-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JHd2YTg9GaS+u9bx29J5mxRERQPKnzz2FveyFKBYJ6pUTIPtiPzJJntEfpQmA+A9 pEsoVPvJafEG9rh25eE4gA== 0001169232-05-004114.txt : 20050812 0001169232-05-004114.hdr.sgml : 20050812 20050812163220 ACCESSION NUMBER: 0001169232-05-004114 CONFORMED SUBMISSION TYPE: SC 13E3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20050812 DATE AS OF CHANGE: 20050812 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RAYTECH CORP ASBESTOS PERSONAL INJURY SETTLEMENT TRUST CENTRAL INDEX KEY: 0001167616 IRS NUMBER: 116556356 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 BUSINESS ADDRESS: STREET 1: 190 WILLIS AVE CITY: MINEOLA STATE: NY ZIP: 11501 BUSINESS PHONE: 516 747 0300 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RAYTECH CORP CENTRAL INDEX KEY: 0000797917 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 061182033 STATE OF INCORPORATION: DE FISCAL YEAR END: 1203 FILING VALUES: FORM TYPE: SC 13E3 SEC ACT: 1934 Act SEC FILE NUMBER: 005-37895 FILM NUMBER: 051022130 BUSINESS ADDRESS: STREET 1: FOUR CORPORATE DR STE 295 CITY: SHELTON STATE: CT ZIP: 06484 BUSINESS PHONE: 2039258000 MAIL ADDRESS: STREET 1: FOUR CORPORATE DRIVE STE 295 CITY: SHELTON STATE: CT ZIP: 06484 SC 13E3 1 d64743_sc13e3.txt RULE 13E-3 TRANSACTION STATEMENT ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13E-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 (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) ---------- 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 ------------------------------------------------------------------------ Transaction Valuation* Amount of Filing Fee $9,441,794 $1,112.00 *For purposes of calculating the Filing Fee only. Assumes the payment of an aggregate of $9,441,794, 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 former affiliates of the Issuer, and $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. 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). |_| 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: Form or Registration No.: Filing Party: Date Filed: ================================================================================ 2 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") about the fairness of the transaction to Raytech's unaffiliated public stockholders. (Raytech's unaffiliated public stockholders are you and the other stockholders, except for the Trust, its affiliates, and the "Sellers" described in "About the Acquisition", below.) 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 ("Raymark"). 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. 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. 3 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. 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 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, 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. 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 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 Trust entered into an Agreement, dated June 8, 2000, and Settlement Agreement, dated October 31, 2001, each with the United States Environmental Protection Agency, the Connecticut Department of Environmental Protection, and FMC Corporation ("Environmental Creditors"). 4 The purpose of the 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. In consideration for the compromise and settlement of the Environmental Creditors' claims, the Trust and the Environmental Creditors determined that is was in each party's interest to accelerate the settlement of the 2000 and 2001 agreements. On July 7, 2005, the Trust entered into a Supplemental Settlement Agreement, dated May 25, 2005, to accelerate the consummation of the earlier agreements (the "2005 Agreement"). Under the 2005 Agreement, the Trust will acquire 3,228,888 shares of Raytech common stock and other assets and consideration from the Environmental Creditors in exchange for the payment of $9,457,776 (the "Acquisition"). See Item 4, "Terms of the Transaction", in this transaction statement. 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. 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. 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. 5 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 into Raytech. 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. Raytech will survive the merger. 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. Purpose of the Going-Private Transaction The Trust's purpose in engaging in the going-private transaction is to own all of Raytech's stock. Upon completion of the short-form merger, Raytech will be wholly-owned by the Trust. 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. 6 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 promptly after the effective date of the short-form merger. Instructions for surrendering your stock certificates will be set 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 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. 7 Fairness of the Going-Private Transaction The Trust's Position on the Fairness of the Going-Private Transaction We have determined that the going-private transaction is both substantively and procedurally fair to Raytech's unaffiliated public stockholders. This belief is based on the following factors: o The going-private transaction represents (in our opinion) 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 This 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. Under the rules and procedures of the NYSE, Raytech must respond to the NYSE within 45 days with a business plan that demonstrates compliance with the continued listing standards. Raytech has stated that it does not believe that it can take the steps that will permit it to satisfy the criteria of the NYSE. In the event Raytech's common stock is delisted, the stock will become even more illiquid. 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 which might otherwise be difficult to realize, given such illiquidity. o The unaffiliated public stockholders of Raytech have the right (under Delaware law) 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 8 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 Only we 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. o Raytech will no longer have to pay the costs associated with being a public company (including legal, accounting, insurance and other fees). 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 450 Fifth Street, N.W., 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 9 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, Four Corporate Drive, Suite 295, Shelton, CT 06484. All documents filed by Raytech pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this transaction statement to the effective time of the short-form merger shall also be deemed to be incorporated into this transaction statement by this reference. 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 Trust's special legal counsel, at (516) 747-0300. 10 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, to acquire all of the outstanding shares of Raytech's stock and to terminate Raytech's registration under the Exchange Act. 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); personnel costs and fees related to filings with the SEC and NYSE and shareholder communications (approximately $300,000 on an annual basis); fees and 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 services and audit related services (approximately $230,000 on an annual basis). We estimate that Raytech's costs during the year ended December 31, 2004 would have been reduced by approximately $1,430,000 if Raytech had been a private company at the time. We believe that savings for Raytech will result from the elimination of NYSE stock market fees, press release expenses, and certain legal fees, as well as a significant reduction in supplemental audit and consulting fees necessary for public companies, independent directors' compensation, officers and directors liability insurance, tax compliance, printing and mailing costs, filing fees, stock transfer agent expenses, and other direct expenses associated with the required SEC filings. (Currently, Raytech pays for all of these costs every year.) 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. We believe that the costs of remaining a public company are too high in relation to the benefits of being a public company, and that it would be irresponsible for Raytech to continue as a public company. 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. 11 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 determination to enter into the 2005 Agreement with the Environmental Creditors, 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, and a subsequent short-form merger could still be required. Reasons We considered several factors in determining whether to effect the going-private transaction, including these: 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; 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. Our Trustees 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 12 cash 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 at this time (i.e., as promptly as practicable after acquiring beneficial ownership of greater than 90% of the shares of Raytech common stock) because we wish to take advantage of the benefits of Raytech becoming a privately-owned company. 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. 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. 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's Common Stock. 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. In addition, 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. 13 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. Under the rules and procedures of the NYSE, Raytech must respond to the NYSE within 45 days with a business plan that demonstrates compliance with the continued listing standards. Raytech has stated that it does not believe that it can take steps which will permit it to satisfy the financial criteria of the NYSE. Treatment of options. Pursuant to the terms of the short-form merger, all vested options that are exercised to purchase Raytech's stock 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 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. Directors. Our Trustees are the persons listed in Schedule I to this transaction statement. 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 thirteen weeks ended April 3, 2005 and March 28, 2004 and "Balance Sheet Data" at April 3, 2005, 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 April 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. 14
- ---------------------------------------------------------------------------------------------------------------------- Income Statement Data Years Ended Thirteen Weeks Ended December 29, December 28, January 2, March 28, April 3, 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 $56,598 $63,352 - ---------------------------------------------------------------------------------------------------------------------- Gross Profit 36,771 26,126 40,935 11,059 11,996 - ---------------------------------------------------------------------------------------------------------------------- Operating (loss) profit 4,440 (57,473) (3,051) 2,449 1,991 - ---------------------------------------------------------------------------------------------------------------------- Net Income (loss) (2,825) (66,443) (2,750) 1,351 1,620 - ---------------------------------------------------------------------------------------------------------------------- Basic and diluted income (loss) per share (.07) (1.59) (.07) .03 .04 - ---------------------------------------------------------------------------------------------------------------------- Weighted average number of shares used in computing net earnings (loss) per share (in thousands): 41,608 41,728 41,737 41,737 41,737 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Balance Sheet Data December 28, January 2, April 3, 2003 2005 2005 - ---------------------------------------------------------------------------------------------------------------------- Audited Audited Unaudited - ---------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) - ---------------------------------------------------------------------------------------------------------------------- Current assets $ 83,756 $ 94,452 $ 98,602 - ---------------------------------------------------------------------------------------------------------------------- Non-current assets 122,268 111,234 107,784 - ---------------------------------------------------------------------------------------------------------------------- Total assets 206,024 205,686 206,386 - ---------------------------------------------------------------------------------------------------------------------- Current liabilities 58,342 60,799 64,847 - ---------------------------------------------------------------------------------------------------------------------- Long-term Liabilities 62,384 61,687 66,310 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities 120,726 122,486 131,157 - ---------------------------------------------------------------------------------------------------------------------- Shareholders' equity 75,910 73,180 73,960 - ---------------------------------------------------------------------------------------------------------------------- Book Value Per share 1.82 1.75 1.77 - ----------------------------------------------------------------------------------------------------------------------
Ratio of Earnings to Fixed Charges Raytech's consolidated ratio of earnings to fixed charges is as follows:
For the Year Ended For the Thirteen Weeks December 28, January 2, Ended April 3, 2003 2005 2005 ------------------------------------------------------------ Ratio of Earnings to Fixed Charges -34.74* 0.82 8.65x
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. *Reflects a deficiency of approximately $39,069,000 15 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE GOING-PRIVATE TRANSACTION The following is a general 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 by a stockholder, pursuant to the short-form merger or pursuant to the exercise of the stockholder's statutory appraisal rights, will be a taxable transaction for United States federal income tax purposes and may also be taxable for state and local income tax purposes as well. Accordingly, a stockholder whose shares of Raytech common stock are converted, pursuant to the short-form merger, into a right to receive cash will recognize gain or loss equal to the difference between (a) the amount of cash that the stockholder receives in the short-form merger and (b) the stockholder's adjusted tax basis in his shares. 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 [___________], 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. EACH BENEFICIAL OWNER OF SHARES OF RAYTECH COMMON STOCK IS URGED TO CONSULT HIS TAX ADVISOR ABOUT THE SPECIFIC TAX 16 CONSEQUENCES TO HIM OF THE SHORT-FORM MERGER, INCLUDING THE APPLICATION OF STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS. 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, our Trustees 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. Our Trustees 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. Our Trustees 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. Our Trustees reviewed Raytech's current financial condition, financial performance, and growth prospects. Specifically, the Trustees identified the following factors that, in the opinion of the Trustees 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 32.0 percent decrease in gross profit for the quarter ended April 3, 2005, despite achieving 8.9 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 wet friction products, and the industry as a whole, has been negatively impacted, which has, in turn, negatively impacted Raytech's business. 17 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 component price reductions and the terms of some of its current sales contracts, Raytech must bear the full 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. o Cash payment for stock; Financial Condition; Prospects. 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. We believe that the $1.32 per share consideration to be paid for shares of Raytech common stock is fair to the unaffiliated public stockholders. The purchase price substantially exceeds the per share tangible book value of Raytech common stock which, based on the most recent unaudited balance sheets of Raytech, was approximately $1.09 at April 3, 2005. o Public Company Compliance. Our Trustees 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. We also expect that this will further impact adversely the trading price of Raytech's common stock. o Current Market Prices, Historical Market Prices; Limited Trading Market and Liquidity. Our board considered the current and historic trading prices of Raytech's common stock. The stock closed at $1.32 on July 6, 2005. The stock price ranged from $1.01 per share to $2.08 per share during the twelve months before we announced the going-private transaction on July 7, 2005. 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. For all of these reasons, it may be extremely difficult for the unaffiliated public stockholders to sell their Raytech stock without adversely impacting the stock's trading price. Our Trustees also concluded that the stock's trading price may not reflect its fair value, because of the low trading volume and limited supply and demand for the stock. On August 1, 2005, Raytech was notified by the NYSE that it is not in compliance with the NYSE's increased continued listing standards. Under the rules and procedures of the NYSE, Raytech must respond to the NYSE within 45 days with a business plan that demonstrates 18 compliance with the continued listing standards. Raytech has stated that it does not believe that it can take the steps that will permit it to satisfy the criteria of the NYSE. In the event Raytech's common stock is delisted, the stock will become even more illiquid. o Limited Benefits from Being a Public Company. 