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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
(Amendment No. 3)
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
Raytech Corporation
(Name of the Issuer)
Raytech Corporation Asbestos Personal Injury Settlement Trust
Raytech Acquisition Corp.
(Name of Person(s) Filing Statement)
$1.00 Par Value Common Stock
(Title of Class of Securities)
755103108
(CUSIP Number of Class of Securities)
Copy to:
Richard A. Lippe, Trustee
Raytech Corporation Asbestos Personal Injury Settlement Trust
c/o Meltzer, Lippe, Goldstein & Breitstone, LLP
190 Willis Avenue
Mineola, NY 11501
(516) 747-0300
(Name, Address and Telephone Number of Person Authorized
to Receive
Notices and Communications on Behalf of Person(s) Filing
Statement)
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This statement is filed in connection with (check the appropriate box):
|_| (a) The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
|_| (b) The filing of a registration statement under the Securities Act of
1933.
|_| (c) A tender offer.
|X| (d) None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. |_|
Check the following box if the filing is a final amendment reporting the results
of the transaction. |_|
Calculation of Filing Fee
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Transaction Valuation* Amount of Filing Fee
$10,683,602 $1,250.00
*For purposes of calculating the Filing Fee only. Assumes the payment of an
aggregate of $10,683,602, comprised of $4,262,132 to be paid for 3,228,888
shares of common stock of the Issuer, under a previously negotiated Settlement
Agreement with creditors of the Issuer and affiliates of the Issuer, $5,179,662
to be paid for 3,923,986 shares of common stock of the Issuer acquired in a
short-form merger transaction with the Issuer's unaffiliated public stockholders
and up to $1,241,808 to holders of 940,764 options of the Issuer. The amount of
the filing fee, calculated in accordance with Regulation 240.0-11(b) of the
Securities Exchange Act of 1934 and Fee Rate Advisory #6 for Fiscal Year 2005
issued by the United States Securities and Exchange Commission (2004-167),
equals $117.70 for each one million ($1,000,000) dollars (based upon the value
of the securities to be acquired in the transactions described in this
transaction statement).
|X| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $1,250.00
Form or Registration No.: Schedule 13E-3
Filing Party: Raytech Corporation Asbestos Personal Injury
Settlement Trust
Date Filed: August 12, 2005
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SUMMARY TERM SHEET
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the transaction, passed upon the
merits or fairness of the transaction, or passed upon the adequacy or accuracy
of the disclosure in this document. Any representation to the contrary is a
criminal offense.
This Summary Term Sheet briefly describes the "going-private" transaction
involving Raytech Corporation ("Raytech" or the "Company"), how it affects you,
what your rights are with respect to the transaction as a stockholder of
Raytech, and the position of Raytech Corporation Asbestos Personal Injury
Settlement Trust (the "Trust") and Raytech Acquisition Corp., a Delaware
corporation ("merger subsidiary") about the fairness of the transaction to
Raytech's unaffiliated public stockholders. We sometimes refer to merger
subsidiary and the Trust together as the "Filing Persons" or "we" or "us."
(Raytech's unaffiliated public stockholders are you and the other stockholders,
except for the Trust.)
Please read this Summary Term Sheet and the remainder of this transaction
statement on Schedule 13E-3 very carefully.
Principal Terms of the Transaction
About Raytech Raytech develops, manufactures and supplies specialty engineered
friction and energy absorption components used in oil immersed (wet)
and dry transmission and brake systems for on- and off-road
vehicles. Raytech also makes and markets specialty engineered
products for heat resistant, inertia control, and energy absorption
applications. Raytech's products are typically found in passenger
cars, heavy-duty construction and agricultural equipment, trucks,
buses and logging, mining and military vehicles. Raytech was
incorporated in Delaware in June 1986 as a subsidiary of Raymark
Corporation. In October 1986, each share of common stock of Raymark
was automatically converted into a share of Raytech. As a result of
this conversion, Raytech became Raymark's sole shareholder, and
Raytech's stock began trading on the New York Stock Exchange. In May
1988, Raytech sold all of its Raymark stock. Under a restructuring
plan, Raytech (through its subsidiaries) purchased non-asbestos
related businesses of Raymark.
About the Asbestos Lawsuits Prior to 1986, Raymark and Raymark Industries, Inc. (together,
"Raymark") had been named as defendants in lawsuits claiming
substantial damages for injury or death from exposure to airborne
asbestos fibers. In spite of the restructuring plan, Raytech was
named a co-defendant with Raymark and other defendants in numerous
asbestos-related lawsuits as a successor in liability to Raymark.
In a lawsuit decided in 1988, the United States District Court in
Oregon ruled that Raytech was to be a successor to Raymark's
asbestos related liability (Oregon equity law). After several court
rulings, including an appeal to the United States Supreme Court, the
Oregon case remained as the prevailing decision holding Raytech to
be a successor to Raymark's asbestos related liabilities. In order
to stay the asbestos related litigation, on March 10, 1989, Raytech
filed a petition seeking relief under Chapter 11, Title 11, United
States Code in the United States Bankruptcy Court, District of
Connecticut ("Bankruptcy Court").
About the Reorganization In October 1998, Raytech reached a tentative settlement with its
creditors for a consensual plan of reorganization providing for all
general unsecured creditors to receive approximately 90% of the
equity in Raytech in exchange for their claims. The Trust was
created under the settlement plan to use its assets and income to
satisfy all asbestos-related claims. As reorganized, Raytech issued
approximately 83% of its common stock to the Trust, 7% to government
and other claimants, and 10% to Raytech's public stockholders at the
time.
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As of the date of this transaction statement, the Trust owns
34,584,432 shares of Raytech's common stock (or 82.86% of its
outstanding shares).
About the Trust The Trust was created under Raytech Corporation's Second Amended
Plan of Reorganization and was formed as an irrevocable trust
pursuant to the Raytech Corporation Asbestos Personal Injury
Settlement Trust Agreement, effective as of April 18, 2001. The
Trust is similar to other trusts formed in connection with the
bankruptcy proceedings of companies involved in the manufacture of
products containing asbestos. The products manufactured by Raymark,
its predecessors and affiliates that contained asbestos were found
to be the cause of injury and death to workers and customers of
those companies.
The purpose of the Trust is to assume all liabilities of Raytech,
and its predecessors and successors in interest, in actions
involving personal injury or death claims caused by exposure to
products containing asbestos for which Raymark or its predecessors
and affiliates have legal liability and to use the Trust's assets
and income to pay the holders of these claims and their families in
a way that the holders of claims are treated fairly, equitably and
reasonably in light of the extremely limited assets available to
satisfy these claims. The Trust's three trustees, are independent
trustees selected as part of Raytech's plan of reorganization, and
have as their sole function the duty of administering and
distributing the Trust's assets to the asbestos victims and their
families.
Under the trust agreement, the Trustee's were granted the power to
take any and all actions that, in the judgment of the Trustees are
necessary and proper to fulfill the purpose of the Trust.
Specifically, among other powers granted to the Trustees, the
Trustees have the power to transfer any or all of the Trust's assets
upon terms that the Trustees consider to be proper and consistent
with the purpose of the Trust and enter into arrangements with third
parties as are deemed by the Trustees to be useful in carrying out
the purposes of the Trust. By accelerating the Acquisition and
completing the short-form merger, we believe that Raytech will
realize significant cost savings which should result in increased
assets and income available to the Trust, as the sole shareholder of
Raytech, which will allow it to maximize the amounts paid to the
holders of asbestos-related claims and their families.
Two of the three Trustees of the Trust are also directors of
Raytech. See Item 3, "Identity and Background of Filing Person" and
Schedule I to this Schedule 13E-3.
About the Merger Subsidiary On August 8, 2005, the Trust organized merger subsidiary in Delaware
as a wholly owned subsidiary of the Trust to effect the merger with
Raytech. After completing the Acquisition and prior to the merger,
the Trust will contribute all of its shares of Raytech common stock
to merger subsidiary, causing the merger subsidiary to own
approximately 90.6% of Raytech's outstanding shares. Prior to the
effectiveness of the short-form merger, the Trustees of the Trust
will be the Directors of merger subsidiary.
About the Acquisition In connection with the plan of Raytech Corporation, Case No.
89-00293, confirmed by the United States Bankruptcy Court for the
District of Connecticut on August 13, 2000, the United States
Environmental Protection Agency, the Connecticut Department of
Environmental Protection, and FMC Corporation (together, the
"Environmental Creditors") were issued shares of stock in the
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reorganized Raytech, representing approximately 8.5% of the
outstanding stock of Raytech.
In addition, the Trust entered into an Agreement, dated June 8,
2000, and Settlement Agreement, dated October 31, 2001, with each of
the Environmental Creditors. The agreements provide for the
assignment by the Environmental Creditors to the Trust of their
interest in certain assets of Raytech and of the estates of Raymark
and Universal Friction Composites, the division of the proceeds of
Raymark liability insurance and the future transfer by the
Environmental Creditors of the Raytech common stock issued to them
under the reorganization. The purpose of the agreements was to
mutually resolve claims of the Environmental Creditors against
Raytech, Raymark Industries, Inc. and Raymark Corporation.
Under the 2001 agreement, the Environmental Creditors exercised an
option to retain amounts to be recovered by the Environmental
Creditors solely from Raymark Corporation and Raymark Industries,
Inc. (the "Raymark Estates") out of insurance proceeds. The 2001
Agreement states that upon receipt by the Environmental Creditors of
a payment under a plan of reorganization or liquidation for Raymark
that is approved by the Environmental Creditors, the Environmental
Creditors are required to transfer to the Trust the 3,228,888 shares
of stock of Raytech issued to them under the bankruptcy plan,
together with other assets described below. The Raymark Estates have
settled all liability insurance claims by them against their
liability insurance carriers.
The Trust and the Environmental Creditors have determined that it is
in each party's interest to accelerate the settlement of the 2000
and 2001 agreements instead of waiting until a bankruptcy plan for
the Raymark estates is confirmed. On July 7, 2005, the Trust entered
into a Supplemental Settlement Agreement, dated May 25, 2005 (the
"2005 Agreement"), to accelerate the consummation of the earlier
agreements. As required under the terms of the 2000 and 2001
agreements, the Environmental Creditors will receive $9,457,776 and
the Trust will receive the following assets and consideration (the
"Acquisition"):
o the Environmental Creditors' agreement to divide insurance
proceeds in the bankrupt Raymark Estates, 60% to asbestos personal
injury creditors and 40% to Environmental Creditors;
o 3,228,888 shares of Raytech common stock owned by the
Environmental Creditors;
o the Environmental Creditors' assignment to the Trust of
their rights to benefits under an agreement to share tax benefits
with the Trust (including tax refunds and net operating losses),
incorporated in the Chapter 11 Plan of Reorganization of the Raytech
Corporation, confirmed August 31, 2000;
o the Environmental Creditors' interest in the other property
of the Raymark Estates (including a 40% ownership interest in
Allomatic Products Company, a subsidiary of Raytech); and
o the Environmental Creditors' interest in the recovery by the
Raymark Estates of proceeds of policies of insurance issued by the
Federal Insurance Company to Raymark Corporation.
See Item 4, "Terms of the Transaction", in this transaction
statement. The consideration received by the Trust and the
Environmental Creditors under the 2005 Agreement is identical to the
consideration
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each party would have received had there not been an acceleration of
the 2000 and 2001 agreements. In the 2000 and 2001 Agreements,
neither the Trust nor the Environmental Creditors specifically
allocated any portion of the $9,457,776 to any particular asset.
Because the shares of Raytech common stock to be acquired from the
Environmental Creditors have the same voting, dividend, liquidation
and other rights and limitations as those held by the other
unaffiliated public stockholders, we believe that of the $9,457,776
to be paid to the Environmental Creditors, $4,262,132 (or $1.32 per
share) represents the fair value of the shares of Raytech common
stock to be acquired by the Trust in the Acquisition.
Upon completion of the Acquisition, the Trust's ownership of the
shares of Raytech's common stock will increase from approximately
82.86% to approximately 90.6%. The 2005 Agreement contains closing
conditions including the approval of the Acquisition by the
Bankruptcy Court. On August 16, 2005, an order approving the terms
of the 2005 Agreement was issued by Bankruptcy Court. The period
during which an appeal could be filed has expired and the approval
order is now final. See the section entitled "Fairness of the
Going-Private Transaction", in this transaction statement.
This transaction statement is being filed because the acquisition of
the shares of Raytech by the Trust is the first step in a
transaction which will result in a "Rule 13E-3 transaction" (as
defined under the Exchange Act).
The Short-Form Merger Upon completion of the Acquisition, the Trust will own approximately
90.6% of Raytech's outstanding common stock. We anticipate that the
short-form merger will occur within thirty (30) days after the date
on which we mail this Schedule 13E-3 to Raytech's public
shareholders (or as soon thereafter as possible). We intend the
short-form merger to result in the acquisition of all of the
outstanding shares of Raytech's common stock owned by unaffiliated
public stockholders of Raytech other than the Environmental
Creditors.
Under the Delaware General Corporation Law, because merger
subsidiary will own more than 90% of the outstanding shares of
Raytech common stock immediately prior to the merger, merger
subsidiary will have the power to effect the merger by action of its
board of directors. No approval is required or will be sought from
the board of directors or public shareholders of Raytech. The Trust,
as the sole shareholder of merger subsidiary, has approved the
merger. To complete the merger, merger subsidiary will merge with
and into Raytech, with merger subsidiary surviving the merger. As a
result of the merger, Raytech's public shareholders (other than
those, if any, who object to the merger and properly exercise their
statutory appraisal rights, which are discussed below) will receive
$1.32 in cash for each of their shares of Raytech common stock. See
"Special Factors - Purposes, Alternatives, Reasons and Effects of
the Going-Private Transaction" and Item 4(a)(2), "Terms of the
Transaction - Material Terms - Mergers or similar transactions" in
this transaction statement.
After the short-form merger, we intend to cause the registration of
Raytech's common stock under the Exchange Act and its listing on the
New York Stock Exchange to be terminated.
When we refer to the "going-private transaction" in this transaction
statement, we mean both the acquisition of shares under the 2005
Agreement and the short-form merger.
