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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
LANIER WORLDWIDE, INC.
(Name of Subject Company)
LANIER WORLDWIDE, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Including Associated Participating Preferred Stock Purchase Rights)
(Title of Class of Securities)
51589L10-5
(CUSIP Number of Class of Securities)
J. MICHAEL KELLY
GENERAL COUNSEL
LANIER WORLDWIDE, INC.
2300 PARKLAKE DRIVE, N.E.
ATLANTA, GEORGIA 30345
(770) 496-9500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person Filing Statement)
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Copy to:
RUSSELL B. RICHARDS
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303-1763
(404) 572-4600
/ / CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Lanier Worldwide, Inc., a Delaware
corporation (together with its subsidiaries, the "Company"), and the address of
the Company's principal executive offices is 2300 Parklake Drive, N.E., Atlanta,
Georgia 30345. The telephone number of the Company at its principal executive
offices is (770) 496-9500.
The title of the equity securities to which this Statement relates is the
Common Stock, par value $0.01 per share, of the Company (the "Shares"). Unless
the context indicates otherwise, all references to Shares shall include the
associated rights issued pursuant to the Stockholder Protection Rights
Agreement, dated as of November 5, 1999, as amended, between the Company and
Mellon Investor Services, L.L.C., formerly ChaseMellon Shareholder Services,
L.L.C., as Rights Agent. As of November 20, 2000, 84,768,152 Shares were issued
and outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The name, business address and telephone number of the Company, the person
filing this statement, are set forth in Item 1 above, which information is
incorporated herein by reference.
This statement relates to a tender offer (the "Offer") disclosed in the
Tender Offer Statement on Schedule TO (the "Schedule TO"), dated December 8,
2000, of LW Acquisition Corp., a Delaware corporation ("Purchaser") and an
indirect, wholly-owned subsidiary of Ricoh Company, Ltd., a Japanese corporation
("Parent"), to purchase any and all issued and outstanding Shares at a price of
$3.00 per Share, net to the selling stockholder in cash without interest thereon
(the "Offer Price"), upon the terms and subject to the conditions set forth in
that certain Offer to Purchase dated as of December 8, 2000 (the "Offer to
Purchase") and the related Letter of Transmittal (the "Letter of Transmittal").
The Offer to Purchase indicates that the principal executive offices of
Purchaser are located at 5 Dedrick Place, West Caldwell, New Jersey 07006 and
the principal executive offices of Parent are located at 15-5, Minami-Aoyama
1-Chome, Minato-ku, Tokyo 107-8544, Japan.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 29, 2000, among Purchaser, Parent and the Company (the "Merger
Agreement"), which provides, among other things, for the making of the Offer by
Purchaser and, subject to the conditions and upon the terms of the Merger
Agreement, for the subsequent merger of Purchaser with and into the Company (the
"Merger"), pursuant to which the separate corporate existence of Purchaser shall
cease and the Company shall continue as the "Surviving Corporation" and an
indirect, wholly-owned subsidiary of Parent.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
CONFLICTS OF INTEREST. Except as described or referred to below, there
exists on the date hereof no material agreement, arrangement or understanding
and no actual or potential conflict of interest between the Company or its
affiliates and (i) the Company or its executive officers, directors or
affiliates or (ii) Parent, Purchaser or their executive officers, directors or
affiliates.
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors, executive officers and affiliates are
described in the Company's Information Statement attached hereto as ANNEX A in
the sections entitled "Certain Transactions," "Directors of the
Company--Compensation of Directors," "Executive Compensation," "Executive
Compensation--Non-Competition and Employment Agreements," "Executive
Compensation--Executive Severance Agreements," "Executive
Compensation--Executive Employment Agreements," and "Report on Executive
Compensation." The Information Statement is attached hereto as ANNEX A and is
incorporated herein by reference. Certain of these contracts, agreements,
arrangements and understandings will be affected by the Merger, as described
below.
In connection with the transactions contemplated by the Merger, the
following agreements were entered into: the Merger Agreement, the
Confidentiality Agreement, Executive Employment Agreements, the Agreements with
Harris Corporation, and the Voting and Tender Agreement. All of such agreements
are discussed in detail below. Except as expressly provided herein, all
capitalized terms utilized but not defined herein shall have the meanings
ascribed to them in the Merger Agreement.
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THE MERGER AGREEMENT. The summary of the material terms of the Merger
Agreement set forth in Section 11 of the Offer to Purchase is incorporated by
reference herein. The summary of the Merger Agreement contained in the Offer to
Purchase and the summary of such terms contained in this document are qualified
in their entirety by reference to the Merger Agreement, a copy of which is filed
as Exhibit (d)(1) to the Schedule TO and is incorporated herein by reference.
CONFIDENTIALITY AGREEMENT. The following summary is qualified in its
entirety by reference to the complete text of the Confidentiality Agreement,
dated June 22, 2000 between the Company and Parent (the "Confidentiality
Agreement"), a copy of which is filed as Exhibit (e)(2) hereto and is
incorporated herein by reference.
Effective June 22, 2000, Parent and the Company entered into a
Confidentiality Agreement, pursuant to which Parent agreed to keep confidential
certain information received from the Company. The Confidentiality Agreement
includes, among other provisions, a standstill period, whereby Parent may not
effect or participate in the acquisition of any securities of the Company
without the Company's prior consent until November 8, 2001, and mutual employee
non-solicitation agreements by both Parent in favor of the Company and the
Company in favor of Parent. The Confidentiality Agreement does not contain a
provision providing for an exclusive negotiating period with Parent.
TREATMENT OF STOCK OPTIONS AND STOCK AWARDS. The Merger Agreement provides
that the Company's Stock Incentive Plan (effective as of October 21, 1999 and as
amended and restated effective August 3, 2000) will be terminated immediately
prior to the Effective Time of the Merger. As soon as practicable following the
Effective Time of the Merger, the Company will pay (1) to each option holder in
cash an amount equal to the number of Shares subject to each option, whether or
not vested or exercisable, multiplied by the excess, if any, of $3.00 over the
exercise price of each such option, and (2) to each holder of restricted stock
and performance share awards (each, a "Stock Award") an amount equal to the
product of $3.00 and the number of Shares subject to such Stock Award.
EXECUTIVE EMPLOYMENT AGREEMENTS. In connection with the transactions
contemplated by the Merger Agreement, on November 29, 2000, Wesley E. Cantrell,
Chairman and Chief Executive Officer of the Company, and C. Lance Herrin,
President and Chief Operating Officer of the Company, entered into executive
employment agreements (each an "Executive Employment Agreement" and
collectively, the "Executive Employment Agreements") with the Company which are
contingent upon the consummation of the Merger and will become effective
immediately thereafter. For purposes of this section only, capitalized terms
utilized but not defined herein shall have the meanings ascribed to them in the
Executive Employment Agreement with respect to each such officer. A copy of the
Executive Employment Agreement of Wesley E. Cantrell is filed as Exhibit (e)(3)
hereto and is incorporated herein by reference, and a copy of the Executive
Employment Agreement of C. Lance Herrin is filed as Exhibit (e)(4) hereto and is
incorporated herein by reference. The summary of the Executive Employment
Agreements contained herein is qualified in its entirety by reference to the
Executive Employment Agreements.
Mr. Cantrell's agreement provides for a six-month term of employment
commencing upon the Effective Time (as such term is defined in the Merger
Agreement), and provides for a base salary of $1,000,000. Upon expiration of
Mr. Cantrell's term of employment, he is entitled to receive a termination
payment of $2.8 million and continued welfare benefits for a period of two
years. In the event his employment is terminated by the Company without Cause or
by Mr. Cantrell for Good Reason prior to the expiration of his employment term,
Mr. Cantrell will be entitled to receive the base salary that would have been
due for the remainder of the term had his employment not been terminated as well
as the termination payment of $2.8 million. This agreement contains non-compete
and non-solicitation provisions.
Mr. Herrin's agreement provides for a two-year term of employment commencing
upon the Effective Time (as such term is defined in the Merger Agreement), which
automatically renews for successive one-year periods unless either party gives
notice of its intention to discontinue employment and provides for a base salary
of $425,000. In addition Mr. Herrin will be eligible to receive the
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following bonus payments: (i) an annual bonus of up to $350,000; (ii) a long
term incentive bonus of up to $120,000 payable annually; and (iii) a retention
bonus of $200,000 payable upon each of the first and second anniversaries of the
Effective Time if Mr. Herrin is still employed with the Company at such times.
Upon expiration of Mr. Herrin's term of employment, he is entitled to receive a
termination payment of $1.7 million and continued welfare benefits for a period
of two years. In the event Mr. Herrin's employment is terminated by the Company
without Cause or by Mr. Herrin for Good Reason prior to the expiration of his
employment term, Mr. Herrin will be entitled to receive the remaining unpaid
retention bonuses that would have been due for the remainder of the term had his
employment not been terminated as well as the termination payment of
$1.7 million. This agreement contains non-compete and non-solicitation
provisions.
EMPLOYEE BENEFITS. The Merger Agreement provides that, subject to certain
conditions, Parent will, for one year following the effective time of the
Merger, either continue the existing benefit plans, excluding any equity-based
plan or arrangement of the Company, or provide, or cause the Surviving
Corporation or its subsidiaries to provide, benefits to employees of the Company
or its subsidiaries that are no less favorable in the aggregate than the benefit
plans and programs provided to similarly situated employees of Parent or its
subsidiaries. In connection with the Merger, the Company amended its Employee
Stock Purchase Plan (the "Purchase Plan"), effective November 29, 2000, such
that the most recent six-month purchase period would terminate on November 29,
2000, the date of the Merger Agreement. A copy of this amendment is filed as
Exhibit (e)(5) hereto and is incorporated herein by reference. In addition, the
Company has amended the Purchase Plan to allow for the immediate transferability
of Shares acquired thereunder. Also, in connection with the Merger, the Company
amended its Save to Accumulate Retirement $ (STAR$) Plan (the "STAR$ Plan") to
eliminate Company stock as an investment option for purchases not in progress
before 4:00 p.m. on the date of the Merger Agreement. A copy of the amendment to
the STAR$ Plan is attached hereto as Exhibit (e)(6) and is incorporated herein
by reference.
Additionally, the Key Contributor Incentive Plan of the Company (effective
as of October 21, 1999 and as amended and restated effective August 3, 2000) and
the Long-Term Incentive Plan for Key Employees of the Company (effective as of
October 21, 1999 and as amended and restated effective August 3, 2000) shall be
terminated immediately prior to the completion of the Offer.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The Merger Agreement
provides that all rights to indemnification existing in favor of the present or
former directors, officers and employees of the Company or any of its
Subsidiaries (or any person who served at the Company's or any of its
Subsidiaries' request as an officer, director or agent) (collectively, the
"Indemnified Parties") as provided in the Company's certificate of incorporation
or by-laws or the certificate or articles of incorporation, by-laws or similar
organizational documents of any of the Subsidiaries of the Company, and the
indemnification agreements with such persons as in effect on November 29, 2000,
with respect to matters occurring prior to the Effective Time, will survive the
Merger and will continue in full force without modification to the maximum
extent allowed by applicable law. The Merger Agreement provides that the
certificate of incorporation of the Surviving Corporation shall contain
provisions with respect to indemnification and advancement of expenses to such
Indemnified Parties identical to those set forth in the certificate of
incorporation of the Company. The Merger Agreement provides that for at least
six (6) years from and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless to the fullest extent permitted by
applicable law the present and former officers and directors of the Company and
its subsidiaries against all losses, claims, damages and liability in respect of
acts or omissions occurring at or prior to the Effective Time. The Merger
Agreement also provides that for at least six (6) years after the Effective
Time, the Surviving Corporation will provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective Time
covering each person currently covered by the Company's directors' and officers'
liability insurance with terms no less favorable than those of the policy in
effect on the date of the Merger Agreement, subject to certain premium caps.
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AGREEMENTS WITH HARRIS CORPORATION. On October 22, 1999, Harris and the
Company (which was, at that time, a wholly-owned subsidiary of Harris) entered
into an Agreement and Plan of Distribution (the "Distribution Agreement") in
connection with the distribution (the "Distribution") of approximately 90% of
the Company's Common Stock to the stockholders of Harris in a spin-off
transaction. Harris and the Company also entered into a Tax Disaffiliation
Agreement (the "Tax Agreement"), dated November 5, 1999, in connection with the
Distribution. The Distribution subsequently occurred on November 8, 1999.
The following is a summary of the principal provisions of certain letter
agreements entered into by the Company and/or Parent with Harris. This summary
is not a complete description of the terms and conditions of the letter
agreements and is qualified in its entirety by reference to the full text of the
letter agreements, which are filed as Exhibits (d)(3) and (d)(4) to the Schedule
TO and incorporated herein by reference. The letter agreements may be examined,
and copies obtained, as discussed in Section 7 of the Offer to Purchase.
As required by the Distribution Agreement, Parent and Harris have executed a
letter agreement obligating Parent to cause the Surviving Corporation to assume
certain tax-related liabilities, obligations and expenses of the Company under
the Distribution Agreement.
Separately, Parent, Harris and the Company have also entered into a letter
agreement providing (i) that Harris would waive the provisions of
Section 2.04(b) of the Tax Agreement, as such section related to the Company's
negotiation of the Merger Agreement and the consummation of the Merger by the
Company, and (ii) that the negotiation of the Merger Agreement and the
transactions contemplated thereby (including the Voting and Tender Agreement
described below) would not be deemed impermissible Harris Tainting Acts (as such
term is defined in the Tax Agreement).
PRIOR AGREEMENTS WITH PARENT. The Company and Parent have entered into a
Sales Agreement, dated as of July 1, 1999, whereby the Company has the
non-exclusive right to distribute, throughout North America, Central America,
Europe and Australia, certain products and equipment manufactured by Parent,
including facsimile equipment, copiers and digital multifunction products (the
"Sales Agreement"). During the fiscal year ended June 30, 2000, Parent was the
Company's largest supplier, and the Company remitted payments of approximately
$238 million, or approximately 50% of the Company's total payments to all major
suppliers, to Parent during the most recent fiscal year. This summary of the
Sales Agreement is qualified in its entirety by reference to the Sales
Agreement, a copy of which is filed as Exhibit (e)(9) hereto and is incorporated
herein by reference.
VOTING AND TENDER AGREEMENT. The summary of the material terms of the
Voting and Tender Agreement, dated November 29, 2000, by and between Parent and
Harris, the holder of 8,785,958 Shares, or approximately 10.4% of the Company's
issued and outstanding Shares as of November 20, 2000, set forth in Section 11
of the Offer to Purchase is incorporated by reference herein. The summary of the
Voting and Tender Agreement contained in the Offer to Purchase is qualified in
its entirety by reference to the Voting and Tender Agreement, a copy of which is
filed as Exhibit (d)(2) to the Schedule TO and is incorporated herein by
reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD.
The Board of Directors of the Company (the "Board"), at a special meeting
held on November 27, 2000, by unanimous vote (1) determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, are, in the belief of the Board, fair to and in the best interests of
the Company's stockholders and (2) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and
declared their advisability. The Board, by unanimous vote, recommends that the
Company's stockholders accept the Offer and tender their Shares thereunder, and,
as required by applicable law, approve and adopt the Merger Agreement and the
Merger. A copy of the press release issued by the Company announcing the Merger
Agreement and the Offer and a letter to the stockholders of the Company
communicating the recommendation of the Board are filed hereto as Exhibits
(a)(4) and (a)(3) respectively, and are incorporated herein by reference.
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BACKGROUND OF THE TRANSACTION.
In early 2000, senior executives of the Company studied the Company's
business relating to sales, service and support of the internally-developed
dictation product line and applications surrounding speech-to-text processing
(the "Voice Products Business") and determined in March 2000 that the Voice
Products Business was not a core, strategic asset for the Company, and could
require significant further investment.
In early 2000, several potential purchasers approached the Company regarding
a purchase of the Voice Products Business.