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. Investment banks have not covered Raytech's stock. We believe that these factors will continue to negatively impact the trading price of shares of Raytech's common stock. o Avoiding continuing declines in stock price. Our Trustees also gave weight to the possibility of future declines in the stock trading price. Lower stock prices will negatively impact the unaffiliated public stockholders. The impending delisting of Raytech's stock from the NYSE and public capital market trends affecting micro-cap companies (like Raytech), will result in a reduction in interest by institutional investors. o Campbell Report. Our Trustees also took note of an analysis that Raytech obtained from W.Y. Campbell & Company during October 2004. This analysis was done as part of a review by the Company of its current and future business prospects. This analysis concluded that the fair value of Raytech's common stock was between $1.21 and $2.05. Since the date of this report, the Trustees believe that the price per share has been negatively impacted by current market and business conditions more fully discussed above. o Appraisal rights. Our Trustees also considered the Delaware laws concerning appraisal rights, in concluding that the purchase price is fair. The unaffiliated public stockholders 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. 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. Accordingly, it 19 is unlikely that finding a third party buyer for Raytech was a realistic option for the unaffiliated public stockholders. We also concluded that the absence of a third party buyer for Raytech shows that the going-private transaction is the only likely source of prompt liquidity for the unaffiliated public stockholders. Shopping Raytech would not only entail substantial time delays and allocation of its management's time and energy, but would also disrupt and discourage Raytech's employees and create uncertainty among Raytech's customers and business associates. We do not have any present intention to liquidate our position in Raytech. 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. Our Trustees considered appointing a special committee to determine the fairness of the going-private transaction but decided not to pursue this option. Our Trustees 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. The cost of hiring counsel and advisors, and the diversion of management resources to assist the special committee, would outweigh any benefit that would be derived from a special committee. Certain negative considerations. Our Trustees evaluated certain factors which weighed against the fairness of the terms of the going-private transaction and its procedural fairness. Our Trustees 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. 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. 20 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 our 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. Our Trustees 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. 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. Our Trustees 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. Our Trustees concluded that, had Raytech's board of directors been asked to consider and vote upon the proposed going-private transaction, it would have wanted to hire its own independent legal and financial advisors. These expenses would have further consumed Raytech's financial resources. Our Trustees gave these negative factors due consideration. They concluded that none of these factors (alone or taken together) is significant enough to outweigh the positive factors and analyses that it considered. Our Trustees believe that the going-private transaction is fair to the unaffiliated public stockholders, both substantively and procedurally. Our Trustees 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. Our Trustees did not quantify, rank, or otherwise assign relative weights to each of the specific factors we considered. Instead, our Trustees 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). 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 21 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. Raytech engaged the services of an outside party, W.Y. Campbell, to analyze the business of Raytech. W.Y. 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. The report concluded that Raytech's value was between $1.21 and $2.05 per share at the time of the report. In reaching this conclusion, W.Y. Campbell analyzed factors such as the state of the industry and the overall prospects of Raytech. Our Trustees gave weight to the findings of this report, and took into account that it was conducted nine months before the date of this transaction statement and that since the report was issued additional factors have and we expect will continue to negatively impact Raytech's business. See "Fairness of the Going Private Transaction - Factors we considered in determining purchase price". A copy of the report of W.Y. Campbell is attached to this transaction statement as Exhibit (e). In determining the price to pay to the unaffiliated public stockholders, our Trustees 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, our Trustees 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. In addition, our Trustees reviewed other financial studies and analyses and considered such other information as they considered appropriate. 22 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 Four Corporate Drive, Suite 295, Shelton, CT, 06484. Its telephone number is (203) 925-8021. (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 April 29, 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 -- -- 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. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) Name and address. The Trust is the person filing this transaction statement. The business address and business telephone number for the Trust is 190 Willis Avenue, Mineola, New York 11501, and the telephone number is (516) 747-0300. 23 (b) Business background of entity. The Trust is organized under the laws of the state of New York. Prior to the Acquisition, the Trust, together with its affiliates, 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. In 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. 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. 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. The Trust has not 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 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. (c) Business and background of natural persons. (1),(2) The name, business address, position with the Trust, principal occupation and five-year employment history of each of the Trustees of the Trust, 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 enjoining those persons from future violations of, or prohibiting 24 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. In consideration for the compromise and settlement of the Environmental Creditors' claims, the Trust and the Environmental Creditors determined that is was in each party's interest to accelerate the settlement of the agreements. On July 7, 2005, the Trust entered into the 2005 Agreement, to accelerate the consummation of the earlier agreements, pursuant to which the Trust will acquire 3,228,888 shares of Raytech common stock and other assets and consideration from the Environmental Creditors. Pursuant to 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 following consideration (the "Acquisition"): 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, incorporated in the Chapter 11 Plan of Reorganization of the Raytech Corporation, confirmed August 31, 2000; 25 o the Environmental Creditors' interest in the other property of the Raymark Estates; 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. 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. 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. 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 into Raytech. 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. Raytech will survive the merger. 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 Trust's purpose in engaging in the going-private transaction is to own all of Raytech's stock. Upon completion of the short-form merger, Raytech will be wholly-owned by the Trust. 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. 26 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, 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 Ira R. Halperin, Esq. 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. Current and former officers and directors of Raytech beneficially own 720,335 shares of common stock of Raytech, which includes 684,232 shares which the officers and directors as a group hold options to purchase that are 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. 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 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- 27 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. 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 28 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 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. 29 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 30 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 450 Fifth Street, N.W., 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 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. (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. Under the rules and procedures of the NYSE, Raytech must respond to the NYSE within 45 days with a business plan that demonstrates compliance with the continued listing standards. Raytech has stated that it does not believe that it can take steps which will permit it to satisfy the financial criteria of the NYSE. 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: 31 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 $5.2 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 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. 32 (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 $ 1,112 Legal fees 250,000 Transfer agent fees 10,000 Printing mailing costs and other fees 40,000 Total $ 301,112 (d) Borrowed funds. Not applicable. ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) Securities ownership. 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. Details regarding the beneficial ownership of the Trust's common stock is set forth in Schedule I to this transaction statement. (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. 33 (2) Incorporated by reference to Raytech's Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2005. (3) The ratio of earnings to fixed charges, as required, is set forth under the heading "Selected Financial Data" in the Transaction Statement. (4) 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 quarter ended 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 450 Fifth Street, N.W., 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 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 (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: August 12, 2005 /s/ Richard A. Lippe ----------------------------- Richard A. Lippe Managing Trustee 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 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. EXHIBIT INDEX Exhibit Number Description - -------------- ----------- (a) Letter from Raytech Acquisition Corp. and Letter of Transmittal (d) Supplemental Settlement Agreement (e) Report of W.Y. Campbell (f) Delaware General Corporation Law Section 262 36 SCHEDULE I MEMBERS OF THE BOARD OF TRUSTEES OF THE TRUST Trustees. The name, business address, position with the Trust, present principal occupation or employment and five-year employment history of the Trustees of the Trust, 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 Trust. Each of the Trustees of the Trust is a citizen of the United States. To the knowledge of the Trust, no Trustee beneficially owns shares of Raytech common stock. To the knowledge of the Trust, no Trustee has been convicted in a criminal proceeding during the last five years (excluding traffic violations or similar misdemeanors) and no Trustee of the Trust 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 Five-Year Employment History. - ---- --------- ----------------------------- Richard A. Managing Trustee Partner in the Corporate & Securities Law Lippe Group of the law firm of Meltzer, Lippe, Goldstein & Breitstone, LLP, 190 Willis Avenue, Mineola, New York; Director, Raytech Corporation since 2002; Managing Trustee, Keene Creditors Trust. Archie R. Trustee Director, Midas Inc., 1300 Arlington Dykes Heights Road Itasca, IL 60143; Director PepsiAmericas, Inc., 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. Steven Trustee Professor of political science and Halpern adjunct professor of law at the State University of New 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. 37 EX-99.(A) 2 d64743_ex99a.txt LETTER FROM RAYTECH ACQUISITION CORP. Exhibit (a) RAYTECH ACQUISITION CORP. Please read this letter carefully. Raytech Acquisition Corp., a Delaware corporation (the "Company") and wholly-owned subsidiary of Raytech Corporation Asbestos Personal Injury Settlement Trust, an irrevocable trust governed by laws of the State of New York (the "Trust"), holds all of the shares of common stock of Raytech Corporation, a Delaware corporation, ("Raytech") beneficially owned by the Trust. These shares represent approximately 90.6% of Raytech's common stock, par value $1.00 per share (the "Common Stock"). The Company and Raytech have entered into an agreement whereby the Company will be merged with and into Raytech with Raytech being the surviving corporation (the "Merger"). Each outstanding share of Common Stock (other than shares of Common Stock held by the Company and the unaffiliated public stockholders, if any, who properly exercise their dissenters' statutory appraisal rights under the Delaware General Corporation Law (the "DGCL")) will be canceled in exchange for cash in the amount of $1.32 per share to the holder in cash, without interest (the "Merger Consideration"), on the effective date of the Merger (the "Effective Date"). All rights with respect to the Common Stock (other than with respect to shares of Common Stock held by the Company and the unaffiliated public stockholders, if any, who properly exercise their dissenters' statutory appraisal rights under the DGCL) will cease and terminate on the Effective Date. [ ] has been appointed paying agent (the "Paying Agent") for the Company. In order to receive your Merger Consideration, you must complete, date, sign and return this Letter of Transmittal to [ ] (the "Exchange Agent") at the address listed below, along with all of your certificates representing your Common Stock. Any person holding more than one certificate representing its Common Stock must surrender all such certificates registered in such person's name in order to receive the Merger Consideration to which such person is entitled. Please return your certificates: If by mail to: If by hand to: If by overnight courier to: If any of your certificates have been mutilated, lost, stolen or destroyed, check here and notify the Exchange Agent at [______________]. They will advise you of the requirements for delivering your Common Stock and receiving your Merger Consideration. (If additional space is needed, please complete separate letters of transmittal) 38 ================================================================================ LETTER OF TRANSMITTAL To Accompany Certificate(s) of Common Stock of RAYTECH CORPORATION Surrendered Pursuant to the Short-Form Merger The Paying Agent is: ------------------------- For Information Call: [________________] If by mail to: If by hand to: If by overnight courier to: DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY |_| Check here if your certificate(s) have been lost, stolen or destroyed. See Instruction 5. ------------------------------------------------------------------------ DESCRIPTION OF SHARE(S) SURRENDERED-BOX 1 ------------------------------------------------------------------------ Name(s) and Address(es) of Certificate Number of Registered Holder(s) Number(s) Shares as appears on certificate(s) Formerly (if you need more space Represented attach a list and sign the by Certificate(s) list) ------------------------------------------------------------------------ ------------------------------------- ------------------------------------- TOTAL SHARES ------------------------------------------------------------------------ 39 Ladies and Gentlemen: This Letter of Transmittal relates to Raytech Acquisition Corp. ("Acquisition Sub"), a subsidiary wholly owned by Raytech Corporation Asbestos Personal Injury Settlement Trust, a New York entity ("The Trust"), and its merger with Raytech Corporation, a Delaware corporation ("Raytech"), with Raytech being the surviving corporation (the "Merger"). The Trust holds 37,813,320 shares of common stock, par value $1.00 per share, of Raytech (the "Common Stock"), which represent approximately 90.6% of the issued and outstanding Common Stock. Each outstanding share of Common Stock (other than shares of Common Stock held by the Trust and the unaffiliated public stockholders, if any, who properly exercise their dissenters' statutory appraisal rights under the Delaware General Corporation Law (the "DGCL") will be canceled in exchange for cash in the amount of $1.32 per share to the holder in cash, without interest (the "Merger Consideration"), on the effective date of the Merger (the "Effective Date"). Payment for the Common Stock will be made on or after the Effective Date. All rights with respect to the Common Stock (other than with respect to shares of Common Stock held by the Trust and the unaffiliated public stockholders, if any, who properly exercise their dissenters' statutory appraisal rights under the DGCL) will cease and terminate on the Effective Date. The terms of the Merger, which will be effected on ________, 2005, are described in the Schedule 13E-3 Transaction Statement dated August 11, 2005 and previously mailed to the stockholders of Raytech. [____________] has been appointed paying agent (the "Paying Agent"). The undersigned hereby surrenders to the Paying Agent the certificate(s) listed in Box 1 (the "Certificates"), which represent all of the undersigned Common Stock. The undersigned irrevocably constitutes and appoints the Paying Agent as the true and lawful agent and attorney-in-fact of the undersigned with respect to the Certificates with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to deliver the Certificates for cancellation to the stock transfer agent or the Trust, together with all accompanying evidence of transfer and authenticity, upon receipt by the Paying Agent as the undersigned's agent of the Merger Consideration. The undersigned hereby represents and warrants that the undersigned has full power and authority to surrender the Certificates and the Certificates being transmitted are free and clear of all liens, restrictions, claims, charges and encumbrances, and are not subject to any adverse claims. The undersigned hereby acknowledges that the delivery of the enclosed Certificates shall be effected and risk of loss and title to such Certificates shall pass only upon proper receipt thereof by the Paying Agent. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Paying Agent or the Trust to be necessary or desirable to complete the transfer of the Certificates. All authority conferred or agreed to be conferred in this Letter of Transmittal be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and will not be affected by, and will survive, the death, incapacity or bankruptcy of the undersigned. 40 The undersigned understands that unless otherwise indicated herein, the check for the Merger Consideration issuable to such registered holder(s) will be issued in the name(s) of the registered holder(s) appearing under "Description of Share(s) Surrendered" in Box 1. Similarly, unless otherwise indicated herein, the check for the Merger Consideration issuable to such registered holder(s) (and accompanying documents, as appropriate) will be mailed to the address(es) of the registered holder(s) appearing under "Description of Shares(s) Surrendered" in Box 1. Unless the appropriate box in Box 2 on the next page is checked, the undersigned is not a foreign person. This information and the undersigned's name, identifying number, address and, if applicable, place of incorporation, as provided in Box 2, are certified to be true under penalties of perjury. If any shares of Common Stock surrendered hereby are registered in different names (e.g., "Jane Doe" or "J. Doe"), it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such shares of Common Stock. BOX 2 IMPORTANT SIGN HERE ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW (OR IF YOU ARE A FOREIGN HOLDER, FORM W-8BEN) ________________________________________________________________________________ ________________________________________________________________________________ (Signature(s) of Holder(s)) Dated: _________________, 2005 (Must be signed by the registered holder(s) exactly as name(s) appear(s) on the Certificate(s) or by person(s) authorized to become registered holder(s) by certificates and documents transmitted therewith. If signature is by trustee, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 4.) Name(s)_________________________________________________________________________ ________________________________________________________________________________ (Please Print) Capacity (full title) __________________________________________________________ Address_________________________________________________________________________ (Including Zip Code) (Home for individual, office for entity) |_| Check here if foreign. Place of incorporation, if a Daytime Area Code and corporation ______________________ Telephone Number ____________ Tax Identification or Social Security No.____________ (See Substitute Form W-9 below) 41 GUARANTEE OF SIGNATURE(S) (IF REQUIRED-SEE INSTRUCTIONS 1 AND 4) Authorized Signature:___________________________________________________________ Name:___________________________________________________________________________ (Please Print) Name of Firm:___________________________________________________________________ Address:________________________________________________________________________ (Including Zip Code) Daytime Area Code and Telephone Number:_________________________________________ Dated:__________________________________________________________________________ ________________________________________________________________________________ ================================================================================ BOX 3 SPECIAL ISSUANCE/DELIVERY INSTRUCTIONS (See Instructions 4 and 9) To be completed ONLY if any checks are to be issued in the name of someone other than the person or persons whose name(s) appear(s) in Box 1 of the Letter of Transmittal or at an address other than that shown in Box 1 of this Letter of Transmittal. Issue and mail any checks to (Please Type or Print) Name:___________________________________________________________________________ Address:________________________________________________________________________ ________________________________________________________________ Zip Code ________________________________________________________________________________ Employer Identification or Social Security No. See Substitute Form W-9 42 INSTRUCTIONS 1. Guarantee of Signatures. All signatures of this Letter of Transmittal must be guaranteed by an Eligible Guarantor Institution (as defined in Rule 17Ad-15) of the Securities Exchange Act of 1934, as amended, including (as such terms are defined in that Rule): (i) a bank; (ii) a broker, dealer, municipal securities dealer, municipal securities broker, government securities dealer or government securities broker; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association) (an "Eligible Institution"), unless (a) this Letter of Transmittal is signed by the registered holder(s) of the Certificates surrendered herewith with the checks are not to be issued in the name of, or delivered to, any person other than the registered holder(s) or (b) such Certificates are surrendered for the account of an Eligible Institution. A verification by a notary public is not acceptable. See Instruction 4. 2. Delivery of Letter of Transmittal. This Letter of Transmittal is to be used if Certificates are to be forwarded herewith. Certificates for all physically tendered Common Stock, as well as this Letter of Transmittal properly completed and duly executed (or a facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Paying Agent at its address set forth on the front page of this Letter of Transmittal. The method of delivery of this Letter of Transmittal, Certificates, and all other documents is at the option and risk of the tendering stockholder and the delivery will be deemed made only when actually received by the Paying Agent. If delivery is by mail, it is recommended that such Certificates and documents be sent by registered mail, properly insured, with return receipt requested. 3. Inadequate Space. If the space provided herein is inadequate, the Certificate numbers and notation of the number of shares formerly represented by the Certificate(s) should be listed on a separate schedule attached hereto. 4. Signatures on Letter of Transmittal, Stock and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Certificates surrendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Certificates, without alteration, enlargement or any change whatsoever. If any of the Certificates surrendered hereby are owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Certificates surrendered hereby are registered in different names on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Certificates, no endorsements of the Certificates or separate stock powers are required, unless checks are to be issued in the name of, or delivered to, any person other than such registered holder(s). If checks are to be issued in the name of, or delivered to, any person other than the registered holder(s) of the Certificates, all signatures on the Certificates or stock powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Certificates, the Certificates must be 43 endorsed or accompanied by appropriate stock powers and, in either case, signed exactly as the names of the registered holder(s) appear on the Certificates. Signatures of any such person on any of the Certificates or any stock powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). If this Letter of Transmittal or any Certificate or stock power is signed by a Trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and proper evidence satisfactory to the Trust of the authority of such person so to act must be submitted with this Letter of Transmittal. 5. Lost Stock Certificates. You will not receive your check unless and until you deliver this Letter of Transmittal properly completed and duly executed to the Paying Agent, together with the Certificate(s) evidencing your Common Stock and any accompanying evidence of authority. If your Certificates have been lost, stolen, misplaced or destroyed, check the box on the front of this form, return it to the Paying Agent and await further instructions about signing an affidavit and/or the posting of a bond or an indemnity undertaking. 6. Request for Assistance or Copies. Requests for assistance or additional copies of this Letter of Transmittal may be obtained from the Paying Agent at any of its addresses listed on the front cover of this Letter of Transmittal or by calling Ira R. Halperin, Esq., Special Counsel to the Trust at (516) 747-0300. 7. Substitute Form W-9. The surrendering stockholder (or other payee) is required to provide his broker with a current Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify whether the surrendering stockholder (or other payee) is subject to backup withholding of federal income tax. If a surrendering stockholder (or other payee) has been notified by the Internal Revenue Service that he is subject to backup withholding, he must cross out item (2) of the Certification box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the surrendering stockholder (or payee) to 28% federal income tax withholding on the payment of the Merger Consideration. If the surrendering stockholder (or other payee) has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he would write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. A surrendering stockholder (or other payee) that is a foreign person should not complete Substitute Form W-9, but instead such persons should complete the Form W-8BEN, which is being provided to all foreign holders. If you require this Form, please contact the Paying Agent. 8. Transfer Taxes. If payments in receipt of surrendered Certificates are to be made to any person(s) other than the registered holder(s) of such Certificates, the amount of any transfer taxes (whether imposed on the registered holder(s) or such other person(s)) payable on account of such transfer will be deducted from such payments unless satisfactory evidence of payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 8, it will not be necessary for transfer tax stamps to be affixed to the Certificates surrendered herewith or funds to cover such stamps to be provided with this Letter of Transmittal. 44 9. Special Payment and Delivery Instructions. If any checks are to be issued in the name of a person other than the person(s) signing this Letter of Transmittal or if any checks are to be sent to someone other than to the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at any address other than that shown in Box 1, then Box 3 (Special Issuance/Delivery Instructions), must be completed. If no such instructions are given, all checks will be issued in the name and sent to the address appearing in Box 1. IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose surrendered Certificates are accepted for payment is required by law to provide the Paying Agent (as payer) with his correct TIN on Substitute Form W-9 below. If such stockholder is an individual, the TIN is his social security number. If the Paying Agent is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to the Certificates may be subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Paying Agent. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Paying Agent is required to withhold 30% of any payments made to the stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of the tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Purpose of Substitute Form W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Certificates surrendered pursuant to the Merger, the stockholder is required to notify the Paying Agent of his correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN). What Number to Give the Paying Agent The stockholder is required to give the Paying Agent the social security number or employee identification number of the record owner of the Certificates. If the Certificates are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Paying Agent is not provided with a TIN within 60 days, the Paying Agent will withhold 30% of all payments of the Merger Consideration until a TIN is provided to the Paying Agent. 45 EX-99.(D) 3 d64743_ex99d.txt SUPPLEMENTAL SETTLEMENT AGREEMENT SUPPLEMENTAL SETTLEMENT AGREEMENT This Supplemental Settlement Agreement is entered into as of May 25, 2005, by and among the United States Environmental Protection Agency (the "U.S. EPA"), the Connecticut Department of Environmental Protection (the "Conn. DEP"), and FMC Corporation ("FMC") (collectively, the "Environmental Creditors"), the Legal Representative for Future Claimants (the "Legal Representative"), and the Raytech Corporation Asbestos Personal Injury Settlement Trust (the "PI Trust"). WHEREAS, the Environmental Creditors have asserted claims against Raymark Industries, Inc. and Raymark Corporation (collectively, "Raymark") and Raytech Corporation ("Raytech") for liability under federal and state environmental laws; and WHEREAS, Raymark and Raytech filed petitions under Chapter 11 of the Bankruptcy Code, all of which cases were ultimately consolidated in the United States Bankruptcy Court for the District of Connecticut; and WHEREAS, an Official Committee of Unsecured Creditors (the "Committee") and the Legal Representative, representing the interests of all present and future holders (the "PI Creditors") of unsecured claims for death, bodily injury or other personal damages caused, directly or indirectly, by exposure to asbestos-containing products for which Raymark or Raytech have legal liability, were appointed in the Raytech bankruptcy case; and WHEREAS, on or about October 15, 1998, Laureen M. Ryan was appointed as trustee in the Raymark bankruptcy cases; and WHEREAS, on August 31, 2000, the bankruptcy court approved Raytech's Second Amended Plan of Reorganization (the "Raytech Plan"), which Plan became effective on April 18, 2001; and WHEREAS, the Raytech Plan provided for the formation of the PI Trust and the assumption by the PI Trust of 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; and WHEREAS, the Raytech Plan also provided for the distribution of stock of reorganized Raytech to the Environmental Creditors in satisfaction of their claims against Raytech; and WHEREAS, the Raytech Plan also incorporated an agreement (the "2000 Agreement") among the Environmental Creditors, the Committee, and the Legal Representative, which set forth an agreement between the parties as to the division of some of the assets of the estates of Raymark and Raytech, but not including the proceeds of liability insurance; and WHEREAS, pursuant to the Raytech Plan, Raytech issued shares of stock in reorganized Raytech to the Environmental Creditors on April 19, 2001; and WHEREAS, in October 2001, the Environmental Creditors, the Committee, and the Legal Representative entered into a further agreement (the "2001 Agreement"), which set forth an agreement between the parties as to the assignment by the Environmental Creditors of their interest in certain assets of Raytech and the of 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 their Raytech stock to the PI Trust; and WHEREAS, the Raymark estates appear to have settled all liability insurance claims by them against their liability insurance carriers, with the exception of ongoing litigation relating to National Union / American Home (the "NU/AH Litigation"); and WHEREAS, the Committee was dissolved on or about December 21, 2004, and the Legal Representative and the PI Trust now represent the interests of the PI Creditors formerly represented by the Committee and the Legal Representative; and WHEREAS, the Environmental Creditors and the PI Trust wish to consummate some of the transactions contemplated by the 2001 Agreement, without waiting until such time as a plan is confirmed in the Raymark bankruptcies; NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the parties hereto agree as follows: 1. The PI Trust will pay the Environmental Creditors the aggregate amount of $9,457,776 in cash, which, together with the Environmental Creditors' rights to recovery as described in paragraphs 1, 4 and 9 of the 2001 Agreement, and in paragraphs 3 and 4 below, represents the consideration for the Environmental Creditors' assignment to the PI Trust of assets and proceeds from the Raymark and Universal Friction Composites estates as described in paragraph 2 of the 2001 Agreement, for the Environmental Creditors' assignment to the PI Trust of rights to recovery on the Federal insurance claim as described in paragraph 5 of the 2001 Agreement, for the Environmental Creditors' assignment to the PI Trust of their rights in Raytech tax benefits as described in paragraph 10 of the 2001 Agreement, and for the Environmental Creditors' transfer to the PI Trust of 3,228,888 shares of common stock of Raytech (the "Shares") as follows: 2,300,868 shares from the U.S. EPA; 231,720 shares from the Conn. DEP; and 696,300 shares from FMC (the "Transaction"). The Environmental Creditors hereby represent that the Shares are all of the shares of capital stock of Raytech acquired by any of them pursuant to the Raytech Plan. The closing of the Transaction (the "Closing") shall take place at 10:00 a.m. at the offices of Raytech Corporation, Four Corporate Drive, Shelton, CT 06484 on July 15, 2005, or such other time, place, and date as the parties hereto may mutually agree, but no later than 30 days following the satisfaction of the Closing Conditions in paragraph 2 hereof. At the Closing, the Conn. DEP and FMC shall deliver, or will have previously delivered, to the PI Trust (a) the certificates representing their Shares accompanied by duly endorsed stock powers executed in blank, and (b) such other documents reasonably required by the PI Trust and agreed to by the Environmental Creditors as necessary to close the Transaction. The U.S. EPA shall deliver the certificates representing their Shares in 2 accordance with Schedule A, attached hereto. At the Closing, the PI Trust shall pay the aggregate amount of $9,457,776 to the Environmental Creditors in the following respective amounts in accordance with the instructions on Schedule A, attached hereto: $6,739,500 to the U.S. EPA; $678,736 to the Conn. DEP; and $2,039,540 to FMC. Upon such payment, (i) all right, title, and interest in the Shares, free and clear of any liens, claims or encumbrances of any kind, shall be transferred to the PI Trust and (ii) the Environmental Creditors shall acknowledge they have no further rights to any of the shares or capital stock of Raytech or to any of the assets, proceeds or rights assigned pursuant to paragraphs 2, 5, and 10 of the 2001 Agreement; provided, however, that such acknowledgement shall not affect the Environmental Creditors' rights of recovery as described in paragraphs 1, 4 and 9 of the 2001 Agreement, and in paragraphs 3 and 4, below. 