f) except as set forth in Section 4.01(f) of the Company Disclosure
Schedule, (i) increase the compensation or severance payable or to become
payable to its directors, officers, employees or consultants, except for
increases in salary or wages of employees of the Company or its subsidiaries,
including in connection with promotions, in accordance with past practices; or
(ii) grant any severance or termination pay (except to make payments required to
be made under obligations existing on the date hereof in accordance with the
terms of such obligations) to, or enter into or amend any employment or
severance agreement, with any current or prospective employee of the Company or
any of its subsidiaries, except for new hire employees in the ordinary course of
business whose annual salary does not exceed $150,000 and whose severance
benefits do not exceed one time annual salary; or (iii) establish, adopt, enter
into or amend any collective bargaining agreement, Company Employee Plan,
including, without limitation, any plan that provides for the payment of bonuses
or incentive compensation, trust, fund, policy or arrangement for the benefit of
any current or former directors, officers, employees or consultants or any of
their beneficiaries, except, in each case, as may be required by law or as would
not result in a material increase in the cost of maintaining such collective
bargaining agreement, Company Employee Plan, trust, fund, policy or arrangement.
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(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) in excess
of $5 million in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Documents filed prior to the date of
this Agreement or incurred in the ordinary course of business and consistent
with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (i) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement 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 below) (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 the Board of Directors of the Company concludes in
good faith after consulting with a nationally recognized investment banking firm
would, if consummated, constitute a Superior Proposal (as defined below) not
solicited in violation of this Agreement, provided that such third party has
executed an agreement with confidentiality provisions substantially similar to
those then in effect between the Company and a subsidiary of Guarantor or
(ii) subject to compliance with the other terms of this Section 4.02, including
Sections 4.02(c) and (d), considering and negotiating a bona fide Acquisition
Proposal that the Board of Directors of the Company concludes in good faith
after consulting with a nationally recognized investment banking firm would, if
consummated, constitute a Superior Proposal not solicited in violation of this
Agreement; PROVIDED, HOWEVER, that, as to each of clauses (i) and (ii), the
Board of Directors of the Company reasonably determines in good faith (after due
consultation with independent counsel, which may be Simpson Thacher & Bartlett)
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, "ALTERNATIVE TRANSACTION" means any of
(i) a transaction pursuant to which any person (or group of persons) other than
Parent or its affiliates (a "THIRD PARTY") acquires or would acquire more than
25% of the outstanding shares of any class of equity securities of the Company,
whether from the Company or pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party acquires or would acquire more than 25% 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 25% of the fair market value of all the assets of the
Company and its subsidiaries, taken as a whole, immediately prior to
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such transaction, or (iv) any other consolidation, business combination,
recapitalization or similar transaction involving the Company or any
"significant subsidiary" (as defined in Rule 1-02 under Regulation S-X) of the
Company, 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.
For purposes of this Agreement, "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 Company Common Stock 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 (after consultation with a financial advisor of nationally
recognized reputation) to be more favorable from a financial point of view to
its shareholders than the Merger and the transactions contemplated by this
Agreement taking into account at the time of determination any changes to the
financial terms of this Agreement proposed by Parent; 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 notify Parent promptly (but in no event later than
24 hours) after receipt of any Acquisition Proposal, or any modification of or
amendment to any Acquisition Proposal, or any request for nonpublic information
relating to the Company or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing, and 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 keep Parent fully
informed, on a current basis, of any material changes in the status and any
material changes or modifications in the material terms of any such Acquisition
Proposal, indication or request. The Company shall also immediately notify
Parent, 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 Simpson Thacher & Bartlett) 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 adoption by such Board
of Directors of this Agreement or its approval of the Merger.
(d) The Company and the Board of Directors of the Company shall not enter
into any agreement (other than a confidentiality agreement entered into not in
violation of Section 4.02(a)) with respect to, or otherwise approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or
Alternative Transaction, unless this Agreement has been terminated in accordance
with its terms.
(e) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its shareholders a position required by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to its
shareholders required by applicable law, rule or regulation or by the NYSE.
(f) 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
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any of the foregoing. The Company agrees not to release any third party from the
confidentiality and standstill provisions of any agreement to which the Company
is a party.
(g) The Company shall ensure that the officers and directors of the Company
and the Company 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. It is understood that any violation of the restrictions
set forth in this Section 4.02 by any officer or director of the Company or the
Company subsidiaries and any investment banker, attorney or other advisor or
representative of the Company shall be deemed to be a breach of this
Section 4.02 by the Company.
Section 4.03 CONDUCT OF BUSINESS BY GUARANTOR. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Parent covenants and agrees that, except
as set forth in Section 4.03 of the Parent Disclosure Schedule or unless the
Company shall otherwise agree in writing, Parent shall take all action necessary
so that (i) Guarantor 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 Guarantor or its
subsidiaries in contemplation of the Merger, and (ii) Guarantor 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 the Guarantor 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 Guarantor may
declare and pay a dividend to its parent, and except that Guarantor may declare
and pay quarterly cash dividends on the Guarantor Common Shares of up to $0.0125
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.
(a) As promptly as practicable after the execution of this Agreement, the
Company shall, and Parent shall cause Guarantor to, 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 Guarantor of all information
required to be contained therein, the Company shall, and Parent shall, and shall
cause Guarantor to, file with the SEC, the definitive Proxy Statement/Prospectus
and the Registration Statement (or, if the Registration Statement has been
previously filed, an amendment thereto) relating to the adoption of this
Agreement by the Company's shareholders as set forth in Section 2.04(c) and the
other transactions contemplated hereby, and to the payment of the Merger
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Consideration in the form of Guarantor Common Shares pursuant to this Agreement,
and shall use all reasonable efforts to cause the Registration Statement to
become effective, and the Company shall mail the Proxy Statement/Prospectus to
its shareholders as soon thereafter as practicable. Parent shall also cause
Guarantor to take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under the applicable state securities
laws in connection with the issuance of Guarantor Common Shares in connection
with the Merger, and the Company shall furnish to Guarantor all information
concerning the Company and the holders of capital stock of the Company as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Proxy Statement/Prospectus. No filing of, or
amendment or supplement to, or correspondence to the SEC or its staff with
respect to the Proxy Statement/Prospectus will be made by the Company or
Guarantor, without providing the other party a reasonable opportunity to review
and comment thereon. Parent will advise the Company, promptly after Guarantor
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Guarantor Common Shares
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Registration Statement or
comments thereon and responses thereto or requests by the SEC for additional
information. The Company will advise Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy
Statement/Prospectus or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective Time
any information relating to the Company or Parent, or any of their respective
affiliates, officers or directors, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to either of the
Registration Statement or the Proxy Statement/Prospectus so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the shareholders of the Company.