The Company engaged in preliminary discussions with potential purchasers
throughout the remainder of 2000. Several potential purchasers either withdrew
their interest or proved to have insufficient funding for the Company to proceed
with a transaction. Following this process, the Company executed an asset
purchase agreement (the "Asset Purchase Agreement") on November 29, 2000 with a
wholly-owned subsidiary of Platinum Equity, LLC ("Platinum"), whereby Platinum
agreed to purchase the Voice Products Business.
In the spring of 2000, the Company's senior management and its Board began
to examine the Company's strategic position in the automated office imaging
equipment market in light of increasing consolidation and competition in the
market, the Company's level of indebtedness, the Company's performance in the
first calendar quarter of 2000 and deterioration in the market price of the
Company's common stock. Senior management and the Board determined that the
Company should take action to explore strategic alternatives that would enable
the Company to remain competitive. Considerations included sales of non-core
assets and restructuring to reduce costs, either by combining with a
manufacturer of office imaging equipment or by workforce and other cost
reductions.
On May 22, 2000, after senior management had begun to consider a potential
business combination, either by sale of the Company or otherwise, the Company
and its financial advisors met in Atlanta with the first of a series of
potential acquirors after such potential acquiror's financial advisor contacted
the Company's Executive Vice President and Chief Financial Officer.
On June 1, 2000, the first potential acquiror performed extensive due
diligence on the Company at the Company's headquarters in Atlanta.
On June 16, 2000, the Company's Chief Executive Officer contacted the
Chairman of Parent to discuss a possible acquisition by Parent of the Company.
On June 19, 2000, the Company met with the first potential acquiror,
together with the parties' attorneys, financial advisors and accountants at a
hotel in Atlanta to discuss a possible acquisition of the Company.
The Company's Chief Executive Officer contacted a senior executive of a
second potential acquiror on June 9, 2000, which led to a meeting of the parties
and their financial advisors on June 21, 2000 at the Atlanta offices of the
Company's financial advisor.
On June 21, 2000, senior executives of the Company met with the Company's
financial advisor in its Atlanta offices to discuss the pending acquisition
proposals.
On June 22, 2000, the Company and Parent executed the Confidentiality
Agreement, providing for, among other things, a standstill period lasting until
November 8, 2001 during which Parent agreed not to effect or participate in the
acquisition of any securities of the Company without the Company's prior
consent.
On June 26, 2000, the Company and its financial advisor continued
negotiations with, and provided a written response to a detailed due diligence
request submitted by, the first potential acquiror. On July 18, 2000, the
Company and its financial advisor responded to additional due diligence
questions
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from this potential acquiror. On August 3, 2000, this potential acquiror
contacted the Company's Chief Executive Officer, stating that it had determined
not to proceed with further negotiations.
On June 30 and July 24, 2000, the Company and its financial advisor met with
Parent in Atlanta to further discuss a possible sale of the Company to Parent
and the strategic fit of the two companies.
On August 4, 2000, Parent submitted a due diligence request to the Company.
Between August 9 and August 11, 2000, Parent and its financial, legal and
accounting advisors met with the Company, together with its attorneys, financial
advisors and accountants at the offices of the Company's financial advisor in
Atlanta. During these sessions, Parent and its representatives conducted due
diligence on the Company and its businesses.
In late August, 2000, a senior representative of the second potential
acquiror contacted the Company's financial advisor, indicating to such financial
advisor that it had determined not to proceed with negotiations.
On August 28, 2000, the Parent and the Company commenced negotiations over
the financial, structural and legal terms of a potential acquisition of the
Company by Parent, including the terms and conditions of a definitive merger
agreement.
In late August, 2000 the Company's Chief Executive Officer contacted the
Chairman of a fourth potential acquiror and a senior representative from a fifth
potential acquiror, which led to scheduling meetings of the parties and their
respective financial advisors.
On September 14, 2000, the Company and its financial advisor met with the
fourth potential acquiror at the offices of the Company's financial advisor in
Atlanta. This potential acquiror and the Company discussed the printer and
copier market generally, and discussed customer segmentation and the convergence
of printers and copiers. In late September, 2000, this potential acquiror
contacted the Company's Chief Executive Officer stating that it had determined
not to proceed with negotiations.
From September 17 through September 19, 2000, the Company met in Tokyo with
Parent and the fifth potential acquiror. On September 18, representatives for
both the Company and Parent met at Parent's headquarters. At this meeting,
representatives of Parent and the Company further explored the financial terms
of the proposed acquisition and also discussed Parent's requirement that the
Company divest itself of its Voice Products Business prior to any acquisition of
the Company by Parent. It was decided that discussions between the parties'
legal and financial advisors should continue. In addition, on September 18, 2000
the Company and the fifth potential acquiror discussed a possible sale of the
Company to the fifth potential acquiror and the strategic fit of the two
companies.
On September 21, 2000, at a meeting held at the offices of its financial
advisor, the Board considered engaging in a transaction in which the Company
would be acquired by a third party. The Board was informed that several parties
had considered acquiring the Company and had withdrawn, and that two parties
continued to express interest in a possible transaction. At that meeting, the
Board authorized the Company to continue discussions toward such a transaction.
On September 25 and 26, 2000, senior executives of both the Company and the
fifth potential acquiror, along with their financial advisors, met at the
offices of the Company's financial advisors in Atlanta to discuss a possible
acquisition of the Company.
The Company subsequently facilitated an initial meeting on September 26,
2000 in Orlando, Florida between representatives of Parent, the Company and
Harris, the former parent company and current 10.4% stockholder of the Company.
The Company's and Parent's financial and legal advisors and Parent's accounting
advisors were also present at the meeting. At this meeting Parent conducted due
diligence on the November 1999 spin-off of the Company from Harris and discussed
amending the Tax Agreement entered into in connection with the Distribution.
Parent and Harris also had an initial
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discussion of the terms of an agreement pursuant to which Harris would agree to
tender its shares of the Company's Common Stock in a tender offer should Parent
and the Company enter into a definitive Merger Agreement. On September 29, 2000,
Parent's legal and accounting advisors conducted additional due diligence at the
headquarters of Harris in Melbourne, Florida on the spin-off of the Company from
Harris.
Parent and the Company continued to negotiate the structure and terms of the
transaction through October and early November. During this time, Parent also
negotiated with Harris the terms of letter agreements necessitated by provisions
of the Tax Agreement to permit Parent to acquire the Company. Parent and Harris
also agreed in principle upon the terms of a voting and tender agreement in
which, among other things, Harris agreed to tender its shares in a tender offer
and Harris further agreed to vote its shares at any meeting of the Company's
stockholders in the same proportion as the other stockholders of the Company.
On October 9, 2000, at a special telephonic meeting of the Board, the
Company's senior executives and financial advisor made a presentation concerning
ongoing discussions with Parent and the fifth potential acquiror. In that
meeting, the Board authorized Mr. Cantrell to contact the Chief Executive
Officer of Parent directly to further negotiations between the parties.
On October 26, 2000, at a regular meeting of the Board held at the Company's
corporate headquarters in Atlanta, the Board received an update on the potential
transactions with Parent and the fifth potential acquiror, as well as an update
concerning the sale the Voice Products Business.
In late October 2000, the fifth potential acquiror indicated that it was not
interested in an acquisition of the Company, but that it was interested in
exploring a possible equity investment in the Company.
On November 9, 2000, meetings were held at Parent's counsel's offices in New
York. Representatives of Parent and the Company and their respective financial
advisors were in attendance. At that meeting, Parent proposed acquiring all of
the shares of the Company at a price of $3.00 per share in cash. This proposal
was contingent upon, among other things, the Company reaching an agreement to
sell the Voice Products Business on terms and conditions satisfactory to Parent
and the negotiation of a mutually satisfactory definitive merger agreement.
On November 10, 2000, meetings were held at the offices of Parent's
financial advisor in New York. Representatives of Parent and the Company and
their respective financial advisors were in attendance. The parties further
discussed the matters discussed at the November 9 meeting.
On the evening of November 12, 2000, representatives from the Company and
Parent agreed to proceed to negotiate a definitive agreement based on Parent's
November 9 proposal, pending a satisfactory agreement for the Company to dispose
of its Voice Products Business and the receipt of official approval from the
boards of directors of both Parent and the Company. On the basis of this
understanding, the parties continued to negotiate the terms of the proposed
transaction through mid-November. During this time, the Company updated Parent
regularly on the status of its efforts to sell the Voice Products Business.
On November 27, 2000, the Company informed Parent that it had reached a
preliminary agreement to sell the Voice Products Business to Platinum. Between
November 27, 2000 and November 29, 2000, the Company and its legal advisors
negotiated definitive agreements with Platinum and its legal advisors for the
sale of the Voice Products Business. The Company regularly updated Parent and
its advisors as to the status of the potential transaction with Platinum, as
well as the terms and provisions of the drafts of the definitive agreements
relating to such transaction.
On November 27, 2000, at a special meeting of the Board held at the offices
of the Company's financial advisor, with one director participating by
conference telephone, the Board considered the
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proposed transactions with Parent and with Platinum. After receiving reports
from management, counsel and its financial advisor, a vigorous discussion among
the Board ensued, after which the Board by unanimous vote (1) determined and
declared that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are fair to and in the best interests of the
Company's stockholders; (2) determined and declared that the Asset Purchase
Agreement for the sale of the Voice Products Business and the transactions
contemplated thereby are, in the belief of the Board, fair to and in the best
interests of the Company's stockholders; (3) approved of the Merger Agreement
and the Asset Purchase Agreement for the sale of the Voice Products Business and
the respective transactions contemplated thereby, including the Offer and the
Merger; and (4) recommended that the Company's stockholders accept the Offer and
tender their Shares thereunder and, as required by applicable law, approve and
adopt the Merger Agreement and the Merger, and declared their advisability. The
Board granted officers of the Company the authority to negotiate the final terms
of the Asset Purchase Agreement, the execution of which was required before
Parent would execute the Merger Agreement.
Between November 27, 2000 and the end of the business day on November 29,
2000, the Company and Platinum negotiated the final terms of the Asset Purchase
Agreement relating to the sale of the Voice Products Business and various
matters related thereto.
The Merger Agreement and agreements related thereto were unanimously
approved by Parent's Board on November 28, 2000.
On November 29, 2000, the Company informed Parent that the terms of the sale
of the Voice Products Business to Platinum had been finalized and definitive
documentation would be executed immediately prior to execution of the definitive
Merger Agreement among Parent, the Company and Purchaser.
On November 29, 2000, following execution by the Company and Platinum of the
Voice Products Business definitive agreements, the Merger Agreement among
Parent, the Company and Purchaser and the letter agreements with Harris were
executed.
On December 8, 2000, in accordance with the Merger Agreement, Parent and
Purchaser commenced the Offer.
ROBINSON-HUMPHREY ANALYSIS.
GENERAL
Pursuant to an engagement letter dated March 28, 2000, The Robinson-Humphrey
Company, LLC ("Robinson-Humphrey"), was retained by the Company to render
financial advisory services, to assist the Company in evaluating proposals, if
any, to acquire the Company or an interest in the Company and, if requested by
the Company, to render an opinion with respect to the fairness, from a financial
point of view, to the Company's stockholders of the consideration to be offered
pursuant to a proposal. At a meeting of the Board on November 27, 2000,
Robinson-Humphrey gave its oral opinion (which was later confirmed by a written
opinion) that, as of the date of such opinion and based upon and subject to
various considerations set forth therein, the consideration to be offered in the
proposed transaction is fair to the stockholders of the Company from a financial
point of view.
8
<PAGE>
THE FULL TEXT OF THE OPINION OF ROBINSON-HUMPHREY, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED TO THIS DOCUMENT AS ANNEX B HERETO AND IS INCORPORATED HEREIN BY
REFERENCE. THE SUMMARY OF THE ROBINSON-HUMPHREY OPINION SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE ROBINSON-HUMPHREY
OPINION. THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS
ENTIRETY.
THE OPINION OF ROBINSON-HUMPHREY IS DIRECTED TO THE BOARD AND RELATES ONLY
TO THE FAIRNESS OF THE CONSIDERATION TO BE OFFERED IN THE PROPOSED TRANSACTION
FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER
OR THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF THE
COMPANY AS TO WHETHER SUCH STOCKHOLDER SHOULD TENDER HIS OR HER SHARES OF THE
COMPANY.
MATERIAL AND INFORMATION CONSIDERED WITH RESPECT TO THE MERGER
In arriving at its opinion, Robinson-Humphrey, among other things, reviewed
and analyzed:
- a draft of the Merger Agreement dated November 22, 2000;
- publicly available information concerning the Company which
Robinson-Humphrey believed to be relevant to its analysis;
- financial and operating information with respect to the business, assets,
operations and prospects of the Company furnished to Robinson-Humphrey by
the Company;
- the trading history of the Shares from November 1, 1999 to November 27,
2000 and a comparison of that trading history with those of other
companies which Robinson-Humphrey deemed relevant;
- a comparison of the historical financial results and present financial
condition of the Company with those of other companies which
Robinson-Humphrey deemed relevant;
- a comparison of the financial terms of the proposed transaction with the
terms of certain other recent transactions which Robinson-Humphrey deemed
relevant; and
- certain historical data relating to acquisitions of publicly traded
companies, including percentage premiums paid in such acquisitions.
In addition, Robinson-Humphrey held discussions with management of the
Company concerning its business, operations, assets, present condition and
future prospects and undertook such other studies, analyses and investigations
as Robinson-Humphrey deemed appropriate.
In rendering its opinion, Robinson-Humphrey assumed and relied upon the
accuracy and completeness of the financial and other information used by
Robinson-Humphrey in arriving at its opinion without independent verification.
With respect to the financial forecasts of the Company, Robinson-Humphrey
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the future
financial performance of the Company.
The Robinson-Humphrey opinion is necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Robinson-Humphrey, as of the date of its opinion.
The financial markets in general and the market for the Shares, in particular,
are subject to volatility, and Robinson-Humphrey's opinion did not purport to
address potential developments in the financial markets or the market for the
Shares after the date of their opinion. Robinson-Humphrey assumed that the Offer
and the Merger would be consummated on
9
<PAGE>
the terms described in the November 22, 2000 draft of the Merger Agreement,
without any change in, or waiver of, any material terms or conditions by the
Company.
In preparing its opinion, Robinson-Humphrey performed a variety of financial
and comparative analyses, the material portions of which are summarized below. A
summary of these analyses does not purport to be a complete description of the
analyses underlying Robinson-Humphrey's opinion. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances and, therefore, is not readily
susceptible to partial analysis or summary description. Accordingly,
Robinson-Humphrey believes that its analyses must be considered as an integrated
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying such analyses and opinion. In its analyses,
Robinson-Humphrey made numerous assumptions with respect to the Company,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of the
Company. The estimates contained in these analyses and the valuation ranges
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, these analyses and estimates are inherently subject to
substantial uncertainty. The following is a summary of the material financial
and comparative analyses performed by Robinson-Humphrey in arriving at the
Robinson-Humphrey opinion.
ANALYSIS OF THE COMPANY
HISTORICAL STOCK PRICE ANALYSIS
Robinson-Humphrey analyzed the prices at which the Shares traded since
November 1, 1999. During this time, the high closing price was $5.88 and the low
closing price was $0.50. In addition, Robinson-Humphrey observed the average
closing price for the common stock over the past 12-month period prior to the
date of its opinion to be $1.86. The average closing price for the periods
ending 5, 30 and 90 days prior to the date of the opinion were $0.53, $0.63 and
$0.83, respectively.
MARKET ANALYSIS OF SELECTED PUBLIC COMPANIES
Robinson-Humphrey reviewed and compared selected publicly available
financial data, market information and trading multiples for the Company with
other selected publicly-traded companies in the office equipment distribution
and manufacturing industry which Robinson-Humphrey deemed comparable to the
Company. This group of 13 publicly traded companies was divided into a Tier 1
and Tier 2 and included:
<TABLE>
<S> <C>
TIER 1
- Danka Business Systems PLC - Global Imaging Systems, Inc.
