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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
PRAEGITZER INDUSTRIES, INC.
(Name of Subject Company)
PRAEGITZER INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK
(Title of Class of Securities)
CUSIP NO. 739422103
(CUSIP Number of Class of Securities)
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MATTHEW J. BERGERON
PRESIDENT AND CHIEF OPERATING OFFICER
PRAEGITZER INDUSTRIES, INC.
19801 SW 72ND AVENUE
TUALATIN, OR 97062
(503) 454-6000
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the person filing statement)
WITH A COPY TO:
STEPHEN E. BABSON
STOEL RIVES LLP
900 SW FIFTH AVENUE, SUITE 2600
PORTLAND, OREGON 97204
(503) 224-3380
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Praegitzer Industries, Inc., an Oregon
corporation (the "Company" or "Praegitzer"). The address of the principal
executive offices of the Company is 19801 SW 72nd Avenue, Tualatin, Oregon
97062. The title of the class of equity securities to which this Schedule
relates is the common stock of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule relates to the tender offer by T Merger Sub (OR), Inc., an
Oregon corporation ("Offeror"), a wholly owned subsidiary Sigma Circuits, Inc.
("Parent"), a Delaware corporation and an indirect wholly owned subsidiary of
Tyco International Ltd., a Bermuda corporation ("Tyco"), to purchase (i) all
outstanding shares (the "Shares") of Common Stock at the purchase price of $5.50
per Share, net to the tendering holder (pre-tax) in cash (the "Per Share
Amount") upon the terms and subject to the conditions set forth in the Offer to
Purchase dated November 1, 1999 (the "Offer"), and the related Letter of
Transmittal (which together constitute the "Tyco Offer"). The Tyco Offer is
disclosed in a Tender Offer Statement on Schedule 14D-1 dated November 1, 1999.
According to the Offer to Purchase, the principal executive offices of Tyco are
located at The Gibbons Building, 10 Queen Street, Hamilton HM11, Bermuda and the
principal executive offices of Offeror are located at One Tyco Park, Exeter, New
Hampshire 03833.
The Tyco Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of October 26, 1999 (the "Merger Agreement"), among the Company, the
Offeror and Parent, with the guarantee of Tyco. A copy of the Merger Agreement
has been filed as Exhibit 1 to this Schedule 14D-9 and is incorporated herein by
reference in its entirety.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Identity.
The name and business address of the Company, which is the person filing
this Schedule, are set forth in Item 1 above.
(b) Contracts.
Except as otherwise described in this Schedule or in the exhibits hereto, to
the knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest, between the Company or its affiliates and Tyco
or Parent or the Offeror or their respective executive officers, directors or
affiliates.
AGREEMENTS WITH THE OFFEROR, PARENT, TYCO OR THEIR AFFILIATES
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement and
is qualified in its entirety by reference to the Merger Agreement, a copy of
which has been filed with the Securities and Exchange Commission (the
"Commission") as Exhibit 1 to this Schedule 14D-9. Capitalized terms not
otherwise defined in this Schedule 14D-9 shall have the meanings set forth in
the Merger Agreement.
THE OFFER. The Merger Agreement provides that Offeror will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, Offeror will purchase all Shares validly
tendered pursuant to the Offer. The Merger Agreement provides that, without the
written consent of the Company, Offeror will not (i) decrease the Per Share
Amount or change the form of consideration payable in the Offer, (ii) decrease
the number of Shares subject to the Offer, (iii) amend or waive satisfaction of
the condition (the "Minimum Condition") that at least 51% of all Shares
outstanding shall have been tendered and not withdrawn in the Offer, or
(iv) impose
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additional conditions to the Offer or amend any other term of the Offer in any
manner adverse to the holders of Shares, except that if on the initially
scheduled expiration date of the Offer all conditions to the Offer shall not
have been satisfied or waived, Offeror may, from time to time, in its sole
discretion, extend the expiration date of the Offer. The Merger Agreement
provides that if, immediately prior to the expiration date of the Offer, as it
may be extended, the Common Shares tendered and not withdrawn pursuant to the
Offer equal less than 90% of the outstanding Common Shares, Offeror may extend
the Offer for a period not to exceed 10 business days.
THE MERGER. The Merger Agreement provides that, following the consummation
of the Offer and subject to the terms and conditions thereof, at the effective
time of the Merger (the "Effective Time") Purchaser shall be merged with and
into the Company and, as a result of the Merger, the separate corporate
existence of Purchaser shall cease, and the Company shall continue as the
Surviving Corporation and a direct subsidiary of Parent.
The respective obligations of Parent and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the satisfaction
or waiver at or prior to the Effective Time of each of the following conditions:
(i) Parent or Purchaser or their affiliates shall have consummated the Offer,
unless such failure to purchase is a result of a breach of Purchaser's
obligations to accept for payment or pay for Shares pursuant to the Offer in
violation of the terms of the Offer or of the Merger Agreement, (ii) the Merger
shall have been approved by the requisite vote of the shareholders, if required
by applicable law, in order to consummate the Merger, (iii) no order, statute,
rule, regulation, executive order, stay, decree, judgment or injunction shall
have been enacted, entered, promulgated or enforced by any court or other
Governmental Authority which prohibits or prevents the consummation of the
Merger which has not been vacated, dismissed or withdrawn prior to the Effective
Time, and (iv) all consents of any Governmental Authority required for the
consummation of the Merger and the transactions contemplated by the Agreement
shall have been obtained, other than where the failure to obtain such consents
is not reasonably likely to have a material adverse effect on the business,
assets, condition (financial or other), liabilities or results of operations of
the Surviving Corporation and its subsidiaries taken as a whole.
At the Effective Time of the Merger, (i) each issued and outstanding Share
(other than Shares that are held by shareholders properly exercising dissenters'
rights under the OBCA and Shares to be cancelled pursuant to clause (ii) below)
will be canceled and extinguished and be converted into the right to receive the
Per Share Amount in cash payable to the holder thereof, without interest, upon
surrender of the certificate representing such Share. From and after the
Effective Time, the holders of certificates evidencing ownership of Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares except as otherwise provided for in the
Merger Agreement or by applicable Law, (ii) each Share owned by Tyco, Parent,
Purchaser or any direct or indirect wholly owned subsidiary of Tyco immediately
before the Effective Time shall be cancelled and extinguished, and no payment or
other consideration shall be made with respect thereto and (iii) the shares of
Purchaser common stock outstanding immediately prior to the Merger will be
converted into 1,000 shares of the common stock of the Surviving Corporation,
which shares will constitute all of the issued and outstanding capital stock of
the Surviving Corporation and shall be owned by Parent.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the purchase by Purchaser of Shares pursuant to the Offer (and
provided that the Minimum Condition has been satisfied), Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as will give Parent, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Board
of Directors of the Company equal to at least that number of directors which
equals the product of the total number of directors on the Board of Directors of
the Company (giving effect to the directors appointed or elected pursuant to
this sentence and including current directors serving as officers of the
Company) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or any affiliate of Parent
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(including such Shares as are accepted for payment pursuant to the Offer, but
excluding Shares held by the Company) bears to the number of Shares outstanding.
At such time, if requested by Parent, the Company will also cause each committee
of the Board of Directors of the Company to include persons designated by Parent
constituting the same percentage of each such committee as Parent's designees
are of the Board of Directors of the Company. The Company shall, upon request by
Parent, promptly increase the size of the Board of Directors of the Company or
exercise reasonable best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors of the Company in accordance with terms of this section and
to cause Parent's designees so to be elected; provided, however, that, in the
event that Parent's designees are appointed to the Board of Directors of the
Company, until the Effective Time the Board of Directors of the Company shall
have at least two directors who are directors on the date of the Agreement, one
of whom will be Robert Praegitzer and one of whom will be a director who is
neither an officer of the Company nor a designee, shareholder, affiliate or
associate (within the meaning of the federal securities laws) of Tyco (such
directors, the "Independent Directors"). Notwithstanding anything in the Merger
Agreement to the contrary, subsequent to the designation of the directors by
Parent and prior to the Effective Time, the unanimous vote of the Independent
Directors shall be required to (i) amend or terminate the Merger Agreement on
behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies thereunder, (iii) extend the time for performance of Parent's
obligations thereunder, (iv) take any other action by the Company in connection
with the Merger Agreement required to be taken by the Board of Directors of the
Company or (v) amend the Company's Articles of Incorporation or the Company's
Bylaws, each as in effect on the date of the Merger Agreement.
SHAREHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call, give
notice of, convene and hold a special meeting of its shareholders as promptly as
practicable following the consummation of the Offer for the purpose of voting
upon the Merger. The Merger Agreement provides that the Company will, if
required by applicable law in order to consummate the Merger, prepare and file
with the Commission and, when cleared by the Commission, will mail to
shareholders a proxy statement in connection with a meeting of the Company's
shareholders to vote upon the Company Proposals, or an information statement, as
appropriate, satisfying all requirements of the Securities Exchange Act.
If Purchaser acquires at least a majority of the Shares, it will have
sufficient voting power to approve the Merger, even if no other shareholder
votes in favor of the Merger.
The Merger Agreement provides that in the event that Parent or Purchaser
acquires at least 90% of each class of Shares, Parent, Purchaser and the Company
will take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer, without a
meeting of shareholders of the Company, in accordance with Section 60.491 of the
OBCA.
OPTIONS, WARRANTS, CONVERTIBLE SECURITIES AND OTHER RIGHTS. The Merger
Agreement provides that each of the Company and Parent shall take all reasonable
actions necessary to provide that all then outstanding options to purchase
Shares, whether or not then exercisable or vested (each, a "Company Option"),
shall constitute the right to receive an amount in cash equal to the positive
difference, if any, between the Per Share Amount and the exercise price of the
Company Option multiplied by the number of Shares for which the Company Option
was exercisable immediately prior to the Effective Time, subject to reduction
only for any applicable withholding taxes. The Company shall provide a period of
at least 30 days prior to the Effective Time during which Company Options may be
exercised to the extent exercisable at the Effective Time and, upon the
expiration of such period, all unexercised Company Options shall immediately
terminate. The Company may, in its sole discretion, permit holders of Company
Options that are not exercisable before the Effective Time to exchange such
options for cash as described above. In lieu of exercising Company Options as
described above, the holders shall be given the right, and the Company shall
encourage the holders of Company Options to exercise such
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right, to exchange such options for cash as described above. In no event will
any Company Options be exercisable after the Effective Time, except to receive
cash.
Each of the warrants of the Company, dated November 17, 1995, to purchase
Shares at a price of $12.00 per share, subject to adjustment (the "Company
Warrants"), shall be exercisable, from and after the Effective Time, for an
amount of cash equal to the Per Share Amount multiplied by the number of Shares
for which such warrant was exercisable immediately prior to the Effective Time.
Except as aforesaid, the exercise of any Company Warrant shall remain subject to
all terms and conditions provided in the applicable Company Warrant and/or
Warrant Agreement. Each of the Company and Parent shall take all action
necessary to provide that, upon consummation of the Merger, all Company Warrants
outstanding immediately prior to the Effective Time shall be exercisable for a
cash amount as aforesaid.
Under the Deferral Agreement, the Company's lenders and equipment lessors
have the right to convert a certain portion of the amounts owed to them under
the Deferral Agreement into shares of the Company's common stock at $5.77 per
share. The maximum number of Shares issuable pursuant to the exercise of the
rights contained in the Deferral Agreement is 1,743,559. This conversion right
cannot be exercised if the Offer is consummated before March 31, 2000. In
addition, the Company's Notes are convertible into shares of the Company's
common stock at $8.325 per share. The maximum number of Shares issuable upon
conversion of the Notes is 1,381,382.
The Company shall take such action as is necessary to cause the ending date
of the then current offering period under the Company's employee stock purchase
plan to be prior to the Effective Time and to terminate such plan as of the
Effective Time.
INTERIM OPERATIONS; COVENANTS. Pursuant to the Merger Agreement, the
Company has agreed that, except as expressly contemplated or provided by the
Merger Agreement or in the Company Disclosure Letter delivered by the Company to
Parent and Purchaser in connection with the Merger Agreement or consented to in
writing by Parent (which consent in the case of certain provisions shall not be
unreasonably denied), prior to the Effective Time, (i) the Company shall
conduct, and it shall cause the Company Subsidiaries to conduct, its or their
businesses in the ordinary course and consistent with past practice, and the
Company shall, and it shall cause the Company Subsidiaries to, use its or their
reasonable best efforts to preserve substantially intact its business
organization, to keep available the services of its present officers and
employees and to preserve the present commercial relationships of the Company
and the Company Subsidiaries with persons with whom the Company or the Company
Subsidiaries do significant business and (ii) without limiting the generality of
the foregoing, neither the Company nor any of the Company Subsidiaries will:
(A) amend or propose to amend its Articles of Incorporation or Bylaws
(or similar organizational documents);
(B) authorize for issuance, issue, grant, sell, pledge, dispose of or
propose to issue, grant, sell, pledge or dispose of any shares of, or any
options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of the
Company or any of the Company Subsidiaries, including, but not limited to,
any securities convertible into or exchangeable for shares of stock of any
class of the Company or any of the Company Subsidiaries, except for (a) the
issuance of shares pursuant to the exercise of Company Options outstanding
on the date of the Merger Agreement in accordance with their present terms,
(b) the issuance of shares pursuant to the Company Stock Purchase Plan as in
effect on the date of the Merger Agreement, (c) the issuance of shares
pursuant to the exercise of Company Warrants outstanding on the date of the
Merger Agreement in accordance with their present terms or (d) the issuance
of shares upon the conversion of the Notes in accordance with the indenture
relating to the Notes on its present terms;
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(C) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, other than dividends to the Company or any Company Subsidiary
(except that in no case may the Company or a Company Subsidiary declare or
pay any cross-border dividends), make or allow any Company subsidiary to
make any cross-border capital contributions, or directly or indirectly
redeem, purchase or otherwise acquire or offer to acquire any shares of its
capital stock or other securities (other than the repurchase of 100,000
Shares from Matthew J. Bergeron, the Company's President and Chief Operating
Officer, pursuant to that certain Stock Purchase Agreement dated
December 22, 1998 between the Company and Mr. Bergeron);
(D) (a) create or incur any indebtedness for borrowed money or issue any
debt securities, except pursuant to the Credit Agreements, or (b) make any
loans or advances, except in the ordinary course of business consistent with
past practice;
(E) (a) sell, pledge, dispose of or encumber any assets of the Company
or of any Company Subsidiary (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice,
(ii) pledges to secure debt permitted under paragraph (D),
(iii) dispositions of obsolete or worthless assets, and (iv) sales of
immaterial assets not in excess of $250,000 in the aggregate); (b) acquire
(by merger, consolidation, or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof;
(c) authorize any capital expenditures or purchases of fixed assets which
are, in the aggregate, in excess of $250,000 from the date hereof until
February 29, 2000; (d) assume, guarantee (other than guarantees of
obligations of the Company Subsidiaries entered into in the ordinary course
of business) or endorse or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except in
the ordinary course of business consistent with past practice; or
(e) voluntarily incur any material liability or obligation (absolute,
contingent or otherwise) except in the ordinary course of business
consistent with past practice.
(F) increase in any manner the compensation of any of its officers or
employees (other than, except with respect to employees who are executive
officers or directors, in the ordinary course of business reasonably
consistent with past practice) or enter into, establish, amend or terminate
any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health or
other welfare, stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other compensation or benefit plan,
policy, agreement, trust, fund or arrangement with, for or in respect of,
any shareholder, officer, director, employee, consultant or affiliate other
than, in any such case referred to above, as may be required by Law or as
required pursuant to the terms of agreements in effect on the date of the
Merger Agreement and other than arrangements with new employees (other than
employees who will be officers of the Company) hired in the ordinary course
of business consistent with past practice and providing for compensation
(other than equity-based compensation) and other benefits consistent with
those provided for similarly situated employees of the Company as of the
date hereof;
(G) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any Company
Subsidiary or the Company;
(H) except as may be required as a result of a change in law or as
required by the Commission, change any of the accounting principles or
practices used by it;
(I) make any tax election or settle or compromise any income tax
liability;
(J) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
other), other than the payment, discharge or satisfaction in
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the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of the Company contained in the
Company SEC Filings filed prior to the date of the Merger Agreement or
incurred in the ordinary course of business consistent with past practice;
(K) except to the extent necessary for the exercise of its fiduciary
duties by the Board of Directors of the Company as set forth in, and
consistent with the provisions described under "No Solicitation" below,
waive, amend or allow to lapse any term or condition of any confidentiality
or "standstill" agreement to which the Company or any Company Subsidiary is
a party; or
(L) take, or agree in writing or otherwise to take, any of the foregoing
actions or any action which would make any of the representations or
warranties of the Company contained in the Merger Agreement untrue or
incorrect in any material respect at or prior to the Effective Time.
The Merger Agreement further provides that the Company shall, and the Company
shall cause each of the Company Subsidiaries to, comply with all Laws applicable
to it or any of its properties, assets or business and to maintain in full force
and effect all the Company Permits necessary for such business, except in any
such case for any failure so to comply or maintain that would not reasonably be
expected to result in a Material Adverse Effect.
NO SOLICITATION. Pursuant to the Merger Agreement, the Company shall not,
directly or indirectly, through any officer, director, employee, representative
or agent of the Company or any of the Company Subsidiaries, solicit or encourage
the initiation of (including by way of furnishing information) any inquiries or
proposals regarding any Company Takeover Proposal that if consummated would
constitute an Alternative Transaction (as defined below). The Board of Directors
of the Company is not prevented from (i) furnishing information to a third party
which has made a BONA FIDE Company Takeover Proposal that is a Superior Proposal
(as defined below) not solicited in violation of the Merger Agreement, provided
that such third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between the Company and an
affiliate of Parent (the "Confidentiality Agreement") or (ii) subject to
compliance with the other terms of the Merger Agreement's "No Solicitation"
provision, considering and negotiating a BONA FIDE Company Takeover Proposal
that is a Superior Proposal not solicited in violation of the Merger Agreement;
PROVIDED THAT, as to each of clauses (i) and (ii), the Board of Directors of the
Company reasonably determines in good faith (after due consultation with
independent counsel, which may be Stoel Rives LLP) that it is or is reasonably
likely to be required to do so in order to discharge properly its fiduciary
duties. For purposes of the Merger Agreement, a "Superior Proposal" means any
proposal made by a party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all of the equity securities of the
Company entitled to vote generally in the election of directors or all the
assets of the Company (other than a DE MINIMUS amount of assets not material to
the conduct of the Company's business), on terms which the Board of Directors of
the Company reasonably believes (after consultation with Financial Advisor,
McDonald Investments or another financial advisor of nationally recognized
reputation) to be more favorable from a financial point of view to its
shareholders than the Offer and the Merger taking into account at the time of
determination all factors relating to such proposed transaction deemed relevant
by the Board of Directors of the Company, including, without limitation, the
financing thereof, the proposed timing thereof and all other conditions thereto
and any changes to the financial terms of the Merger Agreement proposed by
Parent and Purchaser. "Alternative Transaction" means any of (i) a transaction
pursuant to which any person (or group of persons) other than Parent or its
affiliates (a "Third Party") acquires or would acquire more than 20% of the
outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 20% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, (iii) any transaction pursuant to which any Third Party acquires or
would acquire control
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of assets (including for this purpose the outstanding equity securities of
Company Subsidiaries and securities of the entity surviving any merger or
business combination including any of the Company Subsidiaries) of the Company
or any Company Subsidiaries having a fair market value (as determined by the
Board of Directors of the Company in good faith) equal to more than 20% of the
fair market value of all the assets of the Company and the Company Subsidiaries,
taken as a whole, immediately prior to such transaction, or (iv) any other
consolidation, business combination, recapitalization or similar transaction
involving the Company or any of the Company Subsidiaries, other than the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the term
Alternative Transaction shall not include any acquisition of securities by a
broker dealer in connection with a BONA FIDE public offering of such securities.
Notwithstanding anything to the contrary contained in the Merger Agreement,
prior to the Effective Time, the Company may, in connection with a possible
Company Takeover Proposal, refer any third party to the "No Solicitation" and
"Fees and Expenses" sections of the Merger Agreement and make a copy of these
sections available to a third party.
The Merger Agreement requires the Company to immediately notify Parent and
Purchaser after receipt of any Company Takeover Proposal, or any modification of
or amendment to any Company Takeover Proposal, or any request for nonpublic
information relating to the Company or any of the Company Subsidiaries in
connection with a Company Takeover Proposal or for access to the properties,
books or records of the Company or any subsidiary by any person or entity that
informs the Board of Directors of the Company or such subsidiary that it is
considering making, or has made, a Company Takeover Proposal. Such notice to
Parent and Purchaser shall be made orally and in writing, and shall indicate the
identity of the person making the Company Takeover Proposal or intending to make
the Company Takeover Proposal or requesting non-public information or access to
the books and records of the Company, the terms of any such Company Takeover
Proposal or modification or amendment to a Company Takeover Proposal, and
whether the Company is providing or intends to provide the person making the
Company Takeover Proposal with access to information concerning the Company as
provided above. The Company shall also immediately notify Parent and Purchaser,
orally and in writing, if it enters into negotiations concerning any Company
Takeover Proposal.
Except as set forth in the Merger Agreement, neither the Board of Directors
of the Company nor any committee thereof shall (i) withdraw or modify, or
indicate publicly its intention to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors or such
committee of the Offer or the Merger, (ii) approve or recommend, or indicate
publicly its intention to approve or recommend, any Company Takeover Proposal or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "Company
Acquisition Agreement") related to any Company Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the Effective Time the
Board of Directors of the Company determines in good faith, after due
consultation with outside counsel, that the failure to do so constitutes or is
reasonably likely to constitute a breach of its fiduciary duties to the
Company's shareholders under applicable law, the Board of Directors of the
Company may approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Company Proposals, but only at a time that is after the third business day
following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company has received a Superior Proposal and, in the case of
any previously received Superior Proposal that has been materially modified or
amended, such modification or amendment and specifying the material terms and
conditions of such Superior Proposal, modification or amendment.
The Merger Agreement does not restrict the Company from taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Securities Exchange Act or from making any disclosure to
the Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, with the advice of outside counsel, failure so to
disclose could be determined to be a breach of its fiduciary duties to the
Company's shareholders under applicable law;
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PROVIDED, HOWEVER, that neither the Company nor its Board of Directors nor any
committee thereof shall, except as permitted by the above, withdraw or modify,
or indicate publicly its intention to withdraw or modify, its position with
respect to the Offer or the Merger or approve or recommend, or indicate publicly
its intention to approve or recommend, a Company Takeover Proposal.
The Company shall advise its officers and directors and any investment
banker or attorney retained by the Company in connection with the transactions
contemplated by the Merger Agreement of the restrictions set forth above.
INDEMNIFICATION AND INSURANCE. From and after the Effective Time, the
Surviving Corporation shall indemnify and hold harmless all past and present
officers and directors (the "Indemnified Parties") of the Company and of the
Company Subsidiaries to the full extent such persons may be indemnified by the
Company pursuant to Oregon law, the Company's Articles of Incorporation and
Bylaws, as each is in effect on October 26, 1999, for acts and omissions
(x) arising out of or pertaining to the transactions contemplated by the Merger
Agreement or arising out of the Offer Documents or (y) otherwise with respect to
any acts or omissions occurring or arising at or prior to the Effective Time and
shall advance reasonable litigation expenses incurred by such persons in
connection with defending any action arising out of such acts or omissions,
PROVIDED that such persons provide the requisite affirmations and undertaking,
as set forth in applicable provisions of the OBCA.
In addition, Parent will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring or arising at or prior to the
Effective Time (the "D&O Insurance") that is no less favorable than the existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; PROVIDED, HOWEVER, that Parent and the Surviving
Corporation shall not be required to pay an annual premium for the D&O Insurance
in excess of 200% of the annual premium currently paid by the Company for such
insurance, but in such case shall purchase as much such coverage as possible for
such amount.
The Merger Agreement provides that the foregoing provisions are intended to
benefit the Indemnified Parties and shall be binding on all successors and
assigns of Parent, Purchaser, the Company and the Surviving Corporation. Parent
has agreed to guarantee the performance by the Surviving Corporation of the
indemnified obligations set forth above, which guaranty is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the bankruptcy or insolvency of the Surviving Corporation or any
person. The Indemnified Parties shall be intended third-party beneficiaries of
the foregoing provisions on indemnification and insurance.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and
Purchaser with respect to, among other things, its organization, capitalization,
subsidiaries, authority relative to the Merger Agreement, governmental approvals
with respect to the Merger Agreement, the absence of contractual or legal
violations resulting from the Agreement, securities filings, financial
statements, the absence of material adverse effects on the Company and certain
other events since June 30, 1999, the absence of undisclosed liabilities,
compliance with laws, governmental permits, litigation, material contracts,
employee benefit plans, taxes, intellectual property, disclosure documents,
labor matters, the absence of limitations on conduct of business, title to
property, leased premises, environmental matters, insurance, product liability
and recalls, customers, interested party transactions, finders and investment
bankers, fairness opinion, takeover statutes, full disclosure, year 2000
readiness, absence of rights agreements and absence of certain unlawful
payments.
REASONABLE BEST EFFORTS. Under the Merger Agreement, each of the Company,
Parent and Purchaser has agreed to use reasonable best efforts to take all
actions and to do all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions
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contemplated by the Merger Agreement, including, but not limited to,
(i) obtaining all consents from governmental authorities and other third parties
required for the consummation of the Offer and the Merger and the transactions
contemplated thereby and (ii) timely making all necessary filings under the HSR
Act. The Company, Parent and Purchaser have also agreed to use reasonable best
efforts to take all actions and to do all things necessary to satisfy the other
conditions of the closing of the Merger.
PUBLIC ANNOUNCEMENTS. So long as the Merger Agreement is in effect, the
Company, on the one hand, and Parent and Purchaser, on the other, have agreed
not to issue or cause the publication of any press release or any other
announcement with respect to the Offer or the Merger or the transactions
contemplated thereby without the consent of the other party (such consent not to
be unreasonably withheld or delayed), except where such release or announcement
is required by applicable law or pursuant to any applicable listing agreement
with, or rules or regulations of, any stock exchange on which shares of the
capital stock of the Company or Tyco, as the case may be, are listed or the
NASD, or other applicable securities exchange, in which case the parties will
consult prior to making the announcement.
TERMINATION; FEES. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the shareholders of
the Company of the Merger herein:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental Authority shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
transactions contemplated by the Merger Agreement and such order, decree or
ruling or other action shall have become final and nonappealable;
(c) by Parent if:
(i) the Company shall have breached or failed to perform in any
material respect any of its covenants or other agreements contained in
the Merger Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within five days after the giving of
written notice thereof to the Company (but not later than the expiration
of the 20 business day period provided for the Offer above);
(ii) any representation or warranty of the Company shall not have
been true and correct when made (without for this purpose giving effect
to qualifications of materiality contained in such representation and
warranty), if such failure to be true and correct, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect;
(iii) any representation or warranty of the Company shall cease to be
true and correct at any later date (without for this purpose giving
effect to qualifications of materiality contained in such representation
and warranty) as if made on such date (other than representations and
warranties made as of a specified date) other than as a result of a
breach or failure to perform by the Company of any of its covenants or
agreements under the Merger Agreement if such failure to be true and
correct, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect; PROVIDED, HOWEVER, that such
representation or warranty is incapable of being cured or has not been
cured within five days after the giving of written notice thereof to the
Company (but not later than the expiration of the 20 business day period
provided for the Offer above);
PROVIDED, HOWEVER, that the right to terminate the Merger Agreement pursuant
to this clause (c) shall not be available to Parent if Purchaser or any
other affiliate of Parent shall acquire Shares pursuant to the Offer;
(d) by Parent if, whether or not permitted to do so by the Merger
Agreement, (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a
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manner adverse to Parent or Purchaser its approval or recommendation of the
Offer or any of the Company Proposals; (ii) the Board of Directors of the
Company or any committee thereof shall have approved or recommended to the
shareholders of the Company any Company Takeover Proposal or Alternative
Transaction; (iii) the Board of Directors of the Company or any committee
thereof shall have approved or recommended that the shareholders of the
Company tender their Shares in any tender or exchange offer that is an
Alternative Transaction; (iv) the Board of Directors of the Company or any
committee thereof shall have taken any position or make any disclosures to
the Company's shareholders permitted pursuant to the "No Solicitation"
provisions of the Merger Agreement described above which has the effect of
any of the foregoing; or (v) the Board of Directors of the Company or any
committee thereof shall have resolved to take any of the foregoing actions;
(e) by either Parent or the Company if, as the result of the failure of
the Minimum Condition or any of the other conditions set forth in
Section 15, the Offer shall have terminated or expired in accordance with
its terms without Purchaser having purchased any Shares pursuant to the
Offer, PROVIDED that if the failure to satisfy any conditions set forth in
Section 15 shall be a basis for termination of the Merger Agreement under
any other clause of this section, a termination pursuant to this clause
shall be deemed a termination under such other clause;
(f) by either Parent or the Company if the Offer shall not have been
consummated on or before February 29, 2000, PROVIDED that the right to
terminate the Merger Agreement pursuant to this clause shall not be
available to any party whose failure to perform any of its obligations under
the Merger Agreement results in the failure of the Offer to be consummated
by such time;
(g) by the Company, if Parent or Purchaser shall have breached or failed
to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
breach or failure to perform is incapable of being cured or has not been
cured within five days after the giving of written notice thereof to Parent;
or
(h) by the Company, in order to accept a Superior Proposal, PROVIDED
that the Board of Directors of the Company reasonably determines in good
faith (after due consultation with independent counsel, which may be Stoel
Rives LLP), that it is or is reasonably likely to be required to accept such
proposal in order to discharge properly its fiduciary duties; the Company
has given Parent three business days' advance notice of the Company's
intention to accept such Superior Proposal; the Company shall in fact accept
such proposal; the Company shall have paid the fee and expenses contemplated
by the Merger Agreement; and the Company shall have complied in all respects
with the provisions of the section regarding "No Solicitation."
In the event of termination of the Merger Agreement and the abandonment of
the Offer or the Merger, the Merger Agreement (other than certain sections)
shall become void and of no effect with no liability on the part of any party
hereto (or of any of its directors, officers, employees, agents, legal or
financial advisors or other representatives); PROVIDED, HOWEVER, that no such
termination shall relieve any party thereto from any liability for any willful
breach of the Merger Agreement prior to termination. If the Merger Agreement is
terminated as provided herein, each party shall use all reasonable best efforts
to redeliver all documents, work papers and other material (including any copies
thereof) of any other party relating to the transactions contemplated thereby,
whether obtained before or after the execution hereof, to the party furnishing
the same.
The Company agrees that if the Merger Agreement is terminated pursuant to
(i) the provisions described in clause (d) above;
(ii) the provision described in clause (h) above; or
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(iii) the provision described in clause (e) or (f) above and, with
respect to this clause (iii), (A) at the time of such termination, there
shall be outstanding a BONA FIDE Company Takeover Proposal which has been
made directly to the shareholders of the Company or has otherwise become
publicly known or there shall be outstanding an announcement by any credible
third party of a BONA FIDE intention to make an Acquisition Proposal (in
each case whether or not conditional and whether or not such proposal shall
have been rejected by the Board of Directors of the Company) or (B) an
Alternative Transaction shall be publicly announced by the Company or any
third party within 12 months following the date of such termination and such
transaction shall at any time thereafter be consummated on substantially the
terms theretofore announced, then the Company shall pay to Parent the sum of
$5 million. Any payment required by this section shall be made as promptly
as practicable but in no event later than two business days following
termination of the Merger Agreement in the case of clause (i) above, upon
termination of the Merger Agreement in the case of clause (ii) above and, in
the case of clause (iii) above, upon consummation of such Company Takeover
Proposal, and shall be made by wire transfer of immediately available funds
to an account designated by Parent.
The Company further agrees that if the Merger Agreement is terminated
pursuant to clause (c)(i) above,
(i) the Company will pay to Parent, as promptly as practicable but in
no event later than two business days following termination of the Merger
Agreement, the amount of all documented and reasonable costs and expenses
incurred by Parent, Purchaser and their affiliates (including but not
limited to fees and expenses of counsel and accountants and out-of-pocket
expenses (but not fees) of financial advisors) in an aggregate amount not to
exceed $500,000 in connection with the Merger Agreement or the transactions
contemplated hereby ("Parent Expenses"); and
(ii) in the event that the Company consummates a Company Takeover
Proposal (whether or not solicited in violation of the Merger Agreement)
which is publicly announced within one year from the date of termination of
the Merger Agreement, the Company will pay to Parent the sum of $5 million,
which payment shall be made not later than two business days following
consummation of such Company Takeover Proposal.
If the Merger Agreement is terminated pursuant to clause (c)(ii), the Company
will pay to Parent, as promptly as practicable but in no event later than two
business days following termination of the Merger Agreement, the Parent
Expenses.
GUARANTEE. Tyco has guaranteed the payment by Purchaser of the Per Share
Amount and any other amounts payable by Purchaser pursuant to the Merger
Agreement and has agreed to cause Purchaser to perform all of its other
obligations under the Merger Agreement in accordance with its terms.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
SHAREHOLDER'S AGREEMENT. As an inducement to Parent and the Purchaser
entering into the Agreement with the Company, Robert L. Praegitzer (the
"Shareholder"), who owns approximately 53.0% of the Shares on a diluted basis,
has entered into a Shareholder's Agreement (the "Shareholder's Agreement") with
Parent and the Purchaser.
The following summary of certain provisions of the Shareholder's Agreement,
a copy of which is filed as an exhibit to the Schedule 14D-9, is qualified in
its entirety by reference to the text of the Shareholder's Agreement.
AGREEMENT TO TENDER. The Shareholder has agreed that he shall tender his
Shares in the Offer and that he shall not withdraw any Shares so tendered;
PROVIDED, HOWEVER, that if the Shareholder is unable
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to tender any Shares that are pledged to KeyBank National Association
("KeyBank") the Shareholder shall not be obligated to tender such Shares;
PROVIDED FURTHER that the Shareholder shall sell such Shares to Purchaser, and
Purchaser shall purchase such Shares from the Shareholder, at the Per Share
Amount prior to the Effective Time promptly upon termination of the pledge
agreements between the Shareholder and KeyBank relating to such Shares.
Purchaser hereby agrees that, if the Offer is consummated, it will satisfy the
liabilities secured by the pledge of Shares to KeyBank prior to the Effective
Time.
The Shareholder shall tender his Shares (other than the Shares pledged to
KeyBank) not later than fourteen business days following commencement of the
Offer, other than with respect to the Shares subject to the CBL Insured Credit
Facility Agreement (the "CBL Agreement") which shall be tendered not later than
one business day prior to the initially scheduled expiration of the Offer;
PROVIDED, HOWEVER, that if the Shares subject to the CBL Agreement are not
tendered as aforesaid, any damages of Purchaser shall be limited to $5,000,000.
In connection therewith, the Company has agreed with, and covenanted to,
Parent that the Company shall not register the transfer of any certificate
representing any of the Shareholder's Shares, unless such transfer is made to
Parent or the Purchaser or otherwise in compliance with the Shareholder's
Agreement.
GRANT OF IRREVOCABLE PROXY. Subject to the provisions of the pledge
agreements with KeyBank, the Shareholder has irrevocably granted to, and
appointed, Parent and any individual designated by Parent as the Shareholder's
proxy and attorney-in-fact, to vote the Shareholder's Shares, or grant a consent
or approval in respect of the Shares, at any meeting of shareholders of the
Company or in any other circumstances upon which the Shareholder's vote, consent
or other approval is sought, against (i) any merger agreement or merger (other
than the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, joint venture, recapitalization,
dissolution, liquidation or winding up of or by the Company and (ii) any
amendment of the Company's Articles of Incorporation or Bylaws or other proposal
or transaction (including any consent solicitation to remove or elect any
directors of the Company) involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, or result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under or with respect to, the Offer, the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement.
REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS. The
Shareholder has made certain representations and warranties in the Shareholder's
Agreement, including with respect to (i) ownership of his Shares, (ii) the
authority to enter into and perform his obligations under the Shareholder's
Agreement and the absence of required consents and statutory or contractual
conflicts or violations, (iii) the absence of liens, claims, security interests,
proxies, voting trusts or other arrangements or any other encumbrances on or in
respect of the Shares, except for those disclosed to Purchaser (iv) finder's
fees, and (v) an acknowledgment of Parent's reliance upon the Shareholder's
execution of the Shareholder's Agreement in entering into, and causing Purchaser
to enter into, the Merger Agreement. In addition, the Shareholder has agreed not
to transfer, or consent to any transfer of any or all of the Shareholder's
Shares or any interest therein (except as contemplated by the Shareholder's
Agreement), enter into any contract, option or other agreement or understanding
with respect to any transfer of any or all of his Shares or any interest
therein, grant any proxy, power-of-attorney or other authorization or consent in
or with respect to the Shares or any interest therein except with respect to
election of directors at the Company's annual meeting, deposit the Shares into a
voting trust or enter into a voting arrangement or agreement with respect to the
Shares or take any other action that would in any way restrict, limit or
interfere with its obligations under the Shareholder's Agreement. The
Shareholder has also agreed, directly or indirectly, not to solicit, initiate or
encourage the submission of any Acquisition Proposal or participate in any
discussions or negotiations regarding, or furnish to any person any
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information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal.
TERMINATION. The Shareholder's Agreement, and all rights and obligations
thereunder, shall terminate upon the earlier of (a) the date upon which the
Merger Agreement is terminated in accordance with its terms or (b) the date that
Parent or Purchaser shall have purchased and paid for the Shares of the
Shareholder pursuant to the terms of the Shareholder's Agreement; PROVIDED,
HOWEVER, that the termination of the Shareholder's Agreement shall not relieve
any party of liability for breach of such agreement prior to its termination.
OTHER AGREEMENTS. In November 1995 the Company entered into an employment
agreement with Robert L. Praegitzer, providing an annual base salary of $250,000
with increases over time, and eligibility for bonuses and other Company
benefits. Mr. Praegitzer's employment agreement is of an indefinite duration.
In August 1996, the Company entered into employment agreement with Robert J.
Versiackas providing for annual base salary of $130,000 with eligibility for
bonuses and other Company benefits. If at the end of each quarter during the
first two years of this agreement the total salary and bonus paid to
Mr. Versiackas is less than an annualized rate of $165,000, the Company shall
pay Mr. Versiackas an amount equal to the difference. Additionally,
Mr. Versiackas received options to acquire 16,043 shares of Common Stock at a
price of $13.125 per share. Upon termination, Mr. Versiackas is entitled to all
payments customary under Company policies. The agreement with Mr. Versiackas may
be terminated by either party with or without cause upon thirty (30) days
written notice (or, in the case of termination by the Company, with payment of
sixty (60) days of base compensation in lieu of thirty (30) days notice).
Mr. Versiackas has also entered into an agreement with the Company
restricting his ability to compete with the Company until two years after
termination of his employment and prohibiting disclosure of confidential
information and solicitation of the Company's customers or employees.
In addition, in April 1999 Mr. Versiackas entered into an agreement with the
Company which provides that, upon a change of control of the Company, if
Mr. Versiackas' employment is terminated within one year after the change of
control, Mr. Versiackas' stock options will become fully exercisable, unless the
change in control transaction would otherwise be accounted for under the pooling
of interest method. In addition, if Mr. Versiackas' employment is terminated
other than for cause within 12 months of a change of control, he will be
entitled to receive an amount equal to 6 months of his base salary within
30 days of termination.
In March 1998 the Company entered into an agreement with James M. Buchanan,
the Company's Senior Vice President of Sales and Marketing, providing for an
annual base salary of $185,000 with eligibility for bonuses and other Company
benefits.
Mr. Buchanan has also entered into an agreement with the Company in the
event of a change of control. The agreement provides that, upon a change of
control of the Company, if Mr. Buchanan's employment is terminated within one
year after the change of control, Mr. Buchanan's stock options will become fully
exercisable, unless the change in control transaction would otherwise be
accounted for under the pooling of interest method. In addition, if
Mr. Buchanan's employment is terminated other than for cause within 12 months of
a change of control, he will be entitled to receive an amount equal to
18 months of his base salary within 30 days of termination, insurance coverage
and car allowance for 18 months following termination.
In December 1998 the Company entered into a Stock Purchase Agreement with
Matthew J. Bergeron, the Company's President and Chief Operating Officer,
pursuant to which the Company sold Mr. Bergeron 100,000 unregistered shares of
its common stock at fair market value. Due to the restrictions on transfer of
the shares, the agreement provided that the fair market value of the shares
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would be 75% of the public market price of the Company's common stock as quoted
on the Nasdaq National Market System. On December 22, 1998, the date on which
the purchase price for the shares was established, the closing market price for
the Company's common stock was $6.9375 per share. Accordingly, the purchase
price for the shares was $520,350. Under the terms of the agreement,
Mr. Bergeron must pay the Company the entire purchase price, without interest,
on or before January 1, 2006. The Company agreed to indemnify Mr. Bergeron for
any state or federal income tax liability for which he may become liable on
account of interest imputed on the deferred payment of the purchase price.
Mr. Bergeron has the option to require the Company to repurchase the shares from
him during January 2006 for $420,312.50. This transaction closed February 18,
1999.
Each of Mr. Bergeron, Gregory L. Lucas, Senior Vice President of Technology
of the Company, and Robert G. Schmelzer, Senior Vice President of Administration
of the Company, has also entered into an agreement with the Company in the event
of a change of control. The agreement provides that, upon a change of control of
the Company, if such officer's employment is terminated within one year after
the change of control, such officer's stock options will become fully
exercisable, unless the change in control transaction would otherwise be
accounted for under the pooling of interest method. In addition, if such
officer's employment is terminated other than for cause within 12 months of a
change of control, he will be entitled to receive an amount equal to 6 months of
his base salary within 30 days of termination.
The Company has leased its Dallas warehouse facility from Robert L.
Praegitzer, with the lease payments totaling $160,800 for the year end June 30,
1999. The lease rates for the warehouse facility were determined by
Mr. Praegitzer, who was the sole shareholder of the Company at the time of
determination. The Board of Directors of the Company unanimously concluded that
these rates were comparable to rates that could have been obtained from an
independent party.