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Purpose of the Going-Private
Transaction The purpose in engaging in the going-private transaction is to
fulfill the purpose for which the Trust was formed by attempting to
maximize the assets and income of the Trust to ensure that the
holders of asbestos related claims against Raytech, and its
predecessors and successors in interest are treated fairly,
equitably and reasonably. By completing the Acquisition and the
short-form merger, we believe that Raytech will realize significant
cost savings which should result in increased assets and income
available to the Trust, as the sole shareholder of Raytech, to
maximize the amounts paid to the holders of those claims. The 2005
Agreement allows the Trust to accelerate its acquisition of stock
from the Environmental Creditors, as required under the 2000 and
2001 agreements, making the going-private transaction, as structured
by the Trust, the most cost efficient and quickest way to achieve
the goal of going private. Without the determination by the Trust
and the Environmental Creditors that the terms of the 2005 Agreement
were in their best interests, the Trust would have been unable to
acquire the stock and other assets until a bankruptcy or liquidation
plan for the Raymark Estates was confirmed.
The transactions have been structured in order to effect a prompt
and orderly transfer of the minority ownership of Raytech from the
unaffiliated public stockholders to us, and to provide the
unaffiliated public stockholders with cash payments for all of their
Raytech common stock as promptly as practicable. See "Special
Factors - Purposes, Alternatives, Reasons and Effects of the
Going-Private Transaction - Purposes."
Merger Consideration The consideration to be paid to Raytech's unaffiliated public
stockholders in the short-form merger for their stock will be $1.32,
in cash, per share. This price is equal to the closing price per
share of Raytech's common stock on July 6, 2005, the day before the
2005 Agreement was executed and the day before the first public
announcement of the execution of the 2005 Agreement.
Tax Consequences Generally, the cash consideration received by the unaffiliated
public stockholders in the short-form merger will be taxable for
United States federal income tax purposes. You will recognize
taxable gain or loss in the amount of the difference between $1.32
and your adjusted tax basis for each share of Raytech common stock
that you own at the time of the short-form merger. See "Special
Factors - Certain Federal Income Tax Consequences of the
Going-Private Transaction" in this transaction statement.
No Stockholder Vote Because we will own more than 90% of Raytech's outstanding shares
after the acquisition of the shares pursuant to the 2005 Agreement,
the Delaware General Corporation Law ("DGCL") will permit the
short-form merger without the requirement of a vote by Raytech's
stockholders. See "Special Factors - Fairness of the Going-Private
Transaction" and Item 4, "Terms of the Transaction" in this
transaction statement.
Surrender of Certificates and
Payment for Shares We will pay you for your shares of Raytech common stock within
thirty (30) calendar days following the effective date of the
short-form merger. Instructions for surrendering your stock
certificates will be set
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forth in a Notice of Merger and Appraisal Rights and a Letter of
Transmittal, which will be mailed to our unaffiliated public
stockholders of record within ten (10) calendar days after the
short-form merger becomes effective. Please do not send your stock
certificates to us until you have received and read the Notice of
Merger and Appraisal Rights and the Letter of Transmittal. You will
waive your appraisal rights if you send us your stock certificates
with a properly signed Letter of Transmittal. See Item 4, "Terms of
the Transaction" in this transaction statement.
Source and Amount of Funds We estimate the total cost of the going-private transaction to be
approximately $15 million. This estimate includes payments under the
2005 Agreement of $9,457,776 and the short-form merger (estimated at
$5,179,662) and related fees and expenses. We intend to pay these
costs with cash on hand. The going-private transaction is not
subject to any financing condition. See Item 10, "Source and Amount
of Funds or Other Consideration" in this transaction statement.
Fairness of the Going-Private Transaction
Our Position on
the Fairness of the
Going-Private Transaction The Trust and the merger subsidiary have determined that the
going-private transaction is both substantively and procedurally
fair to Raytech's unaffiliated public stockholders. The merger
subsidiary is the wholly-owned subsidiary of the Trust and was
formed specifically to engage in the merger with Raytech. The
Trustees of the Trust are also the directors of the merger
subsidiary. The merger subsidiary has no other business operations.
In their capacity as directors of the merger subsidiary, the
Trustees assessed the fairness of the going private transaction to
the unaffiliated public stockholders. The material factors the
merger subsidiary relied upon in reaching its fairness determination
are identical to the material factors relied upon by the Trust in
reaching its determination. This belief is based on the analysis by
the Trustees and directors of following factors:
o The going-private transaction represents an opportunity for
Raytech's unaffiliated public stockholders to receive cash for each
share of Raytech common stock, not subject to any financing
condition, at the July 6, 2005 closing sale price of $1.32 per
share.
o Raytech has not been able to benefit from being a publicly traded
company. With limited prospects for growth and the incurrence of
expenses and fees as a result of being a public company, the cash
that will be available to the Trust to pay the holders of asbestos
related claims for which the Trust has assumed liability will be
reduced.
o The going-private transaction offers liquidity to the unaffiliated
public stockholders. The common stock of Raytech, currently listed
on the New York Stock Exchange ("NYSE"), is thinly traded, with
average daily trading volume during the two months prior to the
announcement of the going-private transaction of less than 15,000
shares. On August 1, 2005, Raytech was notified by the NYSE that it
is not in compliance with the NYSE's increased continued listing
standards. On September 15, 2005, Raytech submitted its response to
the NYSE. In its response, Raytech stated that as a result of its
continued losses and the proposed going-private transaction,
Raytech's management does not believe that it can take steps which
will permit Raytech to satisfy the financial continued listing
criteria of the NYSE and Raytech is not in a position
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to propose a business plan to come into compliance with the listing
standards. In the event Raytech's common stock is delisted, the
stock will become even more illiquid.
o The merger represents an opportunity for Raytech's public
stockholders (especially those stockholders with large holdings of
shares) to realize cash for their shares, at a price that might
otherwise be difficult to realize, given such illiquidity.
o A review of Raytech's current financial condition, financial
performance, and growth prospects.
o We received an oral advice from HT Capital Advisors LLC, a financial
advisor to the Trust, that the $1.32 purchase price to be paid to
the unaffiliated public stockholders is substantively fair. See
"Reports, Opinions, Appraisals and Negotiations."
o The unaffiliated public stockholders of Raytech who properly assert
their rights under Delaware law have the right to be paid "fair
value" for their Raytech shares.
See "Special Factors - Fairness of the Going-Private Transaction."
Appraisal Rights You have the right, under the DGCL, to ask the Delaware courts to
value your shares. The court's valuation may be higher or lower than
the price we are offering to pay. In order to qualify for these
rights, you must make a written demand for appraisal within 20 days
after the date of mailing of the Notice of Merger and Appraisal
Rights and comply with the additional requirements set forth in
Section 262 of the DGCL. You must be very careful when you exercise
your appraisal rights, because if you do not comply strictly with
the law's procedures, you will lose your appraisal rights. You are
encouraged to seek advice from legal counsel, if you desire to
dissent from this going-private transaction. See Item 4(c), "Terms
of the Transaction - Appraisal rights," in this transaction
statement.
About the Going-Private Transaction
Effects of the Going-Private
Transaction The going-private transaction will have the following consequences:
o Each of your shares of Raytech common stock will be converted into
the right to receive $1.32 in cash, without interest (unless you
exercise your statutory appraisal rights, in which case the Delaware
courts will value your shares. The court's valuation may be higher
or lower than the price we are offering to pay).
o We will own 100% of the business of Raytech.
o Raytech will no longer have to pay the costs associated with being
a public company (including legal, accounting, insurance and other
fees).
o Only the Filing Persons and the holders of asbestos related claims
will benefit from any future earnings and growth of Raytech's
business operations. Conversely, we will suffer from any future
losses generated by Raytech's operations or decline in Raytech's
value.
o Raytech will no longer be required to file reports with the United
States Securities and Exchange Commission.
o Raytech will no longer be listed on the New York Stock Exchange.
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See "Special Factors - Purposes, Alternatives, Reasons and Effects
of the Going-Private Transaction - Effects."
For More Information You may read and copy any of the documents incorporated by reference
at the public reference room of the Securities and Exchange
Commission at 100 F. Street, N.E., Room 1580, Washington, D.C.
20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference
rooms. These SEC filings are also available to the public from
commercial document retrieval services and at the SEC's Internet web
site at www.sec.gov. Documents filed by Raytech and incorporated by
reference are available without charge upon request to: Raytech
Corporation, 711 Tech Drive, Crawfordsville, IN 47933. See Item 2,
"Subject Company Information," and Item 3, "Identity and Background
of Filing Person" in this transaction statement.
If you have any questions about this going-private transaction,
please call Ira R. Halperin, the Filing Persons' special legal
counsel, at (516) 747-0300.
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SPECIAL FACTORS
PURPOSES, ALTERNATIVES, REASONS AND EFFECTS
OF THE GOING-PRIVATE TRANSACTION
Purposes
The purpose of the going-private transaction is for the Trust, the
majority stockholder of Raytech, through the merger subsidiary, to acquire all
of the outstanding shares of Raytech's stock and to terminate Raytech's
registration under the Exchange Act. The Trust was created to assume all
liabilities of Raytech, and its predecessors and successors in interest, in
actions involving personal injury or death claims caused by exposure to asbestos
containing products for which Raymark or its predecessors and affiliates have
legal liability. The Trust has a fiduciary duty to the victims and the families
of victims with such asbestos related claims. It is obligated to use the Trust's
assets and income to pay the holders of these claims in a way that treats them
fairly, equitably and reasonably in light of the extremely limited assets
available to satisfy these claims. As the majority stockholder of Raytech, the
Trust and the Trustees must continuously review the operations of Raytech and
assess taking courses of action that could allow it to increase the amounts paid
to the holders of asbestos related claims for which the Trust has assumed
liability.
The Trust's three trustees, are independent trustees selected as part of
Raytech's plan of reorganization and have, as their sole function, the duty of
administering and distributing the Trust's assets to the asbestos victims and
their families. By engaging in the going-private transaction, we believe that
Raytech will realize significant cost savings which should result in increased
assets and income available to the Trust, as the sole shareholder of Raytech,
which will allow it to increase the amounts paid to the holders of asbestos
related claims for which the Trust has assumed liability.
Upon completion of the Acquisition, less than 10% of the outstanding
shares of Raytech's common stock will be held by unaffiliated public
stockholders. We believe that the going-private transaction is desirable because
it will relieve Raytech of the substantial obligations and expenses of a public
company. We believe that Raytech's direct and indirect expenses of complying
with the Exchange Act have a negative effect on it's business operations and its
financial performance. In addition, we expect these expenses will increase, due
to recent legislative and regulatory initiatives to improve corporate governance
(such as the Sarbanes-Oxley Act of 2002).
We estimate that Raytech spent approximately $1,430,000 for the year ended
December 31, 2004, in costs related to being a public company. These costs can
be attributed to directors' and officers' insurance (approximately $550,000 on
an annual basis); costs and fees related to filings with the SEC and NYSE and
shareholder communications (approximately $300,000 on an annual basis); costs
related to complying with the Sarbanes-Oxley Act of 2002 (approximately $350,000
on an annual basis), and a portion of the fees paid for audit and audit related
services (approximately $230,000 on an annual basis). These costs would not have
been incurred if Raytech were a private company at the time.
To our knowledge, Raytech has no present intention or current or
foreseeable ability to raise capital by selling securities in a public offering,
or to acquire other business entities using its stock as the consideration for
any such acquisition. For these reasons, Raytech is unlikely to be in a position
to benefit from its status as a public company. Based on Raytech's size and
resources, we do not believe the costs associated with Raytech remaining a
public company are justifiable. In light of the high costs, we believe that it
is desirable for Raytech to eliminate the administrative and financial burden of
remaining a public company. We believe that the costs to Raytech of remaining a
public company are too high in relation to the benefits of being a public
company, and that it would be consistent with the purposes for which the Trust
was formed to take the actions necessary to complete the going-private
transaction.
Trustees' Actions
At a meeting of the Trustees on January 16, 2003, Robert F. Carter, the
Legal Representative for Future Claimants and a Director of Raytech, advised the
Trustees that he had received a positive response from the attorney for the
Department of Justice that was representing the United States Environmental
Protection Agency, concerning the possibility of accelerating the closing of the
agreements with the Environmental Creditors. Also present at the meeting either
in person or telephonically were Robert I. Komitor and Robert B. Steinberg
(Members of the Trust Advisory Committee), Stanley J. Levy (Chairman of the
Board of Directors of Raytech), Jack Feinblatt (Executive Administrator of the
Trust), Eric J. Lomas (Member of HT Capital Advisors LLC, a financial advisor to
the Trust,
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and a Chartered Financial Analyst who has been actively involved in the
investment banking industry for over two decades and has completed numerous
merger and acquisition assignments, valuations, fairness opinions and
financings) and George A. Davidson (General Counsel to the Trust).
At a meeting of the Trustees on December 1, 2004, Mr. Carter advised the
Trustees that the Environmental Creditors had agreed with a proposal of the
Trust to accelerate the terms of the 2000 and 2001 agreements rather than
waiting for the triggering events in the Raymark bankruptcy that would then
obligate the Trust and the Environmental Creditors to complete the transactions
provided therein. While not specifically discussed at the meeting, the Trustees
were aware that the same consideration required to be paid under the 2000 and
2001 agreements would be paid to the Environmental Creditors under any
acceleration agreement. Also present at the meeting either in person or
telephonically were Mr. Komitor, Mr. Levy, Mr. Lomas and Mr. Davidson.
At a meeting of the Trustees on January 18, 2005, the Trustees discussed
the current state of affairs at Raytech and determined to invite Mr. Lomas to
the next Trust meeting to address whether it might be in the best interest of
the beneficiaries of the Trust to take Raytech private. Also present at the
meeting either in person or telephonically were Mr. Carter, Mr. Levy, Mr.
Davidson and Mr. Feinblatt.