- IKON Office Solutions, Inc. - Xerox Corporation
- Pitney Bowes Inc.
TIER 2
- Nashua Corporation - F.Y.I. Incorporated
- MCSi, Inc. - Electronics For Imaging, Inc.
- Canon Inc. - Hewlett-Packard Company
- Ricoh Company, Ltd. - Lexmark International, Inc.
</TABLE>
10
<PAGE>
For the selected public companies, Robinson-Humphrey compared, among other
things, firm value (defined as market capitalization plus debt less cash and
cash equivalents) as a multiple of latest twelve months revenues, latest twelve
months EBITDA (earnings before interest, taxes, depreciation and amortization),
latest twelve months EBITDA less capital expenditures and latest twelve months
earnings before interest and taxes (EBIT) and equity value as a multiple of
latest twelve months net income, estimated calendar 2000 net income, estimated
fiscal 2001 net income and latest twelve months book value. All multiples were
based on closing stock prices as of November 21, 2000. Revenue, EBITDA, EBITDA
less capital expenditures, EBIT, net income and book value results for the
comparable companies were based on historical financial information available in
public filings of the comparable companies. Earnings per share estimates were
based on First Call consensus estimates as of November 20, 2000. First Call is
an information provider that publishes a compilation of estimates of projected
financial performance for public companies produced by equity research analysts
at leading investment banking firms. To accurately reflect average values for
statistical purposes, Robinson-Humphrey excluded certain outlying values that
differed from the relative groupings of the other values. Robinson-Humphrey
believes that these outlying values for certain companies reflect market
aberrations that can skew mean values. The following table sets forth the low,
average and high multiples indicated by this analysis for the Tier 1 selected
public companies as of November 21, 2000:
<TABLE>
<CAPTION>
LOW AVERAGE HIGH
-------- -------- --------
<S> <C> <C> <C>
Firm Value to:
Latest twelve months revenues............................. 0.4x 0.7x 2.2x
Latest twelve months EBITDA............................... 4.8 6.3 51.1
Latest twelve months EBITDA less capital expenditures..... 5.7 9.2 11.9
Latest twelve months EBIT................................. 6.6 7.5 102.6
Price to:
Latest twelve months net income........................... 4.9x 7.8x 11.6x
Calendar 2000 estimated net income........................ 4.9 7.3 24.6
Fiscal 2001 estimated net income.......................... 3.6 5.8 13.0
Book value................................................ 0.3 1.0 5.5
</TABLE>
Based upon the multiples derived from this analysis and the Company's actual
historical and projected results and the Company's adjusted historical and
projected results, adjusted to eliminate the impact of non-recurring charges,
Robinson-Humphrey calculated a range of implied equity values for the Company
between $0.00 and $4.76 per share based on actual results and between $0.32 and
$6.84 per share based on adjusted results with a weighted average implied equity
value of $1.26 per share based on actual results and $2.63 per share based on
adjusted results. Robinson-Humphrey noted that the proposed consideration of
$3.00 per share to be received by the Company's stockholders in the Offer and
the Merger was greater than these values.
Robinson-Humphrey noted that none of the companies used in the market
analysis of selected public companies was identical to the Company and that,
accordingly, the analysis of comparable public companies necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies reviewed and other factors that would
affect the market values of comparable companies.
DISCOUNTED CASH FLOW ANALYSIS
Robinson-Humphrey performed a discounted cash flow analysis of the Company
based upon projected results provided by the Company's management for fiscal
2001 through fiscal 2004 and projections for fiscal 2005 developed by
Robinson-Humphrey (calculated using similar growth rates and margins) to
estimate the net present equity value per share of the Company.
Robinson-Humphrey calculated a range of net present equity values for the
Company based on its projected free cash flow
11
<PAGE>
(earnings before interest and after taxes plus depreciation and amortization
expense minus capital expenditures and changes in working capital) for the
fiscal years ending June 30, 2001 through June 30, 2005, inclusive, using
discount rates ranging from 12% to 16% and terminal value multiples of fiscal
year 2005 EBITDA ranging from 4.0x to 7.0x. Robinson-Humphrey observed that the
valuation based on this methodology produced a range of value from $1.67 to
$8.60 per share, with an average implied equity value of $4.87 per share.
Robinson-Humphrey noted that the proposed consideration of $3.00 per share to be
received by the Company stockholders in the Offer and the Merger was less than
this value.
In order to analyze the sensitivity of this discounted cash flow analysis to
revenue growth rates ranging from 2.0% to 6.0% and EBITDA margins ranging from
13.0% to 16.0%, Robinson-Humphrey calculated the range of implied equity values
assuming a discount rate of 14% and a terminal value multiple of fiscal year
2005 EBITDA of 5.5x. Robinson-Humphrey observed that the valuation based on the
parameters set forth in this sensitivity analysis produced a range of implied
equity values from $0.31 to $4.62 per share.
In addition, Robinson-Humphrey projected the Company's operating results
through the year 2010 maintaining applicable growth rates and operating margins.
Robinson-Humphrey calculated the Company's terminal value in the year 2010 based
on terminal growth rates of ranging from 2.0% to 4.0%. Robinson-Humphrey
observed that the valuation based on this methodology produced a range of value
from $0.00 to $4.30, with an average implied equity value of $1.52 per share.
Robinson-Humphrey noted that the proposed consideration of $3.00 per share to be
received by the Company's stockholders in the Offer and the Merger was greater
than this value.
ANALYSIS OF SELECTED MERGER AND ACQUISITION TRANSACTIONS
Robinson-Humphrey reviewed and analyzed the consideration paid in 26
selected completed and pending mergers and acquisitions in the office equipment
distribution and manufacturing industry since October 24, 1994. The transactions
reviewed were divided into a Tier 1 and a Tier 2 and included:
TIER 1
<TABLE>
<CAPTION>
EFFECTIVE DATE TARGET NAME ACQUIRER NAME
-------------- ----------- -------------
<S> <C> <C>
06/24/1999 Lewan & Associates, Inc. Global Imaging Systems, Inc.
05/11/1999 ENTEX Information Services, Inc.-Tech CompuCom Systems, Inc. (Safeguard)
Acquisition
02/18/1999 Vanstar Corporation InaCom Corp.
12/21/1998 Capitol Office Solutions, Inc Global Imaging Systems, Inc.
12/31/1998 DataWorks Corporation Platinum Software Corporation
09/16/1998 Carr Business Systems Inc. Global Imaging Systems, Inc.
06/26/1998 Dataflex Corporation CompuCom Systems, Inc. (Safeguard)
05/13/1998 Computer Integration Corporation CompuCom Systems, Inc. (Safeguard)
05/20/1998 Intelligent Electronics, Inc. Xerox Corporation
05/20/1998 XLConnect, Inc. Xerox Corporation
04/03/1998 Abitibi-Consolidated Inc.--Azerty United Stationers Supply Co.
Incorporated, AP
04/01/1998 Dickens Data Systems, Inc. Pioneer-Standard Electronics, Inc.
02/27/1998 Apollo Presentation Products ACCO World (Fortune Brands Inc)
11/05/1997 Morris Business Machines U.S.Office Products Company
09/29/1997 Interactive Group, Inc. DataWorks Corporation
06/03/1997 Peak Technologies Group. Inc. Moore Corporation, Ltd.
09/26/1995 Gestetner Holdings PLC Ricoh Co., Ltd
04/03/1995 Savin Corp (HCS Technology NV) Ricoh Co., Ltd
</TABLE>
12
<PAGE>
TIER 2
<TABLE>
<CAPTION>
EFFECTIVE DATE TARGET NAME ACQUIRER NAME
-------------- ----------- -------------
<S> <C> <C>
Pending Minolta-QMS, Inc. (Minolta Co.) Minolta Investments Company
09/01/2000 Interface Systems, Inc. Tumbleweed Communications Corp.
05/08/2000 Dictaphone Corporation Lernout & Hauspie Speech Products H.V.
04/03/2000 Comtec Information Systems, Inc. Zebra Technologies Corporation
01/03/2000 Tektronix, Inc.--Color Printing and Xerox Corporation
Imaging Division
07/30/1999 Omnifax (Danka Business Systems) Xerox Corporation
07/21/1999 QMS, Inc. Minolta Co., Ltd.
10/29/1999 Kentek Information Systems, Inc. Investor Group
08/11/1998 Zellerbach (The Mead Corporation) xpedx (International Paper Co)
</TABLE>
For the selected transactions, Robinson-Humphrey compared, among other
things, firm value as a multiple of latest twelve months revenues, latest twelve
months EBITDA, and latest twelve months EBIT and equity value as a multiple of
latest twelve months net income and book value. Revenues, EBITDA, EBIT, net
income and book values were based on historical financial information available
in public filings of the target companies involved in the selected transactions.
To accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believes that these outlying values for
certain companies reflect market aberrations that can skew mean values. The
following table sets forth the low, average and high multiples indicated by the
Tier 1 selected mergers and acquisitions:
<TABLE>
<CAPTION>
LOW AVERAGE HIGH
Firm Value to: -------- -------- --------
<S> <C> <C> <C>
Latest twelve months revenues............................. 0.1x 0.6x 2.4x
Latest twelve months EBITDA............................... 3.2 6.6 62.4
Latest twelve months EBIT................................. 4.8 10.8 48.8
Price to:
Latest twelve months net income........................... 5.6x 15.8x 2,500.0x
Book value................................................ 0.9 2.7 5.8
</TABLE>
Based upon the multiples derived from this analysis and the Company's actual
historical and projected results and the Company's adjusted historical and
projected results, adjusted to eliminate the impact of non-recurring charges,
Robinson-Humphrey calculated a range of implied equity values for the Company
between $0.00 and $5.49 per share based on actual results and between $1.68 and
$7.69 per share based on adjusted results with a weighted average implied equity
value of $1.41 per share based on actual results and $4.52 per share based on
adjusted results. Robinson-Humphrey noted that the proposed consideration of
$3.00 per share to be received by the Company's stockholders in the Offer and
the Merger was greater than the average of these values.
13
<PAGE>
In addition, from the 26 selected completed and pending mergers and
acquisitions, Robinson-Humphrey designated six transactions in the office
equipment distribution and manufacturing industry as key peers. These
transactions were:
KEY PEERS
<TABLE>
<CAPTION>
EFFECTIVE DATE TARGET NAME ACQUIRER NAME
-------------- ----------- -------------
<S> <C> <C>
06/24/1999 Lewan & Associates, Inc. Global Imaging Systems, Inc.
12/21/1998 Capitol Office Solutions, Inc. Global Imaging Systems, Inc.
09/16/1998 Carr Business Systems Inc. Global Imaging Systems, Inc.
11/05/1997 Morris Business Machines U.S. Office Products Company
09/26/1995 Gestetner Holdings PLC Ricoh Co., Ltd
04/03/1995 Savin Corp (HCS Technology NV) Ricoh Co., Ltd
</TABLE>
The following table sets forth the low, average and high multiples indicated
by the key peers selected mergers and acquisitions:
<TABLE>
<CAPTION>
LOW AVERAGE HIGH
Firm Value to: -------- -------- --------
<S> <C> <C> <C>
Latest twelve months revenues............................. 0.2x 0.8x 1.9x
Latest twelve months EBITDA............................... 4.1 5.8 7.2
Latest twelve months EBIT................................. 7.0 9.0 13.6
Price to:
Latest twelve months net income........................... 7.1x 15.5x 24.2x
Book value................................................ 0.9 2.7 4.5
</TABLE>
Based upon the multiples derived from this analysis and the Company's actual
historical and projected results and the Company's adjusted historical and
projected results, adjusted to eliminate the impact of non-recurring charges,
Robinson-Humphrey calculated a range of implied equity values for the Company
between $0.00 and $4.64 per share based on actual results and between $1.90 and
$5.67 per share based on adjusted results with a weighted average implied equity
value of $1.08 per share based on actual results and $4.00 per share based on
adjusted results. Robinson-Humphrey noted that the proposed consideration of
$3.00 per share to be received by the Company's stockholders in the Offer and
the Merger was greater than the average of these values.
Robinson-Humphrey noted that no company utilized in the analysis of selected
transactions is identical to the Company. All multiples for the selected
transactions were based on public information available at the time of
announcement of such transaction, without taking into account differing market
and other conditions during the period during which the selected transactions
occurred.
PREMIUMS PAID ANALYSIS
Robinson-Humphrey analyzed the transaction premiums paid in closed mergers
of publicly traded companies with transaction values between $800 million and
$1.2 billion, effected since January 1, 1999 based on the target company's stock
price one day, one week and four weeks prior to public announcement of the
transaction. To accurately reflect average values for statistical purposes,
Robinson-Humphrey excluded certain outlying values that differed from the
relative groupings of the other values. Robinson-Humphrey believes that these
outlying values for certain companies reflect
14
<PAGE>
market aberrations that can skew mean values. This analysis indicated the
following premiums paid in the selected transactions:
<TABLE>
<CAPTION>
PURCHASE PRICE PREMIUM
PRIOR TO ANNOUNCEMENT
---------------------------------
1 DAY 1 WEEK 4 WEEKS
-------- -------- --------
<S> <C> <C> <C>
Average..................................... 28.0% 31.4% 37.7%
High........................................ 95.4 129.0 169.6
Low......................................... (17.5) (18.8) (15.3)
</TABLE>
------------------------
(1) Source: Securities Data Corporation as of November 20, 2000.
Based upon the Company's closing stock prices one day, one week and four
weeks prior to November 21, 2000, Robinson-Humphrey calculated a range of
implied equity values for the Company between $0.64 and $0.90 per share with an
average implied equity value of $0.80 per share. Robinson-Humphrey noted that
the proposed consideration of $3.00 per share to be received by the Company's
stockholders in the Offer and the Merger was greater than this value.
The summary set forth above does not purport to be a complete description of
the analyses conducted or data presented by Robinson-Humphrey. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. Robinson-Humphrey believes that the
summary set forth above and its analyses must be considered as a whole and that
selecting only portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and opinion.
Robinson-Humphrey based its analyses on assumptions that it deemed reasonable,
including assumptions concerning general business and economic conditions and
industry-specific factors. The preparation of fairness opinions does not involve
a mathematical weighing of the results of the individual analyses performed, but
requires Robinson-Humphrey to exercise its professional judgement, based on its
experience and expertise, in considering a wide variety of analyses taken as a
whole. Each of the analyses conducted by Robinson-Humphrey was carried out in
order to provide a different perspective on the transaction and to add to the
total mix of information available. Robinson-Humphrey did not form a conclusion
as to whether any individual analysis, considered in isolation, supported or
failed to support an opinion as to fairness. Rather, in reaching its conclusion,
Robinson-Humphrey considered the results of the analyses in light of each other
and ultimately reached its conclusion based on the results of all analyses taken
as a whole.
INFORMATION REGARDING ROBINSON-HUMPHREY
Robinson-Humphrey is a nationally recognized investment banking firm with
substantial experience in transactions similar to the Merger. In the past,
Robinson-Humphrey has been engaged by the Company to perform various investment
banking services, and has received customary fees for such services. Currently,
Robinson-Humphrey is performing investment banking services for the Company in
connection with the sale of the Voice Products Business, for which
Robinson-Humphrey will receive customary fees. Robinson-Humphrey is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private placements. In the
ordinary course of its business, Robinson-Humphrey may actively trade in the
securities of the Company for its own account and the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
15
<PAGE>
REASONS FOR RECOMMENDATION. In reaching the determination described above,
the Board considered a number of factors including, without limitation, the
following:
- The Company's financial condition, results of operations and business and
strategic objectives, as well as the risks involved in achieving those
objectives, including the Company's relatively high level of indebtedness,
including the proportion of cash flows which are required to service such
indebtedness and the length of time it would require to satisfy such
indebtedness, and the Board's view as to the Company's ability to grow the
business of the Company successfully while continuing to service such
indebtedness.