In June 1999 Robert L. Praegitzer, Chairman of the Board and Chief Executive
Officer of the Company, pledged an aggregate of 2,656,500 shares of the common
stock of the Company he owns to KeyBank as collateral to secure the Company's
credit facility with the bank. Mr. Praegitzer did not receive any direct or
indirect compensation for this transaction.
Theodore L. Stebbins, a director of the Company, is a managing director of
Adams, Harkness & Hill ("Adams Harkness"), an investment banking firm. The
Company has retained Adams Harkness to provide financial advisory services in
connection with strategic alternatives that the Company had been considering,
including the transactions contemplated by the Merger Agreement. See Item 5.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
RECOMMENDATION OF THE BOARD OF DIRECTORS. THE BOARD HAS DETERMINED THAT THE
TYCO OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF
COMPANY. THE BOARD RECOMMENDS THAT ALL HOLDERS OF COMMON STOCK ACCEPT THE TYCO
OFFER AND TENDER ALL OF THEIR COMMON STOCK PURSUANT TO THE TYCO OFFER. The
Board's determination and recommendation were made by a unanimous vote of the
directors (with Mr. Stebbins abstaining because he is a managing director of
Adams Harkness, which is entitled to a fee payable in part upon the completion
of a transaction such as that presented by the Tyco Offer) at the Board's
October 25, 1999 meeting.
The Board's recommendation is based in part on the oral opinion delivered by
Adams Harkness to the Board on October 25, 1999, that, as of such date, the cash
consideration to be received by the holders of Common Stock pursuant to the Tyco
Offer is fair to such holders from a financial point of view. Adams Harkness
subsequently confirmed its opinion in writing.
A copy of the letter to Company's shareholders communicating the Board's
recommendation is filed as Exhibit 5 to this Schedule and is incorporated herein
by reference.
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BACKGROUND AND REASONS FOR THE RECOMMENDATION. In this section, references
to Tyco are references to Tyco's United States subsidiaries and affiliates
including Tyco (US) International Inc. ("Tyco (US)") and Tyco Printed Circuit
Group. Tyco, the Bermuda company, is referred to in this section as Tyco
International Ltd.
In April 1999, Praegitzer began to explore strategic alternatives, including
acquisition possibilities. At that time, Praegitzer retained Adams, Harkness &
Hill, Inc. and McDonald Investments Inc. to assist it in this broad-ranging
exploration. McDonald and KeyBank, the Company's principal creditor, are both
wholly owned subsidiaries of KeyCorp. Beginning in late April 1999, Adams
Harkness and McDonald contacted not less than 24 companies to gauge their
interest in potential strategic business relationships and business combinations
with Praegitzer. As a result of these contacts, Praegitzer entered into
discussions with four companies concerning a possible transaction.
On April 27, 1999, McDonald contacted a private equity investment firm
("Equity Investment Company A") to discuss a possible transaction. On April 28,
1999, Adams Harkness contacted another private equity investment firm ("Equity
Investment Company B") and Tyco for the same purpose.
On April 29, 1999, Equity Investment Company A contacted McDonald indicating
interest in pursuing a possible transaction. On the same day, Steve Gardner,
President of Tyco Printed Circuit Group, contacted Adams Harkness, indicated
that Tyco was interested in pursuing a transaction and instructed Adams Harkness
to contact Brian Roussell, Vice President of Finance and Administration of Tyco
Printed Circuit Group Inc. Adams Harkness contacted Mr. Roussell on that same
day regarding a possible transaction.
From May 3, 1999 through May 9, 1999, Tyco Printed Circuit Group and
Praegitzer negotiated a confidentiality agreement, which was signed on May 10,
1999, at which time each party commenced due diligence on the other. During the
week of May 3, 1999, Equity Investment Company A and Praegitzer signed
confidentiality agreements and commenced due diligence on each other.
On May 5, 1999, Praegitzer and Equity Investment Company B began negotiating
a confidentiality agreement, which was signed on May 13, 1999.
On May 12, 1999, Equity Investment Company A, Praegitzer and their
respective advisers met at the offices of Praegitzer's legal advisers in
Portland, Oregon to discuss due diligence matters. Additional due diligence
discussions were held on May 14, 1999 and during the weeks of May 16, 1999 and
May 24, 1999.
On May 17, 1999, Equity Investment Company B scheduled a meeting with
Mr. Bergeron to discuss a possible transaction.
On May 19 and 20, 1999, Tyco, Praegitzer and their respective advisers held
meetings at Praegitzer's headquarters offices in Tualatin, Oregon and at the
offices of Praegitzer's legal advisers in Portland, Oregon to continue
discussing a possible business combination. Praegitzer's and Tyco's respective
management and advisers participated in these meetings. The parties held
preliminary discussions about the non-financial aspects of a potential
acquisition of Praegitzer by Tyco, including organization, facilities, products
and customers.
On May 20, 1999, representatives of Equity Investment Company B met with
Mr. Bergeron in Dallas, Oregon and conducted due diligence.
On May 24, 1999, Equity Investment Company B contacted Adams Harkness and
asked for additional due diligence information. On June 1, 1999, Equity
Investment Company B informed Adams Harkness that, although Equity Investment
Company B was interested in pursuing a possible business combination, for
financing and timing reasons it wished to delay discussions for at least three
months.
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On June 3, 1999, Tyco presented Praegitzer with a non-binding indication of
interest letter, suggesting a cash price of $7.25 to $8.00 per share for the
acquisition of all shares of Praegitzer common stock. From June 4, 1999 through
June 21, 1999, the parties exchanged additional information and internally
reviewed the potential benefits of a transaction.
Also on June 3, 1999, Equity Investment Company A indicated it was
considering a recapitalization transaction that would value Praegitzer's common
stock at approximately $6.00 per share, but that Equity Investment Company A
required additional due diligence before it would be in the position to finalize
an offer. Equity Investment Company A conducted further due diligence on
June 4, 1999 and during the week of June 6, 1999.
On June 14 and 15, and also from June 21 to June 24, 1999, representatives
of Tyco's subsidiaries conducted due diligence at the offices of Praegitzer's
legal advisers in Portland, Oregon.
On June 16, 1999, Equity Investment Company A notified McDonald that Equity
Investment Company A was prepared to enter into a recapitalization transaction
with Praegitzer that would value Praegitzer's common stock at $4.00 per share.
On June 20, 1999, McDonald informed Equity Investment Company A that
Praegitzer had decided to postpone any decision on the proposal for at least two
months. On June 22, 1999, the president of a printed circuit board manufacturer
(the "PCB Company") contacted Mr. Bergeron about a possible business
combination.
On June 24, 1999, representatives of the PCB Company and Praegitzer met to
discuss a possible business combination. The PCB Company and Praegitzer entered
into confidentiality agreements and completed due diligence on June 28, 1999.
On June 29, 1999, Richard D. Malloy, Director of Mergers and Acquisitions of
Tyco (US), orally informed Praegitzer that the proposal in its June 3, 1999
letter was no longer feasible due to valuation issues and concern about the
status of Praegitzer's credit arrangements. Mr. Malloy indicated Tyco was still
interested in pursuing a transaction, and suggested postponing further
discussion until Praegitzer's circumstances were clarified.
Also on June 29, 1999, the PCB Company indicated it would submit a business
combination proposal on July 2, 1999, but on July 1, 1999, the PCB Company
informed Praegitzer that no proposal would be forthcoming on July 2, 1999. The
PCB Company requested more time to consider alternatives and to conduct
additional due diligence. On July 21, 1999, the PCB Company informed McDonald
that the PCB Company might be interested only in purchasing one or two of
Praegitzer's manufacturing facilities, but the PCB Company never submitted any
transaction proposal for Praegitzer's consideration.
On August 5, 1999, Praegtizer announced its financial results for the fourth
quarter and fiscal year ended June 30, 1999. For the fourth quarter, Praegitzer
reported a modest increase in revenue from the prior year and a restructuring
that resulted in a pretax charge of $21.4 million. Praegitzer also reported
that, at June 30, 1999 it was not in compliance with all the covenants of its
major credit agreements, including its revolving credit agreement with KeyBank.
Praegitzer reported that its business and financial condition could be
materially and adversely effected if it were unable to reach agreements with its
creditors.
On August 31, 1999, Mr. Bergeron asked Adams Harkness to contact Tyco to
recommence transaction discussions. Adams Harkness left a message with Tyco on
September 1, 1999, and on September 2, 1999 Mr. Malloy informed Adams Harkness
that Tyco would consider recommencing discussions.
On September 7, 1999, Mr. Malloy called Mr. T. L. Stebbins, a director of
Praegitzer and a managing director at Adams Harkness, and indicated Tyco was
interested in recommencing discussions
18
<PAGE>
with Praegitzer, with the understanding that Tyco was prepared to offer no more
than $5.50 per share for the acquisition of all shares of Praegitzer common
stock until Praegitzer's September 1999 financial statements were available.
Upon receipt of this information, Mr. Bergeron instructed Adams Harkness to
cease communications with Tyco.
On September 10, 1999, Praegitzer's commercial lenders requested Praegitzer
renegotiate its credit arrangements. Following this request, Robert Praegitzer,
Chairman of the Board and Chief Executive Officer of Praegitzer, and
Mr. Bergeron convened a conference call among themselves, Adams Harkness and
McDonald during which Mr. Praegitzer and Mr. Bergeron requested that Adams
Harkness and McDonald contact a number of the original companies who Adams
Harkness and McDonald thought may be interested in purchasing Praegitzer at a
lower price. Mr. Praegitzer and Mr. Bergeron also asked Adams Harkness to
contact Tyco to inform Tyco that Praegitzer was interested in recommencing
transaction discussions at a price per share to be determined after Tyco had
completed its due diligence.
On September 13, 1999, Mr. Stebbins discussed Praegitzer's position with
Mr. Malloy, who requested updated due diligence materials and financial
statements.
On September 15, 1999, Adams Harkness contacted Investment Company Company B
to gauge its interest in recommencing discussions concerning a possible
transaction.
On September 16, 1999, the Praegitzer board of directors met to discuss the
status of negotiations with Tyco.
On September 20, 1999, Mr. Malloy indicated Tyco's interest in proceeding
with a transaction to Adams Harkness. Mr. Malloy and Mr. Bergeron arranged
several due diligence meetings at Praegitzer's headquarters offices in Tualatin,
Oregon over the next two weeks.
On September 21, 1999, the management of Praegitzer and its advisers met at
Praegitzer's headquarters offices in Tualatin, Oregon with representatives of
Tyco to discuss a possible business combination. On the same day, Equity
Investment Company B indicated to Adams Harkness that Equity Investment Company
B was interested in pursuing discussions, but that Equity Investment Company B
was now interested only in purchasing certain Praegitzer manufacturing
facilities rather than the entire company.
On September 23, 1999, the Praegitzer Board met to approve the delayed
filing with the Commission of its Annual Report on Form 10-K for the year ended
June 30, 1999 and to explore strategic alternatives with McDonald and Adams
Harkness.
On September 29, 1999, Adams Harkness contacted Tyco to discuss the status
of Tyco's expected offer.
In late September 1999, McDonald contacted Equity Investment Company A to
determine Equity Investment Company A's interest in recommencing discussions
concerning a possible transaction with Praegitzer. On October 7, 1999, Equity
Investment Company A, Praegitzer and their respective advisers met at
Praegitzer's headquarters offices in Tualatin, Oregon to discuss a possible
transaction. At that meeting Equity Investment Company A presented Praegitzer
with a letter of interest for the purchase solely of Praegitzer's Dallas and
Fremont manufacturing facilities, conditioned on satisfactory financing
arrangements and additional due diligence.
On October 12, 1999, the Company executed a Deferral Loan and Lease
Modification Agreement with substantially all of its lenders and lessors,
thereby eliminating the existing covenant defaults and the prospect of immediate
acceleration of the amounts due to those creditors.
Also on October 12, 1999, Equity Investment Company B informed Adams
Harkness that Equity Investment Company B was no longer interested in pursuing
any acquisition discussions.
19
<PAGE>
On October 13, 1999, the Company filed with the Commission its Annual Report
on Form 10-K for the fiscal year ended June 30, 1999, which was due to be filed
September 28, 1999.
Also on October 13, 1999, Tyco delivered an acquisition proposal to
Praegitzer. Under the terms of the proposal, Tyco would acquire Praegitzer by
means of a cash tender offer, at a price of $5.50 per share of Praegitzer common
stock. Representatives of Equity Investment Company A completed additional due
diligence on the same day.
On October 15, 1999, the Praegitzer board met with Adams Harkness at
Praegitzer's headquarters offices in Tualatin, Oregon to review Tyco's proposal
and discuss tender offer procedures.
Also on October 15, 1999, Tyco International Ltd.'s Board of Directors
approved the cash tender offer at a price of $5.50 per share of Praegitzer
common stock.
On October 16, McDonald contacted Equity Investment Company A to inform
Equity Investment Company A that Praegitzer preferred a transaction pursuant to
which all of the common stock of Praegitzer would be acquired, rather than an
asset purchase of only two of Praegitzer's facilities. McDonald also informed
Equity Investment Company A that Praegitzer was seeking a stock transaction that
valued its common stock at $6.00 per share or greater. On October 17, 1999,
Equity Investment Company A informed McDonald that Equity Investment Company A
was not interested in purchasing all of the stock of Praegitzer, but was only
interested in purchasing the two manufacturing facilities.
On October 18, 1999, Mr. Stebbins informed Tyco that Praegitzer was
entertaining other potential proposals for certain Praegitzer assets. Adams
Harkness requested Tyco propose a transaction either at a higher price per share
or structured differently. On October 20, 1999, Irving Gutin, Senior Vice
President of Tyco (US), and Mr. Malloy declined to modify Tyco's proposal.
On October 19, 1999, Tyco, Praegitzer and Adams Harkness convened several
conference calls to discuss Tyco's proposal and the transaction schedule.
On October 20, 1999, Mr. Bergeron verbally accepted Tyco's non-binding
written offer on Praegitzer's behalf and requested Mr. Malloy supply a draft
merger agreement, which Praegitzer received from Tyco's legal counsel on
October 22, 1999.
From October 22 through October 26, 1999, Tyco, Praegitzer and their
respective advisers negotiated the terms and provisions of the merger agreement
and ancillary documents.
The Praegitzer board of directors met on October 25, 1999. At the meeting
- Praegitzer's legal advisers and management updated the Praegitzer board on
the status of negotiations with Tyco and informed the board that all
substantive issues had been resolved,
- Praegitzer's legal advisers made a presentation to the Praegitzer board
regarding the fiduciary duties of the Praegitzer board,
- Praegitzer's legal advisers reviewed with the Praegitzer board the terms
of the proposed merger agreement with Tyco and the regulatory filings and
approvals that would be required in connection with the proposed
transaction,
- Adams Harkness made a financial presentation to the Praegitzer board and
- Adams Harkness rendered its opinion to the effect that, as of that date,
the Per Share Amount was fair to Praegitzer shareholders from a financial
point of view.
Afterwards, the Praegitzer board by a unanimous vote (with Mr. Stebbins
abstaining because he is a managing director of Adams Harkness, which is
entitled to a fee payable in part upon the completion of a transaction such as
that presented by Tyco) determined the merger was fair to, and in the best
interests of, Praegitzer and its shareholders and
20
<PAGE>
- unanimously approved (again with Mr. Stebbins abstaining) the terms of the
Merger Agreement and the transactions contemplated by the agreement, and
- authorized the execution of the Merger Agreement and recommended that
Praegitzer shareholders tender all their shares in the Tyco Offer.
On October 25, 1999 the closing price of Praegitzer common stock was $4.75
per share.
On October 26, 1999 all documentation, including the disclosure schedules of
Praegitzer, were finalized to the satisfaction of the designated officers, and
all conditions with respect to the execution of the Merger Agreement were
satisfied. Late in the morning of that day, the Praegitzer board met to receive
an update from Mr. Bergeron as to the status of the transaction. That afternoon
- Tyco and Praegitzer executed and delivered the Merger Agreement,
- the majority shareholder of Praegitzer executed and delivered a
shareholder agreement agreeing to tender the shareholder's shares in the
Tyco Offer and
- Tyco and Praegitzer publicly announced the signing of the Merger
Agreement.
In reaching the conclusions and recommendations described above, the Board
considered the opportunity the Merger would provide to secure a premium for
shareholders over recent market prices of Common Stock. In comparing this
premium with the return on shareholder investment believed to be achievable
through future appreciation of the Common Stock if the Company remained an
independent company, the Board considered various factors affecting the
Company's future financial performance and prospects. These factors included:
- increasing consolidation in the industry and the Company's difficulty in
competing with larger companies with substantially greater resources and
name recognition than the Company,
- the Company's ability to continue to attract experienced and motivated
personnel in a highly competitive marketplace and
- the Company's ability to service its debt obligations.
In the course of its deliberations, the Board considered, among other
things:
- historical information concerning the Company's business, prospects,
financial performance and condition, operations, technology, management
and competitive position,
- current financial market conditions and historical market prices,
volatility and trading information with respect to the Common Stock,
- the Per Share Amount to be received by the holders of Common Stock in the
Tyco Offer and the Merger and a comparison of comparable business
combination transactions,
- the strong reputation and financial condition of Tyco,
- the belief that the terms of the Merger Agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations, are reasonable,
- the fact that the Merger Agreement permits the Board to furnish
information to, or to engage in negotiations with, third parties and to
terminate the Merger Agreement in certain circumstances, and the belief of
the Board that the payment by the Company of a termination fee of
$5 million to Purchaser in the event of such a termination would not
unreasonably discourage third parties from making a superior proposal,
- the business and financial prospects of the Company as an independent
company,
21
<PAGE>
- the potential for third parties to enter into strategic relationships with
or to acquire the Company if the Company did not enter into the Merger
Agreement,
- the fact that the Company had contact with several alternative parties to
discuss a possible acquisition and that although these parties were each
afforded ample time to submit an offer to acquire the entire Company, none
of these parties made an acceptable offer,
- the possibility that the Tyco Offer or the Merger might not be completed
and the effect of the public announcement of the Tyco Offer and Merger on
(a) the Company's sales, operating results and stock price and (b) the
Company's ability to attract and retain key management, marketing and
technical personnel,
- the financial effect of the Merger and
- the opinion of Adams Harkness that, as of October 25, 1999 and subject to
and based on the matters described in its opinion, the Per Share Amount to
be received by the holders of shares of Common Stock in the Tyco Offer and
the Merger was fair from a financial point of view to the Company
shareholders.
The Board concluded that the benefits of the merger outweigh any of the
potentially negative factors considered.
The discussion above sets forth the material information and factors
considered by the Board in consideration of the Merger Agreement. In view of the
wide variety of factors considered, the Board did not find it practicable to,
and did not, make specific assessments of, quantify or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
determination. The determination to approve the Merger was made after
consideration of all of the factors as a whole. In addition, individual members
of the Board may have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Adams Harkness (under an engagement letter dated
April 21, 1999) and retained McDonald (under an engagement letter dated
April 26, 1999) to provide it with financial advisory services in connection
with the possible sale of the Company. The Board selected Adams Harkness and
McDonald to act as the Company's financial advisor, based on their
qualifications, expertise and reputation and its knowledge of the business and
affairs of the Company.
For these financial advisory services, the Company agreed to pay Adams
Harkness and McDonald a transaction fee of 1% of the Transaction Value less
$350,000 less any remaining Expense Credit. For purposes of the engagement
letters, "Transaction Value" means (a) the total amount of cash paid, directly
or indirectly, for the assets, business or capital stock of the Company,
(b) the fair market value of any assets, securities or other property or rights
transferred, directly or indirectly, in payment for the assets, business or
stock of the Company, except that debt instruments will be valued at their face
amount, (c) the principal amount of any indebtedness for borrowed money
appearing on the most recent balance sheet of the Company before the completion
of the transaction and (d) the aggregate amount of any dividends or other
distributions declared by the Company with respect to its stock after the date
of the engagement letters, other than normal recurring cash dividends. For
purposes of the engagement letters, "Expense Credit" means the credit for all
expenses incurred in connection with the engagement against the $125,000 paid to
McDonald under a previous engagement. This transaction fee becomes payable by
the Company upon the successful completion of the Tyco Offer. In addition, the
Company has agreed to indemnify Adams Harkness and McDonald and their
affiliates, their respective directors, officers, agents and employees and each
person, if any, controlling Adams Harkness and McDonald or any of their
affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, arising out of the engagement.
Forty percent of the transaction fee is payable to Adams Harkness, and the
balance is payable to McDonald.
22
<PAGE>
Under an engagement letter dated September 27, 1999, the Company retained
Adams Harkness to provide it with a financial fairness opinion in connection
with the possible sale of the Company. The Board selected Adams Harkness to act
as the Company's financial advisor based on Adams Harkness' qualifications,
expertise and reputation and its knowledge of the business and affairs of the
Company.
For this financial fairness opinion, the Company agreed to pay Adams
Harkness a fee of $350,000, $50,000 of which was payable upon delivery of Adams
Harkness' oral opinion to the Board, and the remainder of which will become
payable upon completion of the Merger. In addition, the Company has agreed to
reimburse Adams Harkness for its expenses related to this engagement and to
indemnify Adams Harkness and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Adams
Harkness or any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws, arising out of
Adams Harkness' engagement.
Theodore L. Stebbins, a director of Company, is a managing director of Adams
Harkness.
Neither the Company nor any person acting on its behalf intends to employ,
retain or compensate any other person to make solicitations or recommendations
to security holders on their behalf concerning the Tyco Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Transactions in Securities.
To the knowledge of Company, except as otherwise set forth in this Schedule,
no transactions in the Common Stock have been effected during the past 60 days
by Company or by any executive officer, director, affiliate or subsidiary of
Company.
(b) Intent to Tender.
To the knowledge of Company, all of its executive officers, directors,
affiliates or subsidiaries currently intend to tender pursuant to the Tyco Offer
all shares of Common Stock that are held of record or beneficially owned by such
persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Negotiations.
Except as set forth in this Schedule, no negotiation is being undertaken or
is underway by Company in response to the Tyco Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving Company or any subsidiary thereof; (ii) a purchase, sale or transfer
of a material amount of assets by Company or any subsidiary thereof; (iii) a
tender offer for or other acquisition of securities by or of Company; or
(iv) any material change in the present capitalization or dividend policy of
Company.
(b) Transactions and Other Matters.
Except as set forth in this Schedule, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the Tyco
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Not applicable.
23
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
1 Agreement and Plan of Merger dated as of October 26, 1999
among Offeror, Parent and the Company, with the Guarantee of
Tyco
2 Shareholder's Agreement dated as of October 26, 1999 among
Purchaser, Offeror and Robert L. Praegitzer
3 Engagement Letter dated April 21, 1999 between the Company
and Adams Harkness
4 Engagement Letter dated September 27, 1999 between the
Company and Adams Harkness
5 Pledge Agreement dated June 11, 1999 between Robert L.
Praegitzer and Key Bank National Association
6 Pledge Agreement dated June 11, 1999 between Robert L.
Praegitzer and Key Bank National Association
7 Employment Agreement between the Company and Robert L.
Praegitzer dated November 17, 1995 (Incorporated by
reference to Exhibit 10.20 of the Company's Registration
Statement on Form S-1, Registration No. 333-01228)
8 Employment Agreement between the Company and Robert J.
Versiackas dated August 26, 1996 (Incorporated by reference
to Exhibit 10.19 of the Company's annual Report on Form 10-K
for the Year Ended June 30, 1998 (the "1998 Form 10-K")
9 Offer Letter between the Company and James M. Buchanan dated
March 24, 1998 (Incorporated by reference to Exhibit 10.20
of the 1998 Form 10-K)
10 Stock Purchase Agreement between the Company and Matthew J.
Bergeron dated December 22, 1998 (Incorporated by reference
to Exhibit 10 of the Company's Quarterly Report on Form 10-Q
for the Quarter Ending December 31, 1998)
11 Change of Control Agreement between the Company and Matthew
J. Bergeron dated April 16, 1999
12 Change of Control Agreement between the Company and Robert
Versiackas dated April 16, 1999
13 Change of Control Agreement between the Company and James
Buchanan dated April 16, 1999
14 Change of Control Agreement between the Company and Robert
Schmelzer dated April 16, 1999
15 Change of Control Agreement between the Company and Gregory
Lucas dated April 16, 1999
16 Noncompetition Agreement between the Company and Robert J.
Versiackas
17 Press Release issued by the Company on October 26, 1999
18 Form of Letter to Shareholders dated November 1, 1999*
19 Opinion of Adams, Harkness & Hill, Inc.* (attached as Annex
I hereto)
20 Excerpts from the Company's Proxy Statement for its 1999
Annual Meeting of Shareholders dated October 25, 1999.*
(attached as Annex II hereto)
</TABLE>
- ------------------------
* Included in copies mailed to shareholders
24
<PAGE>
SIGNATURE
After reasonable 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.
PRAEGITZER INDUSTRIES, INC.
By: /s/ MATTHEW J. BERGERON
---------------------------------------------------------------------------
Matthew J. Bergeron
President
Dated: November 1, 1999
25
<PAGE>
ANNEX I
ADAMS, HARKNESS & HILL, INC.
October 25, 1999
Board of Directors
Praegitzer Industries, Inc.
19801 SW 72nd Avenue
Tualatin, OR 97062
Attention: Robert L. Praegitzer--Chairman of the Board and Chief Executive
Officer
Members of the Board:
You have requested our opinion (the "Fairness Opinion") as to the fairness, from
a financial point of view, to the holders of common stock, no par value (the
"Common Stock"), of Praegitzer Industries, Inc. (the "Company") of the
consideration proposed to be received by such stockholders pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), to be entered into in
substantially the form of the draft Merger Agreement dated October 25, 1999,
among the Company, Sigma Circuits, Inc. (the "Parent"), an indirect wholly owned
subsidiary of Tyco International Ltd., and T Merger Sub (OR), Inc., a wholly
owned subsidiary of the Parent (the "Sub"). The draft Merger Agreement provides
that the Sub will commence a tender offer (the "Offer") for any and all
outstanding shares of Common Stock at a price of $5.50 per share net to the
seller in cash. Assuming the Sub acquires at least fifty-one percent (51%) of
the Common Stock in the Offer and the Company satisfies certain other conditions
as set forth in the Merger Agreement, a merger of the Sub with and into the
Company (the "Merger") will occur, and stockholders of the Company who do not
tender their shares in the Offer will receive $5.50 per share net to the seller
in cash in the Merger. We refer to the Offer and the Merger together as the
"Transaction."
Adams, Harkness & Hill, Inc., as part of its investment banking activities, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. We have acted as financial advisor
to the Board of Directors of the Company in connection with the proposed
Transaction and will receive fees for our services, including a fee payable upon
rendering this opinion and a fee payable upon the closing of the Transaction. We
have in the past provided investment banking and financial advisory services to
the Company for which we have received various fees. We also serve as a market
maker for the Common Stock, and, in the ordinary course of our business, may
trade in the Common Stock for our own account and for the accounts of customers.
Accordingly, we may at any time hold a long or short position in the Common
Stock.
We are expressing no opinion as to what the value of the Common Stock will be
when purchased in the Offer or when converted in the Merger or the prices at
which the Common Stock will actually trade at any time. Our Fairness Opinion as
expressed herein is limited to the fairness, from a financial point of view, as
of the date hereof, of the consideration to be received by the holders of the
Common Stock pursuant to the Merger Agreement and does not address the Company's
underlying business decision to engage in the Transaction.
In developing our Fairness Opinion, we have, among other things: (i) reviewed
the Company's Annual Reports, Forms 10-K and related financial information for
the three fiscal years ended June 30, 1999; (ii) analyzed certain internal
financial statements and other financial and operating data concerning the
Company, including forecasts, prepared by members of senior management of the
Company which we discussed and reviewed with members of the senior management of
the Company; (iii) conducted due
I-1
<PAGE>
diligence discussions with members of senior management of the Company and
Parent, and discussed with members of senior management of the Company and
Parent their views regarding the business and prospects of the Company and
Parent and financial and operating benefits arising from the Transaction;
(iv) reviewed the historical market prices and trading activity for the Common
Stock and compared them with those of certain publicly traded companies we
deemed to be relevant and comparable to the Company; (v) compared the results of
operations of the Company with those of certain companies we deemed to be
relevant and comparable to the Company; (vi) compared the financial terms of the
Transaction with the financial terms of certain other mergers and acquisitions
we deemed to be relevant and comparable to the Transaction; (vii) participated
in certain discussions among representatives of the Company and Parent and their
financial and legal advisors; (viii) reviewed a draft of the Merger Agreement
dated October 25, 1999; and (ix) reviewed such other financial studies and
analyses and performed such other investigations and took into account such
other matters as we deemed necessary, including our assessment of general
economic, market and monetary conditions as of the date hereof.
Our Fairness Opinion as expressed herein is limited to the fairness, from a
financial point of view, as of the date hereof, of the proposed consideration
and does not address the Company's underlying business decision to engage in the
Transaction. Our Fairness Opinion does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote on any matter
relating to the Transaction. We are expressing no opinion as to the value of the
Company's common stock at the time of our analysis or at any time prior to and
including the effective date of the Transaction. In connection with our review
and arriving at our Fairness Opinion, we have not independently verified any
information received from the Company, have relied on such information, and have
assumed that all such information is complete and accurate in all material
respects. With respect to any forecasts reviewed relating to the prospects of
the Company, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the Company's
senior management as to the future financial performance of the Company. Our
Fairness Opinion is rendered on the basis of securities market conditions
prevailing as of the date hereof and on the conditions and prospects, financial
and otherwise, of the Company as known to us on the date hereof. We have not
conducted, nor have we received copies of, any independent valuation or
appraisal of any of the assets of the Company. In addition, we have assumed,
with your consent, that any material liabilities (contingent or otherwise, known
or unknown) of the Company are as set forth in the consolidated financial
statements of the Company.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission
with respect to the transactions contemplated by the Merger Agreement.
I-2
<PAGE>
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the holders of Common Stock pursuant
to the Merger Agreement is fair, from a financial point of view, to such
holders.
Sincerely,
ADAMS, HARKNESS & HILL, INC.
By: /s/ JOSEPH W. HAMMER
----------------------------------------------------------------------
Joseph W. Hammer
Managing Director
I-3
<PAGE>
ANNEX II
PRAEGITZER INDUSTRIES
19801 SW 72(ND) AVENUE
TUALATIN, OREGON 97062
INFORMATION PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
The following information is being furnished to holders of the common stock
(the "Shares"), of Praegitzer Industries, Inc., an Oregon corporation (the
"Company"), in connection with the possible designation by Sigma Circuits, Inc.
("Sigma"), a Delaware corporation and an indirect wholly owned subsidiary of
Tyco International Ltd. ("Tyco"), a Bermuda company, of at least a majority of
the members of the Board of Directors of the Company pursuant to the terms of an
Agreement and Plan of Merger, dated as of October 26, 1999 (the "Merger
Agreement"), by and among the Company, Sigma and T Merger Sub (OR), Inc.
("Purchaser"), an Oregon corporation, with the guarantee of Tyco. THIS
INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL PURPOSES AND NOT IN
CONNECTION WITH A VOTE OF THE COMPANY'S SHAREHOLDERS.
The Merger Agreement provides that promptly following the purchase of any
Shares pursuant to the Offer, Sigma may request that the Company take all
actions necessary to cause persons designated by Sigma to become directors of
the Company (the "Sigma Designees") so that the total number of directorships
held by such persons is proportionate to the percentage calculated by dividing
(i) the number of Shares accepted for payment pursuant to the Offer plus Shares
beneficially owned by Sigma or any affiliate thereof by (ii) the total number of
Shares outstanding; provided that prior to the consummation of the Merger, the
Board of Directors of the Company (the "Board of Directors") shall always have
at least two members who are directors as of the date hereof, one of whom will
be Robert L. Praegitzer and one of whom will be a director who is neither an
officer of the Company nor a designee of Sigma. The Company has also agreed to
increase the size of the Board of Directors or exercise reasonable best efforts
to secure the resignation of existing directors so as to enable Tyco's designees
to be elected to the Board of Directors in accordance with such provisions.
The information contained in this Annex II concerning Sigma and Purchaser
has been furnished to the Company by Sigma, and the Company assumes no
responsibility for the accuracy or completeness of any such information.
VOTING SECURITIES OF THE COMPANY
As of October 26, 1999, there were issued and outstanding 13,129,751 shares
of Common Stock, each of which entitles the holder to one vote.
II-1
<PAGE>
BOARD OF DIRECTORS, SIGMA DESIGNEES AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
The persons named below are the current members of the Board of Directors.
The followings sets forth as to each director his age (as of September 30,
1999), principal occupation and business experience, the period during which he
has served as a director and the expiration of his terms as a director.
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS AGE SINCE
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
ROBERT L. PRAEGITZER founded the Company in 1981 and has 68 1981
been its Chief Executive Officer and Chairman of the Board
since that time, and was the President from the founding
until January 1998. He was also the founder and President
of Praegitzer Design Incorporated, which merged into the
Company in 1995, and Praegitzer Property Group, the assets
of which were acquired by the Company in 1996.
MATTHEW J. BERGERON joined the Company in 1990 as Chief 36 1995
Financial Officer. He became Senior Vice President in
1993, a director in November 1995, Executive Vice
President and Chief Operating Officer in April 1997 and
President and Chief Operating Officer in January 1998.
Prior to joining the Company, Mr. Bergeron was an
accountant at Johnson & Shute P.S., a public accounting
firm.
DANIEL J. BARNETT joined the Company as Senior Vice 48 1996
President and a director in August 1996 in connection with
the merger of Trend Circuits, Inc. ("Trend") into the
Company. On May 29, 1998, Mr. Barnett terminated his
employment with the Company. Prior to the merger, Mr.
Barnett was the president of Trend. Mr. Barnett served as
the president of Trend from 1992 until August 1996.
THEODORE L. STEBBINS is the Managing Director of Adams, 58 1996
Harkness & Hill, Inc. ("Adams Harkness"), an investment
banking firm, and was appointed to the Board of Directors
of the Company in May 1996.
MERRILL A. MCPEAK joined the Company as a director in April 63 1997
1997. He is a retired general of the United States Air
Force. He served as Chief of Staff of the Air Force from
October 1990 to October 1994. He is Chairman of the Board
and a Director of ECC International, and serves on the
boards of four other publicly traded companies: Tektronix
Inc., Thrustmaster Inc., Trans World Airlines, and Western
Power and Equipment.
GORDON B. KUENSTER joined the Company as a director in 66 1997
November 1997. He is founder and Chief Executive Officer
of Seattle Sight Systems, Inc., a manufacturer of
application-specific high resolution computer displays. He
founded Seattle Sight Systems, Inc. in 1996 and is
presently serving as Chief Executive Officer. Mr. Kuenster
was founder and Chief Executive Officer of Virtual Vision,
Inc. from 1991 to 1994 and Virtual Image Displays, Inc.
from 1994 to 1996.
</TABLE>
INFORMATION CONCERNING SIGMA DESIGNEES TO THE BOARD OF DIRECTORS
Sigma has informed the Company that it will select the Sigma Designees from
L. Dennis Kozlowski (age 52), Joshua M. Berman (age 61), Mark H. Swartz (age
39), Mark A. Belnick (age 53), Irving Gutin (age 67), Neil R. Garvey (age 44),
Steven Gardner (age 44), and Jeffrey D. Mattfolk (age 37), each of whom is a
director or executive officer of Tyco, certain subsidiaries of Tyco (including
II-2
<PAGE>
Sigma) or the Purchaser. Information concerning the Sigma Designees is contained
in Annex I, Annex II and Annex III to the Offer to Purchase, a copy of which is
being mailed to the Company's shareholders with this Schedule 14D-9. The
information in such Annexes is incorporated herein by reference. In addition to
the information concerning Mr. Kozlowski in such Annexes, Mr. Kozlowski is a
director of Applied Power, Inc. (control products), Raytheon Company (electronic
systems and equipment), US Office Products Company (office products) and
Starwood Hotel & Resorts Worldwide Inc. (hospitality and lodging). Tyco has also
informed the Company that each of such directors and executive officers has
consented to act as a Director of the Company, if so designated. It is expected
that none of the Sigma Designees will receive any compensation for services
preformed in his capacity as a Director of the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met four times in the fiscal year ended June 30, 1999
("fiscal 1999"). No director attended fewer than 75 percent of the aggregate of
all meetings of the Board of Directors and the committees of which the director
was a member during fiscal 1999. The standing committees of the Board of
Directors are the Audit Committee and the Compensation Committee. The Company
does not have a Nominating Committee.
The Audit Committee makes recommendations concerning the engagement of the
independent public accountants, reviews with the independent public accountants
the plans and results of audits, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and nonaudit fees, and reviews
the adequacy of the Company's internal accounting controls. The Audit Committee
consists of General McPeak, Mr. Stebbins and Mr. Kuenster and met four times in
fiscal 1999. The Compensation Committee determines compensation for the
Company's executive officers, and administers the Company's 1995 Stock Incentive
Plan and the Company's Employee Stock Purchase Plan. The Compensation Committee
consists of Mr. Kuenster, General McPeak and Mr. Stebbins and met four times in
fiscal 1999.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company are reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings. They also receive, in
cash, an annual retainer fee of $10,000 in quarterly installments along with
$1,000 for each board meeting attended. In addition, each individual who becomes
a nonemployee director of the Company receives a non-statutory option to
purchase 10,000 shares of Common Stock when the individual becomes a director,
and each nonemployee director of the Company is automatically granted an annual
non-discretionary, non-statutory option to purchase 5,000 shares of Common Stock
upon re-election. Members of the Audit and Compensation Committees are each
entitled to $500 per committee meeting they attend and the chairman of both
committees is entitled to an annual cash payment of $1,000.
After the consummation of the Merger, it is expected that the Company's
Board of Directors will act to appoint new members to the Audit and Compensation
Committees. To the Company's knowledge, no decision has been made by the Sigma
Designees regarding the membership of any such committees of the Board.
EXECUTIVE OFFICERS
Executive officers serve at the discretion of the Board of Directors. The
following table sets forth certain information concerning the executive officers
of the Company (as of October 25, 1999) who are
II-3
<PAGE>
expected to serve in such capacity until the consummation of the Merger (none of
whom has a family relationship with any other executive officer):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Robert L. Praegitzer........... 68 Chief Executive Officer and Chairman of the Board
Matthew J. Bergeron............ 36 President, Chief Operating Officer and Director
Robert J. Versiackas........... 50 Senior Vice President of Operations
James M. Buchanan.............. 52 Senior Vice President of Sales and Marketing
Gregory L. Lucas............... 54 Senior Vice President of Technology
Robert G. Schmelzer............ 48 Senior Vice President of Administration
</TABLE>
ROBERT L. PRAEGITZER founded the Company in 1981 and has been its Chief
Executive Officer and Chairman of the Board since that time and was the
President since that time until January 1998. He was also the founder and
President of Praegitzer Design, Inc. which merged into the Company in 1995, and
Praegitzer Property Group, the assets of which were acquired by the Company in
1996.
MATTHEW J. BERGERON joined the Company in 1990 as Chief Financial Officer.
He became Senior Vice President in 1993, a director in November 1995, the
Executive Vice President and Chief Operating Officer in April 1997 and President
and Chief Operating Officer in January 1998. Prior to joining the Company,
Mr. Bergeron was an accountant at Johnson & Shute P.S., a public accounting
firm.
ROBERT J. VERSIACKAS joined Trend in 1990 as Vice President of Operations
and upon the merger of Trend into the Company in August 1996 was appointed Vice
President of Operations--Fremont Division. In February 1997 Mr. Versiackas
became Senior Vice President of Operations.
JAMES M. BUCHANAN joined the Company as Senior Vice President of Sales and
Marketing in April 1998. Prior to joining the Company, Mr. Buchanan served as
Vice President of Sales for Zycon Corporation from 1984 until January 1997, Vice
President of Sales for Hadco Corporation from January 1997 until August 1997 and
Senior Vice President of Sales for Continental Circuits from August 1997 until
April 1998.
GREGORY L. LUCAS joined the Company in June 1997 as Senior Vice President of
Technology. Prior to joining the Company, Mr. Lucas had been Vice President of
Technology for Zycon Corporation since 1991. Mr. Lucas holds several patents
primarily in the field of buried passive components.
ROBERT G. SCHMELZER joined the Company in 1997 as Vice President of Human
Resources. He became Senior Vice President of Administration in March of 1999.
Prior to joining the Company, Mr. Schmelzer served as Vice President of Human
Resources with Penwest, Ltd. and Penford Products Company from 1993 to 1997 and
held a senior Human Resources position with Air Products and Chemicals, Inc.
from 1985 to 1993.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership as of September 20, 1999 of the Common Stock by (i) each person known
by the Company to own beneficially more than 5 percent of the Common Stock,
(ii) each director and each director nominee of the Company, (iii) each
executive officer of the Company named in the Summary Compensation Table,
II-4
<PAGE>
and (iv) all executive officers and directors as a group. Except as otherwise
noted, the persons listed below have sole investment and voting power with
respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED (1) PERCENTAGE OF SHARES
- ---------------- ----------------------------- --------------------
<S> <C> <C>
Robert L. Praegitzer............................... 8,213,125(2) 62.55%
19801 SW 72(nd) Avenue
Tualatin, Oregon 97062
Mellon Bank Corporation (3)........................ 1,007,650(4) 7.67%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Boston Group Holdings, Inc. (3).................... 716,550(5) 5.46%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
The Boston Company, Inc (3)........................ 716,550(6) 5.46%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Matthew J. Bergeron................................ 177,849(7) 1.35%
Robert J. Versiackas............................... 195,692(8) 1.49%
Gregory L. Lucas................................... 31,250(9) *
James M. Buchanan.................................. 34,369(10) *
Daniel J. Barnett.................................. 110,703(11) *
Merrill A. McPeak.................................. 16,999(12) *
Theodore L. Stebbins............................... 21,666(13) *
Gordon B. Kuenster................................. 4,999(14) *
All directors and executive officers as a group
(11 persons)..................................... 8,844,210(15) 67.36%
</TABLE>
- ------------------------
* Less than 1%
(1) Shares that the person has the right to acquire within 60 days after
September 20, 1999 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.