At a meeting of the Trustees on February 10, 2005, Ira R. Halperin, a
partner in the law firm of Meltzer, Lippe, Goldstein and Breitstone, LLP,
discussed with the Trustees certain securities laws compliance issues which
could be raised by the completion of the acceleration of the 2000 and 2001
Agreements with the Environmental Creditors, particularly if the Trust was
entertaining the idea of taking Raytech private. Mr. Lomas briefed the Trustees
on the feasibility of engaging in a Raytech going-private transaction. The
Trustees then discussed the potential for such a transaction and determined that
further investigation and consideration of these transactions should be made. On
February 16, 2005, the Trust engaged Meltzer, Lippe as Special Counsel to
provide advice in connection with the feasibility of a Raytech going-private
transaction. Also present at the meeting either in person or telephonically were
Kevin E. Irwin (General Counsel to the Trust), Mr. Komitor, Robert B. Steinberg
(Member of the Trust Advisory Committee), Mr. Carter, Mr. Levy and Mr.
Feinblatt.
At a meeting of the Trustees on February 28, 2005, Mr. Lomas gave an oral
presentation to the Trustees of the advantages and disadvantages of engaging in
a going-private transaction and expressed his opinion that Raytech could realize
significant cost savings as a result thereof which would accrue to the Trust and
thus help it to increase the amounts paid to the holders of asbestos related
claims for which the Trust had assumed liability. Additionally, in his opinion,
it would be easier for Raytech to complete the turnaround efforts of its new
management and for the Trust to eventually realize the maximum value of its
holdings in Raytech if Raytech was a private company. Also present at the
meeting either in person or telephonically were Mr. Irwin, Mr. Komitor, Mr.
Steinberg, Mr. Carter, Mr. Levy and Mr. Halperin.
At a meeting of the Trustees on March 15, 2005, Mr. Halperin provided
advise on a possible two-step going-private transaction which would include the
closing of the transaction with the Environmental Creditors followed by a
short-form Delaware merger. Mr. Halperin and Mr. Carter advised on the status of
a potential acceleration of the 2000 and 2001 Agreements with the Environmental
Creditors. Also present at the meeting either in person or telephonically were
Mr. Irwin, Mr. Komitor, Mr. Carter, Mr. Levy and Mr. Lomas.
At a meeting of the Trustees on April 7, 2005, Mr. Lomas gave an oral
presentation to the Trustees on the general state of the automotive sector of
the economy and the stock prices of automotive related companies. Mr. Halperin
and Mr. Carter advised on the status of a potential acceleration of the 2000 and
2001 Agreements with the Environmental Creditors. Also present at the meeting
either in person or telephonically were Mr. Irwin, Mr. Komitor, Mr. Steinberg,
Mr. Carter, Mr. Levy and Mr. Feinblatt.
At a meeting of the Trustees on May 25, 2005, the Trustees approved the
terms of the proposed 2005 Agreement and authorized Richard A. Lippe, the
Managing Trustee, to execute it on behalf of the Trust. Also present at the
meeting either in person or telephonically were Mr. Irwin, Mr. Steinberg, Mr.
Carter, Mr. Levy and Mr. Feinblatt.
At a meeting of the Trustees in June 16, 2005, Mr. Carter advised on the
status of the pending execution of the proposed 2005 Agreement with the
Environmental Creditors. Mr. Lomas provided materials to the Trustees that
included a general rationale for a proposed Raytech going-private transaction
and the considerations to be included in determining a fair price to offer the
minority shareholders in the transaction. Mr. Lomas' materials included a
reference to a report prepared for Raytech by W.Y. Campbell & Company in October
2004, that included an analysis of Raytech's business as being a factor that the
Trustees could rely upon in determining whether to
12
undertake the going-private transaction. The Trustees discussed the Campbell
Report and determined that the report and its conclusions was not a factor that
would be considered because they believed that assumptions used in the report
were incorrect, the report was prepared for Raytech for a purpose unrelated to a
going-private transaction and the report was approximately seven months old and
during the period following the issuance of the report, Raytech's business, and
overall market conditions had deteriorated. The Trustees also discussed several
developments which had had a detrimental effect upon the operation and value of
Raytech including, Raytech's inability to achieve desired productivity levels in
the domestic OEM business, the loss of customers due to competitive pressures,
unanticipated developments negatively affecting the U.S. automotive industry,
additional costs incurred as a result of Raytech's delay in closing one of its
manufacturing facilities, and lower than expected EBITDA for the 2004 fiscal
year. No decision was made on whether to undertake a Raytech going-private
transaction. Also present at the meeting either in person or telephonically were
Mr. Irwin, Mr. Steinberg, Mr. Komitor, Mr. Carter, Mr. Levy, Mr. Halperin and
Mr. Feinblatt.
At a telephonic meeting of the Trustees on July 6, 2005, Mr. Halperin
advised the Trustees that the 2005 Agreement with the Environmental Creditors
would be completely signed by all parties on July 7, 2005. After discussion, the
Trustees unanimously agreed to engage in a two-step going-private transaction by
completing the Acquisition and conducting a short-form merger in the State of
Delaware. Mr. Lomas then advised the Trustees of the prior twelve-month and
recent trading history of Raytech's stock. He also advised the Trustees that
Raytech stock closed the day at a price of $1.32. The Trustees and Mr. Lomas
assessed the stock's closing price on July 6, 2005 and the overall downward
trend of the stock price. In addition, the Trustee's and Mr. Lomas discussed
Raytech's disclosure of the delisting notice received by it from the NYSE, its
effect on the stock price and the fact that Raytech responded to the NYSE that
it did not believe that it could comply with the NYSE criteria. The Trustees
also discussed the reasons and factors they considered in determining whether to
engage in the going private transaction. See "Special Factors - Purposes,
Alternatives, Reasons and Effects of the Going Private Transaction - Reasons"
and "Fairness of the Going Private Transaction." Mr. Lomas advised the Trustees
that based upon the factors considered by the Trustees, some of which were
outlined in Mr. Lomas' June 16, 2005 report, they would be able to establish a
price that was fair to pay to the unaffiliated public stockholders in the
going-private transaction. Using his knowledge of the automotive industry, his
extensive experience as a Chartered Financial Analyst, his knowledge of the
factors considered by the Trustees, and his ongoing review and historical
knowledge of Raytech's financial condition, performance and growth prospects,
Mr. Lomas advised the Trustees that a price of $1.32 per share was a fair price
to offer to the unaffiliated public stockholders. See "Reports, Opinions,
Appraisals and Negotiations." The Trustees were aware that Mr. Lomas' advice was
not based upon any formal financial analysis of Raytech conducted by Mr. Lomas
or HT and Mr. Lomas' advice was one of several factors taken into consideration
by the Trustees in determining whether to engage in the going-private
transaction and the price to be offered to the unaffiliated public stockholders.
After further discussion, the Trustees unanimously agreed that based upon all of
the factors considered by them, a price of $1.32 per share was a fair price to
offer to the unaffiliated public stockholders and that the merger subsidiary
would offer the unaffiliated public stockholders $1.32 per share in the
going-private transaction. Also present at the meeting were Mr. Irwin, Mr.
Carter and Mr. Levy.
Alternatives
We believe that the going-private transaction is the quickest and most
cost-effective way for us to acquire Raytech's outstanding public minority
equity interest. Because of the 2000 and 2001 settlement agreements and the
agreement of the Environmental Creditors to enter into the 2005 Agreement, we
are able to acquire a sufficient percentage of Raytech's outstanding stock to
allow us to use a short form merger to acquire Raytech's remaining outstanding
public minority interest. Therefore, we decided against a long-form merger
because of the cost and delay of obtaining the approvals of the unaffiliated
public stockholders. We also rejected the alternative of a tender offer for
Raytech's common stock. A tender offer would entail additional costs estimated
to be between $150,000 and $300,000, and a subsequent short-form merger could
still be required. As of March 11, 2005 Raytech's common stock was held of
record by 1,469 stockholders. As a result, we are not otherwise able to cause
the registration of Raytech's stock to be terminated, which would be permitted
if either Raytech's stock was held of record by less than 300 stockholders or
Raytech's stock was held of record by less than 500 stockholders and Raytech's
total assets did not exceed $10,000,000 on the last day of 2002, 2003 and 2004.
The short-form merger is, therefore, the quickest and most efficient way for us
to acquire Raytech's outstanding public minority equity interest and complete
the going private transaction
13
Reasons
We considered several factors in determining whether to effect the
going-private transaction, including these:
o the duty to maximize the assets and income of the Trust to enable the
Trust to pay the holders of asbestos related claims and their families in
a way that the holders of these claims are treated fairly, equitably and
reasonably in light of the extremely limited assets available to satisfy
these claims.
o the decrease in costs, particularly those associated with being a public
company (for example, as a privately-held entity, Raytech would no longer
be required to file quarterly, annual or other periodic reports with the
SEC or publish and distribute to its stockholders annual reports and proxy
statements), that the Trust's board of trustees anticipates could result
in significant savings, including supplemental audit and consulting fees
necessary for public companies and legal fees;
o the elimination of additional burdens on Raytech's management caused by
being a public company (including, for example, the dedication of time and
resources of Raytech's management and board of directors to stockholder,
investor, and public relations matters);
o that given Raytech's relatively small shareholder base, the costs of
maintaining Raytech's status as a public company are not justified and
that Raytech and its majority shareholder currently derive no material
benefit from registration under the Exchange Act;
o the greater flexibility that Raytech's management would have to focus on
long-term business goals, rather than issues of being a public company;
o the payment of $1.32 per share might otherwise be difficult for the
unaffiliated public stockholders to realize (especially those stockholders
with large holdings of shares), in light of the illiquidity of the market
for shares of Raytech common stock;
o recent public capital market trends affecting micro-cap companies (like
Raytech), including a reduction in interest by institutional investors;
o the elimination of conflict of interest issues with the minority
stockholders;
o the ability to undertake a going-private transaction using a less costly
short-form merger because of the agreement by the Environmental Creditors
to accelerate the settlement of the 2000 and 2001 Agreements by executing
the 2005 Agreement; and
o the recent disclosure by Raytech of the impending delisting of its stock
by the NYSE will make the market for the stock even more illiquid than it
currently is.
We also considered the advantages and disadvantages of continuing
Raytech's current status as a majority-owned, public subsidiary. In our view,
the principal advantage would be our ability to make other uses of the assets
and income that would otherwise be required to pay the purchase price for the
acquisition of the shares and the short-form merger. The disadvantages of
continuing Raytech as a majority-owned, public subsidiary include the inability
to achieve many of the benefits discussed above. We concluded that the
advantages of continuing Raytech's current status were significantly outweighed
by the disadvantages of doing so.
We seek to accomplish the going-private transaction as promptly as
practicable after acquiring beneficial ownership of greater than 90% of the
shares of Raytech common stock because we believe that it is in the best
interest of the holders of asbestos related claims for the Trust to take
advantage of the benefits of Raytech becoming a privately-owned company. By
engaging in the going-private transaction, we believe that Raytech will realize
significant cost savings which should result in increased assets and income
available to the Trust, as the sole shareholder of Raytech, which will allow it
to increase the amounts paid to the holders of asbestos related claims for which
the Trust has assumed liability.
As a result of the settlement by the Raymark estates of all liability
insurance claims by them against their liability insurance carriers and the
determination by the Trust and the Environmental Creditors that it was in each
party's interest to accelerate the settlement of the 2000 and 2001 agreements
instead of waiting until a bankruptcy or liquidation plan for the Raymark
estates to be confirmed, the Trust and Environmental Creditors entered into the
14
2005 Agreement. Under the 2000 and 2001 Agreements, the Environmental Creditors
were obligated to sell the shares of Raytech stock they received in the
reorganization to the Trust when a bankruptcy or liquidation plan for the
Raymark estates was confirmed. The effect of the 2005 Agreement is the
acceleration of the completion of the transactions originally agreed to in the
2000 and 2001 agreements.
Effects
General. After the going-private transaction, we will have complete
control over the conduct of Raytech's businesses and assets. Its management will
be under our exclusive control. In addition, we will benefit from any future
increases in the value of Raytech's business, and, conversely, we will bear the
complete risk of any losses incurred in the operation of Raytech's business and
any decrease in the value of Raytech's business. Once the short-form merger is
completed, the unaffiliated public stockholders will no longer be able to
benefit from a sale of Raytech to a third party. If the merger is completed,
Raytech will become a wholly owned direct subsidiary of the merger subsidiary,
which is a direct subsidiary of the Trust. The merger subsidiary will have a
100% interest in the net book value and net loss of Raytech (approximately
$68,962,000 and approximately ($1,736,000) respectively), based upon the
unaudited financial statements of Raytech as of and for the 26 weeks ended July
3, 2005).
We expect to own approximately 90.6% of Raytech's outstanding stock,
immediately following the Acquisition and prior to the short-form merger.
The Unaffiliated Public Stockholders. In the short-form merger, the
unaffiliated public stockholders that do not exercise their right to appraisal
will receive $1.32 in cash, the price determined by the Trust and the board of
directors of merger subsidiary, for each share of Raytech common stock held by
them and each share shall be cancelled. Upon completion of the short-form
merger, the unaffiliated public stockholders will no longer have any interest in
Raytech, and will not be stockholders any longer. They will not participate in
Raytech's future earnings and growth. They will no longer bear the risk of any
decreases in Raytech's value. In addition, the unaffiliated public stockholders
will not share in any distribution of proceeds after a sale of any of the
businesses of Raytech. See Item 6, "Purposes of the Transaction and Plans or
Proposals - Plans." All of the other benefits of stock ownership by the
unaffiliated public stockholders (such as the right to vote on certain corporate
decisions, to elect directors, and to receive distributions upon the sale of
Raytech), as well as the benefit of potential increases in the value of
Raytech's stock price, will be extinguished upon completion of the short-form
merger. Following the short-form merger, the unaffiliated public stockholders
will have liquidity as a result of receiving the merger consideration in
exchange for their shares of Raytech's stock.
In summary, if the short-form merger is completed, the unaffiliated public
stockholders will give up all of their rights as stockholders of Raytech.
Raytech. If the short-form merger is completed, public trading of the
shares of Raytech's common stock will cease. We intend to deregister the Raytech
common stock under the Exchange Act. As a result, Raytech will no longer be
required, under the federal securities laws, to file reports with the SEC, and
will no longer be subject to the proxy rules under the Exchange Act. Raytech
will no longer be subject to the Sarbanes-Oxley Act of 2002 or the liability
provisions of the Exchange Act and the principal stockholders of Raytech will no
longer be subject to reporting their ownership of shares of Raytech common stock
under Sections 13 and 16 of the Exchange Act, or the obligations under Section
16 of the Exchange Act to disgorge to Raytech certain "short-swing" profits from
the purchase and sale of shares of Raytech's common stock. Raytech's officers
will not be required to certify the accuracy of its financial statements.