- Current conditions and trends in the Company's industry, and the effect of
those conditions and trends on the Company.
- The significant competition and consolidation in the industry and market
in which the Company operates, the relative size of other participants in
the industry and the available capital and resources of those other
participants as compared to the Company.
- The current prospects for appreciation of the Company's valuation given
the Company's relatively small market capitalization, the historical
market prices and recent trading activity of the Company's Common Stock,
including the fact that the Offer represents a premium of 533% over the
closing price of the Company's common stock on the New York Stock Exchange
(the "NYSE") on the date the Merger Agreement was executed, approximately
450% over the one-month average closing price of the Company's Common
Stock on the NYSE and approximately 360% over the three-month average
closing price of the Company's Common Stock on the NYSE.
- A review of possible alternatives to the Merger, including the
possibilities of continuing to operate the Company as an independent
entity, and a sale or partial sale of the Company through a merger or by
other means, and, in respect of each alternative, the timing and the
likelihood of actually accomplishing the alternative.
- The results of the efforts undertaken by the Company's management to
solicit indications of interest in the possible acquisition of the Company
from third parties other than Purchaser.
- The financial and valuation analyses of the Company presented to the Board
by Robinson-Humphrey, including market prices and financial data relating
to other companies engaged in businesses considered comparable to the
Company and the prices and premiums paid in recent selected acquisitions
of companies engaged in businesses considered comparable to those of the
Company.
- The oral opinion of Robinson-Humphrey, which was later confirmed in a
written opinion, dated November 27, 2000, to the effect that, as of the
date of the opinion, the offer price of $3.00 per Share, net to the Seller
in cash, proposed to be received in the Offer and the Merger by the
stockholders of the Company pursuant to the Merger Agreement is fair, from
a financial point of view, to such stockholders. The full text of
Robinson-Humphrey's written opinion, which sets forth the procedures
followed, the limitations of the review undertaken and the assumptions
made by the Robinson-Humphrey in rendering the opinion, is attached as
ANNEX B hereto and incorporated herein by reference. STOCKHOLDERS ARE
URGED TO READ THE OPINION CAREFULLY AND IN ITS ENTIRETY.
- The terms and conditions of the Merger Agreement, including, without
limitation, that the terms of the Merger Agreement will not prevent other
third parties from making proposals to the Company after the execution of
the Merger Agreement, that the Parent has limited rights to terminate the
Offer or the Merger Agreement, and the limited circumstances under which
the
16
<PAGE>
Company would be required to pay Parent a termination fee of $10,000,000
plus reimbursement of expenses up to $2,000,000 if the transaction does
not close.
- The fact that Parent had agreed to maintain, for one year following the
effective time of the Merger, the Company's existing benefit plans, or
cause the Surviving Corporation or its Subsidiaries to provide benefits to
employees of the Company or its Subsidiaries that are no less favorable in
the aggregate than the benefit plans provided to similarly situated
employees of Parent or its subsidiaries at the time of the Merger
Agreement.
- The likelihood that the Offer and the Merger would be consummated,
including consideration of Parent's experience, reputation and financial
condition, as well as the Company's past dealings with Parent.
- The structure of the transaction, which is designed, among other things,
to result in the holders of the Shares receiving, at the earliest
practicable time, the consideration paid in the Offer.
- The possibility, based on the recent trading prices of the Company's
common stock and a previously announced communication from the NYSE, that
the Company's common stock may be suspended or delisted from trading if
the average closing price over a 30-day period does not reach or exceed
the minimum level of $1.00 per Share by March 18, 2001.
- The availability to the Company's stockholders of dissenters' rights in
the Merger under applicable provisions of the Delaware General Corporation
Law (the "DGCL").
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its respective determinations. After
weighing these considerations, the Board, by unanimous vote, determined that the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger are, in the belief of the Board, fair to and in the best
interests of the stockholders of the Company, approved the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, and
declared their advisability and recommends that the Company's stockholders
tender their Shares in the Offer and, as required by applicable law, approve and
adopt the Merger Agreement and the Merger.
INTENT TO TENDER. To the best of the Company's knowledge, all of its
executive officers, directors, affiliates or subsidiaries currently intend to
tender all Shares which are held of record or beneficially owned by such persons
pursuant to the Offer, other than Shares, if any, held by such persons which, if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED OR TO BE COMPENSATED.
On March 28, 2000, the Company retained Robinson-Humphrey as its financial
advisor in connection with the Offer and the Merger. Pursuant to the terms of
their engagement, the Company has agreed to pay Robinson-Humphrey the following
compensation, estimated to total approximately $5,100,000 in the aggregate:
- a retainer fee of $50,000 that was paid upon engagement;
- for the fairness opinion, a cash fee of $500,000 due upon delivery of the
fairness opinion to the Board, such fee not being contingent upon the
contents of the opinion or the consummation of the Merger; and
- if the Merger is consummated, a cash fee equal to 0.50% of the total
consideration involved in the transaction, or approximately $4,550,000,
payable at the Effective Time or consummation of the Merger for
Robinson-Humphrey's services in connection with the Merger.
17
<PAGE>
In addition, if the sale of the assets of the Voice Products Business is
consummated, Robinson-Humphrey will receive a cash fee from the Company equal to
0.50% of the total consideration involved in such transaction.
The Company has also agreed to reimburse Robinson-Humphrey for reasonable
expenses and to indemnify Robinson-Humphrey and certain related parties against
certain liabilities, including certain liabilities under the federal securities
laws, arising out of, or in conjunction with the rendering of services under
their engagement. Robinson-Humphrey has provided investment banking and
financial advisory services to the Company and certain of its affiliates,
unrelated to the Merger, for which it has received customary compensation. In
the ordinary course of business, Robinson-Humphrey and its affiliates may
actively trade or hold the securities of the Company and Parent for their own
accounts or for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Except as set forth below, no transactions in the Shares have been effected
during the past 60 days by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company.
On November 1, 2000, the Company granted options to purchase 2,000 shares at
an exercise price of $0.687 per Share to each of David H. Hughes, Clarence B.
Rogers, Jr., John F. Ward, Sidney E. Harris and Amos McMullian, each a
non-employee director of the Company, pursuant to the terms of the Company's
Stock Incentive Plan. Immediately prior to the effective time of the Merger,
these options will be terminated and as soon as practicable following the
Effective Time, the Company will pay to each director in cash an amount equal to
the number of Shares subject to each option, whether or not vested or
exercisable, multiplied by the excess, if any, of $3.00 over the exercise price
each such option.
ITEM 7. PURPOSES OF THE TRANSACTION; PLANS OR PROPOSALS.
The purpose of the Offer is for Parent to acquire control of, and the entire
equity interest in, the Company. Prior to entering into the Merger Agreement,
the Company had contacts and negotiations with other entities that had expressed
interest in the Company. Prior to execution of the Merger Agreement, the Company
ceased contacts with such other entities. No discussions are underway or are
being undertaken by the Company, and there is no transaction, board resolution,
agreement in principle or signed contract, in either case in response to the
Offer, that relates to (1) a tender offer or other acquisition of the Company by
any Person, (2) any extraordinary transaction, such as a merger, reorganization
or liquidation, involving the Company or any of its subsidiaries, (3) any
purchase, sale or transfer of a material amount of assets of the Company or any
of its subsidiaries other than the Voice Products Business or (4) any material
change in the present dividend rate or policy, or indebtedness or capitalization
of the Company.
ITEM 8. ADDITIONAL INFORMATION
The information statement attached as ANNEX A hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board other than at a
meeting of the Company's stockholders.
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DELAWARE GENERAL CORPORATION LAW
SECTION 203. The Company is incorporated under the laws of the Sate of
Delaware. As a Delaware corporation, the Company is subject to Section 203 of
the DGCL. In general, Section 203 would prevent an "interested stockholder"
(generally defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "business combination" (defined
to include mergers and certain other actions with a Delaware corporation) for
three years following the date such person became an interested stockholder
unless: (1) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (2) upon consummation of the transaction which resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding for purposes of
determining the number of shares of outstanding stock held by directors who are
also officers and by employee stock plans that do not allow plan participants to
determine confidentially whether to tender shares), or (3) following the
transaction in which such person became an interested stockholder, the business
combination is (x) approved by the board of directors of the corporation and
(y) authorized at a meeting of stockholders by the affirmative vote of the
holders of at least 66 2/3% of the outstanding voting stock of the corporation
not owned by the interested stockholder. In accordance with the provisions of
Section 203, the Board has unanimously approved the Merger Agreement and,
therefore, the restrictions of Section 203 are inapplicable to the Merger and
the transactions contemplated under the Merger Agreement.
SECTION 253. Under Section 253 of the DGCL, if Purchaser acquires, pursuant
to the Offer or otherwise, at least 90% of the Shares, Purchaser will be able to
effect the Merger after consummation of the Offer without a vote of the
Company's stockholders. However, if Purchaser does not acquire at least 90% of
the Shares pursuant to the Offer or otherwise and a vote of the Company's
stockholders is required under the DGCL, a meeting of the Company's stockholders
will be required under the DGCL and thus, a significantly longer period of time
will be needed to effect the Merger.
SECTION 262. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders who have not tendered
their Shares will have certain rights under the DGCL to dissent from the Merger
and demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Stockholders who perfect such rights by complying with the
procedures set forth in Section 262 of the DGCL ("Section 262") will have the
"fair value" of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) determined by the Delaware Court of
Chancery and will be entitled to receive a cash payment equal to such fair value
from the surviving corporation. In addition, such dissenting stockholders would
be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. Any such judicial determination of the fair value of Shares could
be based on factors other than, or in addition to, the price per Share to be
paid in the Merger or the market value of the Shares. The value so determined
could be more or less than the price to be paid in the Merger.
REGULATORY APPROVALS.
UNITED STATES ANTI-TRUST COMPLIANCE. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules that have
been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the Offer is subject to such
requirements.
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Pursuant to the requirements of the HSR Act, Parent has advised the Company
that it filed a Notification and Report Form with respect to the Offer and
Merger with the Antitrust Division and the FTC on November 30, 2000. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares may
not be consummated until the expiration of a 15-calendar day waiting period
following the filing by Parent. As a result, the waiting period applicable to
the purchase of Shares pursuant to the Offer would be scheduled to expire at
11:59 p.m., New York City time, on December 15, 2000. However, prior to such
time, the Antitrust Division or the FTC may extend the waiting period by
requesting additional information or documentary material relevant to the Offer
from Purchaser. If such a request is made, the waiting period will be extended
until 11:59 p.m., New York City time, on the tenth day after substantial
compliance by Purchaser with such request. Thereafter, such waiting period can
be extended only by court order or by agreement of the parties.
A request has been made pursuant to the HSR Act for early termination of the
waiting period applicable to the Offer. There can be no assurance, however, that
the applicable 15-day HSR Act waiting period will be terminated early. Shares
will not be accepted for payment or paid for pursuant to the Offer until the
expiration or early termination of the applicable waiting period under the HSR
Act. See Section 15 of the Offer to Purchase. Any extension of the waiting
period will not give rise to any withdrawal rights not otherwise provided for by
applicable law. See Section 3 of the Offer to Purchase. If Purchaser's
acquisition of Shares is delayed pursuant to a request by the Antitrust Division
or the FTC for additional information or documentary material pursuant to the
HSR Act, the Offer will be extended in certain circumstances. See Section 1 of
the Offer to Purchase.
The Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares by Purchaser
pursuant to the Offer. At any time before or after the consummation of any such
transactions, the Antitrust Division or the FTC could take such action under the
antitrust laws of the United States as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant to
the Offer or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Parent or the Company. Private parties (including
individual States of the United States) may also bring legal actions under the
antitrust laws of the United States. The Company does not, and Purchaser has
advised the Company that it does not, believe that the consummation of the Offer
will result in a violation of any applicable antitrust laws. However, there can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made, or if such a challenge is made, what the result will be.
EUROPEAN UNION ANTITRUST COMPLIANCE. Parent and the Company each conduct
business in member states of the European Union. European Union Council
Regulation 4064/89, as amended, requires notification to and approval by the
Commission of the European Union of certain mergers or acquisitions involving
parties with aggregate worldwide sales and individual European Union sales
exceeding certain thresholds, before such mergers or acquisitions are completed.
Parent and the Company have sales that exceed these thresholds. A single
notification to the Commission of the European Union eliminates any need to
submit notifications of the Merger to national competition authorities in member
states within the European Union. Parent initially notified the Commission of
the European Union of the Offer in an informational meeting held on
November 30, 2000. Parent intends to file formal notification with the European
Union on or about December 12, 2000. The Commission of the European Union must
review the Offer and the Merger to determine whether or not it is compatible
with the common market and, accordingly, whether or not to the Merger to
proceed. A merger or acquisition is considered compatible with the common market
if it does not create or strengthen a dominant position as a result of which
effective competition would be significantly impeded in the common market or in
a substantial part of the common market. If a transaction is considered
compatible with the common market it must be allowed to proceed. The Commission
of the European Union has one month following submission of a complete
notification to examine whether the Merger raises serious doubts with regard to
its compatibility with the common
20
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market. If within this one-month period the Commission of the European Union
decides that there are no serious doubts, or if it fails to reach a decision,
the Merger is deemed approved. If, instead, the Commission of the European Union
decides that there are serious doubts, it must open a more detailed
investigation which can last up to an additional four months. Based on the
examination of the information available to Parent, Purchaser, and the Company
relating to the businesses in which the Parent, the Company and their respective
subsidiaries are engaged, Parent, Purchaser and the Company believe that the
transaction will not create or strengthen a dominant position and is, therefore,
compatible with the common market within the meaning of European Union Council
Regulation 4064/89. There can be no assurance, however, that a challenge to the
Offer on European Union antitrust grounds will not be made by the Commission of
the Commission of the European Union, or if such challenge made, what the result
would be.
REPUBLIC OF COLOMBIA ANTITRUST APPROVAL. Parent and Purchaser jointly expect
to notify the Superintendence of Industry and Commerce (the "SIC") of the Offer
on or about December 11, 2000. Pursuant to Colombian law, the SIC must indicate
whether it objects to the Offer within thirty (30) business-days following the
filing referred to in the preceding sentence. The thirty (30) business-day term
will be suspended, however, upon a request for additional information by the
SIC. If the SIC does not object to the Offer within the thirty
(30) business-day term (excluding the days during which such term has been
suspended pursuant to a request by the SIC for additional information), the
Offer shall be deemed to be approved. The receipt of approval from the SIC or
the expiration of the thirty (30) business-day period is a condition to the
Offer. See Section 1 and Section 15 to the Offer to Purchase.
REPUBLIC OF POLAND ANTITRUST APPROVAL. Parent and the Company jointly expect
to notify the President of the Office for Protection of Competition and
Consumers (the "Office") of the Offer on or about December 15, 2000, pursuant to
the Counteracting Monopolistic Practices Act. The assessment of a notification
may last up to two (2) months, but there are exceptions for the acquisition of
shares in publicly listed companies, for which the examination period may last
up to two (2) weeks. Following the examination of the notification, the Office
may either (i) inform Parent and the Company that it has no objection with
regard to the Offer, (ii) issue a decision prohibiting the Offer, or
(iii) propose conditions which the parties must fulfill in order to obtain
clearance. The receipt of approval from the Office is a condition to the Offer.
See Section 1 and Section 15 to the Offer to Purchase.
OTHER FILINGS. Purchaser and the Company each conduct operations in a
number of other foreign countries, and filings may have to be made with foreign
governments under their merger notification statutes. The filing requirements of
various nations are being analyzed by the parties, and, where necessary, the
parties intend to make such filings.
CERTIFICATE OF INCORPORATION.