(2) Includes options to purchase 93,750 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 31,250 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(3) The Company has relied upon the information contained in the Schedule 13G
jointly filed by Mellon Bank Corporation, Boston Group Holdings, Inc. and
The Boston Company, Inc. with the Securities and Exchange Commission on
February 4, 1999.
(4) Mellon Bank Corporation has sole voting power over 998,350 shares and sole
dispositive power over 1,007,650 shares. Mellon Bank Corporation is the
beneficial owner of these shares due to its
II-5
<PAGE>
direct or indirect ownership of certain entities, including without
limitation Boston Group Holdings, Inc. and The Boston Company, Inc., which
are the beneficial and record owners, respectively, of shares of the
Company's common stock.
(5) Boston Group Holdings, Inc. has sole voting power over 707,250 shares and
sole dispositive power over 716,550 shares. Boston Group Holdings, Inc. is
the beneficial owner of these shares due to its ownership of The Boston
Company, Inc., the record owner of the shares. These shares are also
included in the shares beneficially owned by Mellon Bank Corporation.
(6) The Boston Company, Inc. has sole voting power over 707,250 shares and sole
dispositive power over 716,550 shares. The shares are also included in the
shares beneficially owned by Mellon Bank Corporation and Boston Group
Holdings, Inc.
(7) Includes options to purchase 68,749 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 31,251 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(8) Includes options to purchase 35,260 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 54,740 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(9) Includes options to purchase 31,250 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 93,750 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(10) Includes options to purchase 31,250 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 153,750 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(11) Includes options to purchase 3,333 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 6,667 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(12) Includes options to purchase 14,999 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 10,001 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(13) Includes options to purchase 21,666 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 3,334 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(14) Includes options to purchase 4,999 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 10,0001 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(15) Includes options to purchase 332,756 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 464,744 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
II-6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by the Company with
respect to the last three fiscal years to the Chief Executive Officer and the
four other most highly compensated executive officers whose annual compensation
exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------------ --------------------------
FISCAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED COMPENSATION(1)
- --------------------------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Robert L. Praegitzer...................... 1997 $274,999 0 125,000 9,640
Chief Executive Officer 1998 $300,000 0 0 9,640
1999 $300,000 0 0 9,640
Matthew J. Bergeron....................... 1997 $149,999 0 25,000 4,983
President and Chief Operating Officer 1998 $199,423 0 25,000 4,983
1999 $200,000 0 0 4,983
Robert J. Versiackas...................... 1997 $141,731 0 16,043 0
Senior Vice President of Operations 1998 $199,892 0 58,957 0
1999 $185,000 0 15,000 0
James M. Buchanan(2)...................... 1997 -- -- -- --
Senior Vice President of Sales 1998 $ 35,577 0 125,000 $1,615
And Marketing 1999 $185,000 0 20,000 $8,400
Gregory L. Lucas(3)....................... 1997 $ 7,115 0 50,000 0
Senior Vice President of Technology 1998 $181,442 0 25,000 0
1999 $185,000 0 20,000 0
</TABLE>
- ------------------------
(1) Consists of car allowances
(2) Mr. Buchanan commenced employment with the Company on April 13, 1998.
(3) Mr. Lucas commenced employment with the Company on June 16, 1997.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted in
fiscal 1999 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (1)
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------
NAME GRANTED YEAR SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Praegitzer............ 0 -- -- -- -- --
Matthew J. Bergeron............. 0 -- -- -- -- --
Robert J. Versiackas............ 15,000(2) 3.45% $5.344 4/16/09 $50,412 $127,754
James M. Buchanan............... 20,000(2) 4.60% $5.344 4/16/09 $67,216 $170,339
Gregory L. Lucas................ 20,000(2) 4.60% $5.344 4/16/09 $67,216 $170,339
</TABLE>
- ------------------------
(1) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "option spreads" that would exist for
the respective options based on
II-7
<PAGE>
assumed compounded rates of annual stock price appreciation of 5 percent and
10 percent from the date the options were granted over the option term.
(2) These options become exercisable April 16, 2000.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table indicates for all executive officers named in the
Summary Compensation Table (i) stock options exercised during fiscal 1999,
including the value realized on the date of exercise, (ii) the number of shares
subject to exercisable (vested) and unexercisable (unvested) stock options as of
June 30, 1999, and (iii) the value of "in-the-money" options, which represents
the positive spread between the exercise price of existing stock options and the
year-end price of the Common Stock.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED IN-THE-
SHARES TO UNEXERCISED OPTIONS AT MONEY OPTIONS AT FISCAL
ACQUIRED FISCAL YEAR-END YEAR-END(1)
ON VALUE --------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Praegitzer......... -- -- 62,500 62,500 $0 $ 0
Matthew J. Bergeron.......... -- -- 56,250 43,750 $0 $ 0
Robert J. Versiackas......... -- -- 22,760 67,240 $0 $ 8,910
James M. Buchanan............ -- -- 31,250 113,750 $0 $11,880
Gregory L. Lucas............. -- -- 31,250 63,750 $0 $11,880
</TABLE>
- ------------------------
(1) Based on last sale price of $5.938 per share on June 30, 1999.
EMPLOYMENT ARRANGEMENTS
In November 1995 the Company entered into an employment agreement with
Robert L. Praegitzer, providing an annual base salary of $250,000 with increases
over time, and eligibility for bonuses and other Company benefits.
Mr. Praegitzer's employment agreement is of an indefinite duration.
In August 1996, the Company entered into employment agreement with Robert J.
Versiackas providing for annual base salary of $130,000 with eligibility for
bonuses and other Company benefits. If at the end of each quarter during the
first two years of this agreement the total salary and bonus paid to
Mr. Versiackas is less than an annualized rate of $165,000, the Company shall
pay Mr. Versiackas an amount equal to the difference. Additionally,
Mr. Versiackas received options to acquire 16,043 shares of Common Stock at a
price of $13.125 per share. Upon termination, Mr. Versiackas is entitled to all
payments customary under Company policies. The agreement with Mr. Versiackas may
be terminated by either party with or without cause upon thirty (30) days
written notice (or, in the case of termination by the Company, with payment of
sixty (60) days of base compensation in lieu of thirty (30) days notice).
Mr. Versiackas has also entered into an agreement with the Company
restricting his ability to compete with the Company until two years after
termination of his employment and prohibiting disclosure of confidential
information and solicitation of the Company's customers or employees.
In addition, in April 1999 Mr. Versiackas entered into an agreement with the
Company which provides that, upon a change of control of the Company, if
Mr. Versiackas' employment is terminated within one year after the change of
control, Mr. Versiackas' stock options will become fully exercisable, unless the
change in control transaction would otherwise be accounted for under the pooling
of interest method. In addition, if Mr. Versiackas' employment is terminated
other than for cause within 12 months of a change of control, he will be
entitled to receive an amount equal to 6 months of his base salary within
30 days of termination.
II-8
<PAGE>
In March 1998 the Company entered into an agreement with James M. Buchanan,
the Company's Senior Vice President of Sales and Marketing, providing for an
annual base salary of $185,000 with eligibility for bonuses and other Company
benefits.
Mr. Buchanan has also entered into an agreement with the Company in the
event of a change of control. The agreement provides that, upon a change of
control of the Company, if Mr. Buchanan's employment is terminated within one
year after the change of control, Mr. Buchanan's stock options will become fully
exercisable, unless the change in control transaction would otherwise be
accounted for under the pooling of interest method. In addition, if
Mr. Buchanan's employment is terminated other than for cause within 12 months of
a change of control, he will be entitled to receive an amount equal to
18 months of his base salary within 30 days of termination, insurance coverage
and car allowance for 18 months following termination.
In December 1998 the Company entered into a Stock Purchase Agreement with
Matthew J. Bergeron, the Company's President and Chief Operating Officer,
pursuant to which the Company sold Mr. Bergeron 100,000 unregistered shares of
its common stock at fair market value. Due to the restrictions on transfer of
the shares, the agreement provided that the fair market value of the shares
would be 75% of the public market price of the Company's common stock as quoted
on the Nasdaq National Market System. On December 22, 1998, the date on which
the purchase price for the shares was established, the closing market price for
the Company's common stock was $6.9375 per share. Accordingly, the purchase
price for the shares was $520,350. Under the terms of the agreement,
Mr. Bergeron must pay the Company the entire purchase price, without interest,
on or before January 1, 2006. The Company agreed to indemnify Mr. Bergeron for
any state or federal income tax liability for which he may become liable on
account of interest imputed on the deferred payment of the purchase price.
Mr. Bergeron has the option to require the Company to repurchase the shares from
him during January 2006 for $420,312.50. This transaction closed February 18,
1999.
Each of Mr. Bergeron, Gregory L. Lucas, Senior Vice President of Technology
of the Company, and Robert G. Schmetzer, Senior Vice President of Administration
of the Company, has entered into an agreement with the Company in the event of a
change of control. The agreement provides that, upon a change of control of the
Company, if such officer's employment is terminated within one year after the
change of control, such officer's stock options will become fully exercisable,
unless the change in control transaction would otherwise be accounted for under
the pooling of interest method. In addition, if such officer's employment is
terminated other than for cause within 12 months of a change of control, he will
be entitled to receive an amount equal to 6 months of his base salary within
30 days of termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has leased its Dallas warehouse facility from Robert L.
Praegitzer, with the lease payments totaling $160,800 for the year end June 30,
1999. The lease rates for the warehouse facility were determined by
Mr. Praegitzer, who was the sole shareholder of the Company at the time of
determination. The Board of Directors of the Company unanimously concluded that
these rates were comparable to rates that could have been obtained from an
independent party.
In June 1999 Robert L. Praegitzer, Chairman of the Board and Chief Executive
Officer of the Company, pledged an aggregate of 2,656,500 shares of the common
stock of the Company he owns to Key Bank, National Association as collateral to
secure the Company's credit facility with the bank. Mr. Praegitzer did not
receive any direct or indirect compensation for this transaction.
Theodore L. Stebbins, a director of the Company, is a managing director of
Adams, Harkness & Hill, Inc. ("Adams Harkness"), an investment banking firm. The
Company has retained Adams Harkness to provide financial advisory services in
connection with strategic alternatives that the Company had been considering,
including the transactions contemplated by the Merger Agreement.
II-9
<PAGE>
Under the arrangement, Adams Harkness is entitled to receive an aggregate of
$350,000 in connection with a strategic transaction, payable as follows: $50,000
upon delivery of a fairness opinion to the Company relating to the transaction
and $300,000 upon completion of the transaction. Adams Harkness is also entitled
to forty percent of a fee equal to one percent of the value of the strategic
transaction less $350,000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation committee consists of three directors and, pursuant to
authority delegated by the Board of Directors, determines and administers the
compensation of the Company's executive officers. In setting the compensation
for the executive officers other than the Chief Executive Officer, the
Compensation Committee works closely with the Chief Executive Officer, who makes
specific recommendations to the committee concerning compensation for each of
the other executive officers. Although the Board of Directors has granted the
Compensation Committee full authority to set executive compensation, in practice
the decisions of the Compensation Committee are usually reported as
recommendations to the full Board of Directors, which has in the past generally
approved the recommendations.
Internal Revenue Code Section 162(m), limits to $1,000,000 per person the
annual amount that the Company may deduct for compensation paid to any of its
most highly compensated officers. Generally the levels of salary and bonus paid
by the Company do not exceed this limit. However, upon the exercise of
nonstatutory stock options, the excess of the current market price over the
option price (option spread) is treated as compensation and, therefore, it may
be possible for option exercises by an officer in any year to cause the
officer's total compensation to exceed $1,000,000. Under certain regulations,
option spread compensation from options that meet certain requirements will not
be subject to the $1,000,000 cap on deductibility, and it is the Company's
current policy generally to grant options that meet those requirements.
COMPENSATION PRINCIPLES
Executive compensation is based on several general principles, which are
summarized below:
-- Provide competitive total compensation that enables the Company to
attract and retain key executives.
-- Link corporate and individual performance to compensation.
-- Encourage long-term success and align shareholder interests with
management interests by giving executives the opportunity to acquire
stock in the Company.
-- Reward initiative.
COMPENSATION COMPONENTS
The primary components of the Company's executive officer compensation
program are base salary, annual incentive arrangements and long-term incentive
compensation in the form of stock options.
BASE SALARY. Executive officer base salaries for fiscal 1999 were
established by the Compensation Committee, to provide salary levels appropriate
for the responsibilities of the executive officers of the Company. In
determining salaries, the Compensation Committee took into account individual
experience, job responsibility and individual performance. No specific weight
was attached to these factors in establishing base salaries. For fiscal 2000 and
future years, the Company will continue to establish base salary levels for the
Company's executive officers that are competitive with those established by
companies of similar size in the electronics industry. When determining
salaries, the
II-10
<PAGE>
Compensation Committee will also take into account individual experience levels,
job responsibility and individual performance. Each executive officer's salary
will be reviewed annually, and increases to base salary will be made to reflect
competitive market increases and the individual factors described above.
STOCK OPTIONS. The Company's 1995 Stock Incentive Plan (the "Plan") is
intended as a long-term incentive plan for executive officers, managers and
other key employees of the Company. The objectives of the Plan are to align
employee and shareholder long-term interests by creating a direct link between
compensation and shareholder value. The Compensation Committee administers the
Plan and recommends to the full Board of Directors awards of stock options to
executive officers and other employees of the Company. Options granted under the
Plan generally have been granted at an exercise price equal to the fair market
value of the Common Stock on the date of grant. Fair market value is established
by the Board of Directors, upon recommendation of the Compensation Committee, as
the closing price as reported on the Nasdaq National Market on the date of
grant. Options generally become exercisable over a four-year period with 25% of
the options exercisable at the end of each year from date of grant. Stock
options generally have a ten-year term, but terminate earlier if employment is
terminated. Initial option grants to executive officers depend upon the level of
responsibility and position, and subsequent grants are made based on the
Compensation Committee's subjective assessment of performance, among other
factors. In fiscal 1999 the Board of Directors, upon recommendation of the
Compensation Committee, made the following option grants of Company Common Stock
under the Plan to executive officers of the Company: Robert J.
Versiackas--15,000 shares; Gregory L. Lucas--20,000 shares; James M.
Buchanan--20,000; Robert G. Schmelzer--15,000 shares; William J. Thale--15,000
shares; and Scott D. Gilbert--7,500 shares. The Compensation Committee expects
that in the future, if additional grants are made, consideration will be given
to the number of options granted in the past and the exercise price of such
grants.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee and the Board of Directors set Mr. Praegitzer's
compensation for fiscal 1999. They employed the same criteria that the
Compensation Committee used to set compensation for the other executive
officers. The Compensation Committee and the Board of Directors reviewed the
data within the electronics industry and similar size firms. They based
Mr. Praegitzer's salary on their findings of other executives with his level of
experience, and recognized Mr. Praegitzer's individual performance and important
contributions to the Company's increased revenue and earnings growth.
COMPENSATION COMMITTEE MEMBERS
Gordon B. Kuenster
Theodore L. Stebbins
Merrill A. McPeak
II-11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph that compares the cumulative total stockholder
return on the Company's Common Stock with the cumulative total return on the
Nasdaq Composite U.S. Index and a peer group of companies in the Company's
industry (SIC 3672) over the period indicated (assuming the investment of $100
in the Company's Common Stock on April 4, 1996, the date of the Company's
initial public offering, and reinvestment of any dividends). In accordance with
guidelines of the SEC, the stockholder return for each entity in the peer group
index have been weighted on the basis of market capitalization as of each
monthly measurement date set forth on the graph.
[LOGO]
II-12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than 10 percent of the
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors, and
beneficial owners of more than 10 percent of the Common Stock are required by
the SEC regulation to furnish the Company with copies of all section 16(a)
reports they file. Based solely on a review of such reports received by the
Company and on written representations from certain reporting persons that they
have complied with the relevant filing requirements, the Company believes that
all section 16(a) filing requirements applicable to its executive officers and
directors have been complied with except a Form 3 was not timely filed by Robert
G. Schmelzer.
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EXHIBIT 99(c)(2)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SIGMA CIRCUITS, INC.
and
T MERGER SUB (OR), INC.
and
PRAEGITZER INDUSTRIES, INC.
with the Guarantee of
TYCO INTERNATIONAL LTD.
------------------------------
Dated as of October 26, 1999
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TABLE OF CONTENTS
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ARTICLE I
TENDER OFFER AND MERGER
1.1 The Offer.............................................................................................. 7
1.2 Company Action......................................................................................... 8
1.3 Directors.............................................................................................. 10
1.4 The Merger............................................................................................. 11
1.5 Effective Time......................................................................................... 11
1.6 Conversion of Common Shares............................................................................ 11
1.7 Dissenting Shares...................................................................................... 12
1.8 Surrender of Common Shares............................................................................. 12
1.9 Options, Warrants and Employee Stock Purchase Plan..................................................... 14
1.10 Articles of Incorporation and Bylaws................................................................... 15
1.11 Directors and Officers................................................................................. 15
1.12 Other Effects of Merger................................................................................ 15
1.13 Proxy Statement........................................................................................ 15
1.14 Additional Actions..................................................................................... 16
1.15 Merger Without Meeting of Shareholders................................................................. 16
1.16 Lost, Stolen or Destroyed Certificates................................................................. 16
1.17 Material Adverse Effect................................................................................ 17
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization and Good Standing......................................................................... 18
2.2 Capitalization......................................................................................... 18
2.3 Subsidiaries........................................................................................... 19
2.4 Authorization; Binding Agreement....................................................................... 19
2.5 Governmental Approvals................................................................................. 20
2.6 No Violations.......................................................................................... 20
2.7 Securities Filings..................................................................................... 20
2.8 Company Financial Statements........................................................................... 21
2.9 Absence of Certain Changes or Events................................................................... 21
2.10 No Undisclosed Liabilities............................................................................. 22
2.11 Compliance with Laws................................................................................... 22
2.12 Permits................................................................................................ 22
2.13 Litigation............................................................................................. 22
2.14 Contracts.............................................................................................. 22
2.15 Employee Benefit Plans................................................................................. 23
2.16 Taxes and Returns...................................................................................... 26
2.17 Intellectual Property.................................................................................. 28
2.18 Disclosure Documents................................................................................... 29
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2.19 Labor Matters.......................................................................................... 29
2.20 Limitation on Business Conduct......................................................................... 30
2.21 Title to Property...................................................................................... 30
2.22 Owned and Leased Premises.............................................................................. 30
2.23 Environmental Matters.................................................................................. 30
2.24 Insurance.............................................................................................. 32
2.25 Product Liability and Recalls.......................................................................... 32
2.26 Customers.............................................................................................. 33
2.27 Interested Party Transactions.......................................................................... 33
2.28 Finders and Investment Bankers......................................................................... 33
2.29 Fairness Opinion....................................................................................... 33
2.30 Takeover Statutes...................................................................................... 33
2.31 Full Disclosure........................................................................................ 33
2.32 Year 2000.............................................................................................. 34
2.33 Rights Agreements...................................................................................... 34
2.34 Absence of Certain Payments............................................................................ 34
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
3.1 Organization and Good Standing......................................................................... 35
3.2 Authorization; Binding Agreement....................................................................... 35
3.3 Governmental Approvals................................................................................. 35
3.4 No Violations.......................................................................................... 36
3.5 Disclosure Documents................................................................................... 36
3.6 Finders and Investment Bankers......................................................................... 36
3.7 Financing Arrangements................................................................................. 37
3.8 No Prior Activities.................................................................................... 37
ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
4.1 Conduct of Business of the Company and the Company Subsidiaries........................................ 37
4.2 Notification of Certain Matters........................................................................ 40
4.3 Access and Information................................................................................. 40
4.4 Shareholder Approval................................................................................... 40
4.5 Reasonable Best Efforts................................................................................ 41
4.6 Public Announcements................................................................................... 41
4.7 Compliance............................................................................................. 41
4.8 No Solicitation........................................................................................ 41
4.9 SEC and Shareholder Filings............................................................................ 44
4.10 Takeover Statutes...................................................................................... 44
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4.11 Company Options and Stock Purchase Plan ............................................................... 44
ARTICLE V
ADDITIONAL COVENANTS OF PURCHASER AND PARENT
5.1 Reasonable Best Efforts................................................................................ 44
5.2 Public Announcements................................................................................... 45
5.3 Compliance............................................................................................. 45
5.4 Employee Benefit Plans................................................................................. 45
5.5 Indemnification........................................................................................ 46
5.6 Voting of Common Shares................................................................................ 46
5.7 Guarantee of Parent.................................................................................... 46
ARTICLE VI
MERGER CONDITIONS
6.1 Offer.................................................................................................. 47
6.2 Shareholder Approval................................................................................... 47
6.3 No Injunction or Action................................................................................ 47
6.4 Governmental Approvals................................................................................. 47
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 Termination............................................................................................ 47
7.2 Effect of Termination and Abandonment.................................................................. 49
ARTICLE VIII
MISCELLANEOUS
8.1 Confidentiality........................................................................................ 50
8.2 Amendment and Modification............................................................................. 51
8.3 Waiver of Compliance; Consents......................................................................... 51
8.4 Survival............................................................................................... 51
8.5 Notices................................................................................................ 51
8.6 Binding Effect; Assignment............................................................................. 52
8.7 Expenses............................................................................................... 52
8.8 Governing Law.......................................................................................... 53
8.9 Counterparts........................................................................................... 54
8.10 Interpretation......................................................................................... 54
8.11 Entire Agreement....................................................................................... 54
8.12 Severability........................................................................................... 54
8.13 Specific Performance................................................................................... 55
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8.14 Third Parties.......................................................................................... 55
8.15 Disclosure Letter...................................................................................... 55
8.16 Jurisdiction........................................................................................... 55
8.17 Waiver of Jury Trial................................................................................... 55
GUARANTEE..................................................................................... 58
GLOSSARY OF DEFINED TERMS..................................................................... 59
ANNEX I.......................................................................................A-1
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and
entered into as of October 26, 1999, by and among Sigma Circuits, Inc.,
("PARENT"), a Delaware company and an indirect subsidiary of Tyco International
Ltd., a Bermuda company ("GUARANTOR"), T Merger Sub (OR), Inc., an Oregon
corporation and a direct wholly owned subsidiary of Parent ("PURCHASER"), and
Praegitzer Industries, Inc., an Oregon corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company,
Purchaser and Parent have approved the acquisition by Purchaser of the Company;
and
WHEREAS, in furtherance thereof, it is proposed that Purchaser
will make a cash tender offer (the "OFFER") to acquire all of the issued and
outstanding shares of common stock of the Company ("COMMON SHARES"), for $5.50
per share, or such higher price as may be paid in the Offer (the "PER SHARE
AMOUNT"), subject to any applicable withholding, net to the seller in cash
without interest; and
WHEREAS, also in furtherance of such acquisition, the
respective Boards of Directors of the Company, Purchaser and Parent have each
approved the merger (the "MERGER") of Purchaser with and into the Company
following the Offer in accordance with the laws of the State of Oregon; and
WHEREAS, concurrently with the execution of this Agreement and
as an inducement to Parent to enter into this Agreement, Parent, Purchaser and
the majority shareholder of the Company are entering into a Shareholder's
Agreement pursuant to which such holder has, among other things, agreed to
tender all of his Common Shares in the Offer, upon the terms and subject to the
conditions set forth in the Shareholder's Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition to the Company's willingness to enter into this
Agreement, Guarantor has agreed fully and unconditionally to guarantee the
representations, warranties, covenants, agreements and other obligations of
Parent and Purchaser in this Agreement (the "GUARANTEE"); and
WHEREAS, the Board of Directors of the Company has approved
and resolved to recommend acceptance of the Offer and the Merger to the holders
of Common Shares and has determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to and in the best interest of the
holders of Common Shares and to recommend that the holders of such Common Shares
accept the Offer and that the holders of Common Shares approve this Agreement
and the transactions contemplated hereby; and
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WHEREAS, the Company, Purchaser and Parent desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
TENDER OFFER AND MERGER
1.1 THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with SECTION 7.1 hereof and that none of the
events set forth in ANNEX I hereto shall have occurred and be existing,
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"SECURITIES EXCHANGE ACT")) the Offer as promptly as practicable, but in no
event later than five business days following the first public announcement of
the Offer, and shall use reasonable best efforts to consummate the Offer. The
obligation of Purchaser to accept for payment any Common Shares tendered shall
be subject to the satisfaction of only those conditions set forth in ANNEX I
hereto. The Per Share Amount payable in the Offer shall be net to each seller in
cash, subject to reduction only for any applicable withholding or stock transfer
taxes payable by such seller. The Company agrees that no Common Shares held by
the Company or any Company Subsidiaries (as defined below) will be tendered
pursuant to the Offer.
(b) Without the prior written consent of the Company,
Purchaser shall not (i) decrease the Per Share Amount or change the form of
consideration payable in the Offer, (ii) decrease the number of Common Shares
sought in the Offer, (iii) amend or waive satisfaction of the Minimum Condition
(as defined in ANNEX I hereto) or (iv) impose additional conditions to the Offer
or amend any other term of the Offer in any manner adverse to the holders of the
Common Shares. The Offer shall initially expire twenty (20) business days after
the date of its commencement, unless this Agreement is terminated in accordance
with SECTION 7.1 hereof, in which case the Offer (whether or not previously
extended in accordance with the terms hereof) shall expire on such date of
termination. Purchaser agrees that it shall not terminate or withdraw the Offer
or extend the expiration date of the Offer unless at the expiration date of the
Offer the conditions to the Offer described in ANNEX I hereto shall not have
been satisfied or earlier waived. Notwithstanding the foregoing, Purchaser may,
without the consent of the Company, extend the Offer at any time, and from time
to time, (i) if at the then scheduled expiration date of the Offer any of the
conditions to Purchaser's obligation to accept for payment and pay for Common
Shares shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or its staff applicable to the Offer; or (iii) if all conditions to
Purchaser's
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obligation to accept for payment and pay for Common Shares are satisfied or
waived but the number of Common Shares tendered is less than 90% of the then
outstanding number of Common Shares, for an aggregate period of not more than
ten (10) business days (for all such extensions) beyond the latest expiration
date that would be permitted under clause (i) or (ii) of this sentence.
(c) The Offer shall be made by means of an offer to purchase
(the "OFFER TO PURCHASE") having only the conditions set forth in ANNEX I
hereto. As soon as practicable on the date the Offer is commenced, Purchaser
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect
to the Offer that will comply in all material respects with the provisions of,
and satisfy in all material respects the requirements of, such Schedule 14D-1
and all applicable federal securities laws and will contain (including as an
exhibit) or incorporate by reference the Offer to Purchase and forms of the
related letter of transmittal and summary advertisement (which documents,
together with any supplements or amendments thereto, and any other SEC schedule
or form which is filed in connection with the Offer and related transactions,
are referred to collectively herein as the "OFFER DOCUMENTS"). Each of Parent,
Purchaser and the Company agrees promptly to correct any information provided by
it for use in the Schedule 14D-1 or the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect and to supplement the information provided by it specifically for use in
the Schedule 14D-1 or the Offer Documents to include any information that shall
become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and Purchaser further
agrees to take all steps necessary to cause the Schedule 14D-1, as so corrected
or supplemented, to be filed with the SEC and the Offer Documents, as so
corrected or supplemented, to be disseminated to holders of Common Shares, in
each case as and to the extent required by applicable federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on any Offer Documents before they are filed with the SEC, and
Parent and Purchaser shall consider any such comments in good faith.
(d) Upon the terms and subject to the conditions of the Offer,
Purchaser shall accept for payment and pay for Common Shares as soon as
permitted under the terms of the Offer and applicable law.
1.2 COMPANY ACTION. (a) The Company hereby approves and
consents to the Offer and represents and warrants that the Board of Directors of
the Company, at a meeting duly called and held on October 25, 1999, at which all
of the Directors was present, duly approved and adopted this Agreement and the
transactions contemplated hereby, including the Offer and the Merger,
recommended that shareholders of the Company accept the Offer, tender their
Common Shares pursuant to the Offer and approve this Agreement and the
transactions contemplated hereby, including the Merger, and determined that this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are fair
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to and in the best interests of the shareholders of the Company. The Company
hereby consents to the inclusion in the Offer Documents of such recommendation
of the Board of Directors of the Company. The Company represents that its Board
of Directors has received the written opinion (the "FAIRNESS OPINION") of Adams,
Harkness & Hill, Inc. (the "FINANCIAL ADVISOR") that the proposed consideration
to be received by the holders of Common Shares pursuant to the Offer and the
Merger is fair to such holders from a financial point of view. The Company has
been authorized by the Financial Advisor to permit, subject to the prior review
and consent by the Financial Advisor (such consent not to be unreasonably
withheld), the inclusion of the Fairness Opinion (or a reference thereto) in the
Offer Documents, the Schedule 14D-9 (as hereinafter defined) and the Proxy
Statement (as hereinafter defined).
(b) The Company shall file with the SEC, as promptly as
practicable after the filing by Parent of the Schedule 14D-1 with respect to the
Offer, a Tender Offer Solicitation/ Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "SCHEDULE 14D-9") that
will comply in all material respects with the provisions of all applicable
federal securities laws. The Company shall mail such Schedule 14D-9 to the
shareholders of the Company as promptly as practicable after the commencement of
the Offer. The Schedule 14D-9 and the Offer Documents shall contain the
recommendations of the Board of Directors of the Company described in SECTION
1.2(a) hereof. The Company agrees promptly to correct the Schedule 14D-9 if and
to the extent that it shall become false or misleading in any material respect
(and each of Parent and Purchaser, with respect to written information supplied
by it specifically for use in the Schedule 14D-9, shall promptly notify the
Company of any required corrections of such information and cooperate with the
Company with respect to correcting such information) and to supplement the
information contained in the Schedule 14D-9 to include any information that
shall become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company shall
take all steps necessary to cause the Schedule 14D-9 as so corrected or
supplemented to be filed with the SEC and disseminated to holders of Common
Shares to the extent required by applicable federal securities laws. Purchaser
and its counsel shall be given a reasonable opportunity to review and comment on
the Schedule 14D-9 before it is filed with the SEC, and the Company shall
consider any such comments in good faith.
(c) In connection with the Offer, the Company shall promptly
upon execution of this Agreement furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Common Shares and
security position listings of Common Shares held in stock depositories, each as
of a recent date, and shall promptly furnish Purchaser with such additional
information reasonably available to the Company, including updated lists of
shareholders, mailing labels and security position listings, and such other
information and assistance as Purchaser or its agents may reasonably request for
the purpose of communicating the Offer to the record and beneficial holders of
Common Shares. Subject to the requirements of applicable law and except as
necessary to disseminate the Offer Documents and otherwise for the purpose of
effecting the transactions contemplated hereby,
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Parent and Purchaser shall hold in confidence the materials furnished pursuant
to this SECTION 1.2(c), use such information only in connection with the Offer,
the Merger and the other transactions contemplated by this Agreement and, if
this Agreement is terminated, as promptly as practicable return to the Company
such materials and all copies thereof in the possession of Parent and Purchaser.
1.3 DIRECTORS. Promptly upon the purchase by Parent of Common
Shares pursuant to the Offer (and provided that the Minimum Condition has been
satisfied), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
will give Parent, subject to compliance with Section 14(f) of the Securities
Exchange Act, representation on the Board of Directors of the Company equal to
at least that number of directors which equals the product of the total number
of directors on the Board of Directors of the Company (giving effect to the
directors appointed or elected pursuant to this sentence and including current
directors serving as officers of the Company) multiplied by the percentage that
the aggregate number of Common Shares beneficially owned by Parent or any
affiliate of Parent (including for purposes of this SECTION 1.3 such Common
Shares as are accepted for payment pursuant to the Offer, but excluding Common
Shares held by the Company) bears to the number of Common Shares outstanding. At
such time, if requested by Parent, the Company will also cause each committee of
the Board of Directors of the Company to include persons designated by Parent
constituting the same percentage of each such committee as Parent's designees
are of the Board of Directors of the Company. The Company shall, upon request by
Parent, promptly increase the size of the Board of Directors of the Company or
exercise reasonable best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors of the Company in accordance with the terms of this SECTION
1.3 and to cause Parent's designees so to be elected; PROVIDED, HOWEVER, that,
in the event that Parent's designees are appointed or elected to the Board of
Directors of the Company, until the Effective Time (as hereinafter defined) the
Board of Directors of the Company shall have at least two directors who are
directors on the date hereof, one of whom will be Robert Praegitzer and one of
whom will be a director who is neither an officer of the Company nor a designee,
shareholder, affiliate or associate (within the meaning of the federal
securities laws) of Guarantor (such directors, the "INDEPENDENT DIRECTORS").
Subject to applicable law, the Company shall promptly take all action necessary
pursuant to Section 14(f) of the Securities Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this SECTION
1.3 and shall include in the Schedule 14D-9 mailed to shareholders promptly
after the commencement of the Offer (or in an amendment thereof or an
information statement pursuant to Rule 14f-1 if Parent has not theretofore
designated directors) such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this SECTION 1.3. Parent will supply the
Company, and be solely responsible for, any information with respect to itself
and its nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1. Notwithstanding anything in this Agreement to the
contrary, subsequent to the designation of the directors by Parent referred to
in the first sentence of this
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Section 1.3 and prior to the Effective Time, the unanimous vote of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of Parent's
obligations hereunder, (iv) take any other action by the Company in connection
with this Agreement required to be taken by the Board of Directors of the
Company or (v) amend the Company's Second Amended and Restated Articles of
Incorporation or the Company's Bylaws, each as in effect on the date of this
Agreement.
1.4 THE MERGER. Upon the terms and subject to the conditions
of this Agreement, the Merger shall be consummated in accordance with the Oregon
Business Corporation Act (the "OREGON CODE"). At the Effective Time (as defined
in SECTION 1.5 hereof), upon the terms and subject to the conditions of this
Agreement, Purchaser shall be merged with and into the Company in accordance
with the Oregon Code and the separate existence of Purchaser shall thereupon
cease, and the Company, as the surviving corporation in the Merger (the
"SURVIVING CORPORATION"), shall continue its corporate existence under the laws
of the State of Oregon as an indirect subsidiary of Parent. The parties shall
prepare and execute articles of merger (the "ARTICLES OF MERGER") that comply in
all respects with the requirements of the Oregon Code and with the provisions of
this Agreement.
1.5 EFFECTIVE TIME. The Merger shall become effective at the
time of the filing of the Articles of Merger with the Secretary of State of
Oregon in accordance with the applicable provisions of the Oregon Code or at
such later time as may be specified in the Articles of Merger. As soon as
practicable after all of the conditions set forth in ARTICLE VI of this
Agreement have been satisfied or waived by the party or parties entitled to the
benefit of the same, the parties hereto shall cause the Merger to become
effective. Parent and the Company shall mutually determine the time of such
filing and the place where the closing of the Merger (the "CLOSING") shall
occur. The time when the Merger shall become effective is herein referred to as
the "EFFECTIVE TIME," and the date on which the Effective Time occurs is herein
referred to as the "CLOSING DATE."
1.6 CONVERSION OF COMMON SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder of any of the securities specified below:
(a) Each Common Share issued and outstanding immediately
before the Effective Time (other than any Dissenting Shares (as hereinafter
defined) and Common Shares to be canceled pursuant to SECTION 1.6(b)) shall be
canceled and extinguished and be converted into the right to receive the Per
Share Amount in cash payable to the holder thereof, without interest, upon
surrender of the certificate representing such Common Share in accordance with
SECTION 1.8 hereof. From and after the Effective Time, the holders of
certificates evidencing ownership of Common Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such Common
Shares except as otherwise provided for herein or by applicable Law (as defined
below).
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(b) Each Common Share owned by Guarantor, Parent, Purchaser or
any direct or indirect wholly owned subsidiary of Guarantor immediately before
the Effective Time shall be canceled and extinguished, and no payment or other
consideration shall be made with respect thereto.
(c) The shares of Purchaser common stock outstanding
immediately prior to the Merger shall be converted into 1,000 shares of the
common stock of the Surviving Corporation (the "SURVIVING CORPORATION COMMON
STOCK"), which shares of the Surviving Corporation Common Stock shall constitute
all of the issued and outstanding capital stock of the Surviving Corporation and
shall be owned by Parent.
1.7 DISSENTING SHARES. (a) Notwithstanding any provision of
this Agreement to the contrary, any Common Shares issued and outstanding
immediately prior to the Effective Time and held by a holder who has demanded
and perfected his demand for appraisal of his Common Shares in accordance with
the Oregon Code (including but not limited to Sections 60.561 - 60.581 thereof),
and as of the Effective Time has neither effectively withdrawn nor lost his
right to such appraisal ("DISSENTING SHARES"), shall not be converted into or
represent a right to receive cash pursuant to SECTION 1.6 hereof, but the holder
thereof shall be entitled to only such rights as are granted by the Oregon Code.
(b) Notwithstanding the provisions of SECTION 1.7(a) hereof,
if any holder of Common Shares who demands appraisal of his Common Shares under
the Oregon Code shall effectively withdraw or lose (through failure to perfect
or otherwise) his right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such holder's Common Shares
shall automatically be converted into and represent only the right to receive
cash as provided in SECTION 1.6 hereof, without interest thereon, upon surrender
of the certificate or certificates representing such Common Shares.
(c) The Company shall give Purchaser (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Common Shares,
withdrawals of such demands and any other instruments served pursuant to the
Oregon Code received by the Company after the date hereof and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Oregon Code. The Company shall not voluntarily make any
payment with respect to any demands for appraisal and shall not, except with the
prior written consent of Purchaser, settle or offer to settle any such demands.
1.8 SURRENDER OF COMMON SHARES. (a) Prior to the Effective
Time, Purchaser shall appoint ChaseMellon Shareholder Services, L.L.C. or such
other commercial bank or trust company designated by Purchaser and reasonably
acceptable to the Company to act as exchange agent hereunder (the "EXCHANGE
AGENT") for the payment of the Per Share Amount upon surrender of certificates
representing the Common Shares. All of the fees and
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expenses of the Exchange Agent shall be borne by Purchaser.
(b) Parent shall cause the Surviving Corporation to provide
the Exchange Agent with cash in amounts necessary to pay for all of the Common
Shares pursuant to SECTION 1.8(c) hereof when and as such amounts are needed by
the Exchange Agent.
(c) On the Closing Date, Purchaser shall instruct the Exchange
Agent to mail to each holder of record of a certificate representing any Common
Shares canceled upon the Merger pursuant to SECTIONS 1.6(a) hereof, within five
business days of receiving from the Company a list of such holders of record,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates shall pass, only upon
delivery of the certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the certificates. Each holder
of a certificate or certificates representing any Common Shares canceled upon
the Merger pursuant to SECTIONS 1.6(a) hereof may thereafter surrender such
certificate or certificates to the Exchange Agent, as agent for such holder, to
effect the surrender of such certificate or certificates on such holder's behalf
for a period ending one year after the Effective Time. Upon the surrender of
certificates representing the Common Shares, Parent shall cause the Exchange
Agent to pay the holder of such certificates in exchange therefor cash in an
amount equal to the Per Share Amount multiplied by the number of Common Shares
represented by such certificate. Until so surrendered, each such certificate
(other than certificates representing Dissenting Shares) shall represent solely
the right to receive the aggregate Per Share Amount relating thereto.
(d) If payment of cash in respect of canceled Common Shares is
to be made to a person other than the person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such payment
that the certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of Parent or the Exchange Agent that such tax either has been paid
or is not payable.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed, and no transfer of Common Shares shall be made
thereafter, other than transfers of Common Shares that have occurred prior to
the Effective Time. In the event that, after the Effective Time, certificates
are presented to the Surviving Corporation, they shall be canceled and exchanged
for cash as provided in SECTIONS 1.6(a).
(f) The Per Share Amount paid in the Merger shall be net to
the holder of Common Shares in cash, and without interest thereon subject to
reduction only for any applicable withholding or stock transfer taxes payable by
such holder.
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(g) Promptly following the date which is one year after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a certificate representing Common Shares (other than
certificates representing Dissenting Shares and certificates representing Common
Shares held directly or indirectly by Purchaser, Parent or Guarantor) may
surrender such certificate to the Surviving Corporation and (subject to any
applicable abandoned property, escheat or similar law) receive in consideration
therefor the aggregate Per Share Amount relating thereto, without any interest
thereon.
(h) None of the Company, Parent, Purchaser, Guarantor, the
Surviving Corporation or the Exchange Agent shall be liable to any holder of
Common Shares for any cash delivered to a public official pursuant to any
abandoned property, escheat or similar law, rule, regulation, statute, order,
judgment or decree.
1.9 OPTIONS, WARRANTS AND EMPLOYEE STOCK PURCHASE PLAN. (a)
Each option outstanding immediately prior to the Effective Time to purchase
Common Shares (a "COMPANY OPTION") under the Company's 1995 Stock Incentive Plan
or any other stock option plan or agreement of the Company, whether or not then
vested or exercisable, shall constitute the right to receive an amount in cash
equal to the positive difference, if any, between the Per Share Amount and the
exercise price of the Company Option multiplied by the number of Common Shares
for which the Company Option was exercisable immediately prior to the Effective
Time, subject to reduction only for any applicable withholding taxes. The
Company shall provide a period of at least 30 days prior to the Effective Time
during which Company Options may be exercised to the extent exercisable at the
Effective Time and, upon the expiration of such period, all unexercised Company
Options shall immediately terminate. The Company may, in its sole discretion,
permit holders of Company Options that are not exercisable before the Effective
Time to exchange such options for cash as described in the first sentence of
this Section 1.9(a). In lieu of exercising Company Options as described in this
Section 1.9(a), the holders shall be given the right, and the Company shall
encourage the holders of Company Options to exercise such right, to exchange
such options for cash as described in the first sentence of this Section 1.9(a).
In no event will any Company Options be exercisable after the Effective Time,
except to receive cash as provided in the first sentence of this Section 1.9(a).