(b) Parent shall cause Guarantor to include as an exhibit to the
Registration Statement tax opinions of PricewaterhouseCoopers LLP and Simpson
Thacher & Bartlett, in form and substance reasonably satisfactory to Parent and
to the Company, on the basis of customary facts, representations, warranties,
covenants and assumptions set forth in such opinions, to the effect that the
Merger will be treated for United States federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code that is not
subject to Section 367(a)(1) of the Code pursuant to Treasury Regulation
Section 1.367(a)-(3)(c) (other than with respect to Company shareholders who are
or will be "five-percent transferee shareholders" within the meaning of Treasury
Regulation Section 1.367(a)-3(c)(5)(ii)), and that each of Guarantor, Parent,
Merger Sub and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code.
(c) The Proxy Statement/Prospectus shall include the recommendation of the
Board of Directors of the Company in favor of adoption of this Agreement.
Notwithstanding anything to the contrary set forth in this Section 5.01 or
Section 5.02, the Company shall not be obligated to take the action set forth in
the preceding sentence of this Section 5.01(c) or to take the actions set forth
in the second sentence of Section 5.02 to the extent that the Board of Directors
of the Company determines (after due consultation with independent counsel,
which may be Simpson Thacher & Bartlett) that such action is, or is reasonably
likely that such action is, or is reasonably likely to be, inconsistent with the
proper discharge of its fiduciary duties.
Section 5.02 COMPANY SHAREHOLDERS MEETING. The Company shall establish a
record date for, duly call, give notice of, convene and hold the Company
Shareholders Meeting as promptly as practicable for the purpose of voting upon
the adoption of this Agreement, and the Company shall use all reasonable
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efforts to cause the Proxy Statement/Prospectus to be mailed to the Company's
shareholders and to hold the Company Shareholders Meeting as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. The Company shall solicit from its shareholders proxies in favor
of adoption of this Agreement and shall take all other reasonable action
necessary or advisable to secure the vote or consent of shareholders in favor of
such adoption.
Section 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements (from
which such party shall use reasonable efforts to be released), the Company shall
(and shall cause its subsidiaries to) and Parent shall take all action necessary
such that Guarantor and its subsidiaries shall (i) afford to the officers,
employees, accountants, counsel and other representatives of the other,
reasonable access, during the period after the execution and delivery of this
Agreement and prior to the Effective Time, to the properties, books, contracts,
commitments and records of the Company or the Guarantor, as applicable, and,
(ii) during such period, furnish promptly to the other all information
concerning the business, properties and personnel of the Company or the
Guarantor, as applicable, 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 Company's
or Guarantor's, as applicable, business, properties and personnel as either
Parent or the Company may reasonably request. Such information shall be kept
confidential in accordance with the terms of the confidentiality agreements,
dated May 22 and June 14, 2000 (the "CONFIDENTIALITY AGREEMENTS"), between
Guarantor and the Company.
Section 5.04 CONSENTS; APPROVALS.
(a) Subject to Section 5.08, the Company and Parent shall each use its
reasonable best efforts (and Parent shall cause Guarantor to use its reasonable
best efforts) to obtain and to cooperate with each other in order to obtain all
consents, waivers, approvals, authorizations or orders (including, without
limitation, all United States and non-United States governmental and regulatory
rulings and approvals), and the Company and Parent shall make (and Parent shall
cause Guarantor to make) all filings (including, without limitation, all filings
with United States and non-United States governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby. The Company and Parent shall furnish (and
Parent shall cause Guarantor to 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.
(b) The Company shall, and Parent shall cause Guarantor to, notify the other
promptly upon the receipt of any comments from the SEC or its staff or any other
government officials in connection with any filing made pursuant hereto and of
any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the Proxy
Statement/Prospectus or any other filings or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement/Prospectus, the Merger or any other filing. The
Company shall, and Parent shall cause Guarantor to, cause all documents that it
is responsible for filing with the SEC or other regulatory authorities under
Section 5.01 and this Section 5.04 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Registration Statement, the Proxy
Statement/Prospectus or any other filing, the Company will, or Parent will cause
Guarantor to, as the case may be, promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff or any other government
officials and/or mailing to shareholders of Company, such amendment or
supplement.
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Section 5.05 AGREEMENTS WITH RESPECT TO AFFILIATES. The Company shall
deliver to Parent, prior to the date the Registration Statement becomes
effective under the Securities Act, a letter identifying all persons who, at the
Effective Time, are anticipated to be "affiliates" of the Company for purposes
of Rule 145 under the Securities Act. 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 Effective Time a written
agreement in connection with restrictions on affiliates under Rule 145 under the
Securities Act in a form mutually agreeable to the Company and Parent.
Section 5.06 INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Company 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 Certificate of Incorporation
or By-laws, indemnify and hold harmless, each present and former director,
officer or employee of the Company or any of its subsidiaries (collectively, the
"INDEMNIFIED PARTIES") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
(x) arising out of or pertaining to the transactions contemplated by this
Agreement or (y) otherwise with respect to any acts or omissions occurring at or
prior to the Effective Time, to the same extent as provided in the Company
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 Effective Time. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) any counsel retained by the
Indemnified Parties for any period after the Effective Time shall be reasonably
satisfactory to the Surviving Corporation, (ii) after the Effective Time, the
Surviving Corporation shall pay the reasonable fees and expenses of such
counsel, promptly after statements therefor are received, provided that the
Indemnified Parties shall be required to reimburse the Surviving Corporation for
such payments in the circumstances and to the extent required by the Company
Charter Documents, any applicable contract or agreement or applicable law, 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 parties under such agreements being referred to as the "COVERED
PERSONS") with the Company's directors and officers existing at or before the
Effective Time, provided such agreements do not violate 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 with an insurance and indemnification
policy that provides coverage for events occurring at or prior to the Effective
Time
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(the "D&O INSURANCE") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 200% of
the annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much such coverage as possible for such amount.
(e) From and after the Effective Time, Parent shall unconditionally
guarantee the timely payment of all funds owing by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section 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,
the Indemnified Parties and the Covered Persons, shall be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the Indemnified Parties and the Covered Persons.
Section 5.07 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would reasonably be expected to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate, or (ii) any
failure of the Company, Parent or Merger Sub, as the case may be, materially to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and provided further
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 7.01(h) unless the failure to give such notice
results in material prejudice to the other party.
Section 5.08 FURTHER ACTION/TAX TREATMENT.