The following is a discussion of the provisions of the Company's Certificate
of Incorporation which the Company believes to be material to the Merger and the
transactions contemplated thereby:
BOARD OF DIRECTORS. Article Eighth of the Company's Certificate of
Incorporation provides that in taking any action that may involve, or relate to
a change or potential change of control of the Company, a director of the
Company may consider, among other things, both the long-term and short-term
interests of the Company and its stockholders and the effects that the Company's
actions may have in the short-term or long-term upon any one of the following
matters:
- the prospects for potential growth, development, productivity and
profitability of the Company;
- the Company's current employees;
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- the Company's employees and other beneficiaries receiving or entitled to
receive retirement, welfare or similar benefits from or pursuant to any
plan sponsored, or agreement entered into, by the Company;
- the Company's customers and creditors;
- the ability of the Company to provide, as a going concern, goods services,
employment opportunities and employment benefits and otherwise to
contribute to the communities in which it does business; and
- such other additional factors as a director may consider appropriate in
such circumstances.
However, nothing in Article Eighth of the Certificate of Incorporation
creates a duty owed by a director of the Company to any person or entity to
consider, or afford any particular weight to, any of the foregoing matters or to
limit his or her consideration to the foregoing matters.
WRITTEN CONSENT OF STOCKHOLDERS. Article Ninth of the Company's Certificate
of Incorporation provides that no action of the Company's stockholders required
or permitted to be taken at any annual or special meeting of the stockholders
may be taken without a stockholders' meeting. Article Ninth specifically denies
the right of the Company's stockholders to consent to any action without a
meeting.
DIRECTORS; FIDUCIARY DUTIES. Article Eleventh of the Company's Certificate
of Incorporation provides that directors of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director of the Company, except to the extent that such exemption or
limitation is not permitted under the DGCL.
RIGHTS AGREEMENT; AMENDMENT.
The Company's Stockholder Protection Rights Agreement, dated as of
November 5, 1999, by and between the Company and Mellon Investor Services,
L.L.C., formerly ChaseMellon Shareholder Services, L.L.C. (the "Rights
Agreement"), provides that certain transactions, including the Offer and the
Merger, will cause the issuance of right certificates unless prior Board of
Directors approval of the Offer and the Merger is obtained. At a special meeting
of the Board on November 27, 2000, the Board unanimously approved the Merger
Agreement and the transactions contemplated thereby, and effective November 29,
2000, the Company and Mellon Investor Services, L.L.C., as Rights Agent,
executed an amendment to the Rights Agreement (the "Amendment"). The Amendment,
among other things, (i) excludes Parent and its affiliates and associates from
the definition of an "Acquiring Person" thereunder with respect to transactions
contemplated by and effected pursuant to the Merger Agreement; (ii) provides
that the Merger Agreement and the transactions contemplated thereby would not
trigger a "Flip-in Date" thereunder; (iii) provides that the "Separation Time,"
as defined thereunder, is deemed not to have occurred with respect to the Merger
Agreement and the transactions contemplated thereby; and (iv) provides that the
"Stock Acquisition Date" as defined thereunder is not deemed to have occurred by
virtue of the execution and delivery of the Merger Agreement or any of the
transactions contemplated thereby. The foregoing summary is qualified in its
entirety by the provisions of the Amendment, which is filed as Exhibit (e)(11)
hereto and incorporated herein by reference.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<S> <C>
(a)(1) Offer to Purchase (incorporated by reference to
Exhibit (a)(1)(A) of Purchaser's Schedule TO, filed with the
Commission on December 8, 2000).
(a)(2) Letter of Transmittal (incorporated by reference to
Exhibit (a)(1)(B) of Purchaser's Schedule TO, filed with the
Commission on December 8, 2000).
(a)(3) Recommendation Letter to the Stockholders of the Company,
dated December 8, 2000.
(a)(4) Press Release issued by the Company on November 29, 2000,
announcing the Merger and the Offer (incorporated by
reference to Exhibit (a)(4) to the Company's
Schedule 14D-9, filed by the Company with the Commission on
November 30, 2000).
(a)(5) Opinion of The Robinson-Humphrey Company, LLC, dated
November 27, 2000 (included as ANNEX B to this
Schedule 14D-9).
(a)(6) Information Statement of the Company (included as ANNEX A to
this Schedule 14D-9).
(a)(7) Transcript of Conference Call held by the Company on
December 5, 2000 (incorporated by reference to
Exhibit (a)(7) to the Company's Schedule 14D-9, filed by the
Company with the Commission on December 6, 2000).
(a)(8) Joint Press Release issued by Parent and the Company, dated
December 8, 2000 (incorporated by reference to
Exhibit (a)(1)(H) of Purchaser's Schedule TO, filed with the
Commission on December 8, 2000).
(e)(1) Agreement and Plan of Merger dated as of November 29, 2000,
by and among Purchaser, Parent and the Company (incorporated
by reference to Exhibit (d)(1) of Purchaser's Schedule TO,
filed with the Commission on December 8, 2000).
(e)(2) Confidentiality Agreement, dated as of June 22, 2000, by and
between Parent and the Company.
(e)(3) Executive Employment Agreement, entered into on
November 29, 2000, by and between the Company and Wesley E.
Cantrell.
(e)(4) Executive Employment Agreement, entered into on
November 29, 2000, by and between the Company and C. Lance
Herrin.
(e)(5) Amendment No. 2 to the Lanier Worldwide, Inc. Employee Stock
Purchase Plan, adopted November 29, 2000.
(e)(6) Amendment No. 2 to the Lanier Worldwide, Inc. Save to
Accumulate Retirement $ (STAR$) Plan, as amended and
restated as of December 1, 1999, executed November 28,
2000.
(e)(7) Letter Agreement, dated November 29, 2000, between Ricoh
Company, Ltd. and Harris Corporation (incorporated by
reference to Exhibit (d)(3) of Purchaser's Schedule TO,
filed with the Commission on December 8, 2000)
(e)(8) Letter Agreement, dated November 29, 2000, between Harris
Corporation, Ricoh Company, Ltd., and Lanier
Worldwide, Inc. (incorporated by reference to Exhibit (d)(4)
of Purchaser's Schedule TO, filed with the Commission on
December 8, 2000)
(e)(9) Sales Agreement, dated as of July 1, 1999, by and between
Parent and the Company
(e)(10) Voting and Tender Agreement, dated as of November 29, 2000,
by and between Harris Corporation and Parent (incorporated
by reference to Exhibit (d)(2) of Purchaser's Schedule TO,
filed with the Commission on December 8, 2000).
(e)(11) Amendment to Rights Agreement, effective as of November 29,
2000.
ANNEX A Information Statement of the Company.
ANNEX B Opinion of the Robinson-Humphrey Company, LLC, dated
November 27, 2000.
</TABLE>
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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
accurate.
<TABLE>
<S> <C> <C>
LANIER WORLDWIDE, INC.
By: /s/ WESLEY E. CANTRELL
-----------------------------------------
Wesley E. Cantrell
Chairman and Chief Executive Officer
</TABLE>
Dated: December 8, 2000
24
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ANNEX A
LANIER WORLDWIDE, INC.
2300 PARKLAKE DRIVE, N.E.
ATLANTA, GEORGIA 30945
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being furnished to holders of the Common
Stock, par value $0.01 per share (individually, a "Share" and collectively, the
"Shares"), of Lanier Worldwide, Inc., a Delaware corporation (the "Company") on
or about December 8, 2000, as part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"). All references to "Shares"
include the associated rights to purchase shares of the Company's Participating
Preferred Stock, $.01 par value per share, issued pursuant to the Stockholder
Protection Rights Agreement, dated as of November 5, 1999, as amended, between
the Company and Mellon Investor Services, LLC, formerly ChaseMellon Shareholder
Services, LLC, as Rights Agent. Capitalized terms used and not otherwise defined
herein shall have the meaning ascribed to them in the Schedule 14D-9. You are
receiving this Information Statement in connection with the possible election of
persons designated by LW Acquisition Corp. ("Purchaser") to at least a majority
of the seats on the Board of Directors of the Company (the "Board of
Directors"). The Merger Agreement requires the Company, after the purchase by
Purchaser pursuant to the Offer of such number of Shares representing not less
than a majority of the outstanding Shares on a fully diluted basis, to cause
Parent's designees (the "Designees") to be elected to at least a majority of the
seats on the Board of Directors as set forth below. This Information Statement
is required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 thereunder. You are urged to read this
Information Statement carefully. However, you are not required to take any
action. INFORMATION IS BEING PROVIDED FOR SOLELY INFORMATIONAL PURPOSES AND NOT
IN CONNECTION WITH A VOTE OF THE COMPANY'S STOCKHOLDERS.
Pursuant to the Merger Agreement, on December 8, 2000, Parent and Purchaser
commenced the Offer. The Offer is scheduled to expire on January 8, 2000.
The information contained in this Information Statement (including
information listed in SCHEDULE I attached hereto) concerning Parent, Purchaser
and the Designees has been furnished to the Company by Parent and Purchaser. The
Company has no knowledge that would indicate that any of such information or
that any statement based upon such sources is untrue. Any failure by Parent or
Purchaser to update such information, or any failure by the Parent or Purchaser
to disclose events which may have occurred and which may affect the significance
or accuracy of such information, but which are unknown to the Company, may
affect the accuracy or completeness of the information concerning Parent,
Purchaser or the Designees supplied from such sources.
The common stock of the Company is the only class of voting securities of
the Company outstanding. Each Share has one vote. As of November 20, 2000,
84,768,152 Shares were issued and outstanding.
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DIRECTORS OF THE COMPANY
GENERAL
The Board of Directors is currently comprised of seven members. Pursuant to
the Company's Certificate of Incorporation (the "Certificate of Incorporation"),
directors are divided into three classes. All directors of the Company hold
office until the election and qualification of their successors.
DESIGNEES OF PURCHASER
Pursuant to the Merger Agreement, promptly upon the acceptance for payment
of, and payment by Purchaser in accordance with the Offer for, Shares
representing not less than a majority of the outstanding Shares on a fully
diluted basis pursuant to the Offer, Parent is entitled to designate such number
of members of the Board of Directors, rounded up, such that the percentage of
its designees on the Board of Directors equals the percentage of Shares it
beneficially owns; provided, however, that until the effective date of the
Merger, there shall be at least two directors of the Company who are directors
of the Company as of the date hereof. Upon the request of Parent, the Company
shall promptly (i) either increase the size of the Board of Directors or use its
best efforts to secure the resignation of such number of its current directors
as is necessary to enable the Designees to be so elected to the Board of
Directors and (ii) use its best efforts to cause the Designees to be so elected.
Parent and Purchaser have informed the Company that Parent will choose the
Designees from the individuals listed in SCHEDULE I attached hereto. Parent and
Purchaser have informed the Company that each of the Designees listed in
SCHEDULE I has consented to act as a director, if so designated. It is expected
that the Designees may assume office at any time following the purchase by
Purchaser pursuant to the Offer of such number of Shares representing not less
than a majority of the outstanding Shares on a fully diluted basis, which
purchase cannot be earlier than January 8, 2000, and that upon assuming office,
the Designees will thereafter constitute at least a majority of the Board of
Directors.
The Offer to Purchase indicates that the principal executive offices of
Purchaser are located at 5 Dedrick Place, West Caldwell, New Jersey 07006 and
the principal executive offices of Parent are located at 15-5 Minami-Aoyama
1-Chome, Minato-ku, Tokyo 107-8544, Japan.
CURRENT BOARD OF DIRECTORS OF THE COMPANY
Set forth below, for each director of the Company, is information regarding
the expiration of each director's current term as director, their age, as of
December 7, 2000, position(s) with the Company, the period they have served as a
director, any family relationship with any other director or executive officer
of the Company, if any, and the directorships currently held by them in
corporations whose shares are publicly registered.
A. TERMS EXPIRING IN 2001
C. Lance Herrin
Atlanta, Georgia
Mr. Herrin, age 59, is the President and Chief Operating Officer of the
Company. He has been employed by the Company and its predecessor companies since
1967. Mr. Herrin is also a director of GuideOne Insurance Company. He has been a
director of the Company since 1999 and is a member of the Executive Committee.
David H. Hughes
Orlando, Florida
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Mr. Hughes, age 56, has been the Chairman and Chief Executive Officer of
Hughes Supply, Inc. since 1986. Mr. Hughes is also a director of SunTrust
Banks, Inc. and Brown & Brown, Inc. He has been a director of the Company since
1999 and is a member of the Audit Committee and the Nominating and Compensation
Committee.
B. TERMS EXPIRING IN 2002
Wesley E. Cantrell
Atlanta, Georgia
Mr. Cantrell, age 65, is the Chairman of the Board and Chief Executive
Officer of the Company. He has been employed by the Company and its predecessor
companies since 1955. Mr. Cantrell is also a director of Ann Taylor Stores
Corp., Environmental Design International Ltd. and Impact Ministries, a
not-for-profit organization, and is a member of the advisory board of First
Union National Bank of Atlanta. Mr. Cantrell has been a director of the Company
since 1999 and is Chairman of the Executive Committee.
Clarence B. Rogers, Jr.
Atlanta, Georgia
Mr. Rogers, age 70, is the former Chairman of the Board and Chief Executive
Officer of Equifax Inc. He served in various positions at Equifax from 1989 to
1999. Mr. Rogers is also a director of Morgan Stanley Dean Witter & Co.,
Briggs & Stratton Corporation, Oxford Industries, Inc., ChoicePoint Inc., and
Datagistics, Inc. Mr. Rogers has been a director of the Company since 1999 and
is Chairman of the Nominating and Compensation Committee.
John F. Ward
Atlanta, Georgia
Mr. Ward, age 57, is the Chairman, President and Chief Executive Officer of
Russell Corp. He has been employed by Russell Corp. since April 1998. From
September 1996 to March 1998, Mr. Ward was President of J.F. Ward Group, Inc.
From 1979 until 1993, he was President and CEO of several divisions of Sara Lee
Corporation, and from 1992 to August 1996, he was Senior Vice President of Sara
Lee Corporation. Mr. Ward is on the advisory board of the Robert C. Goizueta
Business School as well as the board of visitors at Emory University. He is a
member of the board of advisors for the Metro Atlanta Chamber of Commerce, CURE
Childhood Cancer, United Way's Alexis de Tocqueville Society and the board of
directors of The Georgian Club in Atlanta. Mr. Ward has been a director of the
Company since 1999 and is Chairman of the Audit Committee.
C. TERMS EXPIRING IN 2003
Sidney E. Harris
Atlanta, Georgia
Mr. Harris, age 50, is the Dean of the J. Mack Robinson College of Business,
Georgia State University. From 1987 through July 1997 he was a Professor of
Management at the Peter F. Drucker Graduate Management Center at the Claremont
Graduate School, Claremont, California. He is a director of TransAmerica
Investors, Inc., ServiceMaster Company and Amresco, Inc. Mr. Harris has been a
director of the Company since 1999 and is a member of the Audit Committee.
Amos R. McMullian
Thomasville, Georgia
Mr. McMullian, age 62, is the Chairman of the Board of Directors and Chief
Executive Officer of Flowers Industries, Inc. and has been employed by Flowers
Industries, Inc. and its predecessor companies since 1963. He is also a director
of Keebler Foods Company and serves on the Board of
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Trustees of the Georgia Research Alliance. Mr. McMullian has been a director of
the Company since 1999 and is a member of the Executive Committee and the
Nominating and Compensation Committee.
MEETINGS OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended June 30, 2000, the Board of Directors
held three regular meetings and four special meetings. Each member of the Board
attended at least 75% of the meetings of the Board and the committees of which
he is a member.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established three standing committees to assist
in the discharge of its responsibilities. The principal functions of each
committee are described below.
EXECUTIVE COMMITTEE
The Executive Committee evaluates and reviews the Company's financial
position and capital structure. The Executive Committee also approves capital
asset transactions, and acquisitions and dispositions with a value of up to
twenty million dollars. The members of the Executive Committee are
Messrs. Cantrell (Chairman), Herrin and McMullian. The Executive Committee did
not meet during the past fiscal year.