In addition, on August 1, 2005, Raytech was notified by the NYSE that it
is not in compliance with the NYSE's increased continued listing standards.
Raytech is considered "below criteria" due to the fact that its total market
capitalization is less than $75 million over a 30-day trading period and its
stockholders' equity is less than $75 million. As of August 8, 2005, the NYSE
made available on its consolidated tape, an indicator, "BC," indicating Raytech
is below the NYSE's quantitative continued listing standards. On September 15,
2005, Raytech submitted its response to the NYSE. In its response, Raytech
stated that as a result of its continued losses and the proposed going-private
transaction, Raytech's management does not believe that it can take steps which
will permit Raytech to satisfy the financial continued listing criteria of the
NYSE and Raytech is not in a position to propose a business plan to come into
compliance with the listing standards.
Treatment of options. Pursuant to the terms of the short-form merger, all
vested options to purchase Raytech's stock that are exercised by their holders
prior to the effective date of the merger will be converted into the right to
receive the short-form merger consideration of $1.32 per share. Upon exercise of
options with an exercise
15
price less than $1.32 per share, each holder will receive the difference between
the exercise price of its options and $1.32 per option share. Holders of options
will not receive any consideration if they do not exercise their options prior
to the effective date of the merger. As of January 2, 2005, Raytech had
outstanding 1,942,164 options, of which 940,764 were exercisable. The per share
exercise price for all of the options ranges between $4.25-$5.70 and thus we
believe that the likelihood of an option holder exercising its options is
remote.
Trustees / Directors. Our Trustees and Directors are the persons listed in
Schedule I to this transaction statement.
FAIRNESS OF THE GOING-PRIVATE TRANSACTION
Fairness. We currently own approximately 82.86% of the outstanding shares
of Raytech common stock. We expect to own approximately 90.6% of Raytech's stock
after completing the acquisition of shares under the 2005 Agreement. As a
result, we are considered an "affiliate" of Raytech under Rule 12b-2 of the
Exchange Act. The rules of the SEC require us to express our belief about the
substantive and procedural fairness of the going-private transaction to the
unaffiliated public stockholders of Raytech. In compliance with Rule 13e-3 under
the Exchange Act, the Trust and merger subsidiary have considered the fairness
of the going-private transaction to the unaffiliated public stockholders, and
unanimously concluded that the going-private transaction is fair to them.
The merger subsidiary is the wholly-owned subsidiary of the Trust and was
formed specifically to engage in the merger with Raytech. The Trustees of the
Trust are also the directors of the merger subsidiary. The merger subsidiary has
no other business operations. In their capacity as directors of the merger
subsidiary, the Trustees assessed the fairness of the going private transaction
to the unaffiliated public stockholders. The material factors the merger
subsidiary relied upon in reaching its fairness determination are identical to
the material factors relied upon by the Trust in reaching its determination.
We determined to consummate a proposed two-step plan to acquire the
outstanding minority stockholder interest in Raytech through the going-private
transaction. The initial step of the going-private transaction is the completion
of the Acquisition under the 2005 Agreement. After the Acquisition, our merger
subsidiary will acquire, for a per share price of $1.32 in cash, all of the
shares of Raytech common stock held by the unaffiliated public stockholders.
Factors we considered in determining purchase price. We have determined
that the going-private transaction is both substantively and procedurally fair
to the unaffiliated public stockholders. In coming to that determination, we
considered and assessed the following material factors:
o Information concerning the financial performance, condition, business
operations and prospects of Raytech. We reviewed Raytech's current
financial condition, financial performance, and growth prospects. These
issues were reviewed in the context of identifying ways to reduce expenses
that have a negative effect on Raytech's business operations and its
financial performance to allow the Trust, as the majority stockholder of
Raytech, to maximize the amounts paid to the holders of asbestos related
claims for which the Trust has assumed liability. Specifically, we
identified the following factors that, in the opinion of the Filing
Persons will continue to negatively impact Raytech's business:
o Raytech is a relatively small supplier of a limited number of
components. Raytech's largest customers have been experiencing
margin erosion due to reduced volume, high labor and benefit costs
and intense foreign competition and there is pressure on them to cut
component costs. As a result, Raytech's customers have demanded
component price reductions. Raytech's largest business segment,
sales to domestic original equipment manufacturers has been
significantly impacted by these price reductions, resulting in a
19.7 percent decrease in gross profit for the twenty-six weeks ended
July 3, 2005, despite achieving 7.8 percent sales growth compared to
the same period in 2004.
o As a result of the general downturn in the American automobile
industry, the business of General Motors, Ford Motor Company and
DaimlerChrysler, Raytech's primary customers for its automotive wet
friction products, and the industry as a whole, has been negatively
impacted, which has, in turn, negatively impacted Raytech's
business.
o Raytech anticipates that continued increases in the price of raw
materials necessary for the manufacture of its products will further
negatively impact its business. Due to the demand for
16
component price reductions and the terms of some of its current
sales contracts, Raytech bears a portion of the expense of these
price increases, further reducing its profit margin.
o The trend in the automotive aftermarket is toward longer
transmission service and replacement cycles due to improved quality,
which will negatively impact Raytech's revenues and margins.
o Raytech has also assumed the liability for the pension plans of
Raymark as part of the Chapter 11 reorganization. The plans are
under funded and Raytech, through an agreement with the Internal
Revenue Service, is providing both current contributions and
catch-up contributions. These funding obligations will continue to
impact Raytech's earnings.
We considered the impact of the factors listed above in assessing
Raytech's value as a going concern and in determining the fairness of the
purchase price to be paid to the unaffiliated public stockholders. We did not
conduct a formal analysis of Raytech using standard going concern economic
models such as discounted cash flow or cash flow multiples. See "Fairness of the
Going Private Transaction - Factors not considered in determining purchase
price."
o Cash payment for stock. The going-private transaction represents an
opportunity for the unaffiliated public stockholders to realize $1.32 per
share in cash for their stock. We believe this price might otherwise be
difficult for unaffiliated public stockholders (especially those
stockholders with large holdings of shares) to realize, in light of the
lack of liquidity of the market for shares of Raytech common stock.
o Public Company Compliance. We also considered that there is an increased
cost to Raytech for compliance with the additional requirements on public
companies under the Sarbanes-Oxley Act of 2002 and related SEC
regulations, among other expenses of being a public company. We expect
these increased costs to continue to adversely impact Raytech's financial
performance which will reduce the amounts available for payment to the
holders of asbestos related claims for which the Trust has assumed
liability.
o Current Market Prices, Historical Market Prices. We considered the current
and historic trading prices of Raytech's common stock together with the
future prospects for Raytech's business. The stock closed at $1.32 on July
6, 2005. During the twelve months before we announced the going-private
transaction, the stock price ranged from $1.01 per share (in April, 2005)
to $2.08 per share (in December, 2004). After reaching $2.08 per share,
the stock price began a downward trend. As discussed above, we identified
several factors that, in the opinion of the Filing Persons, will continue
to negatively impact Raytech's business. The determination of the $1.32
purchase price included the impact that these factors had and are expected
to have on Raytech's business and the market price of its stock.
o Limited Trading Market and Liquidity. We considered that there is a
limited trading market for Raytech's stock, and limited liquidity. The
average daily trading volume during the two months before our announcement
of the going-public transaction was less than 15,000 shares. It may be
extremely difficult for the unaffiliated public stockholders to sell their
Raytech stock without adversely impacting the stock's trading price. On
August 1, 2005, Raytech was notified by the NYSE that it is not in
compliance with the NYSE's increased continued listing standards. On
September 15, 2005, Raytech submitted its response to the NYSE. In its
response, Raytech stated that as a result of its continued losses and the
proposed going-private transaction, Raytech's management does not believe
that it can take steps that will permit Raytech to satisfy the financial
continued listing criteria of the NYSE and Raytech is not in a position to
propose a business plan to come into compliance with the listing
standards. In the event Raytech's common stock is delisted, the stock will
become even more illiquid.
o Limited Benefits from Being a Public Company. We considered that Raytech
has not been able to benefit from being a publicly traded company. Raytech
has had limited access to the public capital markets, because of its
limited trading volume and low trading price of its common stock. We
believe that the future prospects for stock price appreciation by Raytech
are limited because investment banks have not covered Raytech's stock.
With limited prospects for appreciation and the incurrence of expenses and
fees as a result of being a public company, the cash that will be
available to the Trust to pay the holders of asbestos related claims for
which the Trust has assumed liability will be reduced.
o Continuing declines in stock price. We also gave weight to the possibility
of future declines in the stock trading price in determining the $1.32 per
share purchase price. Lower stock prices will negatively impact the
unaffiliated public stockholders. The impending delisting of Raytech's
stock from the NYSE and public
17
capital market trends affecting micro-cap companies (like Raytech), will
likely result in a reduction in interest by institutional investors.
Following the short-form merger, the unaffiliated public stockholders will
have liquidity as a result of receiving the merger consideration in
exchange for their shares of Raytech's stock.
o Oral Advice of HT Capital Advisors LLC. We received oral advice from HT
Capital Advisors LLC, financial advisors to the Trust, that a price of
$1.32 per share was a fair price to offer to the unaffiliated public
stockholders. See "Reports, Opinions, Appraisals and Negotiations."
o Tangible Book Value and Net Book Value. The $1.32 per share consideration
is a midpoint between the per share tangible book value and net book value
of Raytech's common stock which, based on the most recent unaudited
balance sheets of Raytech, was approximately $1.00 and $1.65,
respectively, at July 3, 2005. Tangible book value was calculated by
excluding the net carrying amount of Raytech's trademarks, goodwill,
unpatented technology, and other intellectual property aggregating
approximately $27,186,000 as of July 3, 2005 from Raytech's net book value
on such date. We believe that as a manufacturing company, the value of
Raytech's tangible assets may better approximate the value of the Company
than the aggregate of both its tangible and intangible assets. In
addition, we believe that Raytech has been unable to productively utilize
its assets which has resulted in it continuing to incur substantial
operating losses and cash flow deficits. We therefore believe that the
$1.32 per share consideration, as a midpoint between the two values, is a
fair price to offer to the unaffiliated public stockholders.
o Appraisal rights. We also considered the Delaware laws concerning
appraisal rights, in concluding that the purchase price is fair. Under
Delaware law, the unaffiliated public stockholders, other than the
Environmental Creditors, are entitled to exercise appraisal rights and
demand payment if the "fair value" for their shares. A court may determine
"fair value" to be more or less than the payment being made in this
going-private transaction.
Factors not considered in determining purchase price. We did not consider
the following factors to be material in determining the fairness of the
going-private transaction:
o No Firm Offers. We are not aware of any firm offers to purchase Raytech's
business that have been made during the past two years by any unaffiliated
person.
o Merger, Sale, or Other Transfer of Assets. Raytech has not engaged in a
merger or consolidation with another company, or in the sale (or other
transfer) of a substantial part of its assets during in the last two
years.
o Securities Purchases. During the past two years, no one has purchased
enough Raytech common stock to exercise control of Raytech.
o Liquidation Value. We did not give any consideration to liquidation value
in determining the fairness of the purchase price to be paid to the
unaffiliated public stockholders because Raytech will continue to operate
its businesses following completion of the merger. Liquidation value is
not a relevant or accurate valuation method for a business that is a
viable going concern. In addition, we intend to retain our majority
holdings in Raytech, and we do not intend to seek a buyer for Raytech in
the immediate future. This fact foreclosed the opportunity to consider an
alternative transaction with a third party purchaser of Raytech or
otherwise provide liquidity in the form of a third party offer to the
unaffiliated public stockholders. Although we did not market our interest
in Raytech for sale, we believe that finding a third party buyer for
Raytech was unlikely under these circumstances. It is also unlikely that
finding a third party buyer for Raytech is a realistic option for the
unaffiliated public stockholders given our position as the majority
stockholder of Raytech.
o Discounted Cash Flow and Cash Flow Multiples. For discounted cash flow
analysis to be a valid indicator of value, it is important to be able to
project results with some certainty for a reasonable number of years into
the future. In the case of Raytech, the operating environment and industry
conditions are so unstable as to make forecasting extremely difficult and
of little, if any, value. Furthermore, these same unstable operating and
industry conditions also make it extremely difficult to determine an
acceptable discount factor, without which this method is not useful as an
indicator of value. As to multiples of cash flow, we felt that the loss
generating operations anticipated in the immediate future also make it
very difficult to arrive at any meaningful conclusion. Based upon the
foregoing, we did not use these economic models in
18
assessing Raytech's value as a going concern or in determining the
fairness of the purchase price to be paid to the unaffiliated public
stockholders.
o Campbell Report. Raytech obtained an analysis of its business from W.Y.
Campbell & Company in October 2004. This analysis concluded that the fair
value of Raytech's common stock was between $1.21 and $2.05. We did not
rely upon the report in determining the fairness of the going-private
transaction and do not believe that the findings of the report are
materially related to the going-private transaction for the following
reasons:
o The report was prepared for Raytech for the purpose of identifying
strategic options available to it for the sale of all or some of its
business segments, not for the purpose of determining a value of the
company for the purpose of engaging in a going-private transaction;
o The report was issued approximately nine months prior to the
announcement of the going private transaction and during the period
following the issuance of the report, Raytech's business, and overall
market conditions deteriorated; and
o Assumptions relied upon by Campbell have subsequently been proven
to be incorrect. Specifically, compared with Campbell's assumptions,
Raytech realized lower than expected gross profit, gross margin and EBITDA
for 2004 and incurred unanticipated restructuring expenses and impairment
charges.
A copy of the Campbell Report is attached to this transaction statement as
Exhibit (e).