(a) Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all reasonable efforts to, and Parent shall cause Guarantor to
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
include the obligation by Guarantor to agree to divest, abandon, license, hold
separate or take similar action with respect to any assets (tangible or
intangible) which are not material to Guarantor or the Company (but shall not
include any obligation by Guarantor to agree to divest, abandon, license, hold
separate or take similar action with respect to any material assets (tangible or
intangible) of Guarantor or the Company). For this purpose, assets shall be
deemed not to be material to the Company, if they account for no more than 2% of
the total revenues of the Company and its subsidiaries taken as a whole, or to
Guarantor, if they account for no more than 2% of the total revenues of
Guarantor's Healthcare Group.
(b) Each of Parent, Merger Sub and the Company shall, and Parent shall cause
Guarantor to, use its reasonable best efforts to cause the Merger to qualify,
and will not (both before and after the Effective Time) take any actions, or
fail to take any action, which could reasonably be expected to prevent the
Merger from qualifying as a reorganization under the provisions of
Section 368(a) of the Code that is not subject to Section 367(a)(1) of the Code
pursuant to Treasury Regulation Section 1.367(a)-(3)(c) (other than with respect
to Company shareholders who are or will be "five-percent transferee
shareholders" within the meaning of Treasury Regulation
Section 1.367(a)-3(c)(5)(ii)). Parent shall, and shall cause the Surviving
Corporation and Guarantor to, report, to the extent required by the Code or the
regulations thereunder, the Merger for income tax purposes as a reorganization
within the meaning of Section 368 of the Code. Each of Parent and the Company
shall make, and shall cause their affiliates to make, such representations,
warranties and covenants as shall be requested reasonably in the circumstances
by
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PricewaterhouseCoopers LLP and Simpson Thacher & Bartlett in order for such
firms to render their opinions referred to in Section 5.01(b).
Section 5.09 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing (and in the case of Parent, before Guarantor
issues) any press release or making any written public statement with respect to
the Merger or this Agreement and shall not issue any such press release or make
any such public statement without the prior consent of the other party, which
shall not be unreasonably withheld; PROVIDED, HOWEVER, that either party may,
without the prior consent of the other, issue such press release or make such
public statement as may upon the advice of counsel be required by law or the
rules and regulations of the NYSE if it has used all reasonable efforts to
consult with the other party.
Section 5.10 GUARANTOR COMMON SHARES.
(a) Parent shall obtain from Guarantor, and shall cause Guarantor to
transfer to Parent, the Guarantor Common Shares to be delivered by Parent to the
holders of Company Common Stock in the Merger.
(b) Parent shall cause Guarantor to use its best efforts to cause the
Guarantor Common Shares to be delivered by Parent to the holders of Company
Common Stock in the Merger or to be issued upon exercise of the Adjusted Options
to be listed, upon official notice of issuance, on the NYSE prior to the
Effective Time.
(c) Parent shall cause Guarantor on a timely basis to take any action
required to be taken under non-U.S. securities laws in connection with the
issuance of Guarantor Common Shares in the Merger.
Section 5.11 STOCK OPTIONS AND ESPP. (a) At the Effective Time, Parent
shall take all necessary action to provide that each outstanding Company Stock
Option, whether or not then exercisable, will continue to have, and be subject
to, the same terms and conditions set forth in the relevant Company Stock Option
Plan and applicable award agreement immediately prior to the Effective Time;
PROVIDED, HOWEVER, that all Company Stock Options, other than Company Stock
Options granted after the date hereof, shall be 100% vested and exercisable at
the Effective Time, except that, (i) each Company Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole Guarantor Common Shares equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such the
Company Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded to the nearest whole number of Guarantor Common Shares,
(ii) the per share exercise price for the Guarantor Common Shares issuable upon
exercise of such Company Stock Option will be equal to the quotient determined
by dividing the exercise price per share of the Company Common Stock at which
such Company Stock option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded to the nearest whole cent and (iii) Parent
or the Company shall take all necessary actions to enable the holders of such
Company Stock Options to effect a "brokered cashless exercise" of such options
as of the Effective Time or promptly thereafter (each such Company Stock Option,
as modified, an "ADJUSTED OPTION").
(b) Parent will cause Guarantor to take all corporate action necessary to
reserve for issuance a sufficient number of Guarantor Common Shares for delivery
upon exercise of the Adjusted Options and to file a registration statement on
Form S-8 for the Guarantor Common Shares issuable with respect to Adjusted
Options as of or as soon as practicable after the Effective Time and shall
maintain the effectiveness of such registration statement thereafter for so long
as any of such options or other rights remain outstanding.
(c) Beginning on the date hereof, the Company shall not establish any new
employee stock purchase plans or extend the availability of the Company ESPP to
any employees not previously included in the Company ESPP, or, in either case,
implement any decisions to do the same, whether or not such decisions have been
communicated to employees. The Company shall take such action as is necessary to
cause the ending date of the then current offering period under the Company ESPP
to be prior to the Effective Time
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and to terminate such plans as of the Effective Time. All shares of Company
Common Stock under the Company ESPP shall be issued to participants in a manner
such that the shares will be treated as all other shares of Company Common
Stock. Parent shall, to the extent legally feasible, enable employees of the
Company and its subsidiaries to participate in Guarantor's employee stock
purchase plan, in a manner consistent with the current practice of Parent's
affiliates.
Section 5.12 CERTAIN EMPLOYEE BENEFITS.
(a) From the Effective Time through June 30, 2001 (the "BENEFITS
CONTINUATION PERIOD"), the Surviving Corporation shall provide each person who,
as of the Effective Time, is an employee of the Company or any subsidiary of the
Company (a "COMPANY EMPLOYEE") with employee benefits that are comparable in the
aggregate to those provided to such Company Employee immediately prior to the
Effective Time, PROVIDED, HOWEVER, subject to applicable law and contractual
restrictions, that the Surviving Corporation shall have the right to amend any
Company Employee Plans, including without limitation, any retiree welfare
benefit plans or pension benefit plans, in effect as of the Effective Time.
Notwithstanding the foregoing, from the Effective Time through the end of the
Benefits Continuation Period the Surviving Corporation shall maintain severance
plans, policies and programs for the benefit of each Company employee that are
substantially comparable to the severance plans, policies and programs of the
Company as in effect for such employee immediately prior to the Effective Time,
PROVIDED, HOWEVER, that, except as required by contractual obligation, no such
employee shall be entitled to a severance benefit in excess of one year's salary
and one year's continuation of health and welfare benefits.
(b) After the Benefit Continuation Period the Surviving Corporation shall
provide the Company Employees with employee benefits that are comparable in the
aggregate to those provided to similarly situated employees of subsidiaries of
the Guarantor. For the avoidance of doubt, it is understood that the Surviving
Corporation shall have no obligation to provide Company Employees with
post-termination welfare or pension benefits, except to the extent required by
applicable law or contractual agreement.