(b) Each of the warrants of the Company, dated November 17,
1995, to purchase Common Shares at a price of $12.00 per share, subject to
adjustment (the "COMPANY WARRANTS"), shall be exercisable, from and after the
Effective Time, for an amount of cash equal to the Per Share Amount multiplied
by the number of Common Shares for which such warrant was exercisable
immediately prior to the Effective Time. Except as aforesaid, the exercise of
any Company Warrant shall remain subject to all terms and conditions provided in
the applicable Company Warrant and/or Warrant Agreement. Each of the Company and
Parent shall take all action necessary to provide that, upon consummation
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of the Merger, all Company Warrants outstanding immediately prior to the
Effective Time shall be exercisable for a cash amount as aforesaid.
(c) The Company shall take such action as is necessary to
cause the ending date of the then current offering period under the Company's
employee stock purchase plan (the "COMPANY STOCK PURCHASE PLAN") to be prior to
the Effective Time and to terminate such plan as of the Effective Time.
1.10 ARTICLES OF INCORPORATION AND BYLAWS. Subject to SECTION
5.5 hereof, unless otherwise determined by Parent prior to the Effective Time,
at and after the Effective Time (a) the Second Amended and Restated Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by the Oregon Code and such Articles of
Incorporation; PROVIDED, HOWEVER, that (i) Article II shall be amended and
restated in its entirety to provide that the capital stock of the Surviving
Corporation shall consist solely of 1,000 shares of common stock; and (b) the
Bylaws of the Surviving Corporation shall be the Bylaws of Purchaser in effect
at the Effective Time (subject to any subsequent amendments).
1.11 DIRECTORS AND OFFICERS. At and after the Effective Time,
the directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their successors are duly elected or
appointed and qualified.
1.12 OTHER EFFECTS OF MERGER. The Merger shall have all
further effects as specified in the applicable provisions of the Oregon Code.
1.13 PROXY STATEMENT. (a) Following the consummation of the
Offer and if required by the Securities Exchange Act because of action by the
Company's shareholders necessary in order to consummate the Merger, the Company
shall prepare and file with the SEC and, when cleared by the SEC, shall mail to
shareholders, a proxy statement in connection with a meeting of the Company's
shareholders to vote upon the adoption of this Agreement and the Merger and the
transactions contemplated hereby and thereby (the "COMPANY PROPOSALS"), or an
information statement, as appropriate, satisfying all requirements of the
Securities Exchange Act (such proxy or information statement in the form mailed
by the Company to its shareholders, together with any and all amendments or
supplements thereto, is herein referred to as the "PROXY STATEMENT").
(b) Parent will furnish the Company with such information
concerning Parent and its subsidiaries as is necessary in order to cause the
Proxy Statement, insofar as it relates to Parent and its subsidiaries, to comply
with applicable Law. Parent agrees promptly to advise the Company if, at any
time prior to the meeting of shareholders of the Company
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referenced herein, any Parent Information (as defined below) in the Proxy
Statement is or becomes incorrect or incomplete in any material respect and to
provide the Company with the information needed to correct such inaccuracy or
omission. Parent will furnish the Company with such supplemental information as
may be necessary in order to cause the Proxy Statement, insofar as it relates to
Guarantor and its subsidiaries, to comply with applicable Law after the mailing
thereof to the shareholders of the Company.
(c) The Company and Parent agree to cooperate in making any
preliminary filings of the Proxy Statement with the SEC, as promptly as
practicable, pursuant to Rule 14a-6 or Rule 14c-5, as applicable, under the
Securities Exchange Act.
(d) The Company shall provide Parent for its review a copy of
the Proxy Statement prior to each filing thereof, with reasonable time and
opportunity for such review. Parent authorizes the Company to utilize in the
Proxy Statement the information concerning Parent and its subsidiaries provided
to the Company in connection with, or contained in, the Proxy Statement.
1.14 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Purchaser or the Company or otherwise to carry
out this Agreement, the officers and directors of the Company and Purchaser
shall be authorized to execute and deliver, in the name and on behalf of
Purchaser or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Purchaser or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
1.15 MERGER WITHOUT MEETING OF SHAREHOLDERS. Notwithstanding
the foregoing provisions of this ARTICLE I, in the event that Purchaser, or any
other direct or indirect subsidiary of Parent, shall acquire at least 90 percent
of the outstanding Common Shares, the parties hereto agree to take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a meeting of shareholders
of the Company, in accordance with Section 60.491 of the Oregon Code.
1.16 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates representing shares of Common Shares shall have been lost, stolen
or destroyed, the Exchange Agent shall make such payment in exchange for such
lost, stolen or destroyed certificates upon the making of an affidavit of that
fact by the holder thereof; PROVIDED, HOWEVER, that Parent may, in its
discretion and as a condition precedent to the issuance
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thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
1.17 MATERIAL ADVERSE EFFECT. (a) When used in connection with
the Company or any Company Subsidiaries (as defined below) or Parent, Guarantor
or any of their respective subsidiaries, as the case may be, the term "MATERIAL
ADVERSE EFFECT" means any change, effect or circumstance that, individually or
when taken together with all other similar changes, effects or circumstances
that have occurred during the period relevant to the determination of such
Material Adverse Effect, is or is reasonably likely to be materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and any Company Subsidiaries or Parent,
Guarantor and their respective subsidiaries, as the case may be, in each case
taken as a whole; PROVIDED, HOWEVER, that effects of changes that are applicable
to or arise on account of (A) any changes in economic, regulatory, or political
conditions generally, (B) the United States securities markets, (C) this
Agreement or the transactions contemplated by this Agreement and (D) the effect
of the public announcement of the transactions contemplated hereby, including
any effect on customers or employees of the Company, shall be excluded from the
definition of "Material Adverse Effect" and from any determination as to whether
a Material Adverse Effect has occurred or may occur.
(b) The failure of a representation or warranty to be true and
correct, either individually or together with the failure of other
representations or warranties to be true and correct, shall be deemed to have a
Material Adverse Effect if (x) the business, assets (including intangible
assets), financial condition, results of operations, or prospects of the Company
and its subsidiaries or Parent or Guarantor and their subsidiaries, as the case
may be, in each case taken as a whole, are or would reasonably be expected to be
materially worse than if such representation or warranty had been true and
correct, (y) in the case of the Company, such representation or warranty
materially misstates the capitalization of the Company and/or its subsidiaries
or (z) the failure of such representation or warranty to be true and correct
materially and adversely affects the ability of the Company or Parent, as the
case may be, to timely consummate the transactions contemplated by this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser
that, except as set forth in the correspondingly numbered Sections of the
letter, dated the date hereof, from the Company to Parent (the "COMPANY
DISCLOSURE LETTER"):
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2.1 ORGANIZATION AND GOOD STANDING. The Company and each of
the Company Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of the Company Subsidiaries is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not reasonably be
expected to have a Material Adverse Effect. The Company has heretofore made
available to Parent accurate and complete copies of the Articles of
Incorporation and Bylaws, as currently in effect, of the Company. For purposes
of this Agreement, the term "COMPANY SUBSIDIARY" shall mean any "subsidiary" (as
such term is defined in Rule 1-02 of Regulation S-X of the SEC) of the Company.
2.2 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (A) 50,000,000 Common Shares and (B)
500,000 shares of preferred stock (the "PREFERRED SHARES"). As of October 22,
1999, (i) 13,129,751 Common Shares were issued and outstanding, (ii) no shares
of Preferred Shares were issued and outstanding, (iii) 1,809,550 Common Shares
were reserved for future issuance pursuant to outstanding Company Options, of
which 752,431 shares are or will be exercisable before March 1, 2000 and 546,750
shares become exercisable on or after that date at prices below $5.50 per share,
(iv) no Common Shares were reserved for future issuance pursuant to the Company
Stock Purchase Plan, (v) 46,333 shares of Common Shares were reserved for future
issuance upon exercise of Company Warrants, (vi) 1,743,559 Common Shares were
reserved for future issuance upon exercise of the conversion rights contained in
that certain Deferral Loan and Lease Modification Agreement dated as of October
12, 1999 among the Company and the lenders and lessors named therein (the
"Deferral Agreement") (as of the date of this Agreement the Company has received
no notice of intent to exercise such conversion rights) and (vii) 1,381,382
Common Shares reserved for issuance upon the conversion of the Company's 9%
Convertible Subordinated Notes due December 29, 2008 (the "NOTES"). No material
change in the capitalization of the Company has occurred between October 22,
1999 and the date hereof. No other capital stock of the Company is authorized or
issued. All issued and outstanding Common Shares are duly authorized, validly
issued, fully paid and non-assessable. Except as set forth in the Company
Securities Filings (as hereinafter defined) filed prior to the date of this
Agreement or as otherwise contemplated by this Agreement, as of the date hereof,
there are no outstanding rights, subscriptions, warrants, puts, calls,
unsatisfied preemptive rights, options or other agreements of any kind relating
to any of the outstanding, authorized but unissued shares of the capital stock
or any other security of the Company, and there is no authorized or outstanding
security of any kind convertible into or exchangeable for any such capital stock
or other security. Except as disclosed in the Company Securities Filings filed
prior to the date of this Agreement, there are no obligations, contingent or
other, of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Common Shares or the capital stock of any
Company
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Subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such Company Subsidiary or any other
entity.
2.3 SUBSIDIARIES. Section 2.3 of the Company Disclosure Letter
sets forth the name and jurisdiction of incorporation of each Company
Subsidiary, each of which is wholly owned by the Company except as otherwise
indicated in said Section 2.3 of the Company Disclosure Letter. Except as set
forth in Section 2.3 of the Company Disclosure Letter, all of the capital stock
and other interests of the Company Subsidiaries so held by the Company are owned
by it or a Company Subsidiary as indicated in said Section 2.3 of the Company
Disclosure Letter, free and clear of any claim, lien, encumbrance or security
interest with respect thereto. All of the outstanding shares of capital stock of
each of the Company Subsidiaries directly or indirectly held by the Company are
duly authorized, validly issued, fully paid and non-assessable and were issued
free of preemptive rights and in compliance with applicable Laws. No equity
securities or other interests of any of the Company Subsidiaries are or may
become required to be issued or purchased by reason of any options, warrants,
rights to subscribe to, puts, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares. Except as
set forth in the Company Securities Filings filed prior to the date of this
Agreement or Section 2.3 of the Company Disclosure Letter, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, with respect to which interest the Company has invested
or is required to invest $50,000 or more, excluding securities in any publicly
traded company held for investment by the Company and comprising less than five
percent of the outstanding stock of such company.
2.4 AUTHORIZATION; BINDING AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including, but not limited to, the Merger, have been duly and validly
authorized by the Company's Board of Directors, and no other corporate
proceedings on the part of the Company or any Company Subsidiary are necessary
to authorize the execution and delivery of this Agreement or to consummate the
transactions contemplated hereby (other than adoption of this Agreement by the
holders of Common Shares with voting power equal to a majority of the voting
power of all outstanding Common Shares, if required, in accordance with the
Oregon Code). This Agreement has been duly and validly executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that enforceability thereof may be limited by applicable
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bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies (the "ENFORCEABILITY EXCEPTIONS").
2.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("CONSENT") any nation
or government, any state or other political subdivision thereof or any entity,
authority or body exercising executive, legislative, judicial or regulatory
functions of or pertaining to government, including, without limitation, any
governmental or regulatory authority, agency, department, board, commission or
instrumentality, any court, tribunal or arbitrator and any self-regulatory
organization ("GOVERNMENTAL AUTHORITY"), on the part of the Company or any of
the Company Subsidiaries is required in connection with the execution or
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby other than (i) the filing of the Articles
of Merger with the Secretary of State of Oregon in accordance with the Oregon
Code, (ii) filings with the SEC, (iii) filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR ACT"), (iv) filings pursuant to the rules and
regulations of The NASDAQ Stock Market ("NASDAQ") and (v) those Consents that,
if they were not obtained or made, would not reasonably be expected to have a
Material Adverse Effect.
2.6 NO VIOLATIONS. Except as set forth in Section 2.6 of the
Company Disclosure Letter, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by the
Company with any of the provisions hereof will not (i) conflict with or result
in any breach of any provision of the Second Amended and Restated Articles of
Incorporation or Bylaws of the Company or similar documents of any of the
Company Subsidiaries, (ii) require any Consent under or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of, any Company Material
Contract (as defined below ), (iii) result in the creation or imposition of any
lien or encumbrance of any kind upon any of the assets of the Company or any
Company Subsidiary or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in SECTION 2.5 hereof, violate any applicable provision
of any statute, law, rule or regulation or any order, decision, injunction,
judgment, award or decree ("LAW") to which the Company or any Company Subsidiary
or its assets or properties are subject, except, in the case of each of clauses
(ii), (iii) and (iv) above, for any deviations from the foregoing which would
not reasonably be expected to have a Material Adverse Effect.
2.7 SECURITIES FILINGS. The Company has made available to
Parent true and complete copies of (i) its Annual Report on Form 10-K and 10-K/A
for the Fiscal Year ended June 30, 1999, as filed with the SEC, (ii) its proxy
statements relating to all of the meetings of shareholders (whether annual or
special) of the Company since July 1, 1996 as filed with
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the SEC, and (iii) all other reports, statements and registration statements and
amendments thereto (including, without limitation, Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case as
amended) filed by the Company with the SEC since July 1, 1996. The reports and
statements set forth in clauses (i) through (iii) above, and those subsequently
provided or required to be provided pursuant to this SECTION 2.7, are referred
to collectively herein as the "COMPANY SECURITIES FILINGS." Except as set forth
in Section 2.7 of the Company Disclosure Letter, as of their respective dates,
or as of the date of the last amendment thereof, if amended after filing, the
Company Securities Filings (i) were prepared in all material respects in
accordance with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and the rules and regulations promulgated thereunder, or the
Securities Exchange Act, as the case may be, and none of the Company Securities
Filings contained or, as to the Company Securities Filings subsequent to the
date hereof, will contain, any untrue statement of a material fact or omitted
or, as to the Company Securities Filings subsequent to the date hereof, will
omit, to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
2.8 COMPANY FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited interim financial statements of the Company
included in the Company Securities Filings (the "COMPANY FINANCIAL STATEMENTS")
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and present fairly, in all material respects, the financial
position of the Company and the Company Subsidiaries as at the dates thereof and
the results of their operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end audit adjustments, any other adjustments described therein and the fact
that certain information and notes have been condensed or omitted in accordance
with the Securities Exchange Act.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Company Securities Filings filed prior to the date of this Agreement or
Section 2.9 of the Company Disclosure Letter, from June 30, 1999, through the
date of this Agreement, there has not been: (i) any event that has had or would
reasonably be expected to have a Material Adverse Effect; (ii) any declaration,
payment or setting aside for payment of any dividend or other distribution or
any redemption or other acquisition of any shares of capital stock or securities
of the Company by the Company; (iii) any material damage or loss to any material
asset or property, whether or not covered by insurance; (iv) any change by the
Company in accounting principles or practices; (v) any material revaluation by
the Company of any of its assets, including writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course of
business; (vi) any sale of a material amount of property of the Company, except
in the ordinary course of business; or (vii) any other action or event,
involving an amount exceeding $250,000, that would have required the consent of
Parent pursuant to SECTION 4.1 hereof had such action or event occurred after
the date of this Agreement.
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2.10 NO UNDISCLOSED LIABILITIES. Except as set forth in the
Company Securities Filings filed prior to the date of this Agreement or Section
2.10 of the Company Disclosure Letter, neither the Company nor any Company
Subsidiary has any liabilities (absolute, accrued, contingent or other), except
liabilities (a) adequately provided for in the Company's audited balance sheet
(including any related notes thereto) for the fiscal year ended June 30, 1999
included in the Company's 1999 Annual Report on Form 10-K and 10-K/A (the "1999
BALANCE SHEET"), (b) incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected on the
1999 Balance Sheet, (c) incurred since June 30, 1999 in the ordinary course of
business consistent with past practice, (d) incurred in connection with this
Agreement or (e) which would not reasonably be expected to have a Material
Adverse Effect.
2.11 COMPLIANCE WITH LAWS. Except as set forth in Section 2.11
of the Company Disclosure Letter, the business of the Company and each of the
Company Subsidiaries has been operated in compliance with all Laws applicable
thereto, except for any non-compliance which would not reasonably be expected to
have a Material Adverse Effect.
2.12 PERMITS. Except as set forth in Section 2.12 of the
Company Disclosure Letter, (i) the Company and the Company Subsidiaries have all
permits, certificates, licenses, approvals and other authorizations from
Governmental Authorities required in connection with the operation of their
respective businesses (collectively, "COMPANY PERMITS"), (ii) neither the
Company nor any Company Subsidiary is in violation of any Company Permit and
(iii) no proceedings are pending or, to the knowledge of the Company,
threatened, to revoke or limit any Company Permit, except, in the case of each
of clauses (i), (ii) and (iii) above, those the absence or violation of which
would not reasonably be expected to have a Material Adverse Effect.
2.13 LITIGATION. Except as disclosed in the Company Securities
Filings filed prior to the date of this Agreement or Section 2.13 of the Company
Disclosure Letter, there is no suit, action or proceeding ("LITIGATION") pending
or, to the knowledge of the Company, threatened against the Company or any of
the Company Subsidiaries which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Authority
outstanding against the Company or any Company Subsidiary which, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
2.14 CONTRACTS. Section 2.14 of the Company Disclosure Letter
includes, as of the date hereof, a list of the Company's material contracts (the
"COMPANY MATERIAL CONTRACTS") which includes (i) all loan agreements,
indentures, mortgages, pledges, conditional sale or title retention agreements,
security agreements, guaranties, standby letters of credit, equipment leases or
lease purchase agreements, each in an amount equal to or exceeding $250,000 to
which the Company or any Company subsidiary is a party or by which
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any of them is bound; (ii) all contracts, agreements, commitments or other
understandings or arrangements other than those addressed in Section 2.15 to
which the Company or any of its subsidiaries is a party or by which any of them
or any of their respective properties or assets are bound or affected, but
excluding contracts, agreements, commitments or other understandings or
arrangements entered into in the ordinary course of business and involving, in
the case of any such contact, agreement, commitment, or other understanding or
arrangement, individual payments or receipts by the Company or any Company
Subsidiary of less than $250,000 over the term of such contract, commitment,
agreement, or other understanding or arrangement; and (iii) all agreements which
are required to be filed as "material contracts" with the SEC pursuant to the
requirements of the Securities Exchange Act but have not been so filed with the
SEC. The Company is not a party to any agreements to acquire in the future the
stock or substantially all the assets of another person. Except as disclosed in
Section 2.14 of the Company Disclosure Letter or in the Company Securities
Filings filed prior to the date of this Agreement, all such Company Material
Contracts are valid and binding and are in full force and effect and enforceable
against the Company or such Company Subsidiary in accordance with their
respective terms, subject to the Enforceability Exceptions, and neither the
Company nor any Company Subsidiary is in violation or breach of or default under
any such Company Material Contract, except where the failure to be in full force
and effect or where such violation or breach would not reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company, no party (other
than the Company or Company Subsidiaries) is in default, violation or breach of
any Company Material Contract where such violation or breach would reasonably be
expected to have a Material Adverse Effect.
2.15 EMPLOYEE BENEFIT PLANS. (a) Section 2.15(a) of the
Company Disclosure Letter lists all employee pension benefit plans (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all employee welfare benefit plans (as defined in Section
3(1) of ERISA) and all other bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any employment,
executive compensation or severance agreements, written or otherwise, as
amended, modified or supplemented, for the benefit of, or relating to, any
former or current employee, officer or consultant who is an individual or an
individual doing business in a corporate form (or any of their beneficiaries) of
the Company or any other entity (whether or not incorporated) or which is under
common control with the Company (an "ERISA AFFILIATE") within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "CODE") or Section 4001(a)(14) or
(b) of ERISA, or any Company Subsidiary, with respect to which the Company has
or could have any current (actual or contingent) material liability (together
for purposes of this SECTION 2.15, the "EMPLOYEE PLANS"). Prior to the date of
this Agreement, the Company has provided or made available to Parent copies of
(i) each such written Employee Plan (or a written description of any Employee
Plan which is not written) and all related trust agreements, insurance and other
contracts (including policies), summary plan descriptions, summaries of
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material modifications and any material communications to plan participants,
(ii) the three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Employee Plan required to
make such a filing, and (iii) the most recent favorable determination letters
issued for each Employee Plan and related trust which is intended to qualify
under Section 401(a) of the Code (and, if an application for such determination
is pending, a copy of the application for such determination).
(b) (i) None of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person (other than in
accordance with Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA), and none of the Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (ii) to the knowledge of the Company, no
"party in interest" or "disqualified person" (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Employee Plan which could subject the Company or any ERISA
Affiliate, directly or indirectly, to a tax, penalty or other liability for
prohibited transactions under ERISA or Section 4975 of the Code, except for any
such tax, penalty or liability that would not reasonably be expected to result
in a Material Adverse Effect; (iii) to the knowledge of the Company, no
fiduciary of any Employee Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, except where such
breach would not reasonably be expected to result in a Material Adverse Effect;
(iv) all Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, the Internal Revenue Service (the "IRS") or the
Secretary of the Treasury), except where failure to do so would not reasonably
be expected to result in a Material Adverse Effect; and the Company and each
Company Subsidiary have performed all obligations required to be performed by
them under, are not in default under or in violation of any Employee Plan except
where failure to do so would not reasonably be expected to result in a Material
Adverse Effect, and have no knowledge of any default or violation by any other
party to, any of the Employee Plans; (v) each Employee Plan which is subject to
Parts 1, 2 and 4 of Subtitle B of ERISA is the subject of a favorable
determination letter from the IRS, and to the knowledge of the Company nothing
has occurred which mayreasonably be expected to impair such determination; (vi)
all contributions required to be made with respect to any Employee Plan pursuant
to the terms of the Employee Plan have been made on or before their due dates
except for any failure to make contributions that would not reasonably be
expected to result in a Material Adverse Effect; (vii) no facts exist or have
existed under which the Company or any ERISA Affiliate could incur any liability
under Title IV of ERISA; and (viii) there are no complaints, charges or claims
against the Company pending or to the Company's knowledge threatened to be
brought by or filed with any governmental authority based on, arising out of, in
connection with or otherwise relating to the classification of any individual by
the Company as an independent contractor or "leased employee" (within the
meaning of section 414(n) of the Code) rather than as an employee.
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(c) Section 2.15(c) of the Company Disclosure Letter sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any Company Subsidiary who holds (i) any option to
purchase Common Shares as of the date hereof, together with the number of shares
of Common Shares subject to such option, the option price of such option (to the
extent determined as of the date hereof), whether such option is intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code (an "ISO"), and the expiration date of such option; (ii) any shares of
Common Shares that are restricted as a result of an agreement with or stock plan
of the Company; and (iii) any other right, directly or indirectly, to receive
Common Shares, except as otherwise disclosed in Section 2.15 of the Company
Disclosure Letter, together with the number of shares of Company Stock subject
to such right. Section 2.15(c) of the Company Disclosure Letter also sets forth
the total number of any such ISOs and any such nonqualified options and other
such rights.
(d) Unless otherwise disclosed in Section 2.15(a) of the
Company Disclosure Letter, Section 2.15(d) of the Company Disclosure Letter sets
forth a true and complete list of (i) all employment agreements with officers of
the Company or any of the Company Subsidiaries; (ii) all agreements with
consultants who are individuals obligating the Company or any of the Company
Subsidiaries to make annual cash payments in an amount exceeding $250,000; (iii)
all agreements which individually or in the aggregate are or could be material
with respect to the services of independent contractors or leased employees who
are individuals or individuals doing business in a corporate form whether or not
they participate in any of the Employee Plans; (iv) all officers of the Company
or any of the Company Subsidiaries who have executed a non-competition agreement
with the Company or any of the Company Subsidiaries; (v) all severance
agreements, programs and policies of the Company or any of the Company
Subsidiaries with or relating to its employees, in each case with outstanding
commitments exceeding $250,000, excluding programs and policies required to be
maintained by law; and (vi) all plans, programs, agreements and other
arrangements of the Company which contain change in control provisions.
(e) (i) Except as set forth in Section 2.15(e) of the Company
Disclosure Letter, no Employee Plan is an employee stock ownership plan (within
the meaning of Section 4975(e)(7) of the Code) or otherwise invests in Company
Stock; and (ii) the consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any employee except as otherwise provided in
SECTION 1.9 hereof or disclosed in Section 2.15(e) of the Company Disclosure
Letter or except where such increase or acceleration would not reasonably be
expected to result in a Material Adverse Effect. The Company will take all
actions within its control to ensure that all actions required to be taken by a
fiduciary of any Employee Plan in order to effectuate the transaction
contemplated by this Agreement shall comply with the terms of such Plan, ERISA
and other applicable laws. The Company will take all actions
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within its control to ensure that all actions required to be taken by a
trustee of any Employee Plan that owns Company Stock shall have been duly
authorized by the appropriate fiduciaries of such Plan and shall comply with
the terms of such Plan, ERISA and other applicable laws.
(f) Except as set forth in Section 2.15(f) of the Company
Disclosure Letter, the Company maintains no Employee Plan covering non-U.S.
employees.
(g) The Company has fiduciary liability insurance of at least
$500,000 in effect covering the fiduciaries of the Employee Plans (including the
Company) with respect to whom the Company may have liability.
2.16 TAXES AND RETURNS. (a) The Company and each of the
Company Subsidiaries has timely filed, or caused to be timely filed, all
material Tax Returns (as hereinafter defined) required to be filed by it, and
all such tax returns are true, complete and correct in all material respects,
and has timely paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes (as hereinafter defined) required to be
paid, collected or withheld, other than such Taxes for which adequate reserves
in the Company Financial Statements have been established and which are being
contested in good faith. Except as set forth in Section 2.16 of the Company
Disclosure Letter, there are no material claims or assessments pending against
the Company or any of the Company Subsidiaries for any alleged deficiency in any
Tax, and the Company has not been notified in writing of any proposed Tax claims
or assessments against the Company or any of the Company Subsidiaries (other
than in each case, claims or assessments for which adequate reserves in the
Company Financial Statements have been established and which are being contested
in good faith or claims or assessments which are immaterial in amount). Neither
the Company nor any of the Company Subsidiaries has executed any waivers or
extensions of any applicable statute of limitations to assess any material
amount of Taxes. There are no outstanding requests by the Company or any of the
Company Subsidiaries for any extension of time within which to file any material
Tax Return or within which to pay any material amounts of Taxes shown to be due
on any Tax Return. The statute of limitations period for assessment of federal
income taxes has not expired for any taxable year from the taxable year
ended June 30, 1996, the Company's first taxable year as a C corporation. To the
best knowledge of the Company, there are no liens for material amounts of Taxes
on the assets of the Company or any of the Company Subsidiaries except for
statutory liens for current Taxes not yet due and payable. There are no
outstanding powers of attorney enabling any party to represent the Company or
any of the Company Subsidiaries with respect to Tax matters.
(b) For purposes of this Agreement, the term "TAX" shall mean
any federal, state, local, foreign or provincial income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
alternative or add-on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority. The term "TAX RETURN" shall mean a report, return or
other
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information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
(c) Except as set forth in Section 2.16 of the Company
Disclosure Letter, (i) neither the Company nor any of the Company Subsidiaries
has been a member of an affiliated group within the meaning of Section 1504 of
the Code or filed or been included in a combined, consolidated or unitary Tax
Return, other than of the Company and the Company Subsidiaries; (ii) other than
with respect to the Company and the Company Subsidiaries, neither the Company
nor any of the Company Subsidiaries is currently liable for Taxes of any other
person, or is currently under any contractual obligation to indemnify any person
with respect to Taxes (except for customary agreements to indemnify lenders or
securityholders in respect of taxes other than income taxes), or is a party to
any tax sharing agreement or any other agreement providing for payments by the
Company or any of the Company Subsidiaries with respect to Taxes; (iii) neither
the Company nor any of the Company Subsidiaries is a party to any joint venture,
partnership or other arrangement or contract which could be treated as a
partnership for federal income tax purposes; (iv) neither the Company nor any of
the Company Subsidiaries has entered into any sale leaseback or any leveraged
lease transaction that fails to satisfy the requirements of Revenue Procedure
75-21 (or similar provisions of foreign law); (v) neither the Company nor any of
the Company Subsidiaries has agreed or is required, as a result of a change in
method of accounting or otherwise, to include any adjustment under Section 481
of the Code (or any corresponding provision of state, local or foreign law) in
taxable income; (vi) neither the Company nor any of the Company Subsidiaries is
a party to any agreement, contract, arrangement or plan that would result
(taking into account the transactions contemplated by this Agreement),
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code; (vii) the prices for
any property or services (or for the use of property) provided by the Company or
any of the Company Subsidiaries to any other subsidiary or to the Company have
been arm's length prices, determined using a method permitted by the Treasury
Regulations under Section 482 of the Code; (viii) neither the Company nor any of
the Company Subsidiaries is liable with respect to any indebtedness the interest
of which is not deductible for applicable federal, foreign, state or local
income tax purposes; (ix) neither the Company nor any of the Company
Subsidiaries is a "consenting corporation" under Section 341(f) of the Code or
any corresponding provision of state, local or foreign law; (x) the Company and
each Company Subsidiary have complied with all applicable laws, rules, and
regulations relating to the withholding and payment of Taxes except where the
amount of taxes involved is not material; and (xi) none of the assets owned by
the Company or any of the Company Subsidiaries is property that is required to
be treated as owned by any other person pursuant to Section 168(g)(8) of the
Internal Revenue Code of 1954, as amended, as in effect immediately prior to the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
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(d) The amount of net operating losses (as defined in Section
172 of the Code) of the Company and the Company Subsidiaries as of the end of
the fiscal year ended June 30, 1999 is as set forth in the Company's financial
statements for such year.
2.17 INTELLECTUAL PROPERTY. (a) Section 2.17(a) of the Company
Disclosure Letter sets forth a list of (i) all patents and patent applications
owned by the Company and/or each of the Company Subsidiaries worldwide; (ii) all
trademark and service mark registrations and all trademark and service mark
applications, material common law trademarks, material trade dress and material
slogans, and all trade names owned by the Company and/or each of its
subsidiaries worldwide; (iii) all copyright registrations and copyright
applications owned by the Company and/or each of the Company Subsidiaries
worldwide; and (iv) all licenses in which the Company and/or any of the Company
Subsidiaries is (A) a licensor with respect to any of the patents, trademarks,
service marks, trade names or copyrights listed in Section 2.17 of the Company
Disclosure Letter which are material to the Company or (B) a licensee of any
other person's patents, trade names, trademarks, service marks or copyrights
material to the Company except for any licenses of software programs that are
commercially available "off the shelf."
(b) The Company or the Company Subsidiaries own, or are
licensed or otherwise possess legal enforceable rights to use, all patents,
trademarks, trade names, service marks, trade dress, slogans, copyrights and any
applications therefor, technology, know-how, trade secrets, computer software
programs or applications, domain names and tangible or intangible proprietary
information or materials that are used in the respective businesses of the
Company and the Company Subsidiaries as currently conducted (the "COMPANY
INTELLECTUAL PROPERTY RIGHTS"), except for any such failures to own, be licensed
or possess that would not reasonably be expected to have a Material Adverse
Effect.
(c) Except as disclosed in Section 2.17(c) of the Company
Disclosure Letter, the Company and/or each Company Subsidiary has made all
necessary filings and recordations for the patents, patent applications,
trademark and service mark registrations, trademark and service mark
applications, copyright registrations and copyright applications set forth in
Section 2.17(a) of the Company Disclosure Letter, except where the failure to
make such filings or recordations would not reasonably be expected to have a
Material Adverse Effect. There are not currently pending, and to the Knowledge
of the Company there are no valid grounds for, any bona fide claims (i) that the
business of the Company or any of the Company Subsidiaries infringes on any
copyright, patent, trademark, service mark or trade secret; (ii) against the use
by the Company or any of the Company Subsidiaries of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of the Company or any of
the Company Subsidiaries as currently conducted or as proposed to be conducted;
(iii) challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights; or (iv) challenging the license or legally
enforceable right to use of any third-party patents, trademarks, service marks
and copyrights by the Company or any of the
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Company Subsidiaries, except, in the case of each of clauses (i), (ii), (iii)
and (iv) above, for matters that, if determined adversely to the Company, would
not reasonably be expected to have a Material Adverse Effect.
(d) Except as set forth in the Company Securities Filings
filed prior to the date of this Agreement or Section 2.17 of the Company
Disclosure Letter, to the Knowledge of the Company, there is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, including any employee or former
employee of the Company or any of the Company Subsidiaries.
(e) KNOWLEDGE OF THE COMPANY DEFINED. For purposes of this
Section 2.17, the parties acknowledge and agree that the phrase "to the
Knowledge of the Company": (i) will be limited to the knowledge of the officers
and employees of the Company identified in Paragraph 2.17(e) of the Company
Disclosure Letter and (ii) will not be deemed to impose any obligation on the
Company to conduct a patent, trademark or copyright search.
2.18 DISCLOSURE DOCUMENTS. The Proxy Statement will comply in
all material respects with the applicable requirements of the Securities
Exchange Act except that no representation or warranty is being made by the
Company with respect to the Parent Information included in the Proxy Statement.
The Proxy Statement will not, at the time the Proxy Statement is filed with the
SEC or first sent to shareholders or at the time of the Company's shareholders'
meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading except that no representation or warranty is being made by the
Company with respect to the Parent Information (as defined below) included in
the Proxy Statement. The Schedule 14D-9 will comply in all material respects
with the Securities Exchange Act except that no representation or warranty is
being made by the Company with respect to the Parent Information included in the
Schedule 14D-9. Neither the Schedule 14D-9 nor any of the information relating
to the Company or its affiliates provided by or on behalf of the Company
specifically for inclusion in the Schedule 14D-1 or the Offer Documents will, at
the respective times the Schedule 14D-9, the Schedule 14D-1 and the Offer
Documents are filed with the SEC and are first published, sent or given to
shareholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
2.19 LABOR MATTERS. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.19 of
the Company Disclosure Letter, (i) there are no controversies pending or, to the
knowledge of the Company or any of the Company Subsidiaries, threatened, between
the Company or any of the Company Subsidiaries and any of their respective
employees, which controversies would reasonably be expected to have a Material
Adverse Effect; (ii) neither the Company nor any of the Company
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Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or the Company
Subsidiaries, nor, as of the date of this Agreement, does the Company or any of
the Company Subsidiaries know of any activities or proceedings of any labor
union to organize any such employees; and (iii) neither the Company nor any of
the Company Subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or any of the Company Subsidiaries which would reasonably be
expected to have a Material Adverse Effect.
2.20 LIMITATION ON BUSINESS CONDUCT. Except as set forth in
the Company Securities Filings filed prior to the date of this Agreement,
neither the Company nor any of the Company Subsidiaries is a party to, or has
any obligation under, any contract or agreement, written or oral, which contains
any covenants currently or prospectively limiting in any material respect the
freedom of the Company or any of the Company Subsidiaries to engage in any line
of business or to compete with any entity.
2.21 TITLE TO PROPERTY. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.21 of
the Company Disclosure Letter, each of the Company and each of the Company
Subsidiaries owns the properties and assets that it purports to own free and
clear of all liens, charges, mortgages, security interests or encumbrances of
any kind ("LIENS"), except for Liens which arise in the ordinary course of
business and do not materially impair the Company's or the Company Subsidiaries'
ownership or use of such properties or assets, Liens for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
reserves have been established in accordance with GAAP and Liens securing
obligations under the Company's credit agreements, loan agreements and equipment
leases (the "CREDIT AGREEMENTS"). Except as set forth in Schedule 2.21 of the
Company Disclosure Letter, with respect to the property and assets it leases,
the Company, the Company Subsidiaries, and to the best of the Company's
knowledge each of the other parties thereto, is in material compliance with such
leases, and the Company or the Company Subsidiaries, as the case may be, hold a
valid leasehold interest free of any Liens, except those referred to above. The
rights, properties and assets presently owned, leased or licensed by the Company
and the Company Subsidiaries include all rights, properties and assets necessary
to permit the Company and the Company Subsidiaries to conduct their business in
all material respects in the same manner as their businesses have been conducted
prior to the date hereof.
2.22 OWNED AND LEASED PREMISES. Each of the buildings,
structures and premises leased by the Company or any of the Company Subsidiaries
is in reasonably good repair and operating condition, except as would not
reasonably be expected to have a Material Adverse Effect.
2.23 ENVIRONMENTAL MATTERS. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.23 of
the Company Disclosure
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Letter:
(a) The Company and the Company Subsidiaries are in material
compliance with the Environmental Laws (as defined below), which compliance
includes the possession by the Company and the Company Subsidiaries of all
material permits and governmental authorizations required under applicable
Environmental Laws, and compliance in all material respects with the terms and
conditions thereof, except in each case where such non-compliance would not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of the Company Subsidiaries has received any communication (written or
oral), whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Company or any of the Company Subsidiaries is
not in such material compliance, and there are no circumstances that may prevent
or interfere with such compliance in the future, except where such
non-compliance would not reasonably be expected to have a Material Adverse
Effect.
(b) There are no Environmental Claims (as defined below),
including claims based on "arranger liability," pending or, to the best
knowledge of the Company, threatened against the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries has retained
or assumed either contractually or by operation of law, except for such
Environmental Claims that would not reasonably be expected to have a Material
Adverse Effect.
(c) To the knowledge of the Company, there are no past or
present actions, inactions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Material of Environmental Concern (as hereinafter defined), that would form
the basis of any Environmental Claim against the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries have retained
or assumed either contractually or by operation of law, except for such
Environmental Claims that would not reasonably be expected to have a Material
Adverse Effect.
(d) The Company is in compliance in all material respects with
Environmental Laws as they relate to (i) any on-site or off-site locations where
the Company or any of the Company Subsidiaries has stored, disposed or arranged
for the disposal of Materials of Environmental Concern for itself (but not on
behalf of others) or (ii) any underground storage tanks located on property
owned or leased by the Company or any of the Company Subsidiaries. To the
knowledge of Company, there is no asbestos contained in or forming part of any
building, building component, structure or office space owned or leased by the
Company or any of the Company Subsidiaries. To the knowledge of Company, no
polychlorinated biphenyls (PCB's) or PCB-containing items are used or stored at
any property owned or leased by the Company or any of the Company Subsidiaries.
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(e) For purposes of this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any written claim, action,
cause of action, investigation or notice by any person or entity
alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (x) the presence,
or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by the
Company or any of the Company Subsidiaries, or (y) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law.
(ii) "ENVIRONMENTAL LAWS" means all Federal, state, local and
foreign laws or regulations relating to pollution or protection of
human health and the environment (including ambient air, surface water,
ground water, land surface or sub-surface strata), including laws and
regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
(iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances and
hazardous wastes, toxic substances, petroleum and petroleum products
that are regulated under the Environmental Laws.
2.24 INSURANCE. The Company maintains insurance that provides
adequate coverage for normal risks incident to the business of the Company and
the Company Subsidiaries and their respective properties and assets and in
character and amount comparable to that carried by persons engaged in similar
businesses. The insurance polices maintained by the Company are with reputable
insurance carriers and have no premium delinquencies.
2.25 PRODUCT LIABILITY AND RECALLS. (a) Except as disclosed in
the Company SEC Filings filed prior to the date of this Agreement or Section
2.25 of the Company Disclosure Letter, to the Company's knowledge, there is no
claim, pending or overtly threatened, against the Company or any Company
Subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service by
the Company or any Company Subsidiaries, including claims arising out of the
defective or unsafe nature of its products or services, which would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(b) Except as disclosed in the Company SEC Filings filed prior
to the date of this Agreement or Section 2.25 of the Company Disclosure Letter,
there is no pending or, to the knowledge of the Company, overtly threatened
recall or investigation of any product
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sold by the Company or any Company Subsidiaries, which recall or investigation
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
2.26 CUSTOMERS. Section 2.26 of the Company Disclosure Letter
sets forth a list of the Company's ten (10) largest customers (detailed, in the
case of government agencies, by separate government agency) in terms of gross
sales for the fiscal year ended June 30, 1999. Except as set forth in Section
2.26 of the Company Disclosure Letter, since June 30, 1999, there have not been
any changes in the business relationships of the Company with any of the
customers named therein that would constitute a Material Adverse Effect. Except
as set forth in Section 2.26 of the Company Disclosure Letter, no customer of
the Company accounted for more than 5% of the revenues of the Company and the
Company Subsidiaries, taken as whole, for the fiscal year ended June 30, 1999.
2.27 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 2.27 of the Company Disclosure Letter or in the Company Securities
Filings filed prior to the date of this Agreement, since the date of the
Company's proxy statement dated October 25, 1999, no event has occurred that
would be required to be reported pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
2.28 FINDERS AND INVESTMENT BANKERS. Neither the Company nor
any of its officers or directors has employed any broker, finder or financial
advisor or otherwise incurred any liability for any brokerage fees, commissions,
or financial advisors' or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to agreements with McDonald
Investments, Inc. and Adams, Harkness & Hill, Inc., the terms of which have been
disclosed to Parent.
2.29 FAIRNESS OPINION. The Company's Board of Directors has
received from the Financial Advisor a written opinion addressed to it for
inclusion in the Schedule 14D-9 and the Proxy Statement to the effect that the
consideration to be received by the shareholders of the Company pursuant to each
of the Offer and the Merger is fair to the Company's shareholders from a
financial point of view.
2.30 TAKEOVER STATUTES. Assuming Parent and its "associates"
and "affiliates" (as defined in Section 60.825 of the Oregon Code) collectively
beneficially own and have beneficially owned at all times during the three-year
period prior to the date hereof less than fifteen percent (15%) of the Company
Stock outstanding, Sections 60.825 - 60.845 of the Oregon Code is, and shall be,
inapplicable to the acquisition of Common Shares pursuant to the Offer and the
Merger.
2.31 FULL DISCLOSURE. No statement contained in any
certificate or schedule, including, without limitation, the Company Disclosure
Letter, furnished or to be furnished by the Company or the Company Subsidiaries
to Parent or Purchaser in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact
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or omits or will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
2.32 YEAR 2000. Except as would not reasonably be expected to
have a Material Adverse Effect on the Company:
(a) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by
Company or by any of the Company Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate incorrect
data or will produce incorrect results that are caused by processing, providing
or receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.
