- Delaware laws are more responsive than Bermuda laws with respect to
the needs off shareholders.
- Tyco's incorporation in Bermuda makes it more difficult to hold directors,
officers, and companies responsible for breaches in fiduciary duties.
- Delaware affords shareholders rights not provided under Bermuda law.
- Incorporation in Bermuda may affect the enforceability of judgments
obtained in a U.S. Court.
- The favorable tax treatment Tyco receives will be mitigated by pending
legislation, such as elimination of government contracts and elimination
of the tax loophole.
- Incorporation in Bermuda creates the impression that the company is
being "unpatriotic" by evading taxes and insulating itself
and its officers and directors from liability.
- Fears litigation form large shareholders who had to pay a huge tax
(about $1 billion) in 1997.
- Shareholders could be subjected to reincorporation fees.
- Tyco's extensive facilities and operations in the U.S. means that
it is not removed from the U.S. legal system.
- Under Bermuda law, shareholders can bring a derivative action if
there is "fraud on the minority" or the alleged "wrongdoers"
control the corporation.
- Tyco is currently a defendant in over 24 securities class actions
and four derivative action suits have been filed, on behalf of Tyco,
against former officers and certain former Tyco directors.
- Tyco also maintains that currently it is fully subject to U.S. securities
laws and the rules and regulations of the NYSE requirements for listed
companies, and it has not applied for an exemption to these listing
requirements.
- Shareholders should not be faced with this decision until Tyco has
studied the potential benefits, costs, and disadvantages of remaining
in Bermuda, costs of reincorporating into another jurisdiction, and
non-financial implications of the state of incorporation (including
shareholder rights and protections).
- One-time costs. They include the tax costs to shareholders upon reincorporation
and fees associated with reincorporating. ISS has not been able to estimate
them.
- Tax savings. ISS estimates Bermuda's tax savings appear to be in the
range of 4 to 6 percent per year, or about $179 million to $268 million
per year, which equals $0.09 to $0.13 on a per share basis. Unfortunately,
management has not been able to confirm these estimates.
- Shareholder rights are better protected in Delaware than in Bermuda.
ISS recommends to vote FOR the reincorporation proposal because of its
disappointment in the board's failure to properly assess this very important
issue on shareholders' behalf.
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