(c) With respect to the benefits provided pursuant to this Section 5.12,
(i) service accrued by Company Employees during employment with the Company and
its subsidiaries prior to the Effective Time shall be recognized for eligibility
and vesting and, except with respect to defined benefit plans, benefit accrual,
(ii) any and all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under the applicable
Company Employee Plan) and eligibility waiting periods under any group health
plan shall be waived with respect to such Company Employees and their eligible
dependents, and (iii) Company Employees shall be given credit for amounts paid
under a Company Employee Plan during the same period for purposes of applying
deductibles, co-payments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the employee welfare
plans maintained by the Surviving Corporation or the applicable subsidiary of
the Guarantor.
(d) It is expressly agreed that (i) the provisions of Section 5.12 are not
intended to be for the benefit of or otherwise enforceable by any third party,
including, without limitation, any Company Employees and (ii) nothing herein
shall prevent the Surviving Corporation or any other subsidiary of Guarantor
from amending or modifying any employee benefit plan, program or arrangement in
any respect or terminating or modifying the terms and conditions of employment
or other service of any particular employee or any other person.
(e) DEFERRED COMPENSATION. Through the Benefits Continuation Period, the
Surviving Corporation shall continue to maintain the Company's Income Deferral
Plan; PROVIDED that prior to the Effective Time such plan shall be amended to
eliminate the Hypothetical Company Stock Fund and all balances in such Stock
Fund shall be transferred to another fund in the Plan. As of July 1, 2001,
eligible active Company Employees shall be given the opportunity to participate
in and transfer their Income Deferral Plan balances to the Guarantor Deferred
Compensation Plan, the Company's Income Deferral Plan shall be terminated and
any remaining accounts shall be distributed as provided under the Income
Deferral Plan.
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(f) COMMON STOCK OR STOCK UNITS UNDER INCENTIVE COMPENSATION PLANS OR
PROGRAMS. Awards payable in shares of Company Common Stock under any Company
Incentive Compensation Plan, program or agreement not paid out or deferred prior
to the Effective Time shall be converted to an award payable in cash only.
Guarantor will be under no obligation to issue any Guarantor Common Shares
pursuant to any Company Incentive Compensation Plan, program or agreement after
the Effective Time.
Section 5.13 REDEMPTION OF THE SURVIVING PREFERRED STOCK. Promptly
following the Effective Time, the Surviving Corporation shall redeem all of the
outstanding shares of the Surviving Preferred Stock in accordance with the
applicable provisions of the Surviving Corporation's Certificate of
Incorporation, with the redemption proceeds payable out of the Company's assets.
In no event shall Parent or any affiliate thereof (other than a subsidiary of
the Company) reimburse the Surviving Corporation for such redemption payments.
Section 5.14 ACCOUNTANTS LETTERS. Upon reasonable notice from the other,
the Company shall use its best efforts to cause Ernst & Young LLP to deliver to
Parent, and Parent shall use its best efforts to cause PricewaterhouseCoopers to
deliver to the Company, a letter covering such matters as are reasonably
requested by Parent or the Company, as the case may be, and as are customarily
addressed in accountants' "comfort letters."
Section 5.15 COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES. The Company
agrees that it shall use its reasonable commercial efforts to comply promptly
with all requirements of applicable state property transfer laws as may be
required by the relevant state agency and shall take all action necessary to
cause the transactions contemplated hereby to be effected in compliance with
applicable state property transfer laws, except where the failure to so comply
will not materially affect the right to use or enjoy any applicable property
after the Effective Time. The Company, after consultation with Parent, 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 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 prior consent,
which consent shall not be unreasonably withheld or delayed. Parent shall
provide, and shall cause Guarantor to provide, to the Company any assistance
reasonably requested by the Company with respect to such compliance.
Section 5.16 CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time, and the
Company shall be responsible for the payment of all such taxes and fees. In no
event shall Parent or any affiliate thereof (other than a subsidiary of the
Company) reimburse the Company for the payment of such taxes and fees.
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;
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(b) SHAREHOLDER ADOPTION. This Agreement shall have been adopted by the
requisite vote of the shareholders of the Company;
(c) ANTITRUST. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and all
clearances and approvals required to be obtained in respect of the Merger prior
to the Effective Time under any 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, Guarantor or Guarantor's Healthcare
Group;
(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 before any Governmental Authority 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 or court of competent jurisdiction, or
any other legal restraint (i) preventing or seeking to prevent consummation of
the Merger, (ii) prohibiting or seeking to prohibit, or limiting or seeking to
limit, Parent from exercising all material rights and privileges pertaining to
its ownership of the Surviving Corporation or the ownership or operation by
Guarantor 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 Guarantor or any of its subsidiaries
(including the Surviving Corporation and its subsidiaries) to dispose of or hold
separate assets which are material to Guarantor or the Company, as a result of
the Merger or the transactions contemplated by this Agreement; PROVIDED that for
purposes of this Section 6.01(d), assets shall be deemed to be not material to
the Company, if they account for no more than 2% of the total revenues of the
Company and its subsidiaries taken as a whole or to Guarantor, if they account
for no more than 2% of the total revenues of Guarantor's Healthcare Group;
(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. The Company shall have received a written opinion of
Simpson Thacher & Bartlett, and Parent shall have received a written opinion of
PricewaterhouseCoopers LLP, in form and substance reasonably satisfactory to
each of them, on the basis of customary representations, warranties, covenants
and assumptions set forth in such opinions, and delivered as of the date of the
Effective Time, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code that is not subject to
Section 367(a)(1) of the Code pursuant to Treasury Regulation
Section 1.367(a)-(3)(c) (other than with respect to Company shareholders who are
or will be "five-percent transferee shareholders" within the meaning of Treasury
Regulation Section 1.367(a)-3(c)(5)(ii)), and that each of Guarantor, Parent,
Merger Sub and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code.