(b) None of the products and services sold, licensed,
rendered, or otherwise provided by the Company or by any of the Company
Subsidiaries in the conduct of their respective businesses will malfunction,
will cease to function, will generate incorrect data or will produce incorrect
results that are caused by processing, providing or receiving (i) date-related
data from, into and between the twentieth and twenty-first centuries or (ii)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries.
(c) Neither the Company nor any of the Company Subsidiaries
has made any other representations or warranties regarding the ability of any
product or service sold, licensed, rendered, or otherwise provided by the
Company or by any of the Company Subsidiaries in the conduct of their respective
businesses to operate without malfunction, to operate without ceasing to
function, to generate correct data or to produce correct results when
processing, providing or receiving (i) date-related data from, into and between
the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries.
2.33 RIGHTS AGREEMENTS. There are no "rights agreements",
"poison pills" or similar defensive installments, arrangements or agreements
that would prevent or interfere with the consummation of the transactions
contemplated by this Agreement.
2.34 ABSENCE OF CERTAIN PAYMENTS. None of the Company, any
Company Subsidiaries or any of their respective affiliates, officers, directors,
employees or agents or other people acting on behalf of any of them have (i)
engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country and (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of the Company, the Company Subsidiaries or any of
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their respective affiliates, directors, officers, employees or agents of other
persons acting on behalf of any of them, has accepted or received any unlawful
contributions, payments, gifts or expenditures.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and
warrant to the Company that:
3.1 ORGANIZATION AND GOOD STANDING. Each of Guarantor, Parent
and Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
3.2 AUTHORIZATION; BINDING AGREEMENT. Parent, Purchaser and
Guarantor have all requisite corporate power and authority to execute and
deliver this Agreement or the Guarantee, as the case may be, and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Guarantee and the consummation of the transactions
contemplated hereby and thereby, including, but not limited to, the Merger, have
been duly and validly authorized by the respective Boards of Directors of
Parent, Purchaser and Guarantor, as appropriate, and no other corporate
proceedings on the part of Parent, Purchaser, Guarantor or any other subsidiary
of Guarantor are necessary to authorize the execution and delivery of this
Agreement or the Guarantee, as applicable, or to consummate the transactions
contemplated hereby and thereby (other than the requisite approval by the sole
shareholder of Purchaser of this Agreement and the Merger). This Agreement has
been duly and validly executed and delivered by each of Parent and Purchaser and
constitutes the legal, valid and binding agreement of Parent and Purchaser,
enforceable against each of Parent and Purchaser in accordance with its terms,
subject to the Enforceability Exceptions. The Guarantee has been duly and
validly executed and delivered by Guarantor, and constitutes the legal, valid
and binding agreement of Guarantor enforceable against Guarantor in accordance
with its terms, subject to the Enforceability Exceptions.
3.3 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of Parent, Purchaser or Guarantor is required
in connection with the execution or delivery by Parent, Purchaser and Guarantor
of this Agreement or the Guarantee, as the case may be, or the consummation by
Parent, Purchaser and Guarantor of the transactions contemplated hereby or
thereby other than (i) the filing of the Articles of Merger with the Secretary
of State of Oregon in accordance with the Oregon Code, (ii) filings with the
SEC, (iii) filings under the HSR Act (iv) filings pursuant to the rules and
regulations of NASDAQ or the New York Stock Exchange and (v) those Consents
that, if they were not obtained or made, would not reasonably be expected to
have a Material Adverse Effect.
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3.4 NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Parent or Purchaser with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Memorandum of
Association and Bye-Laws or other governing instruments of Guarantor or similar
documents of any subsidiary of Guarantor, including Parent and Purchaser, (ii)
require any Consent under or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of, any material note, bond, mortgage, indenture,
contract, lease, license, agreement or instrument to which Guarantor or any
subsidiary of Guarantor, including Parent, is a party or by which any of them or
any of their respective assets or property is subject, (iii) result in the
creation or imposition of any material lien or encumbrance of any kind upon any
of the assets of Guarantor or any subsidiary of Guarantor, including Parent, or
(iv) subject to obtaining the Consents from Governmental Authorities referred to
in SECTION 3.3 hereof, violate any Law to which Guarantor or any subsidiary of
Guarantor, including Parent, or its assets or properties are subject, except in
any such case for any such conflicts, violations, breaches, defaults or other
occurrences that would not prevent or delay consummation of the Offer or the
Merger, or otherwise materially and adversely affect the ability of Parent or
Purchaser to perform their respective obligations under this Agreement.
3.5 DISCLOSURE DOCUMENTS. None of the information supplied by
Parent, or Purchaser or their respective officers, directors, representatives,
agents or employees (the "PARENT INFORMATION") for inclusion in the Proxy
Statement will, at the time the Proxy Statement is filed with the SEC or first
mailed to the Company's shareholders, at the time of the Company's shareholders'
meeting, contain any untrue statement of a material fact, or will omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances in which they were made not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for such shareholders' meeting which has become false or misleading.
Neither the Schedule 14D-1 or the Offer Documents or any amendments thereof or
supplements thereto nor any of the Parent Information provided specifically for
inclusion in the Schedule 14D-9 will, at the respective times the Schedule
14D-1, the Offer Documents or the Schedule 14D-9 are filed with the SEC or first
published, sent or given to the Company's shareholders, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Notwithstanding the foregoing, neither Parent
nor Purchaser makes any representation or warranty with respect to any
information that has been supplied by the Company or its accountants, counsel or
other authorized representatives for use in any of the foregoing documents. The
Schedule 14D-1 and the Offer Documents will comply as to form in all material
respects with the provisions of the Securities Exchange Act.
3.6 FINDERS AND INVESTMENT BANKERS. Neither Parent, Guarantor,
Purchaser nor any of their respective officers or directors has employed any
broker, finder or financial
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advisor or otherwise incurred any liability for any brokerage fees, commissions
or financial advisors' or finders' fees in connection with the transactions
contemplated hereby.
3.7 FINANCING ARRANGEMENTS. Parent (including for this purpose
one or more other subsidiaries of Guarantor ), has funds available to it
sufficient to enable the Purchaser to purchase the Common Shares in accordance
with the terms of this Agreement and to pay all amounts due (or which will, as a
result of the transactions contemplated hereby, become due) in respect of any
indebtedness of the Company for money borrowed.
3.8 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby
(including any financing in connection therewith), Purchaser has not incurred
any obligations or liabilities and has not engaged in any business or activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any person or entity.
ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
4.1 CONDUCT OF BUSINESS OF THE COMPANY AND THE COMPANY
SUBSIDIARIES. (a) Unless Parent shall otherwise consent in writing (which
consent, in the case of paragraphs (D), (E), (F), (G), (H), (I), or (J) below,
shall not be unreasonably withheld) and except as expressly contemplated by this
Agreement or in the Company Disclosure Letter, during the period from the date
of this Agreement to the Effective Time, (i) the Company shall conduct, and it
shall cause the Company Subsidiaries to conduct, its or their businesses in the
ordinary course and consistent with past practice, and the Company shall, and it
shall cause the Company Subsidiaries to, use its or their reasonable best
efforts to preserve substantially intact its business organization, to keep
available the services of its present officers and employees and to preserve the
present commercial relationships of the Company and the Company Subsidiaries
with persons with whom the Company or the Company Subsidiaries do significant
business and (ii) without limiting the generality of the foregoing, neither the
Company nor any of the Company Subsidiaries will:
(A) amend or propose to amend its Articles of
Incorporation or Bylaws (or similar organizational documents);
(B) authorize for issuance, issue, grant, sell,
pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any
shares of, or any options, warrants, commitments, subscriptions or rights of any
kind to acquire or sell any shares of, the capital stock or other securities of
the Company or any of the Company Subsidiaries, including, but not limited to,
any securities convertible into or exchangeable for shares of stock of any class
of the Company or any of the Company Subsidiaries, except for (a) the issuance
of shares
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pursuant to the exercise of Company Options outstanding on the date of this
Agreement in accordance with their present terms, (b) the issuance of shares
pursuant to the Company Stock Purchase Plans as in effect on the date of this
Agreement, (c) the issuance of shares upon the exercise of Company Warrants
outstanding on the date of this Agreement in accordance with their present
terms, or (d) the issuance of shares upon the conversion of the Notes in
accordance with the indenture relating to the Notes on its present terms;
(C) split, combine or reclassify any shares of its
capital stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, other than dividends or distributions to the Company or a
Company Subsidiary (except that in no case may the Company or a Company
Subsidiary declare or pay any cross-border dividends), make or allow any Company
Subsidiary to make any cross-border capital contributions, or directly or
indirectly redeem, purchase or otherwise acquire or offer to acquire any shares
of its capital stock or other securities (other than the repurchase of 100,000
Common Shares from Matthew J. Bergeron pursuant to that certain Stock Purchase
Agreement dated December 22, 1998 between the Company and Mr. Bergeron);
(D) (a) create or incur any indebtedness for borrowed
money or issue any debt securities, except pursuant to the Credit Agreements, or
(b) make any loans or advances, except in the ordinary course of business
consistent with past practice;
(E) (a) sell, pledge, dispose of or encumber any
assets of the Company or any of Company Subsidiaries (except for (i) sales of
assets in the ordinary course of business and in a manner consistent with past
practice, (ii) pledges to secure debt permitted under paragraph (D), (iii)
dispositions of obsolete or worthless assets, and (iv) sales of immaterial
assets not in excess of $250,000 in the aggregate); (b) acquire (by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership
or other business organization or division thereof; (c) authorize any capital
expenditures or purchases of fixed assets which are, in the aggregate, in excess
of $250,000 from the date hereof until February 29, 2000; (d) assume, guarantee
(other than guarantees of obligations of the Company Subsidiaries entered into
in the ordinary course of business) or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary course of business consistent with past
practice; or (e) voluntarily incur any material liability or obligation
(absolute, contingent or otherwise) except in the ordinary course of business
consistent with past practice.
(F) increase in any manner the compensation of any of
its officers or employees (other than, except with respect to employees who are
executive officers or directors, in the ordinary course of business reasonably
consistent with past practice) or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
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compensation or other compensation or benefit plan, policy, agreement, trust,
fund or arrangement with, for or in respect of, any shareholder, officer,
director, employee, consultant or affiliate other than, in any such case
referred to above, as may be required by Law or as required pursuant to the
terms of agreements in effect on the date of this Agreement and other than
arrangements with new employees (other than employees who will be officers of
the Company) hired in the ordinary course of business consistent with past
practice and providing for compensation (other than equity-based compensation)
and other benefits consistent with those provided for similarly situated
employees of the Company as of the date hereof;
(G) alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
ownership of any Company Subsidiary or the Company;
(H) except as may be required as a result of a change
in law or as required by the SEC, change any of the accounting principles or
practices used by it;
(I) make any tax election or settle or compromise any
income tax liability;
(J) pay, discharge or satisfy any material claims,
liabilities or obliga- tions (absolute, accrued, asserted or unasserted,
contingent or other), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in, or contemplated by, the financial statements
(or the notes thereto) of the Company contained in the Company SEC Filings filed
prior to the date of this Agreement or incurred in the ordinary course of
business consistent with past practice;
(K) except to the extent necessary for the exercise
of its fiduciary duties by the Board of Directors of the Company as set forth
in, and consistent with the provisions of, SECTION 4.8 hereof, waive, amend or
allow to lapse any term or condition of any confidentiality or "standstill"
agreement to which the Company or any Company Subsidiary is a party; or
(L) take, or agree in writing or otherwise to take,
any of the foregoing actions or any action which would make any of the
representations or warranties of the Company contained in this Agreement untrue
or incorrect in any material respect at or prior to the Effective Time.
(b) The Company shall, and the Company shall cause
each of the Company Subsidiaries to, comply with all Laws applicable to it or
any of its properties, assets or business and to maintain in full force and
effect all the Company Permits necessary for such business, except in any such
case for any failure so to comply or maintain that would not
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reasonably be expected to result in a Material Adverse Effect.
4.2 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from any
third party alleging that the Consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement; (ii) receipt
of any material notice or other communication from any Governmental Authority
(including, but not limited to, the National Association of Securities Dealers
("NASD"), NASDAQ or any other securities exchange) in connection with the
transactions contemplated by this Agreement; (iii) the occurrence of an event
which would be reasonably likely (A) to have a Material Adverse Effect or (B) to
cause any condition set forth in ANNEX I hereto to be unsatisfied in any
material respect at any time prior to the consummation of the Offer; or (iv) the
commencement or threat of any Litigation involving or affecting the Company or
any of the Company Subsidiaries, or any of their respective properties or
assets, or, to the Company's knowledge, any employee, agent, director or
officer, in his or her capacity as such, of the Company or any of the Company
Subsidiaries which, if pending on the date hereof, would have been required to
have been disclosed pursuant to this Agreement or which relates to the
consummation of the Offer or the Merger.
4.3 ACCESS AND INFORMATION. Between the date of this Agreement
and the Effective Time, and without intending by this SECTION 4.3 to limit any
of the other obligations of the parties under this Agreement, the Company will
give, and shall direct its accountants and legal counsel to give, Parent and its
authorized representatives (including, without limitation, its financial
advisors, accountants and legal counsel), at reasonable times and without undue
disruption to or interference with the normal conduct of the business and
affairs of the Company, access as reasonably required in connection with the
transactions provided for in this Agreement to all offices and other facilities
and to all contracts, agreements, commitments, books and records of or
pertaining to the Company and the Company Subsidiaries and will furnish Parent
with (a) such financial and operating data and other information with respect to
the business and properties of the Company and the Company Subsidiaries as
Parent may from time to time reasonably request in connection with such
transactions and (b) a copy of each material report, schedule and other document
filed or received by the Company or any of the Company Subsidiaries pursuant to
the requirements of applicable securities laws, the NASD or NASDAQ.
4.4 SHAREHOLDER APPROVAL. As soon as practicable following the
consummation of the Offer, the Company will take all steps necessary to duly
call, give notice of, convene and hold a meeting of its shareholders for the
purpose of voting upon the Company Proposals and for such other purposes as may
be necessary or desirable in connection with effectuating the transactions
contemplated hereby, if such meeting is required. Except as otherwise
contemplated by this Agreement, the Board of Directors of the Company will
recommend to the shareholders of the Company that they approve the Company
Proposals.
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4.5 REASONABLE BEST EFFORTS. Subject to the terms and
conditions herein provided, the Company agrees to use reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, but not limited to, (i) obtaining all Consents from Governmental
Authorities and other third parties required for the consummation of the Offer
and the Merger and the transactions contemplated thereby and (ii) timely making
all necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, the Company agrees to use reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of the Closing set forth herein.
4.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, the Company shall not, and shall use reasonable best efforts to cause
its affiliates not to, issue or cause the publication of any press release or
any other announcement with respect to the Offer or the Merger or the
transactions contemplated hereby without the consent of Parent (such consent not
to be unreasonably withheld or delayed), except where such release or
announcement is required by applicable Law or pursuant to any applicable listing
agreement with, or rules or regulations of, the NASD or NASDAQ, in which case
the Company, prior to making such announcement, will consult with Parent
regarding the same.
4.7 COMPLIANCE. In consummating the transactions contemplated
hereby, the Company shall comply in all material respects with the provisions of
the Securities Exchange Act and the Securities Act and shall comply, and cause
the Company Subsidiaries to comply or to be in compliance, in all material
respects, with, all other applicable Laws.
4.8 NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of the Company Subsidiaries, solicit or encourage the
initiation of (including by way of furnishing information) any inquiries or
proposals regarding any merger, sale of assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving the Company or any Company Subsidiaries that if consummated would
constitute an Alternative Transaction (as defined below) (any of the foregoing
inquiries or proposals being referred to herein as a "COMPANY TAKEOVER
PROPOSAL"). Nothing contained in this Agreement shall prevent the Board of
Directors of the Company from (i) furnishing information to a third party which
has made a BONA FIDE Company Takeover Proposal that is a Superior Proposal (as
defined below) not solicited in violation of this Agreement, provided that such
third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between the Company and an
affiliate of Parent (the "CONFIDENTIALITY AGREEMENT") or (ii) subject to
compliance with the other terms of this SECTION 4.8, considering and negotiating
a bona fide Company Takeover Proposal that is a Superior Proposal not solicited
in violation of this Agreement; provided that, as to each of clauses (i) and
(ii), the Board of Directors of the Company reasonably determines in good faith
(after
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due consultation with independent counsel, which may be Stoel Rives LLP) that it
is or is reasonably likely to be required to do so in order to discharge
properly its fiduciary duties. For purposes of this Agreement, a "SUPERIOR
PROPOSAL" means any proposal made by a party to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, all of the equity
securities of the Company entitled to vote generally in the election of
directors or all the assets of the Company (other than a de minimus amount of
assets not material to the conduct of the Company's business), on terms which
the Board of Directors of the Company reasonably believes (after due
consultation with a financial advisor of nationally recognized reputation, which
may be the Financial Advisor or McDonald Investments) to be more favorable from
a financial point of view to its shareholders than the Offer and the Merger
taking into account at the time of determination all factors relating to such
proposed transaction deemed relevant by the Board of Directors of the Company,
including, without limitation, the financing thereof, the proposed timing
thereof and all other conditions thereto and any changes to the financial terms
of this Agreement proposed by Parent and Purchaser. "ALTERNATIVE TRANSACTION"
means any of (i) a transaction pursuant to which any person (or group of
persons) other than Parent or its affiliates (a "THIRD PARTY") acquires or would
acquire more than 20% of the outstanding shares of any class of equity
securities of the Company, whether from the Company or pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger or other business
combination involving the Company pursuant to which any Third Party acquires
more than 20% of the outstanding equity securities of the Company or the entity
surviving such merger or business combination, (iii) any transaction pursuant to
which any Third Party acquires or would acquire control of assets (including for
this purpose the outstanding equity securities of Company Subsidiaries and
securities of the entity surviving any merger or business combination including
any of the Company Subsidiaries) of the Company or any Company Subsidiaries
having a fair market value (as determined by the Board of Directors of the
Company in good faith) equal to more than 20% of the fair market value of all
the assets of the Company and the Company Subsidiaries, taken as a whole,
immediately prior to such transaction, or (iv) any other consolidation, business
combination, recapitalization or similar transaction involving the Company or
any of the Company Subsidiaries, other than the transactions contemplated by
this Agreement; PROVIDED, HOWEVER, that the term Alternative Transaction shall
not include any acquisition of securities by a broker dealer in connection with
a BONA FIDE public offering of such securities. Notwithstanding anything to the
contrary contained in this SECTION 4.8 or elsewhere in this Agreement, prior to
the Effective Time, the Company may, in connection with a possible Company
Takeover Proposal, refer any third party to this SECTION 4.8 and SECTION 8.7 and
make a copy of this SECTION 4.8 and SECTION 8.7 available to a third party.
(b) The Company shall immediately notify Parent and Purchaser
after receipt of any Company Takeover Proposal, or any modification of or
amendment to any Company Takeover Proposal, or any request for nonpublic
information relating to the Company or any of the Company Subsidiaries in
connection with a Company Takeover Proposal or for access to the properties,
books or records of the Company or any subsidiary by any person or entity that
informs the Board of Directors of the Company or such subsidiary that it is
considering
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making, or has made, a Company Takeover Proposal. Such notice to Parent and
Purchaser shall be made orally and in writing, and shall indicate the identity
of the person making the Company Takeover Proposal or intending to make the
Company Takeover Proposal or requesting non-public information or access to the
books and records of the Company, the terms of any such Company Takeover
Proposal or modification or amendment to a Company Takeover Proposal, and
whether the Company is providing or intends to provide the person making the
Company Takeover Proposal with access to information concerning the Company as
provided in SECTION 4.8(a). The Company shall also immediately notify Parent and
Purchaser, orally and in writing, if it enters into negotiations concerning any
Company Takeover Proposal.
(c) Except as set forth in this SECTION 4.8, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or indicate publicly its intention to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors or
such committee of the Offer or the Company Proposals, (ii) approve or recommend,
or indicate publicly its intention to approve or recommend, any Company Takeover
Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "COMPANY ACQUISITION AGREEMENT") related to any Company Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the Effective Time the
Board of Directors of the Company determines in good faith, after due
consultation with outside counsel, that the failure to do so constitutes or is
reasonably likely to constitute a breach of its fiduciary duties to the
Company's shareholders under applicable law, the Board of Directors of the
Company may (subject to this and the following sentences) approve or recommend a
Superior Proposal and, in connection therewith, withdraw or modify its approval
or recommendation of the Offer or the Company Proposals, but only at a time that
is after the third business day following Parent's receipt of written notice
advising Parent that the Board of Directors of the Company has received a
Superior Proposal and, in the case of any previously received Superior Proposal
that has been materially modified or amended, such modification or amendment and
specifying the material terms and conditions of such Superior Proposal,
modification or amendment.
(d) Nothing contained in this SECTION 4.8 shall prohibit the
Company from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the Securities Exchange Act or from making
any disclosure to the Company's shareholders if, in the good faith judgment of
the Board of Directors of the Company, with the advice of outside counsel,
failure so to disclose could be determined to be a breach of its fiduciary
duties to the Company's shareholders under applicable law; PROVIDED, HOWEVER,
that neither the Company nor its Board of Directors nor any committee thereof
shall, except as permitted by SECTION 4.8(c), withdraw or modify, or indicate
publicly its intention to withdraw or modify, its position with respect to the
Offer or the Company Proposals or approve or recommend, or indicate publicly its
intention to approve or recommend, a Company Takeover Proposal.
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(e) The Company shall advise its officers and directors and
any investment banker or attorney retained by the Company in connection with the
transactions contemplated by this Agreement of the restrictions set forth in
this SECTION 4.8.
4.9 SEC AND SHAREHOLDER FILINGS. The Company shall send to
Parent a copy of all material public reports and materials as and when it sends
the same to its shareholders, the SEC or any state or foreign securities
commission.
4.10 TAKEOVER STATUTES. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "TAKEOVER
STATUTE"), including, without limitation, Sections 60.825 - 60.845 of the Oregon
Code, is or may become applicable to the Offer or the Merger, the Company will
use reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement and the
Company Proposals may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act so as to eliminate or minimize the effects
of any Takeover Statute on any of the transactions contemplated hereby.
4.11 COMPANY OPTIONS AND STOCK PURCHASE PLAN. (a) Prior to the
consummation of the Offer, the Company shall take all action necessary in order
to effectuate the provisions of Section 1.9(a) relating to Company Options.
(b) The Company will not accelerate the exercisability of any
Company Option that by its terms is not exercisable prior to March 1, 2000.
ARTICLE V
ADDITIONAL COVENANTS OF PURCHASER AND PARENT
Parent and Purchaser covenant and agree as follows:
5.1 REASONABLE BEST EFFORTS. Subject to the terms and
conditions herein provided, Parent and Purchaser agree to use reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including, but not limited to, (i) obtaining all Consents from Governmental
Authorities and other third parties required for the consummation of the Offer
and the Merger and the transactions contemplated thereby and (ii) timely making
all necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, Parent and Purchaser agree to use reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions of the Closing set forth
herein.
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5.2 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, Parent and Purchaser shall not, and shall use reasonable best efforts to
cause their affiliates not to, issue or cause the publication of any press
release or any other announcement with respect to the Offer or the Merger or the
transactions contemplated hereby without the consent of the Company (such
consent not to be unreasonably withheld or delayed), except where such release
or announcement is required by applicable Law or pursuant to any applicable
listing agreement with, or rules or regulations of, any stock exchange on which
shares of Guarantor's capital stock are listed or the NASD, or other applicable
securities exchange, in which case Parent, prior to making such announcement,
will consult with the Company regarding the same.
5.3 COMPLIANCE. In consummating the transactions contemplated
hereby, Parent and Purchaser shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and cause their subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Laws.
5.4 EMPLOYEE BENEFIT PLANS. (a) As of the Effective Time,
Parent shall cause the Surviving Corporation to honor and satisfy all
obligations and liabilities with respect to the Employee Plans. Notwithstanding
the foregoing, the Surviving Corporation shall not be required to continue any
particular Employee Plan after the Effective Time, and any Employee Plan may be
amended or terminated in accordance with its terms and applicable Law. To the
extent that any Employee Plan is terminated or amended after the Effective Date
so as to eliminate the future benefits that are being provided with respect to
participants thereunder, Parent shall arrange for each individual who is then a
participant in such terminated or amended plan to participate in a Parent
Benefit Plan ("PARENT BENEFIT PLAN"), to the extent similarly situated employees
of the Parent participate in such Parent Benefit Plan, in accordance with the
eligibility criteria thereof, provided that (i) such participant shall receive
full credit for years of service with the Company or any of the Company
Subsidiaries prior to the Effective Time for all purposes for which such service
was recognized under the applicable Employee Plan, including, but not limited
to, recognition of service for eligibility, vesting (including acceleration
thereof pursuant to the terms of the applicable Employee Plan), entitlement to
commence benefits and, to the extent not duplicative of benefits received under
such Employee Plan, the amount of benefits, (ii) Parent shall cause any and all
pre-existing condition limitations (to the extent such limitations did not apply
to a pre-existing condition under the Employee Plans) and eligibility waiting
periods under any group health plans to be waived with respect to such
participant and his or her eligible dependents and (iii) Parent shall cause the
Parent Benefit Plans that are group welfare plans to provide such participant
with credit towards any applicable deductibles, co-payments and similar
exclusions for expenses incurred prior to the Effective Time.
(b) The provisions of this SECTION 5.4 are not intended to and
do not create rights of third party beneficiaries.
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5.5 INDEMNIFICATION. (a) From and after the Effective Time,
the Surviving Corporation shall indemnify and hold harmless all past and present
officers and directors (the "INDEMNIFIED PARTIES") of the Company and of the
Company Subsidiaries to the full extent such persons may be indemnified by the
Company pursuant to Oregon law, the Company's Second Amended and Restated
Articles of Incorporation and Bylaws, as each is in effect on the date of this
Agreement, for acts and omissions (x) arising out of or pertaining to the
transactions contemplated by this Agreement or arising out of the Offer
Documents or (y) otherwise with respect to any acts or omissions occurring or
arising at or prior to the Effective Time and shall advance reasonable
litigation expenses incurred by such persons in connection with defending any
action arising out of such acts or omissions, PROVIDED that such persons provide
the requisite affirmations and undertaking, as set forth in Section 60.397 of
the Oregon Code.
(b) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring or arising at
or prior to the Effective Time (the "D&O INSURANCE") that is no less favorable
than the existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 200% of the annual premium currently paid by the Company
for such insurance, but in such case shall purchase as much such coverage as
possible for such amount.
(c) This SECTION 5.5 is intended to benefit the Indemnified
Parties and shall be binding on all successors and assigns of Parent, Purchaser,
the Company and the Surviving Corporation. Parent hereby guarantees the
performance by the Surviving Corporation of the indemnified obligations pursuant
to this SECTION 5.5, which guaranty is absolute and unconditional and shall not
be affected by any circumstance whatsoever, including the bankruptcy or
insolvency of the Surviving Corporation or any other person. The Indemnified
Parties shall be intended third-party beneficiaries of this SECTION 5.5.
5.6 VOTING OF COMMON SHARES. At any meeting of the Company's
shareholders held for the purpose of voting upon the Company Proposals, all of
the Common Shares then owned by Parent, Purchaser or any other subsidiaries of
Parent shall be voted in favor of the Company Proposals.
5.7 GUARANTEE OF PARENT. Parent hereby guarantees the payment
by Purchaser of the Per Share Amount and any other amounts payable by Purchaser
pursuant to this Agreement and will cause Purchaser to perform all of its other
obligations under this Agreement in accordance with their terms.
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ARTICLE VI
MERGER CONDITIONS
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
6.1 OFFER. The Offer shall have been consummated; PROVIDED
that this condition shall be deemed to have been satisfied with respect to the
obligation of Parent and Purchaser to effect the Merger if Purchaser fails to
accept for payment or pay for Common Shares pursuant to the Offer in violation
of the terms of the Offer or of this Agreement.
6.2 SHAREHOLDER APPROVAL. If required, the Company Proposals
shall have been approved at or prior to the Effective Time by the requisite vote
of the shareholders of the Company in accordance with the Oregon Code.
6.3 NO INJUNCTION OR ACTION. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or other
Governmental Authority which prohibits or prevents the consummation of the
Merger which has not been vacated, dismissed or withdrawn prior to the Effective
Time. The Company and Parent shall use all reasonable best efforts to have any
of the foregoing vacated, dismissed or withdrawn by the Effective Time.
6.4 GOVERNMENTAL APPROVALS. All Consents of any Governmental
Authority required for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been obtained, except for those
Consents the failure to obtain which will not have a material adverse effect on
the business, assets, condition (financial or other), liabilities or results of
operations of the Surviving Corporation and its subsidiaries taken as a whole.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
shareholders of the Company described herein:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental
Authority shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement and such order, decree or ruling or other action shall have
become final and nonappealable;
(c) by Parent if:
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(i) the Company shall have breached or failed to perform in
any material respect any of its covenants or other agreements contained
in this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within five (5) days after the giving
of written notice thereof to the Company (but not later than the
expiration of the twenty (20) business day period provided for the
Offer under SECTION 1.1(b) hereof);
(ii) any representation or warranty of the Company shall not
have been true and correct when made (without for this purpose giving
effect to qualifications of materiality contained in such
representation and warranty), if such failure to be true and correct,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect;
(iii) any representation or warranty of the Company shall
cease to be true and correct at any later date (without for this
purpose giving effect to qualifications of materiality contained in
such representation and warranty) as if made on such date (other than
representations and warranties made as of a specified date) other than
as a result of a breach or failure to perform by the Company of any of
its covenants or agreements under this Agreement if such failure to be
true and correct, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; PROVIDED, HOWEVER, that
such representation or warranty is incapable of being cured or has not
been cured within five (5) days after the giving of written notice
thereof to the Company (but not later than the expiration of the twenty
(20) business day period provided for the Offer under SECTION 1.1(b)
hereof); PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this SECTION 7.1(c) shall not be available to Parent if
Purchaser or any other affiliate of Parent shall acquire shares of
Common Shares pursuant to the Offer;
(d) by Parent if, whether or not permitted to do so by this
Agreement, (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or Purchaser its approval or recommendation of the Offer or any of the
Company Proposals; (ii) the Board of Directors of the Company or any
committee thereof shall have approved or recommended to the
shareholders of the Company any Company Takeover Proposal or
Alternative Transaction; (iii) the Board of Directors of the Company or
any committee thereof shall have approved or recommended that the
shareholders of the Company tender their Common Shares in any tender or
exchange offer that is an Alternative Transaction; (iv) the Board of
Directors of the Company or any committee thereof shall have taken any
position or make any disclosures to the Company's shareholders
permitted pursuant to SECTION 4.8(e) which has the effect of any of the
foregoing; (v) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions;
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(e) by either Parent or the Company if, as the result of the
failure of the Minimum Condition or any of the other conditions set
forth in Annex I hereto, the Offer shall have terminated or expired in
accordance with its terms without Purchaser having purchased any Common
Shares pursuant to the Offer, PROVIDED that if the failure to satisfy
any conditions set forth in Annex I shall be a basis for termination of
this Agreement under any other clause of this Section 7.1, a
termination pursuant to this clause (e) shall be deemed a termination
under such other clause;
(f) by either Parent or the Company if the Offer shall not
have been consummated on or before February 29, 2000, PROVIDED that the
right to terminate this Agreement pursuant to this SECTION 7.1(f) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the Offer to
be consummated by such time;
(g) by the Company, if Parent or Purchaser shall have breached
or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within five (5) days after the giving
of written notice thereof to Parent; or
(h) by the Company, in order to accept a Superior Proposal,
PROVIDED that the Board of Directors of the Company reasonably
determines in good faith (after due consultation with independent
counsel, which may be Stoel Rives LLP), that it is or is reasonably
likely to be required to accept such proposal in order to discharge
properly its fiduciary duties; the Company has given parent three
business days' advance notice of the Company's intention to accept such
Superior Proposal; the Company shall in fact accept such proposal; the
Company shall have paid the fee and expenses contemplated by SECTION
8.7 hereof; and the Company shall have complied in all respects with
the provisions of Section 4.8.
The party desiring to terminate this Agreement pursuant to the preceding
paragraphs shall give written notice of such termination to the other party in
accordance with SECTION 8.5 hereof.
7.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Offer or the Merger
pursuant to this ARTICLE VII, this Agreement (other than SECTIONS 7.2, 8.1, 8.3,
8.5, 8.6, 8.7, 8.8, 8.10, 8.11, 8.12, 8.14 and 8.15 hereof) shall become void
and of no effect with no liability on the part of any party hereto (or of any of
its directors, officers, employees, agents, legal or financial advisors or other
representatives); PROVIDED, HOWEVER, that no such termination shall relieve any
party hereto from any liability for any willful breach of this Agreement prior
to termination. If this Agreement is terminated as provided herein, each party
shall use all reasonable best efforts to
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redeliver all documents, work papers and other material (including any copies
thereof) of any other party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party furnishing
the same.
ARTICLE VIII
MISCELLANEOUS
8.1 CONFIDENTIALITY. (a) Unless (i) otherwise expressly
provided in this Agreement, (ii) required by applicable Law or any listing
agreement with, or the rules and regulations of, the NASDAQ or any other
applicable securities exchange or the NASD, (iii) necessary to secure any
required Consents as to which the other party has been advised or (iv) consented
to in writing by Parent and the Company, all information (whether oral or
written) and documents furnished in connection herewith together with analyses,
compilations, studies or other documents prepared by such party which contain or
otherwise reflect such information shall be kept strictly confidential by the
Company, Parent, Purchaser and their respective officers, directors, employees
and agents. Prior to any disclosure permitted pursuant to the preceding
sentence, the party intending to make such disclosure shall consult with the
other party regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply with
accounting, SEC and other disclosure obligations imposed by applicable Law. In
the event the transactions contemplated by this Agreement are not consummated,
each party shall return to the other any documents furnished by the other and
all copies thereof that any of them may have made and will hold in confidence
any information obtained from the other party except to the extent (a) such
party is required to disclose such information by Law or such disclosure is
necessary or desirable in connection with the pursuit or defense of a claim, (b)
such information was known by such party prior to such disclosure (and PROVIDED
that, except with respect to information referred to in the following clause
(c), such party shall have advised the other party of such knowledge upon or
promptly after its receipt of such information) or was thereafter developed or
obtained by such party independent of such disclosure or (c) such information is
or becomes generally available to the public other than by breach of this
SECTION 8.1 (or, to such party's knowledge, breach of a confidentiality
agreement with the other party). Prior to any disclosure of information pursuant
to the exception in clause (a) of the preceding sentence, the party intending to
disclose the same shall so notify the party which provided the same in order
that such party may seek a protective order or other appropriate remedy should
it choose to do so.
(b) The Parent and the Company further acknowledge that
certain of the business and activities of each of them is competitive with
business and activities of the other party, and each of them therefore agrees
that it will not use, or seek to obtain any competitive or other business
advantage as a result of, the information or documents so received by it in
connection herewith, such party acknowledging that such use would be unfair and
materially detrimental to the other party, PROVIDED that the provisions of this
SECTION 8.1(b) shall not apply to information referred to in clause (c) of
SECTION 8.1(a) hereof.
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8.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written agreement among the Company, Parent
and Purchaser.
8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Company
on the one hand, or Parent and Purchaser on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent on
the one hand, or the Company on the other hand, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
SECTION 8.3.
8.4 SURVIVAL. The respective representations, warranties,
covenants and agreements of the Company and Parent contained herein or in any
certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time, except for those contained in SECTIONS 1.7,
1.8, 1.9, 1.14, 5.4, 5.5, 5.7 and 8.8 hereof and this SECTION 8.4, which shall
survive beyond the Effective Time.
8.5 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile, receipt confirmed, or on the next business day when
sent by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to the Company, to:
PRAEGITZER INDUSTRIES INC.
19801 S.W. 72nd Avenue
Tualatin, OR 97052
Attention: Matthew J. Bergeron
Telecopy: (503) 454-6266
Confirm: (503) 454-6066
with a copy to:
Stoel Rives LLP
900 S.W. Fifth Avenue
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Suite 2600
Portland, Oregon 97204-1268
Attention: Robert J. Moorman
Telecopy: (503) 220-2480
Confirm: (503) 220-3380
(ii) if to Parent or Purchaser, to:
SIGMA CIRCUITS, INC.
c/o Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Attention: General Counsel
Telecopy: (603) 778-7360
Confirm: (603) 778-9700
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Abbe L. Dienstag, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
8.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto prior to the Effective Time without the
prior written consent of the Company, in the case of a proposed assignment by
Parent or Purchaser, or by Parent, in the case of a proposed assignment by the
Company, except that any Parent and Purchaser may assign its rights, interest
and obligations hereunder to any other wholly owned direct or indirect
subsidiary of Guarantor.
8.7 FEES AND EXPENSES. (a) Except as provided in SECTION
8.7(b) or 8.7(c) hereof, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses.
(b) The Company agrees that if this Agreement is terminated
pursuant to
(i) SECTION 7.1(d);
(ii) SECTION 7.1(h); or
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(iii) SECTION 7.1(e) OR 7.1(f) and, with respect to this
clause (iii), (A) at the time of such termination, there shall be
outstanding a BONA FIDE Company Takeover Proposal which has been made
directly to the shareholders of the Company or has otherwise become
publicly known or there shall be outstanding an announcement by any
credible third party of a BONA FIDE intention to make an Acquisition
Proposal (in each case whether or not conditional and whether or not
such proposal shall have been rejected by the Board of Directors of the
Company) or (B) an Alternative Transaction shall be publicly announced
by the Company or any third party within 12 months following the date
of such termination and such transaction shall at any time thereafter
be consummated on substantially the terms theretofore announced
then the Company shall pay to Parent the sum of (a) $5 million. Any payment
required by this SECTION 8.7(b) shall be made as promptly as practicable but in
no event later than two business days following termination of this Agreement in
the case of clause (i) above, upon termination of this Agreement in the case of
clause (ii) above and, in the case of clause (iii) above, upon consummation of
such Company Takeover Proposal, and shall be made by wire transfer of
immediately available funds to an account designated by Parent.
(c) The Company further agrees that if this Agreement is
terminated pursuant to SECTION 7.1(c)(i) hereof,
(i) the Company will pay to Parent, as promptly as practicable
but in no event later than two business days following termination of
this Agreement, the amount of all documented and reasonable costs and
expenses incurred by Parent, Purchaser and their affiliates (including
but not limited to fees and expenses of counsel and accountants and
out-of-pocket expenses (but not fees) of financial advisors) in an
aggregate amount not to exceed $500,000 in connection with this
Agreement or the transactions contemplated hereby ("PARENT EXPENSES");
and
(ii) in the event that the Company consummates a Company
Takeover Proposal (whether or not solicited in violation of this
Agreement) which is publicly announced within one year from the date of
termination of this Agreement, the Company will pay to Parent the sum
of $5 million, which payment shall be made not later than two business
days following consummation of such Company Takeover Proposal.
(d) The Company further agrees that if this Agreement is
terminated pursuant to SECTION 7.1(c)(ii) hereof, the Company will pay to
Parent, as promptly as practicable but in no event later than two business days
following termination of this Agreement, the Parent Expenses.
8.8 GOVERNING LAW. This Agreement shall be deemed to be made
in, and
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in all respects shall be interpreted, construed and governed by and in
accordance with the laws of, the State of New York.
8.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 INTERPRETATION. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement. As used in this Agreement, (i) the term
"PERSON" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity, (ii)
unless otherwise specified herein, the term "AFFILIATE," with respect to any
person, shall mean and include any person controlling, controlled by or under
common control with such person and (iii) the term "SUBSIDIARY" of any specified
person shall mean any corporation 50 percent or more of the outstanding voting
power of which, or any partnership, joint venture, limited liability company or
other entity 50 percent or more of the total equity interest of which, is
directly or indirectly owned by such specified person.
8.11 ENTIRE AGREEMENT. This Agreement and the documents or
instruments referred to herein including, but not limited to, the Annex(es)
attached hereto and the Company Disclosure Letter referred to herein, which
Annex(es) and Company Disclosure Letter are incorporated herein by reference,
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties with respect to such subject
matter. Notwithstanding the foregoing provisions of this SECTION 8.11, the
Confidentiality Letter shall remain in effect in accordance with its terms.
8.12 SEVERABILITY. (a) In case any provision in this Agreement
shall be held invalid, illegal or unenforceable in a jurisdiction, such
provision shall be modified or deleted, as to the jurisdiction involved, only to
the extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
(b) Parent and the Company agree that the payments to Parent
provided in SECTION 8.7 are fair and reasonable in the circumstances,
considering not only the consideration payable to the holders of Common Shares
in the Offer and the Merger but also the outstanding funded indebtedness
(including capital leases) of the Company and the Company Subsidiaries and
Parent's anticipated costs, including lost opportunity costs, if the
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Offer and Merger are not consummated. If a court of competent jurisdiction shall
nonetheless, by a final, non-appealable judgment, determine that the amount of
such payments exceed the maximum amount permitted by law, then the amount of
such payments shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by such court of competent jurisdiction.
8.13 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties further agree that each party shall
be entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
8.14 THIRD PARTIES. Nothing contained in this Agreement or in
any instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person that is not a party hereto or
thereto or a successor or permitted assign of such a party; PROVIDED HOWEVER,
that the parties hereto specifically acknowledge that the provisions of SECTION
5.5 hereof are intended to be for the benefit of, and shall be enforceable by,
the Indemnified Parties.
8.15 DISCLOSURE LETTER. Parent acknowledges that the Company
Disclosure Letter (i) relates to certain matters concerning the disclosures
required and transactions contemplated by this Agreement, (ii) is qualified in
its entirety by reference to specific provisions of this Agreement, (iii) is not
intended to constitute and shall not be construed as indicating that any such
matter is required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the Company, except
to the extent required by this Agreement.
8.16 JURISDICTION. Each of the parties hereto submits to the
non-exclusive jurisdiction of the state and federal courts of the United States
located in the City of New York, Borough of Manhattan with respect to any claim
or cause of action arising out of this Agreement or the transactions
contemplated hereby.
8.17 WAIVER OF JURY TRIAL. PARENT, PURCHASER AND THE COMPANY
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
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TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
SIGMA CIRCUITS, INC.