2. The PI Trust's obligation to consummate the Transaction shall be conditioned on the satisfaction of either: (I) (A) The PI Trust shall have received notice from the Securities and Exchange Commission (the "SEC") indicating that it does not intend to undertake a review of the Schedule 13E-3 Transaction Statement (the "Schedule 13E-3") filed in connection with the acquisition of the Shares; or (B) The PI Trust shall have resolved all comments received from the SEC pursuant to any SEC review of the Schedule 13E-3; and (C) The PI Trust shall have satisfied its disclosure obligations within the time periods specified under Rule 13e-3(e) and (f) of the Securities Exchange Act of 1934, as amended ("the Act"); or (II) The PI Trust shall have withdrawn the Schedule 13E-3 and abandoned any plans for a Raytech "going private transaction" (as defined in the Act). The Environmental Creditors' obligation to consummate the Transaction shall be conditioned upon final approval by the United States Bankruptcy Court for the District of Connecticut of a motion compromising the Environmental Creditors' claims against the Raymark estates, which motion shall reference and incorporate this Agreement and the 2001 Agreement. Such approval shall not be deemed final until all appeals from any such motion shall have been resolved or until all appeal periods have run, whichever first occurs. 3. Upon completion of the Closing pursuant to paragraph 1 hereof, the contingent payments contemplated by paragraph 9 of the 2001 Agreement shall not be required; provided, however, that should the Environmental Creditors' 40% share of the net proceeds of the recovery of claims against Raymark's former insurance carriers, as described and calculated pursuant to the 2001 Agreement, exceed $11,475,000, then the PI Trust shall pay over to the Environmental Creditors such excess upon receipt thereof. The calculation of the Environmental Creditors' 3 40% share shall occur after the conclusion of the NU/AH Litigation and after the final accounting of the Raymark bankruptcy estates. 4. Nothing in this Agreement, the 2001 Agreement, or the 2000 Agreement, shall prevent the Environmental Creditors from recovering from the Raymark estates the proceeds of the Allstate/Northbrook insurance, net of the costs incurred by the Raymark estates to create that fund. 5. The Environmental Creditors agree not to oppose any plan of reorganization proposed by the PI Trust or the Legal Representative in the Raymark bankruptcies that is consistent with this Agreement, the 2001 Agreement, and the 2000 Agreement. 6. This Agreement is intended to modify paragraphs 8 and 9 of the 2001 Agreement. To the extent this Agreement and the 2001 Agreement do not agree, the terms of this Agreement control. 7. This Agreement shall be governed by and construed under the laws of the State of Delaware. 8. This Agreement, to the extent it modifies and accelerates the 2000 and 2001 Agreements, constitutes the entire understanding among the parties concerning the subject matter hereof and may not be modified or amended except by a writing signed by all parties to this Agreement. 9. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile signatures shall have the same legal effect as original signatures. IN WITNESS WHEREOF, the parties have executed this Agreement as indicated below. /s/ Richard A. Lippe - ------------------------------ Richard A. Lippe Meltzer Lippe 190 Willis Avenue Mineola, NY 11501 Managing Trustee Raytech Corporation Asbestos Personal Injury Trust 4 /s/ Robert F. Carter - ------------------------------ Robert F. Carter Carter & Civitello One Bradley Road, Suite 301 Woodbridge, CT 06525 Legal Representative for Future Claimants /s/ Henry S. Friedman - ------------------------------ Henry S. Friedman Senior Attorney Environmental Enforcement Section U.S. Department of Justice P.O. Box 7611 Washington, D.C. 20044 Counsel to the United States Environmental Protection Agency /s/ Ann M. Nevins - ------------------------------ Ann M. Nevins Assistant United States Attorney District of Connecticut 915 Lafayette Boulevard Bridgeport, CT 06604 Counsel to the United States Environmental Protection Agency /s/ Krista E. Trousdale - ------------------------------ Krista E. Trousdale Assistant Attorney General 55 Elm Street Hartford, CT 06106 Counsel to the Connecticut Department of Environmental Protection 5 /s/ Carol L. Press - ------------------------------- Carol L. Press, Esq. Eckert Seamans Cherrin & Mellott, LLP 1515 Market Street, 9th Floor Philadelphia, PA 19102 Counsel to FMC Corporation 6 Schedule A Payment Instructions and Escrow Agreement (This Schedule is attached to that Supplemental Settlement Agreement dated May 25, 2005 by and among the United States Environmental Protection Agency (the "U.S. EPA"), the Connecticut Department of Environmental Protection (the"Cont. DEP"), and FMC Corporation ("FMC") (collectively, the "Environmental Creditors"), the Legal Representative for Future Claimants (the "Legal Representative"), and the Raytech Corporation Asbestos Personal Injury Settlement Trust (the "PI Trust").) Payment of the $9,457,776 (the "Aggregate Payment") pursuant to paragraph 1 of the foregoing Agreement shall be made in accordance with the following: 1. To the U.S. EPA: A. At the Closing, the PI Trust shall deliver $6,739,500 (the "US Payment") in cash or cash equivalent to the law firm of Carter & Civitello, (the "Escrow Agent") as escrow agent for the PI Trust and United States, which arm represents the portion of the Aggregate Payment due to the United States. By executing this Schedule A, the Escrow Agent agrees that it shall hold the US Payment in its trustee account, or in a segregated account, for a period of ten (10) business days or until it receives written instructions from the PI Trust and the United States Attorney's Office directing the final transfer of the funds to the United States, whichever is earlier. If the Escrow Agent does not receive such written instructions directing the final transfer of the funds to the United States within ten (10) business days after the Closing, the Escrow Agent hereby agrees that it shall transfer the US Payment to the Clerk of the United States Bankruptcy Court for the District of Connecticut, so that the parties may be commence an interpleader action to determine the disposition of the US Payment. B. Upon receipt of written confirmation satisfactory to the PI Trust that the ownership of the 2,300,868 shares of Raytech stock currently owned by the United States has been transferred on the books and records of Raytech, as maintained by Raytech's transfer agent, to the PI Trust, the PI Trust shall execute written instructions to the Escrow Agent directing that the US Payment be transferred to the United States. Payment to the United States shall be made by Fedwire Electronic Funds Transfer to the Department of Justice account in accordance with current electronic funds transfer procedures. Payment shall be made in accordance with instructions provided, upon request, to the PI Trust, by the Financial Litigation Unit of the United States Attorney's Office for the District of Connecticut. The United States represents, and the PI Trust acknowledges, that Merrill Lynch will execute the transfer of shares from the United States to the registered transfer agent for Raytech, on behalf of the United 7 States. Accordingly, written verification from Merrill Lynch that the transfer is complete will be deemed by the PI Trust to be satisfactory confirmation that the ownership of the 2,300,868 shares of Raytech stock currently owned by the United States has been transferred on the books and records of Raytech, as maintained by Raytech's transfer agent, to the PI Trust. C. The US Payment shall be divided by the United States as follows: (i). $5,443,189.87 to EPA Region I on account of its claims with respect to the Raymark Superfund Site (EPA Site number 01H3) .This amount will either be: (a) deposited in the Raymark Industries, Inc. Superfund Site Special Account within the EPA Hazardous Substance Superfund to be retained and used to conduct or finance response actions at or in connection with the Raymark Industries, Inc. Superfund Site, or to be transferred by EPA to the EPA Hazardous Substance Superfund; or (b) be deposited into the EPA Hazardous Substance Superfund; (ii). $859,106.27 to EPA Region III on account of its claims with respect to the Avtex Fibers Superfund Site (EPA Site number 03D1). This amount will be deposited in the Avtex Fibers Superfund Site Special Account within the EPA Hazardous Substance Superfund to be retained and used to conduct or finance response actions at or in connection with the Avtex Fibers Superfund Site, or to be transferred by EPA to the EPA Hazardous Substance Superfund; and (iii). $437,203.86 to the Department of Interior (ALC 14010001) and the National Oceanographic and Atmospheric Administration on account of their Natural Resources Damage Claims; with respect to the Raymark Industries, Inc. Superfund Site divided as follows: $15,000 to DOI (DOI NRDAR Account Number 14X5198) for its Site assessment costs; and $422,203.86 to DOI and NOAA to be placed in the DOI NRDAR Account (DOI NRDAR Account Number 14X5198) and jointly administered for Site restoration. II. To the Conn. DEP: A certified or cashier's check in the amount of Six Hundred and Seventy-Eight Thousand, Seven Hundred and Thirty-Six Dollars ($678,736) payable to "Treasurer, State of Connecticut delivered to Assistant Attorney General Krista E. Trousdale for the State of Connecticut. 8 III. To FMC: A certified or cashier's check in the amount of Two Million, Thirty-Nine Thousand, Five Hundred and Forty Dollars ($2,039,540) payable to "FMC Corporation" delivered to Eckert Seamans Cherrin & Mellott, LLP, Attention: Carol L. Press, Esq. ACKNOWLEDGED AND AGREED TO BY: /s/ Richard A. Lippe - ------------------------------ Richard A. Lippe Meltzer Lippe 190 Willis Avenue Mineola, NY 11501 Managing Trustee Raytech Corporation Asbestos Personal Injury Trust /s/ Robert F. Carter - ------------------------------ Robert F. Carter Carter & Civitello One Bradley Road, Suite 301 Woodbridge, CT 06525 Legal Representative for Future Claimants /s/ Henry S. Friedman - ------------------------------ Henry S. Friedman Senior Attorney Environmental Enforcement Section U.S. Department of Justice P.O. Box 7611 Washington, D.C. 20044 9 Counsel to the United States Environmental Protection Agency /s/ Ann M. Nevins - -------------------------------- Ann M. Nevins Assistant United States Attorney District of Connecticut 915 Lafayette Boulevard Bridgeport, CT 06604 Counsel to the United States Environmental Protection Agency /s/ Krista E. Trousdale - -------------------------------- Krista E. Trousdale Assistant Attorney General 55 Elm Street Hartford, CT 06106 Counsel to the Connecticut Department of Environmental Protection /s/ Carol L. Press - -------------------------------- Carol L. Press, Esq. Eckert Seamans Cherrin & Mellott, LLP 1515 Market Street, 9th Floor Philadelphia, PA 19102 Counsel to FMC Corporation 10 EX-99.(E) 4 d64743_ex99e.txt WY CAMPBELL REPORT CONFIDENTIAL Presentation to: THE RAYTECH CORPORATION BOARD OF DIRECTORS Discussion Materials October 26, 2004 W. Y. CAMPBELL & COMPANY ------------------------ INVESTMENT BANKING EXECUTIVE OVERVIEW ==================-------------------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 1 W. Y. CAMPBELL & COMPANY EXECUTIVE OVERVIEW ==================-------------------------------------------------------------- EXECUTIVE OVERVIEW o The purpose of this presentation: o Update WYC&C's valuation of Raytech, o Revisit "high-interest" strategic alternatives. o WYC&C remains committed to working with Raytech on Strategic Options. o In developing a revised outlook, WYC&C included the following: o Detailed review of revenue, new business, and future prospects for the Wet Friction unit; o Appreciation for the hurdles faced by Wet Friction after 2006, pending new business awards; o Updating our valuation with the Company's/Units' "sharpened" financial outlook; o Preparing our own probability adjusted forecast (for valuation purposes), much the way a financial buyer would approach valuing the Company post-management interviews. o Limitations: o We have not yet spoke to any of the various parties who may be interested in Raytech o More aggressive strategic planning, e.g. China strategy for Wet Friction, were not included due to a lack of clear sight on the cost, timing, customer reaction, or benefit of more "out-of-the-box" strategic thinking; o Assumptions as to the cash-generating capability of the Business Unit through 2008; o Decision not to seek independent verification of Raytech's position vis a vis its customers and their perceptions, or their willingness to promote Raytech as a future supplier. - -------------------------------------------------------------------------------- PAGE 2 W. Y. CAMPBELL & COMPANY EXECUTIVE OVERVIEW ==================-------------------------------------------------------------- FOCUSING TODAY'S CONVERSATION ... CONSIDERATIONS RELEVANT TO PUBLIC (OR PRIVATE) SHAREHOLDERS: 1) Characteristics for the investment vehicle: i. What is the risk-return relationship? 1. Current outlook 2. Stability of value 3. Risk inherent in company as it stands today ii. What level of return is likely to be realized? 1. Sell vs. Keep iii. Is a sale of the Company a value-attractive alternative? iv. Whether sold or not, how could returns from Raytech ownership be increased? 1. Revisit strategic options and alternatives 2) Recognition of when the future holds value + opportunity vs. when cashing out might be the better part of valor. - -------------------------------------------------------------------------------- PAGE 3 W. Y. CAMPBELL & COMPANY EXECUTIVE OVERVIEW ==================-------------------------------------------------------------- CONSIDERATIONS WORTH TAKING ADVANTAGE OF: 1) Tax NOLs create increase the (unusual) ability to sell parts or the whole 2) Raybestos brand continues to have value that Echlin, Dana, and now Cyprus, promote at great annual expense 3) We have taken important steps with Chinese manufacturing. Now we need to develop and explore additional outsourcing (Offer an LTA to a Stamper/Fine Blanker) and further investigate off-shore sourcing. 4) We have a good excuse for not wanting all our eggs in one basket - -------------------------------------------------------------------------------- PAGE 4 W. Y. CAMPBELL & COMPANY EXECUTIVE OVERVIEW ==================-------------------------------------------------------------- RANGE OF STRATEGIC ALTERNATIVES - MACRO STRATEGY CONSIDERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------- Sell All / 50+% / Parts Strategic Partnership / Acquisition Stay The Course/Recap - ---------------------------------------------------------------------------------------------------------------------------------- Q: If someone else can do more with the Q: What would we obtain, and what would Q: Are we making substantial progress Company than we can, and puts a reflective obtaining it mean? What would an towards a suitable goal, such that simply value on the table, do we want to cash out acquisition or partnership add to our doing more of the same is our best and let them take the risks? already exciting story? strategy? o Raytech = "high beta" entity o Re-capturing technological Q: If we took a sizable dividend off the leadership in wet would be highly table now, are we be comfortable with the o Uncertainty in Wet applied to accretive to value... but will be current direction? Aftermarket and Dry not long ago time-consuming, uncertain and expensive! o Substantially increasing leverage, o Management team is incomplete or harvesting one of our o Finding our way into Low-Cost cash-producing divisions appears to o Impressive capital required for Producer status would be highly be a high-risk strategy: change and to sustain Dry. accretive to value Aftermarket risks being marginalized o Excellent customer and technical by Wet. o Capital availability could be a position? No. constraint o Great patience required to turn this o Markets evolving in our favor? No. ship around! o Generally acquisitive efforts come as a result of supreme confidence in o Believe in Management's abilities? O Could someone else extract more management (albeit management could No. value? More importantly, will they also be acquired) pay us for the chance? o Capital available for sustaining and revolutionary investment? Doubtful.