AUDIT COMMITTEE
The Audit Committee serves as the representative of the Board of Directors,
responsible for oversight of the Company's affairs in the areas of financial
accounting and reporting and the underlying internal controls, as well as the
financial aspects of the Company's funded benefit plans. It also recommends the
independent auditors for appointment by the Board and approval of the
stockholders. The members of the Audit Committee are Messrs. Ward (Chairman),
Harris and Hughes. The Audit Committee held two meetings during the past fiscal
year.
The Audit Committee reviews and monitors the Company's accounting policies
and financial reporting practices, paying particular attention to any weaknesses
in internal accounting policies and controls, with the primary goal being to
help assure that the Company's financial statements present fairly its financial
results in accordance with generally accepted accounting principles. Through its
activities, the Audit Committee facilitates open communication among the
Company's directors, management, internal audit functions and the independent
accountants.
NOMINATING AND COMPENSATION COMMITTEE
The Nominating and Compensation Committee supervises the Company's general
compensation strategies, including incentive compensation, stock options and
benefit programs. The members of the Nominating and Compensation Committee are
Messrs. Rogers (Chairman), Hughes and McMullian. The Nominating and Compensation
Committee held four meetings during the past fiscal year.
The Nominating and Compensation Committee reviews the Company's compensation
philosophy and establishes the compensation for officers of the Company other
than the Chief Executive Officer and President, whose compensation is
recommended by the Nominating and Compensation Committee and approved by all of
the outside directors. The Nominating and Compensation Committee generally
administers the Company's stock incentive and stock-based compensation plans and
other incentive plans. The Nominating and Compensation Committee also oversees
the administration and operation of the Company's various retirement and pension
plans, including the selection and review of the performance of the investment
funds and the independent investment advisors for the plans.
A-4
<PAGE>
The Nominating and Compensation Committee identifies, evaluates and
recommends director nominees to the Board of Directors and to be elected at the
annual meeting of the stockholders and to fill vacancies; recommends directors'
compensation and benefit plans to the Board of Directors; recommends committees
of the Board of Directors and committee members; and facilitates the Board of
Directors' evaluation of its effectiveness.
The Nominating and Compensation Committee will consider suggestions for
director nominees from all sources, including stockholders. Any stockholder
suggestion, together with an appropriate biographical summary, should be sent to
the Secretary of the Company. In addition, the Company's by-laws establish
certain requirements concerning stockholder nominations for election of
directors, including that notice of such nominations be delivered to the
Secretary of the Company not less than 90 nor more than 120 days prior to the
date of the annual meeting of stockholders. Each notice of nomination is
required to contain the name and address of the stockholder who intends to make
the nomination; the name, address and written consent of the nominee; and such
other nominee information as would be required to be disclosed in a proxy
solicitation.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer fee of $30,000. In
addition, non-employee directors who serve on a standing committee receive an
additional annual fee of $1,500 for their services on a committee, or $3,000 if
serving as chairperson of a committee.
Each non-employee director also receives $1,000 for attendance at each board
meeting. In addition, each non-employee director receives $800 for attendance at
each committee meeting and for participation in a telephonic or video conference
meeting. Each non-employee director also is reimbursed for out-of-pocket
expenses incurred in connection with attendance at board and committee meetings.
In addition, each non-employee director is provided travel, accident and
disability insurance in the event that the director is involved in an accident
while traveling on business relating to the Company.
Under the amended and restated Lanier Worldwide, Inc. Stock Incentive Plan,
each non-employee director is granted an option to purchase 10,000 shares of the
Company's common stock on the date such director joins the Company's Board of
Directors, and is automatically granted an option to purchase 2,000 shares of
Lanier common stock on the first business day of the month following each Annual
Meeting. Neither the Company's Board of Directors nor any committee of the Board
of Directors has any discretion with respect to the grant of options to
non-employee directors.
Under the Lanier Directors Deferred Compensation Plan (the "Directors
Plan"), each non-employee director may elect to defer all or a portion of his or
her fees. A director's account is credited with a number of units of Lanier
common stock equivalents based upon the fair market value of the Lanier common
stock on the date the fees otherwise would be paid. Once amounts are deferred
they are only payable following a director's resignation, retirement or death.
Each Lanier common stock unit is credited with dividend equivalents, which are
deemed reinvested in additional Lanier common stock units on the dividend
payment date. Amounts deferred under the Directors Plan are paid in whole shares
of Lanier common stock and in cash for any fractional shares as soon as
practicable following resignation, retirement or death. Within ninety days
following a Change in Control (as defined in the Directors Plan), the Company
will pay to each director (or former director) a cash lump sum payment equal to
the then remaining balance in each such director's account.
The Company has adopted a policy that directors retire from the Board of
Directors effective at the end of the month in which they reach age seventy-two.
In addition, a director is expected to tender automatically his or her
resignation in the event of retirement or other significant change in status
from the positions held with the Company at the time of election to the Board of
Directors, although the Board of Directors may opt to have such director
continue to serve on the Board of Directors.
A-5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers and key employees as of December 7, 2000
are as follows:
<TABLE>
<CAPTION>
POSITION WITH LANIER AND PRINCIPAL
NAME AGE CURRENT POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- -------- -------------------------- --------------------------------------------
<S> <C> <C> <C>
Wesley E. Cantrell........ 65 Chairman of the Board and Chief Executive Officer since March, 1987.
Chief Executive Officer President, Lanier Business Products, 1977 to
1987. Executive Vice President and National
Sales Manager, 1972 to 1977. Vice President,
1966 to 1972. Employed by Lanier since 1955.
Member of the board of directors of Ann
Taylor Stores Corp., Environmental Design
International Ltd., OneCoast Network Corp.
and Impact Ministries, a not-for-profit
organization, and member of the advisory
board of First Union National Bank of
Atlanta. Mr. Cantrell is a director of the
Company and is Chairman of the Executive
Committee.
C. Lance Herrin........... 59 President and Chief Chief Operating Officer since July, 1998.
Operating Officer Executive Vice President and General Manager
--U.S. Operations, 1993 to 1998. Executive
Vice President and General Manager --
Imaging Systems Division, 1987 to 1993.
Executive Vice President, Lanier Business
Products, 1982 to 1987. Senior Vice
President, 1981 to 1982. Vice President,
1977 to 1981. Employed by Lanier since 1967.
Member of the board of directors of GuideOne
Insurance Company. Mr. Herrin is a director
of the Company and is a member of the
Executive Committee.
James A. MacLennan........ 41 Executive Vice President Executive Vice President and Chief Financial
and Chief Financial Officer since November, 1998. Vice
Officer President, Finance, 1997 to 1998. Vice
President, Accounting, Noble Drilling Corp.,
1995 to 1997. Director-Risk/Audit, Noble
Drilling Corp., 1993 to 1995.
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH LANIER AND PRINCIPAL
NAME AGE CURRENT POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- -------- -------------------------- --------------------------------------------
<S> <C> <C> <C>
Charles T. Cobb........... 56 Senior Vice President, Senior Vice President, U.S. Operations since
U.S. Operations August, 2000. Vice President since 1985.
Employed by Lanier since 1968.
Timothy A. Vellek......... 45 Senior Vice President, Senior Vice President, European Operations
European Operations since August, 2000. Vice President since
1991. Employed by Lanier since 1978.
Paul M. Anderson.......... 52 Vice President, Worldwide Vice President, Worldwide Marketing since
Marketing July, 1998. Vice President since 1989.
Employed by Lanier since 1972.
Vera M. Arthur............ 45 Vice President, Human Vice President, Human Resources since April,
Resources 1999. Vice President since 1993. Employed by
Lanier since 1979.
Brian R. Bergin........... 53 Vice President, Worldwide Vice President, Worldwide Sourcing and
Sourcing and Development Development since November, 1998. Vice
President since 1992. Employed by Lanier
since 1976.
Richard P. Cleys.......... 49 Vice President, Finance Vice President, Finance and Treasurer since
and Treasurer January, 1999. Vice President and Corporate
Controller, 1996 to 1999. Vice
President/Finance and Chief Financial
Officer, A.B. Dick Company, 1993 to 1996.
J. Michael Kelly.......... 53 Vice President, General Corporate Secretary since January, 1999,
Counsel and Secretary Vice President since 1989. General Counsel
since 1987. Counsel, Harris Corporation 1980
to 1987.
Steven R. McBrayer........ 40 Vice President and Vice President and Corporate Controller
Corporate Controller since January, 1999. Controller, Lanier
Professional Services, 1997 to 1999.
Director, Treasury Operations, 1996 to 1997.
Manager, Treasury Operations, 1994 to 1996.
</TABLE>
A-7
<PAGE>
CERTAIN TRANSACTIONS
Hughes Supply, Inc., a wholesale distributor that provides materials,
equipment, and supplies primarily to the construction industry, purchases
equipment and related services from the Company. David H. Hughes, one of the
Company's directors, is the Chairman and Chief Executive Officer of Hughes
Supply, Inc. In calendar year 1999, Hughes Supply, Inc. purchased $67,707 of
equipment and related services from the Company, and from January 1, 2000 to
July 31, 2000, Hughes Supply, Inc. purchased $173,919 of equipment and related
services from the Company.
COMMON STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock by each director, the Company's Chief Executive
Officer and four other most highly compensated executive officers and the
directors and executive officers of the Company as a group, all as of
September 25, 2000:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------
SOLE OPTIONS OTHER
VOTING AND EXERCISABLE BENEFICIAL TOTAL PERCENT
INVESTMENT WITHIN OWNERSHIP BENEFICIAL OF
INDIVIDUAL OR GROUP POWER(1) 60 DAYS(2) (3)(4) OWNERSHIP CLASS
------------------- ---------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Wesley E. Cantrell..................................... 125,051 797,300 148,068 1,045,419 1.2%
Sidney E. Harris....................................... 0 0 0 0 *
C. Lance Herrin........................................ 26,253 245,046 69,913 341,212 *
David H. Hughes........................................ 0 0 0 0 *
Amos R. McMullian...................................... 0 0 24,301 24,301 *
Clarence B. Rogers, Jr................................. 10,000 0 22,474 32,474 *
John F. Ward........................................... 0 0 0 0 *
Paul M. Anderson....................................... 12,194 57,694 1,287 71,175 *
James A. MacLennan..................................... 19,946 5,583 34,752 60,281 *
Timothy A. Vellek...................................... 12,879 12,097 1,489 26,465 *
All Executive Officers and Directors as a group (16
persons)............................................. 275,889 1,266,017 306,056 1,847,962 2.2%
</TABLE>
------------------------------
* Less than 1%.
(1) Includes shares owned under the Savings Incentive Plan as follows:
Mr. Cantrell--3,434; Mr. Herrin--3,086; Mr. Anderson--4,382;
Mr. MacLennan--4,946; and Mr. Vellek--4,251.
(2) Represents the shares that can be acquired through stock option exercises on
or prior to October 31, 2000.
(3) Includes stock equivalent units under the Lanier Worldwide, Inc. STAR$
Supplemental Executive Retirement Savings Plan as follows:
Mr. Cantrell--12,049; Mr. Herrin--7,506; Mr. Anderson--1,287;
Mr. MacLennan--2,752; and Mr. Vellek--1,489. The deferred stock equivalent
units are settled in cash following, or under certain circumstances prior
to, retirement, and may not be voted or transferred.
(4) Includes performance share awards under the Stock Incentive Plan and
deferred compensation under the Lanier Worldwide, Inc. Deferred Compensation
Plan for Directors as follows: Mr. Cantrell--111,018; Mr. Herrin--62,407;
Mr. MacLennan--32,000; Mr. McMullian--24,301; and Mr. Rogers--22,474. Also
includes 25,000 shares of restricted stock awarded to Mr. Cantrell under the
Stock Incentive Plan. The named individuals have voting power but no
investment power over the performance shares and the restricted stock.
A-8
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth each person who, to the Company's knowledge,
had sole or shared voting or investment power over more than five percent of the
outstanding shares of common stock as of December 7, 2000.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------------ ----------------- --------
<S> <C> <C>
Harris Corporation(1) ...................................... 8,785,958 10.4%
1025 West NASA Boulevard
Melbourne, Florida 32919
Steel Partners II, L.P.(2) ................................. 6,069,300 7.2%
150 East 52nd Street
New York, New York 10022
</TABLE>
------------------------
(1) This information is based on information provided by Harris Corporation to
the Company in connection with the Merger Agreement, as of November 29,
2000.
(2) This information is based on information set forth in a Schedule 13D dated
November 30, 2000 that has been filed with the Securities and Exchange
Commission.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for the fiscal years ended June 30,
2000, July 2, 1999 and July 3, 1998 with respect to the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company during fiscal year 2000 whose salary and bonus exceeded
$100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ---------- ----------
OTHER SECURITIES ALL
ANNUAL UNDERLYING LTIP OTHER
FISCAL COMPENSATION OPTIONS/ PAYOUTS(2) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1)($) SARS (#) (3) ($) (4)($)
--------------------------- -------- --------- -------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell.................... 2000 441,538 184,951 3,600 250,000(5) 23,264 35,268
Chairman and 1999 337,886 182,600 24,000 155,092(6) 315,000 27,879
Chief Executive Officer 1998 312,115 352,501 26,400 124,074(6) 407,100 26,386
C. Lance Herrin....................... 2000 274,423 127,197 1,440 190,000(5) 9,305 29,192
President and Chief 1999 228,077 243,180 9,600 62,037(6) 126,000 20,412
Operating Officer 1998 218,077 255,585 10,560 49,629(6) 159,300 20,046
James A. MacLennan.................... 2000 189,038 48,613 0 120,000(5) 11,000 9,712
Executive Vice President; 1999 165,385 44,886 0 11,166(6) 0 8,281
Chief Financial Officer 1998 152,462 48,921 0 0 0 1,968
Paul M. Anderson...................... 2000 131,346 57,973 240 52,500(5) 12,326 11,284
Vice President-- 1999 124,615 101,700 1,920 20,472(6) 31,500 10,382
Worldwide Marketing 1998 88,654 122,283 2,640 12,407(6) 39,825 7,443
Timothy A. Vellek..................... 2000 140,769 81,859 0 52,500(5) 17,500 9,606
Senior Vice President -- 1999 108,231 84,429 0 16,129(6) 28,000 7,151
European Operations 1998 87,546 61,200 0 0 2,700 4,722
</TABLE>
------------------------------
(1) The amounts reported represent dividend equivalent payments on outstanding
performance shares granted under the Stock Incentive Plan for which the
performance period has not yet expired.
A-9
<PAGE>
(2) The value of performance shares earned for the three-year performance period
ended June 30, 2000 (Mr. Cantrell--31,019 shares; Mr. Herrin--12,407 shares
and Mr. Anderson--3,102) is based upon the closing price of the Company's
common stock on August 3, 2000 (the date on which the share awards were
approved).
(3) Payouts for fiscal 1998 and 1999 were made pursuant to grants under the
Long-term Incentive Plan for Key Employees. The payments reflected in the
table for fiscal years 1998 and 1999 are for performance during the
three-year performance periods ended June 27, 1998 and July 3, 1999,
respectively.
(4) Amounts reported include:
-- Contributions to the Lanier Worldwide, Inc. Save to Accumulative
Retirement $ (STAR$) Plan for fiscal year 2000: Mr. Cantrell--$4,990,
Mr. Herrin--$5,003, Mr. MacLennan--$5,570, Mr. Anderson--$5,049, and
Mr. Vellek--$5,290; for fiscal year 1999: Mr. Cantrell--$5,209,
Mr. Herrin--$5,258, Mr. MacLennan--$3,863, Mr. Anderson--$5,394, and
Mr. Vellek--$4,864; for fiscal year 1998: Mr. Cantrell--$5,935,
Mr. Herrin--$7,415, Mr. MacLennan--$847, Mr. Anderson--$6,034, and
Mr. Vellek--$4,604.