By: /s/ Jeffrey D. Mattfolk
---------------------------------
Name: Jeffrey D. Mattfolk
Title: Vice President
T MERGER SUB (OR), INC..
By: /s/ Jeffrey D. Mattfolk
---------------------------------
Name: Jeffrey D. Mattfolk
Title: Vice President
PRAEGITZER INDUSTRIES, INC.
By: /s/ Matthew J. Bergeron
---------------------------------
Name: Matthew J. Bergeron
Title: President and Chief Operating
Officer
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GUARANTEE
Guarantor guarantees each and every representation, warranty, covenant,
agreement and other obligation of Parent and Purchaser, and/or any of their
respective permitted assigns (and where any such representation or warranty is
made to the knowledge of Parent or Purchaser, such guarantee shall be deemed
made to the knowledge of Guarantor), and the full and timely performance of
their respective obligations under the provisions of the foregoing Agreement.
This is a guarantee of payment and performance, and not of collection, and
Guarantor acknowledges and agrees that this guarantee is unconditional, and no
release or extinguishment of Parent's and Purchaser's obligations or liabilities
(other than in accordance with the terms of the Agreement), whether by decree in
any bankruptcy proceeding or otherwise, shall affect the continuing validity and
enforceability of this guarantee, as well as any provision requiring or
contemplating performance by Guarantor.
The provisions of SECTIONS 8.2, 8.3, 8.5, 8.6, 8.8, 8.9, 8.10, 8.11,
8.12, 8.13, 8.14, 8.16 and 8.17 of the Agreement are incorporated herein,
MUTATIS MUTANDIS, except that notices and other communications hereunder to
Guarantor shall be delivered to Tyco International Ltd., The Gibbons Building,
10 Queen Street, Suite 301, Hamilton, Bermuda HM11, Attention: Secretary,
Telecopy No. (441) 295-9647, Confirm No. (441) 292-8674 (with a copy as provided
therefor in Section 8.5).
We understand that the Company is relying on this guarantee in entering
into the Agreement and may enforce this guarantee as if Guarantor were a party
thereto.
TYCO INTERNATIONAL LTD.
By: /s/ Byron S. Kalogerou
----------------------------------
Name: Byron S. Kalogerou
Title: Vice President and Assistant Secretary
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<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Section
Term Where Defined
- ---- -------------
<S> <C>
"1999 Balance Sheet" 2.10
"affiliate" 8.10
"Agreement" the recitals
"Alternative Transaction" 4.8(a)
"arranger liability" 2.23(b)
"Articles of Merger" 1.4
"Closing" 1.5
"Closing Date" 1.5
"Code" 2.15(a)
"Common Option" 1.9(a)
"Common Shares" the recitals
"Company" the recitals
"Company Acquisition Agreement" 4.8(c)
"Company Disclosure Letter" Article II
"Company Financial Statements" 2.8
"Company Intellectual Property Rights" 2.17(b)
"Company Material Contracts" 2.14
"Company Permits" 2.12
"Company Proposals" 1.13(a)
"Company Securities Filings" 2.7
"Company Stock Purchase Plan" 1.9(c)
"Company Subsidiary" 2.1
"Company Takeover Proposal" 4.8(a)
"Company Warrants" 1.9(b)
"Confidentiality Agreement" 4.8(a)
"Consent" 2.5
"Credit Agreements" 2.21
"D&O Insurance" 5.5(b)
"Deferral Agreement" 2.2
"Oregon Code" 1.4
"disqualified person" 2.15(b)
"Dissenting Shares" 1.7(a)
"Effective Time" 1.5
"Employee Plans" 2.15(a)
"Enforceability Exceptions" 2.4
"Environmental Claim" 2.23(e)(i)
"Environmental Laws" 2.23(e)(ii)
"ERISA" 2.15(a)
</TABLE>
-59-
<PAGE>
<TABLE>
<CAPTION>
Section
Term Where Defined
- ----- -------------
<S> <C>
"ERISA Affiliate" 2.15(a)
"excess parachute payments" 2.16(c)
"Exchange Agent" 1.8(a)
"Fairness Opinion" 1.2(a)
"Financial Advisor" 1.2(a)
"Governmental Authority" 2.5
"group" paragraph (h) of Annex I
"Guarantee" the recitals
"Guarantor" the recitals
"HSR Act" 2.5
"Indemnified Parties" 5.5(a)
"Independent Directors" 1.3
"IRS" 2.15(b)
"ISO" 2.15(c)
"Law" 2.6
"leased employee" 2.15(b)
"Liens" 2.21
"Litigation" 2.13
"Material Adverse Effect" 1.17(a)
"Materials of Environmental Concern" 2.23(e)(iii)
"Merger" the recitals
"Minimum Condition" the introductory paragraph
of Annex I
"multiemployer plan" 2.15(b)
"NASD" 4.2
"NASDAQ" 2.5
"Notes" 2.2
"Offer" the recitals
"Offer Documents" 1.1(c)
"Offer to Purchase" 1.1(c)
"Oregon Code" 1.4
"Parent" the recitals
"Parent Benefit Plan" 5.4(a)
"Parent Expenses" 8.7(c)(i)
"Parent Information" 3.5
"party in interest" 2.15(b)
"Per Share Amount" the recitals
"person" 8.10
"person/group" paragraph (h) of Annex I
"Preferred Shares" 2.2
"Proxy Statement" 1.13(a)
</TABLE>
-60-
<PAGE>
<TABLE>
<CAPTION>
Section
Term Where Defined
- ---- --------------
<S> <C>
"Purchaser" the recitals
"SEC" 1.1(b)
"Securities Act" 2.7
"Securities Exchange Act" 1.1(a)
"Schedule 14D-1" 1.1(c)
"Schedule 14D-9" 1.2(b)
"subsidiary" 8.10
"Superior Proposal" 4.8(a)
"Surviving Corporation" 1.4
"Surviving Corporation Common Stock" 1.6(c)
"Takeover Statute" 4.10
"Tax" 2.16(b)
"tax-exempt use property" 2.16(c)
"Tax Return" 2.16(b)
"Third Party" 4.8(a)
</TABLE>
-61-
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Offer, Purchaser shall not be required to accept for payment or, subject
to any applicable rules and regulations of the SEC, including Rule 14e-1(c)
promulgated under the Securities Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Common Shares promptly after
termination or withdrawal of the Offer), pay for, and (subject to any such rules
or regulations) may delay the acceptance for payment of any tendered Common
Shares and (except as provided in this Agreement) amend or terminate the Offer
as to any Common Shares not then paid for if (i) the condition that there shall
be validly tendered and not withdrawn prior to the expiration of the Offer a
number of Common Shares which represents at least 51% of the total number of
issued and outstanding Common Shares on a fully diluted basis (excluding,
however, shares of common stock issuable (x) upon exercise of conversion rights
pursuant to the Deferral Agreement and (y) upon exercise of Company Options that
are not exercisable prior to March 1, 2000), shall not each have been satisfied
(the "MINIMUM CONDITION") or (ii) any applicable waiting period under the HSR
Act shall not have expired or been terminated prior to the expiration of the
Offer or (iii) at any time after the date of this Agreement and before the time
of payment for any Common Shares (whether or not any Common Shares have
theretofore been accepted for payment or paid for pursuant to the Offer), any of
the following conditions exists:
(a) there shall be in effect an injunction or other order,
decree, judgment or ruling by a Governmental Authority of competent jurisdiction
or a Law shall have been promulgated, or enacted by a Governmental Authority of
competent jurisdiction which in any such case (i) restrains or prohibits the
making or consummation of the Offer or the consummation of the Merger, (ii)
prohibits or restricts the ownership or operation by Parent (or any of its
affiliates or subsidiaries) of any portion of the Company's business or assets,
or Guarantor's business or assets relating to the printed circuit board
business, which is material to the printed circuit board of all such entities
taken as a whole or which would substantially deprive Parent and/or its
affiliates or subsidiaries of the benefit of ownership of the Company's business
or assets, or compels Parent (or any of its affiliates or subsidiaries) to
dispose of or hold separate any portion of the Company's business or assets, or
Guarantor's business or assets relating to the printed circuit board business,
which is material to the printed circuit board business of all such entities
taken as a whole or which would substantially deprive Parent and/or its
affiliates or subsidiaries of the benefit of ownership of the Company's business
or assets, (iii) imposes material limitations on the ability of Purchaser
effectively to acquire or to hold or to exercise full rights of ownership of the
Common Shares, including, without limitation, the right to vote Common Shares
purchased by Purchaser pursuant to the Offer or the Merger on all matters
properly presented to the shareholders of the Company, or (iv) imposes any
material limitations on the ability of Parent and/or its affiliates or
subsidiaries effectively to control in any material respect the business and
operations of the Company, or (v) seeks to materially restrict any future
business activity by Guarantor (or any of its affiliates) relating to the
printed circuit board business, including,
A-1
<PAGE>
without limitation, by requiring the prior consent of any person or entity
(including any Governmental Authority) to future transactions by Guarantor (or
any of its affiliates); or
(b) there shall have been instituted, pending or threatened an
action by a Governmental Authority seeking to restrain or prohibit the making or
consummation of the Offer, the consummation of the Merger or to impose any other
restriction, prohibition or limitation referred to in the foregoing paragraph
(a); or
(c) this Agreement shall have been terminated by the Company
or Parent in accordance with its terms; or
(d) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in the Common Shares on NASDAQ, (ii) a
declaration of a banking moratorium or any general suspension of payments in
respect of banks in the United States or (iii) in the case of any of the
foregoing existing at the time of the execution of this Agreement, a material
acceleration or worsening thereof; or
(e) Parent and the Company shall have agreed that Purchaser
shall amend the Offer to terminate the Offer or postpone the payment for Common
Shares pursuant thereto; or
(f) any of the representations and warranties made by the
Company in the Merger Agreement shall not have been true and correct when made,
or shall thereafter have ceased to be true and correct as if made as of such
later date (other than representations and warranties made as of a specified
date) (in each case without for this purpose giving effect to qualifications of
materiality contained in such representation and warranty), or the Company shall
not have performed each obligation and agreement and complied with each covenant
to be performed and complied with by it under this Agreement, if such failure to
be true and correct or such failure to perform, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect,
PROVIDED, however, that such breach or failure to perform is incapable of being
cured or has not been cured within 5 days after the giving of written notice
thereof to the Company, PROVIDED, however, that no such 5-day cure period shall
require extension of the Offer beyond the twenty (20) business days provided
under SECTION 1.1(b) of the Agreement; or
(g) the Company's Board of Directors shall have modified or
amended its recommendation of the Offer in any manner adverse to Parent or shall
have withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Company Takeover Proposal or shall have resolved to do any of
the foregoing; or
(h) (i) any corporation, entity or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act) ("PERSON/GROUP"), other than
Parent and Purchaser and any person/group identified in the Company's Proxy
Statement dated October 25, 1999), shall
A-2
<PAGE>
have acquired beneficial ownership of more than 15% of the outstanding Common
Shares, or shall have been granted any options or rights, conditional or
otherwise, to acquire a total of more than 15% of the outstanding Common Shares
and which, in each case, does not tender the Common Shares beneficially owned by
it in the Offer; (ii) any new group shall have been formed which beneficially
owns more than 15% of the outstanding Common Shares and which does not tender
the Common Shares beneficially owned by it in the Offer; or (iii) any
person/group (other than Parent or one or more of its affiliates) shall have
entered into an agreement in principle or definitive agreement with the Company
with respect to a tender or exchange offer for any Common Shares or a merger,
consolidation or other business combination with or involving the Company; or
(i) any change, development, effect or circumstance shall have
occurred or be threatened that would reasonably be expected to have a Material
Adverse Effect with respect to the Company; or
(j) the Company shall commence a case under any chapter of
Title XI of the United States Code or any similar law or regulation; or a
petition under any chapter of Title XI of the United States Code or any similar
law or regulation is filed against the Company which is not dismissed within 2
business days.
The foregoing conditions are for the sole benefit of Parent
and Purchaser and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to any such condition and may be waived by Parent or
Purchaser, in whole or in part, at any time and from time to time, in the sole
discretion of Parent. The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any right, the
waiver of such right with respect to any particular facts or circumstances shall
not be deemed a waiver with respect to any other facts or circumstances, and
each right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
Should the Offer be terminated pursuant to the foregoing
provisions, all tendered Common Shares not theretofore accepted for payment
shall forthwith be returned to the tendering shareholders.
A-3
<PAGE>
Exhibit 99(c)(3)
SHAREHOLDER'S AGREEMENT
THIS SHAREHOLDER'S AGREEMENT is made and entered into as of this 26th
day of October 1999, among SIGMA CIRCUITS, INC., Inc., a Delaware corporation
("PARENT"), T MERGER SUB (OR), INC., an Oregon corporation and a wholly owned
subsidiary of Parent ("PURCHASER"), and ROBERT L. PRAEGITZER (the
"SHAREHOLDER").
WHEREAS the Shareholder desires that PRAEGITZER INDUSTRIES INC., Inc.,
an Oregon corporation (the "COMPANY"), Parent and Purchaser enter into an
Agreement and Plan of Merger dated as of the date hereof (as the same may be
amended or supplemented, the "MERGER AGREEMENT") with respect to the merger of
Purchaser with and into the Company (the "MERGER"); and
WHEREAS the Shareholder is executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Purchaser to enter into and
execute, the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by
Parent and Purchaser of the Merger Agreement and the mutual covenants,
conditions and agreements contained herein and therein, the parties agree as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Shareholder represents
and warrants to Parent and Purchaser as follows:
(a) The Shareholder is the record and beneficial owner of the
number of shares of Common Stock of the Company (the "COMPANY COMMON STOCK"),
separately identified as such, set forth opposite the Shareholder's name in
SCHEDULE A hereto (as may be adjusted from time to time pursuant to Section 5,
the Shareholder's "SHARES"). Except for the Shareholder's Shares and any other
shares of Company Common Stock subject hereto, the Shareholder is not the record
or beneficial owner of any shares of Company Common Stock.
(b) This Agreement has been duly authorized, executed and
delivered by the Shareholder and constitutes the legal, valid and binding
obligation of the Shareholder, enforceable against the Shareholder in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally. Neither the execution and delivery
of this Agreement nor the consummation by the Shareholder of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Shareholder is a party or
bound or to which the Shareholder's Shares are subject. To the best of the
Shareholder's knowledge, consummation by the Shareholder of the
1
<PAGE>
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to the Shareholder or the
Shareholder's Shares.
(c) The Shareholder's Shares and the certificates representing
such Shares are now and at all times during the term hereof will be held by the
Shareholder, or by a nominee or custodian for the benefit of the Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder or as
listed on Annex I annexed hereto.
(d) Except for fees payable to Adams, Harkness & Hill, Inc.
and McDonald Investments, Inc., no broker, investment banker, financial adviser
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission from Parent, Purchaser or the Company in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Shareholder.
(e) The Shareholder understands and acknowledges that Parent
is entering into, and causing Purchaser to enter into, the Merger Agreement in
reliance upon the Shareholder's execution and delivery of this Agreement. The
Shareholder acknowledges that the irrevocable proxy set forth in Section 4 is
granted in consideration for the execution and delivery of the Merger Agreement
by Parent and Purchaser.
SECTION 2. AGREEMENT TO TENDER OR SELL. (a) The Shareholder hereby
agrees that it shall tender his Shares into the Offer (as defined in the Merger
Agreement) and that it shall not withdraw any Shares so tendered (it being
understood that the obligation contained in this sentence is unconditional);
PROVIDED, HOWEVER, that if the Shareholder is unable to tender any Shares that
are pledged to KeyBank National Association ("KEYBANK"), as set forth on
Annex I, the Shareholder shall not be obligated to tender such Shares; PROVIDED
FURTHER that the Shareholder shall sell such Shares to Purchaser, and Purchaser
shall purchase such Shares from Shareholder at the Per Share Amount prior to the
Effective Time promptly upon termination of the pledge agreements between the
Shareholder and KeyBank relating to such Shares. Purchaser hereby agrees that,
if the Offer is consummated, it will satisfy the liabilities secured by the
pledge of Shares to KeyBank prior to the Effective Time.
(b) The Shareholder shall tender his Shares (other than the Shares
pledged to KeyBank) not later than fourteen business days following commencement
of the Offer, other than with respect to the Shares subject to the CBL Insured
Credit Facility Agreement (the "CBL AGREEMENT") referred to on Annex I which
shall be tendered not later than one business day prior to the initially
scheduled expiration of the Offer; PROVIDED, HOWEVER, that if the Shares subject
to the CBL Agreement are not tendered as aforesaid, any damages of Purchaser
shall be limited to $5,000,000.
2
<PAGE>
SECTION 3. COVENANTS. The Shareholder agrees with, and covenants to,
Parent and Purchaser as follows:
(a) The Shareholder shall not, except as contemplated by the
terms of this Agreement, (i) transfer (the term "TRANSFER" shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of the
Shareholder's Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares except with respect to election of directors at the Company's annual
meeting, (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby.
(b) Subject to Section 8, the Shareholder shall not, nor shall
it permit any investment banker, attorney or other adviser or representative of
the Shareholder to, directly or indirectly, (i) solicit, initiate or encourage
the submission of, any Acquisition Proposal (as defined in the Merger Agreement)
or (ii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by an investment banker, attorney or other adviser or
representative of the Shareholder, whether or not such person is purporting to
act on behalf of the Shareholder or otherwise, shall be deemed to be a violation
of this Section 3(b) by the Shareholder.
SECTION 4. GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(a) Subject to the provisions of the pledge agreements with
Keybank, the Shareholder hereby irrevocably grants to, and appoints, Parent and
Mark A. Belnick, and any other individual who shall hereafter be designated by
Parent, the Shareholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of the Shareholder, to vote
the Shareholder's Shares, or grant a consent or approval in respect of such
Shares, at any meeting of shareholders of the Company or at any adjournment
thereof or in any other circumstances upon which their vote, consent or other
approval is sought, against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, joint venture, recapitalization,
dissolution, liquidation or winding up of or by the Company and (ii) any
amendment of the Company's Articles of Incorporation or By-laws or other
proposal or transaction (including any consent solicitation to remove or elect
any directors of the Company) involving the Company or any of its subsidiaries
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, or result in
3
<PAGE>
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under or with respect to, the Offer, the Merger, the
Merger Agreement or any of the other transactions contemplated by the Merger
Agreement (each of the foregoing in clause (i) or (ii) above, a "COMPETING
TRANSACTION").
(b) Subject to the provisions of the pledge agreements with
KeyBank, the Shareholder represents that any proxies heretofore given in respect
of the Shareholder's Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy
set forth in this Section 4 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Shareholder under this Agreement. The
Shareholder hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. The Shareholder hereby
ratifies and confirms all that such irrevocable proxy may lawfully do or cause
to be done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 60.231 of the Oregon
Business Corporation Act (the "CORPORATION LAW").
SECTION 5. CERTAIN EVENTS. The Shareholder agrees that this Agreement
and the obligations hereunder shall attach to the Shareholder's Shares and shall
be binding upon any person or entity to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including
without limitation the Shareholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Company Common Stock, or the acquisition of additional
shares of Company Common Stock or other securities or rights of the Company by
any Shareholder, the number of Shares listed on Schedule A beside the name of
the Shareholder shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Company Common
Stock or other securities or rights of the Company issued to or acquired by the
Shareholder.
SECTION 6. STOP TRANSFER. The Company agrees with, and covenants to,
Parent that the Company shall not register the transfer of any certificate
representing any Shareholder's Shares, unless such transfer is made to Parent or
Purchaser or otherwise in compliance with this Agreement.
SECTION 7. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action the acquisition of Company Common Stock by
Parent and Purchaser and the other transactions contemplated by this Agreement
and the Merger Agreement, so that by the execution and delivery hereof Parent or
Purchaser would become, or could reasonably be expected to become, an
"Interested shareholder" with whom the Company would be
4
<PAGE>
prevented for any period pursuant to Section 60.825 - 60.845 of the Corporation
Law from engaging in any "Affiliated transaction" (as such terms are defined in
Section 60.825 of the Corporation Law) then this Agreement shall be void and
unenforceable until such time as such authorization and approval shall have been
duly and validly obtained.
SECTION 8. SHAREHOLDER CAPACITY. The Shareholder does not make any
agreement or understanding in his capacity as director or officer of the
Company. The Shareholder signs solely in his capacity as the record holder and
beneficial owner of Shareholder's Shares and nothing herein shall limit or
affect any actions taken by the Shareholder in his capacity as an officer or
director of the Company to the extent specifically permitted by the Merger
Agreement.
SECTION 9. FURTHER ASSURANCES. The Shareholder shall, upon request of
Parent or Purchaser execute and deliver any additional documents and take such
further actions as may reasonably be deemed by Parent or Purchaser to be
necessary or desirable to carry out the provisions hereof and to vest the power
to vote the Shareholder's Shares as contemplated by Section 4 in Parent and the
other irrevocable proxies described therein.
SECTION 10. TERMINATION. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Merger Agreement is terminated in accordance with its terms or (b) the
date that Parent or Purchaser shall have purchased and paid for the Shares of
the Shareholder pursuant to Section 2; PROVIDED, HOWEVER, that the termination
of this Agreement shall not relieve any party of liability for breach of this
Agreement prior to termination.
SECTION 11. PUBLIC ANNOUNCEMENTS. The Shareholder will consult with
Parent before issuing, and provide Parent with the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and the Merger Agreement, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 12. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Parent or
Purchaser, to the address set forth in Section 8.5 of the Merger Agreement; and
(ii) if to a
5
<PAGE>
Shareholder, to the address set forth on Schedule A hereto, or such other
address as may be specified in writing by the Shareholder.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
Parent, Purchaser and the Shareholder and delivered to Parent, Purchaser and the
Shareholder.
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the New York and, to the extent expressly provided
herein, the Corporation Law, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except by laws of descent. Any assignment in
violation of the foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or
the application thereof to any circumstance, shall, to any event, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
(i) The Shareholder agrees that irreparable damage would occur
and that Parent and Purchaser would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Parent and Purchaser shall be entitled to an injunction
or injunctions to prevent breaches by any Shareholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement. Each of the
parties hereto (i) consents to submit such party to the personal jurisdiction of
any Federal court located in the State of New York in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby, and
(ii) agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court.
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<PAGE>
The prevailing party in any judicial action shall be entitled to receive from
the other party reimbursement for the prevailing party's reasonable attorneys'
fees and disbursements, and court costs.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
7
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Shareholder have
caused this Agreement to be duly executed and delivered as of the date first
written above.
/s/ Robert L. Praegitzer
------------------------
Robert L. Praegitzer,
Shareholder
SIGMA CIRCUITS, INC.
By: /s/ Jeffrey D. Mattfolk
-----------------------
Name: Jeffrey D. Mattfolk
Title: Vice President
T MERGER SUB (OR), INC.
By: /s/ Jeffrey D. Mattfolk
-----------------------
Name: Jeffrey D. Mattfolk
Title: Vice President
ACKNOWLEDGED AND AGREED
TO AS TO SECTION 6:
PRAEGITZER INDUSTRIES INC.
By: /s/ Matthew J. Bergeron
---------------------------------------
Name: Matthew J. Bergeron
Title: President and Chief Operating Officer
8
<PAGE>
SCHEDULE A
Robert L. Praegitzer 8,119,375 shares outstanding
19801 SW 72nd Avenue 125,000 shares issuable upon
Tualatin, Oregon 97062 exercise of options
9
<PAGE>
ANNEX I TO
SHAREHOLDER'S AGREEMENT
1. An aggregate of 2,656,500 shares of Company Common Stock have been pledged to
Keybank National Association ("Keybank") pursuant to two Pledge Agreements dated
June 11, 1999 between Mr. Praegitzer and Keybank.
2. 2,900,000 shares of Company Common Stock are subject to the CBL Insured
Credit Facility Agreement dated April 21, 1998 between Mr. Praegitzer and Credit
Bancorp Limited.
3. 700,000 shares of Company Common Stock are subject to a margin account
agreement with Merrill Lynch.
4. 1,619,875 shares of Company Common Stock are subject to a margin account
agreement with EVEREN Securities.
10
<PAGE>
[LOGO]
April 21, 1999
PERSONAL & CONFIDENTIAL
- -----------------------
Mr. Matthew J. Bergeron
President and Chief Operating Officer
Praegitzer Industries, Inc.
1270 SE Monmouth Cutoff
Dallas, OR 97338
Dear Matt:
We are pleased to confirm the arrangements under which Adams, Harkness &
Hill, Inc. ("AH&H") has today been engaged by Praegitzer Industries, Inc. (the
"Company") to provide general financial advisory services in connection with the
possible sale of the Company.
During the term of its engagement, AH&H will provide financial advice and
assistance in connection with this potential transaction, which may include
searching for acceptable purchasers, advising and assisting the Company in
evaluating the various structures and forms of any purchase, assisting in the
evaluation of offers and assisting the Company in negotiating the financial
aspects of the transaction.
As consideration for AH&H's services, the Company agrees to pay AH&H a
transaction fee (the "Transaction Fee") of (1.0% of the Transaction Value less
$350,000 less any remaining Expense Credit) x 40.0% according to the terms set
forth below. The mechanics of this calculation are illustrated below in Example
Fee Calculation assuming a $200,000,000 Transaction Value:
EXAMPLE FEE CALCULATION
-----------------------
<TABLE>
<CAPTION>
CALCULATION ITEM AMOUNT
----------------------------------------- ------------------
<S> <C>
1% of Transaction Value $2,000,000
Less $350,000 ($350,000)
Less remaining Expense Credit ($25,000)*
-----------
Remainder after deductions $1,625,000
Times 40.0% 40.0%
-----------
AH&H Fee $650,000
-----------
-----------
</TABLE>
* Example amount representing remaining Expense Credit
As shown above, the $125,000 paid to McDonald Investments Inc. under its
December 30, 1998 engagement shall be credited first, against all out-of-pocket
expenses incurred in connection with the performance of duties under this
agreement and second, against any Transaction Fees ("Expense Credit"). Expenses
exceeding $125,000 in the aggregate shall not be reimbursed by the Company.
For purposes of this agreement, the term "Transaction Value" means (i)
the total amount of cash paid, directly or indirectly, for the assets, business,
or capital stock of the Company; (ii) the fair market value of any assets,
securities, or other property or rights transferred, directly or indirectly, in
payment for the assets, business or stock of the Company (including, without
limitation, payments to be made under non-competition or similar arrangements
and any deferred or contingent payments), except that debt instruments
<PAGE>
Praegitzer Industries, Inc.
April 21, 1999
Page 2 of 4
will be valued at the face amount thereof; (iii) the principal amount of any
indebtedness for borrowed money appearing on the most recent balance sheet of
the Company prior to the consummation of the transaction; and (iv) the aggregate
amount of any dividends or other distributions declared by the Company with
respect to its stock after the date hereof, other than normal recurring cash
dividends in amounts not materially greater than currently paid. If, in lieu of
receiving all or any portion of the type of consideration payable to the other
shareholders of the Company in connection with a transaction, any shareholder
directly or indirectly retains an ownership interest in the Company or directly
or indirectly acquires an ownership interest in the corporation or other entity
surviving or resulting from the transaction, the Transaction Value shall be
calculated by assuming that such shareholder had sold its entire ownership
interest in the Company and received in exchange therefor an amount per share
equal to that received by the Company or the other shareholders of the Company,
as the case may be, in the transaction.
For purposes of calculating the Transaction Fee, the fair market value of
securities for which there is an established trading market will be the closing
sale price of the securities on the trading day preceding the date of the
closing of the transaction. The fair market value of any assets, securities,
property, or rights (other than as provided above) will be mutually agreed by
AH&H and the Company. If the parties cannot agree upon the fair market value of
such assets, securities, property, or rights, they will choose a qualified
appraiser of national standing to conclusively determine, at the Company's
expense, such fair market value. Upon request, the Company will make available
to AH&H any information available to it for purposes of calculating the amount
of any component of the Transaction Value.
The Transaction Fee will become payable by the Company upon consummation
of (i) any merger, consolidation, reorganization, recapitalization or other
transaction or series of related transactions pursuant to which the Company is
acquired by or combined with another person or entity or (ii) the acquisition,
directly or indirectly, by another person or entity, in a single transaction or
series of related transactions, of (a) all or a substantial portion of the
assets or business of Company or (b) securities representing 35% or more of the
total voting power of the Company in the election of Directors.
In order to coordinate our efforts to effect a transaction satisfactory
to the Company, the Company agrees that it and its directors and executive
officers will promptly inform AH&H of any inquiry they may receive concerning
the availability of all or a portion of the stock or assets of the Company for
purchase. During the period of AH&H's engagement, neither the Company nor any of
its directors or executive officers will initiate any discussions with respect
to a sale of the Company without first consulting AH&H.
In connection with engagements such as this, it is our policy to receive
indemnification. The Company agrees to the provisions with respect to AH&H's
indemnity and other matters set forth in EXHIBIT A, Indemnification Provisions,
which is incorporated by reference into this letter.
This agreement may be terminated with or without cause by AH&H or the
Company at any time upon receipt of written notice by the other party to that
effect. Upon termination of the agreement, neither party will have any
liability or continuing obligation to the other, except that: (i) the
provisions of EXHIBIT A to this agreement will survive any such termination;
and (ii) if a sale of the Company is consummated within twelve months of the
termination of AH&H's engagement or if a definitive agreement with respect to
such a sale which is subsequently consummated is entered into during such
period, the Company will remain obligated to pay AH&H the Transaction Fee in
accordance with the terms of this agreement.
The Company will provide AH&H with all information concerning the Company
that AH&H reasonably deems appropriate in connection with its engagement and
will provide AH&H with access to the Company's officers, directors, and
advisors. All such information concerning the Company will be true and accurate
in all material respects and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances under which such statements
are made. The Company acknowledges that AH&H will be using and relying upon the
accuracy and completeness of the information supplied by the Company and its
officers in connection with its engagement without independent verification.
<PAGE>
Praegitzer Industries, Inc.
April 21, 1999
Page 3 of 4
As you know, AH&H is a full service securities firm and as such may from
time to time effect transactions for its own account or the account of
customers, and hold positions in securities or options on securities of
companies which may be the subject of the engagement contemplated by this
agreement.
The Company represents that it is a sophisticated business enterprise
that has retained AH&H for the limited purposes set forth in this agreement, and
the parties acknowledge and agree that their respective rights and obligations
are contractual in nature. Each party disclaims any intention to impose
fiduciary obligations on the other by virtue of the engagement contemplated by
this agreement. This agreement is solely for the benefit of AH&H, the Company
and each of their respective officers, directors, employees and agents, and any
person controlling them within the meaning of the Securities Act of 1933, as
amended, and the respective legal representatives, successors and assigns of
AH&H and the Company, and no other person shall acquire or have any right under
or by virtue of this agreement.
No fee payable to any other financial advisor by the Company or any other
company in connection with the subject matter of this engagement shall reduce or
otherwise affect any fee payable hereunder to AH&H.
This agreement may not be amended or modified except in writing and shall
be governed by and construed in accordance with the laws of the State of Oregon,
without regard to principles of conflicts of laws. Furthermore, this letter
supersedes any prior agreements between AH&H and the Company.
If this letter accurately sets forth the understanding between us, please
sign the enclosed copy of this letter below and return it to AH&H, at which
time this letter will become a mutually binding obligation.
Very truly yours,
ADAMS, HARKNESS & HILL, INC.
/s/ Theodore L. Stebbins
----------------------------------
Theodore L. Stebbins
Managing Director
Agreed to as of the above date:
/s/ Matthew J. Bergeron
- ------------------------------------------
Mr. Matthew J. Bergeron
President and Chief Operating Officer
Praegitzer Industries, Inc.
<PAGE>
Praegitzer Industries, Inc.
April 21, 1999
Page 4 of 4
EXHIBIT A
Indemnification Provisions
In the event that Adams, Harkness & Hill, Inc. ("AH&H") becomes
involved in any capacity, other than as a plaintiff, in any action,
proceeding or investigation brought by or against any person, including
stockholders of the Company, in connection with any matter related to the
assignment described in this letter, the Company periodically will reimburse
AH&H for its legal and other expenses (including the cost of any
investigation and preparation) reasonably incurred in connection therewith;
PROVIDED, HOWEVER, that if it is found in any such action, proceeding or
investigation that any loss, claim, damage or liability of AH&H has resulted
from the gross negligence or bad faith of AH&H in performing the services
which are the subject of this letter, AH&H shall repay such portion of the
reimbursed amounts that is attributable to expenses incurred in relation to
the act or omission of AH&H which is the subject of such funding. The
Company also will indemnify and hold AH&H harmless against any losses,
claims, damages or liabilities to any such person in connection with any
matter related to the assignment described in this letter, except to the extent
that any such loss, claim, damage or liability results from the gross
negligence or bad faith of AH&H in performing the services that are the
subject of this letter. If for any reason the foregoing indemnification is
unavailable to AH&H or insufficient to hold it harmless, then the Company
shall contribute to the amount paid or payable by AH&H as a result of such
loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative economic interests of the Company and its stockholders
on the one hand and AH&H on the other hand in the matters contemplated by
this letter as well as the relative fault of the Company and AH&H with
respect to such loss, claim, damage or liability and any other relevant
equitable considerations; PROVIDED, HOWEVER, that in no event shall AH&H be
required to contribute any amounts in excess of the fees received by it
hereunder. The Company shall be liable for any settlement of any claim
against AH&H made with the Company's written consent, which consent shall not
unreasonably be withheld, and the Company shall not, without the prior
written consent of AH&H, settle or compromise any claim or permit a default
or consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent includes, as an unconditional term thereof,
the giving by the claimant to AH&H of any unconditional release from any and
all liability in respect of such claim. AH&H shall have the right to retain
counsel of its own choice to represent it in connection with any matter as to
which the indemnity, expense reimbursement and contribution provisions apply.
The reimbursement, indemnity and contribution obligations of the Company
under this paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions to any
affiliate of AH&H and the directors, agents, employees and controlling
persons (if any), as the case may be, of AH&H or any such affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns,
heirs, and personal representatives of the Company, AH&H, any such affiliate
and any such person. The indemnity obligations of the Company hereunder
shall not extend to any affiliate of AH&H or to the directors, agents,
employees, or controlling persons (if any), as the case may be, of AH&H or
any such affiliate to the extent that any loss, claim, damage or liability
results from the gross negligence or bad faith of AH&H or any such other
person in performing the services which are the subject of the letter. The
Company also agrees that neither AH&H nor any of such affiliates, directors,
agents, employees or controlling persons shall have any liability to the
Company and its stockholders for or in connection with any matter referred to
in this letter except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross
negligence or bad faith of AH&H in performing the services that are the
subject of this letter. The provisions of this EXHIBIT A shall survive any
termination or completion of the engagement provided by this letter agreement
and this letter agreement shall be governed by and construed in accordance
with the laws of the State of Oregon without regard to principles of
conflicts of laws.
<PAGE>
Adams, Harkness & Hill, Inc.
[Logo]
September 27, 1999
PERSONAL & CONFIDENTIAL
- -----------------------
Mr. Matthew J. Bergeron
President and Chief Operating Officer
Praegitzer Industries, Inc.
19801 SW 72nd Avenue
Tualatin, OR 97062
Dear Matt:
We are pleased to confirm the arrangements under which Adams, Harkness &
Hill, Inc. ("AH&H") has today been engaged by Praegitzer Industries, Inc. (the
"Company") to render an opinion (the "Opinion") to the Board of Directors of the
Company as to the fairness, from a financial point of view, of the consideration
to be received by the stockholders of the Company (or, in the case of a
stock-for-stock transaction, the exchange ratio specified in the agreement
relating to such transaction) in connection with a proposed sale of the Company
(the "Transaction").
At the Company's request, AH&H will undertake a study to enable it to
render the Opinion to the Board of Directors of the Company. An oral summary
of the Opinion (the "Oral Opinion") will be presented to the Board of
Directors of the Company at its meeting called to consider the sale
transaction (the "Transaction Meeting"). AH&H's written Opinion will be dated
as of a date reasonably proximate to the date of the definitive agreement
between the Company and the purchaser. It is understood that the Opinion, if
requested, will be in the form customarily provided by AH&H and will be
subject to customary assumptions and qualifications. The Opinion will be
provided solely for the information and assistance of the Board of Directors
and senior management of the Company in connection with its consideration of
the Transaction and is not to be used, circulated, quoted or otherwise
referred to (either in its entirety or through excerpts or summaries) for any
other purposes, unless (i) it is to be filed with or referred to in any
registration statement, proxy statement or any other document filed with the
Securities and Exchange Commission and it is included in full (and AH&H has
had an opportunity, if it deems it appropriate, to update the Opinion to the
date of the document in which it is included) and you have received AH&H's
prior written consent with respect to all of the references to it and/or the
Opinion included in any such registration statement, proxy statement or any
other document filed with the Securities and Exchange Commission or (ii) it
is to be introduced into evidence or referred to in connection with any
litigation relating to the transaction to which the Opinion relates, in which
case the Company will give AH&H written notice at least three (3) business
days in advance of such introduction or reference.
As consideration for AH&H's services, the Company agrees to pay AH&H a fee
for its services in rendering any Opinion of $350,000, promptly upon delivery of
any Oral Opinion. It is understood and agreed that an additional fee in the same
amount will be payable in connection with each Opinion rendered by AH&H with
respect to a Transaction, irrespective of the conclusion expressed in any such
Opinion.
The Company agrees to reimburse AH&H for all reasonable out-of-pocket
expenses incurred in connection with the performance of its duties under this
agreement, including but not limited to, reasonable fees and expenses of legal
counsel retained by it.
The Company agrees to the provisions with respect to AH&H's indemnity and
other matters set forth in EXHIBIT A, Indemnification Provisions, which is
incorporated by reference into this letter.
<PAGE>
Praegitzer Industries, Inc.
September 27, 1999
Page 2
This agreement may be terminated with or without cause by AH&H or the
Company at any time prior to the delivery of the Oral Opinion upon receipt of
written notice by the other party to that effect. Upon termination of the
agreement, neither party will have any liability or continuing obligation to
the other, except that the provisions of EXHIBIT A, attached to this
agreement, will survive any such termination.
The Company will provide AH&H (and will request that each prospective
purchaser with which the Company enters into negotiations provide AH&H) with
such information as AH&H reasonably deems appropriate in connection with its
engagement and will provide AH&H with access to the Company's officers,
directors and advisors. All such information concerning the Company will be
true and accurate in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in light of the
circumstances under which such statements are made. The Company acknowledges
that AH&H: (i) will be using and relying upon the accuracy and completeness
of the publicly available information or information supplied by or on behalf
of the Company and any purchaser in connection with its engagement without
independent verification; (ii) does not assume responsibility for the accuracy
of any such information and (iii) will not make an appraisal of any assets or
liabilities of the Company or any prospective purchaser.
As you know, AH&H is a full service investment banking firm and as such
may from time to time effect transactions for its own account or the account
of customers, and hold positions in securities or options on securities of
companies which may be the subject of the engagement contemplated by this
agreement.
The Company represents that it is a sophisticated business enterprise
that has retained AH&H for the limited purposes set forth in this agreement,
and the parties acknowledge and agree that their respective rights and
obligations are contractual in nature. Each party disclaims any intention to
impose fiduciary obligations on the other by virtue of the engagement
contemplated by this agreement. This agreement is solely for the benefit of
AH&H, the Company and each of their respective officers, directors, employees
and agents, and any person controlling them within the meaning of the
Securities Act of 1933, as amended, and the respective legal representatives,
successors and assigns of AH&H and the Company, and no other person shall
acquire or have any right under or by virtue of this agreement.
No fee payable to any other financial advisor by the Company or any
other company in connection with the subject matter of this engagement shall
reduce or otherwise affect any fee payable hereunder to AH&H.
Except to the extent described in the last sentence of this paragraph,
any controversy or claim arising out of or relating to this engagement
agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. Any arbitration
proceedings will be conducted in Boston, Massachusetts. The arbitrator shall
have no authority to award punitive damages or any other damages not measured
by the prevailing party's actual damages, and may not make any ruling,
finding or award that does not conform to the terms and conditions of this
engagement agreement. Notwithstanding the foregoing, nothing contained in
this engagement agreement shall be construed to restrict in any way the right
of any party hereto to seek injunctive or similar equitable relief in any
court of competent jurisdiction with respect to any threatened breach of the
provisions of this agreement or any of the respective parties' obligations
hereunder.
This agreement may not be amended or modified except in writing and
shall be governed by and construed in accordance with the laws of the State
of Massachusetts, without regard to principles of conflicts of laws.
<PAGE>
Praegitzer Industries, Inc.
September 27, 1999
Page 3
If this letter accurately sets forth the understanding between us,
please sign the enclosed copy of this letter below and return it to AH&H, at
which time this letter will become a mutually binding obligation.
Very truly yours,
ADAMS, HARKNESS & HILL, INC.
/s/ Joseph W. Hammer
--------------------------------
Joseph W. Hammer
Managing Director
Agreed to as of the above date:
/s/ Matthew J. Bergeron
- -----------------------------------------
Mr. Matthew J. Bergeron
President and Chief Operating Officer
Praegitzer Industries, Inc.
<PAGE>
EXHIBIT A
Indemnification Provisions
In the event that Adams, Harkness & Hill, Inc. and its officers,
directors, agents, employees, affiliates and control persons (collectively,
"AH&H") becomes involved in any capacity, other than as a plaintiff, in any
action, proceeding or investigation brought by or against any person,
including stockholders of the Company, in connection with any matter related
to the assignment described in this letter, the Company periodically will
reimburse AH&H for its legal and other expenses (including the cost of any
investigation and preparation) reasonably incurred in connection therewith;
PROVIDED, HOWEVER, that if it is found in any such action, proceeding or
investigation that any loss, claim, damage or liability of AH&H has resulted
from the gross negligence or willful misconduct of AH&H in performing the
services which are the subject of this letter, AH&H shall repay such portion
of the reimbursed amounts that is attributable to expenses incurred in
relation to the act or omission of AH&H which is the subject of such finding.