- -------------------------------------------------------------------------------- PAGE 5 W. Y. CAMPBELL & COMPANY EXECUTIVE OVERVIEW ==================-------------------------------------------------------------- WHEN DOES STRATEGIC PARTNERING LOOK LIKE A SALE MANDATE? -------------------------------- Successful Investigatory Process -------------------------------- - --------- -------- ------------------- ------------ ------ Business Strategy Financial Structure Sale Process Timing - --------- -------- ------------------- ------------ ------ [GRAPHIC] - -------------------------------------------------------------------------------- PAGE 6 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 7 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- MANAGEMENT FORECAST
Raytech - Financial Summary - Management Case (US$ in millions) 2004E 2005E 2006E 2007E 2008E CAGR - --------------------------------------------------------------------------------------- Sales 217.2 229.3 251.3 267.1 282.3 6.8% Cost of Sales 175.6 183.7 198.6 210.9 221.0 - ------------------------------------------------------------------------------- Gross Profit 41.6 45.6 52.7 56.2 61.3 10.2% Gross Margin 19.2% 19.9% 21.0% 21.0% 21.7% SG&A 24.3 25.1 26.3 27.7 29.0 - ------------------------------------------------------------------------------- EBIT 17.4 20.5 26.4 28.5 32.4 16.9% EBIT Margin 8.0% 8.9% 10.5% 10.7% 11.5% Depreciation and Amortization 10.9 9.7 9.7 9.5 9.3 - ------------------------------------------------------------------------------- Pre-Corporate EBITDA 28.3 30.2 36.1 38.0 41.7 10.2% Corporate Expense (7.9) (6.8) (6.8) (6.8) (6.8) - ------------------------------------------------------------------------------- EBITDA 20.4 23.4 29.3 31.2 34.9 14.4% EBITDA Margin 9.4% 10.2% 11.7% 11.7% 12.4% - --------------------------------------------------------------------------------------- Enterprise Value $ 118.3 $ 135.5 $ 170.1 $ 180.8 $ 202.3 14.4% Equity Value $ 58.9 $ 73.7 $ 110.2 $ 123.3 $ 148.8 26.0% Equity Value per Share $ 1.41 $ 1.77 $ 2.64 $ 2.95 $ 3.56 26.0% - ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 8 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- FORECAST SUMMARY o The WYC&C forecast incorporates some key changes versus the Management forecast o Wet Friction Division o Gave full credit for all current business; o Only gave credit to the Automotive segment "potential business" on those platforms in which the sales team believes there is a 50% or greater chance of success. A difference in sales of $1.9 million in 2005, $3.3 million in 2006, $4.3 million in 2007, and $6.6 million in 2008; o WYC&C reduced management's Direct Labor expense by 1% from 2005-2008, and WYC&C reduced management's Variable Overhead expense by 2% from 2005-2008. These expense reductions correspond with the significant sales reductions stated above; o Both management and WYC&C factor in price reduction "give-backs" to the OEM customers in 2007 and 2008 of 1% and 2% respectively. Only GM and Magna did not have these give-backs built into the forecast; o The resultant impact on management's forecast is a decreased revenue and profit forecast (related to new business). Profit impact against forecast is: -12.5% in 2005, -23.0% in 2006, -32.0% in 2007 and -68.0% in 2008 against management's growth forecast; o The Heavy Duty segment assumed minimal new business, WYC&C accepted the Heavy Duty forecast. o Dry Friction Division o WYC&C reduced management's sales forecast slightly (down 1.5% each year from 2005-2008); o The resultant impact is a reduction of management's profit forecast by 11.0% in 2005, 10.0% in 2006 and 2007 and 9.0% in 2008. o Aftermarket Division o WYC&C reduced management's sales forecast slightly (down 2.0% each year from 2005-2008); o The resultant impact is a reduction of management's profit forecast by approximately 12.5% for 2005-2008. - -------------------------------------------------------------------------------- PAGE 9 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- o The Downside forecast incorporates the same reduction in sales in the Dry and Aftermarket divisions as in the WYC&C forecast. The Wet Friction Division Automotive segment new business opportunities are only given credit when the probability is greater than 50% (i.e. 50% cases were dropped from the forecast), except for the NV900 Coupler project (projected at 80% probability) that was also struck as having substantially lower probability of success(1) o The Strategic forecast gives full credit to management's Dry and Aftermarket projections. In the Wet Friction division, full credit is given for all potential business, plus 10% cost reduction (highly successful cost containment initiatives) in each of the Material, Direct Labor and Fixed Overhead expenses. This upside forecast also assumes a 10% increase in the sale value (pricing) on steel scrap. - ---------- (1) This is currently made in Crawfordsville but is in jeopardy due to NVH issues (Noise, Vibration & Harshness). Sterling Heights test center was working on this until closure. Means has been working on a solution with MTM (GM owns MTM). This project has not been picked up by Crawfordsville test center since Sterling Heights closure in March. Need to discuss during Sept 29 & 30 meeting with L.S. & M. T. (As of 10/7/04, MTM is coming to the realization that this is a systems problem vs. a material problem. Therefore, we will likely keep this business - 100%). - -------------------------------------------------------------------------------- PAGE 10 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- WYC&C FORECAST
Raytech - Financial Summary - WYC&C Case (US$ in millions) 2004E 2005E 2006E 2007E 2008E CAGR - -------------------------------------------------------------------------------------------------- Sales 217.2 225.2 245.7 260.3 273.2 5.9% Cost of Sales 175.6 182.8 197.8 209.9 220.0 - ------------------------------------------------------------------------------------------ Gross Profit 41.6 42.4 47.9 50.4 53.1 6.3% Gross Margin 19.2% 18.8% 19.5% 19.4% 19.4% SG&A 24.3 25.1 26.3 27.7 29.0 - ------------------------------------------------------------------------------------------ EBIT 17.4 17.3 21.7 22.7 24.2 8.6% EBIT Margin 8.0% 7.7% 8.8% 8.7% 8.8% Depreciation and Amortization 10.9 9.7 9.7 9.5 9.3 - ------------------------------------------------------------------------------------------ Pre-Corporate EBITDA 28.3 27.0 31.4 32.2 33.5 4.3% Corporate Expense (7.9) (6.8) (6.8) (6.8) (6.8) - ------------------------------------------------------------------------------------------ EBITDA 20.4 20.2 24.6 25.4 26.7 6.9% EBITDA Margin 9.4% 9.0% 10.0% 9.7% 9.8% - -------------------------------------------------------------------------------------------------- Enterprise Value $118.3 $117.0 $142.7 $147.1 $154.7 6.9% Equity Value $ 58.9 $ 55.3 $ 82.8 $ 89.6 $101.2 14.5% Equity Value per Share $ 1.41 $ 1.32 $ 1.99 $ 2.15 $ 2.42 14.5% - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 11 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- STRATEGIC FORECAST
Raytech - Financial Summary - Strategic Case (US$ in millions) 2004E 2005E 2006E 2007E 2008E CAGR - -------------------------------------------------------------------------------------------------- Sales 217.2 239.9 263.2 279.5 295.4 8.0% Cost of Sales 175.6 192.2 208.0 220.7 231.4 - ------------------------------------------------------------------------------------------ Gross Profit 41.6 47.6 55.1 58.8 64.0 11.4% Gross Margin 19.2% 19.9% 20.9% 21.0% 21.7% SG&A 24.3 25.1 26.3 27.7 29.0 - ------------------------------------------------------------------------------------------ EBIT 17.4 22.5 28.9 31.1 35.0 19.2% EBIT Margin 8.0% 9.4% 11.0% 11.1% 11.9% Depreciation and Amortization 10.9 9.7 9.7 9.5 9.3 - ------------------------------------------------------------------------------------------ Pre-Corporate EBITDA 28.3 32.2 38.6 40.6 44.3 11.9% Corporate Expense (7.9) (6.8) (6.8) (6.8) (6.8) - ------------------------------------------------------------------------------------------ EBITDA 20.4 25.4 31.8 33.8 37.5 16.5% EBITDA Margin 9.4% 10.6% 12.1% 12.1% 12.7% - -------------------------------------------------------------------------------------------------- Enterprise Value $ 118.3 $ 147.4 $ 184.4 $ 195.9 $ 217.7 16.5% Equity Value $ 58.9 $ 85.6 $ 124.5 $ 138.3 $ 164.2 29.2% Equity Value per Share $ 1.41 $ 2.05 $ 2.98 $ 3.31 $ 3.93 29.2% - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 12 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- DOWNSIDE FORECAST
Raytech - Financial Summary - Downside Case (US$ in millions) 2004E 2005E 2006E 2007E 2008E CAGR - --------------------------------------------------------------------------------------- Sales 217.2 225.2 244.0 254.9 261.3 4.7% Cost of Sales 175.6 183.7 198.6 210.9 221.0 - ------------------------------------------------------------------------------ Gross Profit 41.6 41.6 45.3 44.0 40.3 -0.8% Gross Margin 19.2% 18.5% 18.6% 17.3% 15.4% SG&A 24.3 25.1 26.3 27.7 29.0 - ------------------------------------------------------------------------------ EBIT 17.4 16.4 19.1 16.3 11.4 -10.0% EBIT Margin 8.0% 7.3% 7.8% 6.4% 4.4% Depreciation and Amortization 10.9 9.7 9.7 9.5 9.3 - ------------------------------------------------------------------------------ Pre-Corporate EBITDA 28.3 26.1 28.8 25.8 20.7 -7.5% Corporate Expense (7.9) (6.8) (6.8) (6.8) (6.8) - ------------------------------------------------------------------------------ EBITDA 20.4 19.3 22.0 19.0 13.9 -9.2% EBITDA Margin 9.4% 8.6% 9.0% 7.4% 5.3% - --------------------------------------------------------------------------------------- Enterprise Value $ 118.3 $ 112.1 $ 127.5 $ 110.0 $ 80.6 -9.2% Equity Value $ 58.9 $ 50.4 $ 67.7 $ 52.5 $ 27.0 -17.7% Equity Value per Share $ 1.41 $ 1.21 $ 1.62 $ 1.26 $ 0.65 -17.7% - ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 13 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- MANAGEMENT CASE VALUATION - DISCOUNTED TO 2004 o Each valuation metric is discounted to year-end 2004 o The valuation highlights the sensitivities to various discount rates, WYC&C used a range of 0% - 20%
Enterprise Value - Management Case ----------------------------------------------- 2004E 2005E 2006E 2007E 2008E ----------------------------------------------- 0% $ 118.3 $ 135.5 $ 170.1 $ 180.8 $ 202.3 5% $ 118.3 $ 129.1 $ 154.2 $ 156.2 $ 166.5 10% $ 118.3 $ 123.2 $ 140.5 $ 135.8 $ 138.2 15% $ 118.3 $ 117.8 $ 128.6 $ 118.9 $ 115.7 20% $ 118.3 $ 112.9 $ 118.1 $ 104.6 $ 97.6
Equity Value - Management Case ----------------------------------------------- 2004E 2005E 2006E 2007E 2008E ----------------------------------------------- 0% $ 58.9 $ 73.7 $ 110.2 $ 123.3 $ 148.8 5% $ 58.9 $ 70.2 $ 99.9 $ 106.5 $ 122.4 10% $ 58.9 $ 67.0 $ 91.1 $ 92.6 $ 101.6 15% $ 58.9 $ 64.1 $ 83.3 $ 81.0 $ 85.1 20% $ 58.9 $ 61.4 $ 76.5 $ 71.3 $ 71.7
Equity Value per Share - Management Case ----------------------------------------------- 2004E 2005E 2006E 2007E 2008E ----------------------------------------------- 0% $ 1.41 $ 1.77 $ 2.64 $ 2.95 $ 3.56 5% $ 1.41 $ 1.68 $ 2.39 $ 2.55 $ 2.93 10% $ 1.41 $ 1.61 $ 2.18 $ 2.22 $ 2.43 15% $ 1.41 $ 1.54 $ 2.00 $ 1.94 $ 2.04 20% $ 1.41 $ 1.47 $ 1.83 $ 1.71 $ 1.72
- -------------------------------------------------------------------------------- PAGE 14 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- WYC&C CASE VALUATION - DISCOUNTED TO 2004 o Each valuation metric is discounted to year-end 2004 o The valuation highlights the sensitivities to various discount rates, WYC&C used a range of 0% - 20%
Enterprise Value - WYC&C Case - ------------------------------------------------------ 2004E 2005E 2006E 2007E 2008E - ------------------------------------------------------ 0% $ 118.3 $ 117.0 $ 142.7 $ 147.1 $ 154.7 5% $ 118.3 $ 111.5 $ 129.5 $ 127.1 $ 127.3 10% $ 118.3 $ 106.4 $ 118.0 $ 110.6 $ 105.7 15% $ 118.3 $ 101.8 $ 107.9 $ 96.8 $ 88.5 20% $ 118.3 $ 97.5 $ 99.1 $ 85.2 $ 74.6
Equity Value - WYC&C Case - ------------------------------------------------------ 2004E 2005E 2006E 2007E 2008E - ------------------------------------------------------ 0% $ 58.9 $ 55.3 $ 82.8 $ 89.6 $ 101.2 5% $ 58.9 $ 52.6 $ 75.1 $ 77.4 $ 83.2 10% $ 58.9 $ 50.2 $ 68.5 $ 67.3 $ 69.1 15% $ 58.9 $ 48.1 $ 62.6 $ 58.9 $ 57.8 20% $ 58.9 $ 46.1 $ 57.5 $ 51.8 $ 48.8
Equity Value per Share - WYC&C Case - ------------------------------------------------------ 2004E 2005E 2006E 2007E 2008E - ------------------------------------------------------ 0% $ 1.41 $ 1.32 $ 1.99 $ 2.15 $ 2.42 5% $ 1.41 $ 1.26 $ 1.80 $ 1.85 $ 1.99 10% $ 1.41 $ 1.20 $ 1.64 $ 1.61 $ 1.66 15% $ 1.41 $ 1.15 $ 1.50 $ 1.41 $ 1.39 20% $ 1.41 $ 1.10 $ 1.38 $ 1.24 $ 1.17
- -------------------------------------------------------------------------------- PAGE 15 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- WET FRICTION DIVISIONAL VALUATION ANALYSIS [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] DCF Sensitivity Analysis - Total Enterprise Value - --------------------------------------------------------------------------------
Terminal Value EBITDA Multiple 4.5x 5.0x 5.5x 6.0x - ---------------------------------------------------------------------- 13.0% 32.6 35.1 37.6 40.0 12.5% 33.1 35.6 38.1 40.6 -------------- Discount 12.0% 33.6 36.1 38.7 41.3 Rate 11.5% 34.0 36.7 39.3 41.9 11.0% 34.5 37.2 39.9 42.5 -------------- 10.5% 35.0 37.8 40.5 43.2 10.0% 35.6 38.3 41.1 43.9 - ----------------------------------------------------------------------
Trading Comparables Analysis
Multiple Range Equity/Enterprise Value Range FYE 2004E Results Low High Low High - ----------------------------------------------------------------------------- Sales $ 103.3 0.5x 0.6x 51.7 62.0 EBITDA $ 10.5 4.5x 5.0x 47.2 52.4 - -----------------------------------------------------------------------------
Transaction Comparables Analysis