-- Contributions to the Lanier Worldwide, Inc. STAR$ Supplemental Executive
Retirement Savings Plan for fiscal year 2000: Mr. Cantrell--$16,828,
Mr. Herrin--$11,724, Mr. MacLennan--$2,715, Mr. Anderson--$2,956, and
Mr. Vellek--$1,861; for fiscal year 1999: Mr. Cantrell--$17,686,
Mr. Herrin--$11,509, Mr. MacLennan--$3,939, Mr. Anderson--$3,529, and
Mr. Vellek--$1,861; for fiscal year 1998: Mr. Cantrell--$15,537,
Mr. Herrin--$7,681, Mr. MacLennan--$920, Mr. Anderson--$363, and
Mr. Vellek--$118.
-- The taxable portion of premiums on life insurance provided for fiscal
year 2000: Mr. Cantrell--$1,289, Mr. Herrin--$2,211,
Mr. MacLennan--$433, Mr. Anderson--$814, and Mr. Vellek $511; for fiscal
year 1999: Mr. Cantrell--$4,984, Mr. Herrin--$3,645,
Mr. MacLennan--$479, Mr. Anderson--$1,659, and Mr. Vellek--$802; for
fiscal year 1998: Mr. Cantrell--$4,914, Mr. Herrin--$4,950,
Mr. MacLennan--$201, Mr. Anderson--$1,046, and Mr. Vellek--$344.
(5) Lanier common stock.
(6) Lanier common stock, issued in exchange for Harris common stock on the date
of the spin-off.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Shown below is additional information on grants of stock options made under
the Stock Incentive Plan during fiscal year 2000. The amounts shown for
potential realizable values are based upon assumed annualized rates of the
Company's stock price appreciation of five percent and ten percent over the full
ten year term (or shorter term) of the options, as required by the Securities
and Exchange Commission, and are not intended to represent or forecast possible
future appreciation, if any, of the price of the Company's common stock.
<TABLE>
<CAPTION>
INDIVIDUAL POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM
OPTION/SARS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED (1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ------------ ------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell................ 125,000 3.20% 4.125 11/12/2009 0 0
125,000 3.20 2.250 4/27/2010 0 124,000
C. Lance Herrin................... 90,000 2.30 4.125 11/12/2009 0 0
100,000 2.56 2.250 4/27/2010 0 99,200
James A. MacLennan................ 40,000 1.02 4.125 11/12/2009 0 0
80,000 2.05 2.250 4/27/2010 0 79,360
Paul M. Anderson.................. 15,000 0.38 4.125 11/12/2009 0 0
37,500 0.96 2.250 4/27/2010 0 37,200
Timothy A. Vellek................. 15,000 0.38 4.125 11/12/2009 0 0
37,500 0.96 2.250 4/27/2010 0 37,200
</TABLE>
------------------------------
(1) All stock option grants were made under the Stock Incentive Plan. The term
of each stock option is generally ten years and is exercisable in
installments of 50% after one year, 75% after two years, and 100% after
three years. The exercise price is the closing price of a share of the
Company's common stock on the date of the grant. The exercise price may be
paid in cash and/or shares of the Company's common stock, or "cashless
exercise" procedures may be used. In the event of a change of control,
outstanding options become immediately exercisable.
A-10
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
Shown below for the Named Executive Officers are the number of shares
covered by exercisable and unexercisable options held by such executives on
June 30, 2000. These options were granted under the Stock Incentive Plan. No
stock options were exercised by any of the Named Executive Officers in fiscal
year 2000, and no stock options were "in the money" on June 30, 2000, based upon
the closing price of the Company's common stock reported on the New York Stock
Exchange.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXPIRED
OPTIONS/SARS AT
FISCAL YEAR-END (#)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Wesley E. Cantrell.......................................... 766,678 358,565
C. Lance Herrin............................................. 229,537 233,426
James A. MacLennan.......................................... 5,583 125,583
Paul M. Anderson............................................ 44,356 65,838
Timothy A. Vellek........................................... 8,064 60,565
</TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN THE LAST FISCAL YEAR
Awards of performance shares under the Stock Incentive Plan to participants
are made at the beginning of each performance period and are earned based on the
Company's performance. The Stock Incentive Plan is designed to motivate key
employees to maximize stockholder value by aligning their interests with
stockholder interests. For the Company's executives, the payout is determined by
the Nominating and Compensation Committee based upon the Company's financial
performance compared with strategic plan objectives. Performance criteria
include the Company's net income during the three-year strategic plan cycle.
Share payouts are made following the determination of the committee and range
from zero to a maximum of 200% of the original shares awarded. Participants
receive quarterly cash payments on the performance share awards in an amount
equal to dividends paid to stockholders.
Shown below is information with respect to awards of performance shares
granted under the Stock Incentive Plan during fiscal year 2000 to the Named
Executive Officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUT UNDER
PERFORMANCE OR
NON-STOCK PRICE-BASED PLAN
OTHER PERIOD
PERFORMANCE -------------------------------
OR OTHER THRESHOLD TARGET MAXIMUM
NUMBER PERIOD UNTIL LANIER LANIER LANIER
OF LANIER MATURATION SHARES SHARES SHARES
NAME SHARES OR PAYOUT (#) (#) (#)
---- ---------- ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Wesley E. Cantrell....................... 35,000 6/30/2002 35,000 35,000 70,000
25,000 11/27/2002 25,000 25,000 25,000
C. Lance Herrin.......................... 15,000 6/30/2002 15,000 15,000 30,000
James A. MacLennan....................... 7,000 6/30/2002 7,000 7,000 14,000
Paul M. Anderson......................... -- -- -- -- --
Timothy A. Vellek........................ -- -- -- -- --
</TABLE>
RETIREMENT PLANS
The Company's defined benefit retirement program consists of:
-- A tax-qualified, funded pension plan, the Pension Equity Plan, which is
available to substantially all of the United States employees of the
Company and its participating subsidiaries and affiliated companies; and
A-11
<PAGE>
-- A non-qualified, unfunded supplemental retirement income plan, the
Lanier Worldwide, Inc. Supplemental Executive Retirement Plan, which
provides benefits that would be provided, but for certain limits imposed
by the Internal Revenue Code on tax-qualified plans, under the Pension
Equity Plan.
The Pension Equity Plan is a defined benefit plan. Its benefits are fully
paid by the Company, and employees become vested upon the completion of five
years of service.
In July 1997, the Company amended its pension plan to provide for a lump sum
retirement benefit calculated by reference to a formula based upon final average
pay, age and years of service. The lump sum may be converted to a straight life
annuity or other form. Under the amended plan, if the determination of benefits
payable to individuals who were eligible for retirement or nearing retirement at
the time of the amendment, including Messrs. Cantrell and Herrin, would have
resulted in a reduction of accrued benefits under the plan as in effect prior to
the 1997 amendment, then the benefits payable to that person are as calculated
under the plan without giving effect to the amendment. Instead, those employees
will receive annual pension benefits determined by adding (a) 1.22% of the
average of the employee's five highest consecutive years' compensation in the
last ten calendar years before retirement, multiplied by the lesser of the
employee's years of service or 30, and (b) 0.33% of that part of the employee's
five-year average compensation in excess of a certain amount, multiplied by the
lesser of the employee's years of service or 30. Benefits are computed as a
straight life annuity, but may be converted to a lump sum or other form.
The following table shows the estimated annual benefits under (1) the
Pension Equity Plan for the Company's executives (including Messrs. Cantrell and
Herrin) calculating annual benefits under the terms of the Pension Equity Plan
as in effect prior to the 1997 amendment and (2) the Supplemental Executive
Retirement Plan, payable at age 65 or older.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR CREDITED YEARS OF SERVICE
-----------------------------------------
HIGHEST CONSECUTIVE 5-YEAR AVERAGE COMPENSATION 15 20 25 30
----------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$250,000............................................ $ 56,600 $ 75,400 $ 94,300 $113,200
500,000............................................. 114,700 152,900 191,200 229,400
750,000............................................. 172,800 230,400 288,100 345,700
1,000,000........................................... 231,000 307,900 384,900 461,900
1,250,000........................................... 289,100 385,400 481,800 578,200
</TABLE>
Under these plans, both Mr. Cantrell and Mr. Herrin are credited with the
maximum of 30 years of service. Messrs. MacLennan, Anderson and Vellek have 2,
22 and 18 years of service, respectively. For the year ended June 30, 2000, the
highest consecutive five year average compensation for Mr. Cantrell for purposes
of the above determination was $770,000 and for Mr. Herrin was $508,126.
Compensation as in effect prior to the July 1997 amendment consists of base
salary, bonuses and sales commissions and, for periods prior to 1998, included
income recognized upon the exercise of Harris stock options. Compensation as in
effect after the July 1997 amendment consists of gross income, including salary,
bonuses, sales commissions, vacation pay, compensation received while on an
authorized leave of absence, and short-term disability payments, but excludes
severance pay, payments made in consideration of a release of employment with
the Company, payments attributable to domestic or foreign assignment
differential, any contest payments, any expense-related reimbursement, and
payments made under any long-term incentive plan, including income from the
exercise of stock options or the value of life insurance or other non-cash
perquisites includible in the participant's gross income. Base salary includes
certain deferred amounts.
Benefits under the Pension Equity Plan and the Lanier Supplemental Executive
Retirement Plan are not subject to any deduction for Social Security or other
offset amounts.
A-12
<PAGE>
EXECUTIVE SEVERANCE AGREEMENTS
To provide continuity of management and dedication of corporate executives
in the event of a threatened or actual change in control of the Company, the
board has approved severance agreements for officers and key managers, including
the Named Executive Officers. Under these agreements, officers and key managers
of the Company are provided with severance benefits in the event the executive's
employment is terminated by the Company without cause or by the executive for
good reason within two years following a change in control (all terms as defined
in the severance agreement).
Under the severance agreement, the executive agrees not to voluntarily
terminate his or her employment with the Company during the six-month period
following a change in control. The lump sum severance benefit payable under the
severance agreement equals the sum of: (a) the executive's unpaid base salary
through date of termination, a pro rata annual bonus (as determined under the
severance agreement) and any compensation deferred by the executive other than
under a tax-qualified plan and any accrued vacation pay; and (b) from one to
three times the executive's highest annual rate of base salary during the
12-month period prior to the date of termination and from one to three times the
greater of the executive's highest annual bonus in the last three years, the
executive's target bonus for the year during which the change in control
occurred, or the executive's target bonus for the year in which the executive's
employment is terminated. Payment amounts are three times compensation for
Mr. Cantrell and the other Named Executive Officers. In addition, the executive
receives the same level of medical, dental, accident, disability, life insurance
and any similar benefits (or the highest level of coverage provided to active
executives, if more favorable). The executive also receives reimbursement for
any relocation expense related to pursuit of other business opportunities
incurred within two years following the date of termination, for recruitment or
placement services of up to $4,000 and for professional financial or tax
planning services of up to $5,000. The severance agreement also provides for a
tax gross-up payment to the executive in the event that payment of any severance
benefits are subject to excise tax imposed under Section 4999 of the Internal
Revenue Code. In addition, the Company shall reimburse the executive for any
legal fees and costs with respect to any dispute arising under the severance
agreement.
NON-COMPETITION AND EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Cantrell,
Herrin and MacLennan. These agreements are for a continuous term of one year.
The agreements are terminable by the Company and by the executive upon sixty
days written notice, or immediately for "cause" (as defined in the employment
agreement) or upon the death or total disability of the executive. The
agreements specify the compensation the executive will receive, and the benefit
plans, stock incentives, club memberships, financial planning and other benefits
that are to be provided by the Company. The agreements provide that the
executive shall not compete with the Company nor recruit, hire or solicit any
employee of the Company during the first two years after leaving the Company's
employment.
EXECUTIVE EMPLOYMENT AGREEMENTS
In connection with the transactions contemplated by the Merger Agreement, on
November 29, 2000, Messrs. Cantrell and Herrin each entered into executive
employment agreements (each, an "Executive Employment Agreement" and,
collectively, the "Executive Employment Agreements") with the Company which are
contingent upon the consummation of the Merger and become effective immediately
thereafter. Upon the consummation of the Merger, the Executive Employment
Agreements will serve to supersede the Employment Agreements and Executive
Severance Agreements previously executed by such officers. Except as stated
otherwise, for purposes of this description of the Executive Employment
Agreements, all capitalized terms used herein shall have the meanings ascribed
to them in the Executive Employment Agreements, which are filed as
Exhibits (e)(3) and (e)(4) to the
A-13
<PAGE>
Schedule 14D-9. The summary of the Executive Employment Agreements is qualified
in its entirety by reference to the Executive Employment Agreements.
Mr. Cantrell's agreement provides for a six-month term of employment
commencing upon the Effective Time (as such term is defined in the Merger
Agreement) and provides for a base salary of $1,000,000. Upon expiration of
Mr. Cantrell's term of employment, he is entitled to receive a termination
payment of $2.8 million and continued welfare benefits for a period of two
years. In the event his employment is terminated by the Company without Cause or
by Mr. Cantrell for Good Reason prior to the expiration of his employment term,
Mr. Cantrell will be entitled to receive the base salary that would have been
due for the remainder of the term had his employment not been terminated as well
as a termination payment of $2.8 million. This agreement contains non-compete
and non-solicitation provisions. A copy of this agreement is filed as
Exhibit (e)(3) to the Schedule 14D-9.
Mr. Herrin's agreement provides for a two-year term of employment commencing
upon the Effective Time (as such term is defined in the Merger Agreement), which
automatically renews for successive one-year periods unless either party gives
notice of its intention to terminate and provides for a base salary of $425,000.
In addition Mr. Herrin will be eligible to receive the following bonus payments:
(i) an annual bonus of up to $350,000; (ii) a long term incentive bonus of up to
$120,000 payable annually; and (iii) a retention bonus of $200,000 payable upon
each of the first and second anniversaries of the Effective Time (as such term
is defined in the Merger Agreement) if Mr. Herrin is still employed with the
Company at such times. Upon expiration of Mr. Herrin's term of employment, he is
entitled to receive a termination payment of $1.7 million and continued welfare
benefits for a period of two years. In the event his employment is terminated by
the Company without Cause or by Mr. Herrin for Good Reason prior to the
expiration of his employment term, Mr. Herrin will be entitled to receive the
remaining unpaid retention bonuses that would have been due for the remainder of
the term had his employment not been terminated as well as the termination
payment of $1.7 million. This agreement contains non-compete and
non-solicitation provisions. A copy of this agreement is filed as
Exhibit (e)(4) to the Schedule 14D-9.
INDEMNIFICATION AGREEMENTS
Each of the directors and executive officers (including the Named Executive
Officers) have entered into an indemnification agreement with the Company
pursuant to which each director and executive officer is indemnified against
expenses (including attorneys' fees, judgments, fines, and amounts paid in
settlement) actually and reasonably incurred in connection with any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal or
administrative or investigative, to which he or she was, is, or is threatened to
be made a party by reason of being or having been such a director or officer, to
the full extent allowable under Delaware law.
NOMINATING AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Nominating and Compensation Committee consists of Messrs. Rogers, Hughes
and McMullian, each a non-employee director. No director or executive officer of
the Company serves on the compensation committee of the board of directors of
any company for which Messrs. Rogers, Hughes and McMullian serve as executive
officers or directors.
REPORT ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee, which is composed solely of
non-employee directors, approves the Company's compensation philosophy and the
compensation, perquisites, and other benefits for executive officers under
salary, incentive and other plans authorized by the board of directors or the
stockholders. In addition, the Nominating and Compensation Committee recommends
for consideration and approval by all of the non-employee directors the
compensation of the Chief Executive Officer and the President.