Procedural fairness. Delaware law allows us to effect the merger by action
of our merger subsidiary's board of directors, without any action on the part of
the board of directors or other shareholders of Raytech, but provides Raytech's
public shareholders who object to the merger with the statutory right to have
the "fair value" of their shares determined by a court and paid to them by
following the procedures outlined in Section 262 of the DGCL, which are
described elsewhere in this transaction statement under the heading Item 4(c),
"Terms of the Transaction". A determination of fair value ultimately depends on
an analysis of what a reasonable purchaser would pay for Raytech common stock.
o We considered requesting that Raytech establish a special committee to
determine the fairness of the going-private transaction but decided not to
pursue this option. In reaching such a conclusion, we considered the
statutory right of a holder of 90% of the outstanding stock of a
corporation under Section 253 of the DGCL. Section 253 creates an
affirmative right in a 90% stockholder to eliminate minority stockholders'
participation in the controlled corporation without any action by the
controlled corporation or its other stockholders, and without the
requirement that the parent corporation appoint a special committee to
determine the fairness of the merger. We determined that by disclosing to
the unaffiliated public stockholders all information that is reasonably
necessary in order to enable them to decide, on a fully informed basis,
whether to exercise their appraisal rights, that our obligation, if any,
to the unaffiliated public stockholders is satisfied. Further, we believe
that a special committee would need to retain its own independent legal
counsel and financial advisors to help evaluate the fairness of the
going-private transaction. We believe that the cost of hiring counsel and
advisors, and the diversion of management resources to assist the special
committee, would be a further drain on the resources of Raytech and reduce
the cash available to holders of asbestos related claims for which we have
assumed liability, which would likely lead us to reduce the price we would
offer to pay to the unaffiliated public stockholders in the going-private
transaction.
Certain negative considerations. We evaluated certain factors that weighed
against the fairness of the terms of the going-private transaction and its
procedural fairness. We also discussed the absence of key procedural safeguards.
In summary, the going-private transaction does not protect the unaffiliated
public stockholders in the following ways:
1. The unaffiliated public stockholders did not vote to approve or oppose
the going-private transaction.
2. An unaffiliated representative was not appointed to act solely on
behalf of the unaffiliated public stockholders.
3. Raytech's board of directors did not vote to approve or oppose the
going-private transaction.
19
These negative considerations are described in more detail below:
o Termination of participation in future growth of Raytech. Following the
completion of the going-private transaction, the unaffiliated public
stockholders would cease to participate in future earnings or growth of
Raytech. They would not benefit from any increases in the value of Raytech
stock.
o Conflicts of interest. The financial interests of the Trust are adverse to
the financial interests of the unaffiliated public stockholders. In
addition, directors of Raytech have actual or potential conflicts of
interest in connection with the going-private transaction. Two of the
Trust's Trustees are also directors of Raytech.
o No public stockholder approval. The unaffiliated public stockholders will
not have an opportunity to vote on the going-private transaction. We
believe that this factor is outweighed by the right of the unaffiliated
public stockholders to seek appraisal and payment for the fair value of
their shares under Delaware law.
o No unaffiliated representative or independent director approval. Because
Raytech's board of directors took no action to consider or vote upon the
going-private transaction, no special committee of Raytech's directors was
appointed to evaluate the going-private transaction. No independent
representative of the unaffiliated public stockholders was appointed to
act solely on their behalf, to negotiate the terms of the going-private
transaction or to consider its fairness. We determined that the costs of
hiring and compensating a representative (including fees for independent
legal and financial advisors to the representative) would have outweighed
its benefit to the unaffiliated public stockholders.
o Raytech's board did not vote. We concluded that, had Raytech's board of
directors been asked to consider and vote upon the proposed going-private
transaction, and had Raytech agreed to do so, it would have wanted to hire
its own independent legal and financial advisors. These expenses would
have further consumed Raytech's financial resources. Because we intended
to and have the legal right under Delaware law to engage in the short-form
merger and going-private transaction without the approval of Raytech's
board of directors and even in the event of opposition by Raytech's board
of directors, we concluded that any consideration of or vote upon the
transaction by Raytech's board of directors, including the retention of
independent advisors, would not have provided any significant benefit to
the unaffiliated public stockholders.
We gave these negative factors due consideration. We concluded that none
of these factors (alone or taken together) is significant enough to outweigh the
positive factors and analyses that it considered. We believe that the
going-private transaction is fair to the unaffiliated public stockholders, both
substantively and procedurally.
We took note of the large number and wide variety of complex factors that
affect the fairness of the going-private transaction to the unaffiliated public
stockholders. We did not quantify, rank, or otherwise assign relative weights to
each of the specific factors we considered. Instead, we conducted an overall
analysis of these factors.
We believe that these factors provide a reasonable basis to form our
belief that the going-private transaction is substantively and procedurally fair
to the unaffiliated public stockholders.
Recent purchases of shares of Raytech Common Stock by the Trust.
The Acquisition. Other than as contemplated by the 2005 Agreement, the
Trust has not engaged in any recent purchases of shares of Raytech Common Stock.
A copy of the 2005 Agreement is attached to this transaction statement as
Exhibit (d).
SELECTED FINANCIAL DATA
The selected consolidated financial information presented below, under the
captions "Income Statement Data" for the years ended January 2, 2005 and
December 28, 2003 and December 29, 2002 and "Balance Sheet Data" at January 2,
2005 and December 28, 2003, have been prepared in accordance with United States
generally accepted accounting principles ("GAAP"). This information has been
derived from Raytech's audited consolidated financial statements included in its
annual report on Form 10-K for the fiscal year ended January 2, 2005, which
financial statements are incorporated by reference in this Transaction
Statement.
The selected consolidated financial information presented below, under the
captions "Income Statement Data" for the twenty-six weeks ended July 3, 2005 and
June 27, 2004 and "Balance Sheet Data" at July 3, 2005,
20
have been prepared in accordance with GAAP and have been derived from Raytech's
consolidated financial statements included in Raytech's Quarterly Report on Form
10-Q for the fiscal quarter ended July 3, 2005, which financial statements are
incorporated herein by reference. Please note that the interim results are not
necessarily indicative of results that may be expected for any other period of
the year.
--------------------------------------------------------------------------------------------------------------------
Years Ended Twenty-six weeks Ended
December 29, December 28, January 2, June 27, July 3,
Income Statement Data 2002 2003 2005 2004 2005
---------------------
--------------------------------------------------------------------------------------------------------------------
Audited Audited Audited Unaudited Unaudited
--------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
---------------------------------------------------------------------------------------------------------------------
Net Sales $ 209,866 $ 205,865 $ 227,313 $ 115,003 $ 123,958
---------------------------------------------------------------------------------------------------------------------
Gross Profit 36,771 26,126 40,935 23,588 18,947
---------------------------------------------------------------------------------------------------------------------
Operating (loss) profit 4,440 (57,473) (3,051) 4,562 (1,522)
---------------------------------------------------------------------------------------------------------------------
Net Income (loss) (2,825) (66,443) (2,750) 1,408 (1,736)
---------------------------------------------------------------------------------------------------------------------
Basic and diluted income (loss)
per share (.07) (1.59) (.07) .03 (.04)
---------------------------------------------------------------------------------------------------------------------
Weighted average number of 41,608 41,728 41,737 41,737 41,737
shares used in computing net
earnings (loss) per share (in
thousands):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
December 28, January 2, July 3,
Balance Sheet Data 2003 2005 2005
------------------
--------------------------------------------------------------------------------
Audited Audited Unaudited
--------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
Current assets $ 83,756 $ 94,452 $ 93,508
--------------------------------------------------------------------------------
Non-current assets 122,268 111,234 104,952
--------------------------------------------------------------------------------
Total assets 206,024 205,686 198,460
--------------------------------------------------------------------------------
Current liabilities 58,342 60,799 64,064
--------------------------------------------------------------------------------
Long-term Liabilities 62,384 61,687 64,911
--------------------------------------------------------------------------------
Total liabilities 120,726 122,486 128,975
--------------------------------------------------------------------------------
Shareholders' equity 75,910 73,180 68,962
--------------------------------------------------------------------------------
Book Value Per share 1.82 1.75 1.65
--------------------------------------------------------------------------------
Tangible Book Value Per Share 1.09 1.06 1.00
--------------------------------------------------------------------------------
Ratio of Earnings to Fixed Charges
Raytech's consolidated ratio of earnings to fixed charges is as follows:
For the Year Ended For the Twenty-six
Weeks
December 28, January 2, Ended July 3,
2003 2005 2005
-----------------------------------------------
Ratio of Earnings to Fixed Charges (27.84)* 0.85 (0.45)**
For the purposes of this ratio, "earnings" consists of earnings before income
taxes, minority interest and fixed charges, and "fixed charges" consists of
interest on indebtedness and capital lease obligations, and the interest
component of rental expenses.
21
*Reflects a deficiency of approximately $37,714,270
** Reflects a deficiency of approximately $483,475
FEDERAL INCOME TAX CONSEQUENCES OF THE GOING-PRIVATE TRANSACTION
The following is a summary of the material United States federal income
tax consequences of the going-private transaction to beneficial owners of shares
of Raytech Common Stock. This summary is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable treasury
regulations, judicial decisions, and current administrative rulings in effect on
the date of this Schedule 13E-3. This discussion does not address all aspects of
United States federal income taxation that may be relevant to particular
taxpayers in light of their personal circumstances, or to taxpayers subject to
special treatment under the Code (for example, financial institutions, real
estate investment trusts, regulated investment companies, brokers, dealers or
traders in securities or foreign currencies, life insurance companies, foreign
corporations, foreign partnerships, foreign estates or trusts, individuals who
are not citizens or residents of the United States, and beneficial owners whose
shares of Raytech common stock were acquired pursuant to the exercise of
warrants, employee stock options, or otherwise as compensation). This discussion
also does not address any aspect of state, local, foreign, or other taxation.
The receipt of cash or other assets by a stockholder (including the
Environmental Creditors) in the Acquisition, the short form merger, or through
the exercise of the stockholder's statutory appraisal rights, will be a taxable
transaction for U.S. income tax purposes with respect to taxpayers subject to
income taxation. Also, the transaction is likely to subject such stockholders to
tax under state and local income tax laws. Accordingly, a stockholder whose
shares are sold or exchanged as a consequence of the Acquisition or a
shareholder whose stock is purchased in the short-form merger, will recognize
gain or loss equal to the difference between (a) the value of the shares
exchanged and (b) the stockholder's adjusted tax basis in the shares. Cash
received in the short-form merger or as a result of appraisal rights is the
value of the shares for such purpose. The gain or loss will be treated as a
capital gain or loss. Generally, the gain or loss will be long-term capital gain
or loss if (at the effective date of the short-form merger) the stockholder's
holding period for his Raytech shares is more than one year. Holders of shares
of Raytech common stock should be aware that American Stock Transfer and Trust
Company, the paying agent, will be required in certain cases to withhold and
remit to the United States Treasury 31% of amounts payable in the short-form
merger to any stockholder that (1) has provided either an incorrect tax
identification number or no number at all, (2) is subject to backup withholding
by the Internal Revenue Service for failure to report the receipt of interest or
dividend income properly, or (3) has failed to certify to the paying agent that
such stockholder is not subject to backup withholding or that such stockholder
is an "Exempt Recipient." Backup withholding is not an additional tax, but
rather may be credited against the taxpayer's tax liability for the year. In
general, cash received by unaffiliated public stockholders who exercise
statutory appraisal rights in respect of appraisal rights will result in the
recognition of gain or loss to the dissenting stockholder. Any dissenting
stockholder should consult with his tax advisor for a full understanding of the
tax consequences of receiving cash in respect of appraisal rights pursuant to
the short-form merger.
Neither the merger subsidiary nor Raytech expects to recognize any gain,
loss, or income due to the short-form merger. Raytech has valuable tax
attributes, the most important of which is its net operating loss carryforward.
If the going-private transaction resulted in an ownership change of more than
fifty percent of the equity of Raytech, the net operating loss and other tax
attributes would be limited by section 382 of the Internal Revenue Code. Because
the Trust owns 82.86% of Raytech, its acquisition of the remaining 17.14% in the
going-private transaction, will not result in a change in ownership or affect
the continued viability of the existing tax attributes of Raytech.
EACH BENEFICIAL OWNER OF SHARES OF RAYTECH COMMON STOCK IS URGED TO
CONSULT HIS TAX ADVISOR ABOUT THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE
SHORT-FORM MERGER, INCLUDING THE APPLICATION OF STATE, LOCAL, FOREIGN, AND OTHER
TAX LAWS.
22
REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
Report, opinion or appraisal
We did not engage any third parties to perform any independent financial
analysis of the going-private transaction or the value of Raytech's common
stock. We have not received any written report, opinion, or appraisal from an
outside party relating to (a) the fairness of the merger consideration being
offered to the unaffiliated public stockholders or (b) the fairness of the
going-private transaction to Raytech or to its unaffiliated public stockholders.
HT Capital Advisors, LLC. In 2001, the Trust engaged HT Capital Advisors
LLC as a financial advisor with the responsibilities of providing general
financial and investment advice to the Trustees regarding the diversification of
its asset base and methods of investment of its available cash. HT Capital
Advisors is a private investment banking firm and, as part of its investment
banking activities, is regularly engaged in the valuation of businesses in
connection with mergers and acquisitions, management buyouts, private placement
financing and recapitalizations and valuations for corporate and other purposes.
HT is paid a monthly fee for providing services to the Trust. During its
engagement by the Trust, HT has gained knowledge of Raytech through its publicly
available filings with the SEC. HT was also familiar with the historical market
price for Raytech's stock. In its role as a financial advisor to the Trust, HT
was asked to provide the Trustees with an overview of a going-private
transaction as well as information on the advantages and disadvantages of
engaging in a going-private transaction. HT was not paid any separate
compensation for providing these services to the Trust.