Multiple Range Equity/Enterprise Value Range FYE 2004E Results Low High Low High - ------------------------------------------------------------------------------ Sales $ 103.3 0.7x 0.8x 72.3 82.7 EBITDA $ 10.5 5.0x 5.5x 52.4 57.7 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 16 W. Y. CAMPBELL & COMPANY VALUATION =========----------------------------------------------------------------------- VALUATION CONCLUSION o Sold as one company, Raytech's value is likely to approximate $120 million o Sold as three divisions, Raytech's value may be has high as $145 million o There are several issues that make a sale of the three divisions less intuitive than a sale of the whole: o Shared facility in Crawfordsville, IN (sourcing of stamped components, HD vs. auto, R&D, etc.) o Brand and product dependence on the auto side of the Wet Friction Division by the Aftermarket Division o Customer and branding differences between the Automotive and Heavy Duty sub-segments of Wet Friction becomes a potential obstacle o In order to maximize value, and make a sale feasible, WYC&C recommends taking the company to market as a single entity, while also soliciting offers on the divisions independently o WYC&C does not necessarily believe the Company would receive a 5.8x EBITDA multiple (for those of you multiplying our current EBITDA x 5.8 to reach $120 million)... however, we believe the total valuation provided herein could be realized through finding add-backs, one-time adjustments and other cost-savings opportunities - -------------------------------------------------------------------------------- PAGE 19 W. Y. CAMPBELL & COMPANY ACCRETIVE ACQUISITION IDEAS ===========================----------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 20 W. Y. CAMPBELL & COMPANY ACCRETIVE ACQUISITION IDEAS ===========================----------------------------------------------------- ACQUISITION IDEA #1 - -------------------------------------------------------------------------------- Rostra Precision Controls, Inc. Ownership: Private www.rostra.com Entity Type: Subsidiary 2519 Dana Dr. Year Formed: 1989 Laurinburg, NC 28352-4000 Ultimate Parent Company: Rostra Scotland County Technologies Inc United States KeyID(SM) Number: 42749958 Tel: (910) 276-4853 D-U-N-S(R) Number: 16-199-4041 Fax: (910) 276-3865 - -------------------------------------------------------------------------------- Reporting Currency: US Dollars Employees: 150 Annual Sales: $30.0 million President: Ray Ford - -------------------------------------------------------------------------------- Business Description: Manufacturer of automotive cruise control systems, rear obstacle sensing systems, seating products, and transmission components, including solenoids and modulators and seat support systems. Products are sold to the automotive industry, the automotive aftermarket, and OEMS. - -------------------------------------------------------------------------------- RATIONALE FOR ACQUISITION: PROS: CONS: o Complementary value-added o Small size of a Rostra products. acquisition would not generate sufficient interest on the o Automotive electronics is an "Street". area with high growth potential. o Rostra is primarily an o Additional product lines for the aftermarket company; this would OE and Aftermarket segments. not help to improve Wet Friction's prospects. o Penetration in the HD segment would provide Raytech additional o Using stock is unfavorable distribution channels. given the current price; using cash would reduce the ability to reinvest in more core products. - -------------------------------------------------------------------------------- PAGE 22 W. Y. CAMPBELL & COMPANY ACCRETIVE ACQUISITION IDEAS ===========================----------------------------------------------------- ACQUISITION IDEA #3 - -------------------------------------------------------------------------------- Means Industries, Inc. Ownership: Private www.amsted.com Entity Type: Parent 3715 E Washington Rd Year Formed: 1999 Saginaw, Ml 48601-9623 KeyID(SM) Number: 45191609 Saginaw County United States Tel: (989)754-1433 Fax: (989)754-1103 - -------------------------------------------------------------------------------- Annual Sales: $50 million President: D W Shaw Plant Size: 40,000 (square feet) Employees: 89 (at HQ location) - -------------------------------------------------------------------------------- Business Description: Manufactures automotive stampings and One-Way Clutches. The Means One-Way Clutch is ideal for the higher demands placed on transmissions in trucks, high-performance cars and sport utility vehicles. At the same time, its remarkably simple design makes it a cost-effective choice for virtually any automatic transmission. - -------------------------------------------------------------------------------- RATIONALE FOR ACQUISITION: PROS: CONS: o Product seems to be non-core to o Smaller acquisition based upon Amsted Industries. publicly available information. o Product line acquisition which o How much leverage can be gained gives access to additional by a single product acquisition markets. vs. that of a larger entity? o Provides additional stamping o Using stock is unfavorable given capabilities which could be used the current price; using cash to supplement what is done in would reduce the ability to Crawfordsville. reinvest in more core products. - -------------------------------------------------------------------------------- PAGE 24 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 25 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- RAYTECH CORPORATION ... OBSERVATIONS ON THE WHOLE o Raytech has clear value as an investment opportunity and as a going concern. The Board needs to carefully consider the long term expected value of the Company versus the opportunity to take advantage of compelling valuations in the Automotive M&A market today. o In seeking a strategic valuation, Raytech will need to defend its position in each market and with each of its key customers. While this is more easily done with Dry and Aftermarket, the auto-OE side of the WET business remains precarious. o Raytech seems to wield a size and critical mass that should allow it to compete. However, the Wet side of the business has fallen to an unenviable 3rd out of three among the North American OE competitors. The ramp-up of the Chinese operation to offer lower OE pricing would be an extremely viable way of changing the playing field on more mature products. o Financial buyers setting a baseline for value would likely be in the 4 to 6x adjusted Trailing Twelve Months EBITDA range. A strategic buyer for one or all of the pieces would need the synergistic aspects of the deal clearly identified (i.e. closure of HQ, full impact of Sterling Heights closure) prior to offering full value. o WET Friction and the visibility of its sales going forward remains difficult. For WET to truly have viable future, considerations should be given toward outsourcing critical processes such as paper manufacture and stamping/fine blanking. By outsourcing these critical manufacturing processes the Company will be able to focus on product development/know-how, engineering, design and assembly. This will also serve to reduce fixed overhead - albeit union considerations will be critical. o Capital spending to sustain and re-take a leadership role could equate to a startlingly large figure. Technology and low-cost producer status are directionally essential targets for the Company to succeed, and maximize shareholder value. o A wide range of possible alternatives has been considered and explored further. We re-cap the various alternatives in the Selection of Alternatives section, but ultimately believe that taking the Company to market in a "cafeteria" style offering memorandum, in the current Automotive M&A marketplace will create the greatest amount of options (i.e. partnering, merger, divestiture) and subsequently allow the shareholders to realize the greatest value. - -------------------------------------------------------------------------------- PAGE 26 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/PARTNERING UNIVERSE
- ------------------------------- --------------------------------- ---------------------------------- DESIGN & ASSEMBLY STRATEGY OFF-SHORE (ASIAN) INDUSTRIAL TRANSMISSION SUPPLIERS - ------------------------------- --------------------------------- ---------------------------------- Representative Companies (Sample): Representative Companies (Sample): Representative Companies (Sample): o PPH (stamping/fine blanking) o Pacifica o Danaher o Boise Cascade (paper making) o Akebono Brake Industry o Ingersoll-Rand o 3M (resin manufacture) o CMT (China Metal) o Emerson Electric o United Technologies
[GRAPHIC]
- ------------------------------- --------------------------------- ---------------------------------- OFF-ROAD & LOW VOLUME AUTOMOTIVE OE & HEAVY DUTY TRUCK COMMERCIAL VEHICLES VEHICULAR AFTERMARKET (ON-ROAD) - ------------------------------- --------------------------------- ---------------------------------- Representative Companies (Sample): Representative Companies (Sample): Representative Companies (Sample): o Carlisle Industrial Brake & o Cypress (bought Dana's o BorgWarner Friction Aftermarket unit) o Dynax o Eaton o Universal Automotive Industries o JATCO o ArvinMeritor o Perfection Clutch o Valeo o GETRAG o EXEDY o ZF/Sachs
- -------------------------------------------------------------------------------- PAGE 27 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/PARTNERING SPECTRUM Magna International GKN Plc Metaldyne Boise Cascade 3M MPI International [GRAPHIC] Integrated Auto Technical Product/Process System/Module Suppliers Experts - -------------------------------------------------------------------------------- PAGE 28 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/STRATEGIC PARTNER IDEA #1 - -------------------------------------------------------------------------------- Magna International Inc. Traded: Toronto Stock Exchange: MG.A http://www.magna.com ADR Traded: NYSE: MGA 337 Magna Drive Ownership: Public Aurora, ON L4G 7K1 Entity Type: Parent Canada KeyID(SM) Number: 18074 Tel: (905)726-2462 D-U-N-S(R) Number: 20-151-6002 Fax: (905)726-7164 - -------------------------------------------------------------------------------- Reporting Currency: US Dollar President: Mark Hogan Annual Sales: $15.3 billion Employees: 73,000 - -------------------------------------------------------------------------------- Business Description: Magna International Inc. is a global supplier of technologically advanced automotive components, systems and modules. The Company designs, engineers and manufactures a range of exterior, interior and powertrain systems. Magna International Inc. designs, engineers and manufactures a range of automotive components, assemblies, modules and systems, and engineers and assembles complete vehicles. - -------------------------------------------------------------------------------- RATIONALE FOR MERGER/STRATEGIC PARTNERING: PROS: CONS: o Magna's expertise in o Due to the sheer size and scope designing/developing full of Magna, a partnering with/ systems could prove very acquisition of Raytech may not valuable in assisting Raytech be high on the list of move up the value chain. priorities. o Synergistically, there may be o opportunities to rationalize additional Raytech facilities. o Magna has shown a willingness to partner/acquire with its recent acquisition of New Venture Gear (80% Magna, 20% DCX). - -------------------------------------------------------------------------------- PAGE 29 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/STRATEGIC PARTNER IDEA #2 - -------------------------------------------------------------------------------- GKN plc Traded: London Stock Exchange (SETS): http://www.gknplc.com GKN PO Box 55, Ipsley House, Ipsley Church Company Status: Active Lane Ownership: Public Redditch, United Kingdom B98 OTL Entity Type: Parent United Kingdom KeyID(SM) Number: 45256552 Tel: +44-1527-517715 D-U-N-S(R) Number: 22-172-7360 Fax: +44-1527-517700 - -------------------------------------------------------------------------------- Reporting Currency: British Pound Chief Executive Officer, Director: Sterling Kevin Smith Annual Sales: $7.5 billion Employees:35,484 - -------------------------------------------------------------------------------- Business Description: The Company operates through two principal business units, Automotive and Aerospace. Automotive consists of GKN Driveline, which specializes in the design and manufacture of driveline system products; Powder Metallurgy, which produces metal powder and sintered products; OffHighway, a supplier of components and systems for agricultural and off-highway equipment; AutoComponents, and Emitec, which manufactures metal substrates. - -------------------------------------------------------------------------------- RATIONALE FOR MERGER/STRATEGIC PARTNERING: PROS: CONS: o GKN could provide a unique o The focus on sintered metal platform to leverage our products may prove to be too far existing technology to other removed from Raytech's core parts of the vehicle requiring business - i.e. not applicable friction material. to our specific transmission components. o The ability to take a large global operation and combined o This may not be on GKN's radar with Raytech's emerging global given the environmental footprint could be compelling liabilities and pension from a synergy perspective. liabilities. o GKN is a WYC&C client and has expressed a desire to grow via acquisitions/partnerships. - -------------------------------------------------------------------------------- PAGE 30 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/STRATEGIC PARTNER IDEA #3 - -------------------------------------------------------------------------------- Metaldyne Corp. Ownership: Private www.metaldyne.com Entity Type: Subsidiary 47603 Halyard Dr. Year Formed: 2001 Plymouth, Ml 48170 Ultimate Parent Company: Heartland Wayne County Industrial Partners, LP