The Company also will indemnify and hold AH&H harmless against any losses,
claims, damages or liabilities to any such person in connection with any
matter related to the assignment described in this letter, except to the
extent that any such loss, claim, damage or liability results from the gross
negligence or willful misconduct of AH&H in performing the services that are
the subject of this letter. If for any reason the foregoing indemnification
is unavailable to AH&H or insufficient to hold it harmless, then the Company
shall contribute to the amount paid or payable by AH&H as a result of such
loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative economic interests of the Company and its stockholders
on the one hand and AH&H on the other hand in the matters contemplated by
this letter as well as the relative fault of the Company and AH&H with
respect to such loss, claim, damage or liability and any other relevant
equitable considerations; PROVIDED, HOWEVER, that in no event shall AH&H be
required to contribute any amounts in excess of the fees received by it
hereunder. The Company shall be liable for any settlement of any claim
against AH&H made with the Company's written consent, which consent shall not
unreasonably be withheld, and the Company shall not, without the prior
written consent of AH&H, settle or compromise any claim or permit a default or
consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent includes, as an unconditional term thereof,
the giving by the claimant to AH&H of an unconditional release from any and
all liability in respect of such claim. AH&H shall have the right to retain
counsel of its own choice to represent it in connection with any matter as to
which the indemnity, expense reimbursement and contribution provisions apply.
The reimbursement, indemnity and contribution obligations of the Company
under this paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions to any
affiliate of AH&H and the officers, directors, agents, employees, affiliates
and control persons (if any), as the case may be, of AH&H and any such
affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, AH&H,
any such affiliate and any such person. The indemnity obligations of the
Company hereunder shall not extend to any affiliate of AH&H or to the
directors, agents, employees, or controlling persons (if any), as the case
may be, of AH&H or any such affiliate to the extent that any loss, claim,
damage or liability results from the gross negligence or willful misconduct
of AH&H or any such other person in performing the services which are the
subject of the letter. The Company also agrees that neither AH&H nor any of
such officers, directors, agents, employees, affiliates and control persons
shall have any liability to the Company and its stockholders for or in
connection with any matter referred to in this letter except to the extent
that any losses, claims, damages, liabilities or the expenses incurred by the
Company result from the gross negligence or willful misconduct of AH&H in
performing the services that are the subject of this letter. The provisions
of this EXHIBIT A shall survive any termination or completion of the
engagement provided by this letter agreement and this letter agreement shall
be governed by and construed in accordance with the laws of the State of
Massachusetts without regard to principles of conflicts of laws.
<PAGE>
EXHIBIT 99.5
PLEDGE AGREEMENT
OF
ROBERT PRAEGITZER
THIS PLEDGE AGREEMENT entered into as of June 11, 1999 by and between
ROBERT PRAEGITZER ("Pledgor") and KEYBANK NATIONAL ASSOCIATION ("Bank") is as
follows:
SECTION 1. RECITALS.
Pledgor is a shareholder of the Debtor. Debtor and Shareholder have
asked the Bank to extend financial accommodations to Debtor. Bank is willing
to make such financial accommodations and continue existing financial
accommodations provided Pledgor executes and delivers this Pledge Agreement
for the benefit of Bank.
SECTION 2. DEFINITIONS.
All capitalized terms used herein and not otherwise defined herein shall
have the meaning attributed to them in the Security Agreement, and the
following terms shall have the meanings set forth below (with all such
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"LIABILITIES" means all Obligations and all of Pledgor's obligations
hereunder.
"PLEDGED COLLATERAL" means all of Pledgor's property and interests in
property described in Section 3(A) below.
"PLEDGED SHARES" means 1,897,500 shares of the Debtor's issued and
outstanding common stock evidenced by a certificate for 2,656,500 shares
bearing CUSIP No. 739422103.
"SECURITY AGREEMENT" means that certain Security Agreement dated as of
June 11, 1999 between Bank and Debtor as such Security Agreement may be
amended from time to time.
SECTION 3. PLEDGE; DELIVERY.
(A) To secure the full and prompt performance of all of the
Liabilities, Pledgor hereby pledges to Bank and grants to Bank a security
interest in (i) the Pledged Shares, (ii) the certificate(s) representing the
Pledged Shares, (iii) all dividends, cash, instruments and other property
from time to time received, receivable
PAGE 1
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<PAGE>
or otherwise distributed in respect of or in exchange for any of the Pledged
Shares and (iv) all proceeds thereof.
(B) Contemporaneously herewith, Pledgor has delivered to McDonald
Investments, Inc. as agent for Bank all of the certificates representing the
Pledged Shares, together with separate stock transfer forms duly endorsed, in
blank, for the transfer of the Pledged Shares. If at any time Pledgor
obtains possession of any other certificate, document or other evidence
representing any of the Pledged Collateral, Pledgor will immediately deliver
such certificate, document or other evidence to Bank or agent designated by
Bank. During such time as any such certificate, document or other evidence
representing any of the Pledged Collateral is in Pledgor's possession or
control, Pledgor shall hold or control such certificate, document or other
evidence in trust for Bank's benefit. All certificates, documents or other
evidence delivered to Bank or its agent shall be accompanied by separate
stock powers duly endorsed, in blank, for transfer.
(C) At any time after the occurrence of an Event of Default, Bank, at
its option and without any obligation to do so, may transfer to or register
in its name, or the name of any nominee, all or any part of the Pledged
Collateral.
(D) Upon the final, irrevocable payment of the Liabilities, Bank shall
return all Pledged Collateral to Pledgor, less such amounts as needed to pay
the Liabilities in accordance with the terms of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Pledgor hereby represents and warrants to Bank as follows:
(i) there is no stamp duty, tax, levy, impost, deduction, charge,
withholding or similar duty, tax or fee imposed on or by virtue of the
execution or delivery of this Agreement or any other document to be furnished
hereunder or in connection herewith;
(ii) to ensure the legality, validity, enforceability or admissibility
in evidence of this Agreement, it is not necessary that this Agreement or any
other document be filed or recorded with any governmental, administrative or
judicial authority or regulatory body;
(iii) the Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable with no personal liability attaching to
the ownership thereof (e.g., the Pledged Shares do not oblige the owner
thereof to make any further payments in respect thereof);
PAGE 2
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<PAGE>
(iv) there are no restrictions upon the transfer of any of the Pledged
Shares, and Pledgor has the unqualified right to transfer the Pledged Shares
without obtaining the consent of any Person, except for restrictions imposed
by applicable securities laws;
(v) the Pledged Shares are registered in Pledgor's name;
(vi) Pledgor is the sole legal and beneficial owner of the entire
right, title and interest in and to the Pledged Collateral, free and clear of
any Lien or contractual obligation, except for the security interests created
by this Agreement, and Pledgor will defend Bank's rights and title to the
Pledged Collateral against the claims of all Persons:
(vii) the pledge and delivery of the Pledged Shares pursuant to this
Agreement creates a valid and perfected first priority security interest in
the Pledged Shares securing payment and performance of the Liabilities; and
(viii) no authorization, approval or other action by, and no notice to
or filing with any governmental, administrative or judicial authority or
regulatory body is required (a) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement, (b) for the execution, delivery or
performance of this Agreement by Pledgor, or (c) for the exercise by Bank of
the voting or other rights provided for in this Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Agreement (except as may
be required in connection with the disposition of the Pledged Collateral by
laws affecting the offering and sale of securities generally).
SECTION 5. FURTHER ASSURANCES.
Pledgor, at its expense and from time to time, will promptly execute and
deliver all further instruments and documents, and take all further action
that may be necessary or desirable, or that Bank may request, in order to
(i) continue, perfect and protect the security interest granted hereby, and
(ii) to enable Bank to exercise and enforce its rights and remedies hereunder
with respect to any Pledged Collateral. Without prejudice to the generality of
the foregoing, each such instrument or document shall be in such form as Bank
shall stipulate and shall contain such provisions as Bank reasonably considers
necessary for the perfection or enforcement of the rights granted hereby.
SECTION 6. VOTING RIGHTS.
(A) So long as no Event of Default is continuing:
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(i) Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Pledged Collateral for any purpose
not inconsistent with the terms of the Security Agreement;
(ii) Pledgor may receive and retain any distributions paid in
respect of the Pledged Collateral; provided, however, that all noncash
distributions made in respect of, or in exchange for, any Pledged
Collateral shall be delivered to Bank and held as Pledged Collateral and
shall, if received by Pledgor, be received in trust for the benefit of
Bank, be segregated from Pledgor's other property, and be immediately
delivered to Bank in the same form as so received (with any necessary
endorsement).
(B) During the continuance of an Event of Default:
(i) all of Pledgor's rights pursuant to Section 6(A) shall, at
Bank's election, cease and shall thereupon become vested in Bank, or
such nominee(s) of Bank as Bank shall direct, who shall thereupon have
the sole right to exercise such voting and other consensual rights and
to receive and hold as Pledged Collateral such distributions; and
(ii) all distributions received by Pledgor contrary to the
provisions of Section 6(B)(i) shall be received in trust for the benefit
of Lenders, shall be segregated from Pledgor's other property, and shall
be immediately delivered to Bank, as Pledged Collateral, in the same
form as so received (with any necessary endorsement).
SECTION 7. TRANSFERS AND OTHER LIENS.
Pledgor will not (i) sell, transfer, or otherwise dispose of, or grant
any option or rights to purchase with respect to, or permit any person to be
registered as holder of, any of the Pledged Collateral or (ii) create or
permit to exist any Lien upon any of the Pledged Collateral, except for the
security interest created under this Agreement. Provided, however, that
Pledgor may enter into agreements for the sale of the Pledged Collateral as
part of the sale of a majority interest in Praegitzer Industries, Inc. Such
agreements shall not impair the rights of Bank, and the Pledged Collateral
shall not be released to Pledgor or any other party except upon full
compliance with the terms of this Agreement.
SECTION 8. ATTORNEY-IN-FACT.
Pledgor hereby irrevocably appoints Bank, and each and every person to
whom Bank shall from time to time delegates the exercise of this power of
attorney, jointly and severally, to be his attorney and in his name and
otherwise on his behalf after the
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occurrence of an Event of Default to sign, seal, execute, deliver, perfect
and do all other acts which may be required (or which Bank considers
necessary) to carry out any obligation imposed on Pledgor pursuant to this
Agreement, to consummate any sale or other dealing by Bank of the Pledged
Collateral, or to enable Bank to exercise the powers conferred on it pursuant
to this Agreement or by law. Bank shall have full power to delegate the power
conferred on it by this Section 8, but no such delegation shall preclude the
subsequent exercise of such power by Bank itself or preclude Bank from making
a subsequent delegation thereof to some other person, and any such delegation
may be revoked by Bank at any time.
Section 9. BANK'S DUTIES.
The powers conferred on Bank hereunder are solely to protect its
interest in the Pledged Collateral and shall not impose any duty upon Bank to
exercise any such powers. Bank shall be deemed to have exercised reasonable
care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially
equal to that which Bank accords its own property, it being understood that
Bank shall not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether Bank has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
Section 10. REMEDIES UPON DEFAULT.
(A) If any Event of Default is continuing:
(i) Bank may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or in the
Security Agreement or otherwise available to it, all the rights and
remedies of a secured party on default under the Code, and Bank may
also, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or any of Bank's offices
or elsewhere, for cash, on credit or for future delivery and upon such
other terms as Bank may deem commercially reasonable. Bank is hereby
authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged Shares for
their own account in compliance with Regulation D of the Securities Act
of 1933 (or under any other applicable exemption available under
applicable law). Pledgor agrees that, to the extent notice of sale shall
be required by law, at least five days notice to Pledgor of the time and
place of any public sale or the time after which any private sale is
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to be made shall constitute reasonable notification. Bank is not
obligated to make any sale of the Pledged Collateral, regardless of
notice of sale having been given. Bank may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned; and
(ii) any cash held by Bank as Pledged Collateral and all cash
proceeds received by Bank in respect of any sale of, collection from, or
other realization upon the Pledged Collateral may, in Bank's sole
discretion, be held by Bank as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to Bank
pursuant to Section 11(B)) against the Liabilities in such order as Bank
shall elect. Any surplus of such cash or cash proceeds held by Bank and
remaining after payment in full of the Liabilities shall be paid over to
Pledgor or to any other Person lawfully entitled to receive such surplus.
(B) Without precluding any other methods of sale, the sale of the
Pledged Collateral, or any part thereof, shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks or finance companies disposing of similar
property, but in any event, Bank may sell or otherwise dispose of the Pledged
Collateral without assuming any credit risk and without any obligation to
advertise.
(C) Pledgor recognizes that federal and/or state securities and other
laws may limit the flexibility desired to achieve an otherwise commercially
reasonable disposition of the Pledged Collateral, and in the event of
potential conflict between such laws or regulations and what in other
circumstances might constitute commercial reasonableness, it is intended that
consideration for such laws and regulations will prevail over attempts to
achieve such commercial reasonableness. In connection with any sale or other
disposition of the Pledged Collateral, compliance by Bank with the written
advice of its counsel concerning the potential effect of any such law or
regulation shall not be cause for Pledgor, or any other Person, to claim that
such sale or other disposition was not commercially reasonable, it being the
intent of Pledgor that Bank not be obligated to risk contravening any such
law or regulation in order to effect what, but for such law or regulation,
would be a commercially reasonable disposition.
(D) By way of example, and not by way of limitation, with respect to
any sale or other disposition of any of the Pledged Collateral (i) such sale
or disposition shall be commercially reasonable if made by and through a
licensed broker/dealer acting under instructions to obtain in his judgment
the best disposition price known to him in the market (however, this
provision does not suggest that such disposition is
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either preferable or exclusive) and (ii) such sale or disposition shall be
deemed to have been a public sale if, in connection with such sale or
disposition, Bank obtains bids from at least two qualified purchasers.
(E) To the extent permitted by applicable law, Pledgor hereby waives
all rights now or hereafter conferred by statute or otherwise which may
require Bank to give any notice (except the notice of sale provided for in
Section 10(A)(i)), make any demand, or invoke any legal process with respect
to the sale or other disposition of the Pledged Collateral or which may
require Bank to sell or otherwise dispose of the Pledged Collateral in
mitigation of Bank's damages, or which may otherwise limit or modify any of
Bank's remedies or rights under this Agreement.
(F) Bank shall be under no duty to sell or otherwise realize upon
the Pledged Collateral. At any time, Bank may release or surrender all or
any part of the Pledged Collateral to Pledgor.
SECTION 11. INDEMNITY AND EXPENSES.
(A) Pledgor shall indemnify and hold Bank harmless from and against
all claims, damages, losses, liabilities and expenses arising out of or in
connection with or resulting from this Agreement, but otherwise without limit
and without regard to the cause(s) thereof or the negligence of any party,
including, but not limited to, any negligent act or omission of Bank, unless
and to the extent such claim, damage, loss, liability or expense was
attributable to Bank's gross negligence or willful misconduct as determined
by a final judgment of a court of competent jurisdiction.
(B) Pledgor, upon demand, will pay to Bank the amount of any
expenses, including the fees and expenses of Bank's attorneys (whether
incurred at the trial or appellate level, in an arbitration proceeding, in
bankruptcy, including, without limitation, any adversary proceeding,
contested matter or motion, or otherwise), that Bank may incur in connection
with (i) the administration of the Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon
any of the Pledged Collateral, (iii) the exercise or enforcement of any of
Bank's rights in respect to enforcement of this Agreement, or (iv) the
failure by Pledgor to perform or observe any of the provisions hereof.
SECTION 12. SECURITY INTEREST ABSOLUTE.
All rights of Bank, all security interests hereunder, and all
obligations of Pledgor hereunder shall be absolute and unconditional
irrespective of:
(i) any invalidity or unenforceability in whole or in part of the
Security Agreement or Note;
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(ii) any change in the time, manner or place of payment of, or in
any other term of, any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Security Agreement or
Note;
(iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Obligations;
(iv) any agreement by Bank to subordinate Debtor's payment of the
Obligations to the payment by Debtor of any other obligations; or
(v) any other circumstance which might otherwise constitute a
defense available to, or discharge of, Pledgor or a third party pledgor.
SECTION 13. MISCELLANEOUS.
(A) No delay, failure or discontinuance of Bank in exercising any right,
power or remedy, hereunder shall affect or operate as a waiver of such right,
power or remedy; nor shall any single or partial exercise of any such right,
power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, consent or approval of any kind by Bank of any breach of or default
under this Agreement must be in writing and shall be effective only to the
extent set forth in such writing.
(B) Any notice or other communication required or permitted hereunder
shall be in writing, shall be addressed to the party to be notified at the
address set forth below, or at such other address as each party may designate
for itself from time to time by notice hereunder, and will be deemed to have
been delivered (i) five days following deposit in the United States mails
with proper first class postage prepaid, (ii) the next business day after
such notice was delivered to a regularly scheduled overnight delivery carrier
or (iii) upon receipt of notice given by telecopy, mailgram, telegram, telex
or personal delivery:
To Bank: KeyBank National Association
Large Corporate Group
46th Floor
700 Fifth Avenue
Seattle, Washington 98104
Attn: Thomas A. Crandell, Vice President
Fax No.: (206) 684-6035
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To Pledgor: Robert Praegitzer
c/o Greene & Markley, P.C.
The 1515 Building
1515 SW Fifth Avenue, Suite 600
Portland, OR 97201-5492
Attn: Charles R. Markley
Fax No.: (503) 224-8434
(C) Time is of the essence of each and every provision of this
Agreement.
(D) This Agreement cannot be modified, amended or changed in any
respect orally or by the conduct of the parties. Any amendment, modification
or change may be made only by a writing signed by the party against whom
enforcement is sought.
(E) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited by or invalid under
applicable law, such provision will be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(F) Each party will promptly execute and deliver to the other parties
all instruments, agreements and documents, and take all further action, that
may be reasonably necessary to enable a party to perform its obligations
hereunder and to exercise and enforce its rights and remedies hereunder.
(G) This Agreement represents the complete undertaking and agreement of
the parties with respect to the subject matter hereof and supersedes any and
all prior and contemporaneous discussions, negotiations or correspondence.
(H) If legal action is required to enforce the terms of this Agreement,
the prevailing party will be entitled to reasonable attorneys' fees and costs
incurred therein, whether incurred at arbitration, trial, on appeal, in a
bankruptcy proceeding, or otherwise.
(I) This Agreement shall be governed by and construed in accordance
with the laws of the State of Oregon.
(J) Until all the Obligations have been fully paid, in cash, and
performed, Pledgor shall have no right of subrogation or any other right to
participate in any security for any of the Obligations or other Liabilities.
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(K) This Agreement shall be binding upon and inure to the benefit of the
respective heirs, successors and assigns of the parties.
(L) UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY BANK TO BE ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
PLEDGOR:
/s/ Robert Praegitzer
-------------------------------------
Robert Praegitzer
BANK:
KEYBANK NATIONAL ASSOCIATION
By: [ILLEGIBLE]
---------------------------------
Title: Vice President
------------------------------
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PLEDGE AGREEMENT
OF
ROBERT PRAEGITZER
THIS PLEDGE AGREEMENT entered into as of June 11, 1999 by and between
ROBERT PRAEGITZER ("Pledgor") and KEYBANK NATIONAL ASSOCIATION, as agent for
the Lenders under the Credit Agreement (as defined below) is as follows:
SECTION 1. RECITALS.
(A) Pledgor is a shareholder of the Borrower and is entering into this
Agreement to induce Lenders to advance additional credit to the Borrower.
(B) Lenders are willing to advance additional credit to the Borrower
provided Pledgor executes and delivers this Pledge Agreement for the benefit
of Lenders.
SECTION 2. DEFINITIONS.
All capitalized terms used herein and not otherwise defined herein shall
have the meaning attributed to them in the Credit Agreement, and the
following terms shall have the meanings set forth below (with all such
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement dated as of April 8, 1999, as amended by that certain First
Amendment to Amended and Restated Credit Agreement of even date herewith and
as said agreement may be amended or restated from time to time hereafter.
"LIABILITIES" means (i) the principal amount of all Obligations in
excess of the credit that Lenders would have been obligated to advance under
that certain Amended and Restated Credit Agreement dated as of April 8, 1999
as such agreement existed before the date hereof ("Principal"), (ii) all
interest payable under the Credit Agreement with respect to the Principal,
and (iii) all of Pledgor's obligations hereunder. For purposes of determining
the amount of Principal outstanding at any time after the occurrence of an
Event of Default, all reductions to the Obligations shall be deemed to be
applied first to those Obligations which are not Principal and last to the
Principal.
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"PLEDGED COLLATERAL" means all of Pledgor's property and interests in
property described in Section 3(A) below.
"PLEDGED SHARES" means 759,000 shares of the Borrower's issued and
outstanding common stock evidenced by a certificate for 2,656,500 shares
bearing CUSIP No. 739422103.
SECTION 3. PLEDGE; DELIVERY.
(A) To secure the full and prompt performance of all of the
Liabilities, Pledgor hereby pledges to Administrative Lender and grants to
Administrative Lender, for the benefit of and on behalf of the Lenders, a
security interest in (i) the Pledged Shares, (ii) the certificate(s)
representing the Pledged Shares, (iii) all dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any of the Pledged Shares and (iv) all
proceeds thereof.
(B) Contemporaneously herewith, Pledgor has delivered to McDonald
Investments, Inc. as agent for the Administrative Lender all of the
certificates representing the Pledged Shares, together with separate stock
transfer forms duly endorsed, in blank, for the transfer of the Pledged
Shares. If at any time Pledgor obtains possession of any other certificate,
document or other evidence representing any of the Pledged Collateral,
Pledgor will immediately deliver such certificate, document or other evidence
to Administrative Lender or agent designated by Administrative Lender. During
such time as any such certificate, document or other evidence representing
any of the Pledged Collateral is in Pledgor's possession or control, Pledgor
shall hold or control such certificate, document or other evidence in trust
for Administrative Lender's benefit. All certificates, documents or other
evidence delivered to Administrative Lender or its agent shall be accompanied
by separate stock powers duly endorsed, in blank, for transfer.
(C) At any time after the occurrence of an Event of Default,
Administrative Lender, at its option and without any obligation to do so, may
transfer to or register in its name, or the name of any nominee, all or any
part of the Pledged Collateral.
(D) Upon the final, irrevocable payment of the Liabilities,
Administrative Lender shall return all Pledged Collateral to Pledgor, less
such amounts as needed to pay the Liabilities in accordance with the terms of
this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Pledgor hereby represents and warrants to Administrative Lender as
follows:
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(i) there is no stamp duty, tax, levy, impost, deduction,
charge, withholding or similar duty, tax or fee imposed on or by virtue of the
execution or delivery of this Agreement or any other document to be furnished
hereunder or in connection herewith;
(ii) to ensure the legality, validity, enforceability or
admissibility in evidence of this Agreement, it is not necessary that this
Agreement or any other document be filed or recorded with any
governmental, administrative or judicial authority or regulatory body;
(iii) the Pledged Shares have been duly authorized and validly
issued and are fully paid and non-assessable with no personal liability
attaching to the ownership thereof (e.g., the Pledged Shares do not oblige the
owner thereof to make any further payments in respect thereof);
(iv) there are no restrictions upon the transfer of any of the
Pledged Shares, and Pledgor has the unqualified right to transfer the Pledged
Shares without obtaining the consent of any Person, except for restrictions
imposed by applicable securities laws;
(v) the Pledged Shares are registered in Pledgor's name;
(vi) Pledgor is the sole legal and beneficial owner of the entire
right, title and interest in and to the Pledged Collateral, free and clear of
any Lien or contractual obligation, except for the security interests created
by this Agreement, and Pledgor will defend Administrative Lender's rights and
title to the Pledged Collateral against the claims of all Persons;
(vii) the pledge and delivery of the Pledged Shares pursuant to
this Agreement creates a valid and perfected first priority security interest
in the Pledged Shares securing payment and performance of the Liabilities; and
(viii) no authorization, approval or other action by, and no
notice to or filing with any governmental, administrative or judicial
authority or regulatory body is required (a) for the pledge by Pledgor of the
Pledged Collateral pursuant to this Agreement, (b) for the execution,
delivery or performance of this Agreement by Pledgor, or (c) for the exercise
by Administrative Lender of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to
this Agreement (except as may be required in connection with the disposition
of the Pledged Collateral by laws affecting the offering and sale of
securities generally).
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Section 5. FURTHER ASSURANCES.
Pledgor, at its expense and from time to time, will promptly execute and
deliver all further instruments and documents, and take all further action
that may be necessary or desirable, or that Administrative Lender may
request, in order to (i) continue, perfect and protect the security interest
granted hereby, and (ii) to enable Administrative Lender to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without prejudice to the generality of the foregoing, each such
instrument or document shall be in such form as Administrative Lender shall
stipulate and shall contain such provisions as Administrative Lender
reasonably considers necessary for the perfection or enforcement of the
rights granted hereby.
Section 6. VOTING RIGHTS.
(A) So long as no Event of Default is continuing:
(i) Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Pledged Collateral for any purpose
not inconsistent with the terms of the Loan Documents;
(ii) Pledgor may receive and retain any distributions paid in
respect of the Pledged Collateral; provided, however, that all noncash
distributions made in respect of, or in exchange for, any Pledged
Collateral shall be delivered to Administrative Lender and held as
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Administrative Lender, be segregated from Pledgor's
other property, and be immediately delivered to Administrative Lender in
the same form as so received (with any necessary endorsement).
(B) During the continuance of an Event of Default:
(i) all of Pledgor's rights pursuant to Section 6(A) shall, at
Administrative Lender's election, cease and shall thereupon become vested
in Administrative Lender, or such nominee(s) of Administrative Lender as
Administrative Lender shall direct, who shall thereupon have the sole
right to exercise such voting and other consensual rights and to receive
and hold as Pledged Collateral such distributions; and
(ii) all distributions received by Pledgor contrary to the
provisions of Section 6(B)(i) shall be received in trust for the benefit
of Lenders, shall be segregated from Pledgor's other property, and shall
be immediately delivered to
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Administrative Lender, as Pledged Collateral, in the same form as so
received (with any necessary endorsement).
SECTION 7. TRANSFERS AND OTHER LIENS.
Pledgor will not (i) sell, transfer, or otherwise dispose of, or grant
any option or rights to purchase with respect to, or permit any person to be
registered as holder of, any of the Pledged Collateral or (ii) create or
permit to exist any Lien upon any of the Pledged Collateral, except for the
security interest created under this Agreement. Provided, however, that
Pledgor may enter into agreements for the sale of the Pledged Collateral as
part of the sale of a majority interest in Praegitzer Industries, Inc. Such
agreements shall not impair the rights of Administrative Lender, and the
Pledged Collateral shall not be released to Pledgor or any other party except
upon full compliance with the terms of this Agreement.
SECTION 8. ATTORNEY-IN-FACT.
Pledgor hereby irrevocably appoints Administrative Lender, and each and
every person to whom Administrative Lender shall from time to time delegates
the exercise of this power of attorney, jointly and severally, to be his
attorney and in his name and otherwise on his behalf after the occurrence of an
Event of Default to sign, seal, execute, deliver, perfect and do all other
acts which may be required (or which Administrative Lender considers
necessary) to carry out any obligation imposed on Pledgor pursuant to this
Agreement, to consummate any sale or other dealing by Administrative Lender
of the Pledged Collateral, or to enable Administrative Lender to exercise the
powers conferred on it pursuant to this Agreement or by law. Administrative
Lender shall have full power to delegate the power conferred on it by this
Section 8, but no such delegation shall preclude the subsequent exercise of
such power by Administrative Lender itself or preclude Administrative Lender
from making a subsequent delegation thereof to some other person, and any
such delegation may be revoked by Administrative Lender at any time.
SECTION 9. ADMINISTRATIVE LENDER'S DUTIES.
The powers conferred on Administrative Lender hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon Administrative Lender to exercise any such powers. Administrative Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Pledged
Collateral is accorded treatment substantially equal to that which
Administrative Lender accords its own property, it being understood that
Administrative Lender shall not have responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Collateral, whether
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Administrative Lender has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against any parties with
respect to any Pledged Collateral.
SECTION 10. REMEDIES UPON DEFAULT.
(A) If any Event of Default is continuing:
(i) Administrative Lender may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided
for herein or in the Loan Documents or otherwise available to it, all
the rights and remedies of a secured party on default under the Code,
and Administrative Lender may also, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or
any of Administrative Lender's offices or elsewhere, for cash, on
credit or for future delivery and upon such other terms as
Administrative Lender may deem commercially reasonable. Administrative
Lender is hereby authorized at any such sale (if it deems it advisable
to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Pledged
Shares for their own account in compliance with Regulation D of the
Securities Act of 1933 (or under any other applicable exemption
available under applicable law). Pledgor agrees that, to the extent
notice of sale shall be required by law, at least five days notice to
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. Administrative Lender is not obligated to make any sale
of the Pledged Collateral, regardless of notice of sale having been
given. Administrative Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned; and
(ii) any cash held by Administrative Lender as Pledged
Collateral and all cash proceeds received by Administrative Lender in
respect of any sale of, collection from, or other realization upon
the Pledged Collateral may, in Administrative Lender's sole
discretion, be held by Administrative Lender as collateral for, and/or
then or at any time thereafter applied (after payment of any amounts
payable to Administrative Lender pursuant to Section 11(B)) against
the Liabilities in such order as Administrative Lender shall elect.
Any surplus of such cash or cash proceeds held by Administrative
Lender and remaining after payment in full of the Liabilities shall be
paid over to Pledgor or to any other Person lawfully entitled to
receive such surplus.
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(B) Without precluding any other methods of sale, the sale of
the Pledged Collateral, or any part thereof, shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks or finance companies disposing of similar
property, but in any event, Administrative Lender may sell or otherwise
dispose of the Pledged Collateral without assuming any credit risk and
without any obligation to advertise.
(C) Pledgor recognizes that federal and/or state securities and
other laws may limit the flexibility desired to achieve an otherwise
commercially reasonable disposition of the Pledged Collateral, and in the
event of potential conflict between such laws or regulations and what in
other circumstances might constitute commercial reasonableness, it is
intended that consideration for such laws and regulations will prevail over
attempts to achieve such commercial reasonableness. In connection with any
sale or other disposition of the Pledged Collateral, compliance by
Administrative Lender with the written advice of its counsel concerning the
potential effect of any such law or regulation shall not be cause for
Pledgor, or any other Person, to claim that such sale or other disposition
was not commercially reasonable, it being the intent of Pledgor that
Administrative Lender not be obligated to risk contravening any such law or
regulation in order to effect what, but for such law or regulation, would be
a commercially reasonable disposition.
(D) By way of example, and not by way of limitation, with
respect to any sale or other disposition of any of the Pledged Collateral
(i) such sale or disposition shall be commercially reasonable if made by and
through a licensed broker/dealer acting under instructions to obtain in his
judgment the best disposition price known to him in the market (however, this
provision does not suggest that such disposition is either preferable or
exclusive) and (ii) such sale or disposition shall be deemed to have been a
public sale if, in connection with such sale or disposition, Administrative
Lender obtains bids from at least two qualified purchasers.
(E) To the extent permitted by applicable law, Pledgor hereby
waives all rights now or hereafter conferred by statute or otherwise which may
require Administrative Lender to give any notice (except the notice of sale
provided for in Section 10(A)(i)), make any demand, or invoke any legal
process with respect to the sale or other disposition of the Pledged
Collateral or which may require Administrative Lender to sell or otherwise
dispose of the Pledged Collateral in mitigation of Administrative Lender's
damages, or which may otherwise limit or modify any of Administrative
Lender's remedies or rights under this Agreement.
(F) Administrative Lender shall be under no duty to sell or
otherwise realize upon the Pledged Collateral. At any time, Administrative
Lender may release or surrender all or any part of the Pledged Collateral to
Pledgor.
PAGE 7
EXECUTION COPY
<PAGE>
SECTION 11. INDEMNITY AND EXPENSES.
(A) Pledgor shall indemnify and hold Administrative Lender harmless
from and against all claims, damages, losses, liabilities and expenses
arising out of or in connection with or resulting from this Agreement, but
otherwise without limit and without regard to the cause(s) thereof or the
negligence of any party, including, but not limited to, any negligent act or
omission of Administrative Lender, unless and to the extent such claim,
damage, loss, liability or expense was attributable to Administrative
Lender's gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
(B) Pledgor, upon demand, will pay to Administrative Lender the amount
of any expenses, including the fees and expenses of Administrative Lender's
attorneys (whether incurred at the trial or appellate level, in an
arbitration proceeding, in bankruptcy, including, without limitation, any
adversary proceeding, contested matter or motion, or otherwise), that
Administrative Lender may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of,
collection from or other realization upon any of the Pledged Collateral,
(iii) the exercise or enforcement of any of Administrative Lender's rights in
respect to enforcement of this Agreement, or (iv) the failure by Pledgor to
perform or observe any of the provisions hereof.
SECTION 12. SECURITY INTEREST ABSOLUTE.
All rights of Administrative Lender, all security interests hereunder,
and all obligations of Pledgor hereunder shall be absolute and unconditional
irrespective of:
(i) any invalidity or unenforceability in whole or in part of any
Loan Document;
(ii) any change in the time, manner or place of payment of, or in
any other term of, any of the Obligations, or any other amendment or
waiver of or any consent to any departure from any Loan Document;
(iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Obligations;
(iv) any agreement by Administrative Lender to subordinate
Borrower's payment of the Obligations to the payment by Borrower of
any other obligations; or
PAGE 8
EXECUTION COPY
<PAGE>
(v) any other circumstance which might otherwise constitute a
defense available to, or discharge of, Pledgor or a third party pledgor.
Section 13. MISCELLANEOUS.
(A) No delay, failure or discontinuance of Administrative Lender in
exercising any right, power or remedy hereunder shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or partial
exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other
right, power or remedy. Any waiver, consent or approval of any kind by
Administrative Lender of any breach of or default under this Agreement must
be in writing and shall be effective only to the extent set forth in such
writing.
(B) Any notice or other communication required or permitted hereunder
shall be in writing, shall be addressed to the party to be notified at the
address set forth below, or at such other address as each party may designate
for itself from time to time by notice hereunder, and will be deemed to have
been delivered (i) five days following deposit in the United States mails
with proper first class postage prepaid, (ii) the next business day after
such notice was delivered to a regularly scheduled overnight delivery carrier
or (iii) upon receipt of notice given by telecopy, mailgram, telegram, telex
or personal delivery:
To Administrative Lender: KeyBank National Association
Large Corporate Group
46th Floor
700 Fifth Avenue
Seattle, Washington 98104
Attn: Thomas A. Crandell, Vice President
Fax No.: (206) 684-6035
To Pledgor: Robert Praegitzer
c/o Greene & Markley, P.C.
The 1515 Building
1515 SW Fifth Avenue, Suite 600
Portland, OR 97201-5492
Attn: Charles R. Markley
Fax No.: (503) 224-8434
(C) Time is of the essence of each and every provision of this
Agreement.
PAGE 9
EXECUTION COPY
<PAGE>
(D) This Agreement cannot be modified, amended or changed in any respect
orally or by the conduct of the parties. Any amendment, modification or
change may be made only by a writing signed by the party against whom
enforcement is sought.
(E) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited by or invalid under
applicable law, such provision will be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(F) Each party will promptly execute and deliver to the other parties
all instruments, agreements and documents, and take all further action, that
may be reasonably necessary to enable a party to perform its obligations
hereunder and to exercise and enforce its rights and remedies hereunder.
(G) This Agreement represents the complete undertaking and agreement of
the parties with respect to the subject matter hereof and supersedes any and
all prior and contemporaneous discussions, negotiations or correspondence.
(H) If legal action is required to enforce the terms of this Agreement,
the prevailing party will be entitled to reasonable attorneys' fees and costs
incurred therein, whether incurred at arbitration, trial, on appeal, in a
bankruptcy proceeding, or otherwise.
(I) This Agreement shall be governed by and construed in accordance
with the laws of the State of Oregon.
(J) Until all the Obligations have been fully paid, in cash, and
performed, Pledgor shall have no right of subrogation or any other right to
participate in any security for any of the Obligations or other Liabilities.
(K) This Agreement shall be binding upon and inure to the benefit of
the respective heirs, successors and assigns of the parties.
(L) UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY BANK TO BE ENFORCEABLE.
PAGE 10
EXECUTION COPY
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
PLEDGOR:
/s/ Robert Praegitzer
---------------------------------------
Robert Praegitzer
ADMINISTRATIVE LENDER:
KEYBANK NATIONAL ASSOCIATION
By: [ILLEGIBLE]
------------------------------------
Title: Vice President
---------------------------------
PAGE 11
EXECUTION COPY
<PAGE>
EXHIBIT 99.11
CHANGE OF CONTROL AGREEMENT
This is an Agreement between Praegitzer Industries, Inc. ("Praegitzer")
and Matthew Joseph Bergeron ("Executive").
Executive is or may in the future be the holder of an option to
purchase common shares in Praegitzer, granted to Executive as part of
Executive's compensation for employment at Praegitzer. The stock option plan
provides for vesting of the stock option exercise rights over a period of
time. The parties wish to provide for immediate vesting of such option
rights, and the payment of severance pay, in the event Executive is
terminated within one year after a Change in Control (defined herein).
This Agreement is not intended to alter the compensation and benefits
that Executive could reasonably expect in the absence a Change in Control.
This Agreement is not intended to change any term of employment of Executive,
and specifically is not intended to change the nature of Executive's
employment from an employee at will.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. CHANGE IN CONTROL DEFINED. Change in Control shall mean:
(a) the purchase or other acquisition by any person, entity or group of
persons, within the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor
provisions, of one ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 30 percent or more of either the outstanding
shares of common stock or the combined voting power of Praegitzer
outstanding voting securities entitled to vote generally; or
(b) the approval by the Stockholders of Praegitzer of a reorganization,
merger, or consolidation, in each case, with respect to which persons
who were stockholders of Praegitzer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Praegitzer's then outstanding securities; or
(c) a liquidation or dissolution of Praegitzer or of the sale of all or
substantially all of Praegitzer's assets.
Provided, however, that transfers made by Robert L. Praegitzer for estate
planning purposes, or in the event of his death, shall not constitute a
Change in Control.
PAGE 1--CHANGE IN CONTROL AGREEMENT
<PAGE>
2. TERMINATION OF EMPLOYMENT DEFINED. For purposes of this Agreement
only, the following shall constitute Termination of the Executive's employment:
(a) Praegitzer terminates the Executive for any reason other than for
"cause." "Cause" includes, but is not limited to, (i) any form of
dishonesty, criminal conduct, or conduct involving moral turpitude
connected with the employment of Executive or which otherwise reflects
adversely on Praegitzer's reputation or operations; (ii) the refusal of
Executive to comply with Praegitzer's instructions, policies, or rules;
(iii) continuing or repeated problems with Executive's performance or
conduct or Executive's inattention to duties; or (iv) any material breach
of Executive's obligations under this Agreement.
(b) Executive terminates his employment with Praegitzer because
Praegitzer makes a material adverse change in Executive's job title or
responsibilities without Executive's consent;
(c) Executive terminates his employment with Praegitzer because
Praegitzer reduces Executive's annual base compensation by more than 15%
from Executive's annual base compensation for the 12 month period ending
immediately before the Change in Control; or
Anything herein to the contrary notwithstanding, no stock options shall vest
and no severance pay shall be payable under this Agreement if the Executive
voluntarily terminates his employment with Praegitzer.
3. VESTING OF OPTIONS. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, all options to purchase the common stock of Praegitzer
granted to Executive as part of any compensation plan of Praegitzer shall
immediately become exercisable; provided, however, that if the change of
control transaction is a pooling transaction, then the stock options shall
not be accelerated. If, during the term of this Agreement a Change in Control
occurs by cash purchase of Praegitzer stock, all options to purchase the
common stock of Praegitzer granted to Executive as part of any compensation
plan of Praegitzer shall immediately become exercisable.
4. SEVERANCE PAY. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, Praegitzer shall pay the Executive a sum equivalent to
six months of his base compensation. This amount shall be paid in a lump sum
within 30 days after the Executive is terminated.
PAGE 2--CHANGE IN CONTROL AGREEMENT
<PAGE>
5. TERM OF AGREEMENT. This Agreement shall remain in effect until
terminated by Praegitzer. Praegitzer may terminate this Agreement upon giving
30 days' written notice to Executive; provided, however, if a Change in
Control occurs prior to the expiration of the 30 day period, this Agreement
will remain in effect until the obligations of Praegitzer have been
fulfilled. This Agreement shall terminate automatically on the date
Executive's employment will Praegitzer ends for any reason; provided,
however, if a Change in Control occurs and the Executive's employment is
Terminated, this Agreement shall remain in effect with respect to all rights
accruing as a result of the occurrence of the Change in Control.
6. CONFIDENTIALITY. During and after the term of this Agreement,
Executive will not divulge or appropriate to Executive's own use or the use
of others any secret or confidential information or knowledge pertaining to
the business of Praegitzer, or any of its subsidiaries, obtained during his
employment by Praegitzer or any of its subsidiaries.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out of
or relating to this Agreement, whether involving rights granted by statute,
torts, or the breach hereof, shall be settled by arbitration in Oregon in
accordance with the laws of Oregon by an arbitrator appointed pursuant to the
rules of the American Arbitration Association, or such other bona fide
arbitration group as may be agreed upon by the parties. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. The prevailing party in any dispute shall be entitled to
reasonable attorney fees, whether incurred before, during or after
arbitration, including on appeal. Any party, however, may apply to a court of
competent jurisdiction for equitable relief.
8. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent
by certified mail (a) to Executive at the last address Praegitzer has on file
for the Executive; or (b) to Praegitzer at its principal executive offices.
9. NON-ALIENATION. Executive shall not sell, transfer, pledge,
hypothecate, assign or create a lien upon any benefits provided under this
Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by
operation of law.
10. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Oregon, without regard to choice of
law rules.
PAGE 3--CHANGE IN CONTROL AGREEMENT
<PAGE>
11. AMENDMENTS. No amendment, waiver or discharge of any provision
of this Agreement shall be effective unless in writing signed by the
party against whom enforcement is sought.