A-14
<PAGE>
COMPENSATION PHILOSOPHY
The compensation program for executive officers is designed to attract,
retain and motivate high performance executives and reward them for the
achievement of short and long-term strategic goals and enhancement of
stockholder value. Currently, the compensation program is highly leveraged with
at-risk incentive compensation accounting for a larger percentage of annual cash
compensation than typically found in other companies. The main elements of the
program are:
-- Annual cash compensation, which consists of base salary and a short-term
incentive component pursuant to the Key Contributor Incentive Plan; and
-- Long-term compensation, which consists of cash and equity based
incentives, pursuant to the Long-term Incentive Plan for Key Employees
and the Stock Incentive Plan.
Annual cash compensation is targeted at the median, or 50th percentile, of
selected peer group companies of comparable size and other comparably sized
companies, with short-term incentive compensation opportunities having upside
potential such that high performance could bring annual cash compensation to the
75th percentile.
Long-term compensation is targeted at or slightly above the median of
selected peer group companies of comparable size and other comparably sized
companies.
In order to reinforce management's alignment with stockholder interests, the
Nominating and Compensation Committee established stock ownership guidelines for
executive officers at the time the Company became publicly traded. These
guidelines range from one to three times base salary depending on job level, and
include stock owned by the executive, vested stock options, performance shares
and other restricted stock grants, and stock acquired through the company's
401(k) and Employee Stock Purchase Plan. Failure to meet the established
guidelines within five years of becoming covered by the guidelines will be taken
into consideration when awarding future stock based grants.
The Company's executive compensation program is designed to ensure that
executive pay remains competitive with comparable jobs, responsibilities and
performance in comparably sized companies. For this reason, we periodically
retain outside compensation and benefit consultants to review executive
compensation programs.
ANNUAL CASH COMPENSATION
Annual cash compensation consists of base salary and a short-term incentive
based on (1) the Company's financial performance on a consolidated basis, in the
case of corporate executives, and (2) the relevant business unit's financial
performance and the Company's performance on a consolidated basis, in the case
of business unit executives. Base salaries and short-term incentives for
executive officers, other than the Chief Executive Officer and the President,
are recommended by the Company's management and then reviewed and approved by
the Nominating and Compensation Committee.
BASE SALARY. Base salary for executive officers is currently positioned
below the median of the comparable group outlined in the compensation philosophy
section of this report. During fiscal year 2000, the Company became an
independent publicly held company. Prior to the Company's spin-off from Harris,
the Company was a wholly owned subsidiary of Harris. This change in company
status significantly expanded the scope of responsibility of certain executive
officers. As a result of this change in scope, base salary levels for executive
officers individually, and as a group, measured significantly below targeted
competitive levels. In order to accomplish the Company's objective of targeting
base salaries at the median, base salaries for certain executives have been
adjusted over time to bring them closer to competitive market levels. Increases
in base salary are determined by individual and company performance, the scope
of the position and the relationship with competitive market data, and are based
on subjective evaluations of all relevant factors.
A-15
<PAGE>
SHORT-TERM INCENTIVE. Short-term incentive payments are made under the Key
Contributor Incentive Plan, as amended and restated effective August 3, 2000,
which has been adopted by the Board of Directors and which was ratified by the
stockholders at the 2000 Annual Meeting. Payments to executive officers are
based upon the percentage achievement of pre-established financial objectives.
For fiscal year 2000, short-term incentive payments were based upon the
attainment of net income and revenue growth objectives. The percentage of an
executive's annual cash compensation attributable to the short-term incentive
component increases proportionately with his or her level of management
responsibility. For the Named Executive Officers, short-term incentive
opportunity at target ranged from 39% to 51% of total annual cash compensation
opportunity.
LONG-TERM COMPENSATION
The Company maintains the Long-Term Incentive Plan for Key Employees. This
plan was adopted by the Board of Directors in October 1999, was ratified by the
stockholders at the 2000 Annual Meeting and was amended and restated effective
August 3, 2000. The Company's Board of Directors has also adopted the Stock
Incentive Plan effective October 21, 1999 in conjunction with the spin-off from
Harris. This plan is also being presented for ratification by the stockholders
at the Annual Meeting. In any given year, an executive officer may be offered
participation in a single plan or in a combination of plans. Each plan is
described below.
LONG-TERM INCENTIVE PLAN. Cash based long-term incentive compensation for
executive officers is provided under this plan. The plan permits the granting of
cash awards based on pre-established performance criteria using the Company's
strategic planning process and a period of time (generally three years) over
which performance is to be measured.
For the three-year period beginning on July 1, 1999 no new awards were
granted under the Long-Term Incentive Plan for Key Employees. For the three-year
period ending on June 30, 2000, payouts made under the Long-Term Incentive Plan
for Key Employees were based upon 71.4% achievement of the aggregate net income
targets for the three-year period.
STOCK INCENTIVE PLAN. The Stock Incentive Plan permits the granting of any
or all of the following types of awards: performance shares conditioned upon
meeting certain performance criteria, restricted stock, stock options, stock
appreciation rights, and other awards valued by reference to, or based on, the
Company's common stock.
In fiscal year 2000, awards made under the Stock Incentive Plan were in the
form of non-qualified stock options. Additionally, a limited group of Named
Executive Officers received a performance share award grant. Stock options and
performance shares are discussed below.
-- STOCK OPTIONS. Stock options are granted at fair market value as of the
date of the grant, vest over three years, and have a term of not greater
than ten years. Stock options provide value only when the price of the
Company's common stock increases above the option grant price.
Approximately 1,100 employees received stock option grants in fiscal year
2000, including the Named Executive Officers.
-- PERFORMANCE SHARES. Each participant is awarded a specified number of
performance shares that can be earned during the period, based on
achieving one or more pre-established financial objectives. At the
beginning of an award cycle, performance criteria are established using
the Company's strategic planning process and a period of time (generally
three years) is established during which performance is to be measured.
Performance shares are subject to forfeiture if performance objectives
are not attained or if a participant's employment is terminated for
certain reasons before the performance period has ended. The value of
performance shares is based on the value of the Company's common stock.
Performance shares were granted to three executive officers in fiscal
year 2000.
A-16
<PAGE>
The Nominating and Compensation Committee believes that through the use of
stock incentives, the interests of the Company's executives are directly related
to the enhancement of stockholder value.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's base salary, short-term incentive
compensation, and long-term incentive compensation are annually reviewed and
recommended by the Nominating and Compensation Committee and approved by the
non-employee directors. In recommending Mr. Cantrell's compensation for fiscal
year 2000, the Nominating and Compensation Committee considered both the
Company's performance and Mr. Cantrell's individual performance along with
recommendations from the independent compensation consultant in light of his
change in responsibilities resulting from the spin-off from Harris and his
promotion to Chairman of the Board.
Mr. Cantrell's annual salary was increased from $340,000 to $500,000 in
November 1999 in conjunction with the spin-off and to reflect his additional
responsibilities as Chairman of the Board and Chief Executive Officer of the
Company.
Under the Key Contributor Incentive Plan, Mr. Cantrell received annual
short-term incentive compensation for fiscal year 2000 based upon 48.5%
achievement of the Company's net income target and 86.9% achievement of the
Company's revenue target for the year.
Mr. Cantrell's long-term incentive compensation was in the form of stock
options and performance shares. Mr. Cantrell received grants totaling 250,000
stock options and 35,000 performance shares in fiscal year 2000. For the
three-year performance period ended June 30, 2000, Mr. Cantrell's performance
share award payout was based on aggregate net income performance of the Company
compared with the aggregate net income target established at the beginning of
the performance period. Based upon the Company's performance and the payout
formula recommended by the Nominating and Compensation Committee, the
non-employee directors authorized a payout of 31,019 shares for Mr. Cantrell for
the three-year period ended June 30, 2000.
At the time of the spin-off from Harris the Nominating and Compensation
Committee recommended, and the non-employee directors authorized, a restricted
stock grant of 25,000 shares for Mr. Cantrell that contained vesting
requirements tied to his continued service and satisfaction of certain financial
performance objectives.
Mr. Cantrell participates in the same benefit programs as all other
employees of the Company. In addition, the Company has an employment agreement
with Mr. Cantrell which provides certain other benefits and payments in
connection with Mr. Cantrell's continued service.
CONCLUSION
The Nominating and Compensation Committee believes that the executive
compensation program directly links the pay opportunities of the Company's
executives to the financial and stockholder returns of the Company. These
programs reinforce the link between pay and performance, and between executive
compensation and stockholder return, and allow the company to attract and retain
a quality management team.
Nominating and Compensation Committee
Clarence B. Rogers, Jr., Chairman
David H. Hughes
Amos R. McMullian
SECTION 16(B) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who beneficially own
more than ten percent of the Company's common stock to file with the Securities
and Exchange Commission certain reports, and to furnish copies thereof to the
Company, with respect to each such person's beneficial ownership of such
A-17
<PAGE>
equity securities. Based solely upon a review of the copies of such reports
furnished to the Company and certain representations of such persons, the
Company believes that all filings were timely.
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph compares the cumulative total
stockholder return of the Company's common stock with the cumulative total
return of (1) the New York Stock Exchange and (2) a selected industry peer group
consisting of the following companies: Danka Business Systems, Inc., Global
Imaging Systems, Inc., IKON Office Solutions, Inc., Lexmark International
Group, Inc., and Xerox Corporation. The peer group was chosen because it is more
representative of companies comparable to the Company's than any published
index. The stock price performance graph assumes an investment of $100 in the
Company's common stock and in the two indices on November 8, 1999. Stock price
performance, presented monthly for the period from November 8, 1999 through
November 30, 2000, is not necessarily indicative of future results.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LANIER NYSE PEER
<S> <C> <C> <C>
Nov 8 1999 100 100 100
Dec 31 1999 137.78 103.16 94.75
Jan 31 2000 124.44 98.63 89.12
Feb 29 2000 100 94.01 91.15
Mar 30 2000 73.33 102.74 82.98
Apr 28 2000 68.89 102.18 81.98
May 31 2000 106.67 102.09 70.88
Jun 30 2000 35.56 101.99 63.11
Jul 31 2000 24.44 101.63 55.93
Aug 31 2000 35.56 107.01 68.71
Sep 29 2000 35.56 105.18 52.72
Oct 31 2000 24.44 105.66 39.02
Nov 30 2000 88.89 99.91 37.45
</TABLE>
A-18
<PAGE>
SCHEDULE I TO ANNEX A
DESIGNEES OF PURCHASER
Parent and Purchaser have advised the Company that none of the Designees
during the past five years, has (i) been convicted in a criminal proceeding
(excluding traffic misdemeanors) or (ii) been a party to any judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws.
Parent and Purchaser have advised the Company that none of the individuals
listed above (i) is currently a director of, or holds any position with, the
Company, (ii) has any familial relationship with any directors or executive
officers of the Company and (iii) to the knowledge of Parent and Purchaser,
beneficially owns any equity securities (or rights to acquire any such
securities) of the Company. The Company has been advised by Parent and Purchaser
that, to Parent's and Purchaser's knowledge, none of the Designees has been
involved in any transaction with the Company or any of its directors, executive
officers or affiliates that is required to be disclosed pursuant to the rules
and regulations of the Commission, except as may be disclosed herein, in the
Schedule 14D-9 or in the Schedule TO.
Set forth below is the name, current principal occupation or employment and
material occupations, positions, offices or employment for the past five years
of each Designee. The current business address for each Designee listed below is
LW Acquisition Corp., 5 Dedrick Place, West Caldwell, New Jersey 07006.
Telephone: (973) 882-2000. Each such person is a citizen of Japan.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL
NAME AGE POSITIONS HELD DURING THE PAST FIVE YEARS
---- -------------------- -------------------------------------------------------
<S> <C> <C>
Masami Takeiri................. 62 President and Director of Purchaser; Managing Director &
Executive Vice President, General Manager of International
Marketing Group of Ricoh Company, Ltd. from June 2000 to
Present; Managing Director, General Manager of
International Marketing Group of Ricoh Company, Ltd. from
June 1998 to June 2000; Director, General Manager of
International Marketing Group of Ricoh Company, Ltd. from
June 1994 to June 1998.
Yukio Mizutani................. 61 Director, Secretary and Treasurer of Purchaser; Associate
Director, Deputy General Manager of International
Marketing Group of Ricoh Company, Ltd. from June 1999 to
Present; Deputy General Manager of International Marketing
Group of Ricoh Company, Ltd. from April 1988 to June 1999;
(General) Manager of Marketing Group, International
Marketing Office of Ricoh Company, Ltd. from January 1996
to April 1998, Deputy General Manager of International
Marketing Group of Ricoh Company, Ltd. from October 1995
to January 1996.
Takahiro Eida.................. 55 Director of Purchaser; General Manager of International
Marketing Group of Ricoh Company, Ltd. from April 1998 to
Present; Deputy General Manager of Marketing Group,
International Marketing Office of Ricoh Company, Ltd. from
March 1997 to April 1998; Vice President of Ricoh Europe
B.V., Groenelaan 3, 1186 AA Amstelveen, The Netherlands
from August 1994 to March 1997.
</TABLE>
A-19
<PAGE>
ANNEX B
[LOGO]
November 27, 2000
Board of Directors
Lanier Worldwide, Inc.
2300 Parklake Drive, NE
Atlanta, Georgia 30345
Dear Sirs:
We understand that Lanier Worldwide, Inc. (the "Company"), Ricoh Company,
Ltd. ("Ricoh") and LW Acquisition Corp., a wholly-owned subsidiary of Ricoh
("Merger Subsidiary"), propose to enter into an Agreement and Plan of Merger
whereby Ricoh will cause Merger Subsidiary to commence a tender offer to
purchase all of the issued and outstanding shares of Company common stock
(including the associated rights to purchase shares of the Company's
Participating Preferred Stock, $.01 par value, issued pursuant to the
Stockholder Protection Rights Agreement, dated as of November 5, 1999, between
the Company and Mellon Investor Services, L.L.C., formerly ChaseMellon
Shareholder Services, L.L.C., as Rights Agent) at a price of $3.00 per share in
cash (the "Consideration"), and, upon the consummation of the tender offer, the
Company will merge with Merger Subsidiary and any remaining stockholders of the
Company will receive in exchange for each share of Company common stock $3.00
per share in cash (the "Proposed Transaction"). The terms and conditions of the
Proposed Transaction are set forth in more detail in the draft of the Agreement
and Plan of Merger dated November 22, 2000 (the "Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's stockholders of
the Consideration to be received by Company stockholders in the Proposed
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) a draft of the
Agreement dated November 22, 2000, (2) publicly available information concerning
the Company which we believe to be relevant to our inquiry, (3) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (4) a trading history of the
Company's common stock from November 1, 1999 to the present and a comparison of
that trading history with those of other companies which we deemed relevant,
(5) a comparison of the historical financial results and present financial
condition of the Company with those of other companies which we deemed relevant,
(6) a comparison of the financial terms of the Proposed Transaction with the
terms of certain other recent transactions which we deemed relevant, and
(7) certain historical data relating to acquisitions of publicly traded
companies, including percentage premiums paid in such acquisitions. In addition,
we have had discussions with the management of the Company concerning its
business,
[LOGO]
B-1
<PAGE>
operations, assets, present condition and future prospects and undertook such
other studies, analyses and investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections of the
Company, we have assumed that such projections have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
In arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made nor obtained any
evaluations or appraisals of the assets or liabilities of the Company. Our
opinion is necessarily based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities arising out of the rendering of
this opinion. We have also performed various investment banking services for the
Company in the past and have received customary fees for such services. At
present, we are performing investment banking services for the Company in
connection with the sale of its Voice Products Business, for which we will
receive customary fees. In the ordinary course of our business, we actively
trade in the equity securities of the Company for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Consideration to be
received by stockholders of the Company in the Proposed Transaction is fair to
the stockholders of the Company.
Very truly yours,
/s/ The Robinson-Humphrey Company, LLC
--------------------------------------
THE ROBINSON-HUMPHREY COMPANY, LLC
B-2