United States KeyID(SM) Number: 169209 Tel: 734-207-6200 D-U-N-S(R) Number: 11-926-9827 Fax: 734-207-6500 - -------------------------------------------------------------------------------- Reporting Currency: US Dollars President/CEO/COB: Timothy D. Leuliette Annual Sales: $2.0 billion Employees: 7,100 - -------------------------------------------------------------------------------- Business Description: Provider of metal-based components, assemblies and modules for transportation-related powertrain and chassis applications including engine, transmission/transfer case, wheel-end and suspension, axle and driveline, and noise and vibration control products to the motor vehicle industry. Products are sold to the automotive industry. - -------------------------------------------------------------------------------- RATIONALE FOR MERGER/STRATEGIC PARTNERING: PROS: CONS: o Metaldyne produces fine blanked o Metaldyne is under some degree and stamped components that of financial strain at the would be synergistic to Raytech. moment and may not have the wherewithal to make an o A partner/merger with Raytech acquisition. would give Metaldyne the ability to provide a complete o Metaldyne may view Raytech to be transmission, including friction non-core to its assembly and material. module based strategy - i.e. not enough juice for the squeeze. o Metaldyne is owned by Heartland Industrial Partners and has expressed a willingness to merge with synergistic opportunities. - -------------------------------------------------------------------------------- PAGE 31 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/STRATEGIC PARTNER IDEA #4 - -------------------------------------------------------------------------------- Boise Cascade Corporation Traded: NYSE: BCC http://www.bc.com Ownership: Public 1111 West Jefferson St. Entity Type: Parent Boise, ID 83728 KeyID(SM) Number: 4172 Ada County D-U-N-S(R) Number: 00-907-3099 United States Tel: 1-208-384-6161 Fax: 1-208-384-7189 - -------------------------------------------------------------------------------- Reporting Currency: U.S. Dollars Chairman of the Board: George Harad Annual Sales: $8.2 billion Employees: 55,618 - -------------------------------------------------------------------------------- Business Description: Boise Cascade Corporation is a multinational contract and retail distributor of office supplies and paper, technology products and office furniture. It is also a distributor of building materials and a manufacturer and distributor of paper, packaging and wood products. The Company operates in four segments: Boise Office Solutions, Contract; Boise Office Solutions, Retail; Boise Building Solutions and Boise Paper Solutions. Boise Paper Solutions manufactures and distributes uncoated free sheet papers, containerboard, corrugated containers, newsprint and market pulp. - -------------------------------------------------------------------------------- RATIONALE FOR MERGER/STRATEGIC PARTNERING: PROS: CONS: o Boise Cascade could become the o It is not known whether Boise exclusive "paper" supplier to Cascade would want to be an Raytech; similar to the exclusive "paper" supplier - arrangement Borg Warner has with strategically this type of Meade. partnership may not appeal to Boise. o By outsourcing the paper manufacturing, it would allow o Would we generate enough volume Raytech to focus on product relative to Boise's capacity - design, engineering and or would it require significant assembly. capital expenditures on their part which potentially would be bourn by Raytech. - -------------------------------------------------------------------------------- PAGE 32 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/STRATEGIC PARTNER IDEA #5 - -------------------------------------------------------------------------------- 3M Company Traded: NYSE: MMM http://www.mmm.com/ Ownership: Public 3M Center Entity Type: Parent St. Paul, MN 55144 KeyID(SM) Number: 19404 Ramsey County D-U-N-S(R) Number: 00-617-3082 United States Tel: 1-651-733-1110 Fax: 1-651-737-3061 - -------------------------------------------------------------------------------- Reporting Currency: U.S. Dollars Chairman of the Board, CEO: W. James Annual Sales: $18.2 billion McNerney, Jr. Employees: 67,072 - -------------------------------------------------------------------------------- Business Description: 3M Company is a diversified technology company with a global presence in the following markets: healthcare, industrial, display and graphics, consumer and office, safety, security and protection services, electronics, telecommunications and electrical and transportation. 3M products are sold through numerous distribution channels. 3M Co. manufactures and markets pressure-sensitive adhesive tapes, abrasives and specialty chemicals. 3M also markets electrical & telecommunication products, medical devices, office supplies and major automotive parts. - -------------------------------------------------------------------------------- RATIONALE FOR MERGER/STRATEGIC PARTNERING: PROS: CONS: o 3M could become the exclusive o We may not generate a volume resin supplier to Raytech - significant enough for 3M to similar to the strategy with devote processing capacity for Boise Cascade or in concert with our product. the strategy for Boise Cascade. o Again in similar fashion to the o By outsourcing some of our Boise Cascade scenario, if critical processes, Raytech will capital is required to build-out be able to focus attention on capacity to manufacture our design and assembly which would product Raytech will have to presumably reduce overhead. bear some if not all of the cost. - -------------------------------------------------------------------------------- PAGE 33 W. Y. CAMPBELL & COMPANY MERGER/STRATEGIC PARTNER IDEAS ==============================-------------------------------------------------- MERGER/STRATEGIC PARTNER IDEA #6 - -------------------------------------------------------------------------------- MPI International, Inc. Ownership: Private www.mpi-int.com Entity Type: Subsidiary 2129 Austin Ave. Year Formed: 1969 Rochester Hills, MI 48309 Ultimate Parent Company: Morgenthaler LLP Oakland County KeyID(SM) Number: 272632 United States D-U-N-S(R) Number: 04-809-1730 Tel: 248-853-9010 Fax: 248-853-5107 - -------------------------------------------------------------------------------- Reporting Currency: US Dollars President/CEO: Karl A. Pfister Annual Sales: $100.0 million Employees: 950 - -------------------------------------------------------------------------------- Business Description: MPI is the largest Fineblanking organization in North America, with respect to dollar volume sold, number of employees, and concentration of heavy tonnage fineblanking equipment. Each facility is a center of excellence, focusing on individual product specialties. MPI products all begin with a fineblanking basis. To provide customers with the finished components, assemblies, and systems required in industry today, MPI offers a diversity of value-added options. - -------------------------------------------------------------------------------- RATIONALE FOR MERGER/STRATEGIC PARTNERING: PROS: CONS: o MPI could become the source o The union may not agree with of our reaction plates - the strategy of outsourcing outsourcing a process that manufacturing which would we are admittedly not great cause them to block in performing. any outsourcing attempts. o Combined with the Boise and o The internal shutdown costs 3M strategy, Raytech would incurred by completely operate in a similar fashion outsourcing manufacturing to the OE's by simply may be too high to justify. focusing on product design, engineering and assembly with little to no manufacturing. - -------------------------------------------------------------------------------- PAGE 34 W. Y. CAMPBELL & COMPANY DIVIDEND STRATEGY =================--------------------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 35 W. Y. CAMPBELL & COMPANY DIVIDEND STRATEGY =================--------------------------------------------------------------- LEVERAGED RE-CAP ANALYSIS o Raytech could support 3.0x it's projected 2004E EBITDA ($20.4 million) in senior debt, for a total of $62 million o On an asset basis, Raytech could borrow approximately $68 million o The debt capital markets for automotive businesses with significant assets, Raytech has over $150 million in net PP&E, net accounts receivable and inventory o Raytech never has EBITDA interest coverage less than 8.3x, assuming the WYC&C forecast, over the life of the senior debt o Due to existing debt of $27.4 million and assumed fees of approximately $1.6 million, Raytech could reap a $33 million dividend in a leveraged recapitalization of 3.0x 2004E EBITDA Coverages & Debt Paydown
- -------------------------------------------------------------------------------------------- Fiscal Years Ended December, ------------------------------------------------------- 2004 2005 2006 2007 2008 2009 ----- ----- ----- ----- ----- ----- EBIT Interest Coverage 3.9x 4.3x 6.7x 8.5x 12.1x 20.2x EBITDA Interest Coverage 8.4x 8.3x 11.0x 13.6x 18.6x 30.6x Cumulative Total Debt Repaid 0.0% 3.3% 16.8% 32.4% 52.1% 74.1% Cumulative Senior Term Debt Repaid 0.0% 3.3% 16.8% 32.4% 52.1% 74.1% EBITDA $20.4 $20.2 $24.6 $25.4 $26.7 $28.0 Debt/EBITDA 3.0x 3.0x 2.1x 1.7x 1.1x 0.6x Debt/Total Capitalization 45.4% 42.0% 35.1% 27.7% 19.1% 10.1% - --------------------------------------------------------------------------------------------
Capitalization
- -------------------------------------------------------------------------------------------- Fiscal Years Ended December, At ----------------------------------------------- Closing 2005 2006 2007 2008 2009 ------- ------- ------ ------ ------ ------ Revolver $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 Senior Term Debt 62.0 59.9 51.6 41.9 29.7 16.1 Subordinated Debt 0.0 0.0 0.0 0.0 0.0 0.0 Equity 74.6 82.7 95.4 109.4 125.4 143.0 ------ ------- ------ ------ ------ ------ Total Capitalization $136.6 $142.6 $146.9 $151.3 $155.0 $159.0 ====== ======= ====== ====== ====== ====== Cash Balance $ 0.0 ($ 0.0) $ 0.0 $ 0.0 $ 0.0 $ 0.0 Average Seasonal Debt 0.0 0.0 0.0 0.0 0.0 0.0 - --------------------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] Total Debt Level Notes (1) Total current debt of $27.4m would be re-financed, leaving a dividend amount of approximately $33m (2) Fees of approximately $1.6m are assumed (3) Tax rate of 0% is assumed because of the significant NOL carry-forward. (4) Assumes the WYC&C P&L forecast, and the balance sheet as of 9/26/04 DIVIDEND STRATEGY =================--------------------------------------------------------------- DIVEST AFTERMARKET - -------------------------------------------------------------------------------- POTENTIAL STAKEHOLDER REACTION - -------------------------------------------------------------------------------- o Shareholders - No more or less reactive than to any other partial sale strategy. If they realized the pricing risk, customer concentration risk, and relatively modest technical capabilities working in o Customers (Aftermarket) - Likely to make comments that would not be assuring to a buyer. Customers would not appreciate separation from Wet OE. o Management/Corporate - Requires sale or licensing of Raybestos trade name to an uncontrolled entity. This has risks and could have some very serious blow-back if the licensee reduced the quality of the products. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- KEY FACTORS FOR SUCCESS - -------------------------------------------------------------------------------- o Operational - Wet would be linked after the sale to the Aftermarket to sell product. We would want to insist the Aftermarket purchase some % of product from OE to sustain revenues, but buyer would probably seek the option of moving purchasing off-shore. o Trade Name - Risks having our very valuable trade-name sullied. o Customers (Aftermarket) - Will probably not support this idea. Question is how unsupportive will they be? - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PAGE 38 W. Y. CAMPBELL & COMPANY SELECTION OF ALTERNATIVES =========================------------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 39 W. Y. CAMPBELL & COMPANY SELECTION OF ALTERNATIVES =========================------------------------------------------------------- THE BEST ALTERNATIVES 1) Sell the Company and distribute/redeploy the proceeds (presumably among a basket of more diversified, more predictable assets). - OR - 2) Define, then explore the possibility of a beneficial technological and/or financial partnership that would allow the Raytech shareholders to extract the upside potential of the company, reduce their risk, and potentially benefit from some much needed help (either as an ongoing entity, or as a private entity with joint ownership). - OR - 3) Double-down on Raytech, with a 100% "we're behind you" message to management. Give management the authority and resources to pursue accretive acquisitions and synergistic "organic" initiatives, while taking a long-term perspective on value. i.e. give management time to realize the "strategic" value curve (5-7 year timeframe). We continue to think selling Aftermarket without Wet is a hard-to-implement strategy. Best case, the value of Aftermarket would be upset by the "siamese-twin" nature of the WET OE relationship. Ultimately, there would be onerous obligations levied on Raytech mandating its support of the OE business, such that the Aftermarket business (under another owner) could continue to thrive. The implications of this agreement would seem unattractive. - -------------------------------------------------------------------------------- PAGE 40 W. Y. CAMPBELL & COMPANY LONG RANGE THINKING ===================------------------------------------------------------------- [LOGO] RAYTECH CORPORATION - -------------------------------------------------------------------------------- EXECUTIVE OVERVIEW 1 VALUATION 2 ACCRETIVE ACQUISITION IDEAS 3 MERGER/STRATEGIC PARTNER IDEAS 4 DIVIDEND STRATEGY 5 LEVERAGE RE-CAP ANALYSIS SALE OF RAYTECH AFTERMARKET SELECTION OF ALTERNATIVES 6 LONG RANGE THINKING 7 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 41 W. Y. CAMPBELL & COMPANY LONG RANGE THINKING ===================------------------------------------------------------------- - -------------------------------------------------------------------------------- PAGE 42 W. Y. CAMPBELL & COMPANY APPENDIX ========------------------------------------------------------------------------ COMPARABLE M&A TRANSACTIONS - -------------------------------------------------------------------------------- Selected Automotive M&A Transactions (2003-present) (dollars in US millions) - --------------------------------------------------------------------------------