12. ENTIRE AGREEMENT. This Agreement is subject to all terms of the
Praegitzer 1995 Stock Incentive Plan, or any other agreement granting to
Executive options to purchase any shares of Praegitzer, not inconsistent with
this Agreement, which agreement is incorporated herein. Otherwise, this
Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, between the parties with respect to such subject matter. Nothing herein
alters Executive's status as an employee at-will.
PRAEGITZER INDUSTRIES, INC.
By: /s/ RG Schmelzer Date: 4-16-99
----------------- -------------
Print Name: RG Schmelzer
--------------
Title: V.P. Admin
-------------
EXECUTIVE:
/s/ Matthew J. Bergeron Date: 4/16/99
- -------------------------- -----------
Matthew Joseph Bergeron
PAGE 4--CHANGE IN CONTROL AGREEMENT
<PAGE>
Exhibit 99.12
CHANGE OF CONTROL AGREEMENT
This is an Agreement between Praegitzer Industries, Inc. ("Praegitzer")
and Robert Versiackas ("Executive").
Executive is or may in the future be the holder of an option to
purchase common shares in Praegitzer, granted to Executive as part of
Executive's compensation for employment at Praegitzer. The stock option plan
provides for vesting of the stock option exercise rights over a period of
time. The parties wish to provide for immediate vesting of such option
rights, and the payment of severance pay, in the event Executive is
terminated within one year after a Change in Control (defined herein).
This Agreement is not intended to alter the compensation and benefits
that Executive could reasonably expect in the absence a Change in Control.
This Agreement is not intended to change any term of employment of Executive,
and specifically is not intended to change the nature of Executive's
employment from an employee at will.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. CHANGE IN CONTROL DEFINED. Change in Control shall mean:
(a) the purchase or other acquisition by any person, entity or group of
persons, within the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor
provisions, of one ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 30 percent or more of either the
outstanding shares of common stock or the combined voting power of
Praegitzer outstanding voting securities entitled to vote generally; or
(b) the approval by the Stockholders of Praegitzer of a reorganization,
merger, or consolidation, in each case, with respect to which persons
who were stockholders of Praegitzer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated Praegitzer's then outstanding securities; or
(c) a liquidation or dissolution of Praegitzer or of the sale of all or
substantially all of Praegitzer's assets.
Provided, however, that transfers made by Robert L. Praegitzer for estate
planning purposes, or in the event of his death, shall not constitute a
Change in Control.
PAGE 1 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
2. TERMINATION OF EMPLOYMENT DEFINED. For purposes of this Agreement
only, the following shall constitute Termination of the Executive's
employment:
(a) Praegitzer terminates the Executive for any reason other than for
"cause." "Cause" includes, but is not limited to, (i) any form of
dishonesty, criminal conduct, or conduct involving moral turpitude
connected with the employment of Executive or which otherwise reflects
adversely on Praegitzer's reputation or operations; (ii) the refusal of
Executive to comply with Praegitzer's instructions, policies, or rules;
(iii) continuing or repeated problems with Executive's performance or
conduct or Executive's inattention to duties; or (iv) any material breach
of Executive's obligations under this Agreement.
(b) Executive terminates his employment with Praegitzer because
Praegitzer makes a material adverse change in Executive's job title or
responsibilities without Executive's consent;
(c) Executive terminates his employment with Praegitzer because
Praegitzer reduces Executive's annual base compensation by more than 15%
from Executive's annual base compensation for the 12 month period ending
immediately before the Change in Control; or
Anything herein to the contrary notwithstanding, no stock options shall vest
and no severance pay shall be payable under this Agreement if the Executive
voluntarily terminates his employment with Praegitzer.
3. VESTING OF OPTIONS. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, all options to purchase the common stock of Praegitzer
granted to Executive as part of any compensation plan of Praegitzer shall
immediately become exercisable; provided, however, that if the change of
control transaction is a pooling transaction, then the stock options shall
not be accelerated. If, during the term of this Agreement a Change in Control
occurs by cash purchase of Praegitzer stock, all options to purchase the
common stock of Praegitzer granted to Executive as part of any compensation
plan of Praegitzer shall immediately become exercisable.
4. SEVERANCE PAY. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, Praegitzer shall pay the Executive a sum equivalent to
six months of his base compensation. This amount shall be paid in a lump sum
within 30 days after the Executive is terminated.
PAGE 2 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
5. TERM OF AGREEMENT. This Agreement shall remain in effect until
terminated by Praegitzer. Praegitzer may terminate this Agreement upon giving
30 days' written notice to Executive; provided, however, if a Change in
Control occurs prior to the expiration of the 30 day period, this Agreement
will remain in effect until the obligations of Praegitzer have been
fulfilled. This Agreement shall terminate automatically on the date
Executive's employment will Praegitzer ends for any reason; provided,
however, if a Change in Control occurs and the Executive's employment is
Terminated, this Agreement shall remain in effect with respect to all rights
accruing as a result of the occurrence of the Change in Control.
6. CONFIDENTIALITY. During and after the term of this Agreement,
Executive will not divulge or appropriate to Executive's own use or the use
of others any secret or confidential information or knowledge pertaining to
the business of Praegitzer, or any of its subsidiaries, obtained during his
employment by Praegitzer or any of its subsidiaries.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out of
or relating to this Agreement, whether involving rights granted by statute,
torts, or the breach hereof, shall be settled by arbitration in Oregon in
accordance with the laws of Oregon by an arbitrator appointed pursuant to the
rules of the American Arbitration Association, or such other bona fide
arbitration group as may be agreed upon by the parties. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. The prevailing party in any dispute shall be entitled to
reasonable attorney fees, whether incurred before, during or after
arbitration, including on appeal. Any party, however, may apply to a court of
competent jurisdiction for equitable relief.
8. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent
by certified mail (a) to Executive at the last address Praegitzer has on file
for the Executive; or (b) to Praegitzer at its principal executive offices.
9. NON-ALIENATION. Executive shall not sell, transfer, pledge,
hypothecate, assign or create a lien upon any benefits provided under this
Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by
operation of law.
10. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Oregon, without regard to choice of
law rules.
PAGE 3 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
11. AMENDMENTS. No amendment, waiver or discharge of any provision of
this Agreement shall be effective unless in writing signed by the party
against whom enforcement is sought.
12. ENTIRE AGREEMENT. This Agreement is subject to all terms of the
Praegitzer 1995 Stock Incentive Plan, or any other agreement granting to
Executive options to purchase any shares of Praegitzer, not inconsistent with
this Agreement, which agreement is incorporated herein. Otherwise, this
Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, between the parties with respect to such subject matter. Nothing herein
alters Executive's status as an employee at-will.
PRAEGITZER INDUSTRIES, INC.
By: /s/ RG Schmelzer Date: 4-16-99
------------------- ---------------
Print Name: RG Schmelzer
------------------
Title: V.P. Admin
---------------
EXECUTIVE:
/s/ Robert Versiackas Date: 4-16-99
- ------------------------ ---------------
Robert Versiackas
PAGE 4 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
Exhibit 99.13
CHANGE OF CONTROL AGREEMENT
This is an Agreement between Praegitzer Industries, Inc. ("Praegitzer")
and James Buchanan ("Executive").
Executive is or may in the future be the holder of an option to
purchase common shares in Praegitzer, granted to Executive as part of
Executive's compensation for employment at Praegitzer. The stock option plan
provides for vesting of the stock option exercise rights over a period of
time. The parties wish to provide for immediate vesting of such option
rights, and the payment of severance pay, in the event Executive is
terminated within one year after a Change in Control (defined herein).
This Agreement is not intended to alter the compensation and benefits
that Executive could reasonably expect in the absence a Change in Control.
This Agreement is not intended to change any term of employment of Executive,
and specifically is not intended to change the nature of Executive's
employment from an employee at will.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. CHANGE IN CONTROL DEFINED. Change in Control shall mean:
(a) the purchase or other acquisition by any person, entity or group of
persons, within the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor
provisions, of one ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 30 percent or more of either the outstanding
shares of common stock or the combined voting power of Praegitzer
outstanding voting securities entitled to vote generally; or
(b) the approval by the Stockholders of Praegitzer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were stockholders of Praegitzer immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50
percent of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated
Praegitzer's then outstanding securities; or
(c) a liquidation or dissolution of Praegitzer or of the sale of all or
substantially all of Praegitzer's assets.
Provided, however, that transfers made by Robert L. Praegitzer for estate
planning purposes, or in the event of his death, shall not constitute a
Change in Control.
PAGE 1 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
2. TERMINATION OF EMPLOYMENT DEFINED. For purposes of this Agreement
only, the following shall constitute Termination of the Executive's employment:
(a) Praegitzer terminates the Executive for any reason other than for
"cause." "Cause" includes, but is not limited to, (i) any form of
dishonesty, criminal conduct, or conduct involving moral turpitude
connected with the employment of Executive or which otherwise reflects
adversely on Praegitzer's reputation or operations; (ii) the refusal of
Executive to comply with Praegitzer's instructions, policies, or rules;
(iii) continuing or repeated problems with Executive's performance or
conduct or Executive's inattention to duties; or (iv) any material breach
of Executive's obligations under this Agreement.
(b) Executive terminates his employment with Praegitzer because
Praegitzer makes a material adverse change in Executive's job title or
responsibilities without Executive's consent;
(c) Executive terminates his employment with Praegitzer because
Praegitzer reduces Executive's annual base compensation more than 15%
from Executive's annual base compensation for the 12 month period ending
immediately before the Change in Control; or
Anything herein to the contrary notwithstanding, no stock options shall vest
and no severance pay shall be payable under this Agreement if the Executive
voluntarily terminates his employment with Praegitzer.
3. VESTING OF OPTIONS. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, all options to purchase the common stock of Praegitzer
granted to Executive as part of any compensation plan of Praegitzer shall
immediately become exercisable; provided, however, that if the change of
control transaction is a pooling transaction, then the stock options shall
not be accelerated. If, during the term of this Agreement a Change in Control
occurs by cash purchase of Praegitzer stock, all options to purchase the
common stock of Praegitzer granted to Executive as part of any compensation
plan of Praegitzer shall immediately become exercisable.
4. SEVERANCE PAY. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, Praegitzer shall (a) pay the Executive a sum
equivalent to eighteen months of his base compensation; (b) continue to pay
for the Executive's life, disability, accident and health insurance for a
period of eighteen months; and (c) pay the Executive a car allowance in the
PAGE 2 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
amount of $700 per month for a period of eighteen months. The amount due
under section (a) shall be paid in a lump sum within 30 days after the
Executive is terminated.
5. TERM OF AGREEMENT. This Agreement shall remain in effect
until terminated by Praegitzer. Praegitzer may terminate this Agreement upon
giving 30 days' written notice to Executive; provided, however, if a Change
in Control occurs prior to the expiration of the 30 day period, this
Agreement will remain in effect until the obligations of Praegitzer have been
fulfilled. This Agreement shall terminate automatically on the date
Executive's employment with Praegitzer ends for any reason; provided,
however, if a Change in Control occurs and the Executive's employment is
Terminated, this Agreement shall remain in effect with respect to all rights
accruing as a result of the occurrence of the Change in Control.
6. CONFIDENTIALITY. During and after the term of this Agreement,
Executive will not divulge or appropriate to Executive's own use or the use
of others any secret or confidential information or knowledge pertaining to
the business of Praegitzer, or any of its subsidiaries, obtained during his
employment by Praegitzer or any of its subsidiaries.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out of
or relating to this Agreement, whether involving rights granted by statute,
torts, or the breach hereof, shall be settled by arbitration in Oregon in
accordance with the laws of Oregon by an arbitrator appointed pursuant to the
rules of the American Arbitration Association, or such other bona fide
arbitration group as may be agreed upon by the parties. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. The prevailing party in any dispute shall be entitled to
reasonable attorney fees, whether incurred before, during or after
arbitration, including on appeal. Any party, however, may apply to a court of
competent jurisdiction for equitable relief.
8. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent
by certified mail (a) to Executive at the last address Praegitzer has on file
for the Executive; or (b) to Praegitzer at its principal executive offices.
9. NON-ALIENATION. Executive shall not sell, transfer, pledge,
hypothecate, assign or create a lien upon any benefits provided under this
Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by
operation of law.
10. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Oregon, without regard to choice of
law rules.
PAGE 3 --- CHANGE IN CONTROL AGREEMENT
<PAGE>
11. AMENDMENTS. No amendment, waiver or discharge of any provision
of this Agreement shall be effective unless in writing signed by the party
against whom enforcement is sought.
12. ENTIRE AGREEMENT. This Agreement is subject to all terms of the
Praegitzer 1995 Stock Incentive Plan, or any other agreement granting to
Executive options to purchase any shares of Praegitzer, not inconsistent with
this Agreement, which agreement is incorporated herein. Otherwise, this
Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, between the parties with respect to such subject matter. Nothing herein
alters Executive's status as an employee at-will.
PRAEGITZER INDUSTRIES, INC.
By: /s/ RG Schmelzer Date: 4-16-99
---------------- -------
Print Name: RG Schmelzer
------------
Title: V.P. Admin
----------
EXECUTIVE:
/s/ James Buchanan Date: April 16, 1999
- -------------------- --------------
James Buchanan
PAGE 4 --- CHANGE IN CONTROL AGREEMENT
<PAGE>
Exhibit 99.14
CHANGE OF CONTROL AGREEMENT
This is an Agreement between Praegitzer Industries, Inc. ("Praegitzer")
and Robert Schmelzer ("Executive").
Executive is or may in the future be the holder of an option to purchase
common shares in Praegitzer, granted to Executive as part of Executive's
compensation for employment at Praegitzer. The stock option plan provides for
vesting of the stock option exercise rights over a period of time. The
parties wish to provide for immediate vesting of such option rights, and the
payment of severance pay, in the event Executive is terminated within one
year after a Change in Control (defined herein).
This Agreement is not intended to alter the compensation and benefits
that Executive could reasonably expect in the absence a Change in Control.
This Agreement is not intended to change any term of employment of Executive,
and specifically is not intended to change the nature of Executive's
employment from an employee at will.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. CHANGE IN CONTROL DEFINED. Change in Control shall mean:
(a) the purchase or other acquisition by any person, entity or group of
persons, within the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor
provisions, of one ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 30 percent or more of either the
outstanding shares of common stock or the combined voting power of
Praegitzer outstanding voting securities entitled to vote generally; or
(b) the approval by the Stockholders of Praegitzer of a reorganization,
merger, or consolidation, in each case, with respect to which persons
who were stockholders of Praegitzer immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter,
own more than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merger or
consolidated Praegitzer's then outstanding securities; or
(c) a liquidation or dissolution of Praegitzer or of the sale of all or
substantially all of Praegitzer's assets.
Provided, however, that transfers made by Robert L. Praegitzer for estate
planning purposes, or in the event of his death, shall not constitute a
Change in Control.
PAGE 1 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
2. TERMINATION OF EMPLOYMENT DEFINED. For purposes of this Agreement
only, the following shall constitute Termination of the Executive's
employment:
(a) Praegitzer terminates the Executive for any reason other than for
"cause." "Cause" includes, but is not limited to, (i) any form of
dishonesty, criminal conduct, or conduct involving moral turpitude
connected with the employment of Executive or which otherwise reflects
adversely on Praegitzer's reputation or operations; (ii) the refusal of
Executive to comply with Praegitzer's instructions, policies, or rules;
(iii) continuing or repeated problems with Executive's performance or
conduct or Executive's inattention to duties; or (iv) any material
breach of Executive's obligations under this Agreement.
(b) Executive terminates his employment with Praegitzer because
Praegitzer makes a material adverse change in Executive's job title or
responsibilities without Executive's consent;
(c) Executive terminates his employment with Praegitzer because
Praegitzer reduces Executive's annual base compensation by more than 15%
from Executive's annual base compensation for the 12 month period ending
immediately before the Change in Control; or
Anything herein to the contrary notwithstanding, no stock options shall vest
and no severance pay shall be payable under this Agreement if the Executive
voluntarily terminates his employment with Praegitzer.
3. VESTING OF OPTIONS. If, during the term of this Agreement a Change
in Control occurs and Executive's employment is Terminated within one year
after the Change in Control, all options to purchase the common stock of
Praegitzer granted to Executive as part of any compensation plan of
Praegitzer shall immediately become exercisable; provided, however, that if
the change of control transaction is a pooling transaction, then the stock
options shall not be accelerated. If, during the term of this Agreement a
Change in Control occurs by cash purchase of Praegitzer stock, all options to
purchase the common stock of Praegitzer granted to Executive as part of any
compensation plan of Praegitzer shall immediately become exercisable.
4. SEVERANCE PAY. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, Praegitzer shall pay the Executive a sum equivalent to
six months of his base compensation. This amount shall be paid in a lump sum
within 30 days after the Executive is terminated.
PAGE 2 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
5. TERM OF AGREEMENT. This Agreement shall remain in effect until
terminated by Praegitzer. Praegitzer may terminate this Agreement upon giving
30 days' written notice to Executive; provided, however, if a Change in
Control occurs prior to the expiration of the 30 day period, this Agreement
will remain in effect until the obligations of Praegitzer have been
fulfilled. This Agreement shall terminate automatically on the date
Executive's employment with Praegitzer ends for any reason; provided,
however, if a Change in Control occurs and the Executive's employment is
Terminated, this Agreement shall remain in effect with respect to all rights
accruing as a result of the occurrence of the Change in Control.
6. CONFIDENTIALITY. During and after the term of this Agreement,
Executive will not divulge or appropriate to Executive's own use or the use
of others any secret or confidential information or knowledge pertaining to
the business of Praegitzer, or any of its subsidiaries, obtained during his
employment by Praegitzer or any of its subsidiaries.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out of
or relating to this Agreement, whether involving rights granted by statute,
torts, or the breach hereof, shall be settled by arbitration in Oregon in
accordance with the laws of Oregon by an arbitrator appointed pursuant to the
rules of the American Arbitration Association, or such other bona fide
arbitration group as may be agreed upon by the parties. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. The prevailing party in any dispute shall be entitled to
reasonable attorney fees, whether incurred before, during or after
arbitration, including on appeal. Any party, however, may apply to a court of
competent jurisdiction for equitable relief.
8. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent
by certified mail (a) to Executive at the last address Praegitzer has on file
for the Executive; or (b) to Praegitzer at its principal executive offices.
9. NON-ALIENATION. Executive shall not sell, transfer, pledge,
hypothecate, assign or create a lien upon any benefits provided under this
Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by
operation of law.
10. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Oregon, without regard to choice
of law rules.
PAGE 3 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
11. AMENDMENTS. No amendment, waiver or discharge of any provision of
this Agreement shall be effective unless in writing signed by the party
against whom enforcement is sought.
12. ENTIRE AGREEMENT. This Agreement is subject to all terms of the
Praegitzer 1995 Stock Incentive Plan, or any other agreement granting to
Executive options to purchase any shares of Praegitzer, not inconsistent with
this Agreement, which agreement is incorporated herein. Otherwise, this
Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, between the parties with respect to such subject matter. Nothing herein
alters Executive's status as an employee at-will.
PRAEGITZER INDUSTRIES, INC.
By: /s/ Matthew J. Bergeron Date: 4/16/99
------------------------------ ------------------------
Print Name: Matthew J. Bergeron
--------------------
Title: President & COO
-------------------------
EXECUTIVE:
/s/ Robert Schmelzer Date: 4/16/99
- ------------------------------------- ------------------------
Robert Schmelzer
PAGE 4 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
Exhibit 99.15
CHANGE OF CONTROL AGREEMENT
This is an Agreement between Praegitzer Industries, Inc. ("Praegitzer")
and Gregory Lucas ("Executive").
Executive is or may in the future be the holder of an option to
purchase common shares in Praegitzer, granted to Executive as part of
Executive's compensation for employment at Praegitzer. The stock option plan
provides for vesting of the stock option exercise rights over a period of
time. The parties wish to provide for immediate vesting of such option
rights, and the payment of severance pay, in the event Executive is
terminated within one year after a Change in Control (defined herein).
This Agreement is not intended to alter the compensation and benefits
that Executive could reasonably expect in the absence a Change in Control.
This Agreement is not intended to change any term of employment of Executive,
and specifically is not intended to change the nature of Executive's
employment from an employee at will.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. CHANGE IN CONTROL DEFINED. Change in Control shall mean:
(a) the purchase or other acquisition by any person, entity or group of
persons, within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Act"), or any comparable successor provisions,
of one ownership (within the meaning of Rule 13d-3 promulgated under the
Act) of 30 percent or more of either the outstanding shares of common stock
or the combined voting power of Praegitzer outstanding voting securities
entitled to vote generally; or
(b) the approval by the Stockholders of Praegitzer of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were stockholders of Praegitzer immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50
percent of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated
Praegitzer's then outstanding securities; or
(c) a liquidation or dissolution of Praegitzer or of the sale of all or
substantially all of Praegitzer's assets.
Provided, however, that transfers made by Robert L. Praegitzer for estate
planning purposes, or in the event of his death, shall not constitute a
Change in Control.
PAGE 1 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
2. TERMINATION OF EMPLOYMENT DEFINED. For purposes of this Agreement
only, the following shall constitute Termination of the Executive's employment:
(a) Praegitzer terminates the Executive for any reason other than for
"cause." "Cause" includes, but is not limited to, (i) any form of
dishonesty, criminal conduct, or conduct involving moral turpitude
connected with the employment of Executive or which otherwise reflects
adversely on Praegitzer's reputation or operations; (ii) the refusal of
Executive to comply with Praegitzer's instructions, policies, or rules;
(iii) continuing or repeated problems with Executive's performance or
conduct or Executive's inattention to duties; or (iv) any material breach
of Executive's obligations under this Agreement.
(b) Executive terminates his employment with Praegitzer because
Praegitzer makes a material adverse change in Executive's job title or
responsibilities without Executive's consent;
(c) Executive terminates his employment with Praegitzer because
Praegitzer reduces Executive's annual base compensation by more than 15%
from Executive's annual base compensation for the 12 month period ending
immediately before the Change in Control; or
Anything herein to the contrary notwithstanding, no stock options shall vest
and no severance pay shall be payable under this Agreement if the Executive
voluntarily terminates his employment with Praegitzer.
3. VESTING OF OPTIONS. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, all options to purchase the common stock of Praegitzer
granted to Executive as part of any compensation plan of Praegitzer shall
immediately become exercisable; provided, however, that if the change of
control transaction is a pooling transaction, then the stock options shall
not be accelerated. If, during the term of this Agreement a Change in Control
occurs by cash purchase of Praegitzer stock, all options to purchase the
common stock of Praegitzer granted to Executive as part of any compensation
plan of Praegitzer shall immediately become exercisable.
4. SEVERANCE PAY. If, during the term of this Agreement a Change in
Control occurs and Executive's employment is Terminated within one year after
the Change in Control, Praegitzer shall pay the Executive a sum equivalent to
six months of his base compensation. This amount shall be paid in a lump sum
within 30 days after the Executive is terminated.
PAGE 2 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
5. TERM OF AGREEMENT. This Agreement shall remain in effect until
terminated by Praegitzer. Praegitzer may terminate this Agreement upon giving
30 days' written notice to Executive; provided, however, if a Change in
Control occurs prior to the expiration of the 30 day period, this Agreement
will remain in effect until the obligations of Praegitzer have been
fulfilled. This Agreement shall terminate automatically on the date
Executive's employment will Praegitzer ends for any reason; provided,
however, if a Change in Control occurs and the Executive's employment is
Terminated, this Agreement shall remain in effect with respect to all rights
accruing as a result of the occurrence of the Change in Control.
6. CONFIDENTIALITY. During and after the term of this Agreement,
Executive will not divulge or appropriate to Executive's own use or the use
of others any secret or confidential information or knowledge pertaining to
the business of Praegitzer, or any of its subsidiaries, obtained during his
employment by Praegitzer or any of its subsidiaries.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out of
or relating to this Agreement, whether involving rights granted by statute,
torts, or the breach hereof, shall be settled by arbitration in Oregon in
accordance with the laws of Oregon by an arbitrator appointed pursuant to the
rules of the American Arbitration Association, or such other bona fide
arbitration group as may be agreed upon by the parties. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. The prevailing party in any dispute shall be entitled to
reasonable attorney fees, whether incurred before, during or after
arbitration, including on appeal. Any party, however, may apply to a court of
competent jurisdiction for equitable relief.
8. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent
by certified mail (a) to Executive at the last address Praegitzer has on file
for the Executive; or (b) to Praegitzer at its principal executive offices.
9. NON-ALIENATION. Executive shall not sell, transfer, pledge,
hypothecate, assign or create a lien upon any benefits provided under this
Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by
operation of law.
10. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Oregon, without regard to choice of
law rules.
PAGE 3 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
11. AMENDMENTS. No amendment, waiver or discharge of any provision of
this Agreement shall be effective unless in writing signed by the party
against whom enforcement is sought.
12. ENTIRE AGREEMENT. This Agreement is subject to all terms of the
Praegitzer 1995 Stock Incentive Plan, or any other agreement granting to
Executive options to purchase any shares of Praegitzer, not inconsistent with
this Agreement, which agreement is incorporated herein. Otherwise, this
Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, between the parties with respect to such subject matter. Nothing herein
alters Executive's status as an employee at-will.
PRAEGITZER INDUSTRIES, INC.
By: /s/ Robert G. Schmelzer Date: 4-16-99
------------------------------- ------------------------------
Print Name: Robert G. Schmelzer
-----------------------
Title: V.P. Admin
----------------------------
EXECUTIVE:
/s/ Gregory Lucas Date: 4/16/99
- ---------------------------------- ------------------------------
Gregory Lucas
PAGE 4 -- CHANGE IN CONTROL AGREEMENT
<PAGE>
EXHIBIT 99.16
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT is entered into as of ___________, 1996 by and
between PRAEGITZER INDUSTRIES, INC., an Oregon corporation ("Praegitzer")
and ROBERT J. VERSIACKAS ("Versiackas").
RECITALS
--------
A. Versiackas is a shareholder of Trend Circuits, Inc., a California
corporation ("Trend").
B. Pursuant to a merger agreement ("Merger Agreement") dated as of
August 19, 1996, Praegitzer and Trend agreed to merge, with Praegitzer as the
surviving corporation.
C. As a condition to closing the Merger Agreement, Praegitzer and
Versiackas are obliged to enter into this Noncompetition Agreement.
AGREEMENT
---------
ARTICLE 1. NONCOMPETITION COVENANT
1.1 COVENANT NOT TO COMPETE OR SOLICIT. Versiackas covenants and
agrees that for the Restricted Period (defined in Article 3), Versiackas
shall not, directly or indirectly:
(a) Engage in the business of fabrication or assembly of those
types of circuit boards fabricated or assembled by Praegitzer on the date
that Versiackas' employment with Praegitzer terminates, within the United
States or in any other market in which Praegitzer produces or sells products;
provided, however, that after termination of Versiackas' employment with
Praegitzer, Versiackas may fabricate or assemble any circuit boards of a type
not being fabricated or assembled by Praegitzer on the date of such
termination.
(b) For the benefit of Versiackas or any other person or
enterprise, to the extent Versiackas is prohibited by Article 1.1.(a) above
from engaging in such business, (i) solicit any business whatsoever from any
customer or supplier of Praegitzer, (ii) induce or cause any customer to
cease purchasing any service or product from Praegitzer or to terminate or
change such customer's business relationship with Praegitzer in any manner,
or (iii) induce or cause any supplier to cease providing or selling any
service or product to Praegitzer or to terminate or change such supplier's
business relationship with Praegitzer in any manner.
Page 1 - NONCOMPETITION AGREEMENT (ROBERT J. VERSIACKAS)
<PAGE>
(c) For the benefit of Versiackas or any other person or
enterprise, induce or solicit any person who is then employed by Praegitzer
to leave his employment or other position with Praegitzer or to accept any
other employment or position.
1.2 INDIRECT ACTIVITIES DEFINED. Versiackas shall be deemed to be
indirectly engaged in a business covered by Article 1.1(a) if he:
(a) owns any interest in (except an interest of less than 5% of a
publicly traded entity), or participates in the management, operation or
control of any enterprise that is engaged in a business covered by
Section 1.1(a); or
(b) performs services for any enterprise that is engaged in a
business covered by Section 1.1(a).
For purposes of this Agreement, the term "enterprise" includes a sole
proprietorship, partnership, limited liability company, limited liability
partnership, corporation, trust, association, or other form of entity or
association, other than Praegitzer.
1.3 REASONABLENESS OF RESTRICTIONS. Versiackas acknowledges that the
covenants set forth in this Article 1 do not impose unreasonable restrictions
or work a hardship on Versiackas, are necessary and fundamental to the
protection of the business conducted by Trend and Praegitzer, are reasonable
as to scope, duration, and territory, and are given as a condition to
Praegitzer's entering into the Merger and to preserve the value of the assets
acquired by Praegitzer by means of the Merger.
ARTICLE 2. CONFIDENTIALITY
2.1 COVENANT OF CONFIDENTIALITY. Except with the prior written consent
of Praegitzer, Versiackas agrees during the term of this Agreement and at all
times thereafter:
(a) to hold the Confidential Information in the strictest
confidence;
(b) to not use the Confidential Information except as required in
the performance of his duties as an employee of Praegitzer;
(c) to not disclose the Confidential Information to any person or
enterprise (except to other employees of Praegitzer on a "need-to-know" basis
to the extent needed for them to perform the duties of their employment with
Praegitzer); and
(d) to exercise the highest degree of care in safeguarding
Confidential Information against loss, theft, or other inadvertent
disclosure.
Page 2 - NONCOMPETITION AGREEMENT (ROBERT J. VERSIACKAS)
<PAGE>
2.2 CONFIDENTIAL INFORMATION DEFINED. As used in this Agreement, the
"Confidential Information" shall mean:
(a) any information that relates to the business, products,
technology, customers, finances, plans, proposals, or practices of
Praegitzer, including, but not limited to, plans and specifications for new
products, research and development, inventions, marketing strategies, lists
of Praegitzer's customers and suppliers, nonpublic financial information,
budgets, and projections;
(b) any other information that Praegitzer designates in writing or
otherwise treats as "confidential"; and
(c) any information given to Praegitzer by a customer or supplier
or otherwise designated as confidential by a customer or supplier.
The Confidential Information shall include information in any form in which
such information exists, whether oral, written, film, tape, computer disk,
or other medium. The Confidential Information shall exclude any information
that is or becomes part of the public domain other than through the
violation of this Agreement.
2.3 OWNERSHIP OF CONFIDENTIAL INFORMATION. The Confidential
Information shall be the sole and exclusive property of Praegitzer, shall be
considered trade secrets of Praegitzer, and shall be entitled to all
protections given by applicable law to trade secrets.
2.4 RETURN OF DOCUMENTS. Versiackas agrees that all originals and
copies of records, data, reports, documents, lists, plans, drawings,
correspondence, memoranda, notes, and other materials related to or containing
any Confidential Information, in whatever form they exist, whether written,
film, tape, computer disk, or other medium, shall be the sole and exclusive
property of Praegitzer and shall be returned promptly to Praegitzer on the
termination of his employment with Praegitzer or on the written request of
Praegitzer.
ARTICLE 3. RESTRICTED PERIOD
The covenants set forth in this Agreement shall bind Versiackas for the
period (the "Restricted Period") starting on the date of this Agreement and
ending two years after the date that Versiackas' employment with Praegitzer
terminates; provided that, if Versiackas' employment with Praegitzer is
terminated without cause by Praegitzer, as defined in Section 10.1(b)(i) of
the Employment Agreement, or by Versiackas pursuant to Section 10.1(c) of the
Employment Agreement, the Restricted Period shall end on the termination date
with respect to Section 1.1(a) hereof.
Page 3 - NONCOMPETITION AGREEMENT (ROBERT J. VERSIACKAS)
<PAGE>
ARTICLE 4. ENFORCEMENT
Versiackas agrees that it may be difficult to measure damage to
Praegitzer from any breach by Versiackas of this Agreement and that monetary
damages may be an inadequate remedy for any such breach. Accordingly,
Versiackas agrees that if Versiackas shall breach or take steps preliminary
to breaching this Agreement, Praegitzer shall be entitled to a restraining
order, temporary and permanent injunctive relief, specific performance, or
other appropriate equitable relief, without showing or proving that any actual
damage has been sustained by Praegitzer, in addition to all other remedies it
may have at law or in equity.
ARTICLE 5. TERMINATION OF AGREEMENT
This Agreement shall terminate at the earlier of (i) expiration of the
Restricted Period as defined in Article 3, or (ii) material breach by
Praegitzer of the Merger Agreement and failure to cure such breach after
thirty days' notice from Versiackas, or, in the case of a breach not curable
within such time, to diligently take steps to cure such breach within such
thirty days.
ARTICLE 6. MISCELLANEOUS PROVISIONS
6.1 AMENDMENT, WAIVER, ETC. The terms of this Agreement may be amended
or waived only by an instrument in writing signed by the party against which
enforcement of such amendment or waiver is sought. Praegitzer's officers
shall not have the authority to amend or waive any provision in this
Agreement without the affirmative vote of Praegitzer's Board of Directors.
Any waiver of any term of this Agreement or any breach hereof shall not
operate as a waiver of any other such term, condition or breach, and no
failure to enforce any provision hereof shall operate as a waiver of such
provision or of any other provision hereof.
6.2 HEADINGS. The headings are for convenience only and will not
control or affect the meaning or construction of the provisions of this
Agreement.
6.3 JURISDICTION; GOVERNING LAW. The construction and performance of
this Agreement will be governed by the laws of the State of Oregon (except
for the choice of law provisions thereof).
6.4 NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement (a) shall be in writing; (b) shall be delivered
personally, including by means of facsimile or courier, or mailed by registered
or certified mail, postage prepaid and return receipt requested; (c) shall be
deemed given on the date of personal delivery or on the date set forth on the
return receipt; and (d) shall be delivered or mailed to the addresses or
facsimile numbers set forth below or to such other address as any party may
from time to time direct:
Page 4 - NONCOMPETITION AGREEMENT (ROBERT J. VERSIACKAS)
<PAGE>
PRAEGITZER: Praegitzer Industries, Inc.
1270 S.E. Monmouth Cut-Off Road
Dallas, OR 97338-9532
Phone: 503-623-9273
Fax: 503-623-3403
Attn: Mr. Robert L. Praegitzer
President, Chief Executive Officer, and Chairman
Copy to: Stoel Rives LLP
Standard Insurance Center
900 S.W. Fifth Avenue, Suite 2300
Portland, OR 97204-1268
Phone: 503-224-3380
Fax: 503-220-2480
Attn: Stephen E. Babson
VERSIACKAS: Robert J. Versiackas
112 Rassani Drive
Danville, CA 94506
6.5 ATTORNEYS' FEES. If suit or action is filed by any party to enforce
the provisions of this Agreement, or otherwise with respect to the subject
matter of this Agreement, the substantially prevailing party shall be
entitled to recover reasonable attorneys' fees as fixed by the court and, if
any appeal is taken, reasonable attorneys' fees as fixed by the appellate
court.
6.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which
together will constitute a single instrument.
Page 5 - NONCOMPETITION AGREEMENT (ROBERT J. VERSIACKAS)
<PAGE>
6.7 SEVERABILITY. If any provision of this Agreement is deemed to be
illegal or otherwise void, invalid, or unenforceable, the provision shall be
deemed modified to the extent required to be enforceable, and the remainder of
this Agreement shall not be affected and shall remain in full force and
effect.
PRAEGITZER INDUSTRIES, INC.
By: Date:
-------------------------------- --------------------------
Robert L. Praegitzer
President, Chief Executive
Officer, and Chairman
/s/ Robert J. Versiackas Date:
- ------------------------------------ --------------------------
ROBERT J. VERSIACKAS
Page 6 - NONCOMPETITION AGREEMENT (ROBERT J. VERSIACKAS)
<PAGE>
FOR IMMEDIATE RELEASE
CONTACT: CONTACT: CONTACT:
Gina O'Neill Matt Bergeron J. Brad McGee
Director of Investor Relations President and COO Senior Vice President
Praegitzer Industries, Inc. Praegitzer Industries, Inc. Tyco International
(503) 454-6059 (503) 454-6066 (US) Inc.
(603) 778-9700
PRAEGITZER INDUSTRIES, INC. ANNOUNCES CASH ACQUISITION
BY TYCO INTERNATIONAL LTD.
Tualatin, OR and Hamilton, Bermuda, October 26, 1999 - Praegitzer
Industries, Inc. (NASDAQ-PGTZ), a leading designer and manufacturer of complex
printed circuit boards, and Tyco International Ltd. (NYSE-TYC, LSE-TYI,
BSX-TYC), a diversified manufacturing and service company, announced today that
they have entered into a definitive Merger Agreement pursuant to which Tyco will
acquire, for cash, all of the outstanding common shares of Praegitzer at a price
of $5.50 per share.
"After a review of possibilities, the Praegitzer Board of Directors
determined that being acquired by Tyco was the best course of action for our
shareholders, employees and customers," stated Matt Bergeron, president and
chief operating officer of Praegitzer Industries, Inc. Bergeron continued, "Our
operations, enhanced by Tyco's financial strength and breadth of product
offerings, will provide a stable environment and exciting opportunity for
Praegitzer employees, suppliers and customers. In addition, the combination of
Praegitzer Industries and Tyco International will create one of the world's
foremost global printed circuit board design and manufacturing companies.
Together we can provide our customers with a more comprehensive range of
integrated solutions to accommodate the rapid growth of the technological adept
interconnect market on a global basis."
"Praegitzer is an excellent fit with the Tyco Printed Circuit Group
(TPCG). First, the combination of Praegitzer's volume commercial production
facilities with ours creates solid opportunities in the data networking and
telecommunications markets. Second, the addition of Praegitzer's quick-turn
capability clearly positions TPCG as the leader in this attractive market.
Finally, Praegitzer's design centers will enhance our ability to provide
advanced circuit board design support for the newest generation of electronics
from our Tyco Submarine Systems undersea telecommunications business," said
L. Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer. Mr. Kozlowski
also noted that the acquisition will provide an immediate positive contribution
to Tyco's earnings.
<PAGE>
Under the Agreement, a subsidiary of Tyco will shortly commence a
tender offer to purchase all of Praegitzer's 13,129,751 shares of common stock
for $5.50 per share in cash, for a total of approximately $72 million. The
tender offer will be followed by a merger in which each of the remaining shares
of Praegitzer will be exchanged for $5.50 in cash.
The offer will be made pursuant to definitive offering documents to be
filed with the Securities and Exchange Commission. The offer is conditioned on
the tender of the majority of the outstanding shares of common stock on a fully
diluted basis, as well as certain other conditions.
Praegitzer Industries, Inc., founded in 1981, is a leader in providing
electronics original equipment manufacturers and contract manufacturers with a
full range of printed circuit board and interconnect solutions. Praegitzer has
four fabrication facilities, as well as, design centers serving customers in
four key electronics industry segments: data and telecommunications; computer
and peripherals; industrial and instrumentation; and, business and consumer. It
is a publicly traded company with annual sales of over $200 million and more
than 1,700 employees. For more information on Praegitzer Industries, Inc., visit
WWW.PII.COM.
Tyco International Ltd., a diversified manufacturing and service
company, is the world's largest manufacturer and servicer of electrical and
electronic components and undersea telecommunications systems, the world's
largest manufacturer, installer, and provider of fire protection systems and
electronic security services, has strong leadership positions in disposable
medical products, plastics, and adhesives, and is the largest manufacturer of
flow control valves. The Company operates in more than 80 countries around the
world and has expected fiscal 2000 revenues in excess of $25 billion.
FORWARD LOOKING INFORMATION
Comments in this release concerning Tyco's expected fiscal 2000
revenues, expected earnings contribution from the acquisition of Praegitzer, the
growth of the interconnect market and the stability of the environment created
by the acquisition are forward-looking statements, which are based on
management's good faith expectations and belief concerning future developments.
Actual results may materially differ from these expectations as a result of many
factors, relevant examples of which are set forth in Praegitzer's 1999 Annual
Report on Form 10-K and in the "Management Discussion and Analysis" section of
Tyco's 1998 Annual Report to Shareholders and the Tyco's 1998 Annual Report on
Form 10-K.
# # #
<PAGE>
[LOGO]
November 1, 1999
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to inform you that on
October 26, 1999, Praegitzer Industries, Inc. ("Praegitzer") entered into an
Agreement and Plan of Merger with T Merger Sub (OR), Inc. ("Purchaser"), a
wholly owned subsidiary of Sigma Circuits, Inc. ("Parent") and an indirect
wholly owned subsidiary of Tyco International Ltd. ("Tyco"), which provides for
the acquisition of all Praegitzer's common stock at a price of $5.50 per share
in cash. Under the terms of the Agreement, Purchaser has commenced a cash tender
offer for all outstanding shares of Praegitzer at $5.50 per share (the "Offer").
Subject to successful completion of the Offer, and satisfaction of certain
conditions in the Agreement, Purchaser will be merged into Praegitzer and all
shares not purchased in the Offer (other than shares held by Tyco, Parent or
Purchaser, or any subsidiary of Tyco) will be converted into the right to
receive $5.50 per share in the merger.
THE BOARD OF DIRECTORS OF PRAEGITZER HAS APPROVED THE OFFER AND DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF PRAEGITZER SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT
ALL PRAEGITZER SHAREHOLDERS TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed today with the Securities and Exchange Commission, including
the written opinion of Adams, Harkness & Hill, Inc. to Praegitzer that the
consideration of $5.50 per share in cash to be received by shareholders pursuant
to the Offer and the merger is fair to shareholders from a financial point of
view. The Schedule 14D-9 contains important information relating to the Offer,
and you are encouraged to read the Schedule 14D-9.
In addition to the enclosed Schedule 14D-9, also enclosed is the Offer to
Purchase dated November 1, 1999, together with related materials, including a
Letter of Transmittal, to be used for tendering your shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
on how to tender your shares. We urge you to read these documents carefully.
Questions or requests for assistance may be directed to Morrow & Co., Inc., the
Purchaser's information agent, at 445 Park Avenue, 5th Floor, New York, NY
10022, tel: (800) 566-9061.
The management and directors of Praegitzer thank you for the support you
have given Praegitzer over the years.
On behalf of the Board of Directors,
Robert L. Praegitzer
Chairman of the Board and
Chief Executive Officer