On June 16, 2005, Eric J. Lomas, a member of HT, provided materials to the
Trustees in this regard. A copy of the HT materials provided to the Trustees is
attached to this transaction statement as Exhibit (c). Mr. Lomas is a Chartered
Financial Analyst (CFA) and has been actively involved in the investment banking
industry for over two decades. He has completed numerous merger and acquisition
assignments, valuations, fairness opinions and financings. HT was not asked to
provide the Trust with any further economic or financial analyses of the
going-private transaction or its fairness to the unaffiliated public
stockholders. At a telephonic meeting of the Trustees, held on July 6, 2005,
during which the Trustees unanimously agreed to engage in a two-step
going-private transaction by completing the Acquisition and conducting a
short-form merger in the State of Delaware, Mr. Lomas advised the Trustees of
the prior twelve-month and recent trading history of Raytech's stock. He also
advised the Trustees that Raytech stock closed the day at a price of $1.32. The
Trustees and Mr. Lomas assessed the stock's closing price on July 6, 2005 and
the overall downward trend of the stock price. In addition, the Trustee's and
Mr. Lomas discussed Raytech's disclosure of the delisting notice received by it
from the NYSE, its effect on the stock price and the fact that Raytech responded
to the NYSE that it did not believe that it could comply with the NYSE criteria.
The Trustees and Mr. Lomas also discussed the reasons and factors they
considered in determining whether to engage in the going private transaction.
See "Special Factors - Purposes, Alternatives, Reasons and Effects of the Going
Private Transaction - Reasons" and "Fairness of the Going Private Transaction."
Mr. Lomas advised the Trustees that based upon the factors considered by the
Trustees, some of which were outlined in Mr. Lomas' June 16, 2005 report, they
would be able to establish a price that was fair to pay to the unaffiliated
public stockholders in the going-private transaction. Using his knowledge of the
automotive industry, his extensive experience as a Chartered Financial Analyst,
his knowledge of the factors considered by the Trustees, and his ongoing review
and historical knowledge of Raytech's financial condition, performance and
growth prospects, Mr. Lomas advised the Trustees that a price of $1.32 per share
was a fair price to offer to the unaffiliated public stockholders. The Trustees
were aware that Mr. Lomas' advice was not based upon any formal financial
analysis of Raytech conducted by Mr. Lomas or HT and Mr. Lomas' advice was one
of several factors taken into consideration by the Trustees in determining
whether to engage in the going-private transaction and the price to be offered
to the unaffiliated public stockholders. HT has consented to the inclusion of
the materials provided to the Trustees as an exhibit to this transaction
statement.
W.Y. Campbell & Company. In 2004, Raytech engaged the services of an
outside party, W.Y. Campbell, to analyze the business of Raytech. While the
Trust did not select Campbell, we believe that Campbell was selected because it
possessed significant knowledge of the industry. Campbell rendered a report to
Raytech's board of directors on October 26, 2004. At that time, the board had
been considering a possible sale of Raytech or its business segments. After
receipt of the report, the Board determined not to market Raytech for sale. We
do not believe that the findings of the report are materially related to the
going-private transaction for the following reasons:
o The report was prepared for Raytech for the purpose of identifying
strategic options available to it for the sale of all or some of its
business segments, not for the purpose of determining a value of the
company for the purpose of engaging in a going-private transaction;
23
o The report was issued approximately nine months prior to the
announcement of the going private transaction and during the period
following the issuance of the report, Raytech's business, and overall
market conditions deteriorated; and
o Assumptions relied upon by Campbell have subsequently been proven
to be incorrect.
We also believe that current market conditions will continue to negatively
impact Raytech's business. See "Fairness of the Going Private Transaction -
Factors not considered in determining purchase price". A copy of the report of
Campbell is attached to this transaction statement as Exhibit (e).
In determining the price to pay to the unaffiliated public stockholders,
we also considered Raytech's substantial costs of being a public company,
including complying with securities laws, increased auditing costs, potential
liabilities under the Sarbanes-Oxley Act of 2002, increased costs of director
and officer liability insurance, the cost of shareholder communications and
public relations, and management inefficiencies created by the public spotlight.
As part of its analysis, we had discussions with members of Raytech's
management about its financial condition, its past and current business
operations, its financial condition, future prospects and operations, and other
matters as described in its public filings or as otherwise described in this
Transaction Statement. In addition, we reviewed other financial studies and
analyses and considered such other information as we considered appropriate.
TRANSACTION STATEMENT
ITEM 1. SUMMARY TERM SHEET.
See the "Summary Term Sheet" section, above.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) Name and address. The name of the subject company is Raytech
Corporation. The principal executive offices of the subject company are located
at 711 Tech Drive, Crawfordsville IN 47933. Its telephone number is (765)
359-2818.
(b) Securities. The subject company's authorized capital stock consists of
50,000,000 shares of common stock, par value $1.00 per share and 5,000,000
shares of cumulative preferred stock, no par value. As of August 8, 2005,
Raytech has outstanding 41,737,306 shares of common stock, the subject
securities of the going-private transaction, and no shares of preferred stock.
(c) Trading market and price. Raytech's common stock is traded publicly on
the New York Stock Exchange under the symbol "RAY".
The following table shows the high and low common stock prices by quarter
from the NYSE of the Raytech common stock for the periods indicated:
2005 2004 2003
---- ---- ----
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
First Quarter $ 2.00 $ 1.41 $ 3.88 $ 2.75 $ 7.22 $ 4.15
Second Quarter 1.71 1.01 3.35 1.45 8.20 3.00
Third Quarter 1.58 1.17 2.01 1.20 4.85 3.23
Fourth Quarter -- -- 2.08 1.62 3.94 3.15
(d) Dividends. To our knowledge, Raytech has not paid any cash dividends
on its common stock during the past two years.
(e) Prior public offerings. To our knowledge, Raytech has not made an
underwritten public offering of its common stock during the past three years
that was registered under the Securities Act of 1933 or exempt from registration
under Regulation A.
(f) Prior stock purchases. Please refer to Item 4 "Terms of the
Transaction", below.
24
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSONS.
(a) Name and address. The Trust and the merger subsidiary are the persons
filing this transaction statement. The business address and business telephone
number for the Trust and the merger subsidiary is 190 Willis Avenue, Mineola,
New York 11501, and the telephone number is (516) 747-0300.
(b) Business background of entity. The Trust is organized under the laws
of the state of New York. Prior to the Acquisition, the Trust holds
approximately 82.86% of the outstanding shares of Raytech Common Stock. Prior to
1986, Raymark and Raymark Industries, Inc. had been named as defendants in
lawsuits claiming substantial damages for injury or death from exposure to
airborne asbestos fibers. In May 1985, Raytech sold all of its Raymark stock.
Under a restructuring plan, Raytech (through its subsidiaries) purchased certain
non-asbestos related business of Raymark. In spite of the restructuring plan,
Raytech was named a co-defendant with Raymark and other defendants in numerous
asbestos-related lawsuits as a successor in liability to Raymark. A lawsuit
decided in 1988 by The United States District Court in Oregon ruled that Raytech
was to be a successor to Raymark's asbestos related liability (Oregon equity
law). After several court rulings, including an appeal to the United States
Supreme Court, the Oregon case remained as the prevailing decision holding
Raytech to be a successor to Raymark's asbestos related liabilities. In order to
stay the asbestos related litigation, on March 10, 1989, Raytech filed a
petition seeking relief under Chapter 11, Title 11, United States Code in the
United States Bankruptcy Court, District of Connecticut. In October 1998,
Raytech reached a tentative settlement with its creditors for a consensual plan
of reorganization providing for all general unsecured creditors to receive
approximately 90% of the equity in Raytech in exchange for their claims.
As reorganized, Raytech issued approximately 83% of its common stock to
the Trust, 7% to government and other claimants, and 10% to Raytech's public
stockholders at the time. As of the date of this transaction statement, the
Trust owns 34,584,432 shares of Raytech's common stock (or 82.86% of its
outstanding shares).
The Trust is governed by the laws of the State of New York. The Trust was
formed as an irrevocable trust pursuant to the Raytech Corporation Asbestos
Personal Injury Settlement Trust Agreement, effective as of April 18, 2001.
Under the trust agreement, the Trustees were granted the power to take any and
all actions that, in the judgment of the Trustees are necessary and proper to
fulfill the purpose of the Trust. Specifically, among other powers granted to
the Trustees, the Trustees have the power to transfer any or all of the Trust's
assets upon terms that the Trustees consider to be proper and consistent with
the purpose of the Trust and enter into arrangements with third parties as are
deemed by the Trustees to be useful in carrying out the purposes of the Trust.
By accelerating the Acquisition and completing the short-form merger, we believe
that Raytech will realize significant cost savings which should result in
increased assets and income that will be available to the Trust, as the sole
shareholder of Raytech, which will allow it to maximize the amounts paid to the
holders of claims.
Neither the Trust nor the merger subsidiary has been a party to any
judicial or administrative proceeding during the past five years that resulted
in (i) a judgment, decree, or final order enjoining the Trust or the merger
subsidiary from future violations of (or prohibiting activities subject to)
federal or state securities laws, or (ii) a finding of any violation of federal
or state securities laws.
On August 8, 2005, the Trust organized merger subsidiary in Delaware as a
wholly owned subsidiary of the Trust to effect the merger with Raytech. After
completing the Acquisition and prior to the merger, the Trust will contribute
all of its shares of Raytech common stock to merger subsidiary, causing the
merger subsidiary to own approximately 90.6% of Raytech's outstanding shares.
Prior to the effectiveness of the short-form merger, the Trustees of the Trust
will be the Directors of merger subsidiary. The merger subsidiary has no other
business operations.
(c) Business and background of natural persons.
(1), (2) The name, business address, position with the Filing Persons,
principal occupation and five-year employment history of each of the Trustees of
the Trust and Directors of merger subsidiary, together with the names, principal
business and addresses of any corporations or other organizations in which such
principal occupations are conducted, are set forth on Schedule I to this
transaction statement.
(3) During the last five years, none of the persons listed in Schedule I
to this transaction statement has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(4) None of the persons listed in Schedule I to this transaction statement
has been a party to any judicial or administrative proceeding during the past
five years that resulted in a judgment, decree or final order
25
enjoining those persons from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws.
(5) The country of citizenship of each of the persons listed in Schedule I
to this transaction statement is listed thereon.
(d) Tender Offer. Not Applicable
ITEM 4. TERMS OF THE TRANSACTION.
(a) Material terms.
(1) Tender offers. Not applicable.
(2) Mergers or similar transactions.
In connection with the plan of Raytech Corporation, Case No. 89-00293,
confirmed by the United States Bankruptcy Court for the District of Connecticut
on August 13, 2000, the Trust entered into an Agreement, dated June 8, 2000, and
Settlement Agreement, dated October 31, 2001, each with United States
Environmental Protection Agency, the Connecticut Department of Environmental
Protection, and FMC Corporation (the "Environmental Creditors"). The purpose of
these agreements was to mutually resolve claims of the Environmental Creditors
against Raytech, Raymark Industries, Inc. and Raymark Corporation. The
agreements provide for the assignment by the Environmental Creditors to the
Trust of their interest in certain assets of Raytech and of the estates of
Raymark and Universal Friction Composites, the division of the proceeds of
Raymark liability insurance and the future transfer by the Environmental
Creditors of the Raytech common stock owned by them.
Under the 2001 agreement, the Environmental Creditors exercised an option to
retain amounts to be recovered by the Environmental Creditors solely from the
Raymark estates out of insurance proceeds. Under the 2001 agreement, the
Environmental Creditors exercised an option to retain amounts to be recovered by
the Environmental Creditors solely from the Raymark estates out of insurance
proceeds; provided, that upon receipt by the Environmental Creditors of cash
under a Raymark plan of reorganization approved by the Environmental Creditors,
the Environmental Creditors would be required to deliver to the Trust, the
3,228,888 shares of stock of Raytech issued to them under the Raytech bankruptcy
plan, together with the other assets discussed below. The Raymark estates have
settled all liability insurance claims by them against their liability insurance
carriers. In consideration for the compromise and settlement of the
Environmental Creditors' claims, the Trust and the Environmental Creditors
determined that it was in each party's interest to accelerate the settlement of
the 2000 and 2001 agreements instead of waiting until a bankruptcy plan for the
Raymark estates is confirmed. On July 7, 2005, the Trust entered into the 2005
Agreement. As required under the terms of the 2000 and 2001 agreements and under
the 2005 Agreement, the Environmental Creditors will receive $9,457,776, in
exchange for the consideration listed below. The consideration received by the
Trust and the Environmental Creditors under the 2005 Agreement is identical to
the consideration each party would have received had there not been an
acceleration of the 2000 and 2001 agreements. In the 2000 and 2001 Agreements,
neither the Trust nor the Environmental Creditors specifically allocated any
portion of the $9,457,776 to any particular asset. Because the shares of Raytech
common stock to be acquired from the Environmental Creditors have the same
voting, dividend, liquidation and other rights and limitations as those held by
the other unaffiliated public stockholders, we believe that of the $9,457,776 to
be paid to the Environmental Creditors, $4,262,132 (or $1.32 per share)
represents the fair value of the shares of Raytech common stock to be acquired
by the Trust in the Acquisition. The consideration to be transferred to the
Trust is:
o the Environmental Creditors' agreement to divide certain insurance
proceeds in the bankrupt estates of Raymark Corporation and Raymark Industries,
Inc.(the "Raymark Estates") 60% to asbestos personal injury creditors and 40% to
Environmental Creditors;
o 3,228,888 shares of Raytech common stock owned by the Environmental
Creditors;
o the Environmental Creditors' assignment to the Trust of their rights to
benefits under an agreement to share tax benefits with the Trust 2000 (including
tax refunds and net operating losses), incorporated in the Chapter 11 Plan of
Reorganization of the Raytech Corporation, confirmed August 31;
o the Environmental Creditors' interest in the other property of the
Raymark Estates (including a 40% ownership interest in Allomatic Products
Company, a subsidiary of Raytech); and
26
o the Environmental Creditors' interest in the recovery by the Raymark
Estates of proceeds of policies of insurance issued by the Federal Insurance
Company to Raymark Corporation.
Upon completion of the Acquisition, the Trust's ownership of the shares of
Raytech's common stock will increase from approximately 82.86% to approximately
90.6%. The 2005 Agreement contains closing conditions which relate to the
satisfaction of our filing obligations under the Securities Exchange Act of 1934
and the approval of the Acquisition by the Bankruptcy Court. On August 16, 2005,
an order approving the terms of the 2005 Agreement was issued by Bankruptcy
Court. The period during which an appeal could be filed has expired and the
approval order is now final.