Enterprise Enterprise Value Multiples Value -------------------------------- Date Target Name Acquiring Company ($mils.) Sales EBITDA EBIT - ------ ---------------------------------------- -------------------------------- -------------------------------------------- Sep-04 Cooper-Standard Automotive Cypress Group/GS Capital $ 1,165 0.7x 4.8x n/a Aug-04 Honsel International Technologies Holdings Sarl Ripplewood Holdings $ 756 1.3x 6.1x n/a Aug-04 Kendrion Automotive Plastics Key Plastics $ 36 0.1x n/a n/a Jul-04 Aftermarket Unit (Dana Corporation) Cypress Group $ 1,100 0.6x 6.5x n/a Jul-04 Stabilus GmbH (Kohlberg Kravis Roberts) Montagu Private Equity n/a n/a n/a n/a Jul-04 Progressive Moulded Products (Oak Hill) Thomas H. Lee Partners $ 528 1.4x 7.0x n/a Jun-04 Jerr-Dan OshKosh Truck Corp. $ 80 0.8x 7.3x n/a Jun-04 Stanadyne Corporation Kohlberg & Company $ 240 0.8x 5.1x n/a Jun-04 Findlay Industries - European Operations Polytec (Capvis Equity Partners) n/a n/a n/a n/a May-04 Heinrich Industrie AG Littelfuse, Inc. $ 51 0.5x 5.7x n/a May-04 Precision Automotive Industries Freudenberg-NOK (Corteco) n/a n/a n/a n/a May-04 Autocam Corporation GS Capital Partners $ 390 1.0x 7.0x n/a May-04 Dynamit Nobel Kunststoff GmbH Flex-N-Gate $ 550 0.5x n/a n/a Mar-04 Burgmann Industries GmbH Freudenberg-NOK n/a n/a n/a n/a Mar-04 Veltri Metal Products Flex-N-Gate $ 67 0.3x n/a n/a Mar-04 WEK Industries Myers Industries n/a n/a n/a n/a Mar-04 Michigan Rubber Company Myers Industries n/a n/a n/a n/a Mar-04 Prestolite Electric First Atlantic Capital $ 180 1.0x 6.0x n/a Mar-04 Guilford Mills Cerberus Capital Management LP $ 244 0.5x 5.3x 12.7x Feb-04 Hirschmann Electronics GmbH HgCapital $ 147 0.4x n/a n/a Feb-04 LDM Technologies Plastech Engineered Products n/a n/a n/a n/a Jan-04 Metzeler Automotive Hose Systems Trelleborg AB $ 37 0.5x n/a n/a Nov-03 Grundig Car InterMedia System GmbH Delphi Corporation $ 67 0.3x n/a n/a Nov-03 Atchison Casting KPS Special Situations Fund $ 40 n/a 4.0x n/a Aug-03 Gates Formed Fibre Morgenthaler $ 25 0.4x 5.2x n/a May-03 Stackpole Ltd. Tomkins plc $ 215 1.2x 6.2x 10.9x May-03 WET Automotive Systems AG HgCapital $ 199 0.8x n/a n/a Apr-03 UIS Inc. The Carlyle Group $ 800 0.9x 6.2x n/a Mar-03 Advanced Accessory Systems Castle Harlan $ 250 0.8x 5.6x n/a Mar-03 Breed Technologies Inc. Carlyle Management Group $ 300 n/a 6.4x n/a Feb-03 Dana - Engine Management Operations Standard Motor Products $ 120 2.4x 4.1x n/a
----------------------------------- Enterprise EV/Sales EV/EBITDA Value Multiple Multiple ----------------------------------- Average $ 473 0.7x 5.7x Median $ 244 0.6x 5.8x
- -------------------------------------------------------------------------------- PAGE 43 W. Y. CAMPBELL & COMPANY APPENDIX ========------------------------------------------------------------------------ COMPARABLE PUBLICLY-TRADED COMPANIES - -------------------------------------------------------------------------------- Selected Comparable Publicly-Traded Comparable Companies ($ millions, except per share data) - --------------------------------------------------------------------------------
Price 52-Week % of Market Ticker Company 10/22/2004 High LTM High Capitalization - ------ ------------------- ---------- -------- -------- -------------- JCI Johnson Controls $ 54.16 $ 62.32 86.9% 10,252.6 ETN Eaton $ 61.20 $ 66.78 91.6% 9,309.7 DPH Delphi $ 8.36 $ 11.78 71.0% 4,691.6 LEA Lear $ 50.25 $ 69.20 72.6% 3,516.5 BWA Borg Warner $ 40.13 $ 49.32 81.4% 2,266.6 DCN Dana $ 14.10 $ 23.20 60.8% 2,105.5 TOMK Tomkins plc $ 251.75 $295.00 85.3% 1,907.8 AXL American Axle $ 27.06 $ 42.10 64.3% 1,396.1 ARM Arvin Meritor $ 16.61 $ 26.24 63.3% 1,140.6 HWK Hawk $ 13.05 $ 14.18 92.0% 928.4 VC Visteon $ 6.96 $ 12.50 55.7% 856.5 SUP Superior Industries $ 28.01 $ 45.96 60.9% 717.4 TEN Tenneco Automotive $ 12.20 $ 15.34 79.5% 502.0 TWR Tower Automotive $ 6.64 $ 17.06 38.9% 121.9 DRRA Dura $ 6.55 $ 17.06 38.4% 120.9 TDI Twin Disc $ 7.42 $ 8.60 86.3% 65.6 INMT Intermet $ 0.15 $ 5.80 2.6% 3.8 - --------------------------------------------------------------------------------- Mean 66.6% Median 71.0% High 92.0% Low 2.6% - --------------------------------------------------------------------------------- RAY Raytech $ 1.80 $ 3.94 45.7% 77.6 Enterprise EV/ EV/ EV/ Total Debt/ Ticker Company Value (EV) LTM Revenue LTM EBITDA LTM EBIT LTM EBITDA - ------ ------------------- ---------- ----------- ---------- -------- ----------- JCI Johnson Controls 12,558.6 0.5x 6.9x 10.2x 1.4x ETN Eaton 11,280.1 1.2x 13.4x 18.5x 2.0x DPH Delphi 7,555.6 0.2x 4.2x 12.6x 1.9x LEA Lear 5,789.6 0.3x 4.9x 7.0x 1.9x BWA Borg Warner 2,899.3 0.8x 6.7x 9.4x 1.6x DCN Dana 5,085.8 0.5x 7.2x 17.4x 5.7x TOMK Tomkins plc 2,752.4 n/a n/a n/a 1.2x AXL American Axle 2,402.2 0.5x 3.8x 5.7x 0.9x ARM Arvin Meritor 2,890.2 0.3x 5.1x 8.7x 3.0x HWK Hawk 1,308.1 0.8x 5.6x 10.5x 1.6x VC Visteon 2,319.7 0.1x 3.7x n/a 6.2x SUP Superior Industries 752.3 0.7x n/a 7.1x 0.1x TEN Tenneco Automotive 1,831.7 0.5x 4.9x 9.5x 4.2x TWR Tower Automotive 1,174.9 0.5x 5.6x 9.6x 5.9x DRRA Dura 1,180.0 0.5x 10.7x n/a 10.7x TDI Twin Disc 158.2 0.7x 5.8x 9.9x 3.9x INMT Intermet 355.3 0.5x n/a n/a n/a - --------------------------------------------------------------------------------------------- Mean 0.5x 6.3x 10.4x 3.3x Median 0.5x 5.6x 9.6x 2.0x High 1.2x 13.4x 18.5x 10.7x Low 0.1x 3.7x 5.7x 0.1x - --------------------------------------------------------------------------------------------- RAY Raytech 97.5 0.5x 8.5x 5.6x 4.3x
- -------------------------------------------------------------------------------- PAGE 44 W. Y. CAMPBELL & COMPANY APPENDIX ========------------------------------------------------------------------------ VALUE DRIVER MATRIX
- ------------------------------------------------------------------------------------------------------------- EBITDA Multiple ---------------------------------------------------------------------- 4.0x 5.0x 6.0x --------------------------------------------------- Raytech Low High Growth (reversal of negative trend) <5% 5% - 7% > 7% Revenue Visibility None Low High Selling Cycle 12 months + 6 - 12 months < 6 months EBITDA Margin <10% 10% - 15% > 15% Capability/Cap Ex High Investment Required Med. Investment Required Low Investment Required Critical Mass < $250 mm $250-$500 > $500 mm Customer Concentration High Medium Low Production Economics GM < 20% 20% < GM < 30% GM > 30% Transplant Business None Mix 100% Design & Engineering Build to Print Grey Box Black Box Customer Perception Negative Mix Positive Material Commodity Engineered Advanced Management Quality Poor Average/New Excellent Core Competence Protection None Proprietary Know How Patented Position with Respect to Next Generation Technology Older Technology Mixed of New & Old Technology Leader - -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PAGE 45 W. Y. CAMPBELL & COMPANY APPENDIX ========------------------------------------------------------------------------ Raytech Corporation Interim Balance Sheet [As Reported; USD Millions]
27-Jun-2004 28-Mar-2004 28-Dec-2003 28-Sep-2003 29-Jun-2003 Cash & Cash Equivalents 16.0 18.9 16.4 11.6 15.0 Restricted Cash 5.2 4.9 4.9 4.9 4.0 Accounts Receivable 32.9 31.9 26.0 29.6 32.1 Doubtful Accounts -1.0 -1.3 -1.3 -1.1 -0.9 Inventories 33.2 30.1 30.9 33.4 33.2 Taxes Receivable 0.1 1.0 1.1 0.6 1.8 Other Assets 6.4 6.5 5.8 2.5 5.4 Total Current Assets 92.8 92.0 83.8 81.5 90.7 Plant & Equipment, Net 127.0 126.6 126.1 139.9 138.4 Depreciation -43.8 -40.5 -36.8 -37.6 -33.5 Goodwill 5.9 5.9 5.9 NA NA Intangibles 23.7 24.2 24.7 68.9 69.4 Deferred Taxes NA NA 0.0 0.0 21.9 Other 2.6 2.7 2.5 3.0 3.0 Total Assets 208.2 211.0 206.0 255.7 289.9 Notes Payable 11.8 13.6 8.1 12.1 13.6 Current Portion of Pension Obligation 5.2 5.2 5.2 8.0 8.0 Accounts Payable 13.6 14.4 14.6 15.8 15.3 Accrued Liabilities 28.4 26.2 26.6 30.1 24.7 Payable to Trust 3.2 3.8 3.8 3.4 3.8 Total Current Liabilities 62.1 63.2 58.3 69.4 65.4 Long Term Debt 12.7 13.5 14.4 4.2 4.6 Total Long Term Debt 12.7 13.5 14.4 4.2 4.6 Pension Obligations 11.3 12.5 13.5 8.6 11.5 Postretirement Benefits 15.8 15.4 15.1 14.5 14.3 Deferred Payable 11.9 11.9 11.9 18.7 42.4 Deferred Taxes 6.8 6.9 6.9 5.5 NA Other 0.6 0.7 0.7 0.9 0.9 Minority Interest 9.9 9.6 9.4 9.4 9.3 Total Liabilities 131.2 133.7 130.1 131.1 148.4 Capital Stock 41.7 41.7 41.7 41.7 41.7 Paid in Capital 117.6 117.6 117.6 117.6 117.6 Retained Earnings -73.4 -73.5 -74.8 -27.1 -10.0 Comprehensive Income -8.8 -8.6 -8.6 -7.6 -7.8 Total Equity 77.0 77.2 75.9 124.6 141.5 Total Liabilities & Shareholders' Equity 208.2 211.0 206.0 255.7 289.9 S/O-Common Stock 41.7 41.7 41.7 41.7 41.7 Total Common Shares Outstanding 41.7 41.7 41.7 41.7 41.7
- -------------------------------------------------------------------------------- PAGE 46 W. Y. CAMPBELL & COMPANY
----- Enterprise Value Discount Rate=========== 15.0% ----- 2004E 2005E 2006E 2007E 2008E 2008E Discn't Management Case $ 118.3 $ 135.5 $ 170.1 $ 180.8 $ 202.3 $ 115.7 WYCC Case $ 118.3 $ 117.0 $ 142.7 $ 147.1 $ 154.7 $ 88.5 Strategic Case $ 118.3 $ 147.4 $ 184.4 $ 195.9 $ 217.7 $ 124.5 Downside Case $ 118.3 $ 112.1 $ 127.5 $ 110.0 $ 80.6 $ 46.1
----- Equity Value Discount Rate=========== 15.0% ----- 2004E 2005E 2006E 2007E 2008E 2008E Discn't Management Case $ 58.9 $ 73.7 $ 110.2 $ 123.3 $ 148.8 $ 85.1 WYCC Case $ 58.9 $ 55.3 $ 82.8 $ 89.6 $ 101.2 $ 57.8 Strategic Case $ 58.9 $ 85.6 $ 124.5 $ 138.3 $ 164.2 $ 93.9 Downside Case $ 58.9 $ 50.4 $ 67.7 $ 52.5 $ 27.0 $ 15.4
----- Equity Value per Share Discount Rate=========== 15.0% ----- 2004E 2005E 2006E 2007E 2008E 2008E Discn't ------- Management Case $ 1.41 $ 1.77 $ 2.64 $ 2.95 $ 3.56 $ 2.04 ------- ------- WYCC Case $ 1.41 $ 1.32 $ 1.99 $ 2.15 $ 2.42 $ 1.39 ------- ------- Strategic Case $ 1.41 $ 2.05 $ 2.98 $ 3.31 $ 3.93 $ 2.25 ------- Downside Case $ 1.41 $ 1.21 $ 1.62 $ 1.26 $ 0.65 $ 0.37 - -------------------------- TODAY $ 1.87 - --------------------------
Management Case EBITDA Wet 10.5 9.5 12.9 13.6 13.8 Dry 9.3 11.7 13.8 14.6 17.6 Aftermarket 8.5 8.9 9.4 9.7 10.3 Corporate -7.9 -6.8 -6.8 -6.8 -6.8 - -------------------------------------------------------------------------------------------------------------------- Total 20.4 23.4 29.3 31.2 34.9 WYCC Case EBITDA Wet 10.5 8.4 10.5 10.3 8.2 Dry 9.3 10.6 12.6 13.2 16.1 Aftermarket 8.5 7.9 8.3 8.7 9.1 Corporate -7.9 -6.8 -6.8 -6.8 -6.8 - -------------------------------------------------------------------------------------------------------------------- Total 20.4 20.2 24.6 25.4 26.7 Strategic Case EBITDA Wet 10.5 11.5 15.4 16.2 16.5 Dry 9.3 11.7 13.8 14.6 17.6 Aftermarket 8.5 8.9 9.4 9.7 10.3 Corporate -7.9 -6.8 -6.8 -6.8 -6.8 - -------------------------------------------------------------------------------------------------------------------- Total 20.4 25.4 31.8 33.8 37.5 Downside Case EBITDA Wet 10.5 7.6 7.9 3.9 -4.5 Dry 9.3 10.6 12.6 13.2 16.1 Aftermarket 8.5 7.9 8.3 8.7 9.1 Corporate -7.9 -6.8 -6.8 -6.8 -6.8 - -------------------------------------------------------------------------------------------------------------------- Total 20.4 19.3 22.0 19.0 13.9
Multiple 5.8x 5.8x 5.8x 5.8x 5.8x Debt 27.4 27.4 27.4 27.4 27.4 Pension 15.4 15.4 15.4 15.4 15.4 Post-Retirement 16.1 16.1 16.1 16.1 16.1 Environmental 6.0 6.0 6.0 6.0 6.0 Minority Interest 10.1 10.1 10.1 10.1 10.1 Cash -15.7 -13.3 -15.2 -17.5 -21.5 - ----------------------------------------------------------------------------------------------------------------- Net Debt 59.3 61.8 59.9 57.6 53.5 # of Shares 41.737 41.737 41.737 41.737 41.737
----- Enterprise Value Discounted back to Year-End 2004 Discount Rate=========== 15.0% ----- 2004E 2005E 2006E 2007E 2008E Management Case $118.3 $117.8 $128.6 $118.9 $115.7 WYCC Case $118.3 $101.8 $107.9 $ 96.8 $ 88.5 Strategic Case $118.3 $128.2 $139.4 $128.8 $124.5 Downside Case $118.3 $ 97.5 $ 96.4 $ 72.3 $ 46.1
----- Equity Value Discounted back to Year-End 2004 Discount Rate=========== 15.0% ----- 2004E 2005E 2006E 2007E 2008E Management Case $58.9 $64.1 $83.3 $81.0 $85.1 WYCC Case $58.9 $48.1 $62.6 $58.9 $57.8 Strategic Case $58.9 $74.5 $94.1 $90.9 $93.9 Downside Case $58.9 $43.8 $51.2 $34.5 $15.4
----- Equity Value per Share Discounted back to Year-End 2004 Discount Rate=========== 15.0% ----- 2004E 2005E 2006E 2007E 2008E Management Case $1.41 $1.54 $2.00 $1.94 $2.04 WYCC Case $1.41 $1.15 $1.50 $1.41 $1.39 Strategic Case $1.41 $1.78 $2.26 $2.18 $2.25 Downside Case $1.41 $1.05 $1.23 $0.83 $0.37
EX-99.(F) 5 d64743_ex99f.txt DELAWARE GENERAL CORPORATION LAW SECTION 262 Exhibit (f) DELAWARE GENERAL CORPORATION LAW SECTION 262. APPRAISAL RIGHTS (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of ss. 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system 46 by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under ss. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such 47 notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting 48 corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. 49 (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. 50 -----END PRIVACY-ENHANCED MESSAGE-----