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 (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) 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;
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(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(j),
the Company shall be deemed to have complied with Section 4.01(j) unless the
failure to comply with such section also results in the failure of the condition
set forth 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 or to make
such filings would not reasonably be expected, individually or in the aggregate
with all other such failures, to have a Material Adverse Effect on the Company,
Parent or Guarantor; and
(d) AFFILIATE AGREEMENTS. Parent shall have received from each person who
is identified in the Affiliate Letter as an "affiliate" of the Company an
Affiliate Agreement, and such Affiliate Agreement shall be in full force and
effect
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 (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) on and as of the
Effective Time, with the same force and effect as if made on and as of the
Effective Time, except for (i) changes contemplated by this Agreement,
(ii) those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date, subject
to clause (iii)), or (iii) where the failure to be true and correct could not
reasonably be expected, individually or in the aggregate with all other such
failures, to have a Material Adverse Effect, and the Company shall have received
a certificate to such effect signed by the President or Chief Financial Officer
of Parent;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate of Parent to
such effect signed by the President or Chief Financial Officer of Parent;
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Parent, Merger Sub or Guarantor for the authorization, execution and
delivery of this Agreement and the Guarantee, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby shall
have been obtained and made by Parent, Merger Sub or Guarantor, except where the
failure to receive such consents, waivers, approvals, authorizations or orders
or to make such filings would not reasonably be expected, individually or in the
aggregate with all other such failures, to have a Material Adverse Effect on the
Company, Parent or Guarantor; and
(d) LISTING. The Guarantor Common Shares to be delivered by Parent 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.
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ARTICLE VII
TERMINATION
Section 7.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding adoption thereof by the
shareholders 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 December 31, 2000 (other than for the reasons set forth in
clause (c) 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 the requisite vote of the
shareholders of the Company shall not have been obtained by December 31, 2000,
or if the shareholders of the Company shall not have adopted this Agreement at
the Company Shareholders Meeting; PROVIDED, HOWEVER, that the Company may not
terminate pursuant to this clause if the Company has not complied with its
obligations under Section 5.02; or
(d) by either Parent or the Company, if a court of competent jurisdiction or
Governmental Authority 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
(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, adoption or recommendation of this Agreement or the
Merger in a manner adverse to Parent or shall have resolved to do so;
(ii) approve or recommend to the shareholders of the Company an Acquisition
Proposal or Alternative Transaction; (iii) approve or recommend that the
shareholders of the Company tender their shares in any tender or exchange offer
that is an Alternative Transaction; or (iv) fail to include the recommendation
of the Board of Directors of the Company in favor of approval of this Agreement
pursuant to Section 5.01(c) or fail to take the action required by the second
sentence of Section 5.02; or (y) take any public position or make any
disclosures to the Company's shareholders, whether or not permitted pursuant to
Section 4.02, which has the effect of any of the foregoing (it being understood
and agreed that a communication by the Board of Directors of the Company to the
Company's shareholders pursuant to Rule 14d-9(f)(3) of the Exchange Act, or any
similar type of communication to the Company's shareholders in connection with
the making or amendment of a tender offer or exchange offer, shall not be deemed
to constitute a basis for termination under this Section 7.01(e)); or
(f) by Parent or the Company, if any representation or warranty of the
Company or Parent and Merger Sub, respectively, set forth in this Agreement
shall be untrue when made, such that the conditions set forth in Sections
6.02(a) or 6.03(a), as the case may be, would not be satisfied (a "TERMINATING
MISREPRESENTATION"); PROVIDED that if such Terminating Misrepresentation is
curable prior to December 31, 2000 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(f); or
(g) 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 either 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
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is curable prior to December 31, 2000 by the Company or Parent, as the case may
be, through the exercise of its reasonable best efforts, and for so long as the
Company or Parent, as the case may be, continues to exercise such reasonable
best efforts, neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(g); or
(h) by Parent or the Company, upon a breach of any covenant or agreement on
the part of the Company or of Parent or Merger Sub, respectively, set forth in
this Agreement such that the conditions set forth in Sections 6.02(b) or
6.03(b), as the case may be, would not be satisfied (a "TERMINATING BREACH");
PROVIDED that, except for any breach of the Company's obligations under
Section 4.02, if such Terminating Breach is curable prior to December 31, 2000
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 the Company, if (w) the Board of Directors of the Company shall have
authorized the Company, subject to complying with the terms of this Agreement,
including Section 4.02, to enter into a definitive agreement with respect to a
Superior Proposal and the Company shall have notified Parent in writing that it
intends to enter into such an agreement, attaching a summary of the material
terms thereof, (x) Parent shall not have made, within two full business days
(disregarding any partial business days) of receipt of the Company's written
notification of its intention to enter into a definitive agreement with respect
to a Superior Proposal, an offer that the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors, is at
least as favorable, from a financial point of view, to the shareholders of the
Company as the Superior Proposal, (y) the Company prior to such termination
pursuant to this clause (i) shall have paid to Parent in immediately available
funds the Fee and the Expenses required to be paid pursuant to Section 7.03(b),
and (z) this Agreement shall not theretofore have been adopted at the Company
Shareholders Meeting; or
(j) by Parent, if the Average Share Price is less than the Floor Price,
provided that (i) Parent shall have given the Company notice of its intention to
terminate pursuant to this Section 7.01(j) prior to 5:00 p.m. New York City time
on the business day following the Closing Conditions Satisfaction Date and
(ii) the Company shall not, by 5:00 p.m. New York City time on the third
business day following the Closing Conditions Satisfaction Date, have delivered
a notice to Parent agreeing that the Exchange Ratio shall equal $47.50 divided
by the Floor Price; provided further that if the Company shall deliver the
notice referred to in the preceding clause (ii), this Agreement shall not be
terminated under this Section 7.01(j) and the Exchange Ratio for all purposes of
this Agreement shall equal $47.50 divided by the Floor Price or, if the parties
shall so agree in their sole and absolute discretion, a number in excess of
$47.50 divided by the Floor Price.
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,
Parent or Merger Sub may have liability or obligations as set forth in
Section 7.03 and as set forth in or contemplated by Section 8.01 hereof.
Notwithstanding the foregoing, nothing herein shall relieve the Company, Parent
or Merger Sub from liability for any willful breach hereof or willful
misrepresentation herein (it being understood that (x) the provisions of
Section 7.03 do not constitute a sole or exclusive remedy for such willful
breach or misrepresentation and (y) the mere existence of a Material Adverse
Effect, by itself, shall not constitute such a willful breach).
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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 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) conveyance and similar taxes required
to be paid or which Parent has agreed should be paid prior to the Effective Time
pursuant to Section 5.16.
(b) The Company shall pay Guarantor a fee of $110 million (the "FEE") and
shall also pay Parent's and Guarantor'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 Parent, Guarantor or the Company) in a combined
amount not to exceed $3 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(c) following the Company Shareholders Meeting at which the
shareholders of the Company failed to adopt this Agreement, provided that
(A) the Alternative Transaction Condition is satisfied; and (B) the Meeting
Average Share Price is equal to or greater than the Floor Price;
(ii) the termination of this Agreement by Parent pursuant to
Section 7.01(e); or
(iii) the termination of this Agreement by the Company pursuant to
Section 7.01(i).
The "MEETING AVERAGE SHARE PRICE" means the average (rounded to the nearest
1/10,000) of the Daily Per Share Prices for the five consecutive trading days
ending on the third trading day prior to the Company Shareholders Meeting.