This transaction statement is being filed because the acquisition of the
shares by the Trust is the first step of a transaction which will result in a
"Rule 13E-3 transaction" (as defined under the Exchange Act).
Upon completion of the Acquisition, the Trust will own approximately 90.6%
of Raytech's outstanding common stock. After completion of the Acquisition, we
intend to undertake a short-form merger. We intend the short-form merger to
result in the acquisition of all of the outstanding shares of Raytech's common
stock owned by unaffiliated public stockholders of Raytech other than the
Environmental Creditors.
To effect the short-form merger, we will organize a wholly-owned
subsidiary corporation ("merger subsidiary") and transfer all of the shares of
Raytech common stock owned by the Trust to the merger subsidiary, causing the
merger subsidiary to own approximately 90.6% of Raytech's outstanding shares.
Our merger subsidiary will then merge Raytech into itself. The merger subsidiary
will survive the merger. Upon the effectiveness of the merger, each outstanding
share of Raytech's common stock owned by the unaffiliated public stockholders
will be canceled. In exchange, our merger subsidiary will pay the unaffiliated
public stockholders the sum of $1.32, in cash, for each share of Raytech common
stock. Upon timely exercise of vested options, each holder will receive payment
of $1.32 per option share. Holders of options will not receive any consideration
if they do not exercise their options prior to the effective date of the merger.
As of January 2, 2005, Raytech had outstanding 1,942,164 options, of which
940,764 were exercisable. The per share exercise price for all of the options
ranges between $4.25-$5.70 and we believe that the likelihood of an option
holder exercising its options is remote.
After the short-form merger, we intend to cause the registration of
Raytech's common stock under the Exchange Act and its listing on the New York
Stock Exchange to be terminated.
The purpose in engaging in the going-private transaction is to fulfill the
purpose for which the Trust was formed by maximizing its assets and income to
ensure that the holders of claims against Raytech, and its predecessors and
successors in interest are treated fairly, equitably and reasonably. The Trust
is similar to other trusts formed in connection with the bankruptcy proceedings
of companies involved in the manufacture of products containing asbestos. The
products manufactured by Raymark or its predecessors and affiliates that
contained asbestos were found to be the cause of injury and death to workers and
customers of those companies. The purpose of the Trust is to assume all
liabilities of Raytech, and its predecessors and successors in interest, in
actions involving personal injury or death claims caused by exposure to products
containing asbestos for which Raymark or its predecessors and affiliates have
legal liability and to use the Trust's assets and income to pay the holders of
these claims and their families in a way that the holders of claims are treated
fairly, equitably and reasonably in light of the extremely limited assets
available to satisfy these claims. The Trust's three trustees, are independent
trustees selected as part of Raytech's plan of reorganization and have, as their
sole function, the duty of administering and distributing the Trust's assets to
the asbestos victims and their families. By engaging in the Acquisition and the
short-form merger, we believe that Raytech will realize significant cost savings
which should result in increased assets and income that will be available to the
Trust, as the sole shareholder of Raytech, to maximize the amounts paid to the
holders of these claims. The transactions have been structured in order to
effect a prompt and orderly transfer of the minority ownership of Raytech from
the unaffiliated public stockholders to us, and to provide the unaffiliated
public stockholders with cash payments for all of their Raytech common stock as
promptly as practicable.
The consideration to be paid to Raytech's unaffiliated public stockholders
in the short-form merger for their stock will be $1.32, in cash, per share. This
price is equal to last sale price per share of Raytech's common stock on July 6,
2005, the day before the 2005 Agreement was executed and the day before the
first public announcement of the execution of the 2005 Agreement.
Under the DGCL, because the merger subsidiary will hold at least 90% of
the outstanding shares of Raytech common stock immediately after the
consummation of the acquisition and prior to the short-form merger,
27
the merger subsidiary will have the power to effect the merger without a vote of
the Raytech board of directors and without a vote of the unaffiliated public
stockholders. The board of directors of the merger subsidiary will approve the
short-form merger by board resolution in accordance with Section 253 of the
DGCL, and no other vote will be necessary to approve the short-form merger. As a
result, neither Raytech, nor the Trust nor the merger subsidiary is soliciting
proxies or consents from the board of directors of Raytech or the stockholders
of Raytech. The reasons for the going-private transaction are set out in
"Special Factors - Purposes, Alternatives, Reasons and Effects of the
Going-private Transaction - Reasons." Certain federal income tax consequences of
the going-private transactions are set out in "Special Factors - Certain Federal
Income Tax Consequences of the Going-Private Transaction".
Upon completion of the short-form merger, in order to receive the merger
consideration of $1.32 per share, each stockholder or a duly authorized
representative must (1) deliver a Letter of Transmittal, appropriately completed
and executed, to American Stock Transfer and Trust Company, the Paying Agent,
and (2) surrender their shares of Raytech common stock by delivering the stock
certificate or certificates that, prior to the short-form merger, had evidenced
those shares to the Paying Agent, as set forth in a Notice of Merger and
Appraisal Rights and Letter of Transmittal, which will be mailed to stockholders
of record on the effective date. Stockholders are encouraged to read the Notice
of Merger and Appraisal Rights and Letter of Transmittal carefully when
received. Delivery of an executed Letter of Transmittal shall constitute a
waiver of statutory appraisal rights.
For federal income tax purposes, the receipt of the cash consideration by
holders of Raytech common stock pursuant to the short-form merger will be a
taxable sale of the holder's shares. You will recognize taxable gain or loss in
the amount of the difference between $1.32 and your adjusted tax basis for each
share of Raytech common stock that you own at the time of the short-form merger.
See "Special Factors - Certain Federal Income Tax Consequences of the
Going-Private Transaction."
(b) Purchases. As of January 2, 2005, current and former officers and
directors of Raytech beneficially owned 720,335 shares of common stock of
Raytech, which included 684,232 shares which the officers and directors as a
group hold options to purchase that were exercisable within the next 60 days.
All of the options held by the officers and directors have exercise prices above
the $1.32 purchase price to be paid to the unaffiliated public stockholders and
we believe that the likelihood of an option holder exercising its options is
remote. The current and former officers and directors will be treated as
described in Item 4(a), "Terms of the Transaction - Material terms - Mergers or
similar transactions."
(c) Different terms. All unaffiliated public stockholders of Raytech other
than the Environmental Creditors, will be treated as described in Item 4(a),
"Terms of the Transaction - Material terms - Mergers or similar transactions."
(d) Appraisal rights. Holders of Raytech common stock who properly perfect
their appraisal rights under Section 262 of the DGCL will have the right to seek
an appraisal and to be paid the "fair value" of their shares of Raytech common
stock at the effective time of the short-form merger. The fair value of the
Raytech common stock is determined exclusive of any element of value arising
from the expectation or accomplishment of the short-form merger.
The following is a brief summary of the statutory procedures to be
followed in order for a holder of Raytech common stock to dissent from the
short-form merger and perfect appraisal rights under Delaware law. This summary
is not intended to be complete and is qualified in its entirety by reference to
Section 262, the complete text of which is set forth in Exhibit (f) to this
transaction statement and is incorporated into this transaction statement by
this reference. Any holder of Raytech common stock considering demanding
appraisal of their shares is advised to consult that stockholder's own
independent legal counsel with respect to the availability and perfection of
appraisal rights in the short-form merger.
Notice of the effective date of the short-form merger and the availability
of appraisal rights under Section 262 will be mailed to record holders of the
Raytech common stock by Raytech, as the surviving corporation in the short-form
merger, within 10 calendar days of the effective date of the short-form merger.
This merger notice should be reviewed carefully by the stockholders. Any Raytech
stockholder entitled to appraisal rights will have the right, within 20 days
after the date of mailing of the merger notice, to demand in writing from
Raytech an appraisal of his or her shares. This demand will be sufficient if it
reasonably informs Raytech of the identity of the stockholder and that the
stockholder intends to demand an appraisal of the fair value of his or her
shares. Failure to make a timely demand would foreclose a stockholder's right to
appraisal.
28
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as the name of the stockholder of record appears on
the stock certificates. If shares of Raytech common stock are owned of record in
a fiduciary capacity, such as by a trustee, guardian or custodian, the demand
for appraisal must be executed by the fiduciary. If shares of Raytech common
stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; provided, however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, he or she is acting as an agent for the record owner.
A record owner who holds Raytech common stock as a nominee for others,
such as a broker, may exercise appraisal rights with respect to the Raytech
common stock held for all or less than all of the beneficial owners of Raytech
common stock as to which the nominee holder is the record owner. In such a case,
the written demand for appraisal must set forth the number of shares of Raytech
common stock covered by the demand. Where the number of shares of Raytech common
stock is not expressly stated, the demand for appraisal will be presumed to
cover all shares of Raytech common stock outstanding in the name of the record
owner. Beneficial owners who are not record owners and who intend to exercise
appraisal rights should instruct the record owner to comply strictly with the
statutory requirements with respect to the exercise of appraisal rights within
20 days following the mailing of the notice of short-form merger.
Stockholders who elect to exercise appraisal rights must mail or deliver
their written demands to: Ira R. Halperin, Esq., Meltzer, Lippe, Goldstein &
Breitstone, LLP, 190 Willis Avenue, Mineola, New York 11501 or to any other
address as is specified in the notice of merger. The written demand for
appraisal should specify the stockholder's name and mailing address, the number
of shares of Raytech common stock covered by the demand and that the stockholder
is demanding appraisal of his or her shares.
Within 120 calendar days after the effective date of the short-form
merger, Raytech, or any stockholder entitled to appraisal rights under Section
262 and who has complied with the foregoing procedures, may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
the shares of Raytech common stock of all stockholders. Raytech is not under any
obligation, and has no present intention, to file a petition with respect to the
appraisal of the fair value of the shares of Raytech common stock. Accordingly,
it is the obligation of the stockholders to initiate all necessary action to
perfect their appraisal rights within the time prescribed in Section 262. If a
stockholder files a petition, a copy of the petition must be served on Raytech.
Within 120 calendar days after the effective date of the short-form
merger, any stockholder of record who has complied with the requirements for
exercise of appraisal rights and, if appraisal rights are available, will be
entitled, upon written request, to receive from Raytech a statement setting
forth the aggregate number of shares of Raytech common stock with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares of Raytech common stock. This statement must be mailed
within 10 calendar days after a written request therefore has been received by
Raytech or within 10 calendar days after the expiration of the period for the
delivery of demands for appraisal, whichever is later.
In determining "fair value", the Delaware Court of Chancery is to take
into account all relevant factors. In Weinberger v. UOP, Inc., et al., the
Delaware Supreme Court discussed the factors that could be considered in
determining "fair value" in an appraisal proceeding, stating that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered.
However, Section 262 provides that "fair value" is to be determined exclusive of
any element of value arising from the accomplishment or expectation of the
short-form merger.
Holders of Raytech common stock who seek appraisal of their Raytech common
stock should bear in mind that the "fair value" of their Raytech common stock
determined under Section 262 could be more than, the same as, or less than the
cash consideration paid for the stock in the short-form merger, and that
opinions of investment banking or financial valuation firms as to fairness from
a financial point of view are not necessarily opinions as to "fair value" within
the meaning of Section 262. Moreover, Raytech, as the corporation surviving the
short-form merger, intends to argue in any appraisal proceeding that, for
purposes of the appraisal proceeding, the "fair value" of the Raytech common
stock, as the case may be, is less than that paid in the short-form merger. The
cost of the appraisal proceeding may be determined by the Delaware Court of
Chancery and assessed upon the parties as the Delaware Court of Chancery deems
equitable in the circumstances. Upon application of a dissenting stockholder,
the Delaware Court of Chancery may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees
29
and expenses of experts, be charged pro rata against the value of all Raytech
common stock entitled to appraisal. In the absence of a determination or
assessment, each party bears its own expenses.
The Delaware Court of Chancery may require stockholders who have demanded
an appraisal and who hold shares of Raytech common stock represented by
certificates to submit their certificates to the Delaware Court of Chancery for
notation thereon of the pendency of the appraisal proceedings. If any
stockholder fails to comply with this direction, the court may dismiss the
proceedings as to such stockholder.
Any holder of Raytech common stock who has duly demanded appraisal in
compliance with Section 262 will not be entitled to vote the shares of Raytech
common stock subject to the demand for any purpose or to receive payment of
dividends or other distributions on Raytech common stock after the effective
time of the short-form merger, except for dividends or other distributions
payable to stockholders of record at a date prior to the effective time of the
short-form merger.
At any time within 60 days after the effective time of the short-form
merger, any former holder of Raytech common stock will have the right to
withdraw his or her demand for appraisal and to accept the merger consideration
paid for shares of Raytech common stock in the short-form merger. After this
60-day period, the former holder may withdraw his or her demand for appraisal
only with the consent of Raytech, as the corporation surviving the merger. If no
petition for appraisal is filed with the Delaware Court of Chancery within 120
days after the effective time of the merger, stockholders' rights to appraisal
will cease and all stockholders will be entitled to receive the cash
consideration paid for the Raytech common stock. Inasmuch as Raytech has no
obligation to file a petition for appraisal, any stockholder who desires a
petition for appraisal to be filed is advised to file it on a timely basis.
However, no petition timely filed in the Delaware Court of Chancery demanding
appraisal will be dismissed as to any stockholder without the approval of the
Delaware Court of Chancery, and the approval may be conditioned upon any terms
as the Delaware Court of Chancery deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of the appraisal
rights.
STOCKHOLDERS ARE URGED TO READ EXHIBIT (F) IN ITS ENTIRETY SINCE FAILURE
TO COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN THE LOSS OF
APPRAISAL RIGHTS.
(e) Provisions for unaffiliated security holders. Raytech does not intend
to grant unaffiliated stockholders special access to its records in connection
with the short-form merger. Neither the Trust nor Raytech intends to obtain
counsel or appraisal services for unaffiliated stockholders of Raytech.