The "FLOOR PRICE" means (i) $37.00 or (ii) if lower, the Meeting Average
Share Price, but only if Parent in its sole and absolute discretion irrevocably
agrees, by notice to the Company delivered not later than 9:00 a.m. New York
City time on the business day prior to the Company Shareholders Meeting, that
the Floor Price shall be the Meeting Average Share Price (in which case for all
purposes of this Agreement, the Floor Price shall equal the Average Meeting
Price); PROVIDED that if Parent delivers such a notice, the Company may postpone
the Company Shareholders Meeting for a period of up to three business days;
PROVIDED FURTHER that the Meeting Average Share Price shall be computed in such
case without regard to such postponement.
The "ALTERNATIVE TRANSACTION CONDITION" shall be satisfied in respect of a
termination of this Agreement if 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, and
in the case of Section 7.03(b)(i), such transaction provides for a per Share
consideration with a fair market value greater than $47.50; PROVIDED that for
purposes of this definition, the definition of Alternative Transaction set forth
in Section 4.02(a) shall be modified to replace "25%," as it appears in such
definition, with "40%."
(c) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(h), (i) the Company shall pay to Guarantor and Parent their
respective Expenses relating to the transactions contemplated by this Agreement
in a combined amount not to exceed $3 million, and (ii) the Company shall pay
Guarantor the Fee provided that (I) such Termination Breach is willful and
(II) the Alternative Transaction Condition is satisfied.
(d) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(f), the Company shall pay to Guarantor and Parent their respective
Expenses in a combined amount not to exceed $3 million.
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(e) Upon a termination of this Agreement by the Company pursuant to
Section 7.01(f) or Section 7.01(h), Parent shall pay to the Company its Expenses
in an amount not to exceed $3 million.
(f) The Fee and Expenses payable pursuant to Section 7.03(b) or
Section 7.03(c), or the Expenses payable pursuant to Section 7.03(d) or
Section 7.03(e), shall be paid within one business day after a demand for
payment following the first to occur of any of the events described in the
aforesaid Sections, as applicable; provided that, in no event shall the Company
be required to pay the Fee or any Expenses to Parent, nor shall Parent be
required to pay any Expenses to the Company if, immediately prior to the
termination of this Agreement, the entity otherwise entitled to receive such fee
and/or expenses was in material breach of its obligations under this Agreement
or, in the case of Parent, Merger Sub was in material breach of its obligations
under this Agreement or Guarantor was in material breach of the Guarantee.
(g) Each of the Company, Parent and Merger Sub agrees that the payments
provided for in this Section 7.03 shall be the sole and exclusive remedy of
Parent and Merger Sub upon a termination of this Agreement by Parent pursuant to
Section 7.01(c), (e), (f), (h) or (i), and the payments provided for in this
Section 7.03 shall be the sole and exclusive remedy of the Company upon a
termination of this Agreement by the Company pursuant to Section 7.01(f) or (h),
regardless of the circumstances giving rise to such termination; PROVIDED,
HOWEVER, that the foregoing shall not apply to any willful breach of this
Agreement or any willful misrepresentation hereunder giving rise to such
termination. Subject to Section 7.03(f), if a party is entitled to terminate
this Agreement pursuant to more than one clause of Section 7.01, such party
shall be entitled to receive the Fees and Expenses to which it is entitled as a
result of any such termination, provided that in no event shall there be any
duplication of payment.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. (a) Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and Sections 5.06 and 5.08 and any other agreement in this
Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely and those set forth in Sections 7.02 and 7.03
and this Article VIII shall survive termination indefinitely. The
Confidentiality Agreements shall survive termination of this Agreement in
accordance with their terms.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Parent Disclosure Schedule
shall not be deemed an admission that such matter is material.
Section 8.02 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with
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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):
If to Parent or Merger Sub:
Tyco Acquisition Corp. VI (NV)/EVM Merger Corp.
c/o Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attn: President
Telecopy: (603) 778-7700
With a copy (which shall not constitute notice) to:
Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attn: Chief Corporate Counsel
Telecopy: (603) 778-7700
and
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Abbe L. Dienstag, Esq.
Telecopy: (212) 715-8000
Telephone: (212) 715-9100
If to the Company:
Mallinckrodt Inc.
675 McDonnell Boulevard
St. Louis, Missouri 63042
Attn: General Counsel
Telecopy: (314) 654-5366
Telephone: (314) 654-2000
With a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attn: Alan D. Schnitzer, Esq.
Telecopy: (212) 455-2502
Telephone: (212) 455-2000
Section 8.03 CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATES", with respect to any person, 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
City 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
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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 or any employee having primary or substantial oversight
responsibility for the matter of the Company, Parent or Guarantor, as the case
may be, have or at any time had actual knowledge of such matter;
(f) "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Corporation, Parent, Guarantor or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Parent, Guarantor 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.
When reference is made in this Agreement to the Company, Parent or
Guarantor, such reference shall include their respective subsidiaries, as and to
the extent the context so requires, whether or not explicitly stated in this
Agreement.
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 adoption
of this Agreement by the shareholders of the Company, no amendment may be made
which by law requires approval by such shareholders without such 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
material 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 provided in Section 7.03(b) 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 and the Guarantor's
guarantee hereof constitute the entire agreement and supersede all prior
agreements and undertakings (other than the Confidentiality
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Agreements), both written and oral, among the parties, or any of them, with
respect to the subject matters hereof and thereof, except as otherwise expressly
provided herein or therein.
Section 8.09 ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise, except that all or any of the rights of Parent and/or
Merger Sub hereunder may be assigned to Guarantor or any direct or indirect
wholly-owned subsidiary of Guarantor, provided that no such assignment shall
relieve the assigning party of its obligations hereunder.
Section 8.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.06 (which is intended to be for the benefit of the Indemnified Parties
and Covered Persons and may be enforced by such Indemnified Parties and Covered
Persons) and Section 7.03 (which contains provisions intended to be for the
benefit of Guarantor and may be enforced by Guarantor).
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
New York applicable to contracts executed and fully performed within the State
of New York.
(b) Each of the parties hereto submits to the exclusive jurisdiction of the
courts of the State of New York and the federal courts of the United States
located in the City of New York, Borough of Manhattan with respect to any claim
or cause of action arising out of this Agreement or the transactions
contemplated hereby.
Section 8.13 COUNTERPARTS. This Agreement may be executed in 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 (AND IN RESPECT OF ANY DISPUTE IN RESPECT OF
THE GUARANTEE, PARENT SHALL CAUSE GUARANTOR TO WAIVE), 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 each of Merger Sub and the Surviving Corporation
to perform all of its obligations set forth in this Agreement and Guarantor to
perform all of its obligations under the Guarantee.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
<TABLE>
<S> <C> <C>
TYCO ACQUISITION CORP. VI (NV)
By: /s/ MARK H. SWARTZ
-----------------------------------------
Name: Mark H. Swartz
Title: Vice President
EVM MERGER CORP.
By: /s/ MARK H. SWARTZ
-----------------------------------------
Name: Mark H. Swartz
Title: Vice President
MALLINCKRODT INC.
By: /s/ C. RAY HOLMAN
-----------------------------------------
Name: C. Ray Holman
Title: Chairman of the Board and Chief
Executive Officer
</TABLE>
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GUARANTEE
Tyco International Ltd. ("GUARANTOR") irrevocably guarantees each and every
representation, warranty, covenant, agreement and other obligation of Parent and
Merger Sub, and/or any of their respective permitted assigns (and where any such
representation or warranty is made to the knowledge of Parent or Merger Sub,
such representation or warranty shall be deemed made to the knowledge of
Guarantor), and the full and timely performance of their respective obligations
under the provisions of the foregoing Agreement. This is a guarantee of payment
and performance, and not of collection, and Guarantor acknowledges and agrees
that this guarantee is full and unconditional, and no release or extinguishment
of Parent's and Merger Sub's obligations or liabilities (other than in
accordance with the terms of the Agreement), whether by decree in any bankruptcy
proceeding or otherwise, shall affect the continuing validity and enforceability
of this guarantee, as well as any provision requiring or contemplating
performance by Guarantor.
Guarantor hereby waives, for the benefit of the Company, (i) any right to
require the Company as a condition of payment or performance by Guarantor, to
proceed against Parent or Merger Sub or pursue any other remedy whatsoever and
(ii) to the fullest extent permitted by law, any defenses or benefits that may
be derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, except to the extent that any such defense is available
to Parent or Merger Sub.
Without limiting in any way the foregoing guarantee, Guarantor covenants and
agrees to take all actions to enable Parent and Merger Sub to adhere to each
provision of the Agreement which requires an act or omission on the part of
Guarantor or any of its subsidiaries to enable Parent or Merger Sub to comply
with its obligations under the Agreement.
The provisions of Article VIII of the Agreement are incorporated herein,
MUTATIS MUTANDIS, except that notices and other communications hereunder to
Guarantor shall be delivered to Tyco International Ltd., The Zurich Centre,
Second Floor, 90 Pitts Bay Road, Pembroke HM 08, Bermuda, Attn: Chief Corporate
Counsel, Telecopy No. (441) 295-9647, Confirm No. (441) 292-8674 (with a copy as
provided therefor in Section 8.02(a)).
We understand that the Company is relying on this guarantee in entering into
the Agreement and may enforce this guarantee as if Guarantor were a party
thereto.
<TABLE>
<S> <C> <C>
TYCO INTERNATIONAL LTD.
By: /s/ MARK H. SWARTZ
-----------------------------------------
Name: Mark H. Swartz
Title: Executive Vice President and Chief
Financial Officer
</TABLE>
A-50
<PAGE>
ANNEX B
PERSONAL AND CONFIDENTIAL
June 28, 2000
Board of Directors
Mallinckrodt Inc.
75 McDonnell Boulevard
St. Louis, Missouri 63134
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of common stock, par value $1.00 per
share (the "Shares"), of Mallinckrodt Inc. (the "Company") of the consideration
to be received for the Shares pursuant to the Agreement and Plan of Merger,
dated as of June 28, 2000, among Tyco Acquisition Corp. VI (NV) (the "Parent"),
EVM Merger Corp. ("Merger Sub") and the Company (the "Agreement"), with the
obligations of Parent and Merger Sub in the Agreement being guaranteed by their
parent company Tyco International Ltd. ("Guarantor"), on the assumption that the
Exchange Ratio (as defined below) is not adjusted pursuant to section 7.01(j) of
the Agreement. The Agreement provides for the merger of Merger Sub into the
Company (the "Merger"), with each Share not owned by the Company, Guarantor,
Parent or Merger Sub immediately prior to the effective time of the Merger being
converted into the right to receive that number of common shares, par value
$0.20 per share, of Guarantor ("Guarantor Common Shares") equal to $47.50
divided by the Average Share Price (as defined in the Agreement) (the "Exchange
Ratio"), together with cash in lieu of fractional shares, on the assumption that
the Exchange Ratio is not adjusted pursuant to section 7.01(j) of the Agreement.
The terms and conditions of the Merger are more fully set forth in the Agreement
and related documents.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company, having acted as its financial advisor in connection with the
acquisition by the Company of Nellcor Puritan Bennett Incorporated in August
1997 and the divestiture of the Company's 50% interest in Tastemaker Inc. in
March 1997 and having acted as the Company's financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We are also familiar with the Guarantor, having acted as the
Guarantor's financial advisor in connection with the acquisition by the
Guarantor of Raychem Corporation in August 1998, having acted as co-managing
underwriter of the Guarantor's 6.875% Notes due September 5, 2002 in August
1998, and having been selected as co-lead underwriter in the Guarantor's planned
initial public offering of its TyCom business. Goldman, Sachs & Co. may provide
investment banking services to the Guarantor and its subsidiaries in the future.
Goldman, Sachs & Co. provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of the Company or the Guarantor for its own account and for the accounts of
customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and the Guarantor for the five fiscal years ended June 30 and September
30, 1999, respectively; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company and the Guarantor; certain other
communications from the Company and the Guarantor to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company and the Guarantor prepared by their respective managements, including
certain cost savings and operating synergies projected by the management of the
Company to result from
B-1
<PAGE>
the transaction contemplated by the Agreement. We also have held discussions
with members of the managements of the Company and the Guarantor regarding the
strategic rationale for, and the potential benefits of, the transaction
contemplated by the Agreement and the past and current business operations,
financial condition and future prospects of their respective companies,
including discussions with members of the management of the Company as to the
attainability of its forecasts. Additionally, we have held discussions with the
Company's independent accountants and the management of the Guarantor concerning
the informal inquiry being conducted by the Division of Enforcement of the
Securities and Exchange Commission. In addition, we have reviewed the reported
price and trading activity for the Shares and the Guarantor Common Shares,
compared certain financial and stock market information for the Company and the
Guarantor with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the specialty chemicals and healthcare industries
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the Company
or the Guarantor or any of their respective subsidiaries and we have not been
furnished with any such evaluation or appraisal. We have assumed that the
Exchange Ratio will not be adjusted as provided in section 7.01(j) of the
Agreement. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how
holders of Shares should vote with respect to the Agreement. We express no
opinion as to the prices at which Guarantor Common Shares may trade in the
future.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
consideration to be received for the Shares in the Merger is fair from a
financial point of view to the holders of the Shares.
Very truly yours,
B-2
<PAGE>
ANNEX C
June 28, 2000
The Board of Directors
Mallinckrodt Inc.
675 McDonnell Boulevard
P.O. Box 5840
St. Louis, MO 63134
Attention: Mr. Ray Holman
Chairman and Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $1.00 per share (the
"Mallinckrodt Common Stock"), of Mallinckrodt Inc. (the "Company") of the
consideration proposed to be paid to them in connection with the proposed merger
(the "Merger") of EVM Merger Corp. ("Merger Sub"), a New York corporation and an
indirect wholly-owned subsidiary of Tyco International Ltd. ("Tyco"), into the
Company. Pursuant to the Agreement and Plan of Merger, dated as of June 28, 2000
(the "Agreement"), among the Company, Tyco Acquisition Corp. VI (NV) (the
"Parent"), a Nevada corporation and a wholly-owned subsidiary of Tyco, and
Merger Sub, the Company will become a wholly-owned subsidiary of the Parent, and
the holders of the Mallinckrodt Common Stock will receive for each share of the
Mallinckrodt Common Stock held by them consideration equal to a number of common
shares, par value $0.20 per share (the "Tyco Common Shares"), of Tyco calculated
pursuant to a formula contained in the Agreement (the "Exchange Ratio").
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving businesses comparable to those of the Company and the consideration
received for such businesses; (iv) current and historical market prices of the
Mallinckrodt Common Stock and the Tyco Common Shares; (v) the audited financial
statements of the Company for the fiscal year ended June 30, 1999, the audited
financial statements of Tyco for the fiscal year ended September 30, 1999, and
the unaudited financial statements of the Company and Tyco, respectively, for
the period ended March 31, 2000; (vi) certain agreements with respect to
outstanding indebtedness or obligations of the Company and Tyco, respectively;
(vii) certain internal financial analyses and forecasts prepared by the Company
and Tyco and their respective managements; and (viii) the terms of other
business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the managements of
the Company and Tyco with respect to certain aspects of the Merger, and the past
and current business operations of the Company and Tyco, the financial condition
and future prospects and operations of the Company and Tyco, the effects of the
Merger on the financial condition and future prospects of the Company and Tyco,
and certain other matters we believed necessary or appropriate to our inquiry.
We have reviewed such other financial studies and analyses and considered such
other information as we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and Tyco or otherwise reviewed
by us, and we have not assumed any responsibility or liability therefor. We have
not conducted any valuation or appraisal of any assets or liabilities, nor have
any such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently
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<PAGE>
available estimates and judgments by management as to the expected future
results of operations and financial condition of the Company and Tyco to which
such analyses or forecasts relate. We have also assumed that the Merger will
have the tax and accounting consequences described in discussions with, and
materials furnished to us by, representatives of the Company, and that the
Exchange Ratio will not be adjusted pursuant to Section 7.01(j) of the
Agreement. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the Tyco Common
Shares will trade at any future time.
We have acted as financial advisor to the Company with respect to the proposed
Merger and will receive a fee from the Company for our services. We will also
receive an additional fee if the proposed Merger is consummated. From time to
time, J.P. Morgan and its affiliates have provided investment banking services
to the Company and Tyco for which we have received customary compensation. In
the ordinary course of their businesses, J.P. Morgan and its affiliates may
actively trade the debt and equity securities of the Company or Tyco for their
own account or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the consideration proposed to be paid to the holders of the
Mallinckrodt Common Stock in the Merger is fair, from a financial point of view,
to such holders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Merger. This opinion does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger. This opinion may not be
disclosed, referred to, or communicate (in whole or in part) to any third party
for any purpose whatsoever except with our prior written consent in each
instance; provided that this opinion may be reproduced in full in any proxy or
information statement mailed to stockholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior written approval
and must be treated as confidential.
Very truly yours,
C-2
<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> <S>
2.1 Agreement and Plan of Merger, dated as of June 28, 2000, by
and among Tyco Acquisition Corp. VI (NV), EVM Merger Corp.
and Mallinckrodt Inc. (included as Annex A to the Proxy
Statement/Prospectus which forms a part of this Registration
Statement)
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 Simpson Thacher & Bartlett*
8.3 Tax Opinion of Appleby Spurling & Kempe*
23.1 Consent of PricewaterhouseCoopers
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of Appleby Spurling & Kempe (contained in Exhibit 5
and Exhibit 8.3)
23.6 Consent of PricewaterhouseCoopers LLP (contained in Exhibit
8.1)
23.7 Consent of Simpson Thacher & Bartlett (contained in Exhibit
8.2)
24.1 Power of Attorney (contained on the signature page hereto)
99.1 Form of Proxy Card of Mallinckrodt Inc.*
</TABLE>
------------------------
* To be filed by amendment.
II-1
<PAGE>
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 a prospectus filed
with the Securities and Exchange Commission 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;
(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), 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
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<PAGE>
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 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.
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<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 12th day of
July, 2000.
<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>
POWER OF ATTORNEY
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 thereto and all registration statements filed pursuant
to Rule 462(b) 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 said
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 for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on July 12, 2000
in the capacities indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ L. DENNIS KOZLOWSKI Chairman of the Board, President, Chief
------------------------------------------- Executive Officer and Director (Principal
L. Dennis Kozlowski Executive Officer)
/s/ MICHAEL A. ASHCROFT
------------------------------------------- Director
Michael A. Ashcroft
/s/ JOSHUA M. BERMAN
------------------------------------------- Director and Vice President
Joshua M. Berman
/s/ RICHARD S. BODMAN
------------------------------------------- Director
Richard S. Bodman
/s/ JOHN F. FORT
------------------------------------------- Director
John F. Fort
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ STEPHEN W. FOSS
------------------------------------------- Director
Stephen W. Foss
/s/ PHILIP M. HAMPTON
------------------------------------------- Director
Philip M. Hampton
/s/ WENDY E. LANE
------------------------------------------- Director
Wendy E. Lane
/s/ JAMES S. PASMAN, JR.
------------------------------------------- Director
James S. Pasman, Jr.
/s/ W. PETER SLUSSER
------------------------------------------- Director
W. Peter Slusser
/s/ MARK H. SWARTZ Executive Vice President and Chief Financial
------------------------------------------- Officer (Principal Financial and Accounting
Mark H. Swartz Officer)
/s/ FRANK E. WALSH, JR.
------------------------------------------- Director
Frank E. Walsh, Jr.
</TABLE>
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