(f) Eligibility for listing or trading. Not applicable.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(a) Transactions. The nature and dollar amount of any transaction, other
than those described in paragraphs (b) or (c) of this Item 5, that occurred
during the past two years, between the Trust or the persons listed on Schedule I
to this transaction statement and Raytech and any affiliate of Raytech is
incorporated herein by reference to Item 13 to Raytech's Annual Report on Form
10-K for the fiscal year ended January 2, 2005. The Form 10-K for its fiscal
year ended January 2, 2005 is available from the SEC's web site at www.sec.gov
and for inspection and copying at the SEC's public reference facilities located
at 100 F. Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain
information on the operation of the public reference facilities by calling the
SEC at 1-800-SEC-0330.
(b), (c) See Item 2(f) above and the Section above entitled "Fairness of
the Going-private Transaction - Recent purchases of shares of Raytech common
stock by The Trust". Two of the three Trustees of the Trust are also directors
of Raytech. See Item 3, "Identity and Background of Filing Person" and Schedule
I to this Schedule 13E-3.
(d) Two of the three Trustees of the Trust and directors of merger
subsidiary are also directors of Raytech. See Item 3, "Identity and Background
of Filing Person" and Schedule I to this Schedule 13E-3.
(e) See Item 4(a)(2) above and the Section above entitled "Fairness of the
Going-private Transaction - Recent purchases of shares of Raytech common stock
by The Trust" for a description of the Acquisition.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
30
(a) Use of securities acquired. The shares of Raytech capital stock will
be canceled in the short-form merger.
(b) Plans. It is currently expected that, following the consummation of
the short-form merger, the business and operations of Raytech will be conducted
by us substantially as they are currently being conducted. We intend to continue
to evaluate the business and operations of Raytech with a view to maximizing its
potential, and we will take the actions deemed appropriate under the
circumstances and market conditions then existing. We intend to cause Raytech to
terminate the registration of its common stock under Section 12 of the Exchange
Act following the short-form merger. This would result in the suspension of
Raytech's duty to file reports pursuant to the Exchange Act. In addition, on
August 1, 2005, Raytech was notified by the NYSE that it is not in compliance
with the NYSE's increased continued listing standards. Raytech is considered
"below criteria" due to the fact that its total market capitalization is less
than $75 million over a 30-day trading period and its stockholders' equity is
less than $75 million. As of August 8, 2005, the NYSE made available on its
consolidated tape, an indicator, "BC," indicating Raytech is below the NYSE's
quantitative continued listing standards. On September 15, 2005, Raytech
submitted its response to the NYSE. In its response, Raytech stated that as a
result of its continued losses and the proposed going-private transaction,
Raytech's management does not believe that it can take steps which will permit
Raytech to satisfy the financial continued listing criteria of the NYSE and
Raytech is not in a position to propose a business plan to come into compliance
with the listing standards. We do not intend to take any action to continue
Raytech's listing on the NYSE. See "Special Factors - Purposes, Alternatives,
Reasons and Effects of the Going-Private Transaction - Effects."
We do not currently have any commitment or agreement, and we are not
currently negotiating for the sale of any of Raytech's businesses. Except as
otherwise described in this transaction statement, as of the date of this
transaction statement, we have not approved any specific plans or proposals for:
o any extraordinary transaction, such as a merger, reorganization or
liquidation, involving Raytech or any of its subsidiaries;
o any purchase, sale or transfer of a material amount of assets of Raytech
or any of its subsidiaries;
o any material change in the present dividend rate or policy, or
indebtedness or capitalization of Raytech. See "Summary Terms Sheet
Consequences of the Going-Private Transaction Effects of the Going-Private
Transaction," "Special Factors Purposes, Alternatives, Reasons and Effects
of the Going-Private Transaction Effects," and "Fairness of the
Going-Private Transaction Factors considered in determining fairness" and
"Certain negative considerations");
o any other material change in the corporate structure or business of
Raytech; or
o any extraordinary corporate transaction involving Raytech after completion
of the short-form merger.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
See the section above captioned "Special Factors - Purposes, Alternatives,
Reasons and Effects of the Going-Private Transaction."
ITEM 8. FAIRNESS OF THE TRANSACTION.
See the section above captioned "Special Factors - Fairness of the
Going-private Transaction."
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.
See the section above captioned "Special Factors - Reports, Opinions,
Appraisals and Negotiations."
ITEM 10. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) Source of funds. The total amount of funds required by the merger
subsidiary to pay the merger consideration to the unaffiliated public
stockholders of Raytech and to option holders of exercised vested options, and
to pay related fees and expenses is estimated to be approximately $6.4 million,
in addition to payment of $9,457,776 million by the Trust for Raytech shares and
other assets to be purchased in connection with the Acquisition. The Trust plans
to fund the Acquisition and the purchase of the shares of common stock from
31
unaffiliated public stockholders by the merger subsidiary with cash on hand that
is not subject to any financing condition.
(b) Conditions. There are no conditions to financing arrangements for the
going-private transaction, and there are no alternative financing arrangements
or alternative financing plans.
(c) Expenses. The paying agent will receive reasonable and customary
compensation for its services and will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection with the short-form merger, including certain liabilities
under U.S. federal securities laws.
Except as described under Item 11(b), "Interest in Securities of the
Subject Company - Securities transactions," and Item 14, "Personal Assets,
Retained, Employed, Compensated or Used," we will not pay any fees or
commissions to any broker or dealer in connection with the going-private
transaction. Brokers, dealers, commercial banks and trust companies will, upon
request, be reimbursed by us for customary mailing and handling expenses
incurred by them in forwarding materials to their customers.
The estimated fees and expenses to be incurred by us in connection with
the going-private transaction are set forth in the table below:
Filing fees $ 1,250
Legal fees 250,000
Transfer agent fees 10,000
Printing, mailing costs and other fees 40,000
Total $ 301,250
(d) Borrowed funds. Not applicable.
ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) Securities ownership. Prior to the Acquisition, the Trust holds
approximately 82.86% of the outstanding shares of Raytech common stock.
Immediately after the consummation of the Acquisition and on the effective date
of the short-form merger, the Trust, through the merger subsidiary, is expected
to be the owner of approximately 37,813,320 shares of Raytech common stock,
representing approximately 90.6% of the outstanding shares of Raytech common
stock. Under the definition of "beneficial ownership" in Rule 13d-3 of the
Exchange Act, the Trustees may be deemed to be the beneficial owners of the
shares of Raytech common stock owned by the Trust because, under the terms of
its Trust Agreement, the Trustees have sole voting power and the power to
dispose of or direct the disposition of the shares. The Trustees disclaim
beneficial ownership of the Raytech common stock owned by the Trust. The
Trustees do not have the opportunity, directly or indirectly, to profit or share
in any profit from a transaction involving the shares. The holders of claims
involving personal injury and death for which Raymark or its predecessors and
affiliates have legal liability have an indirect pecuniary interest in the
shares of Raytech common stock owned by the Trust, because the assets of the
Trust will be used to pay the holders of asbestos related claims for which the
Trust has assumed liability. Neither the Trustees of the Trust nor the Directors
of the merger subsidiary will receive any consideration as a result of the
going-private transaction.
(b) Securities transactions. See Item 4, "Terms of the Transaction",
above.
ITEM 12. THE SOLICITATION OR RECOMMENDATION.
(a) - (e) Not Applicable
ITEM 13. FINANCIAL STATEMENTS.
(a) Financial information.
(1) Incorporated by reference to Raytech's Annual Report on Form
10-K for the fiscal year ended January 2, 2005.
32
(2) Incorporated by reference to Raytech's Quarterly Report on Form
10-Q for the fiscal quarter ended July 3, 2005
(3) Incorporated by reference to Raytech's Quarterly Report on Form
10-Q for the fiscal quarter ended April 3, 2005.
(4) The ratio of earnings to fixed charges, as required, is set
forth under the heading "Selected Financial Data" in the Transaction
Statement.
(5) The book value per share information, as required, is set forth
under the heading "Selected Financial Data" in the Transaction Statement.
The Form 10-K for the fiscal year ended January 2, 2005 and the Form 10-Q
for the fiscal quarters ended July 3, 2005 and April 3, 2005 are available from
the SEC's web site at www.sec.gov and for inspection and copying at the SEC's
public reference facilities located at 100 F. Street, N.E., Room 1580,
Washington, D.C. 20549. You may obtain information on the operation of the
public reference facilities by calling the SEC at 1-800-SEC-0330.
(b) Pro forma information. No pro forma data giving effect to the
going-private transaction is provided because the Trust does not believe such
information is material to the unaffiliated public shareholders in evaluating
the proposed transaction since (1) the consideration for Raytech common stock is
all cash and (2) if the proposed transaction is completed, Raytech's common
stock would cease to be publicly traded.
(c) Summary Information. See the information under the heading "Selected
Financial Data" in the Transaction Statement
33
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) Solicitations or recommendations. There are no persons or classes of
persons who are directly or indirectly employed, retained or to be compensated
to make solicitations or recommendations in connection with the going-private
transaction.
(b) Employees and corporate assets. No employees or corporate assets of
Raytech will be used by us or our affiliates in connection with the
going-private transaction.
ITEM 15. ADDITIONAL INFORMATION.
None.
ITEM 16. EXHIBITS.
(a) Letter from Raytech Acquisition Corp. and Letter of Transmittal
(d) Supplemental Settlement Agreement
(c) Report of HT Capital Advisors, LLC
(e) Report of W.Y. Campbell
(f) Delaware General Corporation Law Section 262
34
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 21, 2005
Raytech Corporation Asbestos
Personal Injury Settlement Trust
-----------------------------------
/s/ Richard A. Lippe
-----------------------------------
Richard A. Lippe
Managing Trustee
Raytech Acquisition Corp.
-----------------------------------
/s/ Richard A. Lippe
-----------------------------------
Richard A. Lippe
Chairman
35
CERTIFICATE
The undersigned, Kevin E. Irwin, Acting Secretary of the Raytech
Corporation Asbestos Personal Injury Settlement Trust, a Delaware trust (the
"Trust"), hereby certifies that attached hereto as Exhibit A are true, correct
and complete copies of resolutions duly adopted by the Trust at the Board of
Trustees meeting on July 6, 2005, approving the acquisition of outstanding
shares of Raytech Corporation not owned by the Trust (the "Resolutions"). The
Resolutions have not been amended, modified or rescinded and are in full force
and effect on the date hereof.
This Certificate shall not create any personal (as opposed to trust)
liability.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed on behalf of the Trust as of this 11th day of August, 2005.
RAYTECH CORPORATION ASBESTOS
PERSONAL INJURY SETTLEMENT TRUST
By: /s/ Kevin E. Irwin
----------------------------------
Kevin E. Irwin, Acting Secretary
36
EXHIBIT A
RESOLVED: that after acquiring rights to the Raymark creditors shares of stock
in the Raytech Corporation, the Trust shall acquire all the remaining
outstanding shares of stock of the Raytech Corporation by means of a short-form
merger in the manner previously recommended by special counsel, Mr. Halperin,
thereby resulting in the Raytech Corporation being wholly owned by a wholly
owned subsidiary of the Trust;
FURTHER RESOLVED: that in connection with the short form merger just described,
the Trust shall offer to pay $1.32 per share for its acquisition of the
remaining outstanding shares of stock of the Raytech Corporation held by the
shareholder other than the environmental creditors; and
FURTHER RESOLVED: that Mr. Lippe is authorized, on behalf of the Trust, to
execute any agreements, regulatory filings, or other documents approved by
special counsel to effect this transaction.
37
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
(a) Letter from Raytech Acquisition Corp. and Letter of
Transmittal
(d) Supplemental Settlement Agreement
(c) Report of HT Capital Advisors, LLC
(e) Report of W.Y. Campbell
(f) Delaware General Corporation Law Section 262
38
SCHEDULE I
MEMBERS OF THE BOARD OF TRUSTEES OF THE TRUST
AND DIRECTORS OF MERGER SUBSIDIARY
Trustees and Directors. The name, business address, position with the
Trust and merger subsidiary, present principal occupation or employment and
five-year employment history of the Trustees of the Trust and Directors of
merger subsidiary, together with the names, principal businesses and addresses
of any corporations or other organizations in which such principal occupation is
conducted, are set forth below. Except as otherwise indicated, each occupation
set forth refers to the Filing Persons. Each of the Trustees of the Trust and
Directors of merger subsidiary is a citizen of the United States. To the
knowledge of the Filing Persons, no Trustee or Director beneficially owns shares
of Raytech common stock. To the knowledge of the Filing Persons, no Trustee or
Director has been convicted in a criminal proceeding during the last five years
(excluding traffic violations or similar misdemeanors) and no Trustee or
Director of has been a party to any judicial or administrative proceeding during
the last five years (except for any matters that were dismissed without sanction
or settlement) that resulted in a judgment, decree or final order enjoining him
from future violations of, or prohibiting activities subject to, federal or
state securities laws, or a finding of any violation of federal or state
securities laws.
Position with Principal Occupation or Employment.
------------- -----------------------------------
Name the Trust and Merger Subsidiary Five-Year Employment History.
---- ------------------------------- -----------------------------
Richard A. Managing Trustee - Trust Partner in the Corporate & Securities Law Group
Lippe of the law firm of Meltzer, Lippe, Goldstein &
Chairman of Board of Directors - Breitstone, LLP, 190 Willis Avenue, Mineola, New
Merger Subsidiary York; Director, Raytech Corporation since 2002;
Managing Trustee, Keene Creditors Trust.
Archie R. Trustee - Trust Director, Midas Inc., 1300 Arlington Heights Road
Dykes Itasca, IL 60143; Director PepsiAmericas, Inc.,
Director - Merger Subsidiary 4000 Dain Rauscher Plaza, 60 South Sixth Street,
Minneapolis, MN 55402; Chairman and Chief
Executive Officer, Fleming Companies, Inc., 1945
Lakepointe Drive, Lewisville, TX 73126, a food
distribution company from 2003 to 2004; Chairman
and Chief Executive Officer of Capital City
Holdings, Inc., 4525 Harding Pike, Nashville, TN
37205, an investment company, from 1988 to 2003
and Chairman in 2004; Director, Raytech
Corporation since 2002.
Stephen C. Trustee - Trust Professor of political science and adjunct
Halpern professor of law at the State University of New
Director - Merger Subsidiary York at Buffalo, and a partner at the law firm of
Lukasik and Halpern. His business address is
State University of New York at Buffalo, 509 Park
Hall, Buffalo, New